Doing Business in Mexico Why Invest in Mexico ? Opportunities & Risks
Doing Business in MexicoOutline 1 General Overview 2 Infrastructure for Services and Manufacture 3 Business Environment 4 Quality of Life 5 How can we support your Company?
Doing Business in Mexico1 General Overview A General Information B Government Structure C Economic Indicators D Strategic Industries E Competitive Economy
General OverviewGeneral Information • Territory1: 1,964,375 km2 (14th largest Country worldwide) • Administrative Divisions2: Monterrey 31 States and the Capital City • Major Cities by Population1,3: Cancun Guadalajara • Mexico City (18,972,473) Mexico City Puebla • Guadalajara (4,380,600) Acapulco • Monterrey (4,003,517) • Puebla (2,273,066) 1 Source: INEGI, 2011 (Economic Yearbook) 2 Source: Mexican Presidency, 2012 3 Source: Metropolitan Zones, CONAPO, INEGI, 2005
General Overview General Information Population 20111: 114,259,114 Weather (% of territory) inhabitants Gender Distribution1: Man 49%; Women 23.01% 51% Population Growth Rate1: 1.8% (2005 – 2010 period) 51.08% 25.90% Religion2: Catholic 89.7%; Protestant 4.9%; Non Religious 3.2%; Various Religious Associations 2.1%; Jewish 0.1% 0.01% Languages2: Spanish (official); Warm Temperate Dry Cold Indigenous Languages (unofficial, at least 68). Source: Mexican Presidency, 20121 Source: INEGI, 20112 Source: Mexican Presidency, 2012
General Overview Government Structure • Government Type: Federal Republic • Executive Branch: Chief of State and Head of Government, 6 year terms. • Legislative Branch: Bicameral National Congress • Chamber of Senators: 128 seats, 6 year terms • Chamber of Deputies: 500 seats, 3 year terms • Judicial Branch: Supreme Court of Justice: 11 ministers, 15 year terms • Main Political Parties: Institutional Revolutionary Party (PRI), National Action Party (PAN) Democratic Revolution Party (PRD). • Oncoming Presidential Election: July 2012Source: Mexican Presidency and Federal Electoral Institute, 2012
General Overview Economic Indicators • Currency1: Mexican Peso GDP Growth Rate (Exchange Rate: $13.01 Pesos / USD) 8% • Gross Domestic Product2: $1.039 trillion 5.2% 5.5% 6% (current USD) 3.3% 4% • Gross Domestic Product per Capita2: 1.5% $9,166 (current USD) 2% 0% • Exports2: 30% of GDP -2% 2006 2007 2008 2009 2010 • Main Exports: Oil, Agricultural Products, Machinery, Minerals -4% • Imports2: 31% of GDP -6% -6.1% • Main Imports: Agricultural and -8% Industrial Machinery and Equipment Source: The World Bank, 20101 Source: Mexican Central Bank, April 20122 Source: The World Bank, 2010
General Overview Economic Indicators GDP Composition by Sector • Gross Capital Formation1: 21% of GDP 3.4% 8.3% • Inflation2: 3.7% (annual, consumer 6.4% 38.7% prices) 17.2% • Central Government Debt3: 33% of GDP • Cash Deficit3: 2.8 % of GDP 3.5% 15.7% 6.8% Agriculture Mining • Foreign Direct Investment 20114: Constuction Industry $19,439.8 Million USD (current USD) Commerce Transportation Financial Services Others1 Source: The World Bank, 2010 Source: INEGI, 20102 Source: Mexican Central Bank, March 20123 Source: Standard and Poor’s, 20114 Source: Foreign Investment National Commission, Ministry of Economy, 2012
General Overview Strategic Industries Aerospace Automotive Agricultural • Represents 3% of the GDP and • It is composed by two main • Comprises 14% of the National sectors: fresh food and Manufacture, MRO1, Design & Manufacturing Production. processed foods, beverages Engineering and R&D. • Mexico is the 10th Largest and tobacco. • Accounts over 238 companies automobile worldwide with 29,000 workers. producer, 6th largest • Mexico is the 12th worldwide worldwide commercial producer and exporter. • The level of exports tripled in vehicles producer and 2nd only 3 years, growing 16.5% • Mexico is the main worldwide on 2010. vehicle producer in Latin producer and exporter of America. • The sector includes leading avocado and lemon. • Exports increased 52% in companies (i.e. Bomardier 2010, being the 4th worldwide • The sector has more than Aerospace, Safran exporter. 750,000 trained engineers Group, Goodrich, Honeywell). • Main exports market: USA and 30 related universities.1Maintenance, Repair and OverhaulSource: ProMexico and Aerospace Industry Mexican Federation (FEMIA), 2012
General Overview Strategic Industries Electrical IT - Software Medical • Comprises the manufacture of • Estimated market value for IT • The production value of the home Services Production (including Industry reached $590 million appliances, transformers, gen BPO): $4.03 billion US. USD in 2010. erators, regulators and engines. • Estimated increase in exports • Exports reached $6 billion of IT and BPO Services in 2010 USD in 2010, ranking on the • The GDP of the sector had an reaches 12%. 11th place worldwide. annual growth rate of 7.9% • Exports had an annual growth from 2003 to • More than 2,000 IT 2010, accounting to the 0.6% companies, including world’s rate of 11.4% from 2003 to of the National GDP. leading companies (i.e. 2010. IBM, HP, Accenture, SAP). • Mexico is the leading exporter • Main exports were in Latin America and primary refrigerators and vacuum • The sector includes Software cleaners, being the main Production, Call Centers, Data supplier to the US. destinations USA and Canada. Centers, ERP Software, etc.Source: ProMexico, 2011
General Overview Competitive Economy Transparency International World Economic Forum Corruption Perception Index Competitiveness Index • Score: Fell from 3.1 to 3.0 (0 - Highly Corrupt to 10 - Very Clean). • Score: Improved from 4.2 to 4.3 (1-Less desirable to 7-Most desirable) • Rank: Improved from 98 / 178 to 100/183. • Rank: Improved from 66/139 to 58/142Source: Transparency International, 2012 Source: World Economic Forum, 2011
General Overview Competitive Economy Standard and Poor’s The World Bank Mexico (Analysis) Ease of Doing Business Ranking • National Scale Grade –CaVal: mxAAA/Stable/- • Ranking: Improved from place 54 to 53 • Strengths: Macroeconomic stability supported by all political parties; stable • Progress: Dealing with construction fiscal debt and interests levels. permits was improved, the access for credit information was streamlined and • Weaknesses: Limited fiscal flexibility due to the procedures and costs in trading a low non-oil tax base; lower real GDP across borders were improved. growth rate than other emerging economies; political scenario could hinder Source: The World Bank, 2012 deep reforms until the next presidential administration.Source: Standard and Poor’s, 2011
Doing Business in Mexico2 Infrastructure for Services and Manufacture A Industrial Parks and Utilities B Human Capital C Logistics and International Trade
Infrastructure for Services and Manufacture Industrial Parks and Utilities Utilities There are more than 250 private Water and Sewer. Provided by local Industrial Parks in Government in all Industrial Parks. Mexico. Wastewater Treatment Plants. Available in Many of them operate under the “Plug & some private Industrial Parks for services Play” concept: water only. • Certainty of Land ownership Electricity. Provided by the Federal • Quality infrastructure Government, serving different capacities • Proximity to trade routes and labor according the Industrial Park or independent project. • Private security Natural / LP Gas. Distributed by dealers all • Speculative buildings for lease / sale over the country, available in most • Shelter services Industrial Parks. • Built-to-suit schemes Optic Fiber. Provided by dealers in someSource: ProMexico, 2012 Industrial Parks but in most offices spaces.
Infrastructure for Services and Manufacture Human Capital Economic Active Population Distribution of Employed Labor 50,273,465 Force by Economic Sector Economic Active (44% of total Population (EAC) population) 10.1% 3.1% Agriculture EAC Average Age 37.7 years 5.6% 25.9% Industry Employed 95.15% of EAC Construction Unemployed 4.84% of EAC CommerceSource: INEGI, 2011 Services 24.8% 9.1% Transport Available Labor Force: 21.4% Others 2,437,409 Source: INEGI, 2012
Infrastructure for Services and Manufacture Human Capital Working Day Annual Variation of Employed • Daily: 8 hrs Labor Force 6% • Weekly: 48 hrs 4.7% 5% 4.2% 4.3% 3.8% 4% Minimum Wage by Geographical Zone 3% 2.1% Zone A Zone B Zone C 2% 62.33 60.57 59.08 1% Source: INEGI, 2012 (Pesos per day) 0% -1% 2006 2007 2008 2009 2010 2011 Strikes and Labor Disputes 2011 -2% -3% Strikes 13 -4% -3.1% Disputes 10,950 Source: INEGI, 2012Source: Ministry of Labor, 2012
Infrastructure for Services and Manufacture Logistics and International Trade 74 Airports Roadway The adequate • 11 Domestic • 133,000 km of combination • 63 International paved roads. of operational 114 Sea Ports 49 Customhouses infrastructure, a • 19 North Border • 53 Cabotage firm regulatory framework and an • 2 South Border • 61 Grand Cargo • 17 Coasts and Cabotage extensive network of Free Trade • 11 In-land Agreements positions Mexico as one of Access to the US the most competitive countries worldwide Railroad • 54 access points • 27,000 km mainly in the context of international trade. troughout 3,000 for cargo. km of border.Source: ProMexico and Ministry of Finance, 2012
Infrastructure for Services and ManufactureLogistics and International TradeFree Trade Agreements % World GDP Free Trade Agreements Network 27.7 • Mexico has signed 11 Free Trade 1.9 Agreements, covering 43 countries. 1.7 • The network allows to access a market of 2.1 more than 1,000,000 potential consumers (60% of the World’s GDP). 1.6 1.7 • The network includes 6 Economic Complementation Agreements, Reciprocal 1.7 Protection Investment Agreements with 25 1.9 countries and Double Taxation Avoidance Agreements with 31 countries. 27.6 Source: ProMexico, 2012Source: ProMexico, 2012
Infrastructure for Services and Manufacture Logistics and International Trade Legal Certainty for Foreign Investment FDI Inflows by Country of Origin Protection Investment Agreements were created to protect foreign investments in 3.4% 6.3% Mexico for: 10.2% 3.4% • Investment Treatment; • Expropriation and Transfers; 6.7% • Investor-State and State-State disputes. 15.0% Duty Reduction Programs 55.0% The Mexican Government has created many mechanisms to encourage manufacturing and exporting of local companies: Canada Switzerland Japan • IMMEX: Avoidance of import tax and VAT Netherlands Spain USA • Prosec: Reduction of import tax Others • 8th Rule: Reduction of import tax Source: Ministry of Economy, 2011Source: ProMexico, 2012
Doing Business in Mexico3 Business Environment A Education and R&D B Taxation System C Process to Set up a Company D Government Incentives
Business Environment Education and R&D Higher Education Level • Literacy Rate1: 93% Distribution 7.0% 3.8% Technician • Average Level of Schooling2: 8.7 years Undergraduate • Total Enrollment in the National Graduate 89.2% Education System2: 34.4 million students Areas of Study (31.7% of Total Population) 9.5% Social and • Higher Education Level2: 8.7% of Total 33.4% Administrative Medical Population enrolled in the National Engineering and Education System. Technology Others 46.9% 10.2%1 Source: The World Bank, 20102 Source: Ministry of Education, 2011 Source: Ministry of Education, 2011
Business Environment Education and R&D Public Expense in Science and Budget for Research Areas by Technology per Sector CONACYT 29% 8% 35% 3% 1% 5% 61% 18% 1% 4% 35% Experimental R&D Agriculture Economy Scientific and Technical Education Public Education Social Security Environment1 Energy Scientific and Technical Services CONACYT Others CONACYT (Science and Technology National Council) Source: INEGI (Economic Yearbook), 20111CONACYT (Science and Technology National Council)Source: INEGI (Economic Yearbook), 2011
Business Environment Taxation System Government Income by Source • Government Income 2011: $0.217 trillion USD (21.6% of GDP) 20% 48% • Taxable Income 2009: 13.9% of GDP (including Oil Rights) Non Oil (33%) Oil • Average Taxable Income of OECD1 (67%) Countries in 2009: 19.2% of GDP 3% 13% 16% • Fiscal Reform in 2007: Leaded to the adoption of the IETU Flat Tax PEMEX (State-owned Oil Company) Government (Oil Yields Tax) • Tax Payers Base 2010: 33.5 million Taxable Revenues (18% increase compared with 2009) Non Taxable (Rights and Duties) Instututions and Companies1Organization for Economic Co-operation and Development Source: Ministry of Finance, 2011Source: Ministry of Finance, 2011
Business Environment Taxation System Main Federal Taxes Taxable Revenue Income Distribution • Income Tax (ISR): 30% of Income 1% 38% 4% (varies according to income level) • Flat Tax (IETU): 17.5% of Income 5% (Complementary tax to ISR) 47% 2% 3% • Tax on Cash Deposits (IDE): 3% over Income Tax (ISR) excess of cash deposits over $1,000 USD Income Tax (IETU) Tax on Cash Deposits (IDE) Value Added Tax (VAT) • Value Added Tax (VAT): 16% over Non Oil IEPS (Production / Services Tax) Imports products and services. OthersSource: Ministry of Finance, 2011 Source: Ministry of Finance, 2011
Business Environment Process to Set up a Company Incorporation Procedure1 Issuing Authority Quick Opening of Ministry of Foreign Business Office 1. Corporate Name Selection Affairs Some local Governments 2. Public Notary Incorporation Public Notary have improved their 3. Public Property and Commerce Office Public Notary / services by providing (PPCO) Registration PPCO counseling over 4. Federal Taxpayer ID Registration Ministry of Finance procedures and 5. Foreign Direct Investment National Registry of Registration Foreign Investment timeframes to set up a 6. Importers / Exporters List Registration Importers / Exporters company (if applicable) Registry (legal, corporate and1 Procedure to set up a company under “Corporation” (S.A.) or “Limited LiabilityCompany” (S.R.L.) schemes. fiscal advice).Source: Mexico City’s Secretariat of Economic Development, 2011
Business EnvironmentProcess to Set up a Company Number of Procedures for Number of Procedures needed to Opening a Business obtain Construction Permits15 12 13 40 34 1710 7 17 6 6 10 15 20 5 0 0 Mexico USA Chile India Brazil Mexico USA Chile India Brazil Time needed for Opening a Recovery Rate (cents per dollar Business (days) recouped by bankruptcy)150 119 100 82 67100 29 50 25 18 50 9 6 7 20 0 0 Mexico USA Chile India Brazil Mexico USA Chile India BrazilSource: The World Bank, Doing Business, 2012
Business Environment Government Incentives Main Government Incentives Description Incentive Branch Payroll Tax 2.5% over Payroll Reduction State Real Estate Tax Fee based on Property Value Reduction State Real Estate Transfer Tax Fee based on Property Value Reduction State Public Property and Commerce Registration Fee based on Property Value Reduction State Depreciation of Fixed Assets Accelerated Rates Reduction State Main Government Support Programs Description Branch Financial Services Diverse Financing Programs (customized) Federal Entrepreneurship, Incubators, Innovation, Training and Counseling Federal Franchises, Commercialization, Exports Training of Human Capital (BECATE Program) Working-Training Scholarships Federal Software Industry Development Program Increase competitiveness of IT Industry FederalSource: Mexico City ‘s Secretariat of Economic Development and Ministry of Economy, 2012
Doing Business in Mexico4 Quality of Life A Tourism and Culture B Living in Mexico C Current Situation in Mexico
Quality of Life Tourism and Culture Tourism Relevance (January - June 2011 period): • International Visitors: 38.2 millions • International Tourists: 11.4 millions • Main Origin of Tourists: USA (57.4%) and Canada (18.2%) • Earnings from International Tourists: $5,195 million USD • Surplus on Tourism Trade Balance: $2,523 million USD • Air Traffic: 19 million of passengersSource: Ministry of Tourism, 2011
Quality of Life Living in Mexico • Extensive Foreign Community with no “Immigrated Status” Resolutions: major difficulties of integration into the 453 (Jan – Feb 2012) Mexican society. • A variety of International Schools 26.7% 38% (American, German, Swiss, Japanese). • Recreational Facilities: Golf 6.2% Courses, Stadiums, Arenas, Concert Halls, Shopping Malls, Parks, Ridging 3.1% 6.0% Clubs. 6.0% 4.0% • World’s Cultural Heritage1: 27 cultural 4.9% 5.3% places and 4 Natural attractions US China (including Prehispanic Argentina Alemania Architecture, Tequila Region Landscape El Salvador Canadá and the National University Campus). Colombia España1 Source: UNESCO, 2012 Source: Immigration National Institute, 2012
Quality of Life Current Situation in Mexico National Security Program 2009 – 2012 10th Survey on Insecurity Perception The National Security Program has • 67% of the surveyed citizens consider identified the main challenges faced by the Army as the best force to fight crime. the Mexican Society: • Up to date, there are more than 397,664 Public Security Officers. • Threats: Organized Crime, Drug Traffic, Armed Groups, Terrorism and • For most of the surveyed citizens, the Border Vulnerability. main problem in Mexico is Insecurity (33.5%), over passing Economic Crisis • Risks: Social and Politic Conflicts, Lost of (20.1%), Poverty (8.5%) or Corruption Social Cohesion, Migratory (5.1%). Dynamics, Pandemics and • 43.2% of the surveyed citizens consider Epidemics, Environment and Social the Police Operatives to confront the Warming and Imbalances on the organized crime as failures. National Development.Source: National Security and Research Center, Ministry of Source: Mitofsky Consulting, November 2012the Interior, 2009
Quality of Life Current Situation in Mexico National Security System “It is the set of instances, policies, capabilities, processes and tools established by law with the explicit mission of preserving the integrity, stability and permanence of the Mexican State, through the creation of public policies and implementation of coordinated actions aimed at addressing threats and risks that could harm it”. Objectives: • Preserve sovereignty and national independence and defend the territory; • Maintain the constitutional order and the strengthening of democratic institutions; • Keep the unity of the Federation; • Provide security and maintain the operation of strategic facilities in the county; • Make the legitimate defense of the nation’s vital interests with no outer pressures; • Disable inertia that hinder the economic, social and political development to preserve democracy.Source: Ministry of the Interior, 2009
Doing Business in Mexico5 How can we support your Company? A 1. Financial Advisor to CEOs and CFOs 2. Fraud Prevention and Detection 3. Mergers and Acquisitions 4. Financing and Investment 5. Project Management 6. Business Process Improvement
How can we support your Company?1. Financial Advisor for CEOS and CFOsProvide value-added advice on accounting and financial matters, offering an independentpoint of view with and international perspective and enriching the decision-makingprocess.2. Fraud Prevention and DetectionPerform special reviews focused on fraud prevention/detection or on any other arearepresenting a specific concern for management.3. Mergers and AcquisitionsAdvise companies contemplating to merge, acquire or be acquired by other companies. Ican help on valuation, due diligence, negotiation and integration.
How can we support your Company?4. Financing and InvestmentSupport in the identification of the best sources of financing for business projects, at thedomestic or international level, and also help to make quantitative and qualitativeanalyses of investment projects.5. Project ManagementManagement of the implementation of specific projects such as informationtechnology, compliance programs or certifications, particularly focusing on deliverytimes, deadlines, and deliverables quality.6. Business Process ImprovementPerform analysis and reengineering of business processes, identifying potentialopportunities for cost savings, efficiencies, optimization, and streamlining.
How can we support your Company?Professional ProfilePublic accountant, certified in Mexico and the U.S., ex-PwC, former internal auditor forcompanies such as WPP, Bombardier, IPG, and Syngenta, and former CFO in theadvertising, consulting, and manufacturing industries. Multilingual and multicultural withmore than 16 years of professional experience in international environments. Working asindependent consultant since 2003.Academic BackgroundB.S. in Accounting, graduated with honors (UNAM, Mexico)Certified by the Illinois State Board of AccountingCertified by the Mexican Institute of Public AccountantsCertified Fraud Examiner (ACFE)
How can we support your Company?Unique Value Proposition• Strategic solution to address accounting, financial, tax or administrative matters effectively and with a highly-personalized level of service.• Independent point of view with an international perspective.• Brings solid technical capabilities, broad experience in several industries and several types of organizations, and the possibility of transferring high value-added knowledge to your organization.• Several strategic partnerships at the domestic and International level make it possible to propose and implement multidisciplinary and personalized solutions to complex problems.• Excellent communication skills in several languages and first-hand knowledge of the Mexico and Latin American markets.• Flexible compensation totally based on results and on the specific needs of each project.• Our 100% satisfaction warranty eliminates the risk for your business.
How can we support your Company? Contact Information Address: Plateros 16 Suite 504, San Jose Insurgentes 03900, Mexico City Office: +52 (55) 5339 5839 Mobile: +52 (55) 5453 6309 E-mail: email@example.com; Web: www.nuricumbo.com Skype: nuricua ; BB Pin: 21BD8276