Mexican Market - part one
With the Canadian dollar reaching new
heights and a Canada-American
border increasingly controlled, Canadian
exporting manufacturers are starting to feel the
impact.
With these tendencies, Canadian exporters have few
options: adjust pricing in line with the increase
of the Canadian dollar to maintain U.S. market shares,
continue (or start) to penetrate into other markets
to minimise the impact or do a little of both.
Many markets are open for the taking, but one in particular
is Mexico
with many advantages. One of which is its geographic
proximity to both Canada and the United States on
one side and the rest of Latin America on the other.
Another advantage would be its population size. With
a little more than 97 millions inhabitants according
to the last census (The C.I.A.'s site estimates that
number to be closer to 107 million) and a very low
average population age of 25 years. Mexico is the
second largest market population wise of Latin America,
behind only Brazil.
Mexican economy can be misleading. On the one hand,
wages are a lot lower than what we have in Canada
and the U.S. But on the other hand, the cost of living
is somewhat similar. How do they fill up the difference?
For some families, sending one or many family members
to work in Canada or the U.S. provides a great source
of income, often enabling them to buy land or construct
houses without debt!
As well, a parallel economy is quite a bit developed
here. One activity in particular is kickbacks. It
is everywhere and in all walks of life: policemen,
civil workers, buyers, sellers, politicians, etc.
For example, it is quite common for a Mexican policeman
to be 'convinced' out of giving you an infraction
with a monetary compensation. Such compensation, once
tallied up, can ad up to many times the monthly salary
of such an employee. And that money does not show
up on any statistics. Hence, on paper, a large amount
of the population is quite poor, but the reality is
that for some, considered to be in the 'poor' category,
are actually doing quite well.
Furthermore, the debt level of Mexicans is quite low.
The average wage of most Mexicans did not allow the
banks to lend to most and interest rates were soaring
but now that Mexico has opened its doors to foreign
banks, interest rates are pushing downwards (mortgage
rates for 08/10/07 are between 10-13%
annually) and a more competitive lending market
enables borrowers to have access to money not previously
available. For the housing market, the Mexican government
has a
program similar to what is going on in Canada,
further encouraging the banks to increase their lending.
An interesting phenomenon that can be seen with the
naked eye is the vast quantity of new motor vehicles
on the roads. For a country that is supposed to be
poor, I am quite impressed by the amount of prestige
cars in the streets. In San Juan were I live, BMWs,
Audis,
Acuras, Navigators
and Escalades
are not common but they do make their presence felt
in increasing numbers. And this, I’m sure, is
a relatively new phenomena since the vast majority
of these cars have only been available in Mexico since
a short
while ago.
In the next article on Mexico, I will outline the
important cities that make up this lovely country.
Stéphane Elmaleh-Riel, MBA
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