According to the law office of Herrman and Herrman, McAllen, a border town in the Rio Grande Valley, “is one of the fastest growing cities in the United States.” This law office has found great success in this area, and many other border towns could make similar claims.
But running a retail business in one of these towns won’t be without its challenges. The laws are different between the United States and Mexico, and you need to understand what business will look like.
Here are four factors to consider in pursuit of a profit.
- Be Aware of US-Mexico Relations and Immigration Policy
When running a business on the U.S.-Mexican border, current policy, especially involving U.S.-Mexican relations and immigration, will play a big role. Not only are many immigrants used as employees, but many retail businesses depend on people crossing the border to shop.
When relations are good, commerce is good, but when relations become tense, people become more apprehensive about crossing the border. This can not only stop potential shoppers, but can also make it more difficult to keep good employees. Even those who are here legally may be afraid of losing their visas.
- The Mexican Peso Affects the Retail Economy
When selling goods in a border town, retail businesses can attribute up to 80 percent of their business to Mexican nationals and border-crossers. Therefore, when the Mexican peso falls, you can expect it to affect your business.
Although the peso falling against the dollar may not affect more affluent Mexicans, budget-conscious shoppers may stop crossing the border for purchases because their peso isn’t worth as much as it was before. This can affect your whole business, including your workforce, causing reduced hours for employees or potential layoffs.
- Taxes and Tariffs
Taxes can affect the profit of your businesses because when taxes go up, obviously your profit margin goes down; you’re spending more money paying your taxes.
But it’s a little more complicated than that. When taxes rise, companies increase the price of their products or services to cover it, which can cause the consumer to be less likely to buy the product. Sales will decrease as a result.
When running a business in a border town, you must also pay special attention to tariffs. Tariffs are the taxes a company pays when exporting goods out of the company. When tariffs are low, U.S.-Mexican commerce is higher, but when tariffs increase, this type of commerce decreases, which can drastically affect the sales and profits of your retail business.
In fact, based on 2015’s imports data, Texas, which is full of border towns, would pay an additional $16.8 billion more for the same goods and services if a 20 percent import tariff was applied, which would dramatically affect the profit of the entire retail industry.
- Bi-Lingual Communication Is a Must
Unsurprisingly, towns located on the Mexican border are predominately Hispanic; therefore, most of the population, if not all, speak Spanish. For some, Spanish may be their native language and their grasp of the English language may be limited. Knowing and being able to communicate in both English and Spanish—at least at the basic level—is a must for effective business.
If you don’t know Spanish, there are many great ways to learn the language. Thousands of language learning resources can be found online, but many language experts recommend language immersion, meaning you place yourself in situations where Spanish is spoken constantly. You must be willing to try to speak it as well.
The more you practice the language in this style, the better your communication will be. You’ll probably have a lot of fun with this too!
Border towns can be an interesting place to live, and when you pay attention to these four things, you can also have a successful retail business that is profitable and valuable to both the U.S. and Mexican economies.