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Mexico

Mexico is a nation with both strengths and areas for improvement. It has a stable economy, a growing middle class, and proximity to the US market. However, it also faces challenges like inequality, violence, lack of infrastructure investment, and low productivity growth. Mexico has potential for the future due to its young population, skilled workforce, cultural attractions, and strategic geographic position between North and Latin America. Overall, Mexico remains a nation of contrasts with both opportunities and challenges to address.

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Mexico May 2016 A Nation of Contrast and Opportunity Key Facts for Understanding the Country and Discussing its Future
STABLE ECONOMY CONSUMPTION CAPACITY MIDDLE CLASS PROXIMITY TO USA INFLATION HAPPINESS SKILLED WORKFORCE ARCHEOLOGY TOURISM GEOPOLITICAL POSITION INSECURITY POLITICS DRUGS POVERTY TECHNOLOGY USE LACK OF GROWTH LACK OF COMPETITIVENESS VIOLENCE INFRASTRUCTURE CORRUPTION EDUCATION QUALITY RULE OF LAW FINANCIAL INCLUSIONCULTURE Productivity NAFTA ENTREPRENEURSHIP EXPORTS INTERNATIONAL RESERVES NATURE GASTRONOMY CONNECTIVITY MEXICO’S STRENGTHS and room for improvement 1 12 15 12 12 1213 17 18 16 16 22 6 3 25 22 25 5 23 24 10 7 8 7 1717 17 9 17
World Estimated GDP, 2050(2) (Trillions of dollars) Countries with Largest GDP in 2014(1) (Trillions of dollars) RankCountry $USD USA China Japan Germany UK France Brazil Italy Mexico 1 2 3 4 5 6 7 8 #15 17.4 10.4 4.6 3.9 2.9 2.8 2.3 2.1 1.3 1Source: (1) IMCO 2013, World Bank 2014. (2) ProMéxico with information from Bloomberg and The Economist. MEXICO IS THE WORLD’S 15 LARGEST ECONOMY it is estimated it could become #8 by 2050 #8 China USA India Indonesia Germany Brazil Mexico UK France Japan 105.9 70.9 63.8 15.4 11.4 11.3 10.3 9.8 9.7 9.8 TH
20072005 2009 2011 2013 2015 MEXICO’S COMPETITIVE POSITION HAS NOT IMPROVED SINCE 2005 largely due to low productivity and lack of rule of law International Competitiveness Index (1) (2015) Competitiveness Index by Specific Indicator (2) 2Source: (1) Índice de Competitividad Internacional 2015, IMCO. (2) World Competitiveness Index 2015-2016 from the World Economic Forum. 32 3736 36 36 IMCO 58 58 52 61 55 WEF57 Market size Business sophistication Technological advance Financial market development Labor market efficiency Innovation Institutions Infrastructure Macroeconomic environment Health and primary education Advanced education and training Property market efficiency 3.3 4.9 5.7 4.0 4.23.84.2 3.8 5.7 3.4 59 50 73 46 114 82 11 109 59 56 71 86 4.2 4.2 Ranking Score
MANY STATES IN MEXICO ENJOY COMPETITIVENESS AND GROWTH but performance levels are unequal by state given different business environments, poverty levels, security and regulatory frameworks 3Source: (1) México cómo Vamos, 2015. (2) Secretaría de Hacienda y Crédito Público, 2015. Competitiveness Index by State (2014) (1) AVERAGE Economic Growth by State(2) (Percentage growth of GDP, 2014) (2) States with growth below the national level States with higher-than-national, and higher-than-2013 growth levels States with higher-than-national, but lower-than-2013 growth levels AGS QRO COAH NL GTO JAL CHIH TAMS BC CAMP TLAX DGO GRO QROO BCS COL CDMX NAY SIN TAB ZAC PUE SLP SON MEX CHIS MICH YUC HGO MOR OAX VER 95 90 75 75 70 70 65 65 60 60 55 50 50 50 45 45 45 40 40 40 40 35 35 30 25 20 20 20 10 10 5 5 Mexico City -1.6% 1.6% -1.6% 0.3% 0%1.3% -1.6% 1.6%1% 9.8% 6.3% 4.9%6.2% 1.2% -0.5% 0.7% 2.5% 2% 1.8% 5.5% 4.4% 2.3% 8.8% 5% 6.3% 1.6% 5.7% 0.1% 2.7% -5.2% 1% 1.4% BC CHIH DGO BCS SIN SON AGS COAH NL JAL TAMS NAY ZAC SLP CAMP GRO MÉX HGO QROO TAB PUE CHIS YUC OAX VER TLA COL MOR QROGTO MICH
AGS QRO COAH NL GTO JAL CHIH TAMS BC CAMP TLA DGO GRO QROO BCS COL NAY SIN TAB ZAC PUE SLP SON MÉX CHIS MICH YUC HGO MOR OAX VER CDMX STATE ECONOMIC COMPLEXITY IS VERY IRREGULAR some states are comparable to Uganda (Chiapas) and others to Hong Kong (Nuevo León) Source: The Atlas of Economic Complexity and the Mexican Atlas of Economic Complexity, Harvard 2014. 4 Economic Complexity Index by State (2014) Economic Complexity Index (International comparative, 2014) From 25 to 50 From 0 to 25 From 50 to 75 From 75 to 100 Higer Complexity Italy Hong Kong Uganda Angola Chiapas Nuevo León Baja California Norte Japan1.0 0.8 0.6 0.4 0.2 0.0 Guanajuato Panama
THERE IS POTENTIAL TO BETTER POSITION MEXICAN CITIES only two Mexican cities are ranked in the regional top 5 Source: americaeconomia.com, 2015. 5 Best Five Cities, by Indicator (according to the Urban Competitiveness Index) (2015) Brand power 100.0 Environmental sustainability Human capital and knowledge economy Infrastructure & connectivity Executive services Corporate services Miami 100.0 Miami 100.0 Santiago 94.5 San José 100.0 Miami 100.0 Miami 97.2 Buenos Aires 73.3 São Paulo 97.3 São Paulo 93.2 Barranquilla 63.1 São Paulo 76.9 Mexico City 96.1 São Paulo 63.6 Mexico City 97.1 Buenos Aires 93.0 Cali 62.8 Mexico City 74.1 Bogotá 94.4 Santiago 53.7 Bogotá 89.2 Miami 93.0 Cartagena 61.9 Bogotá 74.1 Cali 94.4 Bogotá 53.2 Panama City 87.7 Mexico City 92.5 Panama City 59.1 Panama City 72.5 Monterrey Economic framework & dynamism Political & social framework 100.0 Santiago 100.0 Miami 99.9 Miami 89.5 Santiago 99.5 Valparaíso - V.del Mar 82.8 Mexico City 98.5 Concepción-Talcahuano 80.9 Panama City 95.2 Montevideo 76.7 São Paulo
MEXICO IS THE 11 MOST POPULATED COUNTRY but 53% of 120 million Mexicans live beneath the poverty line Social Deprivation Indicators in Mexico (Percentage of total population in 2014) (1) Per-Capita Income Distribution by Decile in Mexico (In thousands of pesos, monthly average, INEGI 2014) (2) (3) 6Source: (1) Coneval, 2015. (2) INEGI. Encuesta Nacional de Ingresos y Gastos de los Hogares, ENIGH 2014. Basic tabulations 2015. (3) Data from SAT, 2016. 50% of the Mexican population has a monthly income below 2 thousand pesos 50% of the Mexican population has a monthly income below 2 thousand pesos Forbes’ Top Five Mexican Businessmen hold 9% of GDP without social security 59% without access to health services 21% without basic utilities at home 18% without access to quality housing 12%19% subject to insufficient education without access to nutrition 23% II I $0.6 $1.0 $1.3 $1.6 $2.0 $2.4 $2.9 $3.7 $5.3 $13.7 III IV VV I VII VIII IX X TH See more here...
Mexico Population (% of distribution by age, 2000 vs. 2030) (1) Working Population (% change, 2010 vs. 2035) (2) Working Population MEXICO IS A YOUNG COUNTRY WITH A GROWING WORKING POPULATION generating production sustainability and consumption within the country Source: (1) INEGI, Censo de Población y Vivienda 2010, Conapo, Proyeciones de la población en México 2005-2010. (2) UN Population Division 2011, Economist Intelligence Unit. 7 -40% 40%20%-20% 0%10% 10%8% 8%6% 6%4% 4%2% 2% 85 or more Ages 80 to 84 75 to 79 70 to 74 65 to 69 60 to 64 55 to 59 50 to 54 45 to 49 40 to 44 35 to 39 30 to 34 25 to 29 20 to 24 15 to 19 10 to 14 5 to 9 0 to 4 00 India Mexico Brazil USA Spain China Japan UK 36.5% 14.3% 26.4% 8.7% 3.7% -2.2% -6.3% -19.0% 2000 2030 World Happiness Index, see more here...
8 Consumer Spending Share, Emerging Economies (Percentage of GDP, 2015) (2) THE MIDDLE CLASS HAS REGISTERED SIGNIFICANT GAINS SINCE 2011 in addition to strong purchasing power Source: (1)PEWResearchCenter,2011.(2)ProMéxicowithinformationfromtheBrazilianInstituteofGeographyandStatistics.InstitutoNacionaldeEstadisticaGeográfiaeInformatica.CentralStatisticalOrganization,India.BadanPusaatStatistic.ChinaNationalBureuofStadisticsHarverAnalytics. LATAM Middle-Class Growth (As a percentage of total population, 2012) (1) Ecuador Colombia Bolivia Peru Argentina Mexico Brazil Paraguay Venezuela Chile Uruguay 2001 2011 8 11 21 13 19 14 25 14 32 17 26 18 28 20 27 20 30 25 34 30 33 21 IndiaChina Colombia Brazil MexicoIndonesia 36.5% 56.6% 59.3% 61.2% 62.5% 67.3%
Student population 9Source: (1) Índice de Competitividad Internacional 2015, IMCO. (2) Prueba PISA. PISA Test Ranking (2014) (2) RANKING 1 2 3 4 5 36 53 SHANGHAI SINGAPORE HONG KONG TAIPEI SOUTH KOREA OCDE AVERAGE USA MEXICO 613 573 561 560 554 494 481 413 REGION SCORE THERE ARE 36 MILLION STUDENTS IN MEXICO however, only 2% graduate from college and according to PISA, Mexico is ranked #53 in global education quality 100 99.4Primary school 14.6M Middle school 6.3M 42.9 27.4 2.2 High school 4.0M 3.0MUniversity Student Attrition Rates by Grade (2013-2014. Base 100)(1)
10 MEXICO IS THE 8 LEADING COUNTRY AT PRODUCING ENGINEERS and is ranked 16th by number of worldwide-ranked universities Graduating Engineers, by Country (Thousands, 2015) (1) Ranked Universities by Country (2015)(2) Source: (1) World Economic Forum 2015/UNESCO Institute for Statistics. (2) Social Progress Index, 2015. #16Mexico 181 74 46 44 44 38 36 33 26 24 22 21 19 16 14 13 13 USA UK China Japan France Germany Italy Austria Canada SouthKorea Brazil Russia Spain Argentina India Netherlands Total engineersPer-Capita 3.2 3.0 3.0 2.9 1.6 1.3 1.1 0.9 0.7 0.6 Russia USA Iran Japan Vietnam Indonesia Ukraine #8 Mexico France South Korea 454 238 234 168 100 148 140 130 114 105 TH
11 IT Professionals Supply Evolution (Number of IT professionals, 2002-2014) THE SUPPLY OF INFORMATION TECHNOLOGY PROFESSIONALS IS GOOD 6 out of 10 certified PSP* developers are Mexican Source: ProMéxico with information from Carnegie Mellon University 2015 *Personal Software Process. 889 693 507 371 IT professionals Software developers 578 436 347 257 2002 2006 2010 2014
MEXICO ENJOYS AN ENVIABLE GEOPOLITICAL AND ECONOMIC POSITION natural resources, strategic location plus solid economic and business climate 12Source: Social Progress Index, eia.gov, Pemex, Análisis SWS / Ignia, 2016. Free trade agreements Commercial infrastructure Solid resources 13.4Bnbarrelsofoil,ranked#17worldwide $177BnUSD ininternationalresources 117ports,16.7Kkmrailroad, 378.9Kkmhighway, 58internationalairports 12with49countries NAFTAisworth$20.5TrUSD,26%GlobalGDP GDP$1.26BnUSD withaworkingpopulationof47M Spending power ExportsurpluswithUSA worthover$100BnUSD 28xgrowthoverpast20years Exporting power Next door to the world’s #1 economy: USA GDP:$19TrUSD/320Minhabitants 460Mbordercrossingsyearly
13 MEXICO HAS BECOME AN IMPORTANT EXPORTER and a strong global competitor in costs primarily due to its productivity and exchange rate USA Imports Participation (selected countries, % of total) (1) Cost competitiveness Index vs. Top 25 Countries (2) Labor Cost Mexico vs. China Mainvariables:exchangerate, costoftransportandproductivity(USD/hour) (1) Country 2014 5.718.1 19.93.1 14.818.4 1990 12.56.1 Top 25 Average 2004-2014 +75 +98 +27 +7 +71 Cost of Electricity Cost of Natural Gas Productivity Currency Wages Mexico 2004-2014 +55 -37 +53 -11 +67 Source: (1) Average Cost; Economist Intelligence Unit, US Department of Commerce. (2) Weighted average cost for all industries, U.S. Economic Census, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, International Labour Organization, Euromonitor, BCG analysis. 20141990 4.20.6 3.31.6
Automotive Plants in Mexico #7Producerof lightvehicles 6% of GDP SOME INDUSTRIES ARE TAKING ADVANTAGE OF MEXICO’S BENEFITS automotivemanufacturingexceedsremittances,tourismandoilproduction.Between1993-2014automotiveproductionhasincreasedfrom1.0Mto3.3M Source: Banxico,2015. 14 #6Producerof heavyvehicles ofcarsintheUSA originatefromMexico19%
15 MEXICO HAS BECOME A RECOGNIZED MANUFACTURED GOODS EXPORTER top 2013 Mexico exports (Billions USD) Source: ProMéxico con información de Global Trade Atlas, 2014. Transport vehicles Computers and components TV receivers $17.6$ 17.4 $16.7 Light vehicles Auto-parts $32.4$ 20.5 Phones and accessories $18.0 Seating Medical and surgical equipment Refrigerators and cooling equipment $5.3 $5.1 $4.4 Electric conductors Solid gold $10.2$ 5.8 Tractors $5.6 See more here...
MEXICANS ARE MORE CONNECTED THAN EVER but ranks 75 on the digitization index according to the WEF(1) 16Source: (1) World Economic Forum 2015, IAB 2016, Competitive Intelligence Unit 2016. 18M Facebookusers 5 worldwide52M vs.Chile34%andUSA60% Ranked 75 onthe digitization index(1) homeshavePay TV Smartphones Internet users 68M 8% of small businesses haveawebsite th th 63M vs.5Min2011
MEXICO RANKS 6 IN WORLD HERITAGE SITES butinsecurityandlackofinfrastructureputit44th in tourism competitivity 17Source: World Tourism Organization. 2014, UNESCO 2015. Global Tourism Competitivity Index (Ranking of 140 countries, 2014) by number of tourists #10 #22 by income from foreign tourists Culture 19 6 2 31 4 14 49 12 7 29 1 2 15 13 23 3 5 22 30 8 57 10 16 33 8 21 121 CountryRanking 1 2 3 4 5 6 7 8 44 Nature Security 5 23 23 5 23 23 5 23 61 Infrastructure 25 5 31 3 8 10 4 16 6 World Heritage Sites TH
MEXICO’S GOVERNMENTAL FINANCES ARE SOLID yet the nation lacks adequate private-sector and venture-capital financing 18Source: SHCP, Banxico 2015, Banco Mundial 2016. 12% 10% 8% 6% 4% 2% 2002 2004 2006 2008 2010 2012 2014 2015 Domestic Credit Allocated to the Private Sector (% of GDP) Annual Inflation (%) Government Debt (% of GDP) Mexico Latin America and the Caribbean 60% 50% 40% 30% 2000 2002 2004 2006 2008 2010 2012 2014 Venture Capital Investment as a Percentage of GDP, 2014 ~20x 0.01% 0.33% ~30x 0.005% India Developed countries China LATAM MEXICO 0.15% 0.25% 50% 20% 30% 40% 10% 0 2002 2004 2006 2008 2010 2012 2014
FISCAL AND MONETARY PRUDENCE IS ONE OF MEXICO'S STRENGTHS despite low economic growth rates and fiscal deficit growth Source: CIA World Factbook, SHCP 2015. 19 -3% -1% 1% 3% 5% 7% 9% Publicdebt(%ofGDP) Fiscal deficit (& of GDP) Brazil Chile Germany Australia Italy Canada France Portugal Spain UK Ireland Greece Maastricht Criterion (≤60% of GDP) ) Maastricht Criterion (≤3% PIB) Debt and Fiscal Deficit in Selected Countries vs. Maastricht Criterion USA (4.1%) 2015 MexicoMexico 100% 140% 180% 20% 60%
9.9 5.0 4.8 3.7 2.9 2.4 2.4 China Chile* Emerging Economies* Colombia* Spain Mexico Brazil* LOW ECONOMIC GROWTH PERSISTS mainly due to slow progress in productivity Source: * 1983-2014 (1) IMF (2) Kehoe y Meza (2011), “Catch-up Growth Followed by Stagnation: Mexico, 1950–2010,” Latin American Journal of Economics, 48. 20 Economic Growth Comparative (Selected countries, 1983-2015*) (1) Total Productivity Factor in Mexico (1950-2010) (2) 110 150 190 230 250 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 Index,1950=100 Annual Average Drop 1980-2010: 0.7%
21 MEXICO HAS ACHIEVED IMPORTANT LEGISLATIVE REFORMS which according to preliminary estimates will have a positive impact on GDP Source: ProMéxico with information from SHCP 2016. Estimate of Structural Reforms Impact on GDP Growth (GDP percentage growth, 2013-2018) 4.4 - 4.9% +0.3% +1% +0.5%+0.1% 2.5 - 3% GDP growth rate (2013) Estimated growth rate (2018) Labor reform Energy reform Fiscal reform Telecommunications reform
LAW ENFORCEMENT INNEFICIENCY IS ALARMING the outcome of bias, few cases ever reaching court, information opacity and corruption 22Source: ENVIPE (2013), México Unido Contra la Delicuencia (2013), Montes, Pesos sin contrapesos: corrupción y gobiernos locales, Índice de Competitividad Internacional 2015, (IMCO). In the Last 16 Years, 272 Corruption Scandals Involving Governors Have Been Reported by the Press Sentencing Effectiveness in Corruption Cases Involving Accused Governors in Mexico vs. USA (2000-2015) Accused governors Investigated cases Detained governors Mexico 41 16/41 4/41 USA 9 9/9 9/9 Law Enforcement Efficiency (Percentage of commited crimes, 2015) 1.7M 5% reported crimes 33M 94.7% unreported crimes 0.3% sentenced criminals PunishedUnpunished 251 cases 21 cases 91.7% 8.3%
Perception of Corruption Associated With Law Enforcement Agencies (Affirmative responses, 2015*) Making Shady Deals: a Way of Life 65% % 68% % Judicial police Municipal police 77Transit police 64%Prosecution authorities 65%Judges Note: Affirmative public-survey response to the question “Do you consider the following Institutions corrupt?” 23Source: Encuesta Nacional de Victimización y Percepción sobre Seguridad Pública 2014, INEGI. JUDICIAL INSTITUTION PRESTIGE HAS BEEN TARNISHED leading to generalized pessimism and demoralization “Hey, if you scratch my back...” “Help me help you” “One hand washes the other” “I leave it up to your judgment” “So, how do we get on the same page on this?” “You don't have to feed me, just get me a spot at the table” See more here...
from Colombia from Asia from Colombia, Venezuela and Brazil Sinaloa Sinaloa Cartel Beltrán Leyva The Mazatlecos El Chapo Trini/El Cadete Jalisco Cartel New Generation Knights Templar The Michoacan Family Guerreros Unidos Los Rojos Independent Cartel of Acapulco The Viagras The Zetas Gulf Cartel All drug traffic Marijuana and methamphetamines Cocaine Production areas Methamphetamine precursors Tierra Caliente Tamaulipas Mérida Cancún Acapulco Mazatlán Culiacán Matamoros Boca del Río Torreón Júarez Mexicali Nogales Tijuana Obregón Hermosillo Manzanillo Lázaro Cárdenas Nuevo Laredo Reynosa Territorial organization of cartels and illegal drug flow in Mexico Annual drug production in Mexico* 15,800 cubic tons MARIJUANA HEROIN 18.0 cubic tons CD MXCD MX MonterreyMonterrey GuadalajaraGuadalajara DRUG TRAFFICKING HAS AFFECTED MEXICO PROFOUNDLY because of proximity to the US, a roughly $200Bn USD per-year consumer market 24Source: INE, PNUD, 2013. World Drug Report, 2013. *Ilegal drugs in selected products. Tampico
AGU QTO COA NLE GUA JAL CHH TAM BCN CAM TLA DUR GRO ROO BCS COL NAY SIN TAB ZAC PUE SLP SON MEX CDMX CHP MIC YUC HID MOR OAX VER STRONG INSECURITY PERSISTS IN VARIOUS STATES the outcome of drug trafficking plus inadequate rule-of-law enforcement Source: Mexico Peace Index 2015 - visiónofhumanity.org. 25 Peace/Security Index by Mexican State AGUASCALIENTES QUERÉTARO COAHUILA NUEVO LEÓN GUANAJUATO JALISCO CHIHUAHUA TAMAULIPAS BAJA CALIFORNIA NORTE CAMPECHE TLAXCALA DURANGO GUERRERO QUINTANA ROO BAJA CALIFORNIA SUR COLIMA MEXICO CITY NAYARIT SINALOA TABASCO ZACATECAS PUEBLA SAN LUIS POTOSÍ SONORA MEXICO STATE CHIAPAS MICHOACÁN YUCATÁN HIDALGO MORELOS OAXACA VERACRUZ Most peaceful Most dangerous
Mexico’sstrengthsareamong theworld’smostextensive Ournationisweakwhenitcomesto povertyrates,competitiveness,social justiceandinstitutionalquality Thecountry'sfuturedependson citizenparticipationtostrengthenrule oflaw,eliminatecorruption,improveeducationand driveentrepreneurship 26 IN SHORT, Manyarebettingonthe country-togreatsuccess
Your ideas and comments are welcome at research@sws.ms This presentation seeks to enhance understanding of today’s Mexico and help generate ideas for it improvement www.ignia.mxwww.sws.mswww.risecapital.com

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Mexico

  • 1.
    Mexico May 2016 A Nationof Contrast and Opportunity Key Facts for Understanding the Country and Discussing its Future
  • 2.
    STABLE ECONOMY CONSUMPTION CAPACITY MIDDLE CLASS PROXIMITY TOUSA INFLATION HAPPINESS SKILLED WORKFORCE ARCHEOLOGY TOURISM GEOPOLITICAL POSITION INSECURITY POLITICS DRUGS POVERTY TECHNOLOGY USE LACK OF GROWTH LACK OF COMPETITIVENESS VIOLENCE INFRASTRUCTURE CORRUPTION EDUCATION QUALITY RULE OF LAW FINANCIAL INCLUSIONCULTURE Productivity NAFTA ENTREPRENEURSHIP EXPORTS INTERNATIONAL RESERVES NATURE GASTRONOMY CONNECTIVITY MEXICO’S STRENGTHS and room for improvement 1 12 15 12 12 1213 17 18 16 16 22 6 3 25 22 25 5 23 24 10 7 8 7 1717 17 9 17
  • 3.
    World Estimated GDP,2050(2) (Trillions of dollars) Countries with Largest GDP in 2014(1) (Trillions of dollars) RankCountry $USD USA China Japan Germany UK France Brazil Italy Mexico 1 2 3 4 5 6 7 8 #15 17.4 10.4 4.6 3.9 2.9 2.8 2.3 2.1 1.3 1Source: (1) IMCO 2013, World Bank 2014. (2) ProMéxico with information from Bloomberg and The Economist. MEXICO IS THE WORLD’S 15 LARGEST ECONOMY it is estimated it could become #8 by 2050 #8 China USA India Indonesia Germany Brazil Mexico UK France Japan 105.9 70.9 63.8 15.4 11.4 11.3 10.3 9.8 9.7 9.8 TH
  • 4.
    20072005 2009 20112013 2015 MEXICO’S COMPETITIVE POSITION HAS NOT IMPROVED SINCE 2005 largely due to low productivity and lack of rule of law International Competitiveness Index (1) (2015) Competitiveness Index by Specific Indicator (2) 2Source: (1) Índice de Competitividad Internacional 2015, IMCO. (2) World Competitiveness Index 2015-2016 from the World Economic Forum. 32 3736 36 36 IMCO 58 58 52 61 55 WEF57 Market size Business sophistication Technological advance Financial market development Labor market efficiency Innovation Institutions Infrastructure Macroeconomic environment Health and primary education Advanced education and training Property market efficiency 3.3 4.9 5.7 4.0 4.23.84.2 3.8 5.7 3.4 59 50 73 46 114 82 11 109 59 56 71 86 4.2 4.2 Ranking Score
  • 5.
    MANY STATES INMEXICO ENJOY COMPETITIVENESS AND GROWTH but performance levels are unequal by state given different business environments, poverty levels, security and regulatory frameworks 3Source: (1) México cómo Vamos, 2015. (2) Secretaría de Hacienda y Crédito Público, 2015. Competitiveness Index by State (2014) (1) AVERAGE Economic Growth by State(2) (Percentage growth of GDP, 2014) (2) States with growth below the national level States with higher-than-national, and higher-than-2013 growth levels States with higher-than-national, but lower-than-2013 growth levels AGS QRO COAH NL GTO JAL CHIH TAMS BC CAMP TLAX DGO GRO QROO BCS COL CDMX NAY SIN TAB ZAC PUE SLP SON MEX CHIS MICH YUC HGO MOR OAX VER 95 90 75 75 70 70 65 65 60 60 55 50 50 50 45 45 45 40 40 40 40 35 35 30 25 20 20 20 10 10 5 5 Mexico City -1.6% 1.6% -1.6% 0.3% 0%1.3% -1.6% 1.6%1% 9.8% 6.3% 4.9%6.2% 1.2% -0.5% 0.7% 2.5% 2% 1.8% 5.5% 4.4% 2.3% 8.8% 5% 6.3% 1.6% 5.7% 0.1% 2.7% -5.2% 1% 1.4% BC CHIH DGO BCS SIN SON AGS COAH NL JAL TAMS NAY ZAC SLP CAMP GRO MÉX HGO QROO TAB PUE CHIS YUC OAX VER TLA COL MOR QROGTO MICH
  • 6.
    AGS QRO COAH NL GTO JAL CHIH TAMS BC CAMP TLA DGO GRO QROO BCS COL NAY SIN TAB ZAC PUE SLP SON MÉX CHIS MICH YUC HGO MOR OAX VER CDMX STATE ECONOMIC COMPLEXITYIS VERY IRREGULAR some states are comparable to Uganda (Chiapas) and others to Hong Kong (Nuevo León) Source: The Atlas of Economic Complexity and the Mexican Atlas of Economic Complexity, Harvard 2014. 4 Economic Complexity Index by State (2014) Economic Complexity Index (International comparative, 2014) From 25 to 50 From 0 to 25 From 50 to 75 From 75 to 100 Higer Complexity Italy Hong Kong Uganda Angola Chiapas Nuevo León Baja California Norte Japan1.0 0.8 0.6 0.4 0.2 0.0 Guanajuato Panama
  • 7.
    THERE IS POTENTIALTO BETTER POSITION MEXICAN CITIES only two Mexican cities are ranked in the regional top 5 Source: americaeconomia.com, 2015. 5 Best Five Cities, by Indicator (according to the Urban Competitiveness Index) (2015) Brand power 100.0 Environmental sustainability Human capital and knowledge economy Infrastructure & connectivity Executive services Corporate services Miami 100.0 Miami 100.0 Santiago 94.5 San José 100.0 Miami 100.0 Miami 97.2 Buenos Aires 73.3 São Paulo 97.3 São Paulo 93.2 Barranquilla 63.1 São Paulo 76.9 Mexico City 96.1 São Paulo 63.6 Mexico City 97.1 Buenos Aires 93.0 Cali 62.8 Mexico City 74.1 Bogotá 94.4 Santiago 53.7 Bogotá 89.2 Miami 93.0 Cartagena 61.9 Bogotá 74.1 Cali 94.4 Bogotá 53.2 Panama City 87.7 Mexico City 92.5 Panama City 59.1 Panama City 72.5 Monterrey Economic framework & dynamism Political & social framework 100.0 Santiago 100.0 Miami 99.9 Miami 89.5 Santiago 99.5 Valparaíso - V.del Mar 82.8 Mexico City 98.5 Concepción-Talcahuano 80.9 Panama City 95.2 Montevideo 76.7 São Paulo
  • 8.
    MEXICO IS THE11 MOST POPULATED COUNTRY but 53% of 120 million Mexicans live beneath the poverty line Social Deprivation Indicators in Mexico (Percentage of total population in 2014) (1) Per-Capita Income Distribution by Decile in Mexico (In thousands of pesos, monthly average, INEGI 2014) (2) (3) 6Source: (1) Coneval, 2015. (2) INEGI. Encuesta Nacional de Ingresos y Gastos de los Hogares, ENIGH 2014. Basic tabulations 2015. (3) Data from SAT, 2016. 50% of the Mexican population has a monthly income below 2 thousand pesos 50% of the Mexican population has a monthly income below 2 thousand pesos Forbes’ Top Five Mexican Businessmen hold 9% of GDP without social security 59% without access to health services 21% without basic utilities at home 18% without access to quality housing 12%19% subject to insufficient education without access to nutrition 23% II I $0.6 $1.0 $1.3 $1.6 $2.0 $2.4 $2.9 $3.7 $5.3 $13.7 III IV VV I VII VIII IX X TH See more here...
  • 9.
    Mexico Population (% ofdistribution by age, 2000 vs. 2030) (1) Working Population (% change, 2010 vs. 2035) (2) Working Population MEXICO IS A YOUNG COUNTRY WITH A GROWING WORKING POPULATION generating production sustainability and consumption within the country Source: (1) INEGI, Censo de Población y Vivienda 2010, Conapo, Proyeciones de la población en México 2005-2010. (2) UN Population Division 2011, Economist Intelligence Unit. 7 -40% 40%20%-20% 0%10% 10%8% 8%6% 6%4% 4%2% 2% 85 or more Ages 80 to 84 75 to 79 70 to 74 65 to 69 60 to 64 55 to 59 50 to 54 45 to 49 40 to 44 35 to 39 30 to 34 25 to 29 20 to 24 15 to 19 10 to 14 5 to 9 0 to 4 00 India Mexico Brazil USA Spain China Japan UK 36.5% 14.3% 26.4% 8.7% 3.7% -2.2% -6.3% -19.0% 2000 2030 World Happiness Index, see more here...
  • 10.
    8 Consumer Spending Share,Emerging Economies (Percentage of GDP, 2015) (2) THE MIDDLE CLASS HAS REGISTERED SIGNIFICANT GAINS SINCE 2011 in addition to strong purchasing power Source: (1)PEWResearchCenter,2011.(2)ProMéxicowithinformationfromtheBrazilianInstituteofGeographyandStatistics.InstitutoNacionaldeEstadisticaGeográfiaeInformatica.CentralStatisticalOrganization,India.BadanPusaatStatistic.ChinaNationalBureuofStadisticsHarverAnalytics. LATAM Middle-Class Growth (As a percentage of total population, 2012) (1) Ecuador Colombia Bolivia Peru Argentina Mexico Brazil Paraguay Venezuela Chile Uruguay 2001 2011 8 11 21 13 19 14 25 14 32 17 26 18 28 20 27 20 30 25 34 30 33 21 IndiaChina Colombia Brazil MexicoIndonesia 36.5% 56.6% 59.3% 61.2% 62.5% 67.3%
  • 11.
    Student population 9Source: (1)Índice de Competitividad Internacional 2015, IMCO. (2) Prueba PISA. PISA Test Ranking (2014) (2) RANKING 1 2 3 4 5 36 53 SHANGHAI SINGAPORE HONG KONG TAIPEI SOUTH KOREA OCDE AVERAGE USA MEXICO 613 573 561 560 554 494 481 413 REGION SCORE THERE ARE 36 MILLION STUDENTS IN MEXICO however, only 2% graduate from college and according to PISA, Mexico is ranked #53 in global education quality 100 99.4Primary school 14.6M Middle school 6.3M 42.9 27.4 2.2 High school 4.0M 3.0MUniversity Student Attrition Rates by Grade (2013-2014. Base 100)(1)
  • 12.
    10 MEXICO IS THE8 LEADING COUNTRY AT PRODUCING ENGINEERS and is ranked 16th by number of worldwide-ranked universities Graduating Engineers, by Country (Thousands, 2015) (1) Ranked Universities by Country (2015)(2) Source: (1) World Economic Forum 2015/UNESCO Institute for Statistics. (2) Social Progress Index, 2015. #16Mexico 181 74 46 44 44 38 36 33 26 24 22 21 19 16 14 13 13 USA UK China Japan France Germany Italy Austria Canada SouthKorea Brazil Russia Spain Argentina India Netherlands Total engineersPer-Capita 3.2 3.0 3.0 2.9 1.6 1.3 1.1 0.9 0.7 0.6 Russia USA Iran Japan Vietnam Indonesia Ukraine #8 Mexico France South Korea 454 238 234 168 100 148 140 130 114 105 TH
  • 13.
    11 IT Professionals SupplyEvolution (Number of IT professionals, 2002-2014) THE SUPPLY OF INFORMATION TECHNOLOGY PROFESSIONALS IS GOOD 6 out of 10 certified PSP* developers are Mexican Source: ProMéxico with information from Carnegie Mellon University 2015 *Personal Software Process. 889 693 507 371 IT professionals Software developers 578 436 347 257 2002 2006 2010 2014
  • 14.
    MEXICO ENJOYS ANENVIABLE GEOPOLITICAL AND ECONOMIC POSITION natural resources, strategic location plus solid economic and business climate 12Source: Social Progress Index, eia.gov, Pemex, Análisis SWS / Ignia, 2016. Free trade agreements Commercial infrastructure Solid resources 13.4Bnbarrelsofoil,ranked#17worldwide $177BnUSD ininternationalresources 117ports,16.7Kkmrailroad, 378.9Kkmhighway, 58internationalairports 12with49countries NAFTAisworth$20.5TrUSD,26%GlobalGDP GDP$1.26BnUSD withaworkingpopulationof47M Spending power ExportsurpluswithUSA worthover$100BnUSD 28xgrowthoverpast20years Exporting power Next door to the world’s #1 economy: USA GDP:$19TrUSD/320Minhabitants 460Mbordercrossingsyearly
  • 15.
    13 MEXICO HAS BECOMEAN IMPORTANT EXPORTER and a strong global competitor in costs primarily due to its productivity and exchange rate USA Imports Participation (selected countries, % of total) (1) Cost competitiveness Index vs. Top 25 Countries (2) Labor Cost Mexico vs. China Mainvariables:exchangerate, costoftransportandproductivity(USD/hour) (1) Country 2014 5.718.1 19.93.1 14.818.4 1990 12.56.1 Top 25 Average 2004-2014 +75 +98 +27 +7 +71 Cost of Electricity Cost of Natural Gas Productivity Currency Wages Mexico 2004-2014 +55 -37 +53 -11 +67 Source: (1) Average Cost; Economist Intelligence Unit, US Department of Commerce. (2) Weighted average cost for all industries, U.S. Economic Census, U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, International Labour Organization, Euromonitor, BCG analysis. 20141990 4.20.6 3.31.6
  • 16.
    Automotive Plants inMexico #7Producerof lightvehicles 6% of GDP SOME INDUSTRIES ARE TAKING ADVANTAGE OF MEXICO’S BENEFITS automotivemanufacturingexceedsremittances,tourismandoilproduction.Between1993-2014automotiveproductionhasincreasedfrom1.0Mto3.3M Source: Banxico,2015. 14 #6Producerof heavyvehicles ofcarsintheUSA originatefromMexico19%
  • 17.
    15 MEXICO HAS BECOMEA RECOGNIZED MANUFACTURED GOODS EXPORTER top 2013 Mexico exports (Billions USD) Source: ProMéxico con información de Global Trade Atlas, 2014. Transport vehicles Computers and components TV receivers $17.6$ 17.4 $16.7 Light vehicles Auto-parts $32.4$ 20.5 Phones and accessories $18.0 Seating Medical and surgical equipment Refrigerators and cooling equipment $5.3 $5.1 $4.4 Electric conductors Solid gold $10.2$ 5.8 Tractors $5.6 See more here...
  • 18.
    MEXICANS ARE MORECONNECTED THAN EVER but ranks 75 on the digitization index according to the WEF(1) 16Source: (1) World Economic Forum 2015, IAB 2016, Competitive Intelligence Unit 2016. 18M Facebookusers 5 worldwide52M vs.Chile34%andUSA60% Ranked 75 onthe digitization index(1) homeshavePay TV Smartphones Internet users 68M 8% of small businesses haveawebsite th th 63M vs.5Min2011
  • 19.
    MEXICO RANKS 6IN WORLD HERITAGE SITES butinsecurityandlackofinfrastructureputit44th in tourism competitivity 17Source: World Tourism Organization. 2014, UNESCO 2015. Global Tourism Competitivity Index (Ranking of 140 countries, 2014) by number of tourists #10 #22 by income from foreign tourists Culture 19 6 2 31 4 14 49 12 7 29 1 2 15 13 23 3 5 22 30 8 57 10 16 33 8 21 121 CountryRanking 1 2 3 4 5 6 7 8 44 Nature Security 5 23 23 5 23 23 5 23 61 Infrastructure 25 5 31 3 8 10 4 16 6 World Heritage Sites TH
  • 20.
    MEXICO’S GOVERNMENTAL FINANCESARE SOLID yet the nation lacks adequate private-sector and venture-capital financing 18Source: SHCP, Banxico 2015, Banco Mundial 2016. 12% 10% 8% 6% 4% 2% 2002 2004 2006 2008 2010 2012 2014 2015 Domestic Credit Allocated to the Private Sector (% of GDP) Annual Inflation (%) Government Debt (% of GDP) Mexico Latin America and the Caribbean 60% 50% 40% 30% 2000 2002 2004 2006 2008 2010 2012 2014 Venture Capital Investment as a Percentage of GDP, 2014 ~20x 0.01% 0.33% ~30x 0.005% India Developed countries China LATAM MEXICO 0.15% 0.25% 50% 20% 30% 40% 10% 0 2002 2004 2006 2008 2010 2012 2014
  • 21.
    FISCAL AND MONETARYPRUDENCE IS ONE OF MEXICO'S STRENGTHS despite low economic growth rates and fiscal deficit growth Source: CIA World Factbook, SHCP 2015. 19 -3% -1% 1% 3% 5% 7% 9% Publicdebt(%ofGDP) Fiscal deficit (& of GDP) Brazil Chile Germany Australia Italy Canada France Portugal Spain UK Ireland Greece Maastricht Criterion (≤60% of GDP) ) Maastricht Criterion (≤3% PIB) Debt and Fiscal Deficit in Selected Countries vs. Maastricht Criterion USA (4.1%) 2015 MexicoMexico 100% 140% 180% 20% 60%
  • 22.
    9.9 5.0 4.8 3.7 2.9 2.4 2.4 China Chile* Emerging Economies* Colombia* Spain Mexico Brazil* LOWECONOMIC GROWTH PERSISTS mainly due to slow progress in productivity Source: * 1983-2014 (1) IMF (2) Kehoe y Meza (2011), “Catch-up Growth Followed by Stagnation: Mexico, 1950–2010,” Latin American Journal of Economics, 48. 20 Economic Growth Comparative (Selected countries, 1983-2015*) (1) Total Productivity Factor in Mexico (1950-2010) (2) 110 150 190 230 250 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 Index,1950=100 Annual Average Drop 1980-2010: 0.7%
  • 23.
    21 MEXICO HAS ACHIEVEDIMPORTANT LEGISLATIVE REFORMS which according to preliminary estimates will have a positive impact on GDP Source: ProMéxico with information from SHCP 2016. Estimate of Structural Reforms Impact on GDP Growth (GDP percentage growth, 2013-2018) 4.4 - 4.9% +0.3% +1% +0.5%+0.1% 2.5 - 3% GDP growth rate (2013) Estimated growth rate (2018) Labor reform Energy reform Fiscal reform Telecommunications reform
  • 24.
    LAW ENFORCEMENT INNEFICIENCYIS ALARMING the outcome of bias, few cases ever reaching court, information opacity and corruption 22Source: ENVIPE (2013), México Unido Contra la Delicuencia (2013), Montes, Pesos sin contrapesos: corrupción y gobiernos locales, Índice de Competitividad Internacional 2015, (IMCO). In the Last 16 Years, 272 Corruption Scandals Involving Governors Have Been Reported by the Press Sentencing Effectiveness in Corruption Cases Involving Accused Governors in Mexico vs. USA (2000-2015) Accused governors Investigated cases Detained governors Mexico 41 16/41 4/41 USA 9 9/9 9/9 Law Enforcement Efficiency (Percentage of commited crimes, 2015) 1.7M 5% reported crimes 33M 94.7% unreported crimes 0.3% sentenced criminals PunishedUnpunished 251 cases 21 cases 91.7% 8.3%
  • 25.
    Perception of CorruptionAssociated With Law Enforcement Agencies (Affirmative responses, 2015*) Making Shady Deals: a Way of Life 65% % 68% % Judicial police Municipal police 77Transit police 64%Prosecution authorities 65%Judges Note: Affirmative public-survey response to the question “Do you consider the following Institutions corrupt?” 23Source: Encuesta Nacional de Victimización y Percepción sobre Seguridad Pública 2014, INEGI. JUDICIAL INSTITUTION PRESTIGE HAS BEEN TARNISHED leading to generalized pessimism and demoralization “Hey, if you scratch my back...” “Help me help you” “One hand washes the other” “I leave it up to your judgment” “So, how do we get on the same page on this?” “You don't have to feed me, just get me a spot at the table” See more here...
  • 26.
    from Colombia from Asia fromColombia, Venezuela and Brazil Sinaloa Sinaloa Cartel Beltrán Leyva The Mazatlecos El Chapo Trini/El Cadete Jalisco Cartel New Generation Knights Templar The Michoacan Family Guerreros Unidos Los Rojos Independent Cartel of Acapulco The Viagras The Zetas Gulf Cartel All drug traffic Marijuana and methamphetamines Cocaine Production areas Methamphetamine precursors Tierra Caliente Tamaulipas Mérida Cancún Acapulco Mazatlán Culiacán Matamoros Boca del Río Torreón Júarez Mexicali Nogales Tijuana Obregón Hermosillo Manzanillo Lázaro Cárdenas Nuevo Laredo Reynosa Territorial organization of cartels and illegal drug flow in Mexico Annual drug production in Mexico* 15,800 cubic tons MARIJUANA HEROIN 18.0 cubic tons CD MXCD MX MonterreyMonterrey GuadalajaraGuadalajara DRUG TRAFFICKING HAS AFFECTED MEXICO PROFOUNDLY because of proximity to the US, a roughly $200Bn USD per-year consumer market 24Source: INE, PNUD, 2013. World Drug Report, 2013. *Ilegal drugs in selected products. Tampico
  • 27.
    AGU QTO COA NLE GUA JAL CHH TAM BCN CAM TLA DUR GRO ROO BCS COL NAY SIN TAB ZAC PUE SLP SON MEX CDMX CHP MIC YUC HID MOR OAX VER STRONG INSECURITY PERSISTSIN VARIOUS STATES the outcome of drug trafficking plus inadequate rule-of-law enforcement Source: Mexico Peace Index 2015 - visiónofhumanity.org. 25 Peace/Security Index by Mexican State AGUASCALIENTES QUERÉTARO COAHUILA NUEVO LEÓN GUANAJUATO JALISCO CHIHUAHUA TAMAULIPAS BAJA CALIFORNIA NORTE CAMPECHE TLAXCALA DURANGO GUERRERO QUINTANA ROO BAJA CALIFORNIA SUR COLIMA MEXICO CITY NAYARIT SINALOA TABASCO ZACATECAS PUEBLA SAN LUIS POTOSÍ SONORA MEXICO STATE CHIAPAS MICHOACÁN YUCATÁN HIDALGO MORELOS OAXACA VERACRUZ Most peaceful Most dangerous
  • 28.
  • 29.
    Your ideas andcomments are welcome at research@sws.ms This presentation seeks to enhance understanding of today’s Mexico and help generate ideas for it improvement www.ignia.mxwww.sws.mswww.risecapital.com