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Spotlight on Mexico
August 31, 2016
This is the latest instalment in our Spotlight series, exploring different regions across the globe. We hope to provide you with the most up to date and relevant information should you wish to expand to new destinations.
Mexico is the second largest economy in Latin America, the 15th largest in the world in nominal terms and the 11th largest by purchasing power parity. Its sustained macroeconomic and financial stability has reduced inflation and interest rates and has increased per capita income. Continued investor confidence has also contributed to an increase in net exports and private sector investments. The current progress in the implementation of structural reforms in the financial, telecommunications and energy sectors is expected to strengthen the expansion of economic activity in Mexico in the medium term.
Mexico has several economic, political and social challenges to consider. Nonetheless, from a general perspective, the country offers multiple opportunities for business and there is an active preoccupation to overcome the challenges.
The decline in the oil industry – Being that Mexico is a large producer of oil, the decrease in the barrel price has put quite an intense economic pressure on the economy in the country. This has forced the country to cut spending and raise interest rates. However, it also must be said that this industry’s contribution to the national economy is declining, while other sources of revenue (such as income from government services and state-owned companies) are increasing in relevance.
Currency depreciation – The Mexican peso has suffered a significant depreciation, mainly due to a gradual tightening of the monetary policy in the United States and a slowdown of growth perspective in emerging market economies. The peso lost nearly 30 percent against the US dollar in 2015. The government has reacted with additional public expenditure reductions, an increase in the monetary policy rate and with discrete currency market interventions.
Inflation – Mexico has managed to keep inflation quiescent. Low inflation benefits the domestic economy by maintaining real wages that empower consumer spending. For companies, this translates as a controlling factor of labour cost increases.
Consumer confidence and spending – The dynamism in the domestic market has caused an increase in consumers’ spending. Household spending power, wages and consumer credit are increasing consistently in Mexico, with a middle class that is finally flourishing in the country.
Social and political challenges
Government corruption and the rule of law – Behind crime, corruption is Mexicans’ second concern. Mexico’s government has been described as unable or unwilling to seriously take on the drug cartels, amongst other serious problems. Many businesses are citing corruption and bribery as a big barrier to investment and a principal cause of being less competitive globally.
Gap between rural and urban population – The quality of life and the opportunities available in Mexico vary greatly for the rural and the urban population. Social stratification is still highly present in Mexico. This fact, jointly with uneven infrastructure in the diverse territories, affects the accessibility of education, employment and even healthcare. When establishing a company or subsidiary in a Mexican region, it is relevant to consider this factor in order to have access to the necessary qualified workforce and infrastructures.
How can we help?
General Global Mobility advice
Companies should ensure applicants being transferred to Mexico are supporting the employee’s health and safety concerns. It is recommended that the employee has a visit paid in advance to see the area they will be working and living in, as well as being provided with local advice in terms of the security situation in the area and surroundings. Moreover, the company should fund the cost of immunisations (cases of locally transmitted Zika virus have been confirmed in the last 3 months). The employee should also know of the potential cultural differences and understand how the company will offer local support in that regard. Although there is a general level of the English language in the country, it is also recommended that the employee has at least a basic level of Spanish for daily life.
Our Immigration Advice
Mexico has a huge potential in terms of immigration. It has a quite flexible system with several options that allows companies to select the most convenient type of permit for their specific circumstances.
Many nationalities around the world do not require a visa to enter Mexico for business meetings or leisure. For the nationals that do require a visa, they are exempt from this request if they have in their passports a valid Canadian, US, Japanese, United Kingdom or Schengen visa. Permanent Residents of the Pacific Alliance country members (Chile, Colombia & Peru) are exempt the visa requirement to Mexico for business.
Business activities versus work permit in Mexico
The distinction between business activities and work activities vary in each country. As per Mexican law, you are not considered in need of a work permit if the tasks you are performing while in the country are only being paid outside of Mexico.
Therefore, if you are a visa waiver national and being sent on assignment to Mexico for less than 180 days, you can travel with your passport. If your nationality requires a visa and the assignment is for less than 180 days, you can apply for a business visa directly at a Mexican consulate. Notwithstanding, it is always recommended to contact us before sending the person on an assignment, for him/her to have the appropriate documents to show in case of a labour or immigration inspection while in the country.
Assignment versus local employment
While on assignment, employees keep their contract, payroll and social security payments in their home country. On the other hand, local employment demands an employment contract and payments made in Mexico.
Mexican immigration law currently offers both options for foreigners to work in the country. Yet it is important to highlight that the work permit given while on assignment does not allow the Mexican company to pay any salary or allowances to the employee. All payments and benefits while on assignment need to be paid abroad by the home entity, with home contract continuity during its whole length.
All work permit applications, for both assignment and local hire, must be sponsored by an entity in Mexico. Local employment requires that the sponsoring entity has a valid registration with the immigration authorities in Mexico in order to sponsor work permits for foreign nationals.
Restrictions on employing foreign nationals
Mexico has not included many restrictions for foreign nationals, apart from having a valid contract and payroll either in the home or host country. On the other hand, there is no local labour market test (advertising to ensure that no local resident workers can be found to fill the position) and no language skill requirement. Employees are not required to undergo medical tests or submit police clearances from previous countries. In general, working at a non-sponsoring client site is possible and companies do not need to be linked by common ownership for assignments.
Employees can normally start working in the country on assignment in just a couple of weeks, and with a local contract in Mexico around two months.
Mexico allows foreigners to become permanent residents in the country after four years of lawful residence. This period can be shorter if the change of status occurs due to personal linkage to a Mexican national (such as marriage or children), in which case it takes two years to become a permanent resident. Permanent residence is also applicable to retired people that wish to continue living in Mexico by showing they have enough funds to support themselves, without necessarily having been in the country for four years.
If you need advice or support with sending employees to Mexico, or other parts of the world, please do not hesitate to contact us at [email protected].