Doing business in Mexico
Mexico has become one of the most competitive countries for international investment, driven by the size and strength of its consumer market, predictable inflation patterns and its strategic geographical location.
However, it is also a highly complex jurisdiction in which to do business. Success depends on effectively navigating regulatory, operational and cultural challenges.
Mexico, officially the United Mexican States, is the world’s 11th most populous country and ranks 13th globally by nominal gross domestic product (GDP). It is the second largest economy in Latin America and continues to grow at an impressive pace. As one of the most dynamic economies worldwide, Mexico is forecast to become the seventh largest global economic power by 2050.
The country is also well integrated into the global economy through its participation in major international organisations and trade agreements, including the US Mexico Canada Agreement (USMCA), the Organisation for Economic Co-operation and Development (OECD), the World Trade Organization (WTO), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Free Trade Agreement between Mexico and the European Union (EU Mexico FTA) and the International Monetary Fund (IMF).
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While Mexico is a dynamic market, it ranked as the second most complex jurisdiction globally in 2026, according to TMF Group’s Global Business Complexity Index (GBCI). Mexico moved up from third place in 2025, reinforcing its position among the world’s most challenging environments for foreign businesses.
This high ranking reflects ongoing regulatory volatility, frequent administrative changes and persistent requirements for physical presence, which continue to create uncertainty and operational friction for international companies operating in the market.
Companies doing business in Mexico must therefore ensure they have a thorough understanding of the local economic landscape, its rules and regulations and the country’s distinct business customs.
Business opportunities and the benefits of doing business in Mexico
Mexico has become one of the most competitive countries for investments at an international level, thanks to factors such as the size and strength of its consumer market, predictable inflation patterns and its strategic geographical location.
One of the main benefits of doing business in Mexico is the tax incentives. These include deductions ranging from 56%–89% in fixed asset investments and additional deductions for labour training expenses across 10 key sectors. There are also tax exemptions associated with 11 economic activities conducted in the Istmo de Tehuantepec region, allowing up to 100% of the original investment amount to be deducted in the same fiscal year, when the asset and activity qualify under the Plan México decree.
Thanks to its proximity to the US, robust manufacturing capabilities, skilled workforce, cost efficiency, supply chain resilience and comprehensive trade agreements, Mexico is now leading the charge in new nearshoring investments, defined as the practice of establishing or relocating outsourced operations closer to domestic markets.
Despite the advantages on offer, there are some complexities to navigate when moving your outsourced operations to Mexico. To highlight the potential risks, read our article covering what foreign companies need to know about Mexico’s nearshoring resurgence.
Mexico has a number of business-friendly cities that are attracting investors. Mexico City has strong infrastructure and a skilled talent pool and is home to the largest number of startups in the country, followed by Monterrey.
Mexico’s infrastructure strategy is increasingly aligned with the federal government’s Plan México, a long-term development agenda announced by the administration of President Claudia Sheinbaum. The plan prioritises large-scale investment in transportation and logistics – particularly railways, highways, ports and airports – in order to improve regional connectivity and support trade and nearshoring. In parallel, Plan México emphasises energy, water and industrial infrastructure as key enablers of economic growth and social development.
More than half of planned investment is being directed towards the energy sector, including electricity generation and transmission, while additional resources will boost water systems and sustainable infrastructure. These efforts are designed to ensure reliable services for industry and cities, attract private investment and position Mexico as a competitive manufacturing and logistics hub.
Business culture in Mexico
Work etiquette in Mexico is similar to that of many other Latin American countries, although the country’s proximity to the US and strong trade links between the two nations have also impacted the business culture.
Strong personal relationships and loyalty are key features of the work culture. While the business environment is still formal, it is slowly changing and the traditionally hierarchical structure is turning more towards a horizontal one.
Mexicans prefer face-to-face communication and like to do business with people they know well and trust. It is good practice to show eagerness and advisable to confirm the date and appointment several times in advance of any meeting to show an appropriate level of diligence.
Challenges of doing business in Mexico
There are still many hurdles to overcome when doing business in Mexico. Local knowledge of the investment environment and detailed information about the legal, accounting and taxation frameworks are therefore crucial for overseas ventures and can help you to bypass many of the risks.
A common challenge is getting connected to the power network. According to the World Bank, Mexico ranks 106th in the world for ease of getting electricity, which underlines the complex nature of the task. The process remains laden with bureaucracy and foreign companies must submit applications and obtain certificates and inspections from the Comisión Federal de Electricidad (CFE) before a contractor can carry out any work.
Registering property can also be a lengthy task, taking almost double the average time when compared to OECD countries. Dealing with the Public Registry of Commerce and Property can be particularly time consuming. In addition, obtaining a certificate of good standing with the water service and the zoning certificate for the property can also take a long time.
While these procedures can be lengthy, some are becoming more digital. This means that they can be followed up electronically rather than necessitating face-to-face contact.
Accounting and taxes in Mexico
Paying taxes is a labour-intensive and complicated process in Mexico with estimates suggesting it takes more than 240 hours of a company’s time each year, despite the fact there are typically only six types of payments to be made.
For companies planning to start a business in Mexico, it is essential to implement an accounting system that complies with the electronic accounting requirements set by the Mexican tax authority. Accounting systems must be configured to generate accounting information in the format established by the Servicio de Administración Tributaria (SAT) and it is important to submit this information when required. This obligation applies to the majority of taxpayers in Mexico.
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From incorporation through to dissolution, the SAT requires all transactions — whether internal or with related or third parties — to be accurately recorded in the electronic accounting system. This requirement has been in force since 2014 and must be observed to ensure full traceability of transactions, cash flow and ultimate beneficiaries.
Under Mexican tax legislation, both vendors and customers are required to issue digital tax invoices (CFDI) in order to enable effective monitoring and traceability of taxpayer transactions.
Mexico has adopted International Financial Reporting Standards (IFRS), which apply to listed entities other than financial institutions and insurance companies. However, foreign businesses entering the Mexican market must carefully analyse local regulatory and reporting requirements, as these can vary significantly across industries.
HR and payroll in Mexico
Another fundamental driver of business complexity in Mexico is the highly protective nature of Mexican labour law, which is based on constitutionally granted employee rights. These include access to socially useful work, limits on working hours and statutory benefits, with minimum wages having increased by approximately 70% over the past five years.
There are four main legal frameworks governing HR and payroll matters in Mexico: the Federal Labour Law, income tax regulations applicable to salaries, social security obligations and local payroll tax requirements at the state level. Together, these regulate employment contracts and cover areas such as wages, working hours, statutory holidays, paid vacation, labour unions, strikes, severance compensation, social security contributions and related federal and local tax obligations.
Following the implementation of the USMCA, Mexico introduced significant labour reforms. These include changes related to labour democracy, gender equality and the strengthening of workers’ rights. Outsourcing of core business personnel has been prohibited since 2021, requiring companies to reassess operating models and ensure compliance with the revised legal framework.
Payroll cycles in Mexico are typically bi-weekly, with employees paid on the 15th and the last day of each month, although weekly payrolls are still common for blue-collar workers.
Mandatory employee benefits include paid vacation (12 days during the employee’s first year), a vacation bonus equal to at least 25% of salary during the vacation period, profit sharing equivalent to 10% of taxable profits, a seniority bonus upon termination and a year-end bonus (aguinaldo) equivalent to a minimum of 15 days’ salary. Proposals to increase the aguinaldo to 30 days are currently under discussion but have not yet been enacted into law.
Mexico also applies differentiated payroll and wage rules in its Northern Border Free Trade Zone. From January 2026, the daily minimum wage in this zone increased to MX$440.87, while the daily minimum wage in the rest of the country rose to MX$315.04.
Regulations and legislation in Mexico
Regulations and legislation in Mexico can often be complex and open to interpretation, increasing compliance risks for foreign businesses.
In recent years, additional regulatory requirements have been introduced, including Ultimate Beneficial Owner (UBO) reporting obligations. When these requirements were first implemented, there was limited clarity regarding the documentation needed for incorporation, leading notaries to adopt a more risk-averse approach due to the significant penalties they face for non-compliance. As a result, incorporation processes can be more time consuming.
Labour legislation is also undergoing significant reform. A bill approved in 2026 establishes a gradual reduction of the standard working week, decreasing by two hours per year, from 48 hours to 40 hours by 2030. If implemented, this reform would significantly increase employers’ costs due to the need for additional staffing, overtime payments and compensation for rest days worked. As a result, the proposed changes have generated intense debate among the business community.
As mentioned earlier, since personnel outsourcing is no longer permitted, any services involving staff at client premises must comply with strict conditions and cannot form part of the company’s core business activity.
The Mexican government’s position on renewable energy has also generated controversy. Policies have increasingly favoured state-owned and fossil fuel-based energy generation, limiting foreign participation in renewable projects. While this approach supports employment in traditional energy sectors, it has raised concerns among investors due to its environmental impact and implications for long-term sustainability.
Starting a business in Mexico
The process of incorporation in Mexico can be complex and time consuming, mainly due to the time it takes to comply with the identification of the Beneficiary Controller and to open a bank account, which must be authorised by the SAT. Companies should also note that it is mandatory to pay taxes through the electronic system.
However, if you are fully aware of the local regulations and policies and plan around them, starting – or expanding – a business in Mexico can be somewhat simplified. Doing business in Mexico requires a detailed understanding of the country’s economic system, so working with a partner that has local knowledge can help to plot out a smoother path forward.
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