In 1994, the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico created the world’s largest free trade area. Today, NAFTA links more than 444 million people producing more than $17 trillion worth of goods and services annually.
U.S. companies of all sizes are benefitting from new opportunities in Canada and Mexico, but there are complexities to managing a business across multiple borders. From the perspective of a financial professional, the challenges of supporting expansion into Canada or Mexico parallel the challenges commonly associated with globalization.
PNC’s George Hoffman spoke to Smart Business about how companies can manage cross-border payments and collections, local currency requirements and hedging options.
Why should U.S. companies consider tapping into the markets in Canada and Mexico?
For companies making their first foray into international markets, doing business with Canada is easy. Canadian business practices are very similar to those in the U.S. and there are no tariffs for NAFTA-produced goods and services.
The country’s large and diversified economy has had solid growth since the 1990s due to great natural resources and a skilled labor force, and it is one of the world’s top 10 trading nations, with the U.S. receiving nearly 80 percent of exports.
Mexico has the 12th largest GDP in the world and the highest gross national income per capita in purchasing power parity in Latin America. With an unprecedented macroeconomic stability, the country has reduced inflation and interest rates and has increased per capita income. Mexico’s proximity and our shared border give U.S. companies access to low-cost, quality manufacturing in addition to favorable NAFTA treatment.
