Cesar CantuDealing with bureaucracy can be bad enough as it is in one’s home country. In a foreign land, where the laws, language and social cues can be incomprehensible at first, bureaucratic processes can feel like an experience crafted by a malicious, twisted imagination.
Mexican bureaucracy is far from the worst you can experience as a business owner, but it can be bad enough. Slow processes, excessive and unnecessary paperwork, unhelpful clerks, a prevalence of ancient or outright broken equipment… Many are the ways in which you can be frustrated during a process as simple as the delivery of a single document.
There are, of course, ways to navigate the labyrinth of Mexican official processes without losing your mind on the way. And we had the chance to speak with a former insider who was willing to share some helpful tips.
Laura Kavanagh leads the business operations of Nearshore Cyber, a small cybersecurity firm in the state of Oaxaca, one of Mexico’s most economically poor states, but also one of its richest in matters of culture and social conscience.
Laura’s background is in social studies and politics, and she spent four years working at Oaxaca’s Public Security Secretariat before launching Nearshore Cyber. In short: she knows the government –its paths and blockades; its most frustrating quirks and pitfalls– both from the inside and from the outside.
In the following conversation, Laura provides some advice on how to navigate Mexican bureaucracy as a business, some of her most frustrating experiences dealing with local laws and regulations, and her hopes for Oaxaca as another node in Mexico’s expanding tech industry.
NSAM: Your professional journey has been, to put it mildly, quite peculiar. You began working in civil society, dealing with gender issues, and moved from there to work in Oaxaca’s state government. Now you lead the business operations of a cybersecurity firm. Tell me how that journey happened.
Laura Kavanagh: I have a degree in social studies and politics. From the beginning of my career, I tended towards gender issues. I began working on matters of sexual and reproductive rights. It might not be obvious, but all of that ended up being of some help to what I do now. Not from a technical perspective, of course, but from a social one.
I was also an activist and representative of specific communities at a state level. I also had the chance of being an intern at an international civil organization which worked “close to the ground”, directly with local communities. From there I learned how to execute organizational programs and social initiatives, to transform those into public policy.
When I returned to Oaxaca, after finishing my studies in Mexico City, I began working in Oaxaca’s Women’s Institute, which eventually became the Women’s Secretariat. There, I analyzed how federal programs for women were being implemented and executed at a state level.
I think that’s where I learned much of what I’ve been doing at Nearshore Cyber, at least in a sense. Business operations, I mean. My background working with local communities has been helpful.
The jump from government to cybersec was circumstantial, truth be told. My associate [Peter Schawacker] and I began talking about what could be done in Mexico with his expertise in cybersecurity and my knowledge in public security, public policy and regulations. I knew which doors to knock on, how to incorporate a company in this country, where to go and how to navigate Mexican bureaucracy, which can be a complicated task.
NSAM: As someone who worked in the Mexican government, what would you recommend to foreigners who plan on doing business in Mexico? Any tips on dealing with Mexico’s federal and state authorities?
Laura Kavanagh: It’s not easy, but you need someone who’s local and can inform you about all the local regulations. And you need to make sure that person has the right credentials and can back up his/her work. Because you can’t take those things for granted. There are accountants, lawyers and public notaries who are out to scam you.
You also need a lot of patience. Paperwork is quite complicated. Your legal representative has to go physically to the offices of IMSS [Mexico’s Social Security Institute] and sit there for hours and do the paperwork to register your employees. It doesn’t matter if you’re the CEO or another big executive; you have to be there, and the process can take a while. Our incorporation process happened in the middle of a change in administration, and that kept it from progressing for a while.
Order is very important too. My associate isn’t Mexican, and he often wondered about all the paperwork we had to do with actual paper. He asked me why we needed to keep 10 folders piled in the office when we could have digitized all of the documents in them.
Not all of Mexico is automated or digitized, so keeping a paper copy of all your documents is vital.
Not all of Mexico is automated or digitized, so keeping a paper copy of all your documents is vital. You might find yourself in a situation in which you’re scheduled for an appointment at a government office at 10:00AM to deliver a specific document, and once you’re there, they’ll ask for that same document in an email.
And there are audits, of course, and those can come out of the blue. And you’ll need paper copies and backups of all your relevant documents for those.
NSAM: Do you have an idea, even a vague one, of how much paperwork you had to do in this process? I’m trying to imagine the actual quantities of paper you had to carry around from office to office.
Laura Kavanagh: I have no idea, honestly. But I can give you a shortlist of some of the paperwork we had to do. We had to register our employees in IMSS. Had to do the same thing for Infonavit, which is Mexico’s government-run housing program for workers. In some cases you have to pay taxes to the state government too, and you have to deal with their Finance Ministry. You have to do the same with SAT [Mexico’s federal tax entity]. Then there are other things that aren’t necessarily related to the government, like benefits. Food vouchers are very popular in this city, for example. I’ll stop there, but there’s so much more that you can or have to do.
And you have to do all of this and more to keep your affairs in order. Nearshoring companies market themselves as lower cost alternatives to the US market, but as a company operating in Mexico, you want to pay your workers as best you can. And that will require lots of paperwork.
There are people who can help you with all that paperwork, of course. But even then, you have to be informed about how the legal and regulatory framework operates locally. Because you can be lied to.
Also, cultural adaptation is very, very important, and an aspect that can be difficult to grasp. Your associates need to keep an open mind about what they’ll find. Maybe your associate thinks that there’s no need to go to the government office to deliver a document that can be sent digitally. But it isn’t always as easy.
NSAM: All of these things you describe sound not only tiresome, but even nightmarish; kafkaesque, perhaps. Is it as difficult for foreign companies as it is for national ones?
Laura Kavanagh: I don’t like to say this in such a blunt manner, but there are ways to game the system. There are paths some companies are willing to take in order to accelerate these processes, and there’s always someone willing to provide that service. Corruption is one of Mexico’s biggest social problems, let’s not forget.
As a company operating in Mexico, you want to pay your workers as best you can. And that will require lots of paperwork.
But it also depends on the size of the company. You have cases of transnational organizations landing here and agreeing to create a considerable amount of jobs. That can open so many doors.
NSAM: I assume big tech companies have an easier time doing business in Mexico. How is it for small tech companies such as yours?
Laura Kavanagh: It’s been tough. When we went to SAT’s office to put our tax issues in order, they didn’t know how to classify our company. They couldn’t really understand what we did. We told them we provided computer-related services, cybersecurity. They thought we meant equipment repairs. They eventually found a place to put us in. Now SAT’s business catalogue is wider, but those things do happen. The cybersec industry is relatively new, and with a very complex regulatory framework.
It’s not only about marketing Mexican or Latin American talent as low cost. We want to give people in Oaxaca the opportunity to work for bigger companies.
As a small company, having all your affairs in order, following federal and state-level regulations to a tee can be daunting. Approval times for paperwork can set back your launch quite a bit. Because if you don’t have everything in order, you can’t start working.
Even the small things weigh on you so much. Typos, for example. At a government office, whoever was typing the documents wanted to spell Peter’s name as “Petr”. That kind of mistake in a legal document can be very costly.
NSAM: Your enterprise is interesting, as a tech provider, because it operates from Oaxaca, which isn’t a city that’s known for tech in Mexico. But there is a tech scene in Oaxaca, right? How would you describe it?
Laura Kavanagh: Oaxaca has a lot of technological catching up to do, honestly, but we’re working on it. You could say that’s a disadvantage, but I see it as an advantage too. As a company, part of our plan consists in strengthening Oaxaca.
One of the things we [Peter and I] are betting on is inclusion. I work in several diversity and inclusion programs, including one that looks to close the gender gap in the tech sector.
It’s about betting on smaller cities, where there aren’t many opportunities for growth yet. If you ask Peter why he decided to found a company in Oaxaca, he’ll tell you: because my wife and my daughter are from Oaxaca.
It’s not only about marketing Mexican or Latin American talent as low cost. We want to give people in Oaxaca the opportunity to work for bigger companies, where their work can reach a wider pool of people and have a social impact in their communities. We’re truly invested in them having better opportunities.
Oaxaca is a state known for its culture. You come here to eat well; to witness the bright, colorful dresses; the artisans at work; to educate yourself on social movements. But beyond that, we’re here too. This land holds talented [tech] people.
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