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back to index backGLOBALtalk August,  2006


Business Practices in Mexico

The Basics.

In Mexico City, most offices are open from 9:00am to 5:00pm, but they can be open until 7:00pm from Monday to Friday. Most people leave for lunch around 2:00 pm and take between 1 and 2 hours. The federal branch of the Mexican government has tried to institute a 9:00am-6:00pm schedule, but they tend to stay later. The local government is going by the old rules of being in by 10:00am and leaving very late at night after a long lunch break. Lunch is generally expected to start between 2:00-3:30pm and end between 4:00-5:30pm.

Dress code

Mexico City is a relatively formal place, so Mexican business people wear suits. Guadalajara and Monterrey are different in that a collared shirt with pants is enough. Except for use in a beach resort, shorts do not enter into the dress code anywhere. Not even for a picnic. In fact, the easiest way to spot a tourist in Mexico City is by looking for people in shorts. If you are invited to a picnic or a tour of the countryside, dress casually, but elegantly. Polo style shirts, a sweater and sports slacks are best.

Negotiations

This is difficult because it very much depends on the type of company you're dealing with. Many multinational corporations negotiate like one does in the US, but in Mexican business circles "yes" can mean no and "no" can mean maybe.

In Mexico it is impolite to turn people down. As an example, if you organize a party, most people would assure you that they would attend regardless of whether they will or won't; only a last-minute confirmation will get you the right answer. In situations where people have no interest in the deal it is pretty common for people to refuse to take your calls (always with a polite lie), or to tell you that they'll "study the situation" and get back to you. It's the "don't call us, we'll call you" syndrome. It is important that you learn to distinguish between those cases where your business partner may need a bit more pushing and those cases where there is no chance of actually proceeding through with the deal, so as not to waste resources. People like to promise you the world while they are leading you down the garden path. The best way to avoid being taken down that road is to sit down and do the numbers meticulously and with realistic assumptions.

Closing a deal

Like in all countries, including the US, you have to be careful and look for references from your potential business partner if you don't want to be had, or at least have your time wasted. It is important to remember that Mexican firms are often under funded and thus can run into serious supply problems. This is a function of the dearth of credit and the cost of money (a loan in pesos has an interest rate of 25%/year; in this respect, Mexican business people are heroes). It's best to have these issues worked out beforehand - if the Mexican company is going to need a little money up-front to get the raw materials to produce what you want, then you should just make sure that they will dedicate their company to working on your order.

Make sure to leave a paper trail. The exchange of money and merchandise should happen at once. Payment should be by certified check, approved credit card transaction or with a transfer of funds in a bank. If you're supplying a Mexican company, the perennial letter of credit is the best idea.

Business Breakfasts and Lunches

A lot of business is done at breakfast and/or lunch. Breakfasts are also the preferred choice to meet, get to know, and exchange information over the potential business deal. People tend to have power breakfast and/or lunch, lasting over two hours, in expensive settings. As mentioned above, unless you want to go out drinking, breakfast is the best bet.

It is impolite to split the bill. The person who is making the sale, is traditionally expected to pick up the tab, or, alternatively, the person who suggested or "invited'' other parties to join him/her for a meal is understood to be offering to pay for that meal. (People rarely split the bill on a business meal). Tips, which are not included in the bill, are generally around 10%, although people are very appreciative of a good tip and they often deserve one.

Hiring

In Mexico, jobs can be advertised for man or woman, with an age range, and marital status specified as well. Unless you've done business in Mexico before, you should never try to hire anyone without having talked to a lawyer. The rigidities in the law make firing very difficult.

Minimum Wage Structure

Minimum wage in Mexico is about 100 USD a month plus benefits, although few people in the formal economy make so little. The Federal Government, depending on "economic zone" and tradesmanship, sets minimum wage. If you want to reduce the turnover factor of your employees in the shop you will most likely have to pay at least three times the minimum wage.

Language

As we've mentioned in other sections, you should take advantage of the language schools offered to learn Spanish. If you don't, you'll need at least one bilingual person working with you.

Translation

According to Mexican laws, and common sense, you must translate your marketing literature, product manuals, labels, and warranty. This may sound obvious to you, but surprisingly many companies provide only a single sheet in English, which hampers your business potential and/or may result in the sequestering of your merchandise at customs or sales point. Products from NAFTA countries must have manufacturer's label in Spanish.

Distribution

Tips:

• Attend Mexican business fairs.

• Look for well-established enterprises, with a long tradition, and solid financial position.

• Ask (see information).

Benefits

As in Canada and the US a worker may be your employee or may be an independent worker providing you a service under contract (por honorarios) in the latter case, you are not responsible for any benefits. In the former, minimum legal benefits include (but are not limited to):

• Health Insurance under the "Seguro Social" (IMSS)

• 15 days of wages at the end of the year. (Aguinaldo)

• Housing Development. (INFONAVIT)

• Retirement Funds. (SAR)

• Holidays. 5 days of paid holidays a year minimum.

• No more than 8 hours of working day under regular wages.

• Profit Sharing. Workers are entitled to a small percentage of your profits. (10% of the total).

Sometimes these regulations are ignored. Especially when it comes to white-collar workers.

Hours

Business Hours

• All banks are open from 9:00am until 5:00pm, Monday to Friday. Some banks have extended hours, including Saturday, at some branches.

• Supermarkets in Mexico City are open seven days a week, from 9:00am to 12:00am, although there are many that are open 24 hours a day.

• In Mexico City, street front stores are usually open from 10:00am to 8:00pm. In other cities hours may be shorter.

Working Hours for factory workers

The standard working schedule in the shop is Monday to Friday, eight hours a day and half-day Saturday. (See section 3).

Working hours and days

According to Mexican law, the working week cannot be more than 48 hours a week. Some workers get paid by the week others may get paid bi-weekly (quincena). Few workers get paid monthly. Workers are usually under a 5.5-day workweek. Legally, lunch hour must be paid for workers whose work shift includes lunch time (3:00-4:00pm). top

Social

Personal Relationships

Once again, the conventional wisdom relies on the stereotype that business deals are only closed between friends. While you should probably develop the ability to share friendly banter with your customers in Mexico don't feel the need to "suck up". What there does have to be is trust. Too many foreigners come in demanding meetings and consideration, promising the world and finally not getting anywhere. Nothing irritates a Mexican more than going through the steps and having the person they're dealing with not take a decision. This is especially onerous because of the fact that Mexicans can be generous and they often spend money on their business contacts.

Business meals are the time to get to know each other, conversation may wander through many different topics and the actual topic at hand is sometimes reached over coffee (or cognac, depending on who you're dealing with). From business breakfast and lunches people usually move on to an after-hour business outing, where drinking is involved, or to be invited for dinner in a family setting. Breakfast meetings are very recommendable, in that they are much more to-the-point.

Greetings in society

In Mexico it's a common practice for people of the opposite sex to greet one another with a kiss on the cheek, especially if they already know each other, but also upon first meeting. Among men, a handshake suffices. A simultaneous bear hug is common between close male friends. When it comes to business, the proper practice is a handshake, regardless of gender. A kiss or a hug can be acceptable among business associates who have developed a personal relationship.

Status

Mexicans are very status conscious. They care about what you wear, what car you drive. Professional titles are also very important. It is customary to address your business partner as "licenciado" which is the equivalent to a bachelors' degree. Do this even if you know that your business partner is not a licenciado. "Ingeniero" (Engineer) and "Doctor" (either medical doctor or PhD) are also quite common. top

Other Practices

Using the telephone and fax

The telephone is a useful tool to set up appointments and ask some general inquiries, but deals are never closed over the phone. The telephone is considered an informal means of communication. It is also the method used to make sure you are not stood up: confirm all meetings the day of the meeting (or the afternoon before, if it's for breakfast the next day).

Cellular phones are pervasive in Mexico. Fax machines are also very common. They are preferred over the phones when with dealing important issues. Remember that a spoken commitment in Mexican business culture is never binding. Practically all professionals in the service industries have email.

In most cases when phoning a Mexican businessperson, you will have to go through 1-3 secretaries before reaching the desired person. These secretaries may not speak English, so have a short sentence in Spanish prepared, asking for the specific person.

Other common business practices

In Mexico, time is not money. They may take their time to reach a decision. Nepotism is a common practice in business circles, not only may the son of the owner work for the company (indeed as is often the case in the USA) but many relatives of the CEO and higher-level managers may do so as well.

Bureaucracy is big in Mexico. Always take with you copies of most relevant files and legal documents that may be required during the transaction. It is also very important to take photocopies and originals of your passport as proof of identification when you're closing a deal. top

Source: SolutionsAbroad.com - GAI


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