Doing Business In (Insert Country Name Here) - Department of ...

Return to table of contentsChapter 7: Trade and Project Financing• How Do I Get Paid (Methods of Payment)• How Does the Banking System Operate• Foreign-Exchange Controls• U.S. Banks and Local Correspondent Banks• Project Financing• Web ResourcesHow Do I Get Paid (Methods of Payment)Return to topU.S. exporters should be aware that Mexican lending rates are significantly higher thanin the U.S., ranging from 15 - 20% per year. Requiring payment either by ConfirmedLetter of Credit or Cash In Advance can cost U.S. exporters sales opportunities. Whilefavorable payment terms are important, U.S. companies should consider all financingoptions available in order to be as competitive as possible.The economic downturn has put increased pressure on Mexican importers to requestlonger payment terms as they struggle to finance their operations. In the case ofexisting contracts, many importers are defaulting on payment deadlines, paying 30 to 45days late. Exporters are advised to protect themselves from the risk of default byobtaining foreign buyer financing or export insurance from the U.S. ExIm Bank (seebelow for more information).It can be difficult to collect from Mexican buyers in cases of non-payment. The U.S.Commercial Service Mexico is currently assisting dozens of U.S. companies in theirefforts to obtain payment for products/equipment delivered. It is often necessary totravel to Mexico to meet with the buyer and in many cases to hire a lawyer to handle thecase. In fact, the state-owned oil company, Pemex, announced in November 2009 athree-month freeze on payments to vendors/contractors in response to adverse financialconditions. This type of decision, by the largest company in the country, creates aripple effect throughout the economy and only compounds the problem.More than ever, U.S. exporters are advised to be cautious and seek counsel whennegotiating contracts in Mexico. Once negotiated, be prepared for the unexpected asMexico and its companies struggle to dig out from a severe recession that has madetight credit even tighter.A detailed report on financing and payment mechanisms is available at:http://www.buyusainfo.net/docs/x_4118633.pdfHow Does the Banking System OperateReturn to topCommercial Banks:Mexico's commercial banks offer a full spectrum of services ranging from depositaccounts, consumer and commercial lending, corporate finance, trusts and mutualfunds, to foreign exchange and money market trading. Currently, 41 banks are