MEXICO: An Introduction to General Business Law: Monterrey

MONTERREY OVERVIEW

Monterrey has long been associated with industrial activity and is renowned for having robust infrastructure development and an inviting environment for national and foreign equity investment. Monterrey is also home to several of the largest publicly traded companies in the Mexican stock exchanges and houses some of the country’s major internationally recognized universities.

After the presidential election and following the numerous policy changes from the federal government in several sectors (including energy), investor confidence in Mexico started to dampen, and when combined with the inherent complexities resulting from the COVID-19 pandemic, local and foreign investment activities in Mexico stalled. The small and medium enterprise sector was especially hit by the pandemic. While Nuevo León’s economic growth is inextricably linked to Mexico’s growth, historically and consistently Nuevo León has grown at a higher average rate than the average rate of economic growth for Mexico. In the last 10 years, local economic growth averaged 4.5% per year, while the country’s annual economic growth averaged only 2.6%. Therefore, Nuevo León is expected to recover at a different, more accelerated rate from the rest of Mexico.

We must note that the business outlook in Monterrey (and northern Mexico in general) is heavily influenced and benefited by its proximity to the United States of America, which in the wake of the pandemic is already seeing a recovery in investment. Local government elections have recently taken place in Nuevo León and the newly elected governor has already announced that priority infrastructure projects will centre on promoting export activities through Nuevo León’s Colombia Customs Port of Entry to the US. These actions are expected to counter-balance the effects of slowing economic growth in the local business environment and are also designed to ensure that exports can flow into the US directly from Nuevo León, rather than having to go through Tamaulipas.

While the newly elected governor is yet to take office and thus much of his actual agenda remains to be seen, in the last 20 years, Nuevo León has been governed by three different political parties and one independent and unaffiliated candidate. Despite such diversity, political transitions have never resulted in social or economic instability. All political parties that have governed Nuevo León have consistently promoted local economic development and infrastructure and this trend is expected to continue for the new local administration. In fact, the new governor has announced plans for enacting a new local constitution and for seeking a higher and direct involvement in local efforts to collect both federal and state taxes in order to have a higher portion of such taxes remain in the state, with the ultimate goal of allowing Nuevo León to increase its public spending.

Growing US commercial activities, the recently enacted US-Mexico-Canada Agreement (USMCA), the US's increasing tensions with China and the highly skilled personnel available in Nuevo León all combine to make Nuevo León a natural and ideal option for manufacturing of goods and services to be exported to the US. We have seen increased interest in real estate transactions in plots that are close to the Mexico-US border and also increased interest in real estate lease options for plots in Tamaulipas ports, all of which confirm that the manufacturing sector is expected to continue to boost local economic growth. Additionally, we have seen a heightened interest in crowdfunding schemes, in the form of simple agreements for future equity, to raise capital for building manufacturing facilities in the Mexico-US border.

Recent labour reforms that strengthen enforcement actions against companies who avoid full compliance with worker rights protections are not seen as a deterrent to local investment since the strengthened labour protections were included and required under the USMCA and represent standard business practice for US companies. Moreover, while labour unions have proven to be a challenge in Mexico, Nuevo León has stayed away from these conflicts and is one of the states with the fewest union strikes in all of Mexico. This stable local trend in labour relations is expected to continue as economic growth recovers in Nuevo León.

In summary, Nuevo León’s business landscape is poised to make a strong and steady recovery from the hardships it endured throughout the COVID-19 pandemic. A change in local government is also expected to strengthen Nuevo León’s profile as a major manufacturer of export goods and services ultimately attracting direct foreign investment by featuring and strengthening local ideal conditions and without resorting to offering additional economic incentives to investors. Local changes and public investment in mobility, security and infrastructure, as well as stable working conditions, are being sought as the key to attract more foreign investment in Nuevo León.