Mexico - Commercial Guide
Selling to the Public Sector

Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.

Last published date: 2020-08-18

This section covers a broad range of considerations for selling to the Mexican public sector. We start with an overview of the size and process of Mexican government procurement, followed by a section on project financing to help exporters bidding on major Mexican government projects.

Selling to the Government

The Mexican Government purchases large volumes of raw material, repair parts, finished goods, and hired services to execute important infrastructure and construction works, not to mention supplies for the broad scope of government functions, including a government-run hospital and healthcare network, schools, defense, police, research, international affairs, and more.

Procurement Centralization

Upon being sworn in December 1, 2018, the López Obrador Administration announced a new system of centralized procurement to support government anti-corruption efforts, increase transparency and accountability, and reduce costs. As of April 2020, significant aspects of the centralized procurement system were still being worked out, including consistency of the new system with procurement provisions of the Mexican Constitution and Mexico’s obligations under its various free trade agreements including the U.S.–Mexico–Canada Agreement. In practical operation, we have seen the government turn away from open international tenders to expanded use of invitations to bid followed by direct awards. This section provides an overview of what we know of this new centralized system together with the government procurement system as laid out in Mexican law.

In December 2018, the Government took two actions to kick off centralized procurement. First, the then–Minister of Finance, Carlos Urzúa, assigned Raquel Buenrostro as the then–Comptroller General (Oficial Mayor) and centralized procurement authority for all procurement. The current Comptroller General is Thalia Lagunas. Second, the Mexican Government signed an agreement with the United Nations Office for Project Services (UNOPS) to advise on tenders for strategic projects, provide technical assistance on tracking contracts, and increase transparency.

The new system was announced in May 2019 as the “Integrated Strategy for the New Public Procurement System” (Estrategia Integral del Nuevo Sistema de Contrataciones Públicas). This strategy sets forth two main objectives. These are (a) Improve the transparency of the public procurement process; and (b) contribute to economic development having a procurement system with strategic planning, social responsibility, and a greater, more diverse number of potential suppliers. (Supplier diversity is thought to mean reducing reliance on suppliers from the United States and other traditional source countries such as Spain.)

The strategy includes the following actions:

  • Strengthen the procurement planning process
  • Support small and medium-sized companies (SMEs) with social responsibility programs
  • Establish strong coordination with procurement units
  • Consolidate procurements
  • Adopt technology tools
  • Improve transparency in public administration
  • Create a flexible legal framework

Government Budgets and Spending

As announced in the Government’s 2020 Economic Program, Mexico’s 2019 overall federal budget authorization is MXN 6.1 trillion, or approximately USD 316 billion (up from USD 5 billion in the 2019 budget). The budget includes increased spending for social programs but also channels funds to security and the energy sectors.

This table depicts the 2019 Government´s GDP percentage expenditure of the public sector compared with 2018.

 

2018

2019

Federal Government

1.6

1.5

Legislative

0.1

0.1

Justice

0.5

0.4

Government Policy Coordination

0.2

0.1

Foreign Affairs

0.1

0.0

Financial and Fiscal Affairs

0.1

0.1

Defense

0.5

0.5

Security

0.2

0.2

Other general services

0.1

0.1

Social Development

10.3

11.0

Environmental Protection

0.1

0.1

Housing

1.0

1.0

Health

2.4

2.4

Recreation and Culture

0.1

0.1

Education

3.0

3.1

Social Protection

3.8

4.3

Economic Development

5.1

4.9

Commercial and labor affairs

5.1

4.9

Agriculture, Fishing and Livestock

0.3

 0.2

Oil& Energy

3.4

3.9

Mining, manufacturing and Construction

0.0

0.0

Transportation

0.6

0.3

Communications

0.0

0.0

Tourism

0.0

0.0

Science and Technology

0.2

0.2

Other industries

0.5

0.1

Stabilization funds

0.2

0.1

Source: Secretariat of Finance (www.finanzaspublicas.gob.mx)

State and municipal spending should not be ignored. The largest states and cities in terms of economic size include Mexico City and the states of México, Nuevo León, Jalisco, Veracruz, Campeche, and Guanajuato, which together account for more than 50 percent of national GDP.

Using Local Partners for Government Sales

For most opportunities, it is not required to have a local representative or an office in Mexico to bid on a tender and sell to the Mexican Government. However, a local office can simplify obtaining bid documents and supporting after-sales service and parts, in addition to tracking competitors and reassuring the procuring agency of your long-term commitment to the market. Frequently, the tender requires some type of local presence and Spanish-language skills. For these reasons, we strongly recommend that U.S. companies seeking government contracts work with a partner in Mexico. The U.S. Commercial Service can assist in identifying potential partners for U.S. companies. More information about these services can be found in the Trade Promotion & Advertising section.

Navigating Mexican Government Procurement

The U.S. Commercial Service Mexico City has a guide to Public Procurement in Mexico. The guide has not been updated as we await more clarity on the evolving centralized procurement system. However, please contact us to inquire about an updated copy. Below is a summary of key points for U.S. exporters based on the Mexican procurement system as stated in existing law.

The Mexican Government Procurement Process

Mexican Government procurement and contracts are governed by Article 134 of the Mexican Constitution, the Public Procurement Act (Ley de Adquisiones, Arrendamientos y Servicios Del Sector Público, or LAASSP), and Public Works Act (Ley de Obras Públicas y Servicios Relacionados con las Mismas, or LOPSRM). The Secretariat for Public Administration (Secretaría de la Función Pública, or SFP) is responsible for defining, monitoring, and enforcing procurement and contracting rules, including managing any objections or disagreements with the legality of the procurement process. Depending on the sector, other government ministries and agencies may have oversight on the process. For example, in the energy sector the Electricity Commission (Comisión Federal de Electricidad, or CFE) and the National Electric System (Sistema Eléctrico Nacional, or SEN) significantly regulate tenders in their respective areas of responsibility.

The Mexican Government makes purchases based on a documented need. Any agency engaging in public tenders or other procurement methods is required to post all listings on CompraNet (see the section on tracking tenders, below). The government must set a procurement budget, enter its information into an Annual Procurement Program (APP) on CompraNet, consider any relevant standards for regulated products, and address the agency’s objective in the short-, medium- and long term. Prior to preparing a tender, the procuring agency must complete a comprehensive market study to establish market prices and specifications. There are three types of procurement procedures agencies can use: public tender, restricted invitation, and direct award. A public tender is the preferred method; however, there are twenty exceptions that allow for an agency to by-pass public tenders. A restricted tender is invitation-only but must include at least three bidders. A direct award is a sole-source procurement and requires approval of a specific justification such as national security. When a single supplier does not exist that can fulfill the required need, the procuring agency can offer a joint bid and/or split award.

An agency seeking to procure a product or service will evaluate the bid on point-based, cost-benefit, or binary criteria. Through a point-based process, every component of a bid is weighted differently (50 points in total), and the experience of a supplier is 10 percent to 15 percent of the final score. The cost-benefit evaluation monetizes the benefit of each component of the bid to enable cost-benefit scoring. The binary process is typically used for commodity purchases in which the procuring agency first determines bids that meet all technical requirements and then automatically awards the purchase to the lowest price bid.

Prior to the final version of the tender publication, the procuring agency has the option to post a draft tender to CompraNet for 10 days. Once this period is over, the final tender will be published. Tenders are published on the agency’s website, CompraNet, and the Official Gazette.

Tracking Tenders and Bidding

The Mexican Federal Government uses an online procurement information management tool called CompraNet, similar to the United States FedBizOpps system. CompraNet is a repository for all official tender information and documents by all bidders. CompraNet stores each tender listing, procurement procedure, and procurement type (e.g. purchase, lease or service contracts), records on submissions and announcements.

Companies should complete the following to pursue a Mexican Government procurement contract:

  1.  Go to CompraNet and press “Register your Company” (accept the terms and conditions).
  2. Select the ‘Foreign Company’ tab (Extranjera Incorporar) and enter all corresponding data and document in the space provided.
  3. Attach the required file to process a digital certificate from the SFP.
  4. Send the form with all registration information.
  5. Wait one to two business days to receive account information and a digital certificate.
  6. Access CompraNet.

The system offers a PDF guide to register in Compranet as a company.

As part of the Secretariat of Finance’s integrated strategy, it issued a decree to incorporate in CompraNet the Federal Digital Store (Tienda Digital del Gobierno Federal), a system for federal government agencies to procure goods or services electronically.

We encourage U.S. firms to carefully analyze tender specifications. They may differ from entity to entity as well as the value of the purchase, type of goods or services, and regulatory requirements. A bid will be disqualified if not received within the specified period. Bids can also be disqualified for not meeting technical requirements—even items as small as a discrepancy in a comma between a bidder’s corporate name and the name appearing in its certifications. Likewise, each tender includes a specific schedule for participants to ask questions.

If a tender specifies a certain brand or gives preference to a supplier, a complaint can be filed with the Directorate General of Complaints (Dirección General de Quejas) at the procuring agency before the contract is awarded. Bids should only include the exact specifications listed in the tender. "Additional solutions" and/or specifications not listed in the tender request can disqualify the bid.

Finally, U.S. firms should communicate regularly with their Mexican representative and fine-tune all details related to the required documents. There have been cases of disqualification based upon seemingly insignificant omissions on the part of bidders to comply with tender requirements and procedures.

Corruption in Government Procurement

Corruption exists in many forms in Mexico, and it can, at times, influence tenders. The use of exceptions such as shortened procurement windows and sole source awards are common. Generally federal-level procurements have better oversight and anti-corruption safeguards than at the sub-national level. Despite these concerns, U.S. companies regularly win government contracts based on the strength of their bid. Please see the sections on Corruption and Regulatory Transparency in the Investment Climate Statement section.

Sector-Specific Procurement Developments

As noted at the beginning of this section, the new centralized public procurement mechanism is still evolving. However, we have observed significant changes in key procurement-heavy sectors.

Defense. The Mexican Secretariat of National Defense (Secretaría de la Defensa Nacional or SEDENA) and the Mexican Navy (Secretaría de la Marina or SEMAR) will handle the defense procurement process through their internal offices, led by their own General Comptroller’s Office (Oficial Mayor) rather than the Secretariat of the Treasury (Secretaría de Hacienda y Crédito Público or SHCP). SEDENA and SEMAR will be more independent in the procurement process than other cabinet agencies and government offices. Both institutions will use the annual budgets assigned by SHCP and will follow the requirements of the Public Procurement Act and Public Works Act, outlined above. The requirements to register new suppliers in CompraNet remains the same as in past administrations. SEDENA has also been managing the procurement to equip the new National Guard. In short, defense procurements will remain similar to the prior administration and will have expanded scope with respect to supporting the National Guard. See our Aerospace and Safety & Security sections for more information and contacts for our team.

Health. The López Obrador Administration is reorganizing the public healthcare sector to expand access to healthcare services and medicines for all Mexicans and to fight corruption in health system procurement. As part of this reorganization, there are several changes underway that impact the government procurement process more significantly than for other government agencies. Please see our Healthcare Products and Services section for an overview of the industry.

The official government purchasing lists are changing, centralized procurement has caused supply problems, and multi-product and emergency tenders have had a range of issues. These include open international sourcing from low-cost countries (rather than phased procurement favoring domestic providers and trade agreement countries including the United States), low-price requirements, short response timelines, separation of product supplies from essential services (such as dialysis supplies separated from dialysis services), and direct supply rather than the use of wholesalers or distributors. Pharmaceutical and medical device / supply companies express concern about the exclusion of distributors since they are reliant upon Mexico’s wholesale distribution system to guarantee controlled storage, inventory, and cold-chain handling. CS Mexico is actively monitoring these developments and communicating with the Mexican Government to implement fair procurement practices that ensure quality-controlled and efficacious products from reputable suppliers.

Infrastructure. As outlined in the National Development Plan, Mexico is planning a wide variety of infrastructure projects for the 2018–2024 Period (see our sections on Transportation Infrastructure, Water, Energy, and Oil & Gas for more details). Procurement for the most prominent of these projects appears to be taking a somewhat different route than either defense or healthcare. It appears tenders for these projects will appear in CompraNet and may be managed to some degree by SHCP. However, we have seen indications that agencies managing the various projects may opt for direct award solicitations when directed by President López Obrador or to focus on preferred identified suppliers. We encourage you to contact your CS Mexico team in the relevant sector for assistance.

Advocacy

U.S. companies bidding on a Mexican Government tender may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center, coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies.

The Advocacy Center works closely with our network of domestic U.S. Commercial Service Export Assistance Centers and with the U.S. Commercial Service in Mexico to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.

Finaning of Projects

For large infrastructure projects, several financing instruments are available. Project consortia often develop a finance mix between development banks, multilaterals, commercial banks, and national export credit agencies, such as the U.S. Export-Import Bank.

U.S. Export-Import Bank

The Export-Import Bank of the United States (EXIM), an independent agency of the Federal Government, offers various short-, medium-, and long-term export finance and insurance programs. Of specific interest to U.S. exporters are the guarantees for medium-term loans to foreign buyers of capital equipment. Most loans are made by U.S. banks with EXIM’s guarantee.  More than 85 percent of EXIM’s transactions in recent years directly benefited small businesses. In Fiscal Year 2018 EXIM Bank’s total exposure in Mexico was USD 4.45 million and guarantee authorizations were USD 47 million. Mexico remains one of the largest markets in EXIM’s portfolio as the second in country exposure followed by Mozambique and Saudi Arabia.

Much of EXIM’s activity is under so-called bundling facilities. A bundling facility is a large medium-term loan made to a Mexican bank by a U.S. bank with the guarantee of EXIM. The Mexican bank then makes loans to Mexican companies for the purchase of American capital goods. There also are several U.S.-based banks that extend EXIM bank credits in Mexico. The major Mexican commercial banks have signed agreements with EXIM bank to grant lines of credit to Mexican firms that purchase U.S.-made products. Many major Mexican banks have Master Guarantee Agreements. Such credits generally are available only to Mexican blue-chip companies and to their suppliers with firm contracts.

Additionally, EXIM has made financing for renewable energy a top priority since the inception of its Environmental Exports Programs in 1994, offering competitive financing terms (up to 18 years in some cases) to international buyers for the purchase of U.S. origin environmental goods and services. Go to www.exim.gov for more information on EXIM.

U.S. Trade and Development Agency

The U.S. Trade and Development Agency (USTDA) provides grant funding for infrastructure project planning activities to help promote U.S. exports. By assisting U.S. firms to become involved in the early stages of project development, USTDA increases awareness of upcoming projects for the U.S. business community, growing the probability that U.S. exports will be used during the implementation stages. USTDA works closely with multilateral development banks, including the World Bank and the Inter-American Development Bank, to help U.S. firms take advantage of projects financed by those banks. Additionally, USTDA organizes reverse trade missions to introduce Mexican project sponsors to U.S. technology and companies. USTDA has an active program in Mexico, funding projects in a wide range of sectors, including energy, transportation, telecommunications, and the environment.

USTDA has published a comprehensive Resource Guide for U.S. companies on Priority Infrastructure Projects in Mexico. Go to www.ustda.gov for more information on USTDA.

U.S. Small Business Administration

The U.S. Small Business Administration (SBA) provides financial and business development assistance to encourage and help small businesses develop an export component to their businesses. The SBA assists businesses in obtaining the capital needed to explore, establish, or expand in international markets. SBA’s export loans are available under SBA’s guaranty program. Prospective applicants should tell their lenders to seek SBA participation if the lender is unable or unwilling to make the loan directly.

SBA also offers an Export Revolving Line of Credit (ERLC) program that is designed to help small businesses obtain short-term financing to sell their products and services abroad. The program guarantees repayment to a lender in the event an exporter default. The ERLC protects only the lender from default by the exporter; it does not cover the exporter should a foreign buyer default on payment. Lenders and exporters must determine whether foreign receivables need credit risk protection. Go to www.sba.gov for more information on SBA.

Multilateral Development Banks and Financing Government Sales

Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.

Learn more by contacting the:

Financing Web Resources

Export-Import Bank of the United States

www.exim.gov

EXIM Country Limitation Schedule

www.exim.gov/tools/country/country_limits.html

Overseas Private Investment Corporation (OPIC)

www.opic.gov

U.S. Trade & Development Agency (TDA)

www.tda.gov

SBA's Office of International Trade

www.sba.gov/oit

USDA Commodity Credit Corporation

www.fsa.usda.gov/ccc/default.htm

U.S. Agency for International Development

www.usaid.gov

Federal Trade Commission

www.ftc.gov

Commercial Liaison Office to the World Bank

http://export.gov/worldbank

Commercial Liaison Office to the Inter-American Development Bank

http://export.gov/idb

Trade Finance Guide for U.S. Exporters

www.export.gov/TradeFinanceGuide

Financing and Payment Mechanisms Report

U.S. Commercial Service Mexico Website