It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment
Mexican lending rates are significantly higher than in the United States. Requiring payment either by confirmed letter of credit or cash in advance can cost U.S. exporters sales opportunities. While favorable payment terms are important, U.S. companies should consider all financing options available to be as competitive as possible. In the case of existing contracts, many importers are defaulting on payment deadlines, paying 30 to 45 days late. Exporters are advised to protect themselves from the risk of default by obtaining foreign buyer financing or export insurance from the U.S. Export-Import Bank (see below for more information).
It can be difficult to collect from Mexican buyers in cases of non-payment. Although the U.S. Commercial Service in Mexico cannot act as a debt collector, we have supported U.S. companies in their efforts to obtain payment for products/equipment delivered. However, it is often necessary to travel to Mexico to meet with the buyer and in many cases you may need to hire a lawyer to handle these types of cases.
U.S. exporters are advised to be cautious and to seek counsel when negotiating contracts in Mexico. Once negotiated, be prepared for the unexpected, as access to credit in Mexico is limited or costly. Moreover, 95 percent of the Mexican private sector is comprised of small- and medium-sized enterprises (SMEs), most of which have limited access to credit.
The Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público or SHCP), the National Banking and Securities Commission (CNBV), and the Bank of Mexico (BANXICO) are the main regulators of the banking system in Mexico. SHCP handles institutional issues, such as licensing, and sets credit and fiscal policies. CNBV, a semi-autonomous government agency, is responsible for supervision and surveillance. BANXICO implements monetary and fiscal policies and operates inter-bank check clearing and compensation systems. The Institute for the Protection of Bank Savings (IPAB) acts as a deposit insurance institution. The Mexican Banking Association (ABM) represents the interests of Mexico’s banks.
Mexico’s commercial banks offer a full spectrum of services ranging from deposit accounts, consumer and commercial lending, corporate finance, trusts, and mutual funds, to foreign exchange and money market trading. Currently, there are 48 banks operating in Mexico, seven of which control 78 percent market share in terms of total assets. The leading banks include BBVA Bancomer, CitiBanamex, Santander, Banorte, HSBC, Inbursa, and Scotia Bank. Mexico’s commercial banking sector is open to foreign competition. All major banks, except for Banorte, are owned by foreign banks.
Following the 1994 peso crisis, banks in Mexico had been very cautious in their lending, offering loans only to their most sound customers. However, banks are now beginning to implement programs for lending to a wider range of clients, although at relatively high rates. In general, SMEs have trouble accessing credit. The Mexican Government has enacted several incentives to encourage more lending to SMEs and banks have followed suit with new lending policies, but it remains to be seen whether the largest segment of the Mexican economy will gain better access to credit.
According to a third quarter 2020 BANXICO survey of established companies, the main sources of financing were suppliers (77.1%), commercial banks (27.1%), other companies and/or their own headquarters (19.5%), foreign banks (5.6%), development banks (4.2%), and debt issuance (0.5%).
In March 2020, due to the COVID-19 pandemic, SHCP announced that commercial banks would be allowed to grant payment extensions up to six months to individuals and SMEs for all type of consumer loans (auto, credit cards, personal loans, mortgage, and commercial credit lines).
Mexican Payments System (SPEI)
The Central Bank owns and operates Mexico’s electronic funds transfer system, SPEI. The system has allowed participants to transfer money in real time since August 2004. The system is used for both large-value payments and low-value transactions such as payrolls and person-to-person transfers. SPEI is a hybrid system, clears operations every few seconds, and the results are settled immediately on the participants’ cash accounts.
Digital Payment System (CoDi)
In January 2019, BANXICO, SHCP, and CNBV announced a new payments system through QR (Quick Response) code. The system called Digital Charge (Cobro Digital or CODI) is part of the government efforts to increase financial inclusion and reduce the cash economy. CoDi’s users/customers must have a smartphone, and a bank account. The sellers must have a static QR Code, a smartphone to download the CoDi app (for face-to-face transactions) or a web page to generate the CoDi requests for online sales.
The mission of development banks is to fill financing shortfalls in the commercial banking sector. Mexico has seven government-owned development banks that provide services to specific areas of the economy. The dominant institutions are National Financial (Nacional Financiera or Nafinsa) and the National Bank for International Trade (Bancomext). These institutions have become primarily second-tier banks that lend through commercial banks and other financial intermediaries such as credit unions, savings and loans, and leasing and factoring companies. Nafinsa’s primary program funds SMEs and micro businesses. Nafinsa also undertakes strategic equity investments and contributes equity to joint ventures. Bancomext provides financing to Mexican exporters and to SMEs. It also offers working capital, project lending, and training to firms in several specific sectors that require support, such as textiles and footwear.
The other Mexican development banks are the National Development Bank for Public Works and Services (Banco Nacional de Obras y Servicios Públicos or Banobras), the Rural Agriculture Financial (Financiera Rural), the National Savings and Financial Services Bank (Banco del Ahorro Nacional y Servicios Financieros or Bansefi), the Mexican Army, Air Force and Navy Bank (Banco Nacional del Ejército or Banjercito), and the Federal Mortgage Bank (Hipotecaria Federal), which finances Mexican homeownership through financial intermediaries.
The non-traditional banking sector in Mexico is comprised of exchange houses, credit unions, leasing, factoring companies, and financial lending networks with multiple objectives, which are also known as SOFOMs. These financial entities are divided in two categories: Entidades Reguladas, or Regulated Entities (SOFOM ER); and Entidades No Reguladas, or Non-Regulated Entities (SOFOM NR). SOFOMs may offer financial factoring, leasing, loans, and/or other credit services, but they are not allowed to receive deposits from the public.
In January 2014, the Government of Mexico announced a financial reform, which had four main goals: 1) promote lending through the development banks; 2) expand credit from private financial institutions; 3) increase competition in the financial sector; and 4) ensure the security of the Mexican financial system. To view the Spanish version of the financial reform: Mexico - Financial Reform (ESP).
Due to the financial reform, regulation and supervision of SOFOMs has increased. SOFOMs have the obligation to maintain up-to-date information with the National Commission for the Protection of Users of Financial Services (CONDUSEF), and they are required to give information about their borrowers to at least one credit bureau.
Foreign Exchange Controls
There are no controls on the transfer of U.S. dollars into or out of Mexico. This means that profits can be repatriated freely. However, to prevent money laundering, SHCP maintains a regulation governing the deposit and exchange of U.S. dollars in Mexican banks. Dollar transactions that are processed through on-line banking are not affected. According to the regulation, banks must observe the following limits:
- Account holders can deposit no more than USD 4,000 per month.
- Mexican citizens who are non-account holders can deposit USD 300 daily, but no more than USD 1,500 per month.
- Tourists who are not account holders can exchange no more than USD 1,500 per month in cash.
Border and tourist-area businesses can exceed the USD 14,000 per month cash deposit limit if they meet the following three criteria: 1) they must have been operating for at least three years; 2) the must provide additional information to financial institutions justifying the need to conduct cash transactions in U.S. dollars; and 3) the must provide three years of financial statements and tax returns. The limit on individual account holders remains unchanged. There is no restriction on the sale of U.S. dollars. However, upon entering or departing Mexico, cash amounts of USD 10,000 or more must be declared and documented. For more information on the regulation in Spanish, see the Official Gazette notice on this subject.
U.S. Banks & Local Correspondent Banks
There are many U.S.-based banks active in the Mexican market, particularly U.S. brokers and banks working with the U.S. Export Import Bank (EXIM) programs. The U.S. Commercial Service Mexico maintains a list of these banks. Please contact Sylvia Montano (Sylvia.Montano@trade.gov) for more information.