AUSTIN, SEPTEMBER 2, 2005

1. AUSTIN, SEPTEMBER 2, 2005 A PATH TOWARDS A MORE SECURE MANUFACTURING AREA IN NORTH AMERICAA deliberate and carefully considered invitation to a win-win propositionPresented by: Alejandro Dieck

2. CONTENTS I INTRODUCTION II MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT III WHAT’S NEXT? WHAT CAN BE DONE ? IV PROSPECTS WE PUT FORWARD V FINAL COMMENTS

3. I. INTRODUCTION HAS NAFTA WORKED ?

4. Trilateral trade reached $727 billion dollars last year, 140.8 % higher than pre-NAFTA levels… I. INTRODUCTION NAFTA: TRILATERAL TRADE (BILLION DOLLARS) + 140.8 Source: Ministry of Economy

5. Mexican exports to the U.S. have almost tripled… I. INTRODUCTION MEXICO: EXPORTS TO UNITED STATES (BILLION DOLLARS) + 285.3 % Source: Ministry of Economy

6. Specially, there has been a dramatic growth in bilateral trade, between U.S. and Mexico… I. INTRODUCTION UNITED STATES: EXPORTS TO MEXICO (BILLION DOLLARS) + 166.7% Source: Ministry of Economy

7. NAFTA has also helped both of our countries to cope storms arising from financial crisis throughout the last decade I. INTRODUCTION NAFTA HAS HELPED ECONOMIES TO DEAL WITH FINANCIAL CRISIS

8. I. INTRODUCTION Source: Ministry of Economy

9. I. INTRODUCTION MEXICO: FOREIGN DIRECT INVESTMENT (Billions of Dollars; Cumulative 1994-2004=158 bd) Source: Ministry of Economy

10. CONTENTS I INTRODUCTION II MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT III WHAT’S NEXT? WHAT CAN BE DONE ? IV PROSPECTS WE PUT FORWARD V FINAL COMMENTS

11. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT COMPLY WITH MOST DEVELOPMENT COUNTRIES (MDC) ON CRITICAL ISSUES 1 Rule of Law 2 Intellectual Property 3 Anti-Trust Agencies 4 Human Rights 5 Labor Rights 6 Environmental Issues 7 Consumer Protection

12. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT THE TRANSITION TOWARD A MODERN DEMOCRACY THE 6 AUTONOMIES 1 The Central Bank 2 The Congress 3 The Judicial Power 4 The Political Party in Power 5 The Electoral Institutions 6 IFAI

13. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT IMPROVEMENT BUSINESS CONDITIONS FOR SUSTAINABLE ECONOMIC GROWTH 1 Investment Grade 2 Labor Force Growth 3 Labor Productivity 4 Industrial Policy Implementation 5 Policy Making to Improve Domestic Economy 6 Sound Financial and Banking Sector 7 Modern Democracy: Transition Towards

14. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT DEEPER AND TRUER COOPERATION… NORTH AMERICAN DEVELOPMENT BANK (NADBANK) • It is an International financial institution created with the purpose of financing environmental infrastructure projects. • The NADBANK is one of the best ways our two governments can contribute to enhance the benefits of NAFTA and to make sure we have an efficient physical infrastructure, especially at the border. • We need to increase investments in border infrastructure like transportation, housing, environmental protection, water and wastewater treatment, along with the strengthening of local institutions.

15. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT BORDER ENVIRONMENT COOPERATION COMMISSION (BECC) • Their primary roll is to provide technical assistance to border communities and to certify environmental infrastructure projects in the border region for financing consideration by the NADBANK and other sources

16. II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT We need to enhance security and facilitating trade… FREE AND SECURE TRADE (FAST) • Program designed to ensure security and safety while enhancing the economic prosperity of both countries. • FAST is already working in Texas, specifically in the US cities of El Paso, Laredo, Hidalgo and Brownsville. CUSTOMS TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT) • Initiative between government and business designed to protect the security

17. CONTENTS I INTRODUCTION II MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT III WHAT’S NEXT? WHAT CAN BE DONE ? IV PROSPECTS WE PUT FORWARD V FINAL COMMENTS

18. III. WHAT’S NEXT? WHAT CAN BE DONE? • Construct real and effective avenues of integration, cooperation and alliances • Involve universities, enterprises, associations, research centers, to profit from the growing market of the region • Coordinate efforts to foster the regional automobile sector • Coordinate efforts to foster every other regional opportunity, particularly in the manufacturing sector

19. III. WHAT’S NEXT? WHAT CAN BE DONE? • Create the Pro-America Financial Intermediaries Association that will facilitate the (financial) resources allocation to areas where they are scarce and hence expensive • Design mechanisms by which Mexican companies or individuals could be considered eligible for applying to programs where minorities have some preferences • Design mechanisms to promote consumption of goods and services of the region

20. CONTENTS I INTRODUCTION II MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT III WHAT’S NEXT? WHAT CAN BE DONE ? IV PROSPECTS WE PUT FORWARD V FINAL COMMENTS

21. IV. PROSPECTS WE PUT FORWARD POSITIVE OUTLOOK WHEN STRUCTURAL REFORMS OCURR FISCAL ENERGY 1 3 • Sound Policy • Growth Oriented • A World Class Competitive Energy Sector 2 LABOR 4 TELECOMMUNICATIONS • More Flexible Labor Market • Improved Level of Competition in the Sector

22. SECTOR WIDE INVESTMENT OPPORTUNITIES IV. PROSPECTS WE PUT FORWARD

23. CONTENTS I INTRODUCTION II MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT III WHAT’S NEXT? WHAT CAN BE DONE ? IV PROSPECTS WE PUT FORWARD V FINAL COMMENTS

24. FINAL STATEMENTS • Globalization itself is changing; so does the way we need to adjust to it • Other economic areas have shown more aggressiveness on the matter • Limited progress could be explained by the priority security has gained since 9-11 • We have before us an opportunity to set an example that can be emulated by other states in the Union

25. 2005 ALEJANDRO DIECKChief of Staff of the Minister of Economy in Mexico+52(55)5729-9149 & 50 e-mail: adieck@economia.gob.mx