Doing Business in Mexico with Eyes Wide Open
Mexico is a critically important trading partner with the US together with China and Canada. The three account for 36.5% of all US imports and 32.1% of all US exports amounting to over a trillion dollars of trade each year. And yet Mexico is always a challenging country in which to do business. The gap between the wealthiest and the poorest is enormous. Violent crime and gun violence is extremely prevalent.
Government and police corruption is widespread and Mexico is amongst the largest producers of cocaine, heroin, and fentanyl. In addition to being a narcotics source country, because it borders the US, it is a major narcotics transshipment country, and all of the money generated by narcotics trafficking has to be laundered. In fact, Mexican money launderers are amongst the most innovative, who make use of a combination of trade-based money laundering, traditional money laundering through cash intensive businesses, bulk smuggling of US currency, the black market peso exchange, and other proven and widely used money laundering techniques.
On a more positive note, Mexico is also a huge trading and manufacturing partner for a wide range of goods including automobiles, car parts, clothing, housewares, precious metals, oil and gas, and a huge volume of agricultural products.
Mexico is fraught with risk and tensions between Mexico and the US are arguably at an all time high, and yet our two economies and national security are inextricably linked.
In a recent conversation with Mexico subject matter experts Matteson Ellis and Mike Belcher, we examined how US companies with significant operations in Mexico continue to operate and what companies who are considering investing in the Mexico market should do to lower their investment risk.
On day one of the Trump administration, President Trump issued an executive order designating numerous Mexico based organized crime cartels as Foreign Terrorist Organizations. In addition, DOJ prosecutors have been instructed to prioritize the investigation of the drug trade, human trafficking and violent crime by transnational criminal organizations consistent with the directive for the total elimination of cartels. Most recently, the US Department of Treasury Financial Crimes Enforcement Network (FinCEN) issued sanctions against three Mexican financial institutions on June 25th, 2025, prohibiting US financial institutions from transmitting any funds to or from these entities. This move can potentially be devastating to Mexico since designating a bank as a Financial Institution of Primary Money Laundering Concern isolates those banks from the global banking community making it nearly impossible for them to survive.
I asked Matt to explain what happens to a bank once it’s designated as a primary money laundering concern and how it affects the customers of those banks.
These orders by FinCEN are striking and they are significant developments. It is clear that the Trump administration has deployed the Department of Justice, Treasury, and other groups within the federal government to focus on cartels, organized crime, and Fentanyl. Until these orders, that came in the form of sanctioning individuals who were close to cartel leaders or sanctioning bulk cash smugglers at the border. These FinCEN orders against three reputable financial institutions in Mexico is really a shot across Mexico’s bow.
It’s a wakeup call that legitimate companies can be in the crosshairs if there are indications that they’re providing support to cartels. What’s quite interesting is the way the market has overreacted to the orders because when you read the sanctions themselves, they are quite limited. They don’t apply to any company. They only apply to covered financial institutions, banks, broker dealers, money service providers, and casinos. They don’t apply to companies outside of that scope. And they aren’t complete sanctions as one would expect with an OFAC Specially Designated National designation. They are only prohibiting the transmittal of funds to and from those three entities from the covered financial institutions. They don’t restrict normal companies from doing anything. Those companies can still open accounts, hire these financial institutions to serve as trustees, et cetera. But the market has greatly overreacted. But it really has put the livelihood of these institutions in great jeopardy. And it’s caused a number of companies in the market to decide not to continue doing business with these entities. Whether FinCEN may have overshot or the market overreacted, but either way, this is going to wake up the markets and highlight these new and emerging risks in Mexico.
Mike Belcher then shared his insights about the imposition of very high tariffs, the crackdown on illegal immigration, what US and other foreign companies can expect as they continue to operate inside Mexico and what should they do in order to safeguard their operations.
Mexico and the US continue to be number one in terms of trading partners, foreign investment and direct foreign investment in Mexico. Over the last two years, this growth has continued and the projections are that it will continue to rise and public statements from the current Mexican administration support a growing foreign investment in a number of areas. These factors support an optimistic view for organizations with operations in Mexico. But that can all break down very quickly. A number of companies are adopting a “wait and see” policy primarily due to uncertainty regarding tariffs, but also uncertainty associated with the political climate in the United States.
Given these uncertainties, it’s critical for U.S. companies to have backup plans depending on several contingencies that they may have to face. One thing that is particularly concerning is the potential affect of a direct unilateral military action on the part of the United States to go after the cartels. This would significantly disrupt the business and economic climate. Certainly, any action on US or on Mexican soil is a flashpoint with Mexicans, given the history between the two countries that would signal disaster in terms of the relationship between the two countries.
One need only look at the current situation between Venezuela and the U.S. to infer how devastating it would be if the U.S. brought its military assets to bear against Mexican cartels.
If there’s a reason to be optimistic that the U.S. won’t use military force against Mexican cartels is the fact there is cooperation on the counter narcotics front especially between the U.S. and the Mexican Navy which is viewed as a conservative and trustworthy international partner.
Matt added that this new emerging legal enforcement environment has created new ways in which companies can fall under the scrutiny of the DOJ and Treasury in particular, should the U.S. take the position that a company is providing material support to cartels that have been designated as Foreign Terrorist Organizations (“FTO”). This can lead to significant criminal and civil liability. Material support can take many forms including making extortionate security payments on highways or having relationships with third party vendors who are serving as front organizations for a cartel. Liability can also come from looking the other way when automobiles or precursors to fentanyl are being stolen from your operations and not being sufficiently diligent at preventing those thefts which then resulted in a benefit to the FTO.
To assist business travelers and tourists, the US Department of State maintains a list of country profiles and issues travel advisories that are specific to countries that may pose safety concerns. Travel advisories are numbered from one to four, with one being the safest country to travel to with those designated three or four where it is deemed unsafe. In fact, level 3 travel advisories carry the label “reconsider travel” and level 4 travel advisories are labeled “do not travel”. Those terms are not subject to interpretation and large swaths of Mexico carry cautions of either reconsider travel or do not travel. These advisories are due to violent crime and kidnapping issues and their prevalence. Generally speaking, business travelers and tourists often are unaware of the crime problem and it’s fair to say people don’t routinely check the Department of State travel advisories when deciding on their travel destination. Mike offered advice to business travelers and tourists on how to avoid becoming a victim of a crime when traveling to Mexico.
The State Department website has an entire section devoted to travel safety issues and country reports, and it’s very idea for people to look at those prior to traveling to Mexico. The Foreign Ministries of Canada and the United Kingdom also have very useful travel advice on their websites. An important part of mitigating travel risk depends on exactly where you’re going and what you’re going to be doing. If you’re in the mining industry or you’re starting a new business building a factory and you’re visiting there, that’s completely different from going into business meetings in Mexico City and the security precautions that need to be taken do differ. Have a good understanding of where you’re going, exactly what you’re going to be doing and plan on getting security advice from either an international company or from a local Mexican company that specializes in that area.
If you’re using a local company, you have to do your due diligence on exactly which company with which you are doing business. And check your documents before you leave. There are too many nightmare stories of people arriving in Mexico and their passport’s due to expire within six months and they’ll turn you away at the border. Make copies of those documents and keep them stored separately. Bring along copies of prescriptions and make sure prescription medications are in their original containers.
You need to consider travel insurance and medevac insurance depending upon where you’re going beyond that. The major point I like to point out, you absolutely have to be aware of it sounds trite and we always hear it, but it’s always good to listen to it again because sometimes you just put it out of your mind, but you absolutely have to be aware of your surroundings and where you are, where you’re going. My advice has always been you’re leaving your hotel, just stop, look around, take a few minutes to see cars parked across the street, people on the street, what’s going on around you. Is there anything that looks out of the ordinary? Listen to what’s going on. Take a 360 degree look around you, especially when you’re walking down the street to make sure that nobody’s paying undue attention to you.
Never hail a taxi on the street. You can call an Uber in Mexico City or anywhere in Mexico now from your cell phone. It’s simple. Or you can use the hotel car service. Another issue is money. Bring cash with you. Never use outdoor ATM machines, always use ATM machines inside banks or hotels. Keep a close watch out on your phone, your laptop, and where possible use a VPN.
To listen to the entire conversation with Matt Ellis and Mike Belcher on how to operate safely in Mexico, click here.
