Diapositiva 1

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
No Oil Exports ? 05-04
Manufactures 10.6
Extractive 29.6
Agriculture 7.8
Total Exports 2004 vs 2005
Billions Dollars
? 24.8
Source BANXICO.
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Mexican Automotive Industry

• Positive results in the Automotive, OEMs and
  Auto Parts Industries.

8
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
Industry 1994-2005 AAGR
Manufacturing 3.3
Automotive 4.2
AAGR Annual Averange Growth Rate. Source
Mexican Institute of Social Security (IMSS).
Ministry of Economy based BANXICO Information.
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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.
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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.

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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
Outlook Outlook 2006 2007 2008 2009 2010
Current Production 1.725 1.872 2.012 2.160 2,290
Potential Production 0 .200 .450 .800 1.200
Total Total 1.725 2.072 2.462 2.960 3.490
AAGR Annual Averange Growth Rate. Source
Ministry of Economy based on AMIA information.
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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
1.186
1.095
Projections
Outlook Outlook 2006 2007 2008 2009 2010
Currents Exports 1.208 1.310 1.408 1.512 1.603
Potential Exports 0 .140 .315 .560 .840
Total Total 1.208 1.450 1.724 2.072 2.443
AAGR Annual Averange Growth Rate. Source
Ministry of Economy based on AMIA information.
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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
Outlook Outlook 2006 2007 2008 2009 2010
Current Production 27.4 29.4 31.2 32.4 33.7
Potential Production 0 3.1 7.0 12.0 17.6
Total Total 27.4 32.5 38.1 44.4 51.3
AAGR Annual Averange Growth Rate. Source
Ministry of Economy based on AMIA information.
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New Investment Projects in the last two years
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New Investment Projects in the last two years
Recent Capital Investments in the Automotive and
Auto Parts Industry
Company Project Investment (Millions dollar) New Jobs
Sonora Plant 1,600 6,800
Bora model Golf model Heavy trucks assembly 180 5 165 1,700501,190
Tacoma pick-up and Box productions for these pick-ups 144 800
Production of "QR engine, "KH" engine assembly "CVT" manufacturing. 1,000 1,100
Pick Up Mega Cab Production 250 n.a
Sub Total 3,344 11,640
Note Include Suppliers
Source Ministry of Economy
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New Investment Projects in the last two years
Recent Capital Investments in the Automotive and
Auto Parts Industry
Company Project Investment (Millions dollar) New Jobs
New world-class vehicle 450 2,500
American Axle Manufacturing Silao Facility extension 400 1,200
Jatco expansion for transmissions production 300 700
Kenworth expansion and modernization of Mexicali Assembly Plant 70 600
Aassembly plant, it is expected to more than double the current production of pickups. 37 n.a.
Others 384 n.a.
Sub Total 1,641 5,000
Total 4,985 16,640
Source Ministry of Economy
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Incentives for Investing in Mexico

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

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SMEs Suppliers
Support Instruments
Suppliers Development Program.
1
Design and Innovation Laboratories.
2
Centers of supply chain development
3
4
Incubators of technology based New Business.
Research Development Fund.
5
Joint Ventures with Foreign SMEs
6
Source Staff of the Minister of Economy of
Mexico.
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Incentives for Investing in Mexico

• Programs Fostering RD
• 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.

Source Ministry of the Economy of Mexico.
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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)
• Mexicos 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.

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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_at_economia.
gob.mx (52-55) 57 29 91 06 to 08