It is apparent that entering an emerging market has a significant potential due to various advantages such as the increasing economic growth, the absence of serious competition, et cetera. However, it is also evident that numerous problems can occur in the process of entering. Therefore, it is essential to analyze the country’s general background and market conditions in order to develop a profound understanding of economic advantages and disadvantages. Thus, a comprehensive recommendation could be created.
General Background of the Country
Mexico is the country with a total population 129,163,276 (as of the end of 2017) that is located in the Southern area of North America (“Mexico: Introduction,” 2018). The country’s income level is considered to be the upper middle (GDP per capita is $18,149 as of the end of 2017), and also Mexico is characterized as a developing country according to the globalEDGE website (“Mexico: Economy,” 2018).
The country is a member of the Asia-Pacific Economic Cooperation (APEC), the North American Free Trade Agreement (NAFTA), and the Trans-Pacific Partnership (TPP) (“Mexico: Introduction,” 2018). One of the most important industries in Mexico is agriculture and foodservice, and also tobacco, chemical, as well as iron and steel industries are well-developed (Torres, Mayo, & Jiménez, 2018; “Mexico: Economy,” 2018).
The political situation in the country lacks stability. It is worth mentioning that the majority of the country’s population is not satisfied with the high level of corruption as well as rising crime rates and violence, which have developed during the President Peña Nieto’s five-year term (“Mexico: Risk assessment,” 2018; “Mexico corruption rank,” 2018; Exhibit 1). Despite the fact that the labor force in the country had vastly developed as it constitutes 58,072,901 people as of the end of 2017, the majority of the employed individuals possess a considerably low education level because the education system is not strong in Mexico (“Mexico: Economy,” 2018). In general, the state of economic freedom in Mexico could be characterized as acceptable for a foreign company to enter the market.
Analysis of the Country
Since the general background of the country was provided, it is appropriate to dwell upon the economic analysis of the market. In overall, Mexico is considered to have the acceptable level of risk climate (“Mexico: Risk assessment,” 2018). Particularly, the country risk rating is marked B on the globalEDGE website, which means that there are political and economic uncertainties that can challenge the adequate decision-making in the business environment as well as corporate payment behavior (“Mexico: Risk assessment,” 2018).
Regarding business climate rating, which is marked A4, one can state that the business environment in the country is acceptable (“Mexico: Risk assessment,” 2018). Several factors that contribute to the current ranking should be discussed First of all, it is mentioned that corporate financial information is not always reliable, and, in some cases, this information is difficult to be retrieved (“Mexico: Risk assessment,” 2018).
The debt collection system is not sufficiently developed, the institutional framework has its flaws, and intercompany transactions might be performed with significant difficulties (“Mexico: Risk assessment,” 2018). The GDP growth rate is relatively low, which is a negative sign, but the unemployment rate is also significantly low, which indicates the strong labor force in the country (Exhibit 2). It is essential to mention a relatively low inflation rate, which is 2,8% as of the end of 2016 (Exhibit 3).
Despite the fact that there are several disadvantages that were mentioned previously, it could be stated that the Mexican market provides a vast set of opportunities for a foreign company. The most beneficial factors are the low unemployment rate, strong labor force, and the country’s openness to foreign investments. Particularly, the country’s closeness with the United States, both geographical and economic, makes Mexico a suitable candidate for investments. Also, the country’s membership in the North American Free Trade Agreement (NAFTA) is a supporting factor for entering the Mexican market. Thus, it would be easier for a foreign company to establish its business in Mexico.
Accordingly, it could be recommended that Mexico is an emerging market that is beneficial to enter by a foreign company. Based on the discussion of various factors, the following thesis could be retrieved: entering the Mexican market is a challenging task; however, the benefits are also evident. Such aspects as the ease of foreign investment process, strong labor force factor and favorable economic indices such as the tax rate and real interest rate are the most important rationales behind the proposed recommendation. Nevertheless, it is also essential to consider such factors as political instability, increased rates of criminality and corruption, as well as the slow GDP growth, which could be problematic factors in the future.
This paper conducted a thorough analysis of Mexico as an emerging market. The majority of principal factors were considered in the process of investigation. The paper concludes that Mexico has a vast potential for a foreign company’s entrance to its markets, despite the fact that there are several challenges. In conclusion, one can state that Mexico is one of the developing countries with positive economic perspectives.
globalEDGE. (2018). Mexico corruption rank. Web.
globalEDGE. (2018). Mexico: Economy. Web.
globalEDGE. (2018). Mexico: Introduction. Web.
globalEDGE. (2018). Mexico: Risk assessment. Web.
Torres-Landa, J. F., Olea, F. de N., & Bain, P. C. (2017). Mexico. Web.