# Presentation: 448464

## Sharing More than Just a Border: U.S. Commercial Opportunities in Mexico

- Karen L. Zens
- Minister Counselor for Commercial Affairs
- U.S. Embassy – Mexico

**May 4, 2006**
**Denver, Colorado**

**Notes:**
Good afternoon 
Welcome I arrived one year ago in Mexico City and have been extraordinarily impressed by size of the market and the wealth of opportunities available to U.S. companies 
I hope to share with you  some information about the Mexican market, as well as some tips on how we, the Commercial Service in Mexico , can help you capitalize on them.

## Mexico – Just What Your Real Estate Agent Told You...

**NAFTA!  Access to Goods/Services/Market in U.S.**
**Proximity to World’s Best Consumer Market.**
**Shared Culture:  Western, Hispanic.**
**Large installed base of manufacturing in various sectors.**
**Perception of stronger legal protections (China, Russia..)**
**Seen as politically stable.**
**Macroeconomic stability.**
**Location, Location, Location...**

## Mexico – A Snap Shot

- GDP per capita: $6,500
- Adj for Purchasing Power: $9,800
- 74 percent urban
- Under 20: 44 %
- Wealthy/Upper Middle: 23%
- Middle Class: 37%
- Poor: 40%

**Mexico – A Snap Shot**

**Notes:**
Poplulation growing at 1.2% per year; half the population under 25
Not one country: Very scewed income distribution:  modern, prosperous North; impoverished. marginalized south
35 –50 million in middle to upper middle classes – about the same size as Canadian population

## TOP U.S. TRADING PARTNERS in 2005

- Source: U.S. Bureau of Census

**Notes:**
Mexico is our second largest trading partner, second only to Canada, our other NAFTA partner.

In 2003, China did become the second largest source of U.S. imports, overtaking Mexico for the number two position behind Canada.  However, with regard to bilateral trade and destination for U.S. exports, Mexico still holds the second position.

## U.S. Exports to Mexico

**U.S. Exports to Mexico**

- Source: International Trade Administration, U.S. Department of Commerce.

**Notes:**
, exports to Mexico have recuperated well in the past 2 years, reaching nearly USD 120 billion in 2005.

## Foreign Direct Investment in Mexico

**Foreign Direct Investment in Mexico**

- Source: Secretariat of Economy, General Directorate of Foreign Investment.

**Notes:**
FDI into Mexico has increased dramatically over the years since the implementation of NAFTA.
U.S. firms are responsible for the lion’s share of this, over 64 percent.

## Foreign Direct Investment in Mexico by Country

**Foreign Direct Investment in Mexico by Country**

- Source: Mexico’s Secretariat of Economy, General Directorate of Foreign Investment.

**Notes:**
Here, you can see how U.S. Foreign Direct Investment in Mexico stacks up against that of the next 6 largest investors.

## Mexico – Outlook for 2006

- U.S. economy – we buy 80% of Mexico’s exports
- GDP growth – 3.5/4.0%   (3% in 2005)
- Inflation – 3.6% - 4.4%   (3.3% in 2005)
- Macroeconomic stability
- Remittances, oil and tourism
- Presidential elections in July 2006
- Congressional deadlock

**Notes:**
In 2005, Remittances to Mexico from the U.S. exceeded $20 billion (up from $3.6 billion in 1995).  Second largest source of foreign currency after oil exports (USD 28.3 billion in 2005) and greater than FDI ($18 billion) and tourism (USD 12 billion). 
Presidential elections this year-so far a very tight race but economic and political stability is expected regardless of the outcome.

## Mexico - A Large and Complex Market

- Tijuana

- Monterrey

- Guadalajara

- Mexico
- City

**Mexico - A Large and Complex Market**

**Notes:**
As Mexico is a large and complex market,  we maintain offices in 4 major cities throughout the country to assist our U.S. and Mexican clients.
MEXICO CITY - 20 million people; financial center; government center; centrally located in a major industrial area including Toluca, Puebla, and Queretaro.
MONTERREY -  Home to 10 largest Mexican conglomerates; principal industrial corridor connecting US with Mexico’s interior; distribution center; heavy industry such as glass, steel, autos; “North American” culture.
GUADALAJARA - 2nd largest city; “Silicon Valley of Mexico”; agribusiness region; dominated by small-medium size family owned business; more traditional culture 
TIJUANA - Fastest growing city in North America; maquiladoras (export-oriented manuafacturing plants) - televisions, computer monitors, laptops, electronics, plastics. 

## Products & Services

**Trade Counseling & Advocacy.**
**Qualified Appointments for U.S. Companies.**
**Partner Searches and Background Checks.**
**Market Research.**
**Single U.S. Company Promotions.**
**International Buyer Program (IBP) for Mexican Companies.**
**Trade Missions for U.S. Companies.**

## The Market for U.S. Exporters:

**Best Prospects**

- Automotive Parts and Supplies
- Electronic components
- Energy Sector
- Airport & Ground Support Equipment
- Travel & Tourism Services
- Plastic Materials/Resins
- Telecommunications Equipment

**Notes:**
So what does this market look like for you?
I would like to take a moment to highlight just a few of the sectors we have identified as “best prospects.”
This does NOT mean that if you sector is not listed that there are not opportunities for you.
However, we wanted to highlight some of the sectors to give you an idea of where the best opportunities might lie.

## More Best Prospects

- Environmental Sector
- Low-Income Housing & Rapid/Prefab Construction
- Safety & Security Equipment/Services
- Hotel & Restaurant Equipment
- Intermodal Transportation Equipment
- Education & Training Services

**Notes:**
More information on these can be found in our Country Commercial Guide on line at www.export.gov.
We highlight these prospects, which include both products and services, not only to identify them for our U.S. clients, but also as a planning tool for establishing our market research priorities and the organization of trade exhibitions, missions, and video briefings.
To get the word out about our market research in these sectors, we are using “push technology.”  Clients can sign up to receive our market research in their sectors of interest automatically by email as it is produced by registering at www.buyusa.gov/mexico.

## Manufacturing Remains Strong in Mexico

**Mexico’s Industrial GDP has grown over 5% annually since 1999.**
**In 2005, Industrial GDP reached $176 billion.**
**$87 billion was exported to the US (50%).**
**Industrial exports to US grew 6% from 1999-2005.**
**Imports $87 billion in componants and equipment (60% from U.S) **
- Leading manufacturing sectors: autos/ auto parts; computer hardware;electronic components; home appliances; tool,die and moldings;
- Maquiladoras: U.S. and foreign firms

**Notes:**
Mexican manufacturing is the recipient of a very large percentage of all U.S. exports destined for Mexico.
There’s a good market to sell to Mexican manufacturers in a variety of sectors.
US service providers – consultants, layout designers, technical education, six sigma/total quality management, lean manufacturing experts, supply chain management gurus – have an extraordinary opportunity here.  It’s not just about exporting widgets to Mexico.
There are an estimated 56,000 companies located all over the U.S. that supply the manufacturing sector in Mexico with equipment, materials and components.
NAFTA gives US exporters a built-in advantage over most other suppliers if at least two conditions apply:
US products/services have low hourly labor content (less than 20% COGS).
US products/services can make Mexican manufacturers more productive in competition with China.

## How Do You Sell to Mexican Manufacturers?

**Good local representation.**
**Knowing where purchasing decisions are made.**
**Identification of your customers – 1****st**** or 2****nd**** tier?**
**Finding out what your customers need.**
**Understanding what financial tools are at your disposal to offer financing.**
**Following up!**

**Notes:**
The maquila industry in Mexico continues to be one of the most important elements in the U.S.-Mexican commercial relationship, with nearly 80% of the capital invested coming from the United States.
While the number of maquiladoras is only 25 percent of all export manufacturing facilities, they account for 55 percent of Mexico’s industrial manufacturing, and their imports make up more than 67 percent of the total for the sector.
The list of 100 companies with the greatest number of employees in Mexico is a list of “who’s who” among American companies: Delphi, Mattel, Ford Motor Company, Tyco, General Electric, Solectron, Johnson and Johnson, ITT, and others.
Procurement decisions?  For new plants, the decisions are made at the company headquarters, as are the purchases of direct inputs.  That being said, decisions on indirect inputs are largely made locally.
A local agent or distributor is advisable; need to work closely with them to develop a sales strategy for the sector.
You will also have to be ISO or QS certified and be able to provide just in time delivery.
Shipment may be requested to the Mexican-based plant, or to a consolidation point on the U.S. side of the border.If selling to a U.S.-owned maquila, payment made to U.S. headquarters.
We can help you with the above 

## Marketing to 

**Manufacturers in Mexico**

- Videoconference with potential buyers
- Monthly electronic research reports
- Qualified trade leads, and more!
- How do you sign up?
- Visit www.buyusa.gov/mexico/en

**Notes:**

CS Mexico “Marketing to Manufacturers Program” provides:
 Customized videoconference  with potential buyers;
 Monthly electronic research reports on Mexico covering key sectors and topics: Machine tool market; Metal mechanic industry; and Selling to the export manufacturing (maquiladora) sector;
 Qualified Trade leads; and,
 Invitations to and support during manufacturing trade shows and trade missions in Mexico. 
Sign up online 

## Some Tips on Mexican Business Customs

- Mexico has its own customs.
- Importance of establishing personal relationships before business is done.
- Breakfast, Lunch and Dinner!
- Time is Flexible
- Patience pays off
- Physical contact: “un abrazo” – you can (air)kiss the ladies!

**Notes:**
Mexico is unique and varies by region
I can’t stress enough the importance of developing personal relationships with potential partners in Mexico: put relationships before business; accept social invitations; show interest in Mexico
Be polite; be patient; LISTEN .
  If you have a good meeting, do come back to Mexico or make sure you see your potential client in a few weeks in the U.S.  Mexicans do business with people after gaining a high level of trust, which takes time to develop.

## Business Customs:Some Hazards

- Indirectness - difficulty in saying “no”
- Push for easy credit terms – be careful
- Follow up quickly with your Mexican partner – there is lots of competition – not an  “American preserve”
- Use a qualified interpreter if needed
- Keep in contact: visit, phone not just e-mail

**Notes:**
Also, in terms of communicating, Mexicans rely a lot less on e-mail than we do.  In-person meetings are always best.  When a personal meeting is not possible, I would urge you to use the phone more than you would with a U.S. partner.
While the developers speak English, many of their receptionists do not.  A few words of Spanish will help. 

## Mexico Monthly WebExes

- Series of Seminars on the Mexico Market
- Local and U.S. – based experts
- Learn about the market from your desk!
- Sign up on line:
- 	_[https://www.buyusa.gov/mexico/](https://www.buyusa.gov/mexico/)_
- 			en/sharing_more_than_a_border.html

## A Sus Ordenes!

**Let us Help You**

**Notes:**
Contact us:
Our home page at www.buyusa.gov/mexico appears in both english and spanish, in order to highlight our products and services, as well as information about our Commercial Specialists (and the sectors they cover) in Mexico City, Monterrey, Guadalajara y Tijuana.
See you in Mexico!