The hidden costs of doing business in Mexico.
Imagine if Steve Jobs or Jeff Bezos had been required to obtain fifteen permits, pay multiple unrelated fees, and navigate unreliable public services before launching their businesses. The world might have missed out on Apple and Amazon. For too many aspiring entrepreneurs in Mexico, this is what they face.
A few years ago, I visited a sprawling open-air book market in Mexico City’s Lagunilla district. I was on one of my usual treasure hunts for rare economic texts or forgotten novels when I overheard a conversation that left a deep impression. The vendor, a middle-aged man with an encyclopedic knowledge of education methods, explained to a customer that he dreamed of founding his own school. He envisioned an educational system superior to the well-known Kumon method, developed in the 1950s to help students master math and reading through self-paced, repetitive daily worksheets.
But there he was, selling used books, saving every peso he could. “Once I’ve saved enough,” he said with hopeful determination, “I’ll leave this stall behind and open my school.” I smiled at his passion, but the optimism was short-lived. I knew too well the gauntlet he would face in trying to bring his idea to life in Mexico’s often hostile business environment.
Mexico’s Promise—and Its Trap
Mexico, with its vibrant culture and large internal market, should be a natural hotspot for entrepreneurs. Micro, small, and medium-sized enterprises (MSMEs) account for 99.8% of all businesses in the country and provide jobs to around 27 million people, representing 68% of employment in the business sector. They contribute approximately 52% of Mexico’s GDP. MSMEs are vital engines of inclusion, innovation, and regional development. Yet, unlike in the United States—where starting a business is often celebrated as a courageous and noble endeavor—entrepreneurs in Mexico frequently face social suspicion, a maze of bureaucracy, limited financial access, and systemic insecurity that stifle their potential.
As Emprender México 2024, a report from our colleagues Caminos de la Libertad, makes clear, these challenges are not merely anecdotal. The rigorous analysis of 64 Mexican municipalities shines a harsh light on where, and why, entrepreneurship struggles to take root.
Where Business Can (Barely) Breathe
The Emprender México 2024 index evaluated municipalities across five critical areas:
- Starting a business (time, cost, permits).
- Employing workers (minimum wage impacts, union density).
- Access to electricity (cost and reliability; while electricity is government-provided, quality of service varies across municipalities).
- Taxes and fees.
- Security and rule of law.
At the top of the rankings are cities like Puerto Vallarta (Jalisco), Mérida (Yucatán), Pachuca (Hidalgo), Chihuahua (Chihuahua), and Aguascalientes (Aguascalientes). These municipalities, by Mexican standards, offer a comparatively better environment with a mix of improved security, less burdensome red tape, more moderate tax burdens, and more reliable infrastructure. They represent islands of relative sanity for local entrepreneurs striving to build a business. However, it is vital to contextualize this. Even these “best” cities in Mexico still present considerable obstacles when compared to the ease of doing business in globally recognized entrepreneurial hubs. For instance, the Global Business Complexity Index 2025 ranks Mexico as the 3rd most complex jurisdiction in the world, highlighting that even its most favorable cities operate within a fundamentally challenging national framework.
At the bottom of the list are cities where the barriers to business are highest. Nuevo Laredo (Tamaulipas), Boca del Río (Veracruz), Tapachula (Chiapas), Benito Juárez (Quintana Roo), and Centro (Tabasco) form the bleakest picture. These municipalities suffer from excessive bureaucracy, unreliable public services, and weak rule of law.
Nuevo Laredo, for example, ranks worst overall. Employers there face inflexible labor markets and a minimum wage that, relative to local income, discourages hiring. The city also underperforms on measures of legal certainty and startup conditions. Meanwhile, Boca del Río offers the most painful process for starting a business: more paperwork, more time, and higher costs.
A clear pattern emerges from the data: cities in the north and center of Mexico tend to provide a more fertile ground for business, while those in the south and southeast lag behind. Tapachula (Chiapas), Villahermosa (Tabasco), and Oaxaca (Oaxaca) are held back by unreliable electricity, high informality, and fragile legal systems.
This regional disparity isn’t new, but it’s alarming in a country that needs inclusive growth. The south’s entrepreneurs face structural challenges that their northern counterparts, while far from immune, can sometimes more easily navigate.
The Many Faces of the Problem
Starting a business isn’t just about the number of forms you file. It’s about whether the environment allows your idea to breathe.
- Permits and Costs: In Hermosillo, you might need only a handful of permits and face costs that are manageable relative to income. In Boca del Río, you’re looking at more paperwork, more waiting, and higher relative expenses.
- Labor Rules: In places like Nuevo Laredo and Matamoros, high union density and rigid wage floors make job creation risky and expensive.
- Security: Entrepreneurs can’t flourish in fear. Mérida and Tepic offer some of the safest environments in the country, while cities like Naucalpan and Ecatepec rank dismally in perceptions of safety and trust in law enforcement.
- Taxes: Low tax rates help, but they aren’t the whole story. Cities with low taxes but weak institutions or bad regulation still struggle to attract and keep businesses.
What Needs to Change?
The book vendor I met at the Lagunilla market is just one of many whose dreams are delayed or crushed by these barriers.
The Emprender México 2024 study offers a blueprint:
- Cut red tape so that ideas can move from dream to reality faster.
- Strengthen the rule of law so that entrepreneurs can operate without fear of arbitrary closure or extortion.
- Encourage labor policies that allow hiring without excessive cost or risk.
I hope to see a Mexico where creative, hard-working people like the man at the bookstall can bring their ideas to fruition without battling a maze of regulations, unreliable services, or suspicion from society. A Mexico that welcomes entrepreneurs is one that can offer shared prosperity, not just for the wealthy few, but for communities across the country.
