WisBusiness: Madison seminar covers perils and pluses of Mexican dairy business

By Tracy Will

For WisBusiness.com

MADISON — Despite the rise of “serial violence” from drug cartels in Mexico, the sales director for a Madison-based dairy equipment company says his company is having a good year there.

“In 1986 you could go anywhere in Mexico,” said Jorge Prieto, Bou-Matic’s Asian and Latin American sales director. Now, as dairy farmers have become targets for kidnapping from the drug cartels, “farms have gates and security checkpoints with guards. Workers wear uniforms and IDs and owners change their driving routes regularly to prevent drug gangs from kidnapping them or their families. Some farmers even moved to the United States to keep their families safe,” making it difficult to contact them for business purposes.

Bus despite those problems, Prieto told an international business seminar that “2009 has been a good year for Bou-Matic Mexico.”

“As of May 2009, our Mexican operations were at 2008 levels, which was an excellent year for Boumatic. By March many new projects were put on hold. Milk prices in Mexico went down substantially,” Prieto said, adding the second half of 2009 will be more difficult, due to imports of inexpensive U.S. milk.

While the serial violence remains a danger, attorney Miguel Noyola of Baker & McKenzie said Mexico has instituted several reforms to improve itself as a place to invest and do business.

“Pre-NAFTA, taxes were nearly 50, sometimes 60 percent on foreign companies, foreign ownership was limited to 49 percent, product or technology licensing was highly taxed and foreign companies were restricted in marketing their products in Mexico,” Noyola said.

Since the reforms, “corporate taxes are 10 percent, currency exchanges offer market rates for cash transfers, full ownership of Mexican companies is permitted and companies can sell their own products in Mexico,” Noyola noted as he described the improved business climate.

“If you are in the dairy business in Wisconsin many of the Mexican counterparts are private and you can negotiate for long-term arrangements to sell your product. And because of the open border, you could also buy a Mexican company and due to tax policies any money flowing back to U.S. the profits would only be taxed at the 10 percent rate,” he said.

Noyola said many challenges remained in Mexico, and Prieto discussed the need for security when dealing in “hot” areas of Mexico where drug cartels exercise control.

His tips:

– Make certain you know the person picking you up in the airport.

– Communications are critical: follow an itinerary and check in regularly.

– Always travel in groups in marked vehicles and do not drive expensive or flashy cars.

– Carry kidnapping insurance.

– Have an ID with you to deal with military checkpoints.