Fulfilling the Promise of NAFTA in the U.S. Hispanic Market

SAN DIEGO (By Ambassador Jeffrey Davidow, Mexidata.info) October 17, 2005 — It seems that every magazine or newspaper that has been published in the United States in the last year has focused attention on America’s growing Hispanic population and the economic market it represents.

The figures are quite impressive and now fairly well known. Over 41 million Hispanics constitute the nation’s largest minority group representing 14.1 percent of the population. Their combined purchasing power is growing at over eight percent a year and will reach $923 billion by 2008, or twice the current GNP of Mexico. The median income of a Hispanic household in the United States in 2000 was $33,500. There are now over 1.6 million businesses owned by Hispanics in the United States, et cetera, etc. The figures indicate a population that is growing in size and economic power at a much faster rate than the non-Hispanic population in the United States.

Another now obvious point is that while there are large numbers of Cubans, Puerto Ricans, Dominicans and representatives of practically every other Spanish-speaking country in the United States, two-thirds of the more than 41 million Hispanics trace their origins to Mexico. And Mexicans are also the fastest growing segment of the Hispanic population.

While arguments may continue about the benefits and negative aspects of documented and undocumented migration, one thing is for sure: the American marketplace has discovered that all these people have money to spend. And the market wants to do what the market always has done — help people spend their money.

There is a growing realization among U.S. retailers that Hispanics require a special treatment, different from the larger English speaking community. As noted by Francisco Valle in his recent book, “How To Win The Hispanic Gold Rush,” Spanish-speaking consumers value brand names over store names. They are often more interested in quality rather than price. They want to feel welcome where they shop and this means that retailers must be culturally sensitive, must offer services in Spanish, and must be seen as a part of the local Hispanic community.

Many Mexican companies have been able to export products to the United States, but succeeding in the United States market is not easy.  Many companies have tried and have failed. Others are so overwhelmed by the laws regarding importation and by the different marketing and commercial culture of the United States that they do not even try to export.

This is unfortunate for a number of reasons.  Obviously, failure to enter or not to succeed constitutes a lost opportunity — for sales, for profits, for increased employment in Mexico. In a larger context, this is also unfortunate because it means that many Mexican producers are not taking full advantage of the possibilities that the North American Free Trade Agreement, or NAFTA, offers. 

Independent analysts agree that producers who have not yet begun to sell their products in the United States or have done so with little success would benefit by acquiring more knowledge and information about customs regulations, distribution networks, appropriate advertising strategies, how food wholesalers, supermarket chains, and other retailers operate, and a multitude of other topics.  The appeal of Mexican consumer products among Mexicans in the United States is as great as it is in Mexico because foreign-born Hispanics tend to purchase goods that they are familiar with and that bring them great memories of home. 

The Mexican market in the United States is embedded within the larger American commercial culture.  Therefore, it is of extreme importance for companies and their leaders looking to penetrate this market to learn how to navigate in that culture in order to guarantee their success.

The essential issue confronting businesses everywhere is to learn how to leverage the new opportunities that the markets offer.  The commercial traffic of the NAFTA must flow in both directions if the promise of free trade is to be realized.  The Hispanic market in the United States offers one of the greatest opportunities Latin American companies may have in years to come to increase their sales and profits, to say nothing of the prospective clients and customers better understanding of the Hispanic market would bring United States companies, stores and service providers.