B Mendez Lugo Arizona Mexico Trade Rel Tmcc23 June2008

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The Tucson Metropolitan Chamber of Commerce invited me to present this slideshow in its Board Meeting in June 2008.

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B Mendez Lugo Arizona Mexico Trade Rel Tmcc23 June2008

  1. 1. MEXICO : an Opportunity for Trade and Investment for Arizona Business People Bernardo Mendez, Deputy Consul of Mexico Planning Session for TMCC Board Retreat Tucson, Arizona, June 23th 2008
  2. 2. NAFTA Benefits Arizona Source: Daniel T. Griswold, associate director of the Center for Trade Policy Studies at the Cato Institute. www.cato.org -In the past 14 years, the people of Arizona have experienced first-hand the benefits of free trade with Mexico. Since enactment of NAFTA in 1994, trade, jobs, and income in Arizona have all been heading north. -Opponents of the freedom to trade have tried to blame NAFTA for a host of problems, real and imagined. But the agreement has been a great success for Arizona, the United States, and neighboring Mexico. -Opponents of NAFTA warned of a "giant sucking sound" of jobs and investment heading south if the agreement were enacted, but all the evidence points the other way. Since 1994, Arizona's exports to Mexico and Canada have doubled, including more than $1.5 billion in computer and software exports to Mexico in 2001 alone.
  3. 3. Arizona's farm exports to Mexico have also soared. -Claims that NAFTA has destroyed jobs in Arizona do not stand the laugh test. Since NAFTA was enacted in 1994, Arizona has added a net 700,000 new jobs and real wages have risen. -The state's unemployment rate today is lower than it was before NAFTA. About 25,000 mostly well-paying jobs in Arizona are directly tied to exports to Mexico and Canada, and thousands more jobs in transportation, banking, and finance are indirectly connected. -NAFTA has stimulated the of tourism in the Southwest and created investment opportunities for small and medium-sized Arizona companies to reach new markets. Mexican visitors spend more than one billion dollars every year in Arizona since 2000 and numbers are growing . -Between 2000 and 2007 the Arizona yearly economic growth was 4.1%, second in the Nation, only Nevada grew more with 4.8% in the same period. -Only construction activity had lower growth in AZ: -16.9% in 2007. “
  4. 4. Mexico’s Evolution: Source for 2007: CIA Country Study Gdp Gdp per capita Inflation Interest Rate Exports Imports Trade balance Public deficit 1987 200 1900 159 120 28 19 7.2 16.1 Billions of US dollars % of Gdp US dollars Annual % Annual % Billions of US dollars Billions of US dollars Billions of US dollars 2007 893 12800 4 9.2 271 283 -7.4 0.2
  5. 5. Mexico has been doing its homework…. <ul><li>... Mexico has free trade access to Europe and North America at the same time. </li></ul><ul><li>Is the only country with free trade access to 9 countries of Latin America. </li></ul><ul><li>And a free trade agreement with Japan entered into effect on April 1st, 2005 </li></ul>We have negotiated preferential market access throughout the world; so far with …42 countries, are you ready to get advantages as privilege neighbor?
  6. 6. El Salvador Costa Rica Nicaragua Honduras Guatemala Israel Canadá United States South Korea Chile Argentina Bolivia Venezuela Colombia Portugal Netherlands Switzerland Austria Spain France Italy Greece Germany Belgium Luxembourg Finland Denmark Ireland United Kingdom Sweeden Norway Iceland Liechtenstein Mexico’s network of FTAs is one of the largest in the world Brazil Cuba Czech Rep. Australia Peru Mercosur Uruguay Japan 20 BITs 12 FTAs 6 CEAs
  7. 7. Mexico’s network of FTAs is one of the largest in the world
  8. 8. As a result of its 12 free trade agreements with 42 countries, Mexico is by far, the leading exporter of the Latin American region. The eight exporter in the world and the second largest partner of the United States. Exports of Mexico account for almost twice the total exports of Brazil and Argentina and almost equal to all Latin America. Mexico is the 10 th economy in the world. In terms of Sq. Miles is the 14 th (equals to France, Spain, Germany, Italy and UK all together)
  9. 9. Mexico is the US’ third largest trading partner… China is second according to recent data.. Source: Ministry of Economy with data from USDOC *Source: Ministry of Economy with data from BANXICO and USDOC <ul><li>From 1993 to 2005, US- Mexico trade grew at an annual average rate of 11.2%. </li></ul>Billions of US dollars
  10. 10. ...its second largest market for US exports... Source: Ministry of Economy with data from USDOC Billions of US dollars
  11. 11. Trade in NAFTA is not only large, but balanced Source: Ministry of Economy with data from USDOC Agricultural Products Food & Kindred Products Textile & Fabrics Textile Mill Products Apparel & Accessories Leather& Allied Products Paper Petroleum & Coal Products Chemicals Plastics & Rubber Products Nonmetallic Mineral Products Primary Metal Manufacturing Machinery, Except Electrical Electrical Equipment, Appliances Computer & Electronic Products Transportation Equipment Miscellaneous Manufactured Fabricated Metal Products 2.5 13.9 7.1 24.4 10.1 4.5 3.8 0.9 5.3 11.3 2.8 2.9 0.9 1.3 0.4 3.0 4.7 3.7 4.0 37.2 12.3 32.9 6.8 4.2 3.9 2.0 1.8 3.1 1.7 0.7 1.7 6.9 0.7 0.6 1.9 3.0 Billions of dollars U.S. – Mexico Trade by Sector <ul><ul><li>The composition of US exports to Mexico is remarkably similar to the composition of Mexican exports to the USA comparative analysis of exports sector by sector not only shows that the two countries share a considerable volume of two-way trade in these categories, but that trade in these sectors is balanced </li></ul></ul>
  12. 12. Despite adverse external context and recent US recession, macroeconomic stability in Mexico was preserved <ul><li>Interest rates have registered historically low levels (6.2%-9.7%) </li></ul><ul><li>Inflation remains low and stable (3.3%) </li></ul><ul><li>The external accounts are in order </li></ul><ul><li>International reserves stand at historically high levels (>60) </li></ul><ul><li>Access to international capital markets has not been hindered </li></ul><ul><li>Fiscal discipline has been preserved </li></ul><ul><li>The structure and maturity of public sector debt has improved </li></ul><ul><li>The legal framework of the Mexican financial system has strengthened </li></ul>
  13. 13. Accumulated FDI 1994 – 2005 202 billions of US dollars NAFTA Open Trade Policies have also boosted investment flows into Mexico... Source: Ministry of Economy
  14. 14. <ul><li>FDI by sector 1994-2005 </li></ul>Source: Ministry of Economy we have diversified our inflows of FDI Manufacture 48.9% Commerce 10.9% Financial Serv. 23.4% Other Serv. 8.2% Others 8.4%
  15. 15. <ul><li>FDI by country 1994-2005 </li></ul>Source: Ministry of Economy Mexico attracts FDI from all the world 30% of the manufacturing industry employees are working in foreign firms USA 62.7% EU 25.3% Canada 3.1% Japan 2.4% Others 6.6%
  16. 16. <ul><li>Advantages of production-sharing and off-shore assembly operations in Mexico to export worldwide include: </li></ul><ul><ul><li>Reduction of manufacturing costs </li></ul></ul><ul><ul><li>Reduction of risks in off-shore ventures through: </li></ul></ul><ul><ul><ul><li>Supply of necessary services </li></ul></ul></ul><ul><ul><ul><li>Assistance to company managers </li></ul></ul></ul><ul><ul><ul><li>Control of the manufacturing environment </li></ul></ul></ul><ul><ul><li>Meeting of delivery schedules and logistics </li></ul></ul><ul><ul><ul><li>Minimization of delays in entry and exit of goods and services </li></ul></ul></ul><ul><ul><ul><li>Just-in-time manufacturing systems </li></ul></ul></ul><ul><ul><ul><li>Outward processing systems </li></ul></ul></ul><ul><ul><li>A legal framework that provides certainty and promotes business activities </li></ul></ul>Production sharing in Mexico to export worldwide:Sonora a good partner for investments
  17. 17. Investment opportunities: produce in Mexico to export easily to the European Union and other markets <ul><li>U.S. Exports to the European Union from Mexico </li></ul><ul><ul><li>The U.S. is the main exporter to the European Union </li></ul></ul><ul><ul><li>U.S. exports to the European Union accounted for 165 billion dollars, in 2000. </li></ul></ul><ul><ul><li>Some US exports face high import duties when entering the EU market. </li></ul></ul><ul><ul><li>In 2000, US exporters paid billions of dollars in import duties in the European market, concentrated in the following sectors: </li></ul></ul>
  18. 18. Investment opportunities in Mexico <ul><li>U.S. investors, EU market (average tariff rate %) </li></ul><ul><li>Products Mexico to UE US to UE </li></ul><ul><li>Vehicles & Auto parts 1.66 6.38 </li></ul><ul><li>Aircraft's 0 1.83 </li></ul><ul><li>Machinery & mechanical </li></ul><ul><li>appliances .04 1.67 </li></ul><ul><li>Turbo jets, turbopropellers .09 2.50 </li></ul><ul><li>Computer & accessories 0 .13 </li></ul><ul><li>Plastic .65 5.11 </li></ul><ul><li>Glass & glassware .79 4.85 </li></ul><ul><li>Ceramic 1.06 4.77 </li></ul><ul><li>Textiles 3.76 8.84 </li></ul><ul><li>Chemicals .68 3.43 </li></ul>
  19. 19. … ..SOME SECTORS HAVE SPECIALLY BENEFITED FROM THESE MEXICO’S STRENGTHS: Autos & auto parts : More than 13.5 billion dollars have been invested in this sector and currently exports to US more than 30 billion dollars per year. Latest investments in the automotive sector 2004-2005 <ul><li>Futura, Lincoln, Mercury……………………… 1,600 </li></ul><ul><li>Jetta “Bora”…………………………………………. 900 </li></ul><ul><li>Golf………………………………………………………. 165 </li></ul><ul><li>Heavy trucks……………………………………….. 5 </li></ul><ul><li>Tacoma trucks………………………………………. 140 </li></ul><ul><li>Engines and transmissions……………………. 850 </li></ul>Millions of dollars
  20. 20. Clearly distinguish 3 clusters in Mexico CAR INDUSTRY: GEOGRAPHIC LOCATION, FORD HAS INCREASED INVESTMENTS IN SONORA (2008) COAHUILA D.F. QRO. HERMOSILLO FORD (PC) SALTILLO CHRYSLER (ENGINES & UV) AGS. NISSAN (PC & ENGINES) GTO. G.M. (UV) SANTIAGO M.BENZ (PC & UV) SILAO AGS. V.W. (PC & ENGINES) PUEBLA HONDA (PC) GUADALAJARA SONORA CHIHUAHUA G. PALACIO LINAMAR (ENGINES) MO R . NISSAN (PC & UV) CIVAC BAJA CALIFORNIA NORTE BAJA CALIFORNIA SUR SINALOA DURANGO NAYARIT ZACATECAS S.L.P. TAMPS. VERACRUZ COLIMA MICHOACAN GUERRERO OAXACA CHIAPAS TABASCO CAMPECHE YUCATAN QUINTANA ROO HIDALGO TLAX. MEX. PUEBLA NUEVO LEON RAMOS ARIZPE G.M. (PC & UV) TOLUCA G.M. (ENGINES) TOLUCA CHRYSLER (PC & UV) TOLUCA BMW (PC) CUAUTITLAN FORD (PC & UV) CHIHUAHUA GARCIA TULTITLAN MASA (TRUCKS) TOLUCA VOLVO (TRUCKS) KENWORTH (TRUCKS) MEXICALI S.L.P. SCANIA (TRUCKS) NAVISTAR (TRUCKS) JALISCO TIJUANA TOYOTA (PICK-UP BOXES OF TRUCKS)
  21. 21. THE ELECTRONIC INDUSTRY: EXPORTS Electronics & Home appliances : Our currently trade with U.S. is more than 87 billion dollars Industrial, Electro medical and Comercial (%) Computers (%) Parts and components (%) Telecommunications (%) Audio ,video ( including CD and DVD's) (%) Millions of dollars 2002-2004 39,871 38,608 42,628 33.6% 33.9% 31.7% 21.2% 23.0% 25.5% 7.4% 9.0% 10.4% 10.8% 10.3% 10.5% 23.8% 27.1% 21.9% 0 10 20 30 40 50 2002 2003 2004*
  22. 22. Electronic Industry location ……(700 + companies) growing now in Nogales, Hermosillo and Culiacan Querétaro  VISTAR  VITROMATIC (2) Cuernavaca  NEC Torreón  THOMSON Monterrey  PIONNER  DANFOSS COMPRESSORS  VITROMATIC (3)  MABE (2)  KODAK  NIPPON DENSO (Automotriz)  AXA YAZAKI (Automotriz) Mexicali  SONY  DAEWOO (SLRC)  MITSUBISHI  GOLDSTAR Aguascalientes  WHITE  WESTINGHOUSE  MEX*  TEXAS INTS.  XEROX  SIEMENS Querétaro  CLARION  DAEWOO  BLACK & DECKER  MABE (2)  SINGER  SIEMENS Estado de M e xico  MABE  BRAUN  ELECTROLUX  SUNBEAM  KOBLENZ  ERICSSON  ALCATEL/INDETEL  AMP Puebla  GESTAR  SINGER  VITROMATIC Saltillo  MABE  HAMILTON BEACH* Reynosa  VITROMATIC  NOKIA  DELCO (Automotriz)  PHILIPS  SONY  MATSUSHITA (Automotriz)  LUCENT TECHNOLOGIES  FUJITSU (Automotriz)  CONDURA (Automotriz)  DELNOSA (Automotriz) San Luis Potosí MABE GE  MABE SANYO  Chihuahua  MOTOROLA  ALTEL  KIOCERA  JABIL Juárez  KENWOOD  ELECTROLUX  ACER  TOSHIBA  PHILIPS  THOMSON  ELAMEX  PLEXUS Tijuana  SANYO  SONY  HITACHI  MATSUSHITA  JVC  SAMSUNG  PIONNER  SANYO ELECTRODOMÉSTICOS  PHILIPS  CASIO  KODAK  CANON  KIOCERA  INTERNACIONAL RECTIFIER  MITSUBISHI  SHARP Guadalajara  I.B.M  H.P.  NEC LUCENT TECHNOLOGIES   MOTOROLA  KODAK  CUMEX  SIEMENS  SOLECTRON DE MEXICO  FLEXTRONICS  JABIL CIRCUIT  MTI ELECTRONICS  SCI SANMINA Estado de M é xico  ELECTROLUX  FILTER QUEEN  HOOVER  IMAN  KOBLENZ  MABE  PHILIPS  SUNBEAM  OLIVETTI  PANASONIC  OLIMPIA  AUDIO Y VIDEO  ELECTRODOMESTICOS  EQUIPO DE COMPUTO  TELECOMUNICACIONES  OTROS
  23. 23. HOME APPLIANCES INDUSTRY LOCATION...(32 + COMPANIES) Ventiladores Copacabana Merrytech G.S.E.B TIMCO <ul><ul><li>Baja California </li></ul></ul><ul><ul><li>Chihuahua </li></ul></ul><ul><ul><li>Coahuila </li></ul></ul><ul><ul><li>Nuevo León </li></ul></ul><ul><ul><li>Tamaulipas </li></ul></ul><ul><ul><li>San Luis Potosí </li></ul></ul><ul><ul><li>Guanajuato </li></ul></ul><ul><ul><li>Querétaro </li></ul></ul><ul><ul><li>Jalisco </li></ul></ul><ul><ul><li>Edo. de México </li></ul></ul><ul><ul><li>Distrito Federal </li></ul></ul><ul><ul><li>Tlaxcala </li></ul></ul><ul><ul><li>Puebla </li></ul></ul>
  24. 24. Mexico: a World of Economic Opportunity: Hermosillo and Culiacan, two logical destinations for Arizona Investors Tijuana Population: 750,000 Key Industries: beverages, processed foods, metalworking, radio and television manufacture, electrical machinery Hermosillo Population: 8 00,000 Key Industries: automotive, meat, cement and derivatives, electrical machinery Culiacán Population: 8 00,000 Key Industries: food processing, cereal milling, sugar, beverages, edible oils and fats Aguascalientes Population: 500,000 Key Industries: electronics, automotive, dairy, textiles, carpets León Population: 1 million Key Industries: refining, footwear, leather and tanning, bakery goods, beverages Guadalajara Population: 4 million Key Industries: high-technology, edible oils and fats, plastic products, chemicals, dairy products, processed foods, textiles, footwear Mexico City Population: 20 million Key Industries: retail, financial services, food, automotive, plastic products, paper and cellulose, chemical derivatives, basic chemicals Puebla Population: 1.5 million Key Industries: automotive, textiles, iron and steel, bottled water, chemicals, meat processing Veracruz Population: 450,000 Key Industries: petrochemicals, refining, basic chemicals, iron and steel, sugar, beef, processed foods, tourism, transportation services (maritime) Ciudad Juárez Population: 800,000 Key Industries: electrical machinery, transport equipment, meat, electronics, dairy products Mérida Population: 600,000 Key Industries: beverages, edible oils and fats, processed foods, cement and derivatives, plastic products Chihuahua Population: 650,000 Key Industries: electrical machinery, automotive, meat, electronics, dairy products, timber Torreón Population: 880,000 Key Industries: automotive, bricks, clay, refractory, general machinery, cement and derivatives Toluca Population: 850,000 Key Industries: automotive, plastics, paper and cellulose, chemical derivatives, basic chemicals Monterrey Population: 3 million Key Industries: oil refining, iron and steel, electrical machinery, glass and derivatives, breweries, meat products, cement, banking San Luis Potosí Population: 670,000 Key Industries: iron and steel, non-ferrous metallurgy, tobacco products, electrical machinery, automotive, livestock Querétaro Population: 460,000 Key Industries: automotive, paper and cellulose, synthetic fibers, general machinery, electrical machinery, processed foods, dairy products Tampico-Madero-Altamira Population: 340,000 Key Industries: chemical, industrial machinery, electronic & electrical equipment, oil and refinery, agriculture, cattle, fishing Source: SE-NAFTA.
  25. 25. we continue working on Mexico´s major strengths: <ul><li>Deepening openness </li></ul><ul><li>keeping macro stability </li></ul><ul><li>further preparing our youngsters </li></ul><ul><li>scaling up in the value chain </li></ul><ul><li>strengthening our local supply chain </li></ul>
  26. 26. <ul><li>Elements to ease key imports for the industry: </li></ul><ul><ul><li>ITA PLUS </li></ul></ul><ul><ul><li>PROSEC </li></ul></ul><ul><ul><li>RULE 8th </li></ul></ul><ul><li>Elements of Government support </li></ul><ul><ul><li>30% TAX Credit on Engineering design, R&D </li></ul></ul><ul><ul><li>Reduced Income tax on Maquiladoras </li></ul></ul><ul><ul><li>Immediate Deduction of Assets </li></ul></ul><ul><ul><li>Grants to help location on designated areas </li></ul></ul><ul><ul><li>Training incentives Federal-State </li></ul></ul><ul><ul><li>Federal-State mixed funds on technology based projects (grants) </li></ul></ul><ul><li>University and Research Centers Involvement </li></ul><ul><ul><li>Working closer to understand industry needs </li></ul></ul><ul><ul><li>Federal Funds for Research Centers </li></ul></ul>MANY COMPANIES ARE TAKING ADVANTAGE OF THE MEXICAN STRATEGY TO ATTRACT BUSINESSES: IF YOU NEED PERSONAL ADVISE, LET ME KNOW We offer:
  27. 27. <ul><li>Look for products with preferential market access and aim towards higher value added products. </li></ul><ul><li>Look for products where geographic advantage gives an edge (i.e closeness to clients): Think in Sonora and Sinaloa New Clusters </li></ul><ul><li>Mexico’s strategy to open new markets represent tremendous opportunities for trade and investment. Think about Guaymas Port </li></ul><ul><li>Mexico is scaling up in the value chain, rising opportunities on engineering, R/D, design and the sort: Sonora is ready for aerospace </li></ul><ul><li>Mexico represent on itself huge opportunities within its major sectors´ supply chains: Not only industry, check the great opportunities to provide services to the National Infrastructure Program (2007-2012). </li></ul>Keys to Mexico’s success :
  28. 28. <ul><li>Mexico´s strategies to open new markets and consolidate its supply chains represent tremendous opportunities for trade and investment. </li></ul><ul><li>We are commited to scale up in the value chain, rising opportunities on R&D, design and the sort. </li></ul><ul><li>Arizona Businesses have great opportunities in new market niches in Mexico: assisting living for US baby boomers, aerospace industry, high tech clusters in Sonora and Sinaloa and outsourcing for services and assembly manufacturing. </li></ul>Final remarks:
  29. 29. Thank you and thanks to John Brown! Remember: Arizona exported globally to 202 foreign destinations in 2007. The state's largest market was NAFTA member Mexico. Arizona posted exports of $5.2 billion to Mexico, over one-quarter (27 percent) of the state's total export shipments in 2007 . Bernardo Mendez Deputy Consul Consulate of Mexico in Tucson, Az 553 South Stone Ave Tucson, Az 85701 Tel. 520-882-5595 ext. 115 [email_address] [email_address]

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