WHY MEXICO César Fragozo, Trade Commissioner Mexican Trade Services / 墨西哥商務辦事處

Contents Country Profile Mexico, a Competitive Country Strategic Sectors Mexico at a Glance

Mexico: a long historical presence in Asia 3 “In 1889, the Yuan was equated at par with the Mexican peso, a silver coin deriving from the Spanish dollar which circulated widely in South East Asia since the 17th century due to Spanish presence in the region.” Chinese Dragon Coinage. Ken Elks, “The Manila Galleon were Spanish trading ships that sailed once or twice per year across the Pacific Ocean between Manila and Acapulco, New Spain (present-day Mexico ).” Williams, Glyn The Prize of All the Oceans. Viking, New York. ISBN , p. 4 Images: and

4 NAFTA: +$101 billion USD LATAM: +$11 billion USD EUROPEAN UNION: -$18 billion USD ASIA: -$92 billion USD OTHERS*: -$3 billion USD Mexico’s Trade Balance 2011 *Includes Africa, Oceania and other European countries Source: 2011 Data. Mexico’s Central Bank and Global Trade Atlas.

Taiwan is Mexico’s 11 th trade partner Total trade = USD $6.2 bd Main exchange products include liquid crystal devices, printed circuit boards, car parts, stainless steel products, aluminum, synthetic yarns, etc. Trade Balance Taiwan - Mexico 5 Data source: World Trade Atlas 2011

Taiwanese involvement in Mexico for 2011 Evergreen’s participation in Lazaro Cárdenas Port Tender Compal purchases Toshiba Corp’s LCD TV manufacturing plant in Mexico Foxconn’s acquisition of Formosa Prosonic in Baja California New Kinpo Group’s establishment in Tamaulipas 6

The US-Mexico relationship benefits both parties 7 6 million U.S. jobs depend on trade with Mexico. Daily Trade: 1.3 billion dollars. 1 st or 2 nd export destination for 21 U.S. states. Mexico's exports to the U.S. have a 40% U.S. content. Source: Wilson Center. The State of Trade, Competitiveness and Economic Well-being in the U.S.-Mexico Border Region/ ASU. Realizing the full value of crossborder trade with Mexico.

Mexico vs. China 8 Average annual real wages in the manufacturing sector, China y México ( ) Constant 2011 USD According to Barclays, the gap in labor costs between Mexico and China is getting closer. Source: Barclays. The productivity revolution and the China manufacturing syndrome, 2012.

Expected Evolution of Labor Costs Mexico (Acc. Var in local currency: 84%) +77% China (Acc. Var in local currency: 176%) +273% Taiwan (Acc. Var in local currency: 8%) +34% Source: ProMéxico’s calculations with Global Insight’s forecasts (November 2011). Korea (Acc. Var in local currency: 23%) +44% dollars / hour United States (Acc. Var in local currency: 18%) +18% Germany (Acc. Var in local currency: 10%) +25%

Forecast Real Exchange Rate (RER) Brazil / RER (Acc. Inf : 59%, Nom. Var.: 2%) +39% +20% Source: ProMéxico’s calculations with Global Insight’s forecasts (using producer price indexes). Mexico/ RER (Acc. Inf : 48%, Nom. Var.: -6%) +64% China / RER (Acc. Inf : 41%, Nom. Var.: 35%) +44% Taiwan/ RER (Acc. Inf : 35%, Nom. Var.: 24%) +6% Japan/ RER (Acc. Inf : 8%, Nom. Var.: 14%) Malaysia / RER (Acc. Inf : 55%, Nom. Var.: 5%) +40%

Contents Country Profile Mexico, a Competitive Country Strategic Sectors Mexico at a Glance

Mexico is in the right place, at the right time. A window of opportunity following the reconfiguration of the global economy. -Optimization of cost structures. -Focus on emerging economies. Some of Mexico’s main advantages are: -Geographical location. -Friendly regulatory and legal framework. -Skillful and talented labor force. -Competitive costs. Current status is product of a 25 years long evolution. Mexico is living one of its greatest economic moments 12

Solid macroeconomic environment 13 Source: INEGI and Central Bank. Inflation International reserves Exports 1. GATT 2. IFE 3. Privatizations 4. APEC 5. NAFTA 6. OECD 7. Floating Ex. Rate 8. Banxico’s Autono. 9. FTA with EU 10. Democratic Alter. 11. Investment grade 12. EAA with Japan 13. Prepayment debt 14. Deregulation 15. Budget Reg. 16. Pacific Alliance 17. FTA Central.Am. 18. TPP Application 19. FTA Peru International reserves /10 — /6

A well evaluated country 14 México ranks as a low-risk country in the Market Overheating Index, published by The Economist, which grades 27 countries. Source:The Economist, Hungary Malaysia Taiwan Pakistan Mexico Czech Republic South Africa Russia Venezuela South Korea Saudi Arabia Poland Colombia China Chile Philippines Peru Egypt Thailand Singapore Vietnam Turkey Indonesia India Hong Kong Brazil Argentina

With 12 trade agreements, Mexico has access to 44 countries (1.2 billion people). We are committed to free trade 15 SOURCE: IMF, OMC, Sea Rates. *Doesn’t consider Economic Complementation Agreements. Number of FTAs and countries with privileged access* Our FTAs give privileged access to 2/3 of the world’s GDP # Countries # FTAs Lázaro Cárdenas Manzanillo Veracruz Tampico Altamira Guanajuato Monterrey Guadalajara SLP Mexico is part of the world’s largest economic block (NAFTA). NAFTA = 18 trillion USD Mexico invests close to 5% of its GDP in infrastructure (OCDE is close to 3.5%).

Source: US Census Bureau: ; INEGI, 2011; Population Projections for Mexico , CONAPO. *Population (in millions) by age group.  112 million inhabitants with a median of 26 years.  47 million in the labor force.  According to forecasts, there will be more than 60 million people of productive age by China’s population pyramid (2030)* Mexico’s population pyramid (2030)* MaleFemale MaleFemale Demographics are on our side 16 Mexico’s demographic bonus

Growth in labor The graph shows that Mexico will record the highest growth in labor in the coming years, compared to other emerging economies. Source: UN Department of Economic and Social Affairs, World Population Prospects. See:

Quality of our labor force 18 Source: FDI Benchmark (Labor Availability & Quality/ Skills), According to the FDI Benchmark, Mexico offers a higher quality and availability of labor force and talent than India, China and Brazil. More than 115,000 Mexican engineers graduate each year. More than Germany, Canada, United Kingdom and Brazil.

No. Country% GDP 1 Germany28.2% 2 South Korea27.2% 3 Mexico19.3% 4 China18.3% 5 France13.1% 6 Canada11.6% 7 Japan10.6% 8 Italy10.5% 9 United Kingdom9.9% 10 Indonesia7.0% 11 United States5.5% 12 Turkey5.2% 13 India4.0% 14 Brazil3.5% 15 Russia3.0% Medium and HighTech Exports as a percentage of GDP (2011) A technologically sophisticated economy 19 Source: IHS Data – Global Insight; ProMéxico’s Analysis. Data in USD Real terms, 2005, considering de G20 countries. Medium Technology (MT): Specialty Chemicals Machinery, Equipment, Appliance Electrical Industrial Machinery Motor Vehicles & Parts Total Motorcycles & Transport. Equipment Railroads & Equipment High Technology (HT): Aircraft & Spacecraft Advanced materials Computers & Office Machinery Communication Equipment Medical, Precision & Optical

MEDICAL DEVICES We are the largest exporter in Latin America and main supplier to the US. AUTOMOTIVE AND AUTOPARTS 8 th producer and 4 th exporter globally of new light vehicles in the world (Q1 2012). 11% of light vehicles sold in the US were produced in Mexico. Mexico is the main auto parts supplier to the US. AEROSPACE Mexico is the 6th supplier to the American aerospace industry. The number of companies grew 4 times since ELECTRONIC Leading flat television screen exporter in the world. The second refrigerator exporter. Source: FEMIA/ GTA/ AMIA/ OICA billions in exports 80% manufactures 53% medium and high tech manufactures Leadership in key sectors 20

Chihuahua Tijuana Mexicali Hermosillo Ciudad Juarez Los Mochis Culiacán Zacatecas Guadalajara Leon Torreón Tampico San Luis Potosi Matamoros Monterrey Monclova Automotive Autoparts Aerospace Electric-Electronics Saltillo Estado de México Ciudad Sahagún Puebla Querétaro Silao Ramos Arizpe Aguascalientes Morelos Tecate Reynosa Nuevo Laredo Tlaxcala Nogales Map of Mexico’s Advanced Manufacturing 21

Jetta Bicentenario (VW)SkyworksMabeIntel Design Center SilanesHoneywell (A350) Flexible manufacturing (Ford) Bombardier Learjet 85 SAFRAN Ericsson (Global Service Center) GE (Genx turbine)Siemens Mexico: an excellent business case for advanced manufacturing…And more

Contents Country Profile Mexico, a Competitive Country Strategic Sectors Mexico at a Glance

Electronic 24 Source: Global Trade Atlas/ KPMG/ Manufacturer Market Insider. Cumulative investments of USD $ 10.49B from 2000 to Production: billion dollars CAGR : 2.5% Consumption: bd CAGR : 3.3% 777 economic units Located mainly in Nuevo León, Chihuahua, Jalisco, Baja California, Sonora and the Federal District. Imports: bd Jobs (2009): 312,913 Exports: bd Main export products: Flat screen televisions, computers and equipment, communications equipment, videogames, etc. FDI : bd The main investor countries in the sector are the US, Singapore, Switzerland and Japan. Mexico is one of the leading assemblers and exporters of the sector in the world. In foreign direct investment (FDI): 3% As a percentage of the national GDP: 5.4% As a percentage of the manufacturing GDP: 31% In non-oil exports: 21% Electronics industry share 1st Flat screen exporter in the world 4th Computer exporter in the world 5th Microphone and speaker exporter in the world.

Mexico is the manufacturing center of leading companies

Automotive  Mexico is the 8 th vehicle producer in the world.  And the 4 th exporter globally of new light vehicles in the world (Q1 2012).  We export almost three times more than Brazil and India combined.  We are a strategic supplier to the North and Latin American automotive markets.  In 2011, Mexico was the leading auto parts supplier to the United States.  Eleven of every 100 light automobiles sold in the United States are manufactured in Mexico.  84 of the top 100 auto parts companies in the world have production facilities in Mexico. Source: OICA/ Global Trade Atlas/ AMIA/ Ward’s Automotive Reports/ AASA, Ford’s plant in Hermosillo, Mexico, is the only facility in the world to produce the new Fusion model and the Lincoln MKZ.

World wide producer of light vehicles ( 2.55 million units ) 8th 4th World wide producer of commercial vehicles ( 136,678 units ) 2 World´s largest vehicle producer ( 2.69 million units ) 1 19 of the top leading automakers are located in 15 states of Mexico. The automotive industry in Mexico accounts for: 6% of the Foreign Direct Investment (FDI) in the country 3 4% of the national GDP 4 20% of the manufacturing GDP 4 23% of Mexican total exports 5 6th 8th 6th Exporter of light vehicles ( 2.14 million units ) 1 Exporter of commercial vehicles* ( 95,175 units ) 2 Occupied workers 4 : 68,895 States with automotive production 1 Source AMIA 2 Source: OICA 3 Source: Ministry of Economics 4 Source: INEGI 5 Source: Business Monitor International *Estimated Mexico´s place in the automotive industry (2011)

Source: Unlocking The Sunbelt, EPIA/ Mexican Geothermics Association, AMG/ Atlas of Wind Resources, AMDEE/ KPMG. Renewable energies 28 Mexico’s wind potential is estimated at 71,000 MW. Mexico is among the countries with the highest sun exposure. It is part of the “Solar Belt” and could generate enough energy to be self- sufficient and export. Average of 5-6 KWh/m 2. Mexico is ranked 4 th globally in geothermal energy generation. Mexico has an hydric potential of 53,000 MW. One of the most important in Latin America. Mexico is the leading photovoltaic module supplier in Latin America. With a production capacity that exceeds that of Brazil, Chile and Argentina. According to KPMG, solar cells and advanced battery production costs in Mexico are 13% lower than in the United States.

Medical devices 29 According to KPMG, medical device manufacturing costs in Mexico are 23% lower than in the United States. Mexico is the 5 th global exporter of medical instruments and devices. We are the largest exporter in the medical device industry in Latin America. The 3 rd global exporter of suture needles in the world. And the 6 th exporter of respiratory and mechanic therapy equipment in the world. Our country is the leading exporter of orthopedic items and gauzes and bandages in Latin America. Source: Global Trade Atlas/ KPMG.

Index Country Profile Mexico, a Competitive Country Strategic Sectors Mexico at a Glance

Mexico is part of North America 31 USA The market of these three countries is 18 trillion dollars. The market of these three countries is 18 trillion dollars. Canada Mexico

Mexico shares a 3000 kilometer border with the US. Mexico shares a 3000 kilometer border with the US. And is the gateway to Latin America. And is the gateway to Latin America. United States Mexico We have a wide border with the US 32

Mexico has access to two oceans. Mexico has access to two oceans. Atlantic Ocean Pacific Ocean And 67 deep sea ports that connect us to the world. Bioceanic access 33

Mexico is a big country Mexico covers 2 million km 2, making it the 14 th largest country in surface area in the world. Mexico covers 2 million km 2, making it the 14 th largest country in surface area in the world. = / 8 X3 X 34

A country of young people The median age of the population is 26 years. The median age of the population is 26 years. 112 million inhabitants 51% 48% 35

And a vast pre-Hispanic heritage There are more than 42,000 archaeological sites and more than 31 sites declared Heritage of Humanity by UNESCO. There are more than 42,000 archaeological sites and more than 31 sites declared Heritage of Humanity by UNESCO. 6 th country in the world in terms of number of sites declared Heritage of Humanity. 36

台北市基隆路一段 333 號 29 樓 2905 室 César Fragozo, Trade Commissioner Mexican Trade Services / 墨西哥商務辦事處 Thank You