Mexico Basics for Virginia Exporters
The Security and Defense Sector
Prepared for the
Virginia Economic Development Partne...
Introduction to Mexico
● Not-so-foreign trade:
– NAFTA created a free-trade
zone between the U.S., Mexico
and Canada
– The...
Mexico Snapshot
● 12th-largest economy in the world
– GDP $1.788 trillion (2012)
● Service sector 60.7%; industry
35.8%; a...
What does Mexico Import?
● In 2012, $185 bn of
Mexico's $370 bn in
imported goods
came from the U.S.
(50%)
● Growth in imp...
Top VA Products Exported to Mexico
● Top NAICS categories exported from Virginia to Mexico, 2012:
● Several Virginia-to-Me...
Top Mexican Sectors for U.S.
Companies
Source: U.S. Commercial Service (click links for sector overviews)
● Agribusiness a...
The Security and Defense Sector
● Mexican defense agencies are primarily focused on domestic law
enforcement
– Therefore l...
Mexico's Security Sector
(Figures in $M) 2010 2011 2012 2013e
Market Size 1,933 2,439 2,854 3,319
Local Production 1,892 2...
Competitiveness of Mexico's
Security Sector
● Market has grown due to the
modernization of public and
private security cap...
Opportunity Ranking Across
Standard Categories: 1-4
Mexican Subsector
Video surveillance systems
CCTV, video management, v...
Public Security Modernization
● New security investment such as
C3 and C4 systems over the last
three years has been suppo...
Mexico as a Defense Customer
● Authorized purchases through
Direct Commercial Sale (DSC)
in 2012 valued $1.21 bn
– Highest...
Defense DCS to Mexico, 2012
Category - Reported by the U.S. Department of State Qty Auth'zd
$US K
I – Firearms, close assa...
Competing and Market Entry
● As the market matures, more
specialized, better-quality, or better
value-for-money products a...
Related Trade Events in Mexico
● Expo Seguridad
– Apr 8-10, 2014
– Mexico City
– U.S. Commercial Service
Pavilion still ac...
For More Information
General Mexico
“Doing Business in Mexico” guides from the
American Chamber of Commerce, the US Commer...
Organizations and Associations
Trade
● U.S. Commercial Service in Mexico – www.trade.gov/mexico
● American Chamber of Comm...
Thank you for your interest in
Mexico!
Contact in Mexico:
Mary Claire Whitaker
Neighbors International Business Developmen...
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Mexico for Exporters in the Defense and Security Sector

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Presentation on the Mexican security and defense market, developed with Virginia exporters in mind.

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Mexico for Exporters in the Defense and Security Sector

  1. 1. Mexico Basics for Virginia Exporters The Security and Defense Sector Prepared for the Virginia Economic Development Partnership Mary Claire Whitaker Global Network Partner for Mexico February 2014
  2. 2. Introduction to Mexico ● Not-so-foreign trade: – NAFTA created a free-trade zone between the U.S., Mexico and Canada – The distance from Richmond to Mexico City is about the same as Richmond to Las Vegas – Mexico hosts the largest resident American population outside the United States (over 750,000 officially) ● Mexico is the economic capital of the Spanish-speaking Americas, making it a good entry point to the rest of Latin America ● Large installed manufacturing base – Top manufacturing sectors are food processing and packaging, automotive, appliances, metals, chemicals and alcohol and tobacco ● Mexico's growing middle class is increasing demand for consumer goods and services – Imported goods and services are valued at about 30% of the country's GDP Mexico is the U.S.'s 2nd-most important destination for exports, at $226 billion last year. It the U.S.'s 3rd-largest trading partner, at $506 billion in 2013.
  3. 3. Mexico Snapshot ● 12th-largest economy in the world – GDP $1.788 trillion (2012) ● Service sector 60.7%; industry 35.8%; agriculture 3.6% ● GDP growth expected at 3.9 % in 2014 – Nearly double Latin America's growth – Stimulated by investment in infrastructure, telecom and oil and gas, ongoing productivity in manufacturing sectors – Projected to reach 5.3% by 2018 ● Inflation 3.6% (2013) ● Unemployment 5.3% (2013) ● 114 million people in 31 states, including the Federal District of Mexico City ● Average age 27, literacy 93.4% ● OECD member and classified as a “middle-upper” income country ● Trade-friendly: most trade agreements of any country (40) – Foreign investment in Mexico for 2013 had more than doubled over 2012, at $28.2 billion, as of September ● Global competitiveness index: #53 of 142 countries
  4. 4. What does Mexico Import? ● In 2012, $185 bn of Mexico's $370 bn in imported goods came from the U.S. (50%) ● Growth in imports from the U.S. averaged 9% annually between 2008 and 2012 ● Machinery/ boilers and electrical/ electronic equipment consistently largest import categories by value after mineral fuels. Mexico Import Categories With >10% Growth, 2008-2012 1. Commodities (“other”) 13. Rubber and articles thereof 2. Sugars and confectionary 14. Ceramic products 3. Railway, tramway locomotives, rolling stock, equipment 15. Beverages, spirits and vinegar 4. Coffee, tea, mate, spices 16. Pearls, precious stones, metals, coins, etc. 5. Mineral fuels, oils, distillation products, etc. 17. Impregnated, coated or laminated textile fabric 6. Headgear and parts thereof 18. Copper and articles thereof 7. Ores, slag and ash 19. Vehicles other than railway, tramway 8. Zinc and articles thereof 20. Tools, implements, cutlery, etc. of base metal 9. Arms and ammunition, parts and accessories thereof 21. Furniture, lighting, signs, prefabricated buildings 10. Articles of leather, animal gut, harness, travel goods 22. Lac, gums, resins, vegetable saps and extracts 11. Cocoa and preparations 23. Dairy products, eggs, honey, edible animal products 12. Works of art, collectors pieces, antiques 24. Live trees, plants, bulbs, roots, cut flowers
  5. 5. Top VA Products Exported to Mexico ● Top NAICS categories exported from Virginia to Mexico, 2012: ● Several Virginia-to-Mexico export categories grew 20 percent or more per year 2005-2012: ● Chemicals ● Paper ● Machinery (non-electrical) ● Computer and electronics products ● Manufactured primary metals ● Forestry products ● Paper ● Textile products ● Processed food ● Chemicals ● Newspapers, books, other published materials, printed matter and related ● Petroleum and coal products ● Electrical equipment components and appliances ● Leather and allied products
  6. 6. Top Mexican Sectors for U.S. Companies Source: U.S. Commercial Service (click links for sector overviews) ● Agribusiness and Agriculture ● Automotive Parts and Supplies ● Education and Training Services ● Energy Sector ● Environmental Sector ● Franchising Sector ● Housing and Construction ● Internet and IT Services ● IT Health Care ● Medical Devices ● Packaging Equipment ● Plastic Materials/Resins ● Renewable Energy ● Security and Safety ● Telecommunications Equipment ● Transportation Infrastructure ● Travel and Tourism Services The website www.export.gov/mexico contains further U.S. federal gov't resources on Mexico.
  7. 7. The Security and Defense Sector ● Mexican defense agencies are primarily focused on domestic law enforcement – Therefore lots of overlap between defense and security, often grouped together with players like security integrators providing service to defense, law enforcement and the private sector ● Key players – The private sector, both in protecting itself and cooperating with government in security enforcement – SEDENA – Secretaría de Defensa Nacional – SEMAR – Secretaría de la Marina – SEGOB – Secretaría de Gobernación, umbrellas Policía Federal, Procuraduría General de la Republica (PGR, the Attorney General's Office), and CISEN, a centralized investigation agency
  8. 8. Mexico's Security Sector (Figures in $M) 2010 2011 2012 2013e Market Size 1,933 2,439 2,854 3,319 Local Production 1,892 2,232 2,824 3,106 Exports out of Mexico 1,954 2,095 2,355 2,567 Total imports 1,995 2,302 2,385 2,600 Imports from U.S. 718 889 823 897 ● Sector expansion – Has averaged over 10-15% annually, compared to 3-4% GDP growth ● Main growth categories: – Surveillance systems – Personal protection – Perimeter protection – Residential and industrial niche categories – Public security and corporate protection also key
  9. 9. Competitiveness of Mexico's Security Sector ● Market has grown due to the modernization of public and private security capabilities ● Mexico has a very open economy; its security market is evolving to become a more mature and specialized market ● Competition from other countries and local manufacturers may be a consideration; depends on how unique a product is ● Business opportunities are present in several market segments ● U.S. security products have a good market reputation ● The U.S. has the major import market share in Mexico; end- users are familiar with U.S. trade brands and common consumer habits The private sector is playing an increasingly large role due to urgency to protect employees and assets.
  10. 10. Opportunity Ranking Across Standard Categories: 1-4 Mexican Subsector Video surveillance systems CCTV, video management, video analytics 3 Intrusion detection, burglar alarm systems Door alarm monitoring, sound and motion sensors, security system monitoring 4 Electronic access controls Proximity/smart cards, electromechanical locking, biometrics 3 Entrance solutions Mechanical locks, automated gates, vehicle barriers, turnstiles, roll-up doors 3 Physical security Fencing, grilles, bullet resistant glazing, mechanical window coverings, safes, locks 3 Scanning Equipment Narcotics/explosives detectors, scanning and screening equipment 2 Article tracking RFID and proximity tag systems 2 Personal protection Goggles, bullet-proof vests, mace 3 Protection services Bodyguards, security guard services 3 Consultancy services Risk analysis, risk management, disaster recovery, business continuity 2 Scale 4 - U.S. exporter has a very high probability of success 3 - more opportunities than challenges 2 - more challenges than opportunities 1 - U.S. exporter has little or no probability of success
  11. 11. Public Security Modernization ● New security investment such as C3 and C4 systems over the last three years has been supported by progress such as: – Restructuring of several law enforcement units (e.g. Federal Police now under SEGOB) – Modernization of equipment – Increase of trust controls in police groups – More specialized training for task forces – Prison construction ● Continuation of these improvement programs contingent upon results ● Government prospects: – Access control solutions – Perimeter surveillance – Electronic devices for mobile phones – Biometric solutions – Tactical equipment – Personal protection products – Communications systems (wireless internet, GPS) – Integrated security solutions – Infrared cameras and equipment
  12. 12. Mexico as a Defense Customer ● Authorized purchases through Direct Commercial Sale (DSC) in 2012 valued $1.21 bn – Highest in Latin America, not far below Canada ● Value of DSC services authorized $2.78 bn ● FMS Agreement sales not as prevalent in Mexico compared to other countries – Lower FMS sales than Brazil, Italy; more than Chile and Argentina ● Transparency of government tender processes and objective treatment of foreign bidders is underwritten by NAFTA Ch 10. – Mexico's SEDENA and SEMAR (National Defense and Navy Departments) generally fall within the agreement – They may claim exception under Article 1018
  13. 13. Defense DCS to Mexico, 2012 Category - Reported by the U.S. Department of State Qty Auth'zd $US K I – Firearms, close assault weapons, combat shotguns 7,909 K 33,964 II – Guns and armament 17 14 III – Ammunition/ordnance 61,482 K 22,185 IV – Launch Vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs, mines 126 K 10,576 V – Explosives and energetic materials, propellants, incendiary agents, their constituents 5,298 K 24,759 VI – Vessels of war and special naval equipment 635 17,363 VII – Tanks and military vehicles 30 K 56,195 VIII – Aircraft and associated equipment 1,079 K 150,223 IX – Military training equipment and training 871 K 82,667 X – Protective personnel equipment and shelters 37 K 20,375 XI – Military electronics 1,503 K 460,668 XII – Fire control, range finder, optical and guidance and control equipment 168 K 44,196 XIII – Auxiliary military equipment 3 K 3,709 XIV – Toxicological agents, including chemical agents, biological agents, and associated equipment 89 K 2,359 XV – Spacecraft systems and associated equipment 250 181,992 K
  14. 14. Competing and Market Entry ● As the market matures, more specialized, better-quality, or better value-for-money products and services will be most competitive ● Added-value can go a long way in Mexico. Examples: – Turn-key solutions – Integration of multiple systems (often combining new with existing) – Customer service – After-sales support – Product customization ● Pairing with Mexican associates is a preferred path for many as it bridges knowledge gaps and ensures in-market presence – Strategic alliances – Local partners – Local sales / service reps – Distributors ● Subcontractors may find a partner among contractors already active in Mexico
  15. 15. Related Trade Events in Mexico ● Expo Seguridad – Apr 8-10, 2014 – Mexico City – U.S. Commercial Service Pavilion still accepting members ● Expo Mundo de la Seguridad – Nov 5-7, 2014 – Monterrey ● Congreso ASIS – Jul 8-9, 2014 – Mexico City ● CMIC Construction Congress – Mar 5-7, 2014 – Oaxaca ● Congreso Mexicano de Petróleo – Jun 4-7, 2014 – Acapulco ● Expo ITT – Sep 24-26, 2014 – Mexico City
  16. 16. For More Information General Mexico “Doing Business in Mexico” guides from the American Chamber of Commerce, the US Commercial Service, and the US Embassy Mexico Business Culture and Mexconnect magazine for expats U.S. Commercial Service presentation “Mexico is Open for Your Business” Mexico's Security Sector InSight Crime article, “Mexican States are not using available police reform resources” 2013 Directorio Latinoamericano de Seguridad OPESA 2013 Directory of the Mexican Security Industry American Chamber of Commerce Security Committee page (see link within to their 5th Annual Business Security Survey)
  17. 17. Organizations and Associations Trade ● U.S. Commercial Service in Mexico – www.trade.gov/mexico ● American Chamber of Commerce in Mexico - www.amcham.org.mx ● United-States Mexico Business Council – www.usmexico.org ● U.S.-Mexico Chamber of Commerce - www.usmcoc.org Security ● ASIS Mexico Chapter - www.asis.org.mx ● Latin American Security Association - www.alas-la.org ● Mexican Assoc. of Co's in Private Security - www.amesp.mx ● National Council of Private Security - www.cnsp.org.mx
  18. 18. Thank you for your interest in Mexico! Contact in Mexico: Mary Claire Whitaker Neighbors International Business Development Global Network Partner for Mexico to the Virginia Economic Development Partnership mc.whitaker@neighbors.mx

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