1. Palacio Nacional 11 Septiembre 2007 February 2010 Mexico 2010 Economic Recovery: Opportunities Between Japan and Mexico

2. Palacio Nacional 2 Mexico’s Economy GDP and Industrial Production: Mexico and U.S. (quarterly % change) l After a complicated 2009, Mexico shows strong recovery signs in synchrony with US industrial activity. Source: INEGI and Federal Reserve.

3. Palacio Nacional 3 Protection and Recovery of Labor Market (A) Non Farm Payroll (% change since peak level) l Mexico preserved thousands of employments. l Technical Strike Program, it protected thousands of highly- skilled and export-driven jobs by direct salary-transfers. l Temporary Jobs Program, those without work were employed in community-related jobs. l Mexico Business Program, provided greater liquidity for firms and increased their capacity to create employment. Source: IMSS.

4. Palacio Nacional 4 OECD Unemployment Rate (% of labor force in Nov. ‘09) l Technical Strike Program, It protected thousands of highly- skilled and export- driven jobs by direct salary- transfers. l Temporary Jobs Program, those without work were employed in community- related jobs. l Mexico Business Program, provided greater liquidity for firms and increased their capacity to create employment. Source: OECD and for Mexico in december the source is INEGI. Protection and Recovery of Labor Market (B) l Mexico preserved thousands of employments.

5. Palacio Nacional 5 Engines of Economic Recovery Mexico’s Exports (quarterly % change) Retail Stores Sales (annual % change) l Mexico’s recovery is supported on a more dynamic external demand. While domestic demand remained stable last year. Source: INEGI. Source: ANTAD, Mexico’s Stores Association.

6. Palacio Nacional 6 Outlook on Output Manufacturing and Services Expectations Index * (index points) l Industrial and Services sectors are optimistic on production recovery. Private sector expectations are above the expansion level since July 2009. Source: IMEF. * This index is analogous to the Purchasing Managers Index of the ISM in the US.

7. Palacio Nacional 7 l Several indicators showed the strength of Mexico among emerging markets. Inflation was 3.57% in 2009 and the exchange rate recovered stability. Macroeconomic Stability Nominal Exchange Rate (pesos for dollar) Country Risk: EMBI Global (basis points, average 2009) Source: JP Morgan. Inflation (annual % change) Source: Reuters. Source: Banco de Mexico.

8. Palacio Nacional 8 Source: Banco de México and SHCP. Banking System Size (% of GDP) Mexican Banking System Capitalization (capital to assets ratio, %) Banking System l The banking sector is strongly capitalized and there is a clear opportunity to increase financial penetration. Source: Banco de México and SHCP.

9. Palacio Nacional 9 Fostered Investment (as % of GDP) Fostered Investment by Sector in 2010 (million dollars) l Infrastructure investment will reach a historical maximum in 2010. It comprises projects in strategic areas to enhance economic development. Source: SHCP and SCT. e: estimated / a: approvedSource: SHCP and SCT.

10. Palacio Nacional 10 Progress on Economic Environment l Mexico has made a major effort to promote an adequate economic environment to foster foreign direct investment. Economic Freedom Index (changes in score for the 20 th largest economies) Most Attractive FDI Destinations (ranking position) Source: AT Kearney. *Gulf States are Bahrein, Kuwait, Omán and Qatar. UAE: United Arab Emirates Source: The Heritage Foundation.

11. Palacio Nacional 11 Attractive Manufacturing Costs l Recent studies by international firms showed that manufacturing costs in Mexico are lower than those in Brazil, China or India. Manufacturing Outsourcing Cost Index (% of producing costs in the US) Source: Alix Partners.

12. Palacio Nacional 12 -8% Other 1 Labor Freight Costs Mexico 307 283 China Transportation Costs and Trade l Mexico has a cost advantage in the production and transportation of manufacturing goods. Costs of a Refrigerator Sold in the U.S. (US dollars, 2009) Source: Boston Consulting Group. 1. Raw materials, depreciation, electricity, tariffs. Note: Assumes 4 hours of labor per unit. Hourly Wage in Manufacturing Sector (US dollars) 238% 14% Source: International Labour Organization and SHCP estimations (E).

13. Palacio Nacional 13 Competitiveness Operating Costs (index*, higher is more competitive) l Mexico shows clear opportunities for investment and trade. Source: Boston Consulting Group / Note:* 1 is the country average of 10 countries and 0 is the worst performance. India is the worst country in two comparatives. Transportation Costs (index*, higher is more competitive) Macroeconomic Stability (index*, higher is more competitive)

14. Palacio Nacional 14 Higher Participation in US Market l The costs and competitiveness advantages have increased the overall market share of Mexico in the US market in 1.0 percentage point. Mexico’s Share in US Imports of Manufacturing Goods (% of total of imports) Source: US Census Bureau.

15. Palacio Nacional 15 Success Story: Mexico - Japan l Trade between Mexico and Japan increased since 2005 free trade agreement. Manufacturing addressed to the U.S. has been the main engine of such trade growth. Mexico and Japan Trade (million dollars) Source: INEGI

16. Palacio Nacional 16 Structural Reforms l Two Fiscal Reforms. Increased public revenue and improved the efficiency and transparency of public expenditure. l Public Pensions. Moved from a pay as you go system to individual accounts. It saved for the government an equivalent of 30 percentage points of GDP in the medium term. l Energy Reform. Reformed nation’s oil industry widening Pemex opportunities, the state oil company, and will take advantage of specialized investment and technology in drilling and exploration. l Luz y Fuerza del Centro Liquidation. It reduced taxpayers costs of transferring significant fiscal resources to an electricity company with annual losses of around 4 billion dollars. l Political System Reform. The reform will empower citizenship and improves its involvement in the democratic process.

17. Palacio Nacional 17 The Road Ahead l Since the proposal to undertake major reforms in September 2009, progress has been made in the following areas: l Public finance reform. l Improve state-owned enterprises. l Reduction in the regulatory burdens on businesses. l Fight against organized crime. l New generation of political and economic reforms. l Investment in infrastructure. l In addition, we are working to make progress on poverty alleviation, universal health coverage, education quality, telecommunications and labor market reforms.

18. Palacio Nacional 1818 Septiembre 2007 February 2010 Mexico 2010 Economy Recovery: Opportunities Between Japan and Mexico

19. Palacio Nacional 1919 Septiembre 2007 February 2010 Annexes

20. Palacio Nacional 20 Outlook on Industrial Production Automobile Production (thousands units & annual % change) Manufacturing and Services Expectations Index 1 (index points) l Mexico’s automobile sector is recovering as worldwide demand for vehicles increases. Industrial and Services sectors are optimistic on production recovery. Source: AMIA Source: IMEF. 1. It is analogous to the Purchasing Managers Index of the ISM

21. Palacio Nacional 21 Services Location Global Services Location Index (index ranking) l Mexico has established itself as best option for locating outsourcing activities, contact centers and back-office support in North America. Source: AT Kearney.

22. Palacio Nacional 22 Source of Japanese Investment in Mexico (share by investment source) l Japan is the 10 th largest direct investor in Mexico, with 1.9 billion dollars in the last 10 years. However, an additional amount, 3.4 times larger, came from subsidiaries in the US. Source: Japan External Trade Organization in Mexico, SE. Success Stories: Mexico - Japan

23. Palacio Nacional 23 Arrested Criminals (thousands) Seized Money (million dollars) Source: Data from CENAPI Seized Cocaine (tons) Weapons Seized (thousdands) Rule of Law and Security l Mexico has taken a frontal fight against organized crime. Recently, we have improved its Systems of Criminal Justice and Public Security.