Say Hola! to the Idea of Making Sales in Mexico
When Michael Bittner, president of MB Graphic Machinery in Novato, Calif., sells a piece of printing equipment, it's usually a cash deal. While this may evoke images of wise guys handing Tony Soprano bulging envelopes of C-notes, the reality is less dramatic--and entirely legal. It merely means that his customers typically make payment by wiring money to Bittner's bank.
But getting payment isn't always simple when doing business in Mexico. It's a country dominated by small, often cash-poor businesses. So when Bittner received a $1.1 million order for a custom printing and decorating machine from Cacao y Cafes, a candy manufacturer in Saltillo, Mexico, he had a quandary. No way could he risk giving the company 30 or 60 days to pay after delivery. "It was just too much money," says Bittner, whose six-person firm generates $2 million or so in annual sales. "I really needed a security blanket."
Help. He found one in the U.S. Export-Import Bank, a little-known federal agency that helps finance the sale of U.S. products abroad. In the case of MB Graphic, the Ex-Im Bank guaranteed a loan through a U.S. lender to the Mexican customer, allowing the deal to go through. The $98 million program is one of several offered by the Ex-Im Bank to help small businesses looking to tap foreign markets like Mexico.
A nation of 108 million, Mexico is a huge market for U.S. businesses. The country is the second-largest U.S. trading partner and imported $111 billion of American goods and services in 2004. Last year, the Ex-Im Bank offered $1.7 billion in financing in support of U.S. exports to Mexico, the bank's largest market. Transactions are up 23 percent during the past four years to more than 2,600, but John Emens, the Ex-Im Bank's senior vice president of small business, concedes that "there is a lack of awareness on the part of small business that this support even exists."
Government assistance isn't the only thing a small business needs in order to succeed south of the border. While a firm may get lucky and get an order because a Mexican customer found it through an online search, an active approach is smarter if the country is going to become a regular market. Robert Duncan, head of GDI Financial Group, an Overland Park, Kan., firm that provides financing to overseas clients seeking to buy from U.S. exporters, recommends visiting with the commercial services section of the U.S. Embassy in Mexico City. It provides export counseling, market research, business contacts, and access to Mexican buyers through trade shows. "They'll arrange meetings and even do some screening before the meetings take place," he says, while also recommending the embassy's website buyusagov/mexico/en/1.html.
No doubt, face time is a must for potential exporters. "You really need to get a feel for what the environment is like," Duncan says. Selling that pricey printer took Bittner about a dozen trips. He learned that Mexicans "negotiate very differently," he says. "Whereas Americans are very strong and say, 'I want this or that,' Mexicans are very quiet." So leave the Donald Trump tactics at home.
And don't forget to leverage domestic resources before you hit the road. Othello Evans, president of Western Forms, a building products manufacturer in Kansas City, Mo., recommends checking to see if your city has a trade office in Mexico. Another good idea: hooking up with a law or accounting firm with Mexican offices or affiliates. "It's helpful to have the presence of someone there who is connected to the business community," Evans says. In Mexico, as here, social networking may mean the difference between success and failure.
DOING BUSINESS WITH MEXICO
Use the Export-Import Bank to secure payment from customers.
Hook up with the U.S. Embassy to aid networking.
Fly down to Mexico for some essential face time.
Trot out the soft sell for negotiations.
Check competitors' websites--in both countries.
See if your law or accounting firm has a Mexican office.
This story appears in the April 24, 2006 print edition of U.S. News & World Report.
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