U.S. Entrepreneurs Might Want To Look South

Sun, surf, and a galaxy of economic opportunities beckon in Mexico.

(Cover Photo: “Sombrero Galaxy” courtesy of NASA/ESA)

Mexico has always held a certain allure in the American entrepreneurial mindset. Pictures of a cold, lime-laden Corona, a laptop, and ocean waves lapping in the background are pinned to cubicles all around the country. However, such dreams usually end in a dusty Spanish-English dictionary acting as a paperweight for newspaper clippings of drug war violence.

Now might be the time to rethink Mexico.

On a macroeconomic level, Mexico is doing relatively well. The economy has grown for 16 consecutive quarters (4 years). Steady growth has also boosted the Mexican peso to a 15-month high against the U.S. dollar, making American products more affordable to Mexican consumers.

Yet, the price of products purchased in Mexico is relatively less. If you’re a McDonald’s fan (I am not, except for the occasional coffee or fries), then you’ll be happy to know that the Big Mac is cheaper south of the border.

According to The Economist’s Big Mac Index, a lighthearted measure of purchasing power parity, the Big Mac in the United States was $5.30 in July 2017. In Mexico, the price was equivalent to $2.75. The disparity in purchasing power can often be found across a broad range of similar goods.

Thanks to the North American Free Trade Agreement (NAFTA), Mexico is now the second largest export market for U.S. goods and services. The country has also struck free trade deals with 45 other countries, covering the vast majority of its international trade.

The largest volume of trade between the U.S. and Mexico centers on automobile manufacturing. However, if you look at this great interactive piece by the Massachusetts Institute of Technology (MIT), you’ll see that there are billions of dollars moving across the border in all kinds of products and services.

Renewable energy certainly seems to be an attractive possibility for growth in Mexico.  Despite being a major oil producer, the country aims to produce 35% of its electricity from clean energy by 2024.

Mexico has a great deal of promise beyond its beautiful beaches and sunshine. With luck, the NAFTA renegotiations that begin later this month will only improve the economic opportunities south of the border.

 


For my latest thoughts on entrepreneurship, follow me on twitter @shawnpmitchell.

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