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ATTORNEYS AT LAW
Please contact us at our Mexico offices located at:
Apartado Postal No. 9
San Miguel de Allende, Guanajuato, Mexico
TEL. US.: (800) 856-5709
|OUR MEXICO CITY OFFICES
Montecito no. 38 Piso 37 Oficina 37
Edificio World Trade Center
Colonia Napolis C.P. 03810
Mexico, Distrito Federal
Tel: (55) 5351-0438
AGRICULTURE AND FOREIGN INVESTMENT IN MEXICO
Choose one: Food Processing & Distribution , Foreign Investment in Agriculture , Imports , Improvements , No Tax Incentives ,
Opportunities , Trade in Commodities
Food Processing & Distribution .
Foreign investment has always been noticeable in food processing and distribution in Mexico. Among the companies in Mexico from abroad are the more outstanding of the world food industry (e.g. Nestle, General Foods, PepsiCo). Today the food industry in Mexico represents one of the fastest growing areas for foreign investment. For example, while the total number of new plants in the Maquiladora industry grows by single digit percentage, the number of food processing plants grows by double digit percentage percent. Joint ventures are under way between U.S. and Mexican retailers, and many restaurant chains have opened up in Mexico.
Foreign Investment in Agriculture
Foreign investment in agricultural production in Mexico, in contrast to food processing and distribution, is very small. The low level of foreign investment is due to the difficult legal structure governing the land tenure system in Mexico: 1) land holdings size is limited; 2) non-resident foreigners are prohibited from owning farm land (only through specialized structures and only in a minority position); 3) eiido land cannot be rented; 4) corporate farming is not allowed; and 5) resident foreigners are restricted from owning land by the coast and borders due to the Restricted Zone and limits on foreign investment in ranching and farming. Many of these restrictions also hold back Mexican investment in agriculture. Some options exit for partnerships. These are, however, limited.
The government has initiated many important policy changes in the food and agricultural area. Import permits have been eliminated on essentially all but the basic commodity products.
Conasupo, the Mexican commodity supply institution has been significantly down scaled. Many food price controls have been eliminated (yet they are still set by government - private sector "negotiations" as part of the anti-inflationary program). During the 1980's food manufacturing grew at an average annual rate ahead of the general industry growth rate. Beer production was the high growth industry of the last decade, along with fruit and vegetable processing. Both have a major export component. Nixtamal, or corn meal for tortillas, also showed strong growth throughout the 1980's. Food manufacturing is concentrated in the central part of the country, reflecting the industry's preference to locate near the consumers.
No Tax Incentives
The tax policy does not facilitate risk capital moving into agriculture production. For further information on taxation issues please contact Santinelli & Associates in Mexico City (please say we sent you).
The Mexican market presents interesting opportunities, yet there are obstacles that must be overcome, income distribution still favors a small proportion of the population. High value product consumption is concentrated in the upper income urban strata. There are approximately 15 million households in Mexico, and about two-thirds are located in urban areas. The average size family is approximately 5.0 persons per household, with only 1.5 working. This means that the household is smaller than commonly thought. Food and beverage consumption represents close to 45% of the total money spent by the average Mexican household. Milk and meat purchases represent the major food cost items. Economic growth has contributed to increased food demand. Shopping frequency varies by income level and type of purchase. While price is an important consideration, Mexican consumers rate product quality as even more important in making their purchase decisions. Mexican consumers want quality products, and are willing to pay for them (within the limits of their ability).
The Mexican market place is showing some change and the economy is showing some hope of opening up, due to there existing more competition and foreign investment. The increase in consumer income (on some levels) is being felt in the market on up-scale and processed food products. The Mexican market place needs foreign capital for production, marketing and technology.
Trade in Commodities
Trade in commodities and food between the U.S. and Mexico has been growing at a rapid pace. Two-way agricultural trade is several billion dollars a year. Growth in processed high-value food trade is out-pacing all other food products.