The world's best start-up hubs: Mexico City, Mexico

An increasingly attractive proposition for US start-ups, Mexico City has recently seen the opening of co-working spaces such as El 3er Espacio, accelerators in the shape of Mexican. VC. as well as whole host of conferences and networking events...

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  • Population: 8.9 million
  • Pros: A very sociable way of doing business, a vibrant economy and good employees/partners aren't hard to come by.
  • Cons: A legal system which is at times tricky to navigate, while the timings businesses run on presents a challenge for those unfamiliar with the country or culture.
  • Cost: Good value can be found in rent and services, however administrative procedures can become very costly.
  • What to expect: ​A friendly, family based business culture, tough negotiations and many unwritten rules which you will quickly need to discover.

The huge metropolitan population of this sprawling capital city now offers a tempting hub for Latin American start-ups to base themselves. To find out a little more about the nuances of doing business in Mexico, we talked to Mark Goodenough, an English entrepreneur now based in Mexico.

What are best aspects of doing business in Mexico?

Mexico is a very sociable country which spills over into business dealings. People are very friendly and it is easy to build relationships. Being a foreigner can be both an advantage and disadvantage. They assume that you are knowledgeable and have money, but are wary of you and cautious. In Mexico everything is possible with money and I mean everything. Salaries on the whole are low, so you can afford to employ good people to do everything and anything. It is a young vibrant economy, so there are many business opportunities.

What are the downsides to doing business in Mexico?

There is a long learning curve if you come from Northern Europe. Very few people or companies have timely cultures, so be patient, things never happen on time. Even the important things. The legal system is on the whole very slow and officials corrupt, so you have to learn how to manage your affairs without relying on legal backup. Easy money is the great motivator and once you understand that everything is for sale with personal benefit above all and at the expense of all, it becomes easier to operate. People will very rarely tell you the truth, so you have to operate by reading their intentions. They don't like confrontation, or saying no, everything is an ongoing negotiation. You have to learn how to speak Spanish - not the Spain kind. Speaking English is fairly common amongst educated people, but to succeed you need to speak the language.

How would you describe the business culture in Mexico?

A friendly family based culture, very common for people to take family members along to meetings, even though they have no role to play. Very status conscious, which as a foreigner gives you an advantage, but be aware of it.  The culture is one of pleasing people, they try to build a personal relationship with you, but beware it often comes at a cost. They will invite you to lunch or to their home for dinner. They are genuinely very friendly people. They are tough negotiators and very price sensitive. Everything is up for negotiation until the contract is signed and even then. They will try and charge you more for being a foreigner, so you have understand what you should be paying. On the whole the culture is unstructured and undisciplined, so you have to learn how to create your own corporate subculture. There is a culture of not paying for things on time, or at all and the richer you are the more you typically follow this rule, beware.

What are the costs of doing business in Mexico?

There is a long learning curve which can be reduced by following some simple rules. People and services are on the whole cheap, but quality and service levels poor. It takes a while to build a network of trustworthy people and suppliers. Be ruthless, if you smell foul play, take tough action, if you forgive it will cost you. Administrative procedures are on the whole very bureaucratic and may take a long time unless you are prepared to pay to speed it up. Rent is good value in most places and normally plentiful.

Certain parts of the country and certain types of businesses are targeted by criminal gangs. They demand a fee. If you want to operate you have to pay it. They have local politicians, police and judges in their pockets, so you either pay, or leave. Know what you are getting in to.

What tips would you give to an entrepreneur thinking of starting-up in Mexico?

Learn the language. Do your homework by creating a network of like people who have been through the experience and can advise you and introduce you to trustworthy local advisors, lawyers and accountants. Ensure that you are setting up in a way in which the criminal organizations cannot get their teeth into you.

Take time to understand the culture and how to interact with the people. Beware of your cash flow, you have to be very well structured to ensure you get paid on time, otherwise your life will be miserable. Up front and guaranteed payments are common. Take time to understand what "doing things the Mexican way" means and how you will manage this aspect of dealing with officials, suppliers and employees.

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