1 A PATH TOWARDS A MORE SECURE MANUFACTURING AREA IN NORTH AMERICA A deliberate and carefully considered invitation to a win-win proposition Presented by: Alejandro Dieck AUSTIN, SEPTEMBER 2, 2005

2 CONTENTS INTRODUCTION MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT PROSPECTS WE PUT FORWARDIV II I WHAT’S NEXT? WHAT CAN BE DONE ? III FINAL COMMENTSV

3 HAS NAFTA WORKED ? I. INTRODUCTION

4 Trilateral trade reached $727 billion dollars last year, % higher than pre-NAFTA levels… NAFTA: TRILATERAL TRADE (BILLION DOLLARS) Source: Ministry of Economy I. INTRODUCTION

5 Mexican exports to the U.S. have almost tripled… MEXICO: EXPORTS TO UNITED STATES (BILLION DOLLARS) Source: Ministry of Economy % I. INTRODUCTION

6 Specially, there has been a dramatic growth in bilateral trade, between U.S. and Mexico… UNITED STATES: EXPORTS TO MEXICO (BILLION DOLLARS) Source: Ministry of Economy % I. INTRODUCTION

7 NAFTA has also helped both of our countries to cope storms arising from financial crisis throughout the last decade NAFTA HAS HELPED ECONOMIES TO DEAL WITH FINANCIAL CRISIS I. INTRODUCTION

8 UNITED STATES: EXPORTS PERFORMANCE DURING ASIAN CRISIS ( ) US. BILLION DOLLARS Growth US EXPORTS TO MEXICO % US EXPORTS TO ASIA % Source: Ministry of Economy I. INTRODUCTION

9 MEXICO: FOREIGN DIRECT INVESTMENT (Billions of Dollars; Cumulative =158 bd) Source: Ministry of Economy I. INTRODUCTION

10 CONTENTS INTRODUCTION MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT PROSPECTS WE PUT FORWARDIV II I WHAT’S NEXT? WHAT CAN BE DONE ? III FINAL COMMENTSV

11 COMPLY WITH MOST DEVELOPMENT COUNTRIES (MDC) ON CRITICAL ISSUES Rule of Law 1 Intellectual Property 2 Anti-Trust Agencies 3 Human Rights 4 Labor Rights 5 Environmental Issues 6 Consumer Protection 7 II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

12 THE TRANSITION TOWARD A MODERN DEMOCRACY The Central Bank 1 The Congress 2 The Judicial Power 3 The Political Party in Power 4 The Electoral Institutions 5 THE 6 AUTONOMIES IFAI 6 II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

13 Investment Grade 1 Labor Force Growth 2 Modern Democracy: Transition Towards 7 Labor Productivity 3 Policy Making to Improve Domestic Economy 4 Industrial Policy Implementation 5 Sound Financial and Banking Sector 6 IMPROVEMENT BUSINESS CONDITIONS FOR SUSTAINABLE ECONOMIC GROWTH II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

14 It is an International financial institution created with the purpose of financing environmental infrastructure projects. The NADBANK is one of the best ways our two governments can contribute to enhance the benefits of NAFTA and to make sure we have an efficient physical infrastructure, especially at the border. We need to increase investments in border infrastructure like transportation, housing, environmental protection, water and wastewater treatment, along with the strengthening of local institutions. NORTH AMERICAN DEVELOPMENT BANK (NADBANK) DEEPER AND TRUER COOPERATION… II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

15 BORDER ENVIRONMENT COOPERATION COMMISSION (BECC) Their primary roll is to provide technical assistance to border communities and to certify environmental infrastructure projects in the border region for financing consideration by the NADBANK and other sources II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

16 FREE AND SECURE TRADE (FAST) Program designed to ensure security and safety while enhancing the economic prosperity of both countries. FAST is already working in Texas, specifically in the US cities of El Paso, Laredo, Hidalgo and Brownsville. We need to enhance security and facilitating trade… CUSTOMS TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT) Initiative between government and business designed to protect the security II. MEXICAN BUSINESS CONDITION: OPPORTUNITIES WE PROPOSE AT PRESENT

17 CONTENTS INTRODUCTION MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT PROSPECTS WE PUT FORWARDIV II I WHAT’S NEXT? WHAT CAN BE DONE ? III FINAL COMMENTSV

18 III. WHAT’S NEXT? WHAT CAN BE DONE? Construct real and effective avenues of integration, cooperation and alliances Involve universities, enterprises, associations, research centers, to profit from the growing market of the region Coordinate efforts to foster the regional automobile sector Coordinate efforts to foster every other regional opportunity, particularly in the manufacturing sector

19 III. WHAT’S NEXT? WHAT CAN BE DONE? Create the Pro-America Financial Intermediaries Association that will facilitate the (financial) resources allocation to areas where they are scarce and hence expensive Design mechanisms by which Mexican companies or individuals could be considered eligible for applying to programs where minorities have some preferences Design mechanisms to promote consumption of goods and services of the region

20 CONTENTS INTRODUCTION MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT PROSPECTS WE PUT FORWARD IV II I WHAT’S NEXT? WHAT CAN BE DONE ? III FINAL COMMENTSV

21 POSITIVE OUTLOOK WHEN STRUCTURAL REFORMS OCURR POSITIVE OUTLOOK WHEN STRUCTURAL REFORMS OCURR FISCAL Sound Policy Growth Oriented LABOR More Flexible Labor Market ENERGY A World Class Competitive Energy Sector TELECOMMUNICATIONS Improved Level of Competition in the Sector IV. PROSPECTS WE PUT FORWARD

22 SECTOR WIDE INVESTMENT OPPORTUNITIES MANUFACTURINGSERVICES 1. AGROBUSINESS 2. FOOD AND BEVERAGES 3. AUTOMOTIVE AND AUTOPARTS 4. PAPER 5. STEEL 6. SHOES 1. CONSTRUCTION (HOUSING) 2. FINANCING 3. ENVIRONMENTAL CARE 4. REAL ESTATE 5. FISHING 6. TOURISM 7. GOVERNMENT PROCUREMENT 8. ENERGY IV. PROSPECTS WE PUT FORWARD

23 CONTENTS INTRODUCTION MEXICAN BUSINESS CONDITIONS: OPPORTUNITIES WE PROPOSE AT PRESENT PROSPECTS WE PUT FORWARDIV II I WHAT’S NEXT? WHAT CAN BE DONE ? III FINAL COMMENTS V

24 FINAL STATEMENTS Globalization itself is changing; so does the way we need to adjust to it Other economic areas have shown more aggressiveness on the matter Limited progress could be explained by the priority security has gained since 9-11 We have before us an opportunity to set an example that can be emulated by other states in the Union

25 ALEJANDRO DIECK Chief of Staff of the Minister of Economy in Mexico +52(55) &