Mexico is often promoted as a tourist destination. On Tuesday, two men who split their time between Mexico and Canada pitched it as a good place to do business.
Carlos Solorzano and Jorge Miranda spoke at a Red Deer seminar organized by Central Alberta: Access Prosperity.
Both are with Solorzano Corp., a Calgary-based firm that assists clients who are investing in Latin America.
“In spite of various challenges that we have in Mexico, Mexico remains a market that you should consider if you are thinking of expanding your business,” said Solorzano, who is a lawyer.
He pointed out that Mexico has signed 44 free trade agreements — more than any other country.
That gives it liberal access to a huge export market, including the European Union, Japan, South Korea and Latin America.
“The amount of trade that we do in Mexico is huge,” said Solorzano, pointing out that it actually exceeds the combined trade of Latin America and the Caribbean.
Mexico has invested heavily in its transportation infrastructure, has a stable economy, and boasts a young and highly skilled labour force, he added.
Of particular interest to oil and gas companies in Canada is the fact that Mexico’s state-owned petroleum company Petróleos Mexicanos (Pemex) is loosening its grip on the domestic industry, said Solorzano.
Recent reforms have included the creation of 11 blocks of land where exploration and development companies like Schlumberger and Halliburton can now operate independent of Pemex.
“We see these as a huge opportunity for the service companies in Alberta,” said Solorzano, suggesting that many were previously reluctant to work for Pemex — which has a reputation for excess bureaucracy and “questionable procedures.”
The impact of these changes has yet to be felt in Canada, with development rights for the blocks awarded only a few months ago, said Solorzano.
“They are not yet at the stage that they’re going to need all of the equipment that is manufactured here in Alberta, and all of the expertise that exists here in Alberta.”
Miranda, who is an accountant, agreed that foreign equipment and expertise will be needed to develop the blocks.
“We’ve been in conversation with the companies that have bought them, and you would be amazed that they don’t have, in many cases, either the physical resources — the units and equipment that is going to be required to do all that work — or the people to do it.”
More reforms are being debated by the Mexican congress, added Solorzano.
Doing business in Mexico is not without challenges, he acknowledged. Key among these are security issues and corruption.
In the case of the former, said Solorzano, the risk is not high in major cities, but grows in remote areas — where mining and energy companies often operate.
Prospective investors should factor in the cost of measures such as hiring a security company, he suggested.
Corruption is rampant in Mexico and throughout Latin America, said Solorzano. Some foreigners simply “play the game,” but that’s not a good option for Canadians because they run the risk of being sanctioned at home.
“Canada is being very strong on enforcing those extra-jurisdictional laws that you have. Other countries are not.”
Ultimately, said Solorzano, the best strategy is to do things right. This includes learning the local culture, carefully selecting your business partners and including dispute resolution provisions in your agreements, and being aware of tax implications.
“You can do all the things right, but if you do not give the right attention to the tax challenges or the tax implications of your business, your venture will be doomed from the beginning.”
Solorzano said his firm initially focused on the legal and tax issues of doing business in Latin America, but has expanded its services to include market entry advice and support. It has offices in Mexico, Colombia and Brazil, with both Solorzano and Miranda holding dual citizenships in Mexico and Canada.
“Mexico has challenges, we know that,” said Solorzano. “But Mexico really represents an opportunity for your business. If you do the right thing, you can land very good opportunities in Mexico.”
Central Alberta: Access Prosperity is a regional economic development organization.