Investing in Mexico - Special Report Beamonte Investments

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Investing in Mexico - Special Report Beamonte Investments

  1. 1. Special Report! Mexico Investment opportunities
  2. 2. Aerospace Industry in Mexico 
Aerospace
companies
are
streaming
to
Mexico,
drawn
by
lower
wages,
 enthusias9c
government
promo9on,
a
new
safety
agreement
with
the
 United
States
and
an
increasingly
sophis9cated
workforce.

 
Mexico's
aerospace‐related
exports
have
more
than
tripled
since
2004,
 from
 $146.2
 million
 to
 $683.2
 million
 last
 year,
 and
 exports
 are
 accelera9ng
 quickly
 as
 manufacturers
 move
 into
 big‐9cket
 items
 like
 tails
and
fuselages.
One
aircraL
maker,
Canada's
Bombardier
Inc.,
says
 it
hopes
to
eventually
assemble
complete
jets
in
Mexico.
 
At
Bombardier,
new
assembly
workers
earn
6,000
pesos
a
month,
or
about
 $560,
according
to
plant
manager
Michael
McAdoo.
That's
about
$3.50
an
 hour.
 Engineers
 can
 earn
 $925
 to
 $1,390
 a
 month,
 according
 to
 a
 Bombardier
 job
 ad.
 That's
 $5.80
 to
 $8.70
 an
 hour.The
 lower
 costs
 have
 translated
into
a
30
percent
savings
 
on
parts
made
here,
even
aLer
the
 added
transporta9on
costs,
Gervais
said.

  3. 3. Aerospace Facts •  Aernnova,
 a
 Spanish
 firm
 that
 makes
 wings,
 tails
 and
 other
 sec9ons
 for
 Boeing,
 Airbus,
 Embraer
 and
 others.
 It
 is
 building
 an
 $84
 million
 plant
 in
 Querétaro.
 •  
Cessna
AircraL
Co.
and
Hawker
BeechcraL
Corp.,
both
makers
of
business
 jets,
which
have
both
moved
subassembly
work
from
their
Wichita
plants
 to
new
factories
in
the
northern
city
of
Chihuahua
since
2006.
 •  MD
 Helicopters,
 based
 in
 Mesa,
 which
 began
 making
 fuselages
 near
 Monterrey
in
2006.
 •  Goodrich
Corp.,
which
s
building
a
350,000‐square‐foot
factory
in
Mexicali
 to
 make
 engine
 nacelles
 for
 the
 Boeing
 787
 Dreamliner.
 The
 Charlo]e,
 N.C.,
company
makes
aircraL
interiors
and
engine
parts
in
Arizona.

  4. 4. U.S. – MEXICO TRADE U.S.
Trade
Balance
with
Mexico
(Millions
 2009
U.S.
Top
Trading
Partners
(Goods,
%
of
Total
 18.0%
 200,000
 of
USD)
 16.4%
 Trade)
 151,220
 133,722
 135,918
 128,998
 16.0%
 150,000
 120,248
 14.0%
 100,000
 14.0%
 11.7%
 50,000
 12.0%
 0
 10.0%
 2005
 2006
 2007
 2008
 2009
 ‐50,000
 8.0%
 5.6%
 ‐100,000
 6.0%
 4.4%
 3.6%
 ‐150,000
 4.0%
 2.3%
 1.9%
 ‐170,109
 1.8%
1.8%
1.5%
1.5%
1.4%
 ‐200,000
 ‐176,537
 2.0%
 ‐198,253
 ‐210,714
 ‐215,942
 ‐250,000
 0.0%
 Exports
 Imports
 Balance
 Canada
 China
 Mexico
 Japan
 Germany
 United
Kingdom
 France
 Netherlands
 Taiwan
 Brazil
 Italy
 Singapore
 SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemina<on Branch,  India
 Washington, D.C. 
 SOURCE: FTD WebMaster, Foreign Trade Division, U.S. Census Bureau, Washington,  NOTE: All figures are in millions of U.S. dollars, and not seasonally adjusted unless  otherwise specified.
 D.C. 


  5. 5. Large
labor
component
 Mexico has significant labor cost advantage over US
 China's
edge
over
Mexico
in
labor
costs
expected
to
shrink
in
coming
years
 China's
labor
rate
to
increase
faster

 Peso
sharp
devalua9on
also
reducing
 than
Mexico's
 China's
cost
advantage

 US$
per
hour
 CAGR
 (02
‐10E)
 Indexed
exchange
rate1
 Mexico
 2%
 USD
per
Yuan
 China
 18%
 Mexico
rate
2x
China's
 today,
but
expected
 ~1.2x
in
2010
 USD
per
peso
 0
 2002
 2004
 2006
 2008E
 2010E
 US
rate

 21.6
 23.1
 23.8
 25.6
 27.3
 ($/hr)
 Labor
economics
and
Yuan
apprecia9on
quickly

 eroding
China's
cost
advantage
 1.
Indexed
to
January
1,
2007
exchange
rate
(MX$
10.82
=
US$
1;
CH$
7.81
=
US$
1)
 Note:
Manufacturing
labor
rate
 Source:
The
Economist
Intelligence
Unit;
Interna9onal
Labor
Organiza9on;
FX
History,
Oanda
Corpora9on;
BCG
analysis

  6. 6. Significant
logis9cs
costs
 Mexico's advantage greatest for high volume-to-weight ratio products where freight costs are significant Mexico's
advantage
in
bulky
products
 Cost
of
producing
a
refrigerator

 Considerable
por9on
of
global
trade
consists
of
high
 US$
 volume‐to‐weight
ra9o
items
(i.e.
bulky)
 ‐8%
 Shipping
for
these
products
represents
a
sizable
 307
 component
of
retail
price

 283
 Freight
costs
 Freight
differen9als
can
outweigh
higher
labor
cost
rates
 Labor
 "As
[U.S.]
retail
prices
begin
falling

towards
$600
[per
PC
 unit],
the
cost
of
logis9cs
involved
will
put
Mexico
back
on
 the
map"

 Other1

 –  Peter
Wiegandt,
Dell
La9n
America
 China
 Mexico
 Key
will
be
to
find
cheapest
labor
force
within

 reasonable
shipping
distance
to
final
market
 1.
Raw
materials,
deprecia9on,
electricity,
tariffs
 Note:
Assumes
4
hours
of
labor
per
unit
 Source:
Press
and
web
research,
BCG
analysis

  7. 7. Commercially
connected
with
75%
of
the
 GDP,
44
countries
through
it's
free
trade
 agreements.

  8. 8. Why Mexico?
  9. 9. Doing business in Mexico Industry Clusters Policy CHIHUAHUA 
 
 
 
 
 AutomoWve
 final
 assembly
 locaWon
 FORD (MOTORES) MEXICALI SONORA CHIHUAHUA map
 KENWORTH (CAMIONES) COAHUILA
 RAMOS ARIZPE G.M. (AUTOS & UV) GARCIA INTERNATIONAL (CAMIONES) NUEVO
 LEON
 DURANGO DAIMLERCHRYSLER (AUTOBUSES) FORD HERMOSILLO TAMPS. G.M. (AUTOS) (AUTOS) ZACATECAS S.L.P. SCANIA SALTILLO S.L.P.
 (CAMIONES) (MOTORES & UV) AGS.
 CD. SAHAGUN DINA GTO.
 (CAMIONES) NISSAN QRO.
 YUCATAN (AUTOS & MOTORES) HIDALGO CUAUTITLAN FORD AGS. JALISCO
 (AUTOS& UV) MEX.
 HONDA TLAX.
 COLIMA MICHOACAN CAMPECHE GUADALAJARA MOR. PUEBLA
 GM (UV) SILAO TABASCO GM MICHOACAN GUERRERO (PRUEBAS) G.M. (MOTORES) TOLUCA OAXACA CHIAPAS DAIMLERCHRYSLER (AUTOS & UV) TOLUCA DAIMLERCHRYSLER (CAMIONES) TOLUCA PUEBLA V.W. BMW (AUTOS) MASA (CAMIONES) TULTITLAN NISSAN CIVAC (AUTOS & MOTORES) TOLUCA (AUTOS & UV) VOLVO (CAMIONES)
  10. 10. Geographic
LocaWon
of
Electronics
 Industry
 TIJUANA MEXICALI SONORA JUÁREZ CHIHUAHUA Sanyo Sony  Alcatel Toshiba Foxconn TORREÓN Sony  Mitsubishi Motorola Philips Honeywell Hitachi LG Volex Thomson  Altec  Thomson Matsushita Thomson  Molex Kenwood  Jabil JVC  King Cord Mex  AMP Asus  SMTC Samsung  BenQ  Amphenol Keytronics Pionner Tatung Mitsubishi Lite on Enlight REYNOSA Sharp Elamex Delta Plexus  Philips Ichia ECMM Sony MONTERREY Jabil Merry Tech Elcoteq Wistron  Delphi Celestica  Pionner  Nokia Display Orion  Kodak  Lucent Technologies Amphenol  SCI – Sanmina  Fujitsu ADI Systems  Celestica  Condura Philips   Elcoteq Kyocera  Delnosa  AFL  Delco Rectificadores Intern.  Nippon Denso  Matsushita Vigobyte GUADALAJARA  Axa Yazaki  Delphi Bourns Bose  IBM  Keytronics Skyworks  HP  Tyco Panasonic  Nec Kodak  Lucent Technologies  Delphi  Kodak  Siemens AGUASCALIENTES CANCÚN  MTI Electronics  Solectron Méx.  White Westinghouse  Vitelcom  Flextronics  Texas Inst. CUERNAVACA  Jabil Circuit  Xerox  Audio & video  SCI Sanmina  Siemens  Nec  ECMM EDO. MÉXICO  Home Appliance  Flextronics  Benchmark  Volex  Computer  Ericsson  Telecommmunications  Technicolor  Alcatel  Pantech  Automotive  Universal Scientific  Motorola  AMP  CEM  Sony  Cumex QUERÉTARO  Foto & impresion  Scientific Atlanta  Others Clarion  Olimpia Siemens
  11. 11. Renewable sources of energy are one of the greatest goals of the energy sector in Mexico. The
use
of
renewable
sources
of
energy
in
 7071
PJ
=
1155.4
Mbp
 Mexico
represents
10%
of
the
total
 primary
energy
consump9on.
 Oil
 The
greatest
poten9als
for
the
country
 come
from
hydro,
biomass,
geothermal
 and
wind.
 Coal
 Nuclear
 The
PNI
sets
the
target
to
have
25%
of
our
 total
power
capacity
on
renewable
 sources
of
energy.
 Geothermal
 Hydro
 Bagasse
 Wood
 Source:
PNI,
and
Sener:
“Balance
nacional
de
energía
2006”
 PJ:
Petajoules;
Mbp:
million
barrels
of
oil

  12. 12. Aerospace
industry

  13. 13. Contact Boston 711 Atlantic Av. Boston, MA 02111 T.  617.275.8960 F.  617.292.2300

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