Why is Mexico your best trade partner? 1.Mexico’s favorable economic performance 2.Mexico’s competitive advantages 3.FDI Confidence 4.Mexico as a strategic global leader 5.The automotive industry in Mexico 6.What the world says about Mexico 7.Mexico’s wealth: beyond its economy 8.Success stories 9.About ProMéxico 2

MEXICO’S FAVORABLE ECONOMIC PERFORMANCE Chapter I

Mexico’s Q2 2011figures Compared with 19.6 billion dollars in During the first half of 2011, we received 11 billion USD of Foreign Direct Investment. Compared with close to 300 billion USD in Until August 2011, our exports reached 230 billion USD. Mexico’s GDP grew 3.9% during the first half of Mexico is estimated to grow 4% in 2011, almost twice than the advanced economies, which growth is estimated at 1.6%. We have been climbing positions. We were 8 th in 2009 and 6 th in During the first half of 2011, we were the 5 th exporters in the automotive sector. 4 Source: Ministry of Economy/ Ministry of Finance/ IMF/ National Institute of Statistics, Geography and Informatics of Mexico/ ProMéxico with data of Global Trade Atlas and AMIA.

Source: Goldman Sachs. The N-11: More Than an Acronym. Global Economics Paper No: 153. March, 2007/ HSBC. 1/ Goldman Sachs forecast / International Monetary Fund th place 11th place 2010 Goldman Sach’s Forecast Gross Domestic Product (Billion Dollars) Forecasts According to HSBC, by 2050 Mexico will be the 8th largest economy in the world. It is estimated that by 2050, Mexico will become between the fifth and eighth largest economy. — Its GDP per capita will be comparable with those of developed countries. World's largest GDP measured by PPP (Billion Dollars)

Competitiveness indicators For sixth consecutive year, Mexico improved its position. Beyond BRIC’s. Reforms that enhanced our ranking: –Construction permits (+6). –Getting credit (+5). –Trading across borders (+3). –Paying taxes (+1). Source: World Bank, 2011;, World Economic Forum 2011; IMD, Mexico’s position GLOBAL COMPETITIVENESS REPORT DOING BUSINESS 2012 Mexico registered the largest improvement in the American continent. Our country advanced in 10 of the 12 pillars analyzed by the Index According to IMD’s World Competitive Yearbook 2011, in terms of economic performance, Mexico was ranked 16th of 59 countries. WORLD COMPETITIVENESS YEARBOOK Mexico’s position

Other competitiveness indicators 7 INDEXAUTHORPOSITIONCONTEXT FDI Confidence Index AT Kearney 8 Mexico went from the 19 th to the 8 th place in terms of this index, which measures global confidence in Foreign Direct Investment. Global Manufacturing Competitive- ness Index 2010 Deloitte7 Mexico became the 7th most competitive country in manufacturing, above countries like Germany, Singapore, Canada and Poland. Manufacturing Outsourcing Cost Index Alix Partners 1 Mexico is the most cost-effective country in the world for the offshore production of manufactured goods for the US market. Trade Confidence Index HSBC3 According to this index, Mexico ranks 3th in the world, just below India and the United Arab Emirates. Global Services Location Index 2011 AT Kearney 6 Mexico ranks 6 th in this index, jumping five places since This index ranks the best countries for “outsourcing” through the world.

Favorable macroeconomic environment México ranks as a low-risk country in the Emerging Market Overheating Index, published by The Economist, which grades 27 countries. Source: / JP Morganhttp:// / 8 Argentina Brazil Hong KongIndiaIndonesiaTurkey Vietnam SingaporeThailand Egypt PeruPhilippines Chile China Colombia Poland Saudi Arabia South Korea Venezuela RussiaSouth Africa Czech RepublicMexico PakistanTaiwanMalaysiaHungary EMBI (Basis point) According to JP Morgan’s EMBI, Mexico’s country risk has been lower than the global average for the last years.

MEXICO’S COMPETITIVE ADVANTAGES Chapter II

Mexico is a great exporter Mexico is the 15 th largest exporter in the world. In 2010, we exported close to 300 billion dollars (record high). 60% of GDP 10 SOURCE: Global Trade Atlas/ National Institute of Statistic and Geography (INEGI by its name in Spanish), Statistics on Mexico’s foreign trade (January-May 2011)/ Mexico’s Central Bank, Mexico accounts for more than 40% of Latin America’s total trade. Mexican exports of manufactured goods grew by 30% in 2010 (compared to 20% globally). Our country has become a production center of value added goods. More than 80% of exports were manufactured goods.

We export sophisticated goods Mexico ranks in the top 20 of Harvard’s Atlas of Economic Complexity report, which recognizes that our country is able to hold vast amounts of productive knowledge, and that we manufacture and export a large number of sophisticated goods. The Index of Technological Sophistication of Mexican export products (3.25) is above the average for Latin America (2.16) and above India (2.61) and Brazil (2.49). (OECD) 11

Mexico is the ideal export platform for reaching 2/3 of the world’s GDP. With 11 trade agreements, Mexico has privileged access to 43 countries (one billion people). We are the Gateway to the World 12 SOURCE: IMF, OMC Number of FTA per country  Mexico is part of the world’s largest economic block (NAFTA).  NAFTA market= 17 trillion USD. 2,000 miles of border with the US, which is the world’s largest market.

With a Solid Infrastructure 63 international airports. 61 international sea ports. 2 of them post-Panama. More than 16,000 miles of railroads. 82,600 miles of federal roads. 13 Source: SCT, SAT, SHCP, Presidency. Mexico invests 5% of its GDP in infrastructure. (The average of OECD’s 34 countries is 3.5% of GDP). Lázaro Cárdenas Manzanillo Veracruz Tampico Altamira Guanajuato Monterrey Guadalajara SLP

Number of procedures required to open a business México Facility to do business  Ranked 53 th by the World Bank’s “Doing Business 2012.” Climbed 1 place. Better than the BRIC countries and the rest of Latin America.  Investors only need 9 days and 6 procedures to open a business. A Friendly Business Environment 14 Simplicity of Operation Source::World Bank, IFC 6 Number of days required to open a business México 9 Canadá Polonia Estados Unidos República Checa Chile Rusia India Alemania China Brasil Canadá Estados Unidos Alemania República Checa India Chile Polonia Rusia China Brasil

And a Favorable Legal Framework Competitive mechanisms to protect Intellectual Property. Mexico’s solid legal framework safeguards intellectual and industrial property based on its two main laws:  Federal Copyright Law  Industrial Property Law 28 Reciprocal Investment Protection and Promotion Agreements Source: World Intellectual Property Indicators 2010, WIPO; Ministry of Economy. 15

 Mexico has an average cost advantage of 18% (over 17 industries), compared to the US (KPMG).  It is the most competitive country in terms of costs and taxes, according to Global Benchmark Report 2011, published by the Danish Industry Confederation. The most competitive manufacturing costs for the North American market.  The Alix Partners Manufacturing Cost ranks Mexico as the best, with a 25% advantage in terms of costs for the US.  Better than all the BRIC countries. Source: Competitive Alternatives 2010, KPMG; Global Benchmark Report 2011, of the Danish Industry Confederation; Manufacturing Outsourcing Cost Index 2010, Alix Partners. We have Competitive Cost Advantages for manufacturing The lowest logistics and manufacturing costs in the North American market. 16

More than 100,000 engineers and technicians graduate every year from science and technology programs.  Which exceeds the number of graduates in countries such as Germany, Canada, United Kingdom and Brazil. Highly Skilled Talent 17 Source: Ministry of Economy, INEGI, The National Council of Science and Technology (CONACYT), The National Association of Universities and Higher Education Institutions (ANUEIS), National Science Foundation

Demographics are on Our Side Source: Oxford Economics, Creating Jobs in a Global Economy; INEGI, 2011; Population Projections for Mexico , CONAPO.  47 million in 2010 were in the labor force.  Mexico will be one of the countries to experience the largest labor growth between 2010 and  By 2025, Mexico will reach its lowest dependency rate (children and seniors/EAP).  According to forecasts, there will be more than 60 million people of productive age by million inhabitants with an average age of 29 years. Demographic bonus in Mexico, Demographic bonus Dependents for every 100 people Seniors Children and youth Total 18

FDI CONFIDENCE Chapter II 19

An Important Destination for FDI According to UNCTAD, Mexico’s FDI grew by 22% in According to UNCTAD, Mexico is top of mind for transnational companies Source: World Investment Report 2011, World Investment Prospects Survey , UNCTAD; Survey on Expectations of Economy Experts in the Private Sector, Banxico, Ministry of Economy. Meanwhile, global flows experienced a 5% growth. The value of FDI reached billion dollars in By 2011, 19 billion dollars in FDI are expected to reach Mexico. China United States Peru Taiwan Russia Singapore United Kingdom Brazil Thailand Vietnam Mexico India Poland Indonesia Australia Germany Between 2005 and 2010, Mexico ranked above Brazil, China and India in terms of FDI received per capita. 20 During the first half of 2011, Mexico attracted 10.6 billion USD of FDI.

FDI Confidence FDI, Confidence Index 2010 Mexico was ranked 8 th in terms of FDI confidence index by AT Kearney.  A rise of 11 places, compared to Source: FDI Investing Index, AT Kearney China United States India Brazil Germany Poland Australia Mexico Canada United Kingdom United Arab Emirates Vietnam France Hong Kong Other Gulf countries Romania Czech Republic Russia Indonesia Malaysia 21

MEXICO AS STRATEGIC GLOBAL LEADER Chapter IV

ProMéxico’s strategy 23 ManufacturesServices Aerospace Automotive E&E Renewable energies and energy efficiency Creative industries IT Added value Agro- industry (integral) Mining (integral) Sectors Primary Economy Secondary Economy Tertiary Economy Life Sciences Infrastructure, educative services and economic policy

Strategic Industries Automotive  Mexico is the ninth vehicle producer in the world.  And the 6 th vehicle exporter worldwide.  The value of our vehicle exports is twice that of Brazil and India combined.  We are a strategic supplier to the North and Latin American automotive markets. 11% of all cars and light trucks sold in the US were manufactured in Mexico. 18 of the main OEM's have facilities in Mexico. 90 of the top 100 auto parts companies in the world have production operations in Mexico. Source: Global Trade Atlas (HS code 87); AMIA, Ward’s Automotive Reports 2010; Ministry of Economy. 24

Aerospace Mexico is the leading receiver of FDI projects in aerospace manufacturing (between 1990 and 2010).  6 th in FDI projects related to R&D.  8 th supplier to the US in this industry.  232 aerospace sector companies, employing more than 30 thousand individuals.  Mexico manufactures sophisticated added value products (LearJet 85). Source: Aerostrategy 2010; US Census Bureau; Ministry of Economy; Bombardier. Strategic Industries 25

Electronics and home appliances  Mexico is the leading exporter of flat screen TVs in the world.  Second exporter of refrigerators and freezers.  Third exporter of mobile phones.  Sixth exporter of home appliances globally. Source: Global Trade Atlas (HS Code , 8418, ). Strategic Industries 26

Renewable energies Source: Unlocking The Sunbealt, EPIA; Asociación Mexicana de Geotermia, AMG; Atlas de Recursos Eólicos, AMDEE. Mexico is ranked fourth in the world in geothermal power generation (958 MW installed that generate more than 6,500 GWh/year). Mexico ranks among the top countries with the highest solar irradiation. It is part of the "sun belt", which could generate large amounts of energy to self-sufficiency and export. The state of Oaxaca, in Mexico, is one of the most privileged of the world in terms of wind power potential (close to 6,000 MW). Mexico is the leading provider of solar photovoltaic modules in Latin America, with a production capacity of 245 MW (above Brazil, Chile and Argentina). 27 Strategic Industries

Agroindustries Source: Global Trade Atlas (HS Code 07, , , , 0702, ); Ministry of Economy and Ministry of Agriculture (Mexico), FAO. Leading exporter of vegetables, roots and tubers in the Americas. Leading producer and exporter of avocado. Leading exporter of papaya, mango and powdered and sweetened cocoa. Second world exporter of fresh tomatoes. 28 Strategic Industries

Mining  Fourth destination receiving investments in mining exploitation.  Leading producer of silver and second producer of fluorite. Source: Metals Economic Group, The Silver Institute, Mining Statistics Yearbook. Strategic Industries 29

Creative Industries Mexico is the largest exporter of creative goods in Latin America. It is the world’s 6 th exporting country of New Media. Mexico is ranked as the destination with the largest competitive advantage for software, video games, Web and multimedia development, compared to 102 countries. Creative industries in Mexico contribute with 4.77% of the country’s GDP. The Fondo ProAV promotes investments in this industry. Source: Competitive Alternatives 2010, KPMG; Creative Economy Report 2010, United Nations. NEW MEDIA: animation, video games, software and digital content.. Strategic Industries 30

THE AUTOMOTIVE INDUSTRY IN MEXICO Chapter V

Sector Strategy Specialization. More quality, more added value. Duty free import vehicles to offer in Mexico. Competitive parts and components. Commercial world wide opening.

AMIA´s Report 2010 vs (units) PeriodProductionExportsDomestic Sales October ,648192,84175,747 October ,707166,93174,094 Difference in % Total difference 19,94125,9101,653 Jan – Oct ,146,3071,773,492707,083 Jan – Oct ,881,5991,543,738639,883 Difference in % Difference in units 264,708229,75467,200 Source: ProMéxico with data from AMIA, October 2011.

PeriodProductionExportsDomestic Sales September ,37010,1882,643 September ,3584,8072,783 Difference in % Total difference 5,0125, Jan – Sept ,63576,13923,920 Jan – Sept ,53244,19820,845 Difference in % Difference in units 35,10331,9413,075 ANPACT´s Report 2010 vs (units) Source: ProMéxico with data from ANPACT, September 2011.

Heavy Vehicle Importance in Mexico Source: ANPACT: ABC Indutria Manufacturera de Vehículos de Transporte, 2011 edition. Mexican Heavy Vehicle production, represents 4.5% of the total manufacturing GDP value. Generates a total of 103,550 employees. 15,550 direct employees. 88,000 indirect employees. Mexico is the 8 TH worldwide producer of heavy vehicles (2010), just after China, Japan, India, Brazil, United States, Germany and Indonesia.

INA´s Report 2010 vs (mdd) vs 10 (%) Production % Exports % Domestic Sales % 84% of the top 100 global auto parts manufacturers have presence in Mexico and the vast majority of them are of foreign origin.* Mexico has over 1,400 auto parts companies (Tier 1, 2, 3). The auto parts sector in 2010 showed an increase of 49% over the previous year, with revenues of 62 billion USD, of which, 65% were exports valued at 38 billion dollars.** Mexico remains as the # 1 automotive parts supplier to the U.S.** Source *: ProMéxico with AASA (Automotive Aftermarket Suppliers Association) information and Ernst & Young y Automotive News “100 top suppliers” Ciiam with INA, INEGI and Global Trade Atlas. INA with data from INEGI (Table).ProMéxico with INA data (Diario Milenio, Tractoportal, 2010).

Importance of Mexican Industry in the World World Production – 2010 (million units) Mexico is the 9 TH worldwide producer of vehicles (The International Organization of Motor Vehicle Manufacturers, 2010). The value of Mexican exports was higher than the BRIC countries, and placed it in the 6 th position globally (ProMéxico, with data from Global Trade Atlas, 2010). 11 out of 100 vehicles, light and heavy, sold in the United States are produced in Mexico (AMIA with information from Ward´s Auto Info Bank, 2010). SOURCE: The International Organization of Motor Vehicle Manufacturers (OICA).

Mexico's share in the worlds’ - vehicle production (millions units) Mexico in the World Despite of 2009 crisis, Mexico reflected a strong and solid market.

There are almost 500,000 direct employees related to the Automotive Industry in Mexico Employees Automobile & Truck Manufacturing 53,985 Body parts and Trailers Manufacturing 10,592 Automotive components 413,039 Source: Economic Information Bank (BIE) and INEGI (December 2010)

Who is producing in Mexico? GM Ford Chrysler/Fiat Nissan Honda Toyota Volkswagen BMW Mazda (2013) Freightliner Scania Volvo Mercedes Benz Kenworth International Volkswagen Giant Motors Hino Isuzu Dina Detroit Diesel Man Cummins Passenger vehiclesCommercial vehiclesEngines

Mexican Automotive Industry Geographic Location

Domestic Production CompanyModelType Fusion*, Milan* & Lincoln MKZ Hermosillo, Sonora Medium & Luxury sedans * Including hybrid versions Beetle, Jetta (sedan & variant) Puebla, Puebla Medium / Compact Captiva & Cadillac SRX / Avalanche & Escalade EXT Ramos Arizpe, Coahuila / Silao, Guanajuato SUV’s & Crossover Types Journey/Fiat 500 Toluca, Estado de México SUV & Small Size Vehicle Tacoma Mexicali, Baja California Pick-up Truck Tiida, Versa & Sentra Aguascalientes, Aguascalientes Compact Sedans & Hatchback New CR-V El Salto, Jalisco SUV BMW Series 5 & X5 (Armored / Security ver.) Lerma, Mexico´s State Sedan and SUV

CompanyProject 975 Million USD Investment: Ramos Arizpe, Coahuila: New Engines & Assembly Plant. Toluca, Estado de México: New Engines & Aluminum Foundry Plant. 1,190 new jobs. 3 Billion USD Investment: Cuautitlán: New “Fiesta” sedan & hatchback. Chihuahua: New Diesel Engines (expansion). Guanajuato: New Getrag Transmissions Plant. 4,600 new jobs. 550 Million USD Investment: Toluca: 1 st. Chrysler / FIAT Strategic Project: FIAT 500 (2011). 500 new jobs. Projects

CompanyProject 2.3 Billion USD Investment: 1 billion USD in Puebla for its 2 nd Facility (New Jetta A6, 2010). 836 millions USD in Guanajuato for a new Engines Plant (2010). 470 millions USD in Puebla for the new Beetle. 4,300 new jobs. 800 Million USD Investment: Celaya, Guanajuato: New Honda Facility (2014). Automobile Manufacturing. 3,200 new jobs. 500 Million USD Investment: Salamanca, Guanajuato Plant (2013). Mazda 2/Mazda 3/ Engines. First Assembly and Engine Plant 3,000 new jobs. Projects

Investing Incentives in Mexico Programs Fostering R&D Science and Technology Fund for R&D, technology development or technology transfer. Income Tax Credit on projects for R&D, process and product design. Support Program for the Development of New Enterprises Based on Scientific and Technological Advances (AVANCE). Tax Incentives Special incentives for Strategic Projects (Automotive, Aerospace, Electronic, Nanotechnology). Immediate Capital Investment Deduction. Reduced income tax and trade facilitation programs for export oriented companies. Reduced Social Security liabilities for first time employees.

Investing Incentives in Mexico Labor Training Labor training support programs. Special scholarships for international in house industrial training for engineers abroad. State and Local Incentives Infrastructure. Land reserves and build to suit leasing available. Property tax of payroll tax credits.

President´s strategy for the Mexican Automotive Industry Automotive Sector as the industrial activity priority number one! Focus on Competitiveness and Technological Innovation. More aggressive and more focused on support schemes (built on what we already have). Maximize synergies with others successful Industries in Mexico. Linkage between Academia, Industry & Government. Taking advantage of the benefits of the largest FTA Network.

WHAT THE WORLD SAYS ABOUT MEXICO Chapter VI

Say that*… Foreign Chambers of Commerce in Mexico and Trade Councils such as:  95% consider that Mexico’s business environment is favorable or very favorable  Mexico is 74% more profitable than other emerging economies  The Swedish Trade Council  German- Mexican Chamber of Commerce and Industry (CAMEXA) What the World Says about Mexico 49 * Based on interviews with members

Goldman Sachs: Growth Markets 50

IDB: It’s Time to Invest in Mexico 51

Mexico was ranked 6 th by AT Kearney’s Global Services Location Index The best in the Americas. 52 Source: Offshoring Opportunities Amid Economic Turbulence, AT Kearney Mexico is the Choice for Services

Mexico is the most influential country in Latin America and the only country in the region to rank among the 20 most influential in the world, according to Spain’s Elcano Royal Institute of International and Strategic Studies. 53 Source: Elcano Global Presence Index. The Most Influential Country in Latin America

MEXICO’S WEALTH: BEYOND ITS ECONOMY Chapter VII

Mexico’s Wealth Mexico is Latin America’s leading tourist destination and the eleventh in the world.  22 million tourists from around the world (a value of billion dollars).  The second luxury tourist destination in the world.  The country with the largest number of spas. Source: World Tourism Organization, Tourism Highlights 2011 Edition; SECTUR. 55

Biodiversity With a territory of almost 1 million km 2, Mexico is home to 10% of the world’s species biodiversity.  Monarch Butterfly Biosphere Reserve.  Grey Whale Sanctuary of El Vizcaíno.  The world’s second largest coral reef. Source: SEMARNAT. 56

Culture and History  110,000 historic monuments  30,000 archaeological sites  31 sites declared “World Heritage” by UNESCO  Sixth country with the largest number of World Heritage sites  One of two unique cuisines in the world declared Intangible World Heritage  2012, one more step in the cycle of the Mayan calendar Source: UNESCO, SECTUR. 57

Quality of Life Mexico is the favorite retirement destination among our North American neighbors.  Close to 20% of North American expatriates live in Mexico (1 million people). Source: U.S. Embassy/ American Living 58

SUCCESS STORIES Chapter VIII

Mexico is a Very Attractive Platform for Lego- Financial Times Lego established its plant in Monterrey in Currently, close to 1/3 of the company’s global production is made in Mexico. According to the company, producing in Mexico is 20% cheaper than anywhere else in the world. The Monterrey plant has a loss of 43 defective pieces per million, compared to 114 in Hungary and 350 in Denmark. Source: Financial Times (published on July 29, 2011).

The Aerospace Industry Takes Off in Mexico 85% of the LearJet was manufactured in Mexico. Mexico offers savings between 25% and 30% compared to the US and Japan. GE, the world’s leading aircraft engine manufacturer, has its largest research and design center outside the US and Canada in Querétero. Source: The Wall Street Journal (published on July 28, 2011). 61

PIMCO Suggests Investing in Mexico “Investors should look towards countries that have cleaner instruments and higher interest rates, such as Mexico” Bill Gross, CEO of PIMCO Source: CNN Expansión (published on August 2, 2011). 62

China vs. Mexico “We are seeing a major relocation of companies from China to Mexico” Gabriel Casillas, JP Morgan Source: Miami Herald (published on August 10, 2011):

ABOUT PROMÉXICO Chapter IX

ProMéxico’s role Mexican government’s agency in charge of: Attracting foreign investment to our country. Supporting exports of Mexican goods. Helping Mexican companies go global.

What can we do for you? Information and Advice Training in international business Advice on export procedures, documentation and tariffs Market studies Access to Markets Technical assistance to improve production processes and products Support for compliance with international standards System for contact with foreign buyers (B2B) Promotion Business agendas and travel grants Investment and export missions International fairs Accompaniment and Contact Investor aftercare Investment attraction support programs Contact with public and private sectors and academia

Thank you! 67