Mexico's Top Sourcing Opportunities in Key Export Categories

Dragon Sourcing
Your Tailored Approach to Emerging Markets
www.dragonsourcing.com
Study on Sourcing Opportunities in Mexico
Dec, 2017

www.dragonsourcing.com© 2017 Dragon Sourcing. All rights reserved. 2
Table of Contents
▪ Executive Summary
▪ Mexico – An Overview
▪ Mexico – Country Overview
▪ Trade Statistics
▪ Export & Import Trade Statistics
▪ Top Export Categories & Duty Rates
▪ Vehicles, other than Railway
▪ Electrical Equipment
▪ Machinery
▪ Mineral Fuel
▪ Optical Products, Watches & Medical instruments
▪ Furniture and Furnishings
▪ Plastics and Plastic Parts
▪ Precious Metals
▪ Vegetables
▪ Fruits
▪ Trade Agreements

Executive Summary
© 2017 Dragon Sourcing. All rights reserved. 3
Category HS Code
2016
Export
Value in
USD
Billion
Annual
Growth of
Exports
Value
(2012-
2016)
Mexico’s
share of
Global
Exports
(2016)
Category‘s
share of
Total Mexico
Exports
(2016)
Top Products Top Export Destinations
Import Duty
into US
Import Duty
into EU
Vehicles
other than
railway
87 88 6% 7% 24%
Cars
Parts and accessories for tractors, motor vehicle
Vehicles for goods transport
USA, Canada, Germany Free Free
Electrical
Equipment
85 76 1% 3% 20%
Telephone sets
Monitors and projectors
Insulated wires and cables
USA, Canada, China Free Free
Machinery 84 62 4% 3% 16%
Automatic data-processing machines
Refrigerators, freezers
Spark-ignition reciprocating or rotary internal
combustion piston engine
USA, Canada, Germany Free Free
Mineral Fuel 27 18 -25% 1% 5%
Crude oil
Petroleum oil
Electrical energy
USA, Spain, India Free Free
Optical
Products,
watches &
medical
instruments
90 16 9% 3% 4%
Medical Instruments
Regulating or controlling instruments
Meters
USA, Netherlands, Ireland Free Free
Furniture and
Furnishings
94 10 9% 4% 3%
Seats
Lamps and lighting fittings
Furniture parts
USA, Canada, Luxembourg Free Free
Plastics and
plastic parts
39 8 2% 2% 2%
Packaging products
Other Plastic Articles
Plates, sheets, film, foil and strip
USA, Belgium, China Free Free
Precious
metals
71 7 -14% 1% 2%
Gold
Silver
Jewelry
USA, UK, Switzerland Free Free
Vegetables 07 7 7% 7% 2%
Tomatoes
Cucumbers and gherkins
USA, Canada, Guatemala Free Free
Fruits 08 6 16% 5% 1%
Dates, figs, pineapples, avocados, guavas,
mangoes and mangosteens
Strawberries, raspberries, blackberries, back, white
or red currants, gooseberries
Nuts (excluding coconuts, Brazil nuts & cashew
nuts)
USA, Canada, Japan Free Free

MEXICO – AN OVERVIEW

Mexico – Country Overview
Source: World Economic Forum, data.worldbank.org, promexico.mx
Country Facts (2016)
Population 127.5 million
GDP USD 1.046 trillion
Annual GDP Growth 2.3 %
Country Indicators
Score/
Value
Global Competitiveness Index
Score
4.4
Macroeconomic environment
Score
5.2
Labor Market Efficiency Score 3.8
Domestic market size index 5.7
Business Sophistication Score 4.3
Country Indicators
Mexico
Ranking
(out of
190)
Ease of Doing Business 49
Starting a Business 90
Dealing with Construction
Permits
87
Getting Electricity 92
Registering Property 99
Protecting Minority Investors 62
Paying Taxes 115
Trading across Borders 63
Enforcing Contracts 41
Resolving Insolvency 31
Note: Score reading: 1-7 (best)
▪ Political Outlook: Mexico’s political
outlook is faintly unstable due to pressing
challenges such as nationwide protests
against rising gas prices, the depreciation
of the peso, and handling the relationship
with the new U.S. administration.
▪ Economic Outlook: GDP growth is
expected to decelerate modestly to 2.1% in
2017 and 1.9% in 2018
▪ Investment Outlook: FDI inflow was about
26.73 billion USD in 2016. USA is the major
investor contributing about 44% of the total
investments into Mexico. About 48% of the
total investments is in the Manufacturing
sector, followed by Commerce at 7%,
Media and Telecom at 5%, Services at
15%, Mining at 6%, and Others 18%.

TRADE STATISTICS

Export & Import Trade Statistics
0.40
0.38 0.37
0.40 0.40 0.39
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
2014 2015 2016
Export and Import Statistics
(in USD Trillion)
Total Exports from Mexico Total Imports into Mexico
319
11 6 4 3
309
11 5 4 3
303
10 5 4 4
0
50
100
150
200
250
300
350
USA Canada China Germany Japan
Top Importing Markets for products exported by
Mexico (in USD Billion)
2014 2015 2016
▪ About 80% of the total exports from Mexico is to the US. Canada, China, Germany and Japan contributes to about 1% and 5% of Mexico’s
exports.
▪ There is lot of export potential for Motor Vehicles & Parts from Mexico. About USD 30 billion worth market for Motor Vehicles & Parts is
still untapped. Machinery market worth of USD 11 billion is available to explore.
Source: World Economic Forum, data.worldbank.org

Top Export Categories & Duty Rates
90
81
59
23
15
10
8
7
6
5
88
76
62
18
16
10
8
7
7
6
0 10 20 30 40 50 60 70 80 90 100
Vehicles other than railway
Electrical machinery, equipment and parts
Machinery
Mineral fuels and mineral oils
Optical Products, watches & medical instruments
Furniture and Furnishings
Plastics and plastic parts
Precious metals
Vegetables
Fruits
Top Export Categories from Mexico (Values in USD Billion)
2016 2015
Category (HS code)
Import Duty into the US
from Mexico
Import Duty into the
EU from Mexico
Vehicles other than Railway (HS 87 series) Free Free
Mineral fuels and mineral oils (HS 27 series) Free Free
Electrical machinery, equipment and parts (HS 85 series) Free Free
Electronic Equipment (HS 84 series) Free Free
Furniture and Furnishings (HS 94 series) Free Free
Source: International Trade Centre, US International Trade Commission, European Commission
Top 10 export categories contributes to about 80% of the total exports value from Mexico

Top Exported Products in this Category
▪ Motor cars and other motor vehicles principally designed for
the transport of persons
▪ Parts and accessories for tractors, motor vehicles for the
transport of ten or more persons, motor cars and other motor
vehicles
▪ Motor vehicles for the transport of goods
244, 18%
142, 10%
125, 9%
88, 7%
64, 5%
686, 51%
World Export of HS 87 series (Vehicles, other
than Railway) in USD billion in 2016
Germany Japan USA Mexico Canada Others
70
4 2 2 2
76
4 2 1 1
74
5 2 1 1
0
10
20
30
40
50
60
70
80
USA Canada Germany China Brazil
Top Importers of HS 87 series (Vehicles, other
than Railway) from Mexico in USD billion
2014 2015 2016
77
86
90 88
0
20
40
60
80
100
2013 2014 2015 2016
Export of HS 87 series (Vehicles, other than
Railway) from Mexico in USD billion
Vehicles, other than Railway (1/2)

▪ About 21 of the major vehicle
manufacturers in the world have
presence in 14 Mexican states. Mexico
ranks 7th in the production of vehicles
globally producing about 3.6 million
vehicles.
▪ Gross production value of automobile
and light-duty motor vehicle
manufacturing in Mexico peaked in
March 2017 at a worth of USD 5.35
billion
▪ In May 2017, the value amounted to USD
5 billion, up from USD 4.2 billion a month
earlier
▪ Recently, Ford has announced its plan to
manufacture a new electric vehicle in
Mexico
Vehicles, other than Railway (2/2)
Major Vehicles Production Zones in Mexico
Source: statista.com, promexico.mx, usatoday.com
Aguascalientes
Baja California
Chihuahua
Coahuila
Guanajuato
Jalisco
State of Mexico
Puebla
Queretaro
Nuevo León
San Luis Potosi
Sonora

▪ Telephone sets, incl. telephones for cellular networks or for
other wireless networks; other apparatus for the transmission
or reception of voice, images or other data
▪ Monitors and projectors
▪ Insulated wires and cables
70
2 0 1 1
72
2 0 1 1
67
2 1 1 1
0
10
20
30
40
50
60
70
80
USA Canada China France Colombia
Top Importers of HS 85 series (Electrical
Equipment) from Mexico in USD billion
2014 2015 2016
78 80 81
76
0
20
40
60
80
100
2013 2014 2015 2016
Export of HS 85 series (Electrical Equipment)
from Mexico in USD billion
937, 41%
167, 7%138, 6%
134, 6%
76, 3%
856, 37%
World Export of HS 85 series (Electrical
Equipment) in USD billion in 2016
China USA Germany South Korea Mexico Others
Electrical Equipment (1/2)

Electrical Equipment (2/2)
▪ Gross production value of small
household appliances manufacturing in
Mexico peaked to USD 20 million in
March, 2017
▪ Mexico is the leading exporter of the
electronics industry in Latin America
▪ The cost of electronics assembly in
Mexico is 11.9% lower than in the United
States. In addition, Mexico has
significantly lower operating costs for the
manufacture of electronics equipment
and components compared to nine other
leading countries in the industry.
▪ Mexico’s costs are 13.8% lower than the
United States for the manufacture of
telecommunications equipment. Mexico
also stands out as the country with the
lowest operating costs in the
manufacture of telecommunications
equipment compared to nine other
leading countries in the industry.
Major Industrial Zones in Mexico
Source: statista.com, promexico.mx
State of Mexico
Nuevo León
Baja California
Sonora
Chihuahua
Jalisco

▪ Automatic data-processing machines
▪ Refrigerators, freezers and other refrigerating or freezing
equipment, electric or other; heat pumps
▪ Spark-ignition reciprocating or rotary internal combustion
piston engine
53
1 0 0 0
51
1 0 0 00 1 1 0 0
0
10
20
30
40
50
60
USA Canada Germany China France
Top Importers of HS 84 series (Machinery) from
Mexico in USD billion
2014 2015 2016
54
60 59
62
0
20
40
60
80
2013 2014 2015 2016
Export of HS 84 series (Machinery) from Mexico
in USD billion
344, 18%
223, 12%
191, 10%
124, 7%
62, 3%
938, 50%
World Export of HS 84 series (Machinery) in USD
billion in 2016
China Germany USA Japan Mexico Others
Machinery (1/2)

Machinery (2/2)
▪ Mexico is one of the largest electronics
production hubs other than Asia Pacific.
Electronics industry in Mexico grew at a
CAGR of 4% between 2010 and 2015.
▪ Over 2010-2015, production of
computers and office machinery in
Mexico jumped by 27%, communications
equipment – by 17%, followed by a 29%
surge in electronic components
fabrication.
▪ A significant share of product output,
ranging from 4% in electronic
components to 79% of communication
equipment, was exported
▪ Growth drivers: Increasing Foreign
Investments , Joint Ventures with local
manufacturers
Major Industrial Zones in Mexico
Source: euromonitor.com, statista.com, lexology.com
Veracruz
Chiapas
Guerrero
Michoacán

▪ Crude oil
▪ Petroleum oil
▪ Electrical energy
30
5
2
0 0
14
2 1 1 1
9
2 2 1 1
0
5
10
15
20
25
30
35
USA Spain India Japan South Korea
Top Importers of HS 27 series (Mineral Fuel) from
2014 2015 2016
49
42
23
18
0
20
40
60
2013 2014 2015 2016
Export of HS 27 series (Mineral Fuel) from
164, 11%
135, 9%
94, 7%
62, 4%
18, 1%
1,015, 68%
World Export of HS 27 series (Mineral Fuel) in
USD billion in 2016
Saudi Arabia Russia USA Canada Mexico Others
Mineral Fuel (1/2)

Mineral Fuel (2/2)
▪ Mexico is one of the largest oil producers
in the world (2.1 million barrels per day in
2016), and the third-largest in the
Americas after the United States and
Canada
▪ Oil is a crucial component of Mexico's
economy and earnings from the oil
industry accounted for about 32% of total
government revenues in 2016.
▪ Mexico is likely to keep its production
target at 1.944 million barrels per day in
2017.
▪ PEMEX is the national oil company (now
termed a "state productive enterprise")
with a 75-year long monopoly over the oil
and gas industry
▪ Mexico is likely to continue as one of the
largest crude producers due to more
foreign investment and expertise in the
oil sector
Major Mineral Fuel Zones in Mexico
Source: export.gov, oilprice.com, forbes.com, mxoil.com
Veracruz
Tamaulipas
Coahuila

▪ Medical Instruments (medical, surgical, dental or veterinary
sciences)
▪ Regulating or controlling instruments and apparatus
▪ Revolution counters, production counters, taximeters,
milometers, pedometers
13
0.1 0.2 0.2 0.1
14
0.2 0.2 0.2 0.1
15
0.2 0.2 0.1 0.1
0
2
4
6
8
10
12
14
16
USA Netherlands Ireland Canada France
Top Importers of HS 90 series (Optical Products,
Watches & Medical Instruments) from Mexico in
USD billion
2014 2015 2016
13
14
15
16
0
20
2013 2014 2015 2016
Export of HS 90 series (Optical Products,
Watches & Medical Instruments) from Mexico in
USD billion
82, 15%
67, 13%
65, 12%
36, 7%16, 3%
268, 50%
World Export of HS 90 series (Optical Products,
Watches & Medical Instruments) in USD billion in
2016
USA China Germany Japan Mexico Others
Optical Products, Watches & Medical instruments (1/2)

Optical Products, Watches & Medical instruments (2/2)
▪ Total production of medical device
manufacturing in Mexico was about USD
8.6 billion in 2011 and is expected to
reach USD 15 billion by 2020, according
to Mexico’s National Institute of Statistics
and Geography (INEGI)
▪ Mexico’s optical sensors market is
expected to grow to USD 0.64 billion by
2018 at a CAGR of 7.89% over the
period 2016-2021.
▪ Optical sensors business is witnessing
innovative progression, and market
players have come up with exceptionally
power-efficient optical sensors.
Major Optical Products, Watches and Medical Device Production Zones in Mexico
Baja California
Chihuahua
Source: tecma.com, offshoregroup.com, todaysmedicaldevelopments.com, mordorintelligence.com

▪ Seats, whether or not convertible into beds
▪ Lamps and lighting fittings
▪ Furniture parts
9.0
0.3 0.1 0.1 0.04
9.3
0.3 0.1 0.1 0.03
9.7
0.3 0.1 0.05 0.03
0.0
2.0
4.0
6.0
8.0
10.0
12.0
USA Canada Luxembourg Japan Brazil
Top Importers of HS 94 series (Furniture and
Furnishings) from Mexico in USD billion
2014 2015 2016
8
10 10 10
0
10
20
2013 2014 2015 2016
Export of HS 94 series (Furniture and
Furnishings) from Mexico in USD billion
88, 38%
17, 7%
13, 6%12, 5%
10, 4%
94, 40%
World Export of HS 94 series (Furniture and
Furnishings) in USD billion in 2016
China Germany Italy Poland Mexico Others
Furniture and Furnishings (1/2)

Furniture and Furnishings (2/2)
▪ Total furniture production is about USD
16.5 billion in countries of Latin America
and the Caribbean. Brazil and Mexico
alone contributes to about 70% of the
production in that region.
▪ Mexico is the 2nd largest producer and
2nd largest consumer of furniture in the
Latin American and Caribbean area
accounting about 18% of the total
production in the region
▪ Revenue in the "Furniture & Homeware"
segment in Mexico is about USD 708
million in 2017. It is expected to reach
USD 1,484 million in 2022 and resulting
in a CAGR of 16%.
Major Furniture Production Zones in Mexico
Source: statista.com, furnitureandfurnishing.com, worldfurnitureonline.com
Jalisco
Zacatecas
State of Mexico

▪ Articles for the conveyance or packaging of goods, of plastics;
stoppers, lids, caps and other closures, of plastics
▪ Other plastic articles
▪ Plates, sheets, film, foil and strip, of non-cellular plastics, not
reinforced, laminated, supported or similarly combined with
other materials, without backing, unworked or merely surface-
worked or merely cut into squares or rectangles
6
0.2 0.1 0.3 0.1
6
0.2 0.1 0.2 0.1
6
0.2 0.2 0.2 0.1
0
2
4
6
8
USA Belgium China Colombia Guatemala
Top Importers of HS 39 series (Plastics & Plastic
Parts) from Mexico in USD billion
2014 2015 2016
8
9
8 8
0
10
2013 2014 2015 2016
Export of HS 39 series (Plastics & Plastic Parts)
62, 11%
62, 11%
59, 11%
28, 5%
8, 2%
326, 60%
World Export of HS 39 series (Plastics & Plastic
Parts) in USD billion in 2016
China Germany USA South Korea Mexico Others
Plastics and Plastic Parts (1/2)

Plastics and Plastic Parts (2/2)
▪ Total Local Production of Plastics and
Plastic Articles:
▪ 2014: 17.6 billion USD
▪ Plastics industry witnessed a growth of
5.7% in 2016
▪ Guanajuato is the major producer of
plastics and plastic products in Mexico
▪ Though the current state of the industry
is stable, manufacturers are expecting
higher growth rates in the near future as
Mexico continues to negotiate additional
free trade agreements with key
economies.
Major Plastics Production Zones in Mexico
Guanajuato
Source: plasticnews.com, export.gov
Jalisco
Nuevo León
State of Mexico
Puebla
Queretaro
San Luis Potosi

▪ Gold
▪ Silver
▪ Jewelry
6
0.3
0.8
0.0 0.3
5
0.3
0.9
0.0 0.04
6
1.3
0.3 0.1
0.04
0
2
4
6
8
USA UK Switzerland India Canada
Top Importers of HS 71 series (Precious Metals)
2014 2015 2016
10
8
7 7
0
5
10
15
2013 2014 2015 2016
Export of HS 71 series (Precious Metals) from
99, 15%
106, 16%
57, 9%
42, 7%7, 1%
341, 52%
World Export of HS 71 series (Precious Metals) in
USD billion in 2016
Switzerland China USA India Mexico Others
Precious Metals (1/2)

Precious Metals (2/2)
▪ Mexico ranks 8th in global gold
production
▪ Mexico witnessed five times increase in
growth is gold production from 2001
reaching 14.4%
▪ In 2015, the gold production was about
4.3 million ounces.
▪ 3 states (Sonora, Zacatecas and
Chihuahua) contribute to about 70% of
the country’s gold production.
▪ Mexico contributes to about 20% of the
global silver production which is higher
than China and Peru.
Major Gold and Silver Production Zones in Mexico
Source: issuu.com/mexicobusinesspublishing
Sonora
Chihuahua
Durango
Zacatecas

▪ Other vegetables, fresh or chilled (excluding potatoes,
tomatoes, alliaceous vegetables, edible brassicas, lettuce
"Lactuca sativa" and chicory "Cichorium spp.", carrots, turnips,
salad beetroot, salsify, celeriac, radishes and similar edible
roots, cucumbers and gherkins, and leguminous vegetables)
▪ Tomatoes
▪ Cucumbers and gherkins
5
0.06 0.05 0.03 0.03
6
0.04 0.05 0.01 0.03
6
0.05
0.05 0.03 0.02
0
2
4
6
8
USA Canada Guatemala Algeria Spain
Top Importers of HS 07 series (Vegetables) from
2014 2015 2016
5 5
6
7
0
10
2013 2014 2015 2016
Export of HS 07 series (Vegetables) from Mexico
in USD billion
11, 15%
7, 10%
7, 10%
7, 9%
5, 7%
34, 49%
World Export of HS 07 series (Vegetables) in USD
billion in 2016
China Netherlands Mexico Spain Canada Others
Vegetables (1/2)

Vegetables (2/2)
▪ Sales volume of vegetables reached 6
million tons in 2016.
▪ Sales of vegetables is estimated to reach
a volume CAGR of 1% by 2021.
▪ Tomatoes and Maize are the major
vegetables produced in 2016
▪ Tomatoes, Maize and Onions constitutes
about 24%, 22% and 12% of sales
volume among other vegetables
produced.
▪ Yellow maize is commonly used to feed
livestock, white maize is mostly for
human consumption.
Major Vegetables Production Zones in Mexico
Source: euromonitor.com, digitalcommons.calpoly.edu
Sonora
Baja California
Baja California Sur
Sinaloa

▪ Dates, figs, pineapples, avocados, guavas, mangoes and
mangosteens
▪ Fresh strawberries, raspberries, blackberries, back, white or
red currants, gooseberries and other edible fruits (excluding
nuts, bananas, dates, figs, pineapples, avocados, guavas,
mangoes, mangosteens, papaws "papayas", citrus fruit,
grapes, melons, apples, pears, quinces, apricots, cherries,
peaches, plums and sloes)
▪ Other nuts, whether or not shelled or peeled (excluding
coconuts, Brazil nuts and cashew nuts)
3
0.14 0.14 0.03 0.02
4
0.18 0.14 0.04 0.03
5
0.22 0.19 0.08 0.06
0
2
4
6
8
USA Canada Japan Netherlands Vietnam
Top Importers of HS 08 series (Fruits) from
2014 2015 2016
3
4
5
6
0
10
2013 2014 2015 2016
Export of HS 08 series (Fruits) from Mexico in
USD billion
14, 13%
9, 8%
6, 6%
6, 5%
6, 5%
68, 63%
World Export of HS 08 series (Fruits) in USD
billion in 2016
USA Spain Chile Netherlands Mexico Others
Fruits (1/2)

Fruits (2/2)
▪ Mexico is the 5th largest producer of
Oranges in the world with an average
annual production volume of 4.2 million
tons
▪ Top categories (Mexican consumers’
favorite fruits) - overall volume sales in
2016:
▪ Oranges, tangerines and mandarins:
21%
▪ Banana: 17%
▪ Sales of fruits are estimated to reach
about 10.5 million tons by 2021 thus
attaining a volume CAGR of 1%.
▪ Population growth and increase in
awareness about the healthy eating
habits are the major drivers for the
growth in volume.
Major Fruits Production Zones in Mexico
Source: euromonitor.com, theyucatantimes.com
Veracruz
Tamaulipas
San Luis Potosi
Nuevo Leon
Puebla
Sonora
Tabasco
Yucatan
Oaxaca

TRADE AGREEMENTS

Trade Agreements
Agreements Region/ Countries Involved
Asia Israel – Mexico, Japan – Mexico
Europe EEFTA – Mexico, EU – Mexico
North America NAFTA (North American Free Trade Agreement)
Central America Mexico – Central America, Mexico – Panama
South America
Chile – Mexico, Colombia – Mexico, LAIA (Latin American Integration Association), Mexico –
Uruguay, Peru – Mexico, Pacific Alliance, Southern Common Market (MERCOSUR) - Mexico
Other Trade Agreements
Other Agreements
Global System of Trade Preferences among Developing Countries (GSTP)
Protocol on Trade Negotiations (PTN)
Source: World Trade Organization, promexico.mx, gob.mx
México has signed 32 Reciprocal Promotion and Protection of Investments Agreements with 33 countries, 12 free trade agreements
spanning 46 countries, 9 agreements of limited scope and economic complementation agreements within the framework of the Latin-
American Integration Association (ALADI) and it is a member of the Trans-Pacific Partnership Agreement (TPP)

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