How to do Business in Mexico IV - Incredible Margins

A typical Mexican business must pay well over 50 interest on borrowed money. A foreign investor with borrowed money at 7 or equity, has a tremendous advantage. A typical Mexican business with no foreign competition may enjoy 40 to 200 margins; a clear signal that this is fertile ground for entrepreneurship.

The business mentality of a typical Mexican businessman is to earn a return on investment immediately. That is, the money for inventory must be converted to cash within a very few days. The idea that you invest, then put time and energy in developing customers is not in their paradigm. Today' investments being made by companies such as Carrefourt in Frnace and Wal-Mart from the U.S. where no profits are expected for several years is a concept so unbelievable to most Mexican business people that they simply don't believe it. Therfore a company with equity financing can gain loyal customers very quickly through quality service and competitive prices.

The game in business is to gain customers. Think of Mexico as a source of customers, but also as a source of fun things to do that will attract rich customers from Japan, Germany, England -- the rest of the world! As U.S. seniors increase in numbers -- will be 50% of the population by 2020 -- what kind of entertainment will make them reach into their wallets? Adventure and eco-toursim is one of the fastest growing businesses around. Mexico is the ideal palce to offer safe, fun, exciting adventure and eco-tours. There are over 10,000 areheological sites, first class bus transport is dirt cheap, bread and breakfast concepts have yet to be developed and every Mexican family is a potential host.

Every town and village boasts one kind of special art or other. A roving buyer in Mexico with a roving salesman in the U.S. would generate great margins for the business and would be great in reducing the number of illegals crossing our borders by making it possible for more Mexicans to earn a fair living from their honest labors. It is rumored that Wal-Mart will buy ten truckloads of goods from a U.S. manufacturer  for distribution to their U.S. stores and negotiate an eleventh truck from the manufacturer at near the cost of materials. This eleventh truck goes into Mexico where the merchandise is sold at cost in Pesos. The truck then loads up with Mexican merchandise bought with those Pesos. When it returns to the U.S. the merchandise is sold at two or three times the cost resulting in huge, wonderful, exciting margins.

Think of a long term contract with a eucalyptus beetle grower in Michoacan. Import the beetles along with mescal -- worms and all! Intoduce the beetle sauce as a dip in all those X generation joints where the men and women test their bravery by the exotic stuff they can put down their gullets. Or screen printed tequila shot glasses. Or brides by mail. Or erotica excursions to towns where the special Zonas de Tolerancia have been set up where legalized prostitution is the cash cow of the locality. Or simply make arrangements with an existing herbal medicine manufacturer to put your own packaging logo and import same for distribution to a growing market. More and more people are looking at alternative medicine for solutions and herbal remedies are proven alternatives.

In the January 23 edition of El Economista the headline screamed out that $200 Million Dollars are being invested in Mexico every day. This is a clear indication that there is good business to be had in this great country for the true entrepreneur. How about a business dedicated to taking prospective investors for journeys through the country to discover opportunities. Or getting hold of a ship now sitting in some harbor with nothing to do and put it to work carrying cargo from Acapulco to Los Angeles on well defined schedules and lots of small Less than Boatload containers for hundreds of shippers. A big problem today is cargo transport over the highways. And the hesitation on both sides to carry out the NAFTA agreement on truck transport may remain frozen for a long time. Ships could do better. So could old 727s and DC3s.

Cancun is a man-made city. There are no resident older than 27 born in that city. Everything is freighted into that most popular tourist attraction. There are no chicken farms, ranches or truck farmers around. Every penny is invested in the tourist trade. Consider the cost of freight and shrinkage in bringing fresh meat, fish and produce into that remote site. The opportunities for farming and food production are incredible. Think of the vast open pastures for hundreds of miles up and down the Golf Coast where cattle simply eat what grows. The land is so fertile that fenceposts grow into trees. A more economical method of growing cattle would be to cultivate corn along with beans and squash and use feedlots. Better meat which could be sold at higher prices and lower costs of production because the surplus beans and squash are sold to the food chains. Workers stay at home and work and the investor runs frequently to the bank. Today's Mexican rancher is an absentee owner content to let the cash fall in his lap. Ripe for enterpising competition to take it from them.

Mexican businesses have grown fat and lazy because they have been protected from competition by government edicts and laws. NAFTA is forcing an opening and many old businesses have fallen, gone broke, or simply shut down because they don't know how to manage a business capable of competing on the world market. Anybody with this kind of know-how can step in and make a huge profit while benefiting customers, employees, investors and the neighborhood. There are thousands of fat cats who resufe to see the writign on the wall even to this date after so many have fallen. The time is really right for smart capital to be invested in Mexico.