Electric - Electronics Sectors 2006

1. BANCOM EXT Electric - Electronics Sectors 2006

2. Electronic Market Overview World Market Trends Openness of Mexican Economy Economic Indicators The Electronics Sector CONTENTS

3. Home Appliance Consumer Electronics Semi Conductors Medical Mobile Communication IT Computers World Wide Electronic Sector

4. World Market Trends • Environmental friendly products that minimize pollution • Protect natural resources (water, air & energy) • Thinner, lighter & Smaller products that offer substantial reduction in power consumption • Increasing End User Applications Lead to Significant Market Growth

5. 2005 sales rose 5% to $106 billion. Similar forecast increases for the following years are expected until 2007. World Market Trends • The demand for FPDs is expected to be strong as they replace low-priced CRT displays in many applications. • Digital TV Sales Increase 61.7% to 4.12M In ’03.

6. Technological advancements are improving production yields and reducing the manufacturing costs of flat panel displays (FPD), increasing their use in many end user applications. If the proliferation of cellular phones, personal digital assistants (PDAs), camcorders, game consoles, and digital cameras across the world is any indication, thedemand for FPDs is likely to increase. World Market Trends

7. 140 million sets world wide USA 25 million sets Japan 9 million sets China 28 million sets Europe 12 million sets Color TV World Market

8. Source: CEA Market Research LCD TV World Demand

9. Source: CEA Market Research Forecast of Plasma TV sales

10. Source: CEA Market Research Analog Color TV sales 5% 80% 15% Labor Accessories CRT

11. Preferential market access to 32 countries Free Trade Agreements with USA and Europe Negotiating FTA with Japan Market access to all countries in Central America OPENNESS OF THE MEXICAN ECONOMY

12. FREE TRADE AGREEMENTS ANDBILATERAL INVESTMENT TREATIES Sweden Norway Finland Canada Denmark Iceland USA   Netherlands UK Germany Cuba Ireland Liechtenstein Belgium Honduras Austria Luxembourg Nicaragua Switzerland Portugal Guatemala Costa Rica France Spain El Salvador Italy Greece Venezuela Colombia South Korea Israel Bolivia Uruguay Chile Argentina Free Trade Agreements Bilateral Investment Treaties

13. INTEREST RATES Source: INEGI

14. INFLATION RATES Source: INEGI

15. COUNTRY RISK Source: JP Morgan

16. MEXICO´S OUTSTANDING POSITION IN LATIN AMERICA Source: JP Morgan

17. INDUSTRIAL PRODUCTION Source: INEGI

18. Mexico has become the seventh largest exporter in the world Second largest exporter to the U.S. in 2002 Mexico is by far the leading exporter of the Latin American region Exports of Mexico account for almost twice the total exports of Brazil, Argentina, Paraguay and Uruguay put together. MAIN RESULTS OF OPENNESS

19. ELECTRIC - ELECTRONICS SECTORS

20. MOST BENEFITED SECTORS Automobiles and Autoparts • More than 10 billion dollars have been invested in this sector in Mexico, and currently exports to the U. S. more than 30 billion dollars a year. Electronics And Home Appliances • Currently trades with the U.S. more than 87 billion dollars a year.

21. TRADE BALANCE 2005

22. ELECTRONICS SECTOR EXPORT DYNAMICS 1998-2005 49,648 47,398 46,248 42,978 39,871 40,036 36,548 30,464 Parts and components Electromedical Telecomm equip. Audio and video, IT

23. TRADE BALANCE 2005 Main Products and Countries (millions of USD) Imports Origin 50,500 Exports Destination 49,648 USA 14% • PRODUCTS • PC´s 17% • TV’s 16% • Telecom. Sys. 8% • Interruptores 4% + China 11% Malaysia 8% Korea 7% Japan 7% Others 53% • PRODUCTS • Semicond. 14% • PCB 12% • CRT 5% • Passive Comp. 5% USA 94% + Switzerland 1.5% Canada 1.4% Germany 0.7% Others 2.4% Source: World Trade Atlas & Bancomext

24. MAIN ELECTRIC AND ELECTRONICS CLUSTERS NORTH CD. JUÁREZ CHIHUAHUA NORTHWEST TIJUANA MEXICALI SAN LUIS R.C. TECATE ENSENADA NOGALES NORTHEAST MONTERREY SALTILLO REYNOSA TAMPICO CENTRAL EDOMÉX QUERÉTARO MORELOS PUEBLA VERACRUZ WEST GUADALAJARA AGUASCALIENTES MANZANILLO SOURCE: Preliminary data from Banco de México 34

25. AUDIO & VIDEO Main Manufacturers in Mexico SOURCE: BANCOMEXT 27

26. PERSONAL COMPUTERS Main Manufacturers in Mexico SOURCE: BANCOMEXT 28

27. ELECTRONICS INDUSTRY MAIN DOMESTIC COMPONENTS SUPPLIERS SOURCE: BANCOMEXT 29

28. ELECTRONICS INDUSTRY MAIN DOMESTIC COMPONENTS SUPPLIERS SOURCE: BANCOMEXT 30

29. SUPPORT PROGRAMS • ITA Plus • National Program for the Competitiveness of the Electronics Industry and High Tech

30. ITA PLUS OBJECTIVES • Mexico’s ITA Plus, eliminates tariffs on imports from all the worldto: • Computer products (Computers, monitors, printers, scanners) • Telecommunication products (modems, cellular phones, office switching equipment, switching transmission equipment, audio & video) • Other electronics goods (calculators, photocopy machines, cash registers).

31. Package 1: Elimination of tariff to 290 codes for all importers will be according to three groups: ITA PLUS PACKAGES Package 2: Tariffs on raw materials and inputs of other sectors, such as steel, plastics, and chemical products, only to be used by the electronic, computer and telecommunications firms, were eliminated since September 2002 (278 tariff codes in the electronics PROSEC) 9

32. Electronics, computer and telecommunications productive chain was liberalized: tariffs on almost 4,000 are to be eliminated ITA PLUS COVERAGE 11

33. NATIONAL PROGRAM FOR COMPETITIVENESS OF ELECTRONICS AND HIGH TECHNOLOGY INDUSTRIES • The National Program for the Competitiveness of the Electronics Industry and High Technologyincludes issues suchas: • Designing a competitive fiscal policy • Promoting a competitive tariff structure • Efficient foreign trade processes • Develop the supply chain • Promoting technological development • Upgrading human capital • Generating an adequate infrastructure 33