Mexican Chamber of Construction Industry - Associations Overview

1. 2005 NACF MeetingAGC – CCA - CMIC September, 2005.

2. Associations Overview

3. Associations Overview Mexican Chamber of the Construction Industry • It is a public interest, autonomous institution with its own legal personality and resources, which was created to represent the construction industry’s general interests and to comply with the Business Chambers and Confederations Law. • It has nation-wide jurisdiction. • It has 43 delegations, which confer its National characteristic. Delegations • Institutions whose legal personality and resources are conformed as one. • They represent the Chamber within a territorial distric, in which it exerts its action in state and municipal matters. • They are in charge of offering the services to affiliates.

4. Tijuana Ciudad Juarez Chihuahua Baja Cal. Durango Zacatecas Sonora Comarca Lagunera Saltillo Coahuila San Luis Potosi Northeast Nuevo Leon Queretaro Hidalgo Cd. Victoria Tamaulipas Quintana Roo Yucatan Poza Rica Campeche Veracruz Xalapa Northwest Noroeste Noroeste - - NO NO Coatzacoalcos Tabasco Baja Cal. Sur Center of Country Sinaloa Nayarit Aguascalientes Jalisco Colima Michoacan Guanajuato Guerrero Edo. de Mexico Mexico City Morelos Oaxaca South Southeast Tlaxcala Puebla Chiapas Middle West Associations Overview 43 Delegations nation-wide 8 thousand affiliates

5. Chamber Objectives To represent, protect and promote the general interests of the construction industrialists. To serve as a State’s advisory and collaborative body. To perform all the activities established in the Business Chambers Law. Associations Overview Normativity Business Chambers and Confederations Law Bylaws Ethics Code

6. Construction Industry Training Institute Technological Institute of Construction The Construction Industry Foundation TRAINING AND PRACTICE FOR THE INTEGRATED DEVELOPMENT OF THE CONSTRUCTION INDUSTRY EMPLOYEES PROFESSIONAL EDUCATION OF HUMAN RESOURCES FOR CONSTRUCTION APPLIED RESEARCH AND TECHNOLOGICAL DEVELOPMENT FOR THE INCREASE OF PRODUCTIVITY Associations Overview Our Institutions

7. Associations Overview Governing Bodies • General Assembly • Board of Directors • Executive Commission • Chairman of the Board of Directors • Delegational Executive Committees • General Direction

8. President Ing. Netzahualcóyotl Salvatierra López

9. Economic Background

10. Economic Scenario 1 U.S., Canada and Mexico’s Population and GDP, 2005 Population GDP (billion dollars) (million people) Total 435 14,196 United States 296 12,376 Canada 33 1,070 Mexico 106 750 1 Information as of the 2nd quarter. Source: INEGI and Oxford Economic Forecasting. • Mexican Economy Strengths: • 2.8% growth in the 1st. semester and 3% expected at year’s closure, based on: • Healthy public finances: 0.5% GDP surplus as of June, the goal at year’s closure is a 0.1% deficit. • Manageable foreign debt: it reduced from 12.2% of GDP in 2000 to 8.9% in June this year (66.1 thousand million dollars).

11. Economic Scenario • The highest international reserves in history: 60 billion dollars in June. • Oil price higher than expected: 51 dls./barrel in August vs 27 dls. projected. Part of the surplus is allocated to infrastructure works in the provinces. • The flow of family remittances continues: 9 billion dollars as of June, 2005, 18% more than in 2004. • Exchange rate estimation: 10.83 pesos per dollar in August, at the end of 2004 it was 11.15. • The Country’s risk has remained at low levels, below 200 points.

12. Economic Scenario • The construction industry: • Has shown a progressive growth, from a 2.1% growth in 2002 to 5.3% in 2004. An increase of 4% is expected by the end of 2005. • 3% growth as of the first quarter, 2005. • It is one of the main drivers of the Mexican economy. • Housing is the leading sector: 640 thousand housing credits and subsidies will be granted this year, with a 13.1 million dollar investment, 3.9% more than in 2004. • Investments in hydrocarbons (11.5 billion dollars), electricity (4.6 billion dollars) and highways (2.5 billion dollars) are also outstanding. • Greater public investment in the provinces due to the extraordinary oil revenues.

13. Economic Scenario • Public-private alliances are multiplying the infrastructure investment: • Highway concessions: • -In operation, the Matehuala bypass road (142 km and a 35 million dollar investment);-Under construction, the Mexicali bypass road (41 km and 60 million dollars) and the Tepic-Villa Union Highway (224 km and 221 million dollars);-To be initiated, the Amozoc-Perote (122.5 km and 174 million dollars) and the Morelia-Salamanca (83 km and 81 million dollars) Highways;-Under bidding process, the Mexico City North bypass road (219 km and 522 million dollars) and the San Luis Rio Colorado International Bridge. • 22 projects next to be opened for bidding for the concession of more than 700 km, with a total investment of 2.5 billion dollars.

14. Economic Scenario • Projects for Service Rendering: • Roads: forthcoming initiation of the Irapuato-La Piedad section (74 km and 83 million dollars). Additionally, there are 7 projects next to be opened for bidding for the operation of 438 km, with a total investment of 1.4 billion dollars. • The High Specialty Hospital of the Bajio Region [Hospital Regional de Alta Especialidad del Bajio], with 184 beds, is currently in bidding process. • The bidding process for the San Luis Potosi Polytechnic University is currently under preparation.

15. Political Background

16. Political Background • The presidential candidates of each political party will be defined this year, in order to begin the political campaigns process. • On July 6th, 2006, the presidential elections and the elections for Federal Deputies and Senators will take place. • The elected President will take office on December 1st, 2006.

17. Political Scenario • Change in the political forces: • The PRI has maintained its political presence, ruling 17 of the 32 federal entities of the Country, and it is also the political party that leads the greatest number of municipalities . Political filiation of the Federal Entities and Municipalities of Mexico, 2005 (percentages) Population Federal Entities Concept Municipalities per Federal Entity Total 100.0 100.0 100.0 PRI 53.1 26.8 57.1 PAN 21.9 20.9 19.7 PRD 18.8 11.8 21.8 Coalitions 6.3 8.9 1.4 1 Other 0.0 31.5 0.0 Source: Web Directory of the Mexican Government and the National Institute for Federalism and Municipal Development (INAFED). 1 Includes municipalities ruled by the PVEM, PT, Municipal Councils, Independent candidates in the federal entities and by usages and customs.

18. Political Scenario • Even though PRI holds the majority in the legislative power, it does not reach the minimum required for the approval of the proposed laws (2/3), and therefore, it has to seek agreements with other parties . Political filiation of the federal legislators in Mexico, 2005 Concept Deputies % Senators % Total 494 100.0 128 100.0 PRI 218 44.1 58 45.3 PAN 149 30.2 47 36.7 PRD 97 19.6 16 12.5 PVEM 17 3.4 5 3.9 1 Other 13 2.6 2 1.6 Votes required (66.6%) 329 85 Source: Chamber of Deputies of the Congress and Senate of the Republic. 1 Includes legislators from Convergencia and PT parties and legislators who have no specific policital filiation.

19. Political Scenario • 2006 Elections: • The political parties are in the process of selecting their candidates; there is no glimpse yet of a candidate with a high popular support. • The PRI’s adversary will be the search for credibility from the population, as well as the conciliation of the internal conflicts. • The PAN’s adversary will be the voters themselves, who did not perceive the party as the real change. • PRD’s adversaries will be abstention from voting, the expenditure in promotion and image and the emergence of new leftist options. • For the first time, the 4.3 million Mexicans in the United States will be able to vote, which may be important for the presidential elections, since they represent 6.3% of the electoral census in Mexico (68.4 million).

20. Accomplishments and Priorities

21. Accomplishments and Priorities Priorities • To maximize the securing capacity of constructors affiliated to CMIC, according to their sales, administration and work production capacity. • To develop and promote mechanisms to link economic resources to infrastructure needs, through the work of the National Financing Commission. • Financing for Public Work Contracts (public work advance payments and public work preestimation factoring). • Productive chains (work advancement estimation factoring).

22. Coordinate, guide, promote and foment strategies and actions between the public and private sector, for the integrated development of the infrastructure required in the Country. National Infrastructure Council • Round Tables • Normativity • Financing • Budget • Public-Private Alliances • Competitiveness • Global Markets • Environmental Infrastructure • Energy Infrastructure • Communications and Transportation • Regional Development

23. National Infrastructure Council Mesoregional Infrastructure Council The regional nature of some projects (more than one federal entity) makes the coordination between the local governments and the participation of the federal government necessary.

24. National Infrastructure Council Mesoregional Infrastructure Council State Infrastructure Council With the purpose of coordinating, guiding, promoting and fostering strategies and actions between the public and private sectors for the integrated development of the infrastructure required in the state and municipalities.

25. SECRETARIA DE LA FUNCION PUBLICA SFP BIDDING BASES “CRITERION” PROPOSAL SOLVENCY ECONOMIC TECHNIQUE = = ECONOMICALLY MORE ADVANTAGEOUS TO THE STATE EVALUATION AWARD • To establish guidelines regulating the allocation of biddings in a more equitable manner. PRICE QUALITY FINANCING OPPORTUNITY NATIONAL CONTENT

26. SECRETARIA DE LA FUNCION PUBLICA SFP The strategic entities that execute the most important governmental public works concur in the agreement. • To assure the mechanisms and procedures allowing the completion of the infrastructure projects promoted by the federal government in terms of transparency, equity and legal certainty, so they are completed timely and in the due form. AGREEMENT BETWEEN CMIC AND THE PUBLIC FUNCTION DEPARTMENT FOR SAID PURPOSE

27. SECRETARIA DE LA FUNCION PUBLICA SFP • To collaborate in the transparency and fight against corruption practices within contracting processes. AGREEMENT BETWEEN CMIC, THE PUBLIC FUNCTION DEPARTMENT AND THE FEDERAL ROADS AND BRIDGES AGENCY PARTICIPATION IN THE BIDDING BASES OF IMPORTANT PROJECTS PREPARED BY PEMEX • To promote training, validation and certification among companies in this sector. THERE ARE INTEGRAL PROGRAMS CONSIDERING TRAINING COURSES, DIPLOMA COURSES, VALIDATION AND CERTIFICATION OF COMPANIES BY SPECIALTY, CURRENTLY IN HOUSING AND TOURISM

28. Labor / Labour Topics

29. Migration and Labor Policy • Mexicans in the United States: • The estimated number of Mexican-origin people living in the United States is 26.6 million. • The number of people born in Mexico who live in the United States equals 9.9 million. • 54% entered between 1990 and 2002. • Only 22% have the U.S. citizenship. • 69% are in working ages, i.e., 6.8 million people. • Construction and the primary sector draw 17% and 4.4% of the working population, respectively.

30. Migration and Labor Policy • Temporary migration: • Around 437 thousand mexicans in average cross the border each year as temporary immigrants who later go back to their communities of origin. Of these, 79% work without authorization. • The temporary immigrants flow decreased from 464 thousand during 1993-1997 to 437 thousand in 2001-2003. • Between 2001-2003, the average stay of temporary immigrants in the U.S. increased to 12.2 months, in contrast with 5.5 months during 1993-1997.

31. Migration and Labor Policy • The migration policy of the Mexican Government with the U.S.: • The Mexican Government seeks: • To allow the safe, suitable, legal and orderly displacement and residence of Mexicans. • A negotiation with the United States, considering migration as a shared responsibility. • The September 11, 2001 attacks have limited the advancement of the migration agreement.

32. Migration and Labor Policy • The U.S. migration agenda considers the following: • The migratory regularization of around 3.5 million indocumented immigrants. • A temporary workers program allowing the authorized access of Mexicans to productive regions and sectors of the U.S. • The strengthening of border security aimed to prevent the death of immigrants and illegal people trade.

33. Job Safety

34. Federal Government Energy Department Labor and Social Security Department Federal Labor Law TRAINING The Construction Industry Training Institute

35. BACKGROUND Petroleos Mexicanos is one of the companies of greatest interest due to the continuous improvement of the productive processes of its organization and the respect for the communities and the ecological setting where it operates; in addition, one of its priorities is the Industrial Safety and Environmental Protection in its facilities and for the personnel working in them.

36. Consolidation of contracting companies workers safety through training Due to the fact that the contractors’ personnel in Pemex Gas represented 40% of the total population in 1998, Pemex Gas suggested as strategy the training in industrial safety and environmental protection through CMIC-ICIC. On November 18th, 1998, an Agreement was undersigned with CMIC-ICIC for the training of the contractors’ personnel in industrial safety and environmental protection. THE GOAL IS O CER Incidents

37. OBJECTIVE OF THEPEMEX-CMIC-ICIC AGREEMENT To assist constructor companies in fulfilling Pemex requirements regarding Safety and Environmental Protection, thus contributing to the prevention of accidents in its facilities and to the maintenance of safe works.

38. By means of: Incorporation of Industrial Safety and Environmental Protection requirements in contracts. Training Operation Strategy To assure that the construction activities performed by Contracting Companies are executed according to PEMEX’s safety and environmental protection standards, and that their performance in this area equals that of world class companies in the construction sector. 7

39. PEMEX GAS AND BASICPETROCHEMISTRY PEMEX EXPLORATION AND PRODUCTION PEMEX REFINING PEMEX PETROCHEMISTRY

40. PEMEX-ICIC Training Strategy Development and implementation of training programs in Industrial Safety and Environmental Protection for medium level and operating personnel in companies that develop construction and maintenance projects in Petroleos Mexicanos subsidiaries.

41. FIRST STAGE • Training in Industrial Safety and Environmental Protection for supervisors • Training in Industrial Safety and Environmental Protection for operating levels SECOND STAGE THIRD STAGE • Training in Industrial Safety and Environmental Protection by occupation

42. PEMEX-CMIC-ICICAgreement Actions Technical and didactic training for instructors. Sensitization lectures. Seminars on Industrial Safety and Environmental Protection. Training is carried out in PEMEX-ICIC class rooms located within the parastatal company facilities.

43. PEMEX-CMIC-ICICAgreement Actions Design of didactic materials for Training Design of the PEMEX - ICIC Training Certificate

44. PEMEX CMIC-ICIC AGREEMENT RESULTS FROM 1998 TO JUNE 2005 Employees from 644 companies have received the training courses

45. Environmental Aspects RULING LAWS AND REGULATIONS FOR TOURISM DEVELOPMENTS

46. RULING LAWS AND REGULATIONS • FOR TOURISM DEVELOPMENTS • In terms of environmental regulations, basic terms are defined in the Constitution of Mexico in it’s 4th article: “Every person has the right for an appropiate environment in order to find prosperity.” • Articlr 27 underlines that “The property of land and water inside the national territory belongs to the nation, having by that the right to regulate the use of the natural resources, assure it’s conservation, preserve and restore the ecological equilibrium, in order to achieve an equilibrate development of the country.” • There is also the General Law of Ecological Equilibrium and the Protection of the Environment (LGEEPA) as well as the Official Mexican Rulings (NOM’S). Their goal si to preserve and restore the ecological equilibrium.

47. In order to obtain authorization to develop a tourism resort, an evaluation of the environmental impact needs to be done, as it is defined in article 28 of the General Law of Ecological Equilibrium and Environment Protection : “The Environmental Impact Evaluation is the procedure through wich the Ministry of Environment and Natural Resources(SEMARNAT) establishes the conditions for construction and activities that might cause unstable ecosystems or avoid the limits and conditions establish in the appropiate laws to protect the environment and preserve the ecosystems, in order to reduce to the minimum the negative effects on the environment....” • Project should be developed according to local urban plans and the federal ecological ruling, declarations of indangered species and other laws that might apply.

48. The official laws that have more impact on Tourism developments are: • NOM-022-SEMARNAT-2003, Establishes the specifications to preserve and watch the ustaintability of the coast zones with mangrove. • NOM-059-SEMARNAT-2001, Protects the native mexican species of silvester flora and fauna at risk. • PROY-NOM-140-SEMARNAT-2005, Establishes the general environmental requirements to develop golf courses and resorts that include them.

49. Tourism is an activity that can increase the value of local ecosystems, and integrates the people to the town, city or municipality development, wich is more important during the transition from rural municipalities to urban developments. • It’s an economic activity that might sustain the environmental conditions and who’s responsability belongs to the nation. • Environmental legislation in a major component in any tourism develpment in Mexico, essencial to prevent future damages, and to prepare how to deal with problems.

50. CONSTRUCTION INPUTS AVAILABILITY AND PRICES