# Presentation: 941620

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

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

**Dale Wright**
**Commercial Officer / Standards Attaché**
**U.S. Embassy Mexico City**

**Sacramento, CA**
**5 August, 2008**

**Notes:**
Good afternoon 
Welcome I arrived 2 and 1/2 years ago in Mexico City and continue to be 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...

**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

**Mexico – A Snap Shot**

**Pop: 108 million (est.) **
**GDP per capita: $8,270 ($9,100 est ’08)**
**74 percent urban**
**Under 20: 44 %**
**Wealthy/Upper Middle: 23%**
**Middle Class: 37%**
**Poor: 40%**

**Notes:**
Given the country’s size and its proximity to the United States, that which occurs in Mexico has a tremendous and direct impact on our country, and visa versa.
Ambassador Antonio O. Garza, Jr., the Ambassador of the United States to Mexico often says that it is easier to talk about what U.S.-Mexican relations do NOT involve, than it is to list all of the things that they do.
While the poorest sector is still substantial, there is a very significant middle and upper middle class not to mention an extremely sophisticated wealthy class
There are a variety of GOM and bilateral initiatives to improve conditions for the poorest class

## The Impact of NAFTA

**The Impact of NAFTA**

**World’s largest free trade area: 442.4 million people; $15.4 trillion GDP**
**No tariffs on U.S. exports to Mexico; final tariffs eliminated in 2008 **
**Elimination of Barriers**
**Institution of Dispute Resolution Process**
**U.S-Mexico trade increased 377%: from $88 billion in 1993 to $347 billion in 2007**

**Notes:**
NAFTA is a trade agreement, signed in November 1993 by the United States, Mexico and Canada.
Went into effect on January 1st, 1994, NAFTA established free-trade conditions among the 3 countries and was the result of negotiations covering 11,000 products classified according to their harmonized codes.
NAFTA has been controversial in all three countries but its record of results in trade and investment shows unprecedented success for all three countries
there have been some real and very significant achievements, some of which are listed here.
Most recent – cross border trucking pilot- worth $400 million annual savings to consumers
2008: corn, beans, sugar, milk

## U.S. Exports to Mexico

**U.S. Exports to Mexico**

**Notes:**
US exports of goods to Mexico have increased substantially since the entry into force of NAFTA. The decline in U.S. exports to Mexico between 2001 and 2003 reflected the impact of the worldwide recession: exports to Mexico have recuperated well since then reaching  USD 134 billion in 2006. Exports of US services in 2005 represented approximately another $30 billion in 2005 the most recent year for which we have data.

## TOP U.S. TRADING PARTNERS in 2007

**TOP U.S. TRADING PARTNERS ****in 2007**

## 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.
FDI in 2006: $18.9 billion : $13 billion in first half of  2007 – on track for $ 25/26 billion this year 

## 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.

## The Future of NAFTA

**The Future of NAFTA**

**Clearly not about cheap labor**
**It is about integration of the North American marketplace**
**It is about moving up the value-added chain**
**It is about maintaining and increasing competitiveness and productivity**
**Mexico, like the U.S., fears losing its manufacturing sector to other countries – why? Over the last 5 years:**
**China’s exports to the U.S. grew 300%**
**Mexico’s exports to the U.S. grew 30%**

**Notes:**
China has been in the news a lot lately.
The U.S. and Mexico have seen factories, especially for sectors that are labor intensive (like textiles), and the jobs associated with these factories, move to Asia and Central America in search of cheaper labor.
From our perspective, it is only through the integration of our manufacturing processes, with a focus on increasing efficiency and productivity in sectors where we have a comparative advantage that we will be able to ensure competitiveness globally.

## Mexico’s Competitive Challenge:  US trade with China

**Mexico’s Competitive Challenge:  US trade with China**

**Notes:**
China’s trade with the US looks like it’s going to pass Mexico this year.
China’s exports are already greater than Mexico’s exports to the US.

## Beyond NAFTA:  Security and Prosperity Partnership 

**Beyond NAFTA:  ****Security and Prosperity Partnership**** **

_**Security and Prosperity Partnership of North America **_
**Trilateral Initiative**
**Building on NAFTA**
**Security – Led by DHS**
**Prosperity – Led by Commerce**
_**North American Competitiveness Council **_
**Trilateral private sector representation**_** **_
_**WWW.SPP.GOV**_

**Notes:**
In 2005 in Waco, Texas Presidents Bush and Fox and Prime Minister Martin announced the Security and Prosperity Partnership of North America (SPP) to keep our borders closed to terrorism and open to trade. 
SPP is a trilateral, government driven initiative building on the North American Trade Agreement (NAFTA) to increase security and enhance prosperity among Mexico, the United States and Canada.
In the US,  DHS is working with a wide variety of agencies on the security portion;  The Secretary of Commerce has the lead in coordinating the “prosperity” agenda to improve the competitiveness of our businesses and enhance the quality of life of our people.
This commitment was renewed last year in Cancun with Presidents Bush, Fox and PM Harper and last month in Montebello Quebec.  In 2006 the NACC was founded to provide private sector input to the SPP

## Mexico: Outlook for 2008

**Mexico:**** Outlook for 2008**

**Impact of U.S. economy **
** ****GDP growth: 2.5-2.9%   (3.3% in 2007)**
** ****Inflation:  3.9%  (3.8% in 2007)**
** ****Macroeconomic stability**
** ****Oil, foreign investment, remittances and tourism **
** ****New Calderon Administration 2040 goal:**
**     ****5****th**** largest economy in the world**
** ****More economic reforms **

**Notes:**
Most of the points here on this slide are self-explanatory.  However, I want to highlight one for you.
Through November 2007 , remittances to Mexico from the U.S. were $22 billion (versus $23.1 B in 2006 and up from $3.6 billion in 1995).  Second largest source of foreign currency after oil exports (USD billion) and greater than FDI ($21.4 billion) and tourism (USD billion). Mexicans send an average of$350 monthly to families.  
Calderon won a tightly contested Presidential election last year revealing a sharp North/South split in the country; his party holds the largest number of seats in the two congressional chambers but does not have a majority in either.  Congressional power split between the three leading parties : PAN, PRI and PRD, making quick progress on needed economic reforms difficult.
Calderon priorities: public security; jobs; economic development- -Mexico as the best place to invest;   goal – 5th largest economy by 2040 (12th today) a recent Goldman Sachs analysis published by The Economist, stated that Mexico will be the world’s fifth largest economy by 2040. cited of Mexico’s advantages:new government’s commitment to the rule of law, low country risk; the Stock Exchange's recent record performance, world's 4th largest petroleum producer, 5th largest biodiversity, a broad network of trade agreements and a young population. 

## Mexico - A Large and Complex Market

**Mexico - A Large and ****Complex Market**

**Tijuana**

- Monterrey

- Guadalajara

- Mexico
- City

## Products & Services

**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.**
**US Pavilions at Certified Trade Shows.**
**American Business Information Center (ABIC)**
**Customized programs for individual clients.**
- _[www.buyusa.gov/mexico/en](http://www.buyusa.gov/mexico/en)_
- _[www.export.gov](http://www.export.gov/)_

## The Market for U.S. Exporters:Best Prospects

**The Market for U.S. Exporters:****Best Prospects**

**Airport & Ground Support Equipment**
**Automotive Parts and Supplies**
**Education & Training Services**
**Electronic components**
**Energy Sector**
**Environmental Equipment  & Services**
**Franchising**
**Hotel & Restaurant 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

**More Best Prospects**

- Housing & Construction
- Internet & IT Services
- Packaging Equipment
- Safety & Security Equipment/Services
- Telecommunications Equipment
- Transportation Infrastructure Equipment & Services
- Travel & Tourism 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.

## The Manufacturing Sector

**The Manufacturing Sector**

- Imports $87 billion of machinery,           components and inputs annually
- 56,000 companies in the U.S. supply this sector
- Competition is strong but opportunities are great

**Notes:**
Specific opportunities in Mexico: selling to the manufacturing sector 
To give you an idea of the magnitude, the export manufacturing sector in Mexico alone imports nearly $87 billion of machinery, components and inputs every year, the single largest industrial market in Latin America. 
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.
Mexican manufacturing is the recipient of a very large percentage of all U.S. exports destined for 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.

## Opportunities and Challenge:U.S. Share of Maquila Imports

**Opportunities and Challenge:****U.S. Share of ****Maquila Imports**

**Notes:**
As you can see from this slide, in spite of the geographic advantage that the United States has with regard to supplying Mexico’s maquila sector, we have lost market share every since 1999: that is approximately 35% of our market share in just 5 years from just over 90% of the market in 1999 to just under 45% in 2007.
(1999 - 90.52%; 2000 - 90.23%; 2001 - 79.18%; 2002 – 70.76%; 2003 – 69.06%; 2004 – 58.95%; 2005 – 52.40%; 2006 – 47.58%; 2007 – 45.28%)
In dollar terms, the picture is no brighter: USD 45.6 billion in 1999, decreasing to USD 36 billion in 2007, even though our total exports to Mexico over that same period increased from USD 87 billion to USD 112 billion.
In actual dollar terms: 1999 – USD 45.6 billion; 2000 – USD 55.7 billion; 2001 – USD 45.6 billion; 2002 – USD 42 billion; 2003 – USD 40.8 billion; 2004 – USD 40 billion; 2005 – USD 39.5 billion; 2006 41 billion; 2007 40 billion.
But where did that market share go?   China.  Its exports to the maquiladora industry increased by 43% from 2005 to 2006.

## How We Help US Suppliers

**How We Help US Suppliers**

**Identify key sectors and market trends through company visits, association partnerships (eg AMT, NAM) and market research.**
**Publicize  opportunities through Trade Leads system.**
**Locate qualified reps and customers through our services. **
**Promote relevant trade shows/events**
**Provide information through USEACs, electronic newsletters, and web/videoconferences.**

**Notes:**
Manufacturing facilities are looking for products, services, technologies to help them operate more efficiently and be more competitive.

## National Infrastructure Plan

**National Infrastructure Plan**

**Announced by President Calderon in July, 2007 with over 300 projects in the power, oil and gas, airport, ports, environmental, road transport and other sectors;**
**Public-private partnership model, with 45/55 split as base case;**
**Major opportunities for U.S. primary/sub contractors and suppliers;**
**February Conference in Mexico City focused on 34 projects with best opportunities for U.S.-Mexican business; bidding over next 6-36 months **

**Notes:**
Major projects are another source of opportunities for US suppliers 
Need savvy Mexican partners 

## NIP:Public-Private Partnership Project Vehicle

**NIP:****Public-Private Partnership ****Project Vehicle**

**Differs from standard public sector tendering by sharing costs, risks, and upsides with the private sector over an extended period (usually 20-30 years);**
**Private sector takes life cycle cost risks and upsides**
**Most widely used in Europe; **
**Private equity very interested: InterAmerican Development Bank committed USD2.5 billion in February 2007, with the goal of attracting additional USD7.5 billion in private money**

## Airports

**Airports**

## Ports

## Water and Wastewater

**Water and Wastewater**

## Rail

## Power Generation

**Power Generation**

## Upcoming Trade Events in Mexico 	

**Upcoming Trade Events in Mexico**** ****	**

**Tijuana’s Border Program – Exporting to Mexico**
**Tijuana, Mexico – August 21; September 13; October 9, 2008**
**Las Americas Security Show – Security and Protection Industry **
**	****	****Mexico City – September 9-11, 2008  **

**Notes:**
Complete list on our website of events in Mexico as well as selected trade shows in the U.S. to which we will recruit  Mexican buyer delegations 

## Upcoming Trade Events in Mexico 	-Continued-

- Upcoming Trade Events in Mexico** ****	****-Continued-**

**BajaMak 2008 – Manufacturing Supply Chain**
**	****	****Tijuana, Mexico  - September 22, 2008**
**Study USA at Education Fairs  -  Educational Institutions**
**Mexico City, Queretaro, Monterrey, Guadalajara, Mexico  - September 23-30, 2008 **
**Expo –CIHAC Mexico 2008 – Housing/construction industry **
**Mexico City  - October 14-18, 2008**
**Enviro-Pro  PowerMex 2008 – Environmental & Power Industries**
**Mexico City – October 16-18, 2008 **

**Notes:**
Complete list on our website of events in Mexico as well as selected trade shows in the U.S. to which we will recruit  Mexican buyer delegations 

## Some Tips on Mexican Business Customs

**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”**

## Business Customs:Some Hazards

**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**

## CS Mexico ResultsOct  2006 – Sep 2007

**CS Mexico Results****Oct  2006 – Sep 2007**

**We helped U.S. companies obtain 473 distinct export sales worth over $75 million in sales for American small and medium size firms**

** ****160 days of appointments arranged for U.S. companies**
** ****103 trade events (trade missions, seminars, etc.)**
** ****20 Mexican delegations to U.S. trade shows **

## A Sus Ordenes!  Let Us Help You

**A Sus Ordenes! **** Let Us Help You**

## Thank You!

**Thank You!**

**Dale Wright**
**Commercial Officer / Standards Attaché**
**U.S. Embassy Mexico City**
- _[dale.wright@mail.doc.gov](mailto:dale.wright@mail.doc.gov)_** **_[www.buyusa.gov/mexico/en](http://www.buyusa.gov/mexico/en/)__[/](http://www.buyusa.gov/mexico/en/)_