14 Tips on Mexico

By | Muxin Xu

On April 16, Dark Currents published "In Mexico, Waiting for a World-Class Windfall," an attempt to examine a country that has captured the attention of many going-global entrepreneurs — exploring whether this place is magical realism or a genuine gold rush. After publishing, we received numerous direct messages from readers facing all sorts of questions, ranging from macro environment and sector trends down to practical concerns like which lawyer to contact first upon arriving in Mexico. So Dark Currents decided to host a salon, inviting friends to discuss Mexico together: Penglan Zhao of BAI Capital, Yunqi Lai of RockFlow, Jing Zhong of Airwallex, Haiwei Shen of MoonPay, Cong Luo of Shenzhen Chongao, and a Huawei Cloud Mexico business lead. Below are 14 takeaways from that afternoon session, edited by "Dark Currents Waves."

1. The weak global macro environment is an objective reality, so everyone is derisking — and that's brought Mexico into the spotlight. Mexico has a developed manufacturing sector, so mid-to-lower stream supply chain companies head to Southeast Asia, while upstream companies go to Mexico. Mexico has natural advantages in manufacturing: since the 1950s, it became America's industrial backyard, with established automotive supply chain talent on the ground.

2. Mexico's new-economy opportunities have little to do with Chinese entrepreneurs. First, few Chinese founders in new-economy sectors go there; second, local infrastructure can't support it. Instead, merchants and e-commerce operators are the ones heading to Mexico in larger numbers — because margins in these sectors are already solid, so why bother starting from scratch? For investors, the paradox is: the economy looks good, but investable targets are scarce.

3. From a macro perspective, why Mexico deserves attention: geopolitical advantages, attractive and sizable demographics, decent foundational education (Latin America was wealthy once, after all), riding both American and Chinese tailwinds, the Mexican peso's 20% appreciation against the dollar, political turbulence nearing its end, and Spanish being the world's third most-spoken language. But there are also warning signs: with so much old money, can the middle class actually rise? And then there's the cartel problem.

4. Mexico's domestic stock market is difficult for foreigners to access because institutional investors absolutely dominate, making liquidity poor. The recommendation is to buy Mexican index stocks through US markets.

5. The country has 10 unicorns and 30+ companies at $300-500 million valuations — we see future unicorns among them. The investment premise: using China's new-economy know-how to empower local businesses. If this premise is wrong, the entire investment logic collapses.

6. We've invested in 3 local companies from a China angle. Chinese enterprises will definitely thrive in Mexico. Examples: Didi entered Mexico five years after Uber but now they're neck-and-neck; TikTok became the market leader in three years; Shein is now worth hundreds of billions; Temu has the highest daily order volume. So today we want to find Chinese founders willing to go global — but the problem is, out of 10 people, 6 want Southeast Asia, and not a single one wants Latin America.

7. Mexico has two most important partners: first, Huawei — Huawei people are everywhere globally; second, the Fujian Chamber of Commerce, because after opportunities in Spain dried up, large numbers of Fujianese and Wenzhouese migrated to Mexico.

8. Authentic Chinese restaurants are increasing, and you're seeing more Chinese faces in hotels. But it's not just Chinese people heading to Mexico — plenty of Europeans and Japanese are there too. Mexico isn't as unsafe as people imagine.

9. Products in Mexico must be simple and clean. Chinese users can tolerate some complexity, but Southeast Asian and Latin American users definitely cannot — local apps often have just one button per screen.

10. Mexicans tend toward conservatism, with xenophobia levels somewhere between Japan/Korea and Southeast Asia, so building a localized team is essential. The class structure is pronounced: the wealthy speak fluent English and live in neighborhoods resembling San Francisco, while ordinary people only use Spanish — so know your user positioning.

11. Chinese identity is relatively welcome in Mexico. Large numbers of Mexicans earn money in the US and spend it back home, and they want to see Chinese solutions. So China can enter Mexico as a foreign enterprise, then go heavily local — Chinese companies in the back office, with a globally-minded Chinese CEO but local talent at the -1 level.

12. Against the backdrop of this year's Mexican election, policy continuity is assured. The likely winner will be reformist/market-oriented, pursuing small-government-big-market policies and embracing global Chinese enterprises with openness. The real concern is actually the US election, because Trump has tense relations with Mexico — if he returns, US-Mexico relations would worsen. Mexico holds two cards: trade war and immigration. We'll see how it plays them.

13. The payments market has no monopolist here; the largest player only has ~40% market share. There's room.

14. Why is automotive going global so hot these past two years? Because previously, even used cars couldn't compete on price in Southeast Asia. This wave of automotive globalization is driven by new energy vehicles — Huawei, Xiaomi can all arrive late and win. And Mexico's zero-tariff trade agreements have attracted many who originally targeted North America.

Image source | IC photo