In 2022, while most Chinese VCs focused on Southeast Asia, BAI Capital turned its attention to Mexico. Their team visited Mexico that year and, after meeting with all the local unicorn companies, local giants, and Chinese-funded enterprises, gained a highly concentrated understanding of the country. ” We felt that Mexico was in a phase similar to the Chinese mobile internet era 2015.”
In 2023, when Tesla announced the establishment of a factory in Mexico, the “Mexican wave” gradually began to gain momentum.
Why a Hotbed for Investment?
Some reasons drive the focus on Mexico’s international expansion.
Firstly, some investment companies witnessed rapid growth firsthand and directly experienced the rise of Mexico’s economy.
Secondly, from a top-down perspective, the Mexican market had already attracted significant international capital attention as early as 2020 and 2021. Engagements with global thought leaders, such as Larry Fink and Jamie Dimon, validated and confirmed the potential and importance of the Mexican market.
Thirdly, since 2015, Chinese enterprises have ventured into international business investments, capturing trends from mobile internet to content going overseas and continuously focusing on overseas market opportunities beyond cross-border e-commerce. The economic growth, capital structure, and work ethic in Mexico further solidified their optimism about the market’s potential.
Compared to Southeast Asia, Mexico’s location and culture make it a crucial link between North and Latin America, drawing Chinese investors and entrepreneurs looking for new opportunities. It acts as a gateway to North America and a launchpad into Latin America, allowing for expansion in both directions.
Additionally, the reasons for expanding into Mexico include tariff advantages and a recognition of Mexico’s unique position.
Key Considerations When Exploring the Mexican Market:
Mexicans are pragmatically minded people who find Chinese experiences more relevant than those from the US, given the similarity in GDP per capita between Mexico and China. Whether in terms of talent or business models, leveraging China’s experience in consumer internet and fintech can be highly valuable and applicable in Mexico. So, adopting a China angle to build trust is possible.
Mexico is the third largest market for financial inclusion globally (GDP per capita x unbanked population). The potential of Mexico’s financial inclusion market and the rapid development of cross-border e-commerce are key focus areas. These sectors are prioritized for their direct business opportunities and as crucial drivers for developing other online economies and infrastructures.
The development of mobile wallets in Mexico could be faster. Mexico leans more towards the US culture of card usage, preferring credit cards over mobile payments. Spei, Mexico’s attempt at promoting mobile payment, has seen less than ideal uptake as the culture is more accustomed to card usage, signifying status with credit card ownership.
For now, the emphasis remains on issuing cards, with mobile payments seen as the next-generation method, expected to take over in 5 to 10 years.
However, the trend towards e-commerce in Mexico has been accelerated by Chinese companies like SHEIN, TEMU, and TikTok, opening up many new opportunities likely to benefit Chinese entrepreneurs. The flourishing online economy will only come after establishing two fundamental infrastructures: payment and logistics.