Solid Waste Equipment and Services in Mexico: A Strategic Reference, 2007
ICON Group International, July 2007, Pages: 248
How to Strategically Evaluate Mexico
Perhaps the most efficient way of evaluating Mexico is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to solid waste equipment and services are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Mexico
This report provides a detailed overview of factors driving latent demand and accessibility for solid waste equipment and services in Mexico. Latent demand is largely driven by economic fundamentals specific to solid waste equipment and services. This topic is discussed in Chapter 2 using work carried out in Mexico on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for solid waste equipment and services in Mexico. I use the term “micro” since the discussion is focused specifically on solid waste equipment and services.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Mexico. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Mexico. The numbers are only indicative of an average firm whose primary activity is in Mexico. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Mexico. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “sanitary services”, as defined in Chapter 3. Again, while “sanitary services” does not exactly equate to “solid waste equipment and services”, it nevertheless gives an indicator of how Mexico compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond solid waste equipment and services. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Mexico:
Openness to Trade in Mexico
Openness to Direct Investment in Mexico
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Mexico. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Mexico. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Mexico 1
1.3 Latent Demand and Accessibility in Mexico 3
2 SOLID WASTE EQUIPMENT AND SERVICES IN MEXICO 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.3 Latent Demand: Market Data 7
2.4 Latent Demand: Leading Segments 7
2.5 Key Suppliers 7
2.5.1 Third-Country Competitors 8
2.6 Market Issues and Obstacles 9
2.6.1 Import, Duties, and Taxes 9
2.6.2 Certificate of Origin 10
2.6.3 Free Sale Certificate 10
2.6.4 Nom Certification 10
2.6.5 Labeling Requirements 11
2.7 Accessibility: Market Entry 12
2.7.1 Opportunities for Profile Building 12
2.8 Accessibility: Financing Strategies 12
2.8.1 BANOBRAS 13
2.8.2 NADB 13
2.9 Accessibility: Trade Event 14
2.10 Key Contacts 14
3 FINANCIAL INDICATORS: SANITARY SERVICES 15
3.1 Overview 15
3.1.1 Financial Returns and Gaps in Mexico 15
3.1.2 Labor Productivity Gaps in Mexico 18
3.1.3 Limitations and Extensions 19
3.2 Financial Returns in Mexico: Asset Structure Ratios 20
3.2.1 Overview 20
3.2.2 Assets - Definitions of Terms 20
3.2.3 Asset Structure: Outlook 22
3.2.4 Large Variances: Assets 23
3.2.5 Key Percentiles and Rankings 26
3.3 Financial Returns in Mexico: Liability Structure Ratios 41
3.3.1 Overview 41
3.3.2 Liabilities and Equity - Definitions of Terms 41
3.3.3 Liability Structure: Outlook 43
3.3.4 Large Variances: Liabilities 44
3.3.5 Key Percentiles and Rankings 47
3.4 Financial Returns in Mexico: Income Structure Ratios 60
3.4.1 Overview 60
3.4.2 Income Statements - Definitions of Terms 60
3.4.3 Income Structure: Outlook 62
3.4.4 Large Variances: Income 63
3.4.5 Key Percentiles and Rankings 66
3.5 Financial Returns in Mexico: Profitability Ratios 79
3.5.1 Overview 79
3.5.2 Ratios - Definitions of Terms 79
3.5.3 Ratio Structure: Outlook 81
3.5.4 Large Variances: Ratios 82
3.5.5 Key Percentiles and Rankings 85
3.6 Productivity in Mexico: Asset-Labor Ratios 100
3.6.1 Overview 100
3.6.2 Asset to Labor: Outlook 101
3.6.3 Asset to Labor: International Gaps 102
3.6.4 Key Percentiles and Rankings 105
3.7 Productivity in Mexico: Liability-Labor Ratios 120
3.7.1 Overview 120
3.7.2 Liability to Labor: Outlook 120
3.7.3 Liability and Equity to Labor: International Gaps 121
3.7.4 Key Percentiles and Rankings 124
3.8 Productivity in Mexico: Income-Labor Ratios 137
3.8.1 Overview 137
3.8.2 Income to Labor: Outlook 137
3.8.3 Income to Labor: Gaps 138
3.8.4 Key Percentiles and Rankings 141
4 MACRO-ACCESSIBILITY IN MEXICO 154
4.1 Executive Summary 154
4.2 Economic Fundamentals and Dynamics 155
4.2.1 Major Trends and Outlook 155
4.2.2 Government Role in the Economy 156
4.2.3 Balance of Payments Situation 156
4.3 Political Risks 156
4.3.1 Nature of Bilateral Relationship 157
4.3.2 Relations between the Federal Executive and State Leaders 157
4.3.3 The Political System 157
4.4 Marketing Strategies 158
4.4.1 Distribution, Sales Channels, and Partners 158
4.4.2 Franchising Activities 159
4.4.3 Pricing Issues 160
4.4.4 Government Procurement 161
4.4.5 Legal Considerations 162
4.4.6 Due Diligence 163
4.4.7 Opening an Office in Mexico 164
4.4.8 NAFTA Certificate of Origin 164
4.4.9 Advertising Options 165
4.4.10 Demographics 167
4.4.11 Intellectual Property Risks 168
4.5 Marketing Strategies 170
4.5.1 Western Region 170
4.5.2 Northwestern Region 174
4.5.3 Northeast Region 176
4.5.4 Central Region 178
4.5.5 Southeastern States 179
4.5.6 Yucatan Peninsula 180
4.6 Import and Export Regulation Risks 181
4.6.1 Tariffs and Fees 181
4.6.2 Licenses Required for Imports 182
4.6.3 Controls on Exports 183
4.6.4 Local Standards 184
4.7 Investment Climate 188
4.7.1 Openness to Foreign Investment 188
4.7.2 Conversion and Transfer Policies 190
4.7.3 Expropriation and Compensation 190
4.7.4 Dispute Settlement 190
4.7.5 Performance Requirements and Incentives 191
4.7.6 Right to Private Ownership and Establishment 192
4.7.7 Intellectual Property Risks 193
4.7.8 Transparency of the Regulatory System 194
4.7.9 Capital Market Risks 194
4.7.10 Political Violence 195
4.7.11 Corruption 195
4.7.12 Bilateral Investment Agreements 196
4.7.13 Investment Insurance 197
4.7.14 Labor 197
4.7.15 Free Trade Zone Options 197
4.8 Trade and Project Financing 198
4.8.1 Financing Availability 198
4.8.2 Exchange Control Risks 201
4.8.3 Project Financing in Mexico 201
4.9 Travel Risks 202
4.9.1 Transportation and Hotels 203
4.9.2 Visas and Visitor Fees 203
4.9.3 Language 205
4.9.4 Climate 205
4.9.5 Health Issues 205
4.9.6 Communications 206
4.9.7 Local Business Customs 207
4.9.8 Security Considerations 207
4.9.9 Education and Training Services 208
4.9.10 Culture and Recreation 208
4.9.11 Country Data 208
4.10 Key Contacts 209
4.10.1 U.S. Embassy Contacts Located in Mexico 209
4.10.2 Mexican Government Agencies 211
4.10.3 Trade Associations and Chambers of Commerce 212
4.10.4 Product and Quality System Certification Organizations 215
4.10.5 Banking 217
4.10.6 U.S. Agricultural Cooperator Offices in Mexico 223
4.10.7 U.S. Government Contacts in Washington D.C. 227
4.10.8 U.S.-Based Partners Relevant for Mexico 229
4.10.9 Association of State Offices in Mexico (ASOM) 230
4.10.10 Labor Organizations 236
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 239
5.1 Disclaimers & Safe Harbor 239
5.2 Icon Group International, Inc. User Agreement Provisions 240
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