Septiembre 2007

1. February 2010 Mexico 2010 Economic Recovery: Opportunities Between Japan and Mexico Septiembre 2007

2. Mexico’s Economy • After a complicated 2009, Mexico shows strong recovery signs in synchrony with US industrial activity. GDP and Industrial Production: Mexico and U.S. (quarterly % change) Source: INEGI and Federal Reserve.

3. Protection and Recovery of Labor Market (A) • Mexico preserved thousands of employments. • Technical Strike Program, it protected thousands of highly- skilled and export-driven jobs by direct salary-transfers. • Temporary Jobs Program, those without work were employed in community-related jobs. • Mexico Business Program, provided greater liquidity for firms and increased their capacity to create employment. Non Farm Payroll (% change since peak level) Source: IMSS.

4. Protection and Recovery of Labor Market (B) • Mexico preserved thousands of employments. • Technical Strike Program, It protected thousands of highly- skilled and export-driven jobs by direct salary-transfers. • Temporary Jobs Program, those without work were employed in community-related jobs. • Mexico Business Program, provided greater liquidity for firms and increased their capacity to create employment. OECD Unemployment Rate (% of labor force in Nov. ‘09) Source: OECD and for Mexico in december the source is INEGI.

5. Engines of Economic Recovery • Mexico’s recovery is supported on a more dynamic external demand. While domestic demand remained stable last year. Mexico’s Exports (quarterly % change) Retail Stores Sales (annual % change) Source: ANTAD, Mexico’s Stores Association. Source: INEGI.

6. Outlook on Output • Industrial and Services sectors are optimistic on production recovery. Private sector expectations are above the expansion level since July 2009. Manufacturing and Services Expectations Index* (index points) Source: IMEF. * This index is analogous to the Purchasing Managers Index of the ISM in the US.

7. Macroeconomic Stability • Several indicators showed the strength of Mexico among emerging markets. Inflation was 3.57% in 2009 and the exchange rate recovered stability. Country Risk: EMBI Global (basis points, average 2009) Inflation (annual % change) Nominal Exchange Rate (pesos for dollar) Source: Banco de Mexico. Source: JP Morgan. Source: Reuters.

8. Banking System • The banking sector is strongly capitalized and there is a clear opportunity to increase financial penetration. Mexican Banking System Capitalization (capital to assets ratio, %) Banking System Size (% of GDP) Source: Banco de México and SHCP. Source: Banco de México and SHCP.

9. Fostered Investment • Infrastructure investment will reach a historical maximum in 2010. It comprises projects in strategic areas to enhance economic development. Fostered Investment (as % of GDP) Fostered Investment by Sector in 2010 (million dollars) Source: SHCP and SCT. e: estimated / a: approved Source: SHCP and SCT.

10. Progress on Economic Environment • Mexico has made a major effort to promote an adequate economic environment to foster foreign direct investment. Economic Freedom Index (changes in score for the 20th largest economies) Most Attractive FDI Destinations (ranking position) Source: AT Kearney. *Gulf States are Bahrein, Kuwait, Omán and Qatar. UAE: United Arab Emirates Source: The Heritage Foundation.

11. Attractive Manufacturing Costs • Recent studies by international firms showed that manufacturing costs in Mexico are lower than those in Brazil, China or India. Manufacturing Outsourcing Cost Index (% of producing costs in the US) Source: Alix Partners.

12. Transportation Costs and Trade • Mexico has a cost advantage in the production and transportation of manufacturing goods. Costs of a Refrigerator Sold in the U.S. (US dollars, 2009) Hourly Wage in Manufacturing Sector (US dollars) -8% 307 14% Freight Costs 283 238% Labor Other1 Mexico China Source: International Labour Organization and SHCP estimations (E). Source: Boston Consulting Group. 1. Raw materials, depreciation, electricity, tariffs. Note: Assumes 4 hours of labor per unit.

13. Competitiveness • Mexico shows clear opportunities for investment and trade. Operating Costs (index*, higher is more competitive) Transportation Costs (index*, higher is more competitive) Macroeconomic Stability (index*, higher is more competitive) Source: Boston Consulting Group / Note:* 1 is the country average of 10 countries and 0 is the worst performance. India is the worst country in two comparatives.

14. Higher Participation in US Market • The costs and competitiveness advantages have increased the overall market share of Mexico in the US market in 1.0 percentage point. Mexico’s Share in US Imports of Manufacturing Goods (% of total of imports) Source: US Census Bureau.

15. Success Story: Mexico - Japan • Trade between Mexico and Japan increased since 2005 free trade agreement. Manufacturing addressed to the U.S. has been the main engine of such trade growth. Mexico and Japan Trade (million dollars) Source: INEGI

16. Structural Reforms • Two Fiscal Reforms. Increased public revenue and improved the efficiency and transparency of public expenditure. • Public Pensions. Moved from a pay as you go system to individual accounts. It saved for the government an equivalent of 30 percentage points of GDP in the medium term. • Energy Reform. Reformed nation’s oil industry widening Pemex opportunities, the state oil company, and will take advantage of specialized investment and technology in drilling and exploration. • Luz y Fuerza del Centro Liquidation. It reduced taxpayers costs of transferring significant fiscal resources to an electricity company with annual losses of around 4 billion dollars. • Political System Reform. The reform will empower citizenship and improves its involvement in the democratic process.

17. The Road Ahead • Since the proposal to undertake major reforms in September 2009, progress has been made in the following areas: • Public finance reform. • Improve state-owned enterprises. • Reduction in the regulatory burdens on businesses. • Fight against organized crime. • New generation of political and economic reforms. • Investment in infrastructure. • In addition, we are working to make progress on poverty alleviation, universal health coverage, education quality, telecommunications and labor market reforms.

18. February 2010 Mexico 2010 Economy Recovery: Opportunities Between Japan and Mexico Septiembre 2007

19. February 2010 Annexes Septiembre 2007

20. Outlook on Industrial Production • Mexico’s automobilesector is recovering as worldwide demand for vehicles increases. Industrial and Services sectors are optimistic on production recovery. Automobile Production (thousands units & annual % change) Manufacturing and Services Expectations Index1 (index points) Source: IMEF. 1. It is analogous to the Purchasing Managers Index of the ISM Source: AMIA

21. Services Location • Mexico has established itself as best option for locating outsourcing activities, contact centers and back-office support in North America. Global Services Location Index (index ranking) Source: AT Kearney.

22. Success Stories: Mexico - Japan • Japan is the 10th largest direct investor in Mexico, with 1.9 billion dollars in the last 10 years. However, an additional amount, 3.4 times larger, came from subsidiaries in the US. Source of Japanese Investment in Mexico (share by investment source) Source: Japan External Trade Organization in Mexico, SE.

23. Rule of Law and Security • Mexico has taken a frontal fight against organized crime. Recently, we have improved its Systems of Criminal Justice and Public Security. Seized Cocaine (tons) Weapons Seized (thousdands) Arrested Criminals (thousands) Seized Money (million dollars) Source: Data from CENAPI