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

1. Sharing More than Just a Border: U.S. Commercial Opportunities in Mexico Asia Pacific Business Outlook Conference University of Southern California March 26-27, 2007 Los Angeles, CA Karen L. Zens Minister Counselor for Commercial Affairs U.S. Embassy – Mexico

2. 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…

3. Mexico – A Snap Shot • Pop: 104 million • GDP per capita: $8,135 • Adj for Purchasing Power: $9,800 • 74 percent urban • Under 20: 44 % • Wealthy/Upper Middle: 23% • Middle Class: 37% • Poor: 40%

4. TOP U.S. TRADING PARTNERS in 2006 (Goods) Source: U.S. Bureau of Census

5. U.S. Exports to Mexico Source: International Trade Administration, U.S. Department of Commerce.

6. Foreign Direct Investment in Mexico Source: Secretariat of Economy, General Directorate of Foreign Investment.

7. Foreign Direct Investment in Mexico by Country Source: Mexico’s Secretariat of Economy, General Directorate of Foreign Investment.

8. Mexico’s 2006 Bilateral Trade Source: Mexico’s Secretariat of Economy.

9. Mexico: Outlook for 2007 • U.S. economy • GDP growth – 3.5% (4.8% in 2006) • Inflation –4.1% (4.05% in 2005) • Macroeconomic stability • Remittances, oil and tourism • New Calderon Administration: 2040 goal - 5th largest economy in the world • Economic reforms - Congressional split

10. The Impact of NAFTA • Almost no tariffs on U.S. exports to Mexico • More than 85% of U.S. Goods enter duty-free • By 2008, 100% will enter duty-free • Elimination of Barriers • Institution of Dispute Resolution Process • U.S-Mexico trade increased 377%: from $88 billion to $332 billion in 2006

11. U.S. EXPORTS TO WESTERN HEMISPHEREEXCEEDING THOSE TO OTHER REGIONS 2006 Western Hemisphere: 43.8% Source: U.S. Bureau of Census

12. 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%

13. 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 Beyond NAFTA: Security and Prosperity Partnership

14. SPP –Prosperity Working Groups • Manufactured Goods • Movement of Goods • Energy • Environment • E-Commerce and ICT • Financial Services • Business Facilitation • Food and Agriculture • Transportation • Health

15. U.S. Commercial Service Mission • Agency of the U.S. Department of Commerce. • Helps small and medium size U.S. companies export goods and services. • Protects U.S. business interests abroad. • Network of 100+ offices in the U.S. and 160 worldwide.

16. Mexico - A Large and Complex Market Tijuana Monterrey Guadalajara Mexico City

17. 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. www.buyusa.gov/mexico/en

18. CS Mexico Results Oct 2005 – Sept 2006 We helped U.S. companies obtain 500 distinct export sales worth over $360 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. • Interagency Representation: •  U.S. Export-Import Bank. • U.S. Trade Development Agency (TDA). • U.S. Overseas Private Investment Corporation (OPIC).

19. Upcoming Trade Events in Mexico • Tijuana Border Program April 16-19 Tijuana, B.C. • Expo Logistica 2007 - Customs and Logistics May 7-9 Mexico City, Mexico • Aeroexpo Aviation Trade Show May 24 – 26 Mexico City and Toluca, Mexico • World of Concrete Mexico June 19-21 Mexico City, Mexico • Enviropro / Power Mex - Environmental and Energy Industries September 26-29 Mexico City, Mexico

20. The Market for U.S. Exporters: Best Prospects • Automotive Parts and Supplies • Electronic components • Energy Sector • Airport & Ground Support Equipment • Travel & Tourism Services • Plastic Materials/Resins • Telecommunications Equipment

21. More Best Prospects • Environmental Sector • Low-Income Housing & Rapid/Prefab Construction • Safety & Security Equipment/Services • Hotel & Restaurant Equipment • Intermodal Transportation Equipment • Education & Training Services

22. Manufacturing Remains Strong in Mexico • Mexico’s Industrial GDP has grown over 5% last year . • In 2005, Industrial GDP reached $176 billion. • $87 billion was exported to the US . • $7 billion exported to other countries. • Leading manufacturing sectors: autos/ auto parts; computer hardware;electronic components; home appliances; tool,die and moldings; • Maquiladoras: U.S. and foreign firms

23. The Manufacturing Sector • Imports $87 billion of machinery, componants and inputs annually • 56,000 companies in the U.S. supply this sector • Competition is strong but opportunities are great

24. U.S. Share of Maquila Imports Source: Banco Mexicano de Comercio Exterior

25. Asian Share of Maquila Imports Source: Banco Mexicano de Comercio Exterior

26. How Do You Sell to Mexican Manufacturers? • Good local representation. • Knowing where purchasing decisions are made. • Identification of your customers – 1st or 2nd tier? • Finding out what your customers need. • Understanding what financial tools are at your disposal to offer financing. • Following up!

27. How We Help US Suppliers Goal: Increase US exports of goods/services to Mexican Manufacturers. • Identify key sectors and market trends through company visits, association partnerships (AMT, NAM, MIT, etc.), and market research. • Publicize opportunities to export to these companies through Trade Leads system. • Locate qualified reps and customers through our services. • Promote relevant trade shows like Expo Manufactura. • Give updates on our findings through teams, USEACs, electronic newsletters, and web/videoconferences.

28. 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” – you can (air)kiss the ladies!

29. 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

30. A Sus Ordenes! Let us Help You