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Investing Opportunities in Mexico: the Automotive example Eduardo J Solís March 17, 2006

Investing Opportunities in Mexico: the Automotive example Eduardo J Solís March 17, 2006. Mexico has been doing its homework…. We have negotiated preferential market access throughout the world; so far with …43 countries We have followed very disciplined fiscal and monetary policies

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Investing Opportunities in Mexico: the Automotive example Eduardo J Solís March 17, 2006

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  1. Investing Opportunities in Mexico: the Automotive example Eduardo J Solís March 17, 2006

  2. Mexico has been doing its homework…. We have negotiated preferential market access throughout the world; so far with …43 countries We have followed very disciplined fiscal and monetary policies We have maintained a very responsible policy towards government spending

  3. Current Economic Indicators

  4. Current Economic Indicators InflationAnnual growth Country Risk EMBI Interest RateCETES 28 days Exchange RatePesos per dollar 7.89% *** February 3th ** January 19th Source: BANXICO.

  5. Current Economic Indicators Permanent Workers registered at IMSS* 1998-2006 Millions of Workers and Annual Growth Mexico: Job Creation 2005 vs 2000 New Jobs ∆% 8.9 *Source: Mexican Institute of Social Security (IMSS)

  6. Current Economic Indicators Mexico: Total Exports Amount and Annual Growth Billions Dollars ∆% USD $ Total Exports 2004 vs 2005 Billions Dollars ∆% 24.8 Source: BANXICO.

  7. Mexican Automotive Industry • Positive results in the Automotive, OEM’s and Auto Parts Industries.

  8. CHIHUAHUA LINAMAR (ENGINES) BAJA CALIFORNIA NORTE G. PALACIO KENWORTH (TRUCKS) MEXICALI SONORA CHIHUAHUA TIJUANA TOYOTA PICK-Ups & BEDS COAHUILA RAMOS ARIZPE G.M. (PC & UV) GARCIA BAJA CALIFORNIA SUR NAVISTAR (TRUCKS) NUEVO LEON S.L.P. DURANGO SINALOA SCANIA (TRUCKS) TAMPS. HERMOSILLO FORD (PC) ZACATECAS S.L.P. CUAUTITLAN FORD (PC & UV) AGS. NAYARIT GTO. YUCATAN SALTILLO QRO. CHRYSLER (ENGINES & UV) D.F. HIDALGO QUINTANA ROO JALISCO AGS. NISSAN (PC & ENGINES) MEX. TLAX. COLIMA GUADALAJARA MICHOACAN HONDA (PC) CAMPECHE VERACRUZ MOR. PUEBLA TABASCO SILAO G.M. (UV) GUERRERO TOLUCA G.M. (ENGINES) OAXACA CHIAPAS TOLUCA CHRYSLER (PC & UV) SANTIAGO M.BENZ (PC & UV) TOLUCA TOLUCA PUEBLA BMW (PC) BMW (P V.W. (PC & ENGINES) CIVAC NISSAN (PC & UV) MASA (TRUCKS) TULTITLAN TOLUCA VOLVO (TRUCKS) AUTOMOTIVE LOCATION • Three major clusters: • Norte • Centro • Bajío

  9. Automotive Industry in Mexico Permanent Workers registered at IMSS* 1995-2005 Thousands of Workers and Annual Growth A supply of highly qualified labor in the industry… Productivity Index AAGR = Annual Averange Growth Rate. * Source: Mexican Institute of Social Security (IMSS). ** Ministry of Economy based BANXICO Information.

  10. Automotive Industry in Mexico Domestic Sales 1995-2007 Thousands of Units and Annual Growth e) Estimate Source: Ministry of Economy based on AMIA information.

  11. Automotive Industry in Mexico Foreign Direct Investment in Mexico Automotive and Auto Parts Sector 2000-2005 Million dollars Total USD $10,312 e. Estimate. Source: Ministry of Economy.

  12. Automotive Industry Performace • The new Automotive Investment Policy in Mexico is aimed to provide different kind of incentives to the Automotive Sector and other related key Industries.

  13. Automotive Industry Performance Vehicles Total Production 2000-2010 Millon of Units 3 m + ∆% 16.9 Development Policy to provide incentives to the Automotive Sector 2.960 Potential Projects AAGR 2.462 2.072 1.889 1.818 1.725 1.774 Current production 1.607 1.541 1.507 Projections AAGR = Annual Averange Growth Rate. Source: Ministry of Economy based on AMIA information.

  14. Automotive Industry Performance Vehicles Exports 2000-2010 Millon of Units ∆% 15.8 2.443 Development Policy to provide incentives to the Automotive Sector 2.072 Potential Projects AAGR 1.724 1.450 1.434 1.404 1.326 Current Projects 1.208 1.170 1.095 1.186 Projections AAGR = Annual Averange Growth Rate. Source: Ministry of Economy based on AMIA information.

  15. Automotive Industry Performance Auto Parts Production 2000-2010 Billions Dollars 51.3 ∆% 16.7 Development Policy to provide incentives to the Automotive Sector 44.4 Potential Projects AAGR 38.1 32.5 27.4 23.7 Current Projects 22.4 21.5 20.5 20.4 19.5 Projections AAGR = Annual Averange Growth Rate. Source: Ministry of Economy based on AMIA information.

  16. New Investment Projects in the last two years

  17. New Investment Projects in the last two years Recent Capital Investments in the Automotive and Auto Parts Industry * Note: Include Suppliers Source: Ministry of Economy

  18. New Investment Projects in the last two years Recent Capital Investments in the Automotive and Auto Parts Industry Source: Ministry of Economy

  19. Incentives for Investing in Mexico • Improvied competitiveness, technology development, suppliers development programs, expansion and infraestructure of the Automotive and Auto Parts Industry in Mexico.

  20. SME’s Suppliers Support Instruments 1 Suppliers Development Program. 2 Design and Innovation Laboratories. 3 Centers of supply chain development 4 Incubators of technology based New Business. 5 Research & Development Fund. 6 Joint Ventures with Foreign SME´s Source: Staff of the Minister of Economy of Mexico.

  21. Incentives for Investing in Mexico Programs Fostering R&D: • Tax credit on projects involving Research & Development of New Technologies. • Science and Technology Fund for the Economic Development. • Support Program for the Development of New Enterprises Based on Scientific and Technological Advances (AVANCE). Government Grants for Strategic Projects: • Ministry of Economy. Tax Incentives: • Immediate Capital Investment Deduction. • Reduced income tax for Maquiladoras (Presidential decree) Labor Training: • Labor Training System (SICAT). State and Local Incentives: • Infrastructure. • Land reserves. • Property tax of payroll tax credits. • Training program. Source: Ministry of the Economy of Mexico.

  22. Final Remarks • Look for products with preferential market access and aim towards higher value added products. • Look for products where geographic advantage gives an edge (i.e closeness to clients) • Mexico’s strategy to open new markets represent tremendous opportunities for trade and investment. • Mexico is scaling up in the value chain, rising opportunities on engineering, R/D, design and the sort. • Mexico represent on itself huge opportunities within its major sectors´ supply chains.

  23. Investing Opportunities of the Mexican Automotive Industry: a win-win proposition Eduardo J Solís Head of the Unit for Investment Promotion Ministry of the Economy esolis@economia.gob.mx (52-55) 57 29 91 06 to 08

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