The results are very good, thank you the cultural impact

I have attended the MEXPORT Expo at the San Diego Convention Center, as both a journalist and an exhibitor. Nineteen ninety seven marked the ninth year of the expo which, at its inception, consisted of an ad-hoc group of local manufacturers and distributors who gathered in a vacant Otay Mesa warehouse to display their services to interested maquila (foreign owned assembly) plant managers. The fact that MEXPORT graduated from a warehouse to the air conditioned, state of the art, mult media confines of the San Diego Convention Center is proof positive that the San Diego Baja trade zone has finally arrived. The very powerful San Diego Chamber of Commerce, organizers of MEXPO, can now boast hundreds of exhibitors and over three thousand attendees.

There I was offering up my dual services as a legal and business consultant as well as those of a journalist; promoting both the BAJA SUN NEWSPAPER and my syndicated radio program MEXICO TODAY. I can’t honestly measure the results of being a MEXPORT exhibitor in dollars and cents. However, it bolstered my, oftentimes flagging, conviction that the sacrifices I have made as a pioneer promoter for trade and commerce between the U.S. and Mexico were worth it. MEXPORT 1997 confirmed my belief that, a little later than I would have liked, I am in the right place at the right time.

Less than fifteen years ago, San Diego had a provincial, small town attitude, focused primarily on defense industries and providing goods and services to support the navy and her personnel residing in San Diego. With defense cutbacks and base closures San Diego would now be up the Tijuana River without the proverbial paddle if not for the 800 Maquiladoras that have developed over the past twenty years south of the border. One half of all the earned income of the one and one half million Tijuana residents comes from these foreign owned assembly plants and those folks, along with other Baja Californianos, spend two and one half billion of it each year on San Diego goods and services.

Trade figures tell a more complete story about the importance of crossborder trade in the San Diego- Baja region. According to the San Diego Chamber, of the 7.5 billion dollars in exports that flowed through San Diego in 1996 7.2 billion went to Mexico. Imports, that flowed through San Diego, totaled eleven billion, up 23% from 1995. Of that eleven billion, $9.7 billion originated in Mexico.

Nafta Mexico: When we look at the importance of this border to Mexico the figures are equally impressive. Mexico has 3,000 maquiladoras, employing more than 500,000 workers; over 15% of the total employment in Mexico’s manufacturing sector. Maquiladoras are by far the largest producer of foreign currency income, exceeding both the petroleum and tourism sectors in dollar revenue produced. The total number of plants in Tijuana, Ensenada, Tecate and Mexicali lead all the nation’s states in the number of plants, accounting for more than 25% of Mexico’s Maquiladoras. Reflecting the importance of this region to the international trading community Mexport attendees and exhibitors included the Japanese External Trade Organization and the Korean Trade Center. The Mexican states of: Jalisco, Veracruz, Nuevo Leon, Durango, Guanajuato, Morelos and Chiapas also exhibited at Mexport. You can’t blame them for trying to hook the Baja Maquiladoras or prospective Maquis to locate in their states.

Mexport folks reminisce with old friends who still bear the scars of the arrows they received as pioneers promoting cross border trade and cultural exchange. Survivors of the December 1994 devaluation of the peso and the excesses of the Salinas government. Veterans of the financial ups and downs for the Baja – San Diego border mingle with region newcomers to ce;ebrate at Mexport. Celebrating what appears to be a more secure future for growth and development in this fascinating border region.

Congrats to Neil Whitely Ross, V.P. of the San Diego Development Corp. the driving force for Mexport, Cindy Goforth for her competent and amicable management of the exhibitors and to all the folks that make Mexport a high energy celebration of the border’s most important economic sector.

The latinizing of the United States in U.S. Mexico Relations, the San Diego

When my parents were growing up in the early part of this century and even into my childhood years, in the 1950′s, it was best for us to assimilate and not exhibit our culture. We were chastised as children for speaking Spanish in public schools. In my home we only spoke Spanish in the presence of my grandmother, who spoke no English, or when my mother wanted to communicate to me without my friends understanding her. This always embarrassed me because it was rude to talk about them and they, of course, knew my mother was not expressing positive observations. It was not until the La Raza movement, in the sixties, that Chicanos and other Hispanics began to identify with the mother culture. Now in the United States, particularly in the Southwest, you are at a disadvantage if you do not speak Spanish.

The statistics are awesome regarding the growth of the Hispanic population in the U.S. and by the end of this century we will be the largest “ethnic minority” in the country. More importantly Hispanics are by and large a more successful entrepreneurial group than the average Gringo John or Jane. U.S. Hispanic owned businesses are growing at a 76% faster rate than non Hispanic businesses. In the communications industry the largest growth sector is in Spanish language media. The number one listened to station in Los Angeles, at this writing, is (KVLE) which broadcasts in Spanish. Presently, there are over 400 Spanish language radio stations in the United States. If you are a cable TV subscriber just surf your options and you will likely find several Spanish language networks and or local stations to choose from- TELEMUNDO, TELEVISA and TV AZTECA are transmitted all around the globe.

If L.A. were in Mexico its five million Mexican residents would make it the fourth biggest city in the country after Mexico City, Guadalajara and Monterey. From L.A. to the border 40% of the population in Southern California speaks Spanish. South of the border another unique market and culture has emerged. A new hybrid culture that has developed in Tijuana and Mexicali and their U.S. border cousins. Called “Fronteriza” it is a frontier culture that mixes: language, styles of dress, music and a perspective that is influenced by both Mexican and Stateside values. Although influenced by cross border experiences, Fronteriza is a distinct culture, neither Mexican or American. This synergy of influences is producing new and unique music, theater, literature and art.

The U.S. – Mexico border is where bi lingual highly educated Mexicanos are as apt to read the Wall St. Journal as they are a Spanish language business journal and conversely fronteriza U.S. businessmen read El Financiero (the Mexican business journal also found as an english language weekly version. This border region is also producing young entrepreneurs who are developing new approaches to marketing to these important and quickly growing, bi national, bi cultural economies.

Javier Reyes is the publisher of Latino Magazine, struggling to educate San Diego advertisers about the importance of the Hispanic market. Reyes, who originates from L.A., is somewhat frustrated with the San Diego advertiser’s slowness in accepting the importance of Hispanic oriented media. Reyes points out that San Diego’s hispanic market is, by national standards, the eighth largest in the United States. However, when we include the border towns of Baja California, the Hispanic market in this region is really among the top five in the nation.

The Baja border population is about equal to that of the San Diego market. Therefore, advertisers in the San Diego market are getting a double bang for their buck. Radio signals, cable T.V. , satellite dishes and wide distribution of U.S. magazines and newspapers provides advertisers with a “free ride” into Mexico. The major Baja market spans the border through Tijuana and Mexicali to Ensenada, seventy miles to the South.

Throughout these cities cable T.V. provides all of the major networks, including Fox, CNN, The San Diego PBS affiliate and of course MTV. When we include satellite viewers, and AM radio signals the entire state of Baja has wide access to U.S. initiated programming and commercial coverage. In print media, pharmacies and news stands throughout Baja sell the San Diego Tribune and the L.A. Times. Local San Diego advertisers, paying local rates in all of the media, get the benefit of this audience windfall.

Advertisers are also getting hip to the fact that this is not some “poor farmworker” demographic in Baja. San Diego Dialogue, a University of San Diego research group, dedicated to researching the border region, determined that the average income in Tijuana was equal to that of the average San Diegan. Tijuana scored higher, however, on the education scale. North of the border, a new generation of affluent Hispanics has emerged. These new, upwordly mobile, Spanish speaking buyers, can afford second homes. As a result, Rosarito Real Estate sales people estimate that 40% of their sales are now to Hispanics. They also report that it is an easier sale because they do not have the same gringo fears about Mexico to overcome.

If you don’t believe the crossborder Hispanic market is big business ask Enrique Morones, Hispanic Marketing Director for the San Diego Padres. The following is extracted from a recent Wall St. Journal article by Julio Laboy: “For years the Padres had a reputation for ignoring San Diego’s minority communities; some critics had even dubbed them ‘the champions of neglect”.

Then in 1994, John Moores and Larry Luchhino took over the team from a group of 15 owners and attitudes changed. Now instead of minority leaders struggling to initiate contact with the Padres the Padres are seeking them out.

The groundwork for the Padres program was laid two years ago when the team named business consultant Enrique Morones to the newly created position of director of Hispanic marketing. With an eye on drawing fans from a huge regional market that includes Tijuana, the team opened a store selling Padres tickets and memorabilia across the border in Mexico.

In 1996 the Padres began busing Mexican fans to Sunday games and broadcasting the games in Mexico. The team also made history when it played the New York Mets in Monterey, Mexico. It was the first regular season major league game ever played outside the U.S. or Canada.

Morones who is justifiably proud of the bottom line results he and management have been able to produce by paying attention to this very lucrative market. The 1996 attendance figures were three and one half times greater than the previous season with a total of 225,000 Hispanic fans. The success of Morone’s effort resulted in his being promoted to the new title of Director, Multicultural Marketing, expanding the concept to other ethnic groups.

A new day has dawned in the hearts and minds of businessmen at the border. Almost everyone now realizes how economically dependent we are upon each other and that economic dependency will translate into better relations between the two countries. I am very excited about where I live and work again after some very lean times. I’m not predicting a boom as I did in the mid 80′s for Baja because I’m afraid it might, again, jinx the state’s chances.

The US Science Mexico Needs

The United States of America is the superpower of selling. A nation that bombards its populace with direct mail, billboard advertising, commercials, infomercials, telemarketing, and armies of sales folks who approach you at home, in your office, in stores, and on the streets. A nation that rewards selling handsomely – one of the highest paid professions. This century’s lead salesman, Lee Iacoca, became a billionaire and was seriously considered as a candidate for the presidency as a result of his ability to sell. Ronald Reagan was called The Great Communicator because of his ability to sell us soap in the early days of television and later selling us “trickle down economics” and Starwars as President. So good at selling he could sell us Vodoo economics and a huge boost in the cold war.

In addition to salespeeople we have millions of folks who provide sales support, marketing or research: psychologists, sociologists, demographers, market specialists, statisticians, graphic designers, cinematographers, choreographers, actors, writer, composer, editors, comics, announcers, technicians, focus group leader, scientists, computer experts, various celebrities-all engaged in studying our buying habbits or motivation us to buy a particular product or service.

In 1996 the Secretary for Tourism of Mexico, Sylvia Hernandez, appeareed in an American Express commercial that caused a flurry of criticism in this country. I doubt the same criticism would have befallen a politician in the States. That is a major difference between the two country’s attitudes toward selling. In the U.S. we give out awards for the best sales pitches (television commercials). In Mexico, selling is not only an undeveloped science it is viewed as something that “professionals” do not engage in. This negative attitude toward selling is hurting Mexico’s chances to compete internationally.

The historical precedence for this lack of salesmanship comes from a variety of cultural traditions and lack of competition in the marketplace. Until the mid 1980′s the banks, transportation, telecommunications and many major manufactureres were government owned entities without competition. An isolated economy with prohibitively high tariffs on imported goods.

U.S. manufacturers have been producing products in Mexico since the 1970′s, however, they were only allowed to export the products they were only allowed to export their manufactured products. One of the problems that NAFTA created for Mexican manufacturers was a fifty year pent up demand for U.S. made goods that flooded the market upon passage of NAFTA. Prior to 1989 Mexico’s access to foreign made goods resembled cold war Russia where tourists were approached on the street of Moscow by natives wanting to buy their jeans. Similarly, here in Ensenada, in the 1980′s Mexican friends would ask me to bring them Levis from the States.

Aside from isolationist policies prior to 1990, well ingrained cultural values, as mentioned, run counter to encouraging agressive selling in Mexico. Selling as we know it in the States involves a bit of bragging and comparative criticizing of the competition. In 1960′s U.S., it was still considered bad taste to knock the competition.

I worked for IBM in the 60′s. If a prospective customer decidied on a competitive product, it was considered highly unethical to engage in discouraging that decision. More than unethical, violating this rule would result in dismissal. We called it “unhooking” the customer. Now knocking the competition is done by office products, auto manufacturers, drug companies (the headache remedy wars), and a whole host of products.

The most insidious knocking of the competition is in the U.S. political arena, where a candidate’s private life (past & present) is thoroughly investigated and exploited by the opposition. Through the Kennedy years, politians could maintain a provate life without the constant scrutiny of the press. Reporters had a code of ethics that not only avoided reporting persanol skeletons, in the closets of politicians, but even included conspiracy to hide “personal matters” from the public if it wold tarnish an important political image.

Examples of press restraint and ethics can by found in the concealment of FDR’S physical handicap and Kennedy’s womanizing. The press corps until the late 60′s consisted of the three networks, and a handful of major newpapers, magazines and press services. Now the press includes a whole host of new players: hundreds of television options, talk radio jocks, shameless tabloids, and the internet. All are competing furiously for juicy gossip and willing to pay for it. This is not only an ugly smudge on our political landscape, it is preventing “good people” from running for office and causing effective incumbents to retire early.

In Mexico the press still respects the private lives of public figures. Also, it is still unseemly to brag on oneself and especially at the expense of someone else. There is a popular saying for folks who brag or exaggerate the qualities of a product or person “hachando demasiada crema a su taco” (adding too much cream to you taco). Whereas, in the U.S. we have a saying: “if you don’t toot your own horn somebody will use it as a spittoon”. If a Mexican stumbles and falls ssocially or financially, and their reputation damaged, it is in bad taste for the competition or detractors to exploit the misfortune. The Mexican saying is: “no haces leña de un arbol caido” (don’t make firewood from a fallen tree). “Never kick a man when he’s down” has become a mean spirited “finish him” press and public motto for those we dislike or oppose politically or financially. We are all responsible for this mean spiritedness. As a people, we can let those that try to sell us personal attack propaganda that it won’t sell cause we ain’t buyin it. We can learn a lot from our Southern neighbor about being ethical and corteous.

Mexico is still relatively free of a “dog eat dog” competitive mentlisty. The Mexican tradition of sharing with your neighbor is more firmly entrenched than in North America. In the U.S., even your neighbor is seen as a competitor. The culture has gone beyond “keeping up with the Joneses” to outdoing the Joneses. A horrifying example of competitive materialism gone berserk is inner city kids literally killing each other for “the right sneaker”. In Mexico the cultural tradition of sharing is reflected in the quite common practice of shopkeepers sending customers to competitors if they cannot provide a particular product of service. In the U.S. that might happen occasionally, in a small town, but not likely in the highly competitive cities.

CUSTOMER SERVICE

In 1999 Ensenada, I still can’t pay my telephone or electricity bill by check via the mail. Lines are so long at the bank that it becomes a social event, friends asking friends to accompany them on the long wait in line. The banks and the phone company are probabley the worse examples of not atttending to customer needs. The banks charge extra for every imaginable service, fifty dollars is the standard charge for a returned check due to insufficient funds. The telephone company charges long distance rates and service installations that are 50% higher than in the States. This situation has improved since 1998 as foreign owned long distance providers have entered the Mexican market.

An example of not paying attention to your customer occurred in San Felipe, Baja California. A U.S. retiree convinced the phone company marketing reps to travel two hours by car to San Felipe from their Mexicali office to talk to customers about “new” phone services. The executives were shocked at the demand for telephone service as they signed up 100 new subscribers in one weekend.

The new customers were delighted to discover that Telnor had reduced installation fees by one half. The local telephone reps were double charging for phone installation and pocketing the difference. Also, unknown to San Felipe customers was that Telnor had touch tone dialing, call waiting , data transmission and the internet. All of these technological improvements had been implemented for over a year without informing the customers or prospective customers.

The lack of human resouce development (training) has also contributed to poor sales, marketing and customer service. The historical answer to increasing productivity in Mexico has been to simply hire more “cheap” labor rather than increase the productivity of existing workers. The tradition of throwing cheap labor at a production demand is still very much in vogue since minimum wages are still less than $5.00 a day. The lack of training is thereby compounded by the lack of incentive for workers who view their jobs as financially unrewording and not deserving of extra effort. The lack of training is compounded by the lack of incentive for workers . In the sales arena the cheap labor attitude of employers is evident with low commissions and small to non existant bonus pay. Mos tourists in Mexico see the result of these traditions in sales clerks who sit behind the counter watching television or talking to friends while customers enter and leave the store without an inquiry from the employee for sales assistance.

The point of all of this is that the U.S. knows how to train sales, marketing and sales service personnel. All the training that Mexico requires has already been developed and awaits translation into Spanish. Many programs have been translated and simply await implementation. Mexico most develop her managers and sales people if she is to compete more successfully in this highly competitive global economy.

Whether it is a marketing campaign for the world’s tourists or a sales/service clerk in a retail store-Gringos know how to increase sales through attention to customer needs, providing better service, and looking for value added products and services to enhance profitability. U.S. sales and marketing trainers have a lot to contribute to increasing Mexico’s revenues and the personal development and financial success of her sales people. I hear Mexican businessmen pay lip service to training and development, but most still do not understand the commitment required to successfully improve sales performance. They must also adopt new employee incentives to reward successful selling and abandon an age old proactice of a “cheap labor” psychology.

The sales, service and marketing technology can be easily made available but Mexican businessmen really “gotta wanna”. I believe we can develop a culturally sensitive approach to successful sales training in Mexico. The result could be a cadre of professional sales people in Mexico without the dog eat dog fallout that has ensued in the States. If Mexicanos don’t commit to developing better sales skills they might just as well get out of the way. If major commitments to selling differently in Mexico are not made then U.S. and other foreign entities will continue to kick the sales and marketing butts of their Mexican competition.

A lack of a sales and marketing culture is an advantage to those who are entering this arena in Mexico.

You can skip if you don’t want to do business in Mexico.

THE RULES

1. AVOID LAWYERS
2. DO YOUR OWN HOMEWORK
3. UTILIZE GOVERNMENT AGENCIES FOR FOREIGN INVESTMENT

Lawyers in Mexico, as in the United States, should be avoided; however, at times they can be a very “necessary evil” – as the saying goes.

My work as a consultant at a Mexican law firm and my experience as a foreign investor in Mexico, over the past fifteen years, has taught me that in order to succeed you must educate yourself regarding the rules of the game; of course, this is true of investing in any country. The U.S. businessman at home understands enough about his country’s civil laws and tax code to intelligently manage a legal or fiscal professional. The foreign client is vulnerable to professionals overcomplicating their matter, overcharging for services or shortcutting the legal process. The client often ends up paying government fines for non compliance and repays someone to do the work correctly.

Education is the operative word for neophyte foreign investors. There are over 500 seminars annually on Mexican investment that are scheduled throughout the Americas. Choose one that includes a comprehensive discussion of the following: foreign investment as it pertains to establishing a foreign owned business, tax laws and international tax reporting agreements between the U.S. and Mexico; how to use bank trusts for acquiring coastal and border property as a foreigner, and how to purchase property as a foreign owned Mexican corporation. Avoid a one day crash course on investing in Mexico.

The comprehensive conferences I have organized in Baja California always require two to three days to cover the subjects properly. Handouts should include a copy of Mexican foreign investment law in english and an outline of tax obligations in Mexico for foreigners. The U.S.-Mexico Chamber of Commerce is a good organization to check with, in addition to their own seminars and trade shows, they can advise you on the quality of other workshops.

Ron Sharpe is a furnishings factory owner in Rosarito, Baja California who speaks very little Spanish and has never used a lawyer either to establish his successful business or in the running of same. What Ron has is patience and dogged determination. He tirelessly goes to Mexican authorities for assistance. He finds that his lack of Spanish and desire to do things himself strikes a responsive chord and produces an extra effort on the part of bureaucrats to help him. Ron is unique in this regard. Speaking Spanish, in most instances, is imperative for successfully running a business in Mexico. Entrepreneurs, who do not speak Spanish can choose a total immersion program from one of the hundreds of fine foreign language schools throughout Mexico. My clients have typically become fluent within six weeks of training.

Exploiting governmental resources

If you are a U.S. citizen the first agency to contact would be the department of trade in your state. Somebody in the state commerce or economic development department has the responsibility for advising you on commerce with Mexico. The Small Business Administration has computerized training programs on international trade and, in the Western United States, have folks who are knowledgeable about trade between the U.S. and Mexico. These agencies are a good resource for identifying educational opportunities close to your home and typically have someone they work with on the Mexican side of the border to refer to as well.

Another important resource, already mentioned, is the U.S./MEXICO Chamber of Commerce with offices in most major cities throughout the U.S.. In Mexico BANCOMEXT is the trade bank with offices in the major cities, i.e., Tijuana. They are are staffed with english speaking investment counselors and provide a library with directories to help foreign investors find suppliers and or joint venture partner candidates in specific industrial sectors. Bancomext also provides guidance in seeking loans for international trade ventures.

Most small investors who seek my help are usually not investing out of a singular desire to do business. They are mostly motivated by a love of Baja where they have spent great vacations and want to spend more or all of their time here. My advice is to proceed slowly. Try living for a while in the area you have selected for your future Mexican home and spend some time talking to Mexican officials at the state and municipal levels to determine their attitude toward foreign investors. Also, seek out foreign and native entrepreneurs in the area to test out your business ideas and seek their advice on market feasibility and potential problems.

Living and doing business in Mexico area, over an extended period of time, is always quite different than vacationing there. You may discover the area is too remote and lacking in services to fill your long term needs either business or personal.

I am more than happy about my decision to move to Ensenada, where my first investment was a vacation home. I soon realized when my “getaway” became my primary home that my beach property, with no nearby business services, was too remote a location. I also learned that it was great living there on holidays but not on a permanent basis – (too quiet for this Oakland homeboy), so I ended up renting an apartment in town.

Being close to international business resources is important when doing due diligence. For prospective foreign investors the following resources are available in Mexico: State Economic Development and Tourism, Department of Foreign Investment (if considering a tourism related business), bankers and of course lawyers and accountants recommended by foreign entrepreneurs and government officials. Other agencies to solicit counsel from are Mexican chambers of commerce: CANACO, for retailers; CANACINTRA, industrialists; COTUCO, tourism; and an Association called COPARMEX, a small business organization to assist small to medium sized businesses in Mexico. COPARMEX can help with legal, accounting, and bilingual personnel selection and training. All of these agencies have offices in major Mexican cities. TAKE YOUR TIME, DO YOUR HOMEWORK AND SELECT PROFESSIONALS CAREFULLY and like any business anywhere – LOTS OF LUCK!

If you don’t feel much satisfied about what you found, please contact us for a free consultation

Foreign Investment in Mexico

Is it “Let’s get the gringo” time?

The above is sometimes true. Understandably, in a nation whose millions of poor people see gringos as having enormous wealth as compared to their meager existence. The result is often a two tier pricing policy, one for gringos and one for Mexicanos. Savy U.S. residents in Mexico will often have a trusted house servant or employee do the bulk of the shopping to avoid discriminatory pricing. Price comparing for major purchases can eliminate the gringo gouge, the ripping off of gringos is not the national pastime (soccer is) and so getting bids can prevent overpricing. I certainly don’t wish to infer that most Mexicanos overcharge gringos – that is not the case, but the practice is prevalent enough for the anglo buyer to be aware.

If you are ripped off there is a consumer protection agency called PROFECO, The Federal Consumer Protection Agency, with offices in all major cities. In the cases I have seen, the agency is fair and disregards nationality when rendering decisions. The Mexicanos who do the most ripping off, in my experience, are: lawyers, contractors and mechanics, in that order. Not much different than stateside consumer abuser lists. The important attribute about PROFECO is that they have the power to order the service or product provider to return moneys, or complete what was promised.

Many instances of “gringos getting screwed” doing business in Mexico results not from a purposeful intent to do so but because of a difference in cultural perceptions. Talk to any long time ex patriate in Mexico and they will agree that trying to “make sense” out of Mexico or Mexicanos is a fruitless task. The country and her people are full of paradoxes. If you approach understanding this country using rational thought processes Mexico will only confuse you. Let me illustrate with a real life example:

My clients, a married couple, spent $50,000 to buy a lot and then another 150 thousand to build a home in a hillside subdivision in which all of the lots have gorgeous ocean views. Those ocean views are “protected” by convenants, conditions and restrictions (C.C. & R’S) that each lot owner agrees to when purchasing property at the subdivision. Prior to building, each lot owner is obligated to submit construction plans to the DESIGN COMMITTEE of the homeowner’s association for approval – One of the major responsibilities of that committee is to protect those expensive ocean views from neighbor’s building a home that blocks the vista.

My clients were concerned that construction on the adjoining property could hamper their ocean view but were assured this would not happen by the President of the DESIGN COMMITTEE; that the only construction plan acceptable would require the owners to locate the structure on the lower grade level of this sloping hillside property. My clients had just gotten comfortable in their new home when their neighbors went before the DESIGN COMMITTEE with a building plan that obliterated their primary view of the ocean; allowing only two telescopic views on either side of the structure. The DESIGN COMMITTEE properly rejected the building plan, however, the neighbor’s Architect, requested a building permit from the city and received it.

I assured my client -NOT TO WORRY. When the subdivision was approved by the city planning department the C.C. and R.’s were published and legally approved by the city agreeing to the non issuance of building permits without the subdivision’s DESIGN COMMITTEE approval. The planning department, under several different department heads over the years, had always respected the DESIGN COMMITTEE’S rights of prior approval before granting a building permit.

Representing my client I asked for a meeting with the Planning Department Director and was told to present my case in writing. I did so and was told by the Planning Department Director that nothing could be done about it and that the matter was closed; he would not rescind the building permit. I then proceeded to the City Attorney’s office. When presented with copies of the official publication of the C.C. & R.’s and the subdivision agreement with the city he agreed that the city erred in issuing the permit and that he would personally discuss the matter with the planning department director.

After repeated unanswered phone calls to the City Attorney I went to his office and waited until he agreed to see me. He explained that he could not convince the Planning Department Director to change his decision and suggested we file a law suit against the city and that surely the outcome of that suit would be in our favor.
In my best Oakland Spanish I said to the City Attorney “Say What?”
“Now let me get this straight. You the city attorney is recommending we sue the city and you know you will be losing the case?” His answer was in the affirmative.

Now by U.S. standards this solution to the problem would not be acceptable but in Mexico it is. His good relationship with the planning department head, the city attorney explained to me, was important to him and defending a law suit for the city that he would lose was preferable to battling with the planning director.

This story above has an unfortunate bottom line – my clients are going to pay a minimum of $8,000.00 in legal fees to obtain their rights from a system that acknowledges their rights but wont protect them.

If you try, when doing business in Mexico or investing here, to apply gringo logic to everything you will go crazy or broke or both. If you approach understanding this country using a rational (scientific method) thought process Mexico will only confuse you more. To understand and assimilate into the culture you must give up logic as we know it in the States. In order to understand Mexico and Mexicanos you have to stop trying to understand – the enigmas and contradictions are too great. Only a holistic, experiential, non analytical approach to Mexico and Mexicanos will work but the rewards are fantastic.

My clients have good reason to be pissed at Mexico but they will tell you in a heartbeat they would not live anywhere else – Gringos becoming Mexicanos? Could be.

The Steps

The first step is a permit from The Department of Exterior Relations (departamento de relaciones exteriores) in which you register the name of your Mexican corporation. Three names for the company are submitted and a computer search of those names is completed to avoid duplicating an existing name. Approval of the company name, and a permit authorizing same, is done within 24-48 hours.

The next step is developing the articles of incorporation and this task requires the inclusion of a “Notario”. These are not notaries as we know them in the States. The name is similar, however, the Notario in Mexico has incredibly vaster powers. The notario is a keeper of the public record: A licensed attorney, willing to forsake litigation, who passes the notario exam and is appointed by the state. The number of notarios in a county is based on population. This restricts the number of notarios and thus guarantees their millionaire status. For example, Ensenada with a population of 457,387 has only five notarios.

Notarios must put their approval on all property transfers, publicly recorded contracts, wills and public registry of all corporations. As you can imagine, they are very busy people. Notarios, like all professionals, vary in terms of: competency, accessibility and promptness of completed work.

Via a process of elimination, over a ten to fifteen year period, I have identified notarios from Ensenada to Chiapas (on the border with Guatamala) who work efficiently and posses a comprehensive understanding of foreign investment law. A good notario is absolutely essential to accomplish the maximum benefits for our foreign clients. If a real estate purchase in Mexico is the objective; the sale can be managed as an escrow. The notario can be instructed to then act as the escrow agent.

Notaries tend to differ in the legal criteria they use in permitting certain transactions. Often an individual notario will not agree with what I and my client want to accomplish. If I know it is legally appropriate, I simply go to a notario who understands the appropriateness of the transaction.

Once the articles of incorporation are recorded in the public record, we begin to obtain the necessary permits: Hacienda (tax boys) , Department of Commerce, State Registry, a mandatory Chamber of Commerce (by industry), SIC code data base, Import/Export permit and the Department of Immigration. Additional permits are required specific to certain industries. All of the above permit fees, including the Notario’s five hundred dollars, is around $1,500. Consulting fees for processing the paper work and completing registries is additional.

Upon hiring employees they and your corporation must be registered in “Seguro Social”. The agency provides medical benefits, subsidized housing and retirement. You can expect approximately 22% of payroll earnings as payment to Seguro Social. Employees also receive annual vacation pay of six days for the first year of employment, eight for the second anniversary, ten for the third and twelve days for the fourth year. Succeeding years are incremented by two days every five years.
Additional employee benefits are a X-Mas bonus totaling fifteen days of salary.

Severance benefits include 90 days for completing the first year of employment plus 20 days for each year of employment beyond the first year. Included in the severance package is an antiquity bonus: Twelve days for each year, after the first anniversary of employment, multiplied by twice the minimum wage. The minimum wage is $4.50 per day.

If an employee is consistently late, absent, disrespectful, irresponsible, dishonest or incapable of completing required tasks you can terminate that employee (with sufficient documentation) for considerably less than the formula outlined above. The employer pays the annual Christmas, vacation and antiquity bonus but is relieved of paying the annual severance pay of ninety days (first year) and twenty days for each year thereafter.

Employees also receive a profitability bonus that amounts to ten percent of company profits. Most employers do not pay that amount. The company and employees can agree, in writing, to a bonus system that substitutes for the ten percent of profitability. Another corporate responsibility is to pay Hacienda (IRS) 34% of profitability.

Employee contracts are a must to safeguard the employer. The contract outlines: hours, responsibilities, salary and bonus incentives if they differ from the 10% stipulated by law. If the contract is for seasonal work, the season length is specified and termination stipulated. Severance for seasonal workers only includes Christmas and antiquity bonus in proportion to the number of days worked.

For decades there has been a recognition that the Mexican labor code needs a dramatic overhaul. The present system tends to create an adversarial relationship between employer and employee. Because of severance considerations, Seguro Social and profitability bonus, employers tend to pay the lowest wages possible. Employees who feel underpaid tend to give less than a 100% effort and look for opportunities to be fired, without legal justification, if severance pay is significant.

Employees can walk off the job as a group, in a general strike, if labor law has been violated by the employer. A typical rational for a general strike is failure to pay employees in a timely fashion or a change in work days and hours without sufficient notice. A change in job responsibilities, without employee agreement in writing, is also sufficient grounds for a labor demand. These general strikes can be costly if the number of employees and years of employment are significant. All labor demands are settled by arbitration in a proscribed labor court called “conciliacion” (conciliation).

The expense and complexity of creating a corporation in Mexico is far greater than in the states. The time it takes to complete all of the governmental hurdles is approximately six weeks. President Vicente Fox has vowed to streamline the process but to date it just gets more complicated.