1. Government Incentives for Vertical Supply Chain Development in Mexico
Luis Landa
September, 2014

2. Motivation
We represent the National Institute for the Entrepreneur (NIE), which is part of Mexico´s Ministry of the Economy.
We are peers with Korea´s SMBA
We are gathered here to promote a work agenda between the NIE and Korean firms established or soon to be established in Mexico in the automotive, electronic and household appliances sectors.
Source: Ministry of the Economy

3. Basic facts about Mexico
Before explaining what we have to offer, some basic facts are necessary to set forth:
Mexico is an upper middle income country with one of the highest per-capital incomes in LA
12th – 14th largest economy of the world about the size of Korea
Member of the OECD and G20
Free Trade Agreements with more than 40 countries
Total annual trade exceeding US$ 800 bn.
75% of exports to US and Canadian markets
Source: Ministry of the Economy

4. More basic facts about Mexico
Electronic industry exported USD$ 75 billion in 2012
1st largest exporter of flat screen televisions – US$ 15 bn.
5th largest exporter of computers – US$ 18 bn.
10th largest exporter of cell phones – US$ 4.5 bn.
84% directed to the US market
In 2012 ,860 economic units specialized in the electronic industry and employed more than 466,000
Source: Ministry of the Economy

5. Still more basic facts about Mexico
Household appliances industry exported US$ billion in 2012
1 st largest exporter of refrigerators with a freezer – US$2.4 bn.
2nd th largest exporter of washing machines with capacity of 10kgs or less – US$ 476 million
3rd largest exporter of air conditioning , compression refrigerators and gas stoves - combined US$ 1.3 bn.
84% directed to the US market
In 2012 ,268 economic units specialized in the electronic industry and employed more than 51,000 workers
Source: Ministry of the Economy

6. Final basic facts about Mexico
In 2012 production in the autoparts industry reached US$ 75 bn.
Automotive industry exported 2.4 million units in
4th largest light vehicle exporter in the world
In 2012 , 90% of all autoparts were directed to the US market
In 2012 , 19 vehicle OEMs and more than 3,000 local suppliers, including the home of 30 design centers
Source: Ministry of the Economy

7. Korean companies operating in Mexico
Over 1,600 registered Korean companies
Contributing to Mexican anual exports with approximately US $10 Bn.
Centered in the electronics, automotive and household appliances sectors
Samsung alone has:
30% of the domestic TV market (LED and LCDS) and 50% plasma screens
32% of the domestic market of laundry washing machines

8. Korean companies in Mexico
A Korean Map of Mexico
Korean companies in Mexico
Tijuana
Chihuahua
Altamira
SLP
Puebla
Querétaro
Monterrey
Monclova
Ramos Arizpe
Tlanepantla
Manzanillo
Durango
Matamoros
5/22/2018

9. Success stories of FDI Bilateral Relationship Energy
Electric & Electronic
Samsung
– Plasma TV’s / Baja California
– Home Appliances / Querétaro
LG Electronics
– Plasma TV’s / Tamaulipas, NL, BC
Samsung C&T
– LNG Plant / Manzanillo
– Electricity Power Plant /KEPCO Chihuahua
SPECO – Wind Turbines / Coahuila
KOGAS – LNG / Colima
Mining and Metalurgy
Automotive
KIA announced new investment just last week. Cars production will start in Pesquerias/Nuevo Leon
Hyundai-Autoparts/ Tijuana Plant
DongKwang – Autoparts / Saltillo
Kafus – Autoparts / Nuevo León
Nifco – Autoparts / Nuevo León
POSCO – Steel /Tamaulipas, Puebla & SLP
KORES – Copper / Baja California Sur
5/22/2018

10. Why are we here and How does INADEM work
2014 budget of US$ 700 million
Resources channeled as subsidies to worthy projects submitted through public tenders.
Resources used to support the SME Loan Guarantee Program.
The relationships between INADEM and SME’s established by these 2 mechanisms though very important, is impersonal and purely mechanical.
Source: Ministry of the Economy

11. What we are looking for (1)
We want to take a step further in our relationship with SMEs.
We are ready to offer, develop and support strategic long term partnerships, particularly with Korean firms and their suppliers already operating or soon to start operations in Mexico.
Source: Ministry of the Economy

12. What we are looking for (2)
We want to establish partnerships with Korean firms aimed at strengthening the value chains associated with their businesses
Source: Ministry of the Economy

13. What we are looking for (3)
We are looking to increase the local component of the value chains driven by the transfer of Korean knowledge, technology and best practices
We are looking to increase competitiveness of Korean firms operating in Mexico by:
Minimizing freight and insurance costs of imports
Minimizing inventory management costs
Minimizing risk in unforeseen delays in product delivery
Increased possibility of outsourcing non-core activities.
Source: Ministry of the Economy

14. What we offer
Our strategy would focus on directing our battery of instruments aimed at:
capacity building,
technical assistance
certifications
technology transfer
development of managerial skills
networking
Incubation for new Korean firms
Acceleration
R&D Innovation and product design
venture capital
loans
Source: Ministry of the Economy

15. How would we do it
We start out with a Competitiveness Improvement Plan with support from NIE, international and local experts and Korean company businessmen. The Plan should include:
Supply chain mapping and diagnostics: Exhaustive report on the competitive situation of the firm and identification of supply chain bottlenecks and high risk areas
Identify areas of feasable import substitution
SWAT analysis

16. How would we do it (2) The Plan must consider (cont´d):
A benchmarking excercise with international and national standards
Strategic planning of the company´s future direction to best position itself in the market
and
An action plan which include invesments and corrective actions

17. How do we get started? All relationships must start with a first date
We invite all interested parties to join us in individual meetings to provide additional information about our incentives program.
Source: Ministry of the Economy

18. The National Institute
of the Entrepreneur
is waiting to be your
host in Mexico!