The U.S. Flags Tepito, San Juan de Dios, and El Santuario Again for Counterfeiting: Implications for Trade and Investment in Mexico
Adding Mexican markets to the USTR’s “notorious markets” list reignites the debate over informality, competitiveness, and intellectual property enforcement.
The U.S. government, through the Office of the United States Trade Representative (USTR), has once again put three iconic hubs of Mexico’s popular commerce—Tepito, San Juan de Dios, and El Santuario—under scrutiny by including them in its 2025 Review of Notorious Markets for Counterfeiting and Piracy. This is an annual report that identifies physical locations and digital platforms where, based on information from rights holders and authorities, the sale of counterfeit goods and the distribution of pirated content are concentrated.
The list is not the same as a court ruling, but it does function as a tool of reputational pressure and trade policy leverage. In practice, the designation comes at a time when Mexico is trying to solidify its role in nearshoring-linked value chains, where traceability, regulatory compliance, and respect for intellectual property carry increasing weight in investment decisions.
According to the document, Tepito—located in Mexico City—operates as a massive open-air market and a redistribution point for counterfeit merchandise to other street markets across the country and even into Central America. The report describes recurring sales of counterfeit apparel, accessories, electronics, beauty products, and luxury items, as well as devices and services tied to digital piracy, such as modified game consoles and tools used to circumvent technological protection measures.
In Guadalajara, the USTR identifies the San Juan de Dios Market (Mercado Libertad), known for its size and commercial capacity, as a major hotspot for piracy and counterfeiting. The report cites thousands of stalls and an offering that, according to the allegations, would include everything from counterfeit clothing and footwear to pirated software, movies, and video games; it also mentions alleged console-modification services that facilitate illegal reproduction of content.
The third location flagged is El Santuario, in downtown Mexico City, described as a logistics node with warehouses and wholesale businesses that supply vendors in other markets. Unlike areas focused on direct consumer sales, this zone is portrayed as standing out for storing and distributing large volumes of counterfeit merchandise, which, according to the report, strengthens illegal supply chains by speeding product flows to different parts of the country.
Informality, consumer risks, and economic costs
Beyond the intellectual property angle, the phenomenon has broader economic implications for Mexico. The sale of counterfeit goods often goes hand in hand with informal employment, lower tax collection, and unfair competition for formal businesses that do comply with taxes, health regulations, and quality standards. In addition, when it comes to cosmetics, perfumes, electronics, or medicines—categories mentioned in the report—the issue goes beyond branding: it increases the risk of consumer harm and raises indirect costs for the health system and for companies dealing with returns, warranties, or fraud.
From a public policy standpoint, the challenge is twofold: on one hand, strengthening law enforcement and coordination between federal and local authorities; on the other, addressing the economic incentives that keep the informal market alive. Demand for cheaper goods in a context of pressure on disposable income, combined with supply chains that adapt quickly, means isolated raids tend to produce only temporary results unless paired with financial investigations, customs controls, and pathways to formalization.
Signals for the USMCA and the business climate
The USTR’s designation takes place within a broader regional conversation about regulatory compliance in North America. Under the USMCA, intellectual property is part of the commitments framework that shapes investment confidence and trade. For companies considering building plants, distribution centers, or design capabilities in Mexico, perceptions about brand protection and “clean” sales channels can influence location decisions, pricing strategies, and supplier selection.
While the list does not impose automatic sanctions, it can feed country-risk narratives in sectors that rely heavily on brands, innovation, and content—fashion, software, entertainment, electronics—and raise compliance costs for companies operating in markets with high penetration of illegal goods. It may also increase pressure for tighter monitoring at entry points and for measures aimed at distribution hubs, where the impact is often greater than at the retail level.
Globally, the USTR cites estimates placing trade in counterfeit goods in the hundreds of billions of dollars and as a meaningful share of worldwide commerce. For Mexico, the challenge is to turn the fight against piracy into a policy that is not merely reactive, but consistent with a competitiveness strategy: strengthening the rule of law, protecting consumers, and preventing informality from eroding productivity and tax revenues.
In perspective, the repeated appearance of these markets in international reports suggests the problem remains structural. The most effective response will likely combine inspections and penalties targeted at wholesale and logistics networks, cooperation with rights holders, and—at the same time—mechanisms that make it easier to transition into the formal economy without choking off the popular commerce that sustains jobs in urban areas.
