Mexico
According to experts Mexico is considered the "nearshore outsourcing hub of the United States" with approximately 95 percent of its clients coming from the U.S.
Mexico launched PROSOFT in 2002, a program aimed to advocate the technological industry, maximizing the IT industry's value to USD $15 billion by 2013. Mexico built three technology parks: Monterrey Technology Park for multinational companies; Apodaca Technology Park; and Guadalajara Park, which is situated in the center of Mexico's Silicon Valley.
Mexico has the advantage of being in close proximity to the U.S. allowing American companies to conveniently outsource their software processes to Mexican enterprises. Mexico also has the added advantage of NAFTA membership allowing free flow of goods and services between the U.S., Canada, and Mexico. There is also protection of intellectual property rights in all three countries.
Mexico has experienced rampant violence in some areas in recent years. Although these incidents are primarily isolated, such occurrences have become major issues for its perception, lessening foreign companies’ interest to invest. Mexico also lacks English-speaking skills, especially among its programmers. Many of the Mexican software service companies are small, with inadequate influence in gaining the attention of outsourcing decision-makers.
Country overview
Mexico has a population of 112 million, with most of the population comprising of Amerindian-Spanish natives. The main language is Spanish, with other indigenous dialects.
The 1994 financial crisis devalued the peso, resulting in Mexico's worst recession in decades despite economic aid from NAFTA. Although its macroeconomic fundamentals have significantly improved, the recent global financial crisis has slowed its impressive recovery and Mexico has experienced ongoing issues such as inequitable income, underemployment, low real wages, and impoverishment within the southern states.
Mexico's middle class has been experiencing a widening gap between the rural and urban population together with the poor and the rich since the start of 1990's, The main challenges facing Mexico are reducing income equality, improve its labor laws, and modernize the tax system.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
Employee compensation
In the information technology sector, Software Engineers in Mexico earn 32 percent of U.S. resources, averaging USD $19,200, and senior resources are comparable at 36 percent. IT Project Managers average salaries of $36,400 or 35 percent of US counterparts.
Junior BPO resources’ salaries are 35 percent of US wages, averaging $14,700. More senior BPO roles offer significantly less savings, at 50 percent for resources with up five to nine years experience. Operations managers in Mexico also fail to offer worthwhile savings, with salaries at 86 percent of those in the US.
Real estate
Mexico offers competitive real estate, with central business district rates for Class A properties following the top five countries of South Africa, Indonesia, Thailand, the Philippines, and Chile.
Mexico was able to maintain its office market competitiveness even during the economic crisis. According to Colliers International Global Review, Mexico City's average lease rates are stable, with Class A office space in Mexico City averaging just USD $32 per square foot annually. Suburban offices offer similar savings, with office space just $26 per square foot.
Taxes
Mexico’s corporate tax rate is 30 percent, on par with Indonesia, the Philippines, Canada and India. Indirect tax rates, such as value added taxes (VAT) are about 16 percent.
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010
Source: Colliers International, SourcingLine, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Real Estates : Office occupancy costs are for Mexico City.
Resources and skills
Workforce
Mexico has a workforce population of around 47 million. The sourcing workforce proves to be strong in software and scientific research and development. With prevalent English language barriers, companies hoping to do business in Mexico must be precise in their project specifications.
Education
Mexico ranks among the top three countries with the largest GDP expenditure on education with 6.4 percent. It only follows Israel and the United States, at 7.9 and 6.4 respectively.
Mexico is taking steps to improve its information technology talent resource, collaborating with the World Bank and Ministry of Economy of Mexico in creating Mexico FIRST which will set aside USD $40 million to subsidize the training and career certification programs of its IT students. Through this program they will be able to access better networking certification programs.
Mexico has "technological ecosystems" clustered within different regions - the start of 2010 saw 28 IT clusters in Mexico. The interaction between the government, the industry, and academia has created IT activity, such as electronic design, nanotechnology and multimedia, BPO, and software development.
Source: CIA Factbook, 2009
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Mexico benefits from its strategic location, but its current environment of violence and corruption is damaging the nation’s reputation within the outsourcing market. The Joint Operating Environment, which reports on global security trends, warns that Mexico could suffer “rapid and sudden collapse” because of threats on the government and infrastructure.
Economic competitiveness
Economic competitiveness is bases on several factors: taxation, regulation, and infrastructure. Mexico scores a 4.2 index, similar to India, the Philippines, Vietnam, Brazil and Panama. Mexico’s infrastructure is also on par with many leading outsourcing locations, with road quality scoring 4.1, but electrical supply falling short with just 3.9, beating Pakistan, Senegal, and Jamaica.
Regulation
Mexico fares well for ease of doing business, ranked thirty-fifth globally. Starting a business in Mexico takes on average nine days, better than most countries –India takes 29 days, Indonesia takes 47 days, Argentina takes 26 days, and Brazil takes 120 days.
Legal protection of intellectual property
Enforcing contracts in Mexico is a relatively quick process, averaging 415 days. This number is much lower than competing outsourcing locations, such as India (1,420 days), Indonesia (570 days), Chile (480 days) and Brazil (616 days). It generally costs 32 percent of the claim to fully enforce, and intellectual property protection scores a 3.1 index.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009