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Global Economic Report

Boosting your moxie in Mexico

By Lincoln Brunner

Like any cross-cultural experience, doing business in Mexico means adjusting your expectations to the environment--for your benefit and theirs.

Some U.S.-based companies have a strong history in the Mexican market; others are just finding their way. Regardless, the riches behind those foreign-looking doors can be unlocked with some common-sense keys.

Build Commitment
The first is commitment to the market. If all politics are local, then it stands to reason that all business is, too.

That’s especially true in Mexico where people want to be confident that the person they’re dealing with won’t take advantage of them, says Alex Trevino, sales manager for Latin America for Herr-Voss Stamco, Callery, Pa.

"The first key to success in the market is to gain the customer’s trust," says Trevino, a Monterrey native who has been working in the Latin American market for Herr-Voss Stamco since 2003.

Having someone in-country who can make personal calls, speak the language and understand the culture is everything--no long-distance selling here. Waterjet manufacturer Omax has been doing business in Mexico for about five years but just got a full-time Latino sales manager there less than a year ago. Just being there has made all the difference, says Steve Ulmer, Omax senior regional manager.

"Service and support are critical there," Ulmer says. "They want to see that you have someone there locally, that you’re committed to the marketplace down there, that you’re going to be there for the long haul and that when they call for parts or support, that you’ll answer quickly."

Part of that commitment also shows up in the willingness to educate customers in the latest technology. Much of the Mexican manufacturing sector, particularly in northern maqui­ladora centers such as Monterrey and Matamoros, depends heavily on the U.S. market, economically and technologically. And as the push for tighter tolerances increases the need for better fabrication technology, Mexican fabricators are investing in late-model lasers, waterjets, plasma cutters and better software to run them all.

That influx of new technology breeds a growing need for education among machine operators--a process that technology-based companies need to show patience with, says Derek Weston, vice president of international sales for nesting software company MTC Software.

"It’s a lot of consulting...basically sharing of product knowledge and providing a lot of education," says Weston, who also has a regional manager located in Mexico. "When a new programmer or machine operator is hired, he’s hired with virtually no experience. It’s important to us that we provide the level of process knowledge and software education to allow people to get the most from their machinery."

Create financing
Ah, machinery. Actually getting a machine on the floor in Mexico is harder than most companies would like to admit.

"The Mexican economy operates under a different sort of credit system than the United States," Ulmer says. "It’s not like you just go to the leasing company and get a five-year lease with a $1 buyout. It’s just not the case there."

Start with financing. Securing credit in Mexico can be like trying to land a helicopter in a hurricane. While U.S. lenders want transparent books, many Mexican businesses deliberately muddy them to hide income from the tax man.

Add to that a 15 percent tax slapped on machinery shipped to Mexico, and American manufacturers have a double hurdle to clear, regardless of the customer’s eagerness to buy. Mitsubishi representative MC Machinery Systems helped itself over that hurdle recently by offering in-house financing to its Mexican customers, a tactic that helped the company increase its sales of lasers (and EDM machines) into Mexico during the past two years.

"It’s hard to get financing in Mexico, and it’s hard for any bank in America to get the proper documentation for them to feel comfortable," says Patrick Simon, marketing manager for MC Machinery. "If you’re able to get creative in the financing area, you’re able to help people out and get them [to buy]. That’s the biggest issue: their cash flow and getting into the investment and being able to make the parts they need to make."

With the Mexican economy set to grow by about 2.5 percent this year, OEMs and manufacturers are looking for, if not spectacular, at least solid opportunities in Mexico in 2008. And it’s precisely because Mexico isn’t as mature of a market for machinery as its neighbors to the north that many observers are optimistic.

"It’s still an active market compared to the domestic market," says Trevino, who notes that about 25 percent of the company’s sales are now coming from Latin America. "It’s behaving in a more dynamic way. We have a lot of inquiries, a lot of curiosity on how to do things and how to expand current business. It’s not like what we’re seeing in the United States where the level of inquiries has dropped dramatically.

"The market hasn’t reached a complete maturity level," he says. "It’s still growing."

Follow the Trends
Though official trade data is sketchy, Mexico represents a growing market for machine tools, according to the 2008 World Machine Tool Output & Consumption Survey. Mexican machine tool consumption grew by 34 percent from 2006 to 2007, increasing from $1.246 billion to $1.667 billion, the survey reported.

Anecdotal evidence seems to back that up. With machine tool makers opening new offices in Mexico--Trumpf opened a new sales and production center in Monterrey in March 2007--Weston sees Mexico moving up the bell curve in its use of technology. "I would say that Mexico has moved up significantly on the left side of the curve, toward the peak in use of technology," Weston says. "The fact that you see laser companies investing in buildings down there, means that people are looking to higher-productivity machine technologies.

"Where you might have seen an eight-torch oxy machine cutting 10-mm plate, now you see a laser machine doing that a lot faster with better quality," he says.

Ulmer notes that one customer in Mexico City, a manufacturer of food processing equipment, recently added a waterjet table that transformed its production process. "They did everything by hand prior to it; now they do everything on the waterjet," Ulmer says. "It’s eliminated many processes. I think that’s typical of what we’ve found there."

Trevino sees the same push for higher-quality equipment across Mexico, whether it’s in Monterrey, Mexico City, in central states such as San Luis Potosi or in other manufacturing centers such as Saltillo.

"You have a trend the last three to five years in which the customers are buying good, quality equipment," Trevino says. "Before that, there was a lot of used equipment being relocated down there, but they’ve learned that used equipment comes with drawbacks, and sometimes those drawbacks really impact the bottom line of their business. So they’ve been buying a lot of new capital equipment not only from the United States but from all over the world."

That adds up to opportunity for those willing to play ball. With manufacturing exports making up 80 percent of total exports from Mexico, the market is hungry for ways to improve profitability.

"The Mexican economy right now is doing relatively well, and manufacturing is really driving its economy," Ulmer says. "Worldwide, I think we’re expecting in the neighborhood of 30 percent growth for Omax as a whole, and I would expect Mexico could exceed that."

Given his company’s robust action of late and the Mexican government’s recent commitment to greater infrastructure spend­ing, Trevino sees an open road ahead. "They’re increasing infrastructure for roads [and] border crossing points, making those border cross points wider, staffing them with more people," he notes. "So when they have exports or imports, they can go in a more expedited way. Instead of waiting for two or three days for a product, maybe you can have it the next day.

"They closely follow the market levels of the United States," he says. "When we slow down here, they get a little bit nervous, and they may delay making some investments. Still, we see a lot more inquiries coming from down there than what we’ve seen here in the United States. " FFJ

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Company Profiles

AIR FILTRATION

IRONWORKERS

NESTING SOFTWARE

SERVICE CENTERS

Camfil APC - Equipment Trilogy Machinery Inc. Metamation Inc. Admiral Steel
Camfil APC - Replacement Filters

LASER TECHNOLOGY

PLASMA TECHNOLOGY

Alliance Steel
Donaldson Company Inc. AMADA AMERICA, INC. Messer Cutting Systems Inc.

SOFTWARE

BENDING/FOLDING

Mazak Optonics Corp.

PLATE

Enmark Systems Inc.
MetalForming Inc. MC Machinery Systems Inc. Peddinghaus Lantek Systems Inc.
RAS Systems LLC Murata Machinery, USA, Inc.

PLATE & ANGLE ROLLS

SecturaSOFT

BEVELING

TRUMPF Inc. Davi Inc. SigmaTEK Systems LLC
Steelmax Tools LLC

LINEAR POSITION SENSORS

Trilogy Machinery Inc. Striker Systems

COIL PROCESSING

MTS Sensors

PRESS BRAKE TOOLING

STAMPING/PRESSES

Bradbury Group

MATERIAL HANDLING

Mate Precision Tooling AIDA-America Corp.
Burghardt + Schmidt Group EMH Crane Rolleri USA Nidec Press & Automation
Butech Bliss Fehr Warehouse Solutions Inc.

PRESS BRAKES

STEEL

Red Bud Industries UFP Industrial AMADA AMERICA, INC. Alliance Steel
Tishken

MEASUREMENT & QUALITY CONTROL

Automec Inc.

TUBE & PIPE

CONVEYOR SYSTEMS

Advanced Gauging Technologies MC Machinery Systems Inc. BLM Group
Mayfran International

METAL FABRICATION MACHINERY

SafanDarley HGG Profiling Equipment Inc.

DEBURRING/FINISHING

Cincinnati Inc.

PUNCHING

Prudential Stainless & Alloys
ATI Industrial Automation LVD Strippit Hougen Manufacturing

WATERJET

Lissmac Corp. Scotchman Industries Inc.

SAWING

Barton International
Osborn Trilogy Machinery Inc. Behringer Saws Inc. Jet Edge Waterjet Systems
SuperMax Tools

METAL FORMING

Cosen Saws Omax Corp.
Timesavers FAGOR Arrasate USA Inc. DoALL Sawing

WELDING

HYDRAULIC PRESSES

MetalForming Inc. HE&M Saw American Weldquip
Beckwood Press Co.

MICROFINISHING TOOLS

Savage Saws Strong Hand Tools
Triform Titan Tool Supply Inc.

 

T. J. Snow Company

TPMG2022 Brands


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