a global country report on pdf 2012/717 - mexico.pdf · chapter - 1 ―demographic profile of...
TRANSCRIPT
A Global Country Report on
―Mexico Country‖
Submitted to
GUJARAT TECHNOLOGICAL UNIVERSITY
UNDER THE GUIDANCE OF
Assistant Professor Priya Panchal
Golden Jubilee Institute of Management &
Technology, Sidhpur
Institute code : (717)
MBA PROGRAMME
Affiliated to
GUJARAT TECHNOLOGICAL UNIVERSITY
Ahmedabad
January, 2012
1
PART - I
2
CHAPTER - 1
―DEMOGRAPHIC PROFILE OF MEXICO‖
3
1.1 Demographics of Mexico
With a population 112.3 in 2011, Mexico is the most populous Spanish-speaking
country in the world, the second-most populous country in Latin America after
Portuguese-speaking Brazil, and the second in North America, after the United
States. Throughout most of the twentieth century Mexico's population was
characterized by rapid growth. Even though this tendency has been reverted and
average annual population growth over the last five years was less than 1%, the
demographic transition is still in progress, and Mexico still has a large cohort of
youths. The most populous city in the country is the capital city, Mexico City, with a
population of 8.7 million (2005), and its metropolitan area is also the most populous
in the country with 19.2 million (2005). Approximately 50% of the population lives in
one of the 55 large metropolitan areas in the country.
The Census Bureau in Mexico is the Instituto Nacional de Estadística y Geografía
(INEGI). The National Population Council (CONAPO), is an institution under the
Secretary of the Interior in charge of the analysis and research of population
dynamics. The National Commission for the Development of Indigenous Peoples
(CDI), amongst other things, undertakes research and analysis of the socio
demographic and linguistic indicators of the indigenous peoples in Mexico.1
1.1.2 Age structure:
0-14 years: 28.2% (male 16,395,974/female 15,714,182)
15-64 years: 65.2% (male 35,842,495/female 38,309,528)
65 years and over: 6.6% (male 3,348,495/female 4,113,552) (2011 est.)
This entry provides the distribution of the population according to age. Information is
included by sex and age group (0-14 years, 15-64 years, 65 years and over). The
age structure of a population affects a nation's key socioeconomic issues. Countries
with young populations (high percentage under age 15) need to invest more in
schools, while countries with older populations (high percentage ages 65 and over)
need to invest more in the health sector. The age structure can also be used to help
1 http://en.wikipedia.org/wiki/Demographics_of_Mexico
4
predict potential political issues. For example, the rapid growth of a young adult
population unable to find employment can lead to unrest.2
1.1.3 Median Age:
Age total: 27.1 years
Male: 26 years
Female: 28.1 years (2011 est.)
This entry is the age that divides a population into two numerically equal groups; that
is, half the people are younger than this age and half are older. It is a single index
that summarizes the age distribution of a population. Currently, the median age
ranges from a low of about 15 in Uganda and Gaza Strip to 40 or more in several
European countries and Japan. See the entry for "Age structure" for the importance
of a young versus an older age structure and, by implication, a low versus a higher
median age.
1.1.4 Population Growth Rate: 1.102% (2011 est.)
The average annual percent change in the population, resulting from a surplus (or
deficit) of births over deaths and the balance of migrants entering and leaving a
country. The rate may be positive or negative. The growth rate is a factor in
determining how great a burden would be imposed on a country by the changing
needs of its people for infrastructure (e.g., schools, hospitals, housing, roads),
resources (e.g., food, water, electricity), and jobs. Rapid population growth can be
seen as threatening by neighboring countries.3
1.1.5 Birth Rate: 19.13 births/1,000 population (2011 est.)
This entry gives the average annual number of births during a year per 1,000
persons in the population at midyear; also known as crude birth rate. The birth rate is
2 http://www.indexmundi.com/mexico/demographics_profile.html
3 http://en.wikipedia.org/wiki/List_of_countries_by_population_growth_rate
5
usually the dominant factor in determining the rate of population growth. It depends
on both the level of fertility and the age structure of the population.4
1.1.6 Death Rate: 4.86 deaths/1,000 population (July 2011 est.)
This entry gives the average annual number of deaths during a year per 1,000
population at midyear; also known as crude death rate. The death rate, while only a
rough indicator of the mortality situation in a country, accurately indicates the current
mortality impact on population growth. This indicator is significantly affected by age
distribution, and most countries will eventually show a rise in the overall death rate, in
spite of continued decline in mortality at all ages, as declining fertility results in an aging
population.5
1.1.7 Net Migration Rate: -3.24 migrant(s)/1,000 population (2011 est.)
This entry includes the figure for the difference between the number of persons entering
and leaving a country during the year per 1,000 persons (based on midyear population).
An excess of persons entering the country is referred to as net immigration (e.g., 3.56
migrants/1,000 population); an excess of persons leaving the country as net emigration
(e.g., -9.26 migrants/1,000 population). The net migration rate indicates the contribution
of migration to the overall level of population change. High levels of migration can cause
problems such as increasing unemployment and potential ethnic strife (if people are
coming in) or a reduction in the labor force, perhaps in certain key6 sectors (if people are
leaving).
1.1.8 Urbanization: Urban population: 78% of total population (2010)
Rate of Urbanization: 1.2% annual rate of change (2010-15 est.)
This entry provides two measures of the degree of urbanization of a population. The first,
urban population, describes the percentage of the total population living in urban areas,
4 http://www.indexmundi.com/mexico/birth_rate.html
5 http://www.indexmundi.com/mexico/death_rate.html
6
as defined by the country. The second, rate of urbanization, describes the projected
average rate of change of the size of the urban population over the given period of time.
Additionally, the World entry includes a list of the ten largest urban agglomerations. An
urban agglomeration is defined as comprising the city or town proper and also the
suburban fringe or thickly settled territory lying outside of, but adjacent to, the boundaries
of the city.7
1.1.9 Sex Ratio: At Birth: 1.05 male(s)/female
Under 15 years: 1.04 male(s)/female
15-64 years: 0.94 male(s)/female
65 years and Over: 0.82 male(s)/female
Total Population: 0.96 male(s)/female (2011 est.)
This entry includes the number of males for each female in five age groups - at
birth, under 15 years, 15-64 years, 65 years and over, and for the total population.
Sex ratio at birth has recently emerged as an indicator of certain8 kinds of sex
discrimination in some countries. For instance, high sex ratios at birth in some
Asian countries are now attributed to sex-selective abortion and infanticide due to a
strong preference for sons. This will affect future marriage patterns and fertility
patterns. Eventually, it could cause unrest among young adult males who are
unable to find partners.
1.1.10 Infant Mortality Rate: Total: 17.29 deaths/1,000 live births
Male: 19.14 deaths/1,000 live births
Female: 15.36 deaths/1,000 live births (2011 est.)
This entry gives the number of deaths of infants under one year old in a given year per
1,000 live births in the same year; included is the total death rate, and deaths by sex,
male and female. This rate is often used as an indicator of the level of health in a country.
7 http://www.indexmundi.com/mexico/urbanization.html
8 http://www.indexmundi.com/mexico/demographics_profile.html
7
1.1.11 Life Expectancy at Birth: Total Population: 76.47 years
Male: 73.65 years
Female: 79.43 years (2011 est.)
This entry contains the average number of years to be lived by a group of people born in the
same year, if mortality at each age remains constant in the future. The entry includes total
population as well as the male and female components. Life expectancy at birth is also a
measure of overall quality of life in a country and summarizes the mortality at all ages. It can
also be thought of as indicating the potential return on investment in human capital and is
necessary for the calculation of various actuarial measures.
1.1.12 Total Fertility Rate: 2.29 children born/woman (2011 est.)
This entry gives a figure for the average number of children that would be born per woman
if all women lived to the end of their childbearing years and bore children according to a
given fertility rate at each age. The total fertility rate (TFR) is a more direct measure of the
level of fertility than the crude birth rate, since it refers to births per woman. This indicator
shows the potential for population change in the country. A rate of two children per woman
is considered the replacement rate for a population, resulting in relative stability in terms of
total numbers. Rates above two children indicate populations growing in size and whose
median age is declining. Higher rates may also indicate difficulties for families, in some
situations, to feed and educate their children and for women to enter the labor force. Rates
below two children indicate populations decreasing in size and growing older. Global
fertility rates are in general decline and this trend is most pronounced in industrialized
countries, especially Western Europe, where populations are projected to decline
dramatically over the next 50 years.
1.1.13 Nationality:
Noun: Mexican(s)
Adjective: Mexican
This entry provides the identifying terms for citizens - noun and adjective.
8
Ethnic Groups: Mestizo (Amerindian-Spanish) 60%, Amerindian or
predominantly Amerindian 30%, white 9%, other 1%. This entry provides an
ordered listing of ethnic groups starting with the largest and normally includes the
percent of total population.9
Religions: Roman Catholic 76.5%, Protestant 6.3% (Pentecostal 1.4%,
Jehovah's Witnesses 1.1%, other 3.8%), other 0.3%, unspecified 13.8%, none
3.1% (2000 census). This entry is an ordered listing of religions by adherents
starting with the largest group and sometimes includes the percent of total
population.
Languages: Spanish only 92.7%, Spanish and indigenous languages 5.7%,
indigenous only 0.8%, unspecified 0.8% This entry provides a rank ordering of
languages starting with the largest and sometimes includes the percent of total
population speaking that language
1.1.14 Total Population: 86.1%
Male: 86.9%
Female: 85.3%
This entry includes a definition of literacy and Census Bureau percentages for the total
population, males, and females. There are no universal definitions and standards of
literacy. Unless otherwise specified, all rates are based on the most common definition -
the ability to read and write at a specified age. Detailing the standards that individual
countries use to assess the ability to read and write is beyond the scope of the Factbook.
Information on literacy, while not a perfect measure of educational results, is probably the
most easily available and valid for international comparisons. Low levels of literacy, and
education in general, can impede the economic development of a country in the current
rapidly changing, technology-driven world.
1.1.15 Education Expenditures: 4.8% of GDP
This entry provides the public expenditure on education as a percent of GDP.
9 http://www.indexmundi.com/mexico/demographics_profile.html
9
1.1.16 Maternal Mortality Rate: 85 deaths/100,000 live births.
The maternal mortality rate (MMR) is the annual number of female deaths per 100,000
live births from any cause related to or aggravated by pregnancy or its management
(excluding accidental or incidental causes). The MMR includes deaths during pregnancy,
childbirth, or within 42 days of termination of pregnancy, irrespective of the duration and
site of the pregnancy, for a specified year.
1.16 Children under the age of 5 years underweight: 3.4%.
This entry gives the percent of children under five considered to be underweight.
Underweight means weight-for-age is approximately 2 kg below for standard at age one,
3 kg below standard for ages two and three, and 4 kg below standard for ages four and
five. This statistic is an indicator of the nutritional status of a community. Children who
suffer from growth retardation as a result of poor diets and/or recurrent infections tend to
have a greater risk of suffering illness and death.
1.1.17 Health Expenditures: 13.8% of GDP
This entry provides the total expenditure on health as a percentage of GDP. Health
expenditures are broadly defined as activities performed either by institutions or
individuals through the application of medical, paramedical, and/or nursing knowledge
and technology, the primary purpose of which is to promote, restore, or maintain health.
1.1.18 Physicians Density:
2.893 physicians/1,000 population. This entry gives the number of medical doctors
(physicians), including generalist and specialist medical practitioners, per 1,000 of the
population. Medical doctors are defined as doctors that study, diagnose, treat, and
prevent illness, disease, injury, and other physical and mental impairments in humans
through the application of modern medicine. They also plan, supervise, and evaluate care
and treatment plans by other health care providers. WHO estimates that fewer than 23
10
health workers (physicians, nurses, and midwives only) per 10,000 would be insufficient
to achieve coverage of primary healthcare needs.10
1.1.19 Race:
Neither the INEGI nor the CONAPO classify the population according to race. Most of
these are the descendants of the Spanish colonial population called criollo. However,
other immigrants arrived during the Second Mexican Empire (mostly French) and during
the late nineteenth and early twentieth century‘s, mostly from Italy, the United Kingdom,
Ireland and Germany. White Americans, Croats, Armenians, Greeks, Germans, Polish,
Romanians, Russians and Ashkenazi Jews, along with many Spanish refugees fleeing
the Spanish Civil War of 1937 who also immigrated seeking asylum or better economic
prospects.The European Jewish immigrants joined the Sephardic community that lived in
Mexico since colonial times, though many lived as Crypto-Jews, mostly in the northern
states of Nuevo León and Tamaulipas. Some communities of European immigrants have
remained isolated from the rest of the general population since their arrival, amongst
them the Dutch Mennonites of Chihuahua and Durango, the Venetos of Chipilo, Puebla,
which have retained their original languages. 11
1.1.20 Genetic Research:
A study presented by the American Society of Human Genetics has showed (based on
genes) that, on average, Mestizo Mexicans are (genetically) 58.96% European, 35.05%
"Asian" (Amerindian), and 05.03% African. Sonora shows the highest European
contribution (70.63%) and Guerrero the lowest (51.98%) where we also observe the
highest Asian contribution (37.17%). African contribution ranges from 2.8% in Sonora to
11.13% in Veracruz. 80% of the Mexican population was classed as mestizo (meaning
being racially mixed in some degree).
Another study however, performed by the National Institute of Genetic Medicine
(INMEGEN) in Mexico and supported by the government in the country showed that the
Mestizo population in Mexico were on average 55% of indigenous ancestry followed by
10
http://www.indexmundi.com/mexico/demographics_profile.html 11
http://en.wikipedia.org/wiki/Demographics_of_Mexico#Race
11
41.8 % of European, 1.8% of African, and 1.2% of East Asian ancestry. The sample size
used for this research involved 300 Mestizos who were picked from the states of
Guerrero, Sonora, Veracruz, Yucatán, Zacatecas, and Guanajuato. Whereas Mestizo
individuals from the state of Guerrero showed on average 66% of indigenous ancestry,
those from the state of Sonora displayed about 61.6% European ancestry. There was a
clear increase in indigenous ancestry as one traveled towards the Southern states in
Mexico, while the indigenous ancestry declined as one traveled to the Northern states in
the country, such as Sonora. The name of this paper was titled "Analysis of genomic
diversity in Mexican Mestizo populations to develop genomic medicine in Mexico" by
researchers such as Irma Silva-Zolezzi1 and others12.
1.2 Mexican Nationality and Citizenship:
The Constitution of Mexico grants Mexican nationality based on birth and naturalization.
Mexican laws regarding nationality by birth are very open. Mexican nationality by birth is
granted to: 13
All those individuals born in Mexican territory,
All those individuals born outside Mexico, whose father or mother is Mexican by
birth,
All those individuals born outside Mexico, whose father or mother is Mexican by
naturalization,
All those individuals born in Mexican aircraft or sea vessels, whether warships or
commercial vessels.
Mexican nationality by naturalization is granted to:
Foreign citizens granted Mexican nationality by the Secretariat of Government
(Ministry of the Interior);
Foreign citizens married to a Mexican national, whether by birth or naturalization.
12
http://en.wikipedia.org/wiki/Demographics_of_Mexico#Genetic_research 13
http://en.wikipedia.org/wiki/Demographics_of_Mexico#Mexican_nationality_and_citizenship
12
CHAPTER - 2
―ECONOMIC OVERVIEW OF MEXICO COUNTRY‖
13
Mexico, the second largest economy in Latin America, is recovering from a brief but very
deep recession -resulting mostly from its heavy reliance on oil exports and its trade with
the United States.14
According to CONEVAL the number of Mexicans living in poverty increased by 3.2 million
from 2008 to 2010, following the global economic crisis. It implies that around 46.2
percent of Mexico's total population, live in poverty, mainly in urban areas. Meanwhile,
extreme poverty reduced slightly from 10.4 to 10.2 percent .The fact that extreme poverty
held steady over that period is attributed to targeted social protection programs.
The Mexican economy has embarked on a strong recovery from the recession of 2008-
09. Initially driven by exports, activity is expected to be increasingly supported by
domestic demand. After a strong rise in 2010 to 5½ per cent, GDP growth will ease in
2011 (4½ per cent) and 2012 (3.8%), as the expansion of exports will normalize.
2.1 Major Contributor to Mexico’s GDP
1. Agriculture
2. Manufacturing
3. Service
4. Infrastructure Development
1. Agriculture:15
In most agriculture remains mired in the past, with production techniques reminiscent of
those prevailing in the l9th century in Europe or North America. Agriculture is the greatest
failure of modern Mexico. Twenty five percent of Mexico's population lives in the
countryside, but agriculture production represents only 9% of the country's gross
14
http://en.wikipedia.org/wiki/Economy_of_Mexico 15
http://en.wikipedia.org/wiki/Economy_of_Mexico
14
domestic product. Average agricultural productivity in the U.S. is almost 20 times bigger
than in Mexico.It is not the workers who are different, but the production system. The
excessive fragmentation of land in Mexico and the lack of clear property rights are two of
the reasons why agricultural productivity is so low in Mexico. Lands was divided and
subdivided, and then distributed in ejidos –which peasants could work in but did not own
outright.
2. Manufacturing:
CEMEX plant on the outskirts of Monterrey. 16 Among the most important industrial
manufacturers in Mexico is the automotive industry, whose standards of quality are
internationally recognized. The automobile sector in Mexico differs from that in other Latin
American countries and developing nations in that it does not function as a mere
assembly manufacturer. The industry produces technologically complex components and
engages in some research and development activities, an example of that is the new
Volkswagen Jetta model with up to 70% of parts designed in Mexico. The "Big Three"
(General Motors, Ford and Chrysler) have been operating in Mexico since the 1930s,
while Volkswagen and Nissan built their plants in the 1960sLater, Toyota, Honda, BMW,
and Mercedes-Benz joined in.
3. Service Sector17
Communications:
The once government own only telephone company (TELMEX) was privatize during the
Salinas administration with 2 goals:
1. Gradually open the telephone market
2. Ensure enough money available for the huge investments necessary to modernize the
old system.
The owners got in return for its commitment to invest billions of dollars in the
16
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23 17
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23
15
modernization through digital and optic fiber system replacing analogic switchboards and
copper wiring and other, the protection of the long distance market over a five year
period. Thus in 1997 new companies will compete with Telmex in this market.
Transportation: 18
Mexico was the biggest promoter of private roads in the world during the Salinas
administration. This was done due to the lack of money of the government. These
companies in return received concessions to operate the roads for a number of years,
after which they would become government property.
This decision allowed 4,000 kilometers of highways to be build. The downside for
this project was that there was no subside on this so the full cost had to be reflected on
the tolls, also the concession lasted only for 8 years, were this type of project have an
amortization of 30 years. Result: very expensive tolls. Transportation within the city is
very cheap and get everywhere. There is the subway system, one of the largest in the
world, subsidized in a large amount by the government. The buses are also from the
government and subsidize and there are taxis and other private types of massive
transportation.
Tourism:19
There are more than 6,000 miles of warm-water coast on the Pacific, the Gulf of
Mexico and the Caribbean. Archaeological sites and colonial towns offer recreation for
those who tire rapidly for the sun. Mexico city is one of the cultural capitals of the
Spanish-speaking world. You may find high quality hotel, restaurants and all the tourism
facilities of industrialized countries.
Strangely enough Mexico with all the beautiful resorts and places has not
increased its share of international tourism from 1.5%. New resorts like Huatulco and
Cancun has gained successes sometimes by taking it from traditional resorts like
Acapulco and Puerto Vallarta
18
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23 19
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23
16
Technology:
Electronics20A tablet PC and touch screen computer / television made by Mexican
Mailbox. The electronics industry of Mexico has grown enormously within the last
decade. Mexico has the sixth largest electronics industry in the world after China,
United States, Japan, South Korea, and Taiwan. Mexico is the second largest
exporter of electronics to the United Sates where it exported $71.4 billion worth of
electronics in 2011 The Mexican electronics industry is dominated by the
manufacture and OEM design of televisions, displays, computers, mobile phones,
circuit boards, semiconductors, electronic appliances, communications equipment
and LCD modules. The Mexican electronics industry grew 20% between 2010 and
2011.
Televisions21
The design and manufacture of flat panel plasma, LCD and LED televisions is the single
largest sector of the Mexican electronics industry, representing 25% of Mexico's
electronics export revenue. In 2009 Mexico surpassed South Korea and China as
the largest manufacturer of televisions, with Sony[ Toshiba Samsung Sharp (through
Semen Zeni,LG, Lanix, TCL, RCA, Phillips ,Elcoteq, Tatung,] Panasonic] and Vizio[]
manufacturing CRT, LCD, LED and Plasma televisions in Mexico. Due to Mexico's
position as the largest manufacturer of television it is known as the television capital of
the world in the electronics industry.22
GDP (Purchasing Power Parity) 1.658 trillion of International dollars (2010
estimate)
Real GDP growth rate.23
20
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23 21
http://en.wikipedia.org/wiki/Economy_of_Mexico#cite_note-Gereffi-23
23 http://www.tradingeconomics.com/mexico/gdp
17
2008 2009 2010 2011
1.5% -6.1% 5.5% 4.6%
GDP per capita - current prices US$ 10,638 (2010 estimate
GDP per capita - PPP $15,114 International Dollars (2010 estimate)
GDP (PPP) - share of world total
1980 1990 2000 2010 2015
2.94% 2059% 2.48% 2.09% 2.08%
GDP - composition by sector (2009,10,)24
Agriculture: 4.3% , 3.9%.
industry: 32.9%,32.6
Services: 62.8% 63.5.
Gross domestic expenditure on R&D (% of GDP) 0.38% (2007)
Inflation
2008 2009 2010 2011
5.1%(2008) 5.3% 4.2% 3.6%
Unemployment rate25
2008 2009 2010 2011
4% 5.5% 5.4%(2009) 4.5%
24
http://www.tradingeconomics.com/mexico/gdp 25
http://www.tradingeconomics.com/mexico/gdp
18
Household saving rates N/A
Public debt (General government gross debt as a % of GDP) 26
2008 2009 2010 2011
43.3% 44.6% 42.7% 42.3%
Public deficit (General government net lending/borrowing as a % of GDP)
2008 2009 2010 2011
-1.4% -4.9% -3.6% -3.1%
Household income or consumption by percentage share:
lowest 10%: 1.8%
highest 10%: 36.6% (1996,2010)
Largest companies in Mexico
América Móvil (Telecommunications services), Femsa (Beverages),
Grupo Mexico (Diversified Metals & Mining), Grupo Modelo (Beverages),
GFNorte (Regional Banks), Cemex (Construction Materials) (2011)
Budget:
Revenues: $117 billion
Expenditures: $123 billion, including capital expenditures of(1998 est.)
Industries: food and beverages, tobacco, chemicals, iron and steel,
petroleum, mining, textiles, clothing, motor vehicles, consumer
Agriculture Products:
Corn, wheat, soybeans, rice, beans, cotton, coffee, fruit, tomatoes;
beef, poultry, dairy products; wood products.
26
http://www.tradingeconomics.com/mexico/gdp
19
Exports:
Industrial production growth rate: 6% (1998 est.)
$117.5 billion , includes in-bond industries (assembly plant
operations with links to US companies).
Exports in commodities: crude oil, oil products, coffee, silver, engines,
motor vehicles, cotton, consumer electronics
Export partners: US 87.5%, Canada 1.3%, Japan 0.8%, Spain 0.6 China
20
CHAPTER - 3
―OVERVIEW OF INDUSTRIES TRADE AND
COMMERCE IN MEXICO COUNTRY‖
21
3.1 Introduction on Mexico:
Three times the size of the state of Texas, Mexico has a population of almost
88 million. The ethnic composition of the country is 60 percent matzo (a
mixture of Indian and European), 30 percent Amerindian, 9 percent white,
and 1 percent other. Mexico is a federal republic. Spanish is the official
language of Mexico, although over 100 Indian languages are also spoken.
English is widely understood by educated people and in urban centers. There
is no official religion, but almost 90 percent of Mexicans are Roman Catholic.
Protestants account for around 5 percent.
Mexico is one of the United States‘ most important trade partners. It is the
third largest exporter to the United States, and its international trade products
include oil exports, tourism, and the products of its many assembly plants
(called maquiladoras). Most of the labor force is employed in the agricultural
sector.(source:- http://www.cyborlink.com/besite/mexico.htm)
3.2 Country Facts:-
Area: 1,964,375 sq km, of which 1,959,248 sq km is continental and 5,127
sq km are islands.
Capital City: Mexico City
People: The people of Mexico today are a mixture of descendants from
Spanish and other immigrants, mainly Europeans, who settled in Mexico from
the 16th century onwards, and matzos (mixed European and indigenous
ancestry), as well as the many indigenous groups.
Languages: The official language is Spanish. There are at least 62
indigenous languages.
Religion(s): Roman Catholic 89%, Protestant 6%, other denominations 5%
Currency: Mexican Peso, divided into 100 centavos
Government: Mexico has a Federal republic system of government covering
the 31 states and the Federal District of Mexico with powers separated into 3
22
branches: independent executive (President), legislative (Congress) and
judicial (Supreme Court of Justice, federal and local systems).
The President is elected for a 6-year term and may not hold office a second
time. Congress is bi-cameral and consists of a Senate (128 seats) and a
Chamber of Deputies (500 seats). The judges making up the Supreme Court
are appointed by the President, with the consent of the Senate.
Life expectancy: 76.26 years
Fertility rate: 2.34 (births per woman)
Infant mortality rate: 18.42/1,000
Literacy rate: 92% (of adult population)
Economy: - GDP: $1.04 trillion (2010)
Annual real GDP growth: 5.4% (2010)
Natural resources: Petroleum, silver, copper, gold, lead, zinc, natural gas.
Agriculture (5% of GDP): Products--corn, wheat, soybeans, rice, beans,
cotton, coffee, fruit, tomatoes, beef, poultry, dairy products, wood products.
Industry (31% of GDP): Types--food and beverages, tobacco, chemicals, iron
and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer
durables.
Services (64% of GDP): Types--commerce and tourism, financial services,
transportation and communications. Trade (goods): Exports to U.S. (2010)--
$230 billion (80% of total). Imports from U.S. (2010)--$163 billion (50% of
total). Major markets--U.S., South America (5% of total). 27
3.3 Overview of Industries Trade in Mexico
Chamber of India Mexico Commerce, Industry, Trade, Tourism and Culture is
27
http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/country-profile/north-central-america/mexico/
23
established to promote and support the business initiatives between Mexico
and India. The organization will aim to disseminate useful information about
the business environment in Mexico. This will enable Indian business houses
to make the right decisions on their investment. CIMCCITT is also keen to
increase its presence and add more chapters and reach to more Indian
businessmen across the world.
CIMCCITT Aims and Objectives28:-
The Chamber of India-Mexico Commerce, Culture, Industry, Trade and
Tourism (CIMCCITT) were founded on April 25th, 2006, at the Public
Registry of the Property, with the number of the following objectives:
To aid, stimulate and promote the development of trade, commerce
and industry in both nations.
To promote and coordinate activities of various Mexican States
building synergies with appropriate, complimentary Indian Sates
Identification and dissemination of information on business
opportunities available for promoting trade and business
collaborations with Indian organizations with special reference to
Mines, Pharmaceuticals, Textiles, Trade and Culture
To facilitate the setting up of Indian industries and businesses in
Mexico. Promoting mutual growth and prosperity, spreading
business expertise
CIMCCITT LINKS TO INDUSTRIES IN MEXICO
India on Monday signed a ten-year bilateral investment promotion and
protection agreement (BIPPA) with Mexico to promote flow of investment to
both countries and allow free repatriation of funds by investors.
The agreement, for which the Union Cabinet gave its approval on May 18,
was signed by Finance Minister P. Chidambaram and visiting Mexican
28
http://www.indiamexico.com/aboutus.htm
24
Minister of Economy Eduardo Sojo Garza-Aldape.
Since Mexico is a member of the North American Free Trade Agreement
(NAFTA) — trading block comprising Mexico, the U.S and Canada — the
agreement is likely to help Indian companies access these markets as well.
Under the agreement, both countries would accord equal treatment to
investors from other country as given to domestic investors and those from
any other country.
As per the agreement, both countries will grant the Most Favored Nation
(MFN) status to each other and offer protection to investors, which would
include safeguarding their intellectual property rights (IPRs).
Mexico Consulting Group:
A professional services organization advising corporate managers and
investors on issues of feasibility and strategy in establishing and expanding
their businesses in Mexico. Mexico Consulting Group works with you to
determine the merit of new ventures in Mexico including sales, distribution,
technology transfer, manufacturing and financial investments. Our
consultants assist you in preparing your business plans for Mexico and in
evaluating and acting on the wide variety of entry options.29
Mexico Consulting Group was founded in 1978. We provide services to our
clients on a fee basis. Our clients are companies that want to add value to
their enterprises by developing successful businesses in Mexico. Although
most are mid-sized firms, we work with funded start-ups, and nearly one in
five of the Fortune 500 companies in Mexico have been our client.
3.4 Trade in Mexico:-
Mexico presents attractive import markets for a wide variety of industrial and
29
http://www.indiamexico.com/news.htm
25
consumer products and services.
Mexico consulting Group has extensive operating experience in Mexico‘s
retail and wholesale distribution channels. We can assess the opportunity
for your products and services. We can help you set up your export system
by finding suitable distributors or prospects for a successful joint venture.
We can locate products for you to import from Mexico and identify
appropriate, reliable sources for you. We work with the myriad issues of
Mexican logistics, trade finance, transportation systems, tariffs, the NAFTA
and related laws and regulations.
Mexico consulting Group consultants undertake Mexican market research
and blend the results with sensitive industry intelligence. You can benefit
from our knowledge of Mexico‘s unique issues, methods and business
culture.
We can help you, as your Mexican connection, to build your Business Plan
for Mexico including market and financial analysis, the evaluation of strategic
alliances and partnerships and the assessment of the cultural and legal
issues.
Mexico consulting Group consultants understand technology industries in the
U.S. and Mexico. They know the relevant issues of energy and
environment. They can help you to outsource in Mexico, form strategic
partnerships, sell and distribute. 30
Intra–Industry Trade
When the possibility of a North American Free Trade Agreement was first
being discussed, analysts speculated about which sectors of the U.S.
economy would end up as "winners" or "losers" through such an agreement.
30
http://www.mexicoconsultinggroup.com/html/practice.html
26
A winner was interpreted as a sector whose exports would rise through
NAFTA; a loser was a sector whose imports from the other two countries
would rise. There are at least two misleading elements in this way of looking
at trade.
First, imports per se should not be viewed as contributing a "loss" for a
country; imports make available a greater variety of consumer goods or
producer inputs, often at lower prices than the domestically produced
versions.
Second, since in most economies any given sector or industry generates
both exports and imports, the distinction between the export and import
sectors is blurred. Two-way trade occurs within virtually any industry. In fact,
intra-industry trade represents a significant portion of world trade today.
Moreover, the great majority of U.S.–Mexico trade—about 80 percent—is
intra-industry.
For example, electrical machinery and appliances constituted the leading
U.S. export to Mexico in 1999; yet, this group of products was also the United
States' second-largest import from Mexico. Motor vehicles were the second
largest U.S. export to Mexico but also the top U.S. import from Mexico.
This two-way exchange within the same industry reflects the specialization
that occurs through trade. It can imply any of the following:
Each country is sending the other a totally different product within the same
industrial category. Within electrical machinery and appliances, for example,
the United States sends dishwashers to Mexico while Mexico sends ignition
wiring sets to the United States. 31
Each country is sending the other a differentiated version of the same
product. Within electrical machinery and appliances, the United States and
Mexico send vacuum cleaners to each other but of a different variety. Under
31
http://dallasfed.org/research/busfront/bus0002.html
27
motor vehicles, the United States sends Mexico Cadillac, while Mexico sends
Volkswagen New Beetles to the United States.
Each country is sending the other essentially the same product but at a
different stage of production. In the electrical machinery and appliances
category, the United States sends Mexico television picture tubes, while
Mexico sends television receivers—entire TV sets—to the United States.
The third case, in fact, is an example of U.S.–Mexico trade through the
maquiladora industry, also known as production sharing.
Bilateral Export by State
U.S.–Mexico trade activity involves all states within the United States and
Mexico. All 50 U.S. states, in addition to the District of Columbia, Puerto Rico
and the Virgin Islands, export to Mexico. Likewise, all Mexican states, plus
the Federal District (Mexico's equivalent of the District of Columbia), export to
the United States. As expected, while some states in each country are high
exporters, others are negligible participants in this bilateral trade scene.
Mexico is an export oriented economy. It is an important trade power as
measured by the value of merchandise traded, and the country with the
greatest number of free trade agreements.
However, Mexican trade is fully integrated with that of its North American
partners: close to 90% of Mexican exports and 50% of its imports are traded
with the United States and Canada. Nonetheless, NAFTA has not produced
trade diversion. 32
3.5 The Role of Mexico in the Commerce Industry:
In the corporate environment, one of the most significant focuses
32 http://www.economywatch.com/international-trade/mexico.html
28
which a company has, in connection to finances, is found with identifying the
best answers to assist reduce expenditure. The sum of money which a
company has to spend on expenses can dramatically influence the revenue
they put up and significantly reduce overall profits. When seeking to
capitalize in the environment of commerce, it‘d be perfect for any firm to take
advantage of the unique resources that are accessible through Mexico.
These resources can often assist to cut down on expenses significantly, as
you address issues such as exporting, low-cost production, low-cost
transportation, and transportation possibilities
Economy:
Mexico City is one of the most important economic hubs in Latin America.
The city proper (Federal District) produces 21.8% of the country's gross
domestic product. According to a study conducted by
PricewaterhouseCoopers, Mexico City had a GDP of $390 billion, ranking as
the eighth richest city in the world after the greater areas of Tokyo, New York,
Los Angeles, Chicago, Paris, London and Osaka/Kobe, and the richest in
Latin America,[15] making Mexico City alone the 30th largest economy in the
world. Mexico City is the greatest contributor to the country's industrial GDP
(15.8%) and also the greatest contributor to the country's GDP in the service
sector (25.3%). Due to the limited non-urbanized space at the south—most of
which is protected through environmental laws the contribution of the Federal
District in agriculture is the smallest of all federal entities in the country.
Mexico City has one of the world's fastest-growing economies and its GDP is
set to double by 2020.33
Exporting:
In the commerce environment, many companies are looking to take
advantage of unique opportunities, which will allow them to increase
33
www.virket.com/english/trade-and-investment/the-role-mexico-plays-in-a-commerce-industry
29
worldwide and reach their full potential. When looking to reap the benefits of
these large opportunities, it‘s essential to tackle pricing concerns, like
importing and exporting. As a company centralized in Mexico, a business has
got to take advantage of many unique savings, when it pertains to exporting
goods, so as to help keep down the cost of their business.
Low-Cost Production:
Production expenditures represent another tremendous expense, in relation
to commerce, which a firm must account for. No concern can find success
without the utilization of high quality production, yet expensive production will
considerably escalate the cost of your products, requiring an increase in
price. To be able to recognize a quality source of production which will also
present you with unique opportunities to reduce its expense, identify the
opportunities which exist with Mexico.
Low-Cost Transportation:
Transportation of goods usually indicates an extremely expensive resource of
commerce, as you send your goods to every corner of the globe. A single
opportunity that will considerably assist to reduce your transportation
expenditures is found with making use of a country like Mexico, which
represents a central point in the world. From this location, you will be able to
gain easy access to areas like North America and Latin America, while also
finding uninterrupted transportation to regions such as Europe and Asia.34
Mexico City Welcomes Chambers of Commerce From Around the World35
34
www.virket.com/english/trade-and-investment/the-role-mexico-plays-in-a-commerce-industry
35www.solutionsabroad.com/en/business-in-mexico/business-category/chambers-of-commerce-in-
mexico.html
30
Mexican President Felipe Calderon addressing delegates to the 7th World Chambers Congress. Some 1,200 participants from chambers of commerce and other
business groups in over 100 countries gathered in Mexico City June 8-
10 for the 7th World Chambers Congress, organized by the USCIB
affiliate the International Chamber of Commerce, ICC‘s World
Chambers Federation (WCF) and the Mexico City National Chamber
of Commerce (CANACO).
Under the theme of ―Enterprise – Network – Prosperity,‖ the congress
comprised plenary sessions and an array of practical workshops
relevant to the chamber and business community. It also provided
plentiful networking opportunities to position the congress as the most
important event of the year on the chamber calendar.
Chamber of India Mexico Commerce, Industry, Trade, Tourism and
Culture is established to promote and support the business initiatives
between Mexico and India. The organization will aim to disseminate
useful information about the business environment in Mexico. This will
enable Indian business houses to make the right decisions on their
investment
The National Chamber of Commerce of Mexico City, offers a wide
range of services for international trade by identifying opportunities
31
and assistance to small and medium enterprises to export and import,
among other services
Commerce Industries
The leading industries in Commerce, Texas are Educational, health and
social services, 29%; Retail trade, 11%; and Manufacturing, 10%. Simply
Hire‘s Commerce job listings indicate that the following industries in
Commerce are hiring the most workers: Mail Order Retailing, Clinics &
Outpatient Services, Hardware Mfg, Misc Electrical Equipment Mfg and
Computer Terminal Mfg.
Commerce Careers
Among the most common occupations in Commerce are Management,
professional, and related occupations, 28%. Sales and office
occupations,22%. and Service occupations, 14%. Approximately 56 percent
of workers in Commerce, Texas work for companies, 24 percent work for the
government and 5 percent are self-employed.
Chambers of Commerce in Mexico
There are many foreign chambers of commerce in Mexico, the largest being
the American with others including the Canadian the British and also
Japanese and European chambers of commerce. Most have offices in other
large cities throughout Mexico, such as Guadalajara and Monterrey.
Large Mexican chambers of commerce include CANACINTRA and the
Camara National de Comerica de la Ciudad de Mexico. The various
chambers of commerce offer diverse services for the facilitation of business
32
and the promotion of trade between Mexico and the foreign countries. They
offer publications, both weekly and monthly, keeping their members up to
date on economic and financial news.
They organize seminars, conferences and cocktail events with the purpose
of helping their members gain a solid knowledge base for doing business in
Mexico and also for the all-important purpose of networking. The chambers
of commerce are also excellent resources for those looking for employment
and work in close collusion with the embassies of their respective countries.
3.6 Foreign relations of Mexico
Mexico is one of the founding members of several international
organizations, most notably the United Nations the Organization of American
States the Organization of Ibero-American States the OPANAL and the Rio
Group. In 2008, Mexico contributed over 40 million dollars to the United
Nations regular budget. In addition, it has been the only Latin American
member of the Organization for Economic Co-operation and Development
since it joined in 1994 though Chile is in the process of gaining full
membership. Mexico is considered as a regional power hence its presence in
major economic groups such as the G8+5 and the G20.
In addition, since the 1990s Mexico has sought a reform of the United
Nations Security Council and its working methods with the support of
Canada, Italy, Pakistan and other nine countries, which form a group
informally called the Coffee Club.
After the War of Independence, the relations of Mexico were focused
primarily on the United States, its northern neighbor, largest trading partner
and the most powerful actor in hemispheric and world affairs.
Mexico supported the Cuban government since its establishment in the early
1960s, the Sandinista revolution in Nicaragua during the late 1970s and
leftist revolutionary groups in El Salvador during the 1980s. A greater priority
to Latin America and the Caribbean has been given in the administration of
33
President Felipe Calderón.36
U.S. Chamber to Lead Trade Delegation to Mexico
WASHINGTON, D.C.—In an effort to highlight the importance of economic
engagement between the United States and Mexico, Myron Brilliant, senior
vice president for International Affairs at the U.S. Chamber of Commerce, will
be leading a two-day trade delegation to Mexico City on January 10-11. This
trip comes just days after the administration released a framework to resolve
the U.S.-Mexico cross-border trucking dispute. Among other goals, the
delegation will press for a mutually agreeable solution to the debate over
allowing safe, carefully inspected trucks to operate across the U.S.-Mexico
border.
The delegation will also continue the work that began last year when the U.S.
Chamber launched the U.S.-Mexico Leadership Initiative, which provides the
strategic energy behind Vision 2020, a five-point plan for enhancing the U.S.-
Mexico economic partnership. The plan is intended to:
1. Make both countries more competitive in global markets;
2. Make our border a model for the 21st century;
3. Leverage the continent's energy resources while protecting the
environment;
4. Raise living standards for our citizens; and
5. Do so all within a framework that respects national sovereignty and
national interests.
―The Chamber is well aware of the important economic relationship between
the United States and Mexico and we are building a program that will move
the economic partnership between these two countries from a policy
36http://foreignpolicyblogs.com/category/mexico/
34
aspiration to a reality,‖ said Brilliant.37
37 www.solutionsabroad.com/en/business-in-mexico/business-category/chambers-of-
commerce-in-mexico.html
35
CHAPTER – 4
―OVERVIEW OF DIFFERENT ECONOMIC SECTOR OF MEXICO‖
36
Gross Domestic Product (GDP) in purchasing power parity (PPP) in 2006
was estimated at US $1.134 trillion, and GDP per capita in PPP at US
$10,600. The service sector is the largest component of GDP at 70.5%,
followed by the industrial sector at 25.7% (2006 est.). Agriculture represents
only 3.9% of GDP (2006 est.). Mexican labor force is estimated at 38 million
of which 18% is occupied in agriculture, 24% in the industry sector and 58%
in the service sector (2003 est.).
4.1 Agriculture and food production38 (The Primary Sector)
History Foods and Agriculture
Product Quantity (Tm) World Rank
Avocados 1,040,390 1
Onions and
chayote
1,130,660 1
Limes and
lemons
1,824,890 1
Sunflower seed 212,765 1
Dry fruits 95,150 2
Papaya 955,694 2
Chillies and
peppers
1,853,610 2
Whole beans 93 000 3
Oranges 3,969,810 3
Anise, badian,
fennel
32 500 3
38 www.en.wikipedia.org/wiki/Agriculture_sector_in_Mexico
37
Chicken meat 2,245,000 3
Asparagus 67,247 4
Corn 20,000,000 4
Importance of agriculture to Mexico's economy39
Agriculture, as a percentage of GDP, has been steadily declining, and now
resembles that of developed nations, in that it plays a smaller role in the
economy. In 2006, agriculture accounted for only 3.9% of GDP, down from
7% in 1980, and 25% in 1970. Nonetheless, given the historic structure of
ejidos, it still employs a considerably high percentage of the work force: 18%
in 2003, mostly of which grows basic crops for subsistence, compared to 2–
5% in developed nations in which production is highly mechanized.
Crops
In spite of being a staple in the Mexican diet, Mexico's comparative
advantage in agriculture is not in corn, but in horticulture, tropical fruits, and
vegetables. Negotiators of NAFTA expected that through liberalization and
mechanization of agriculture two-thirds of Mexican corn producers would
naturally shift from corn production to horticultural and other labor-intensive
crops such as fruits, nuts, vegetables, coffee and sugar cane.
Potatoes
The area dedicated to potatoes has changed little since 1980 and average
yields have almost tripled since 1961. Production reached a record
1.7 million tons in 2003. Per capita consumption of potato in Mexico stands at
17 kg a year, very low compared to its maize intake of 400 kg.
Sugar cane
39 www.en.wikipedia.org/wiki/Agriculture_sector_in_Mexico
38
Approximately 160,000 small- and medium-sized farmers grow sugar cane in
15 Mexican states; currently there are 54 sugar mills around the country that
produced 4.96 million tons of sugar in the 2009 crop, compared to 5.8 million
tons in 2005.
4.2 Industry (The Secondary Sector)40
Industrial production
Main industries Aircraft, automobile industry,
petrochemicals, cement and
construction, textiles, food and
beverages, mining, consumer
durables, tourism
Industrial growth rate
3.6%
Labor force 24% of total labor force
GDP of sector 25.7% of total GDP
Sources:economywatch.com/...economy/Mexico/industry-sector
The industrial sector as a whole has benefited from trade liberalization; in
2000 it accounted for almost 90% of all export earnings.
Sources: en.wikipedia.org/wiki
Among the most important industrial manufacturers in Mexico is the
automotive industry, whose standards of quality are internationally
40
www.economywatch.com/...economy/Mexico/industry-sector
39
recognized. The automobile sector in Mexico differs from that in other Latin
American countries and developing nations in that it does not function as a
mere assembly manufacturer. The industry produces technologically complex
components and engages in some research and development activities, an
example of that is the new Volkswagen Jetta model with up to 70% of parts
designed in Mexico. The "Big Three" (General Motors, Ford and Chrysler)
have been operating in Mexico since the 1930s, while Volkswagen and
Nissan built their plants in the 1960s. Later, Toyota, Honda, BMW, and
Mercedes-Benz joined in. Some large industries of Mexico include Cemex,
the worlds largest construction company and the third largest cement
producer the alcohol beverage industries, including world-renowned players
like Grupo Modelo; conglomerates like FEMSA, which apart from being the
largest single producer of alcoholic beverages and owning multiple
commercial interests such OXXO convenience store chain, is also the
second-largest Coca-Cola bottler in the world; Gruma, the largest producer of
corn flour and tortillas in the world; and Grupo Bimbo, Telmex, Televisa,
among many others. In 2005, according to the World Bank, high-tech
industrial production represented 19.6% of total exports.41
Currently Mexico is focusing in developing an aerospace industry and the
assembly of helicopter and regional jet aircraft fuselages is taking place.
Foreign firms such as MD Helicopters, Bell, Cessna and Bombardier build
helicopter, aircraft and regional jets fuselages in Mexico. Although the
Mexican aircraft industry is mostly foreign, as is its car industry, Mexican
firms have been founded such as Aeromarmi, which builds light propeller
airplanes, and Hydra Technologies, which builds Unmanned Aerial Vehicles
such as the S4 Ehécatl, other important companies are Frisa Aerospace that
manufactures jet engine parts for the new Mitsubishi Regional jet and Kuo
Aerospace that builds parts for aircraft landing gear
As compared with the United States or countries in Western Europe a larger
sector of Mexico's industrial economy is food manufacturing which includes
41
www.economywatch.com/...economy/Mexico/industry-sector
40
several world class companies but the regional industry is undeveloped.
There are national brands that have become international and local Mom and
Pop producers but little manufacturing in between.
Electronics42
Televisions
Mobile Phones
Computers
A tablet PC and touch screen computer / television made by Mexican
Meebox.
The electronics industry of Mexico has grown enormously within the last
decade. Mexico has the sixth largest electronics industry in the world after
China, United States, Japan, South Korea, and Taiwan. Mexico is the second
largest exporter of electronics to the United Sates where it exported $71.4
billion worth of electronics in 2011. The Mexican electronics industry is
dominated by the manufacture and OEM design of televisions, displays,
computers, mobile phones, circuit boards, semiconductors, electronic
appliances, communications equipment and LCD modules. The Mexican
electronics industry grew 20% between 2010 and 2011, up from it's constant
growth rate of 17% between 2003 and 2009. Currently electronics represent
30% of Mexico's none petroleum based exports.
OEM and ODM manufacturing43
Sources:en.wikipedia.org/wiki
A Lanix LT10.1 high definition LCD assembled under OEM contract by Lanix
for use in a Sharp LCD television.
Mexico is also home to a large number of OEM and ODM manufactures both
foreign and domestic. Among them include Foxconn, Jabil, Elcoteq, Falco,
42
www.en.wikipedia.org/wiki/Electricity_sector_in_Mexico 43
www.en.wikipedia.org/wiki/Electricity_sector_in_Mexico
41
Compal, Lanix and Flextronics. These companies assemble finished
electronics or design and manufacture electronic components on behalf of
larger companies such as Sony or Microsoft using locally sourced
components, for example the ODM, Flextronics manufactures Xbox video
games systems in Guadalajara, Mexico for Microsoft using components such
as power systems and printed circuit boards from a local company, Falco
Electronics which acts as the OEM.
Engineering and Design44
The Monterrey Institute of Technology and Higher Education is Mexico's
most prestigious technology and engineering university and is ranked as the
7th tech university worldwide.
The success and rapid growth of the Mexican electronics sector is driven
primarily by the relatively low cost of manufacturing and design in Mexico; its
strategic position as a major consumer electronics market coupled with its
proximity to both the large North American and South American markets
whom Mexico shares free trade agreements with; government support in the
form of low business taxes, simplified access to loans and capital for both
foreign multinational and domestic startup tech based firms; and a very large
pool of highly skilled, educated labor across all sectors of the tech industry.
Joint Production45
While many foreign companies like Phillips, Vizio and LG simply install wholly
owned factories in Mexico a number of foreign companies have set up semi-
independent joint venture companies with Mexican businesses to
manufacture and design components in Mexico. These local companies
function under Mexican law and retain a sizable portion of the revenue.
44 www.nationsencyclopedia.com › Americas › Mexico
45 www.nationsencyclopedia.com › Americas › Mexico
42
These companies typically function dually as in-company OEM development
and design facilities and manufacturing centers and usually produce most
components needed to manufacture the finished products. An example would
by Sharp which has formed Semex. Semex was founded as a joint venture
between Sharp and Mexican investors which acts as an autonomous
independent company which Sharp only maintains partial control over. The
company manufactures whole products such televisions and designs
individual components on behalf of Sharp such as LCD modules and in
return Semex is granted access to Sharp capital, technology, research
capacity and branding. Notable foreign companies which have set up joint
venture entities in Mexico include Samsung which formed Samex, a local
designer and manufacturer of finished televisions, white goods and individual
electronic components like printed circuit boards, LCD panels and
semiconductors,Toshiba, who formed Toshiba de México, S.A. de C.V., an
administratively autonomous subsidiary which produces electronics parts,
televisions and heavy industrial equipment.
Domestic Industry46
Lanix W10 Ilium Tablet PC.
Although much of Mexico's electronics industry is driven by foreign
companies, Mexico also has a sizeable domestic electronics industry and a
number of electronics companies including Mabe, a major appliance
manufacturer and OEM which has been functioning since the nineteen fifties
and has expanded into the global market, Meebox, a designer and
manufacturer desktop and tablet computers, solar power panels and
electronics components, Texa, which manufactures computers laptops and
servers, Falco, a major international manufacturer of electronic components
such as printed circuitboards, power systems, semiconductors, gate drives
and which has production facilities in Mexico, India and China, and Lanix,
46
www.economywatch.com/...economy/Mexico/industry-sector
43
Mexico's largest electronics company which manufactures products such as
computers, laptops, smartphones, LED and LCD displays, flash memory,
tablets, servers, hard drives, RAM, optical disk drives, and printed
circuitboards and employes over 11,000 people in Mexico and Chile and
distributes its products throughout Latin America. Another area being
currently developed in Mexico is Robotics, Mexico's new Mexone robot has
been designed with the idea that in future years develop a commercial
application for such advanced robots.
Services (The Tertiary Sector)47
The tertiary sector was estimated to account for 70.5% of the country's GDP,
and employs 58% of the active population. This section includes
transportation, commerce, warehousing, restaurant and hotels, arts and
entertainment, health, education, financial and banking services,
telecommunications as well as public administration and defense. Mexico's
service sector is strong, and in 2001 replaced Brazil's as the largest service
sector in Latin America in dollar terms.
Tourism
Tourism is one of the most important industries in Mexico. It is the fourth
largest source of foreign exchange for the country. Mexico is the eighth most
visited country in the world (with over 20 million tourists a year).
Finance & Banking system
According to the IMF the Mexican banking system is strong, in which private
banks are profitable and well-capitalized. The financial and banking sector is
increasingly dominated by foreign companies or mergers of foreign and
Mexican companies with the notable exception of Banorte. The acquisition of
Banamex, one of the oldest surviving financial institutions in Mexico, by
Citigroup was the largest US-Mexico corporate merger, at US $12.5 billion. In
47
www.nationsencyclopedia.com › Americas › Mexico
44
spite of that, the largest financial institution in Mexico is Bancomer associated
to the Spanish BBVA.
The process of institution building in the financial sector in Mexico has
evolved hand in hand with the efforts of financial liberalization and of
inserting the economy more fully into world markets. Over the recent years,
there has been a wave of acquisitions by foreign institutions such as US-
based Citigroup, Spain‘s BBVA and the UK‘s HSBC. However, bank credit
accounts for only 22% of GDP, which is significantly low compared to 70% in
Chile. Credit to the Agricultural sector has fallen 45.5% in six years (2001 to
2007), and now represents about 1% of total bank loans. Other important
institutions include savings and loans, credit unions, government
development banks, ―non-bank banks‖, bonded warehouses, bonding
companies and foreign-exchange firms.
A wave of acquisitions has left Mexico‘s financial sector in foreign hands.
Their foreign-run affiliates compete with independent financial firms operating
as commercial banks, brokerage and securities houses, insurance
companies, retirement-fund administrators, mutual funds, and leasing
companies. Other important institutions include savings and loans, credit
unions, government development banks, ―non-bank banks‖, bonded
warehouses, bonding companies and foreign-exchange firms.
Securities market48
Mexico has a single securities market, the Mexican Stock Exchange (Bolsa
Mexicana de Valores, known as the Bolsa). The market has grown steadily,
with its main indices increasing by more than 150% in 2003–05. It is Latin
America's second largest exchange, after Brazil's. Still, the Bolsa remains
relatively small when compared to other North American exchanges. The
New York Stock Exchange is about 100 times larger; the Toronto Stock
Exchange is six times larger.
48
www.nationsencyclopedia.com › Americas › Mexico
45
The Indice de Precios y Cotizaciones (IPC, the general equities index) is the
benchmark stock index on the Bolsa. In 2005 the IPC surged 37.8%, to
17,802.71 from 12,917.88, backed by a stronger Mexican economy and
lower interest rates. The stock market also posted a record low vacancy rate,
according to the central bank. Local stock market capitalization totaled
US$236bn at end-2005, up from US$170bn at end-2004. As of March 2006
there were 135 listed companies, down from 153 a year earlier. Only a
handful of the listed companies are foreign. Most are from Mexico City or
Monterrey; companies from these two cities compose 67% of the total listed
companies.
46
CHAPTER - 5
―AN OVERVIEW OF BUSINESS AND TRADE AT
INTERNATIONAL LEVEL IN MEXICO‖
47
5.1 Introduction to the Mexican Market
It is easy to do business and free trade is a reality, - and Mexico has a free
trade agreements with more than 40 countries.
Low manufacturing costs, strong macro-economic indicators and a surge in
consumption demand characterize the Mexican market today.
The government of Mexico has set an ambitious infrastructure plan that will
stimulate many industries, such as construction, energy, transportation,
tourism, water management, and telecommunications.
Low cost
Demands in the private sector are driven by low manufacturing costs, low
logistics costs, strong macro-economic indicators and a surge in
consumption demand by the growing middle class.
39 million people have high or very high income
Demand growth has increased foreign products‘ supply and there is a strong
demand for luxury products: The top 10 % of households hold around 40 %
of incomes and 80 %of assets, and the rich segment is constantly looking
for new products to purchase.
Location
As a ―Near Shore‖ option for the North American market (NAM),
Mexico serves as manufacturing, engineering and sourcing base for
NAM. Local Market Size
The large local market size and growth potential offer a solid base for loading
of manufacturing and engineering capacity in addition to export potential49
Manufacturing Cost
Mexico is attractive for mid to mid-high labour content, as well as
products that are heavy or over sized with higher freight cost
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Dollar Dependency
Strong correlation between the peso and USD makes Mexico a natural
choice for companies with high invoicing in USD
Logistical Savings
Free trade transit zones, local consolidation points (inbound and outbound)
and localized customs clearance lead to optimized time, transportation costs
and administration efficiency.
Business culture
When in Mexico – do as the Mexicans do. A successful business in Mexico is
also about adapting to the Mexican culture.
Mexicans often mix business with their leisure time and will often Invite
business associates and their families to their home at the weekend and you
will have a chance to talk informally. These types of activities are important to
Mexicans and help to build the trust required for long-term business relations.
Business meetings in general:
Due to their reputation - Mexicans business people usually arrive at time for
meetings. Start by offering you business card and take time to time to look at
your meeting partner‘s name and title. Titles are important. You may directly
speak to someone by only using his or her title only, without including the last
name.50
Asking the right questions
Mexicans have a culture for only answering the direct answer to a
question without elaborating. While this can be very frustrating, there are
several ways to approach this issue, which basically is asking follow up
questions.
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Unserious business people
Be careful of the fair- share of unserious people round. There are always
people who will tell you they have good contacts with certain companies
and that they can arrange meetings for you.
Dress Code
Mexicans generally dress conservatively and both men and women will
wear suits in a formal business setting.
General behaviors
- Standing with your hands on your hips suggests aggressiveness, and
keeping your hands in your pockets is impolite.
- Refrain from using first names until invited to do so.
Mexicans may not make eye contact. This is a sign of respect and should not
be taken as an affront.
Mexican men are warm and friendly, and make a lot of physical contact. They
often touch shoulders or hold another‘s arm. To withdraw from this touch is
considered insulting.
5.2 Investment, Economy, Statistics and Information about
Mexico
U.S. Commercial Service Mexico 51
The U.S. Commercial Service in Mexico offers market research, consulting,
trade events, and matchmaking services to help U.S. Companies do
business in Mexico, export goods and services to Mexico, and find Mexican
business partners and distributors. 52
Doing Business in Mexico - World Bank :
Great resource providing benchmarking compared to other international
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economies. Topics include
Starting a Business
Dealing with Licenses
Employing Workers
Registering Property
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Closing a Business
Domestic vs. International Business
Domestic and international enterprises, in both the public and private sectors,
share the business objectives of functioning successfully to continue
operations. Private enterprises seek to function profitably as well. Nation-
states generally have unique government systems, laws and regulations,
currencies, taxes and duties, and so on, as well as different cultures and
practices. An individual traveling from his home country to a foreign country
needs to have the proper documents, to carry foreign currency, to be able to
communicate in the foreign country, to be dressed appropriately, and so on.
Doing business in a foreign country involves similar issues and is thus more
complex than doing business at home. The following sections will explore
some of these issues. Specifically, comparative advantage is introduced, the
international business environment is explored, and forms of international
entry are outlined.
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Theories of International Trade and Investment
In order to understand international business, it is necessary to have a broad
conceptual understanding of why trade and investment across national
borders take place. Trade and investment can be examined in terms of the
comparative advantage of nations.
Comparative advantage suggests that each nation is relatively good at
producing certain products or services. This comparative advantage is based
on the nation's abundant factors of production—land, labor, and capital—and
a country will export those products/services that use its abundant factors of
production intensively. Simply, consider only two factors of production, labor
and capital, and two countries, X and Y. If country X has a relative
abundance of labor and country Y a relative abundance of capital, country X
should export products/services that use labor intensively, country Y should
export products/services that use capital intensively.
There are many more factors of production, of varying qualities, and there
are many additional influences on trade such as government regulations.
Nevertheless, it is a starting point for understanding what nations are likely to
export or import. The concept of comparative advantage can also help
explain investment flows. Generally, capital is the most mobile of the factors
of production and can move relatively easily from one country to another.
Other factors of production, such as land and labor, either do not move or are
less mobile. The result is that where capital is available in one country it may
be used to invest in other countries to take advantage of their abundant land
or labor53.
Firms may develop expertise and firm specific advantages based initially on
abundant resources at home, but as resource needs change, the stage of the
Product life cycle matures, and home markets become saturated, these
firms find it advantageous to invest internationally.54
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The International Business Environment
International business is different from domestic business because the
environment changes when a firm crosses international borders. Typically, a
firm understands its domestic environment quite well, but is less familiar with
the environment in other countries and must invest more time and resources
into understanding the new environment. The following considers some of
the important aspects of the environment that change internationally.
The economic environment can be very different from one nation to another.
Countries are often divided into three main categories: the more developed
or industrialized, the less developed or third world, and the newly
industrializing or emerging economies. Within each category there are major
variations, but overall the more developed countries are the rich countries,
the less developed the poor ones, and the newly industrializing (those
moving from poorer to richer). These distinctions are usually made on the
basis of gross domestic product per capita (GDP/capita). Better education,
infrastructure, and technology, health care, and so on are also often
associated with higher levels of economic development.
The political environment refers to the type of government, the government
relationship with business, and the political risk in a country. Doing business
internationally thus implies dealing with different types of governments,
relationships, and levels of risk.
A particular concern of international firms is the degree of political risk in a
foreign location. Political risk refers to the likelihood of government activity
that has unwanted consequences for the firm. These consequences can be
dramatic as in forced divestment, where a government requires the firm give
up its assets, or more moderate, as in unwelcome regulations or interference
in operations. In any case the risk occurs because of uncertainty about the
likelihood of government activity occurring. Generally, risk is associated with
instability and a country is thus seen as more risky if the government is likely
to change unexpectedly, if there is social unrest, if there are riots, revolutions,
war, terrorism, and so on.
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International Entry Choices
International firms may choose to do business in a variety of ways. Some of
the most common include exports, licenses, contracts and turnkey
operations, franchises, joint ventures, wholly owned subsidiaries, and
strategic alliances.
The Private Sector in Mexico
Trade policy interests are a function of the sector, size and asset mobility of a
business enterprise, usually a conglomerate. This sub-section explores the
nature and distribution of these interests in Mexico from the late 1970s
through the early 1990s, a period that witnessed a major overhaul of the
Mexican trade regime. Mexico City metropolitan area, have historically
depended more heavily on the domestic market and state protection.
The shift in the internal structure of the private sector
Three general factors help explain these shifts in the internal structure of the
private sector in Mexico: the international context, the domestic economy,
and government policy.
International context: Two aspects of the international context contribute to
the distribution of business trade preferences. First, patterns of international.
nancial integration and international capital mobility have favored the larger,
more outward-oriented. mostly large Mexican conglomerates and
multinational subsidiaries, had preferential access to mobile capital assets,
especially foreign Lending. These conglomerates normally link industrial
concerns with, among others.55
The domestic economy: The post-1982 economic crisis and the
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government‘s policy response furthered the rebalancing of business interests
in Mexico. Negative real rates of economic growth, restrictions on
government spending, and abysmally low domestic demand shifted
economic opportunity away from the domestic market and toward external
markets.
Government policy:This paper intentionally adopts a business-centric view of
trade politics. The most politically and economically successful state
policymakers are often those who are able to align themselves
With the more powerful elements of the business community, including those
whose strength grows as a result of state policy. ‗Reform results when
political movements secure suf. cient backing from the reform-minded
interests that they capture power and use their control over the government
to impose reform programs.
Business strategies: Since the early 1980s, however, voice, or political
protest, has begun to gain favor among some segments of the business
community. Historically, the private sector preferred not to involve itself
directly in the messy politics of Mexico: ‗Businessmen left politics to the PRI
in return for a promise that their pro. It would be guaranteed and their
interests would not be compromised.‘
5.3 Hofstede's Analysis for Mexico
Mexico is similar to many Latin countries when Hofstede's Dimensions are
compared and analyzed (see Latin America Hofstede graph below).
Mexico's highest Hofstede Dimension is Uncertainty Avoidance (UAI) (82),
indicating the society‘s low level of tolerance for uncertainty. In an effort to
minimize or reduce this level of uncertainty, strict rules, laws, policies, and
regulations are adopted and implemented. The ultimate goal of this
55
population is to control everything in order to eliminate or avoid the
unexpected. As a result of this high Uncertainty Avoidance characteristic, the
society does not readily accept change and is very risk adverse.
Mexico has a low Individualism (IDV) ranking (30), but is slightly higher than
other Latin countries with an average 21. The score on this Dimension
indicates the society is Collectivist as compared to Individualist. This is
manifest in a close long-term commitment to the member 'group', be that a
family, extended family, or extended relationships. Loyalty in a collectivist
culture is paramount, and over-rides most other societal rules and
regulations. The society fosters strong relationships where everyone takes
responsibility for fellow members of their group
In many of the Latin American countries, including Mexico, the population is
predominantly Catholic. The combination of Catholicism and the cultural
dimensions, shown in the Hofstede Graphs above, reinforce a philosophy
predicated in the belief that there is an absolute ‗Truth‖. As Geert Hofstede
explains about peoples with a high Uncertainty Avoidance Index, their
attitude is, ―There can only be one Truth and we have it.‖ 56
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CHAPTER - 6
―PRESENT TRADE RELATIONSHIP AND BUSINESS
VOLUME OF DIFFERENT PRODUCTS OF MEXICO
WITH INDIA & GUJARAT‖
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6.1 Mexican Exports57
Of the $198.3 billion in American imports from Mexico in 2006, the following
product categories had the highest values.
Crude oil …US$30.3 billion (15.3% of Mexico to U.S. exports, up 31.8% from
2005)
1. Car parts & accessories … $21.8 billion (11%, up 5.7%)
2. Video equipment (e.g. DVD players) … $14.6 billion (7.4%, up 38.3%)
3. Passenger cars … $14.2 billion (7.2%, up 31.2%)
4. Other complete & assembled vehicles … $9.6 billion (4.8%, up 20.2%)
5. Electrical apparatus & parts … $8.5 billion (4.3%, up 15.1%)
6. Telecommunications equipment … $7.0 billion (3.5%, up 41.2%)
7. Engines & parts … $5.0 billion (2.5%, up 5.6%)
8. Computers … $4.3 billion (2.2%, up 3.7%)
9. Miscellaneous household goods (e.g. clocks) … $4.2 billion (2.1%,
down 6%)
6.2 Mexican Imports58
Of the $134.2 billion in American exports to Mexico in 2006, the following
product categories had the highest values.
1. Electrical apparatus & parts … US$10 billion (7.4% of Mexico from
U.S. imports, up 13.2% from 2005)
2. Vehicle parts & accessories … $9.4 billion (7%, up 14.2%)
3. Plastics … $6.6 billion (4.9%, up 12.9%)
4. Computer accessories … $6.2 billion (4.6%, down 1%)
5. Semi-conductors … $5.6 billion (4.1%, up 0.4%)
6. Other petroleum products … $4.8 billion (3.6%, up 9%)
7. Finished metal shapes … $4.75 billion (3.5%, up 28.2%)
8. Telecommunications equipment … $4.4 billion (3.3%, up 45.7%)
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9. Industrial supplies … $4.2 billion (3.1%, up 13.3%)
10. Industrial machines … $3.9 billion (2.7%, up 5.4%)
As an export orientated country, Mexico is the 15th largest exporter in the
world. They are also the United States' second largest export market, making
about 12.21 percent of U.S. total exports in 2009. With the signing of the
North American Free Trade Agreement (NAFTA) in 1994 with the United
States, Mexico's trade economy is heavily linked to the United States', with
as high as 80.5 percent for Mexico's exports going to the U.S.
As a result, Mexico's economy suffered greatly during the 2008 global
financial crisis and U.S. economic downturn, due to a drop in U.S demand of
exports. Mexico's exports to U.S fell from US$234.6 billion in 2008 to $184.9
billion in 2009. GDP (PPP) of Mexico also posted a negative 5.25 percent
growth in 2009, a drop from US$1.553 trillion in 2008 to US$1.471 trillion in
2009
6.3 Gujarat Agriculture Product59
Gujarat is the main producer of tobacco, cotton, and groundnuts in India.
Other major food crops produced are rice, wheat, jowar, bajra, maize, Tur,
and gram. Gujarat has an agricultural economy; the total crop area amounts
to more than one-half of the total land area.
Animal husbandry and dairying have played a vital role in the rural economy
of Gujarat. Dairy farming, primarily concerned with milk production, functions
on a cooperative basis and has more than a million members. Gujarat is the
largest producer of milk in India. Amul - Anand milk co-operative federation
products are well known all over India and it is Asia's biggest dairy. Among
livestock raised are buffalo and other cattle, sheep, and goats. As per the
results of livestock census 1997, there were 209.70 lakh livestock in Gujarat
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State. As per the estimates of the survey of major livestock products, during
the year 2002–03, the Gujarat produced 6.09 million tones of milk, 385
million eggs and 2.71 million kg of wool. Gujarat also contributes inputs to
industries like textiles, oil, and soap.
As in much of India, since the 1960s farmers in Gujarat have increasingly
relied on extensive groundwater irrigation to maintain production. In recent
years, however, experts have become increasingly alarmed at the rate of
water depletion in the state. The water table in Gujarat has been falling
steadily for the last 15–20 years, leading to a risk of catastrophic, irreversible
salt-water intrusion into the groundwater. The problem is exacerbated by the
fact that electricity for farmers is subsidized, leaving little incentive to
conserve water.
6.4 Different Types of Sectors of Mexico City60
Agriculture
In most agriculture remains mired in the past, with production techniques
reminiscent of those prevailing in the l9th century in Europe or North
America. Agriculture is the greatest failure of modern Mexico.
Twenty five percent of Mexico's population lives in the countryside, but
agriculture production represents only 9% of the country's gross domestic
product. Average agricultural productivity in the U.S. is almost 20 times
bigger than in Mexico.
Energy and Mining:
Some portions of these industries, it is true, was eventually privatized or
are in the process of being offered to private investors. Production of
petrochemicals, which until recently was largely a government monopoly, is
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being put in private hands. Private companies have also been allowed to
prospect various areas of the country on behalf of Petroleos Mexicanos
(Pemex), the government oil company.
Communications:
The once government own only telephone company (TELMEX) was privatize
during the Salinas administration with 2 goals:
1. Gradually open the telephone market
2. Ensure enough money available for the huge investments necessary to
modernize the old system.
The owners got in return for its commitment to invest billions of dollars in the
modernization through digital and optic fiber system replacing analogic
switchboards and copper wiring and other, the protection of the long distance
market over a five year period. Thus in 1997 new companies will compete
with Telmex in this market.
Transportation:
Mexico was the biggest promoter of private roads in the world during the
Salinas administration. This was done due to the lack of money of the
government. These companies in return received concessions to operate the
roads for a number of years, after which they would become government
property.
This decision allowed 4,000 kilometers of highways to be build
Tourism:
There are more than 6,000 miles of warm-water coast on the Pacific, the Gulf
of Mexico and the Caribbean. Archaeological sites and colonial towns offer
recreation for those who tire rapidly for the sun. Mexico is one of the cultural
capitals of the Spanish-speaking world. You may find high quality hotel,
61
restaurants and all the tourism facilities of industrialized countries. Strangely
enough Mexico with all the beautiful resorts and places has not increased its
share of international tourism from 1.5%. New resorts like Huatulco and
Cancun has gained successes sometimes by taking it from traditional resorts
like Acapulco and Puerto Vallarta.
6.5 Different Products Imported and Exported From Mexico 61
Tin, gold & sugar are fast-growing Mexican exports to the U.S. while tobacco,
coins & nuclear fuels are the fast-growing imports into Mexico from America.
Mexico exported US$198.3 billion worth of merchandise to the United States
in 2006, up 16.5% from 2005 and up 47.3% in just 4 years.
Mexican imports from the U.S. rose 11.5% to $134.2 billion in 2006, up
37.6% since 2002.
In terms of the merchandise flow between the two countries, America‘s trade
deficit with Mexico was $64.1 billion in 2006, up 72.5% from 2002. The U.S.
trade deficit with Mexico increased 28.8% in 2006 from 2005 – up from the
10.4% deficit increase in 2005 from the year earlier
6.6 India eyeing China, Mexico for basmati rice export62
India is looking at China, Mexico and the Commonwealth of Independent
States (CIS) as new markets for its basmati rice, with a view to expand its
share of global trade.
India exported 2.2 million tonnes of basmati rice to more than 100 countries
in the 2010-11 fiscal.
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The country‘s share of the global market for basmati rice is 60 per cent, while
Pakistan accounts for the remaining 40 per cent. This high quality rice is
mainly grown in these two countries. ―India is looking for new international
markets for its quality basmati rice in China and Mexico,‖ a senior official of
Agricultural and Processed Food Products Export Development Authority
(Apeda) said.
CIS countries like Russia, Tajikistan, Turkmenistan, Uzbekistan, Ukraine, etc,
could be another destination for basmati rice, he said. Basmati rice exports
last fiscal were 8 per cent higher than the year-ago period, when the country
shipped 2.02 million tonnes overseas. In India, it is grown mainly in Punjab,
Haryana, Uttar Pradesh and Uttarakhand. Annual production now stands at
around 4.5 mt. The official said that basmati rice fetches $1,100 per tonne in
international markets. Indian basmati is sold to over 100 countries, including
the US, UK, UAE, Iran, Kuwait and Europe.
6.7 Mexico's Import and Export Indicators and Statistics at a
Glance 2010 63
Total value of exports: US$303 billion
Primary exports - commodities: manufactured goods, oil and oil products,
silver, fruits, vegetables, coffee, cotton
Primary export partners: US (80.5 percent of total exports), Canada (3.6
percent), Germany (1.4 percent)
Total value of imports: US$306 billion
Primary imports - commodities: metalworking machines, steel mill products,
agricultural machinery, electrical equipment, car parts for assembly, repair
parts for motor vehicles, aircraft and aircraft parts
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Primary import partners: US (48 percent of total imports), China (13.5
percent), Japan (4.8 percent), South Korea (4.6 percent), Germany (4.1
percent).
Post Your Free Ads at leading Mexico Free Classifieds site and Mexico
Portal.
Trade 64
Mexico's trade regime is built upon 13 trade agreements with 44 countries,
including the United States, Canada, and the European Union. In 2010 it
exported nearly $300 billion of goods, led by electronic and other machinery
(38% of total), road vehicles and transportation equipment (17.8%), and
mining and crude oil (14.6%). Mexico relies heavily on supplying the U.S.
market but has also sought to diversify its export destinations. Eighty percent
of Mexico‘s exports went to the United States in 2010,
The United States exported $163 billion of goods to Mexico in 2010. Mexico
is the United States‘ second-largest export market (after Canada) and third-
largest trading partner (after Canada and China). Two-way trade (exports
plus imports) reached nearly $400 billion in 2010, more than quadruple what
it was 20 years ago. Top U.S. exports to Mexico include electronic
equipment, motor vehicle parts, and chemicals. Trade matters are generally
settled through direct negotiations between the two countries or addressed
via World Trade Organization (WTO) or North American Free Trade
Agreement (NAFTA) formal dispute settlement procedures.
Traditionally, Mexico has sought to maintain its interests abroad and project
its influence largely through moral persuasion and has championed the
principles of nonintervention and self-determination. In its efforts to revitalize
its economy and open up to international competition, Mexico has sought
closer relations with the U.S., Western Europe, and the Pacific Basin.
President Calderon has actively promoted international human rights and
democracy and sought to increase Mexico's participation in international
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affairs.
Mexico is a strong supporter of the United Nations and Organization of
American States systems. While selective in its membership in other
international organizations.
Transportation65
Mexico was the biggest promoter of private roads in the world during the
Salinas administration. This was done due to the lack of money of the
government. These companies in return received concessions to operate the
roads for a number of years, after which they would become government
property.
This decision allowed 4,000 kilometers of highways to be build. The
downside for this project was that there was no subside on this so the full
cost had to be reflected on the tolls, also the concession lasted only for 8
years, were this type of project have an amortization of 30 years. Result: very
expensive tolls. Transportation within the city is very cheap and get
everywhere. There is the subway system, one of the largest in the world,
subsidized in a large amount by the government. The buses are also from
the government and subsidize and there are taxis and other private types of
massive transportation.
Pursues its interests through a number of ad hoc international bodies. Mexico
was the Secretary Pro Tempore of the Rio Group for the term 2008-2010;
separately, it held a seat on the UN Security Council for the period 2009-
2010. In late 2010, Mexico hosted the 16th Conference of the Parties of the
UN Framework Convention on Climate Change.
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Communications 66
The once government own only telephone company (TELMEX) was privatize
during the Salinas administration with 2 goals:
1. Gradually open the telephone market
2. Ensure enough money available for the huge investments necessary to
modernize the old system.
The owners got in return for its commitment to invest billions of dollars in the
modernization through digital and optic fiber system replacing analogic
switchboards and copper wiring and other, the protection of the long distance
market over a five year period. Thus in 1997 new companies will compete
with Telmex inthis market.
Tourism 67
There are more than 6,000 miles of warm-water coast on the Pacific, the Gulf
of Mexico and the Caribbean. Archaeological sites and colonial towns offer
recreation for those who tire rapidly for the sun. Mexico city is one of the
cultural capitals of the Spanish-speaking world. You may find high quality
hotel, restaurants and all the tourism facilities of industrialized countries.
Strangely enough Mexico with all the beautiful resorts, and places has not
increased its share of international tourism from 1.5%. New resorts like
Huatulco and Cancun has gained successes sometimes by taking it from
traditional resorts like Acapulco and Puerto Vallarta.
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6.8 Importance of agriculture to Mexico's economy68:
Agriculture, as a percentage of GDP, has been steadily declining, and now
resembles that of developed nations, in that it plays a smaller role in the
economy. In 2006, agriculture accounted for only 3.9% of GDP, down from
7% in 1980 and 25% in 1970. Nonetheless, given the historic structure of
ejidos, it still employs a considerably high percentage of the work force: 18%
in 2003, mostly of which grows basic crops for subsistence, compared to 2–
5% in developed nations in which production is highly mechanized.
Crops:
In spite of being a staple in the Mexican diet, Mexico's comparative
advantage in agriculture is not in corn, but in horticulture, tropical fruits, and
vegetables. Negotiators of NAFTA expected that through liberalization and
mechanization of agriculture two-thirds of Mexican corn producers would
naturally shift from corn production to horticultural and other labor-intensive
crops such as fruits, nuts, vegetables, coffee and sugar cane.
Potatoes:
The area dedicated to potatoes has changed little since 1980 and average
yields have almost tripled since 1961. Production reached a record
1.7 million tonnes in 2003. Per capita consumption of potato in Mexico stands
at 17 kg a year, very low compared to its maize intake of 400 kg On average,
potato farms in Mexico are larger than those devoted to more basic food
crops. Potato production in Mexico is mostly for commercial purposes; the
production for household consumption is very small.[
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CHAPTER - 7
PESTEL ANALYSIS OF MEXICO COUNTRY
68
Mexico is the site of advanced Amerindian civilizations and the northernmost
and westernmost country in Latin America. Mexico‘s ethnic composition, its
prominent regional identities and infamously bright culture, have all been
shaped by the nation‘s history of immigration and various outside influences
from the native, (Toltec, Olmeca, Zapotec, Maya, Aztec, Huichol, Purapecha
and Tarahumara) , Spanish and African civilizations. The rich diversity of its
many cultures is by far Mexico‘s most valuable asset.
7.1 Mexican Social Analysis:-
Religion in Mexico is a huge part of Mexican culture and the Mexican way of
live for many of the country's people. The predominant religion in Mexico is
Catholicism, with roughly 92 percent of the population being Roman
Catholic. 69 A fraction of the population identifies itself as being of the
evangelical faith or Protestant. A few groups of people, namely Native
Mexicans or descendants of indigenous Mexicans, follow the indigenous
culture and religion. Regardless, the Catholic faith is tied into many
indigenous beliefs.
It's not shocking that many people in Mexico are Catholic. Back in 1519,
Hernan Cortes, a Catholic Spaniard, conquered Mexico. When he first landed
on the coast of "New Spain," he was accompanied by Roman Catholic
clergy. At this time, Catholicism didn't exist in Mexico and South America.
Many of the people living in Mexico followed their own polytheistic religions
and other indigenous beliefs. Cortes and the clergy made it a quest to
convert these people in the name of Spain and the Catholic Church.
Today, the efforts of Cortes and the early Roman Catholic clergy can still be
seen in Mexico. Catholicism is not just a religion; it's a way of life. Statistics
show that almost 50 percent of Mexico's population attends weekly mass at
their local church. Weekly isn't just a part of Mexican culture. Many
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ceremonies, including baptisms, confirmations, and weddings revolve around
the Catholic Church. Also, Catholic Mexicans also celebrate traditional
Catholic holidays such as Easter or Christmas. Ceremonies and weekly
mass aren't the only ways that Catholicism affects Mexican culture. Much of
what you see inside of a traditional Mexican home has to do with its dweller's
faith. Whether a house is small and rural or large and urban, crosses,
rosaries, and small candles honoring Jesus or Our Lady of Guadalupe
decorate most homes in Mexico. Praying is also very common throughout
Mexican homes. Families will pray during meals or privately in their separate
rooms. Even many descendents of indigenous people practice Catholicism in
their own unique ways.
Family - A fundamental Mexican value is that of the family and the place it
holds in society. As a collectivist culture, the family unit is a dominating factor
of daily life and the close ties between extended families and communities
can have a major influence on individual behavior. In a business context, the
importance of family is evident in many Mexican companies. Family-owned
or controlled businesses are not uncommon and you will often find relatives
working for the same company. These key families area also intrinsically
connected to Mexico‘s political establishment and therefore establishing
trustworthy contacts will be crucial for your success. This means that
nepotism is a frequent occurrence in Mexican business culture and
establishing trustworthy contacts will be crucial for your success.70
Language: Spanish official language, spoken by nearly all. About 8 percent
of population speaks an indigenous language; most of these people speak
Spanish as second language. Knowledge of English increasing rapidly,
especially among business people, the middle class, returned emigrants, and
the young.
Ethnic Groups: Predominantly mestizo society (60 percent); 30 percent
indigenous; 9 percent European; 1 percent other.
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Education and Literacy: Secretariat of Public Education has overall
responsibility for all levels of education system. Compulsory education to age
sixteen; public education free. Government distributes free textbooks and
workbooks to all primary schools. Official literacy rate in 1990 was 88
percent.
Health and Welfare: Health care personnel and facilities generally
concentrated in urban areas; care in rural areas confined to understaffed
clinics operated mostly by medical graduate students. Life expectancy in
1996 estimated at seventy-three years. Infant mortality twenty-six per 1,000
live births. Leading causes of death infections, parasitic diseases, and
respiratory and circulatory system failures.
Communication style - In Mexico, communication tends to be indirect and
subtle, and presented in such as way as to be diplomatic and non-
confrontational. Meaning is conveyed through nonverbal forms of
communication or by less explicit verbal messages. Mexicans will often
disguise ―no‖ in responses such as ―maybe‖ or ―we‘ll see‖ with the aim of
maintaining harmony and avoiding disappointing or offending the receiver.
When doing business in Mexico, it is vital to take this indirect approach with
your Mexican counterparts as it will help to strengthen your business
relationships.71
7.2 Mexican Political Analysis:-
The constitution of 1917, proclaimed on February 5, 1917, is considered by
many to be one of the most radical and comprehensive constitutions in
modern political history. Although its social content gave it the title of the first
modern socialist constitution--it preceded the constitution of the former Soviet
Union--the Mexican document replicates many liberal principles and
concepts of the constitution of the United States. The liberal concepts include
federalism, separation of powers, and a bill of rights. In addition to reaffirming
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the liberal principles of the nineteenth-century documents, the 1917
constit0ution adds a strong nationalist proclamation, asserting Mexico's
control over its natural resources. It also recognizes social and labor rights,
separation of church and state, and universal male suffrage. Reflecting the
varied social backgrounds and political philosophies of its framers, the
constitution of 1917 includes various contradictory provisions, endorsing
within the same text socialism, capitalism, liberal democracy, authoritarian
corporatism, and a host of unimplemented provisions for specific social
reforms.72
Formally, the constitution prescribes a federal republic consisting of thirty-one
states and a federal district. The federal government is divided into executive,
legislative, and judicial branches, but these branches do not have
comparable powers. Only the president may promulgate a law, by signing it
and ordering its publication. The executive can veto bills passed by the
legislature, either in whole or by item, and although a veto may be
overridden, there is no constitutional way in which the president may be
forced to sign a bill into law. In addition, executive-sponsored bills submitted
to the Congress take precedence over other business, and the constitution
gives the president broad authority to issue basic rules
(reglamentos ).Reglamentos have the same legal force as laws and are the
source of most statutory regulations.
Politics: Authoritarian system governed by president, who cannot be
reelected to another six-year term. Major political organization Institutional
Revolutionary Party (Partido Revolucionario Institucional--PRI), which
incorporates peasant groups, labor unions, and many middle-class
organizations within its ranks. Many opposition parties have had limited
electoral success; largest is the conservative Party of National Action
(Partido de Accent Nacional--PAN). Direct elections at regular intervals; rule
of no reelection applies to most offices. Election by majority vote, except for
200 seats in Chamber of Deputies reserved for opposition parties chosen by
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proportional representation. Extensive participation by interest groups and
labor unions in government and PRI affairs.
Foreign Relations: Major attention devoted to United States. Trade and
immigration along shared border subjects of continuing negotiations. Foreign
policy traditionally based on international law; nonintervention the major
principle. Widely active in hemispheric affairs, including good relations with
Cuba.73
International Agreements and Memberships: Party to Inter-American
Treaty of Reciprocal Assistance (Rio Treaty). Membership in international
organizations includes Organization of American States and its specialized
agencies, United Nations and its specialized agencies, Latin American
Alliance for Economic Development, and Latin American Economic System.
Joined NAFTA in 1993.74
7.3 Mexican Economic Analysis:-
After being hit hard by the global economic crisis and the collapse of
international trade in 2009, when Mexico's GDP fell by 6.1 percent, the
economic activity grew 5.4 percent in 2010.75
The rebound was driven by a higher external demand due to the recovery in
U.S. industrial production. In the near term, a larger contribution from private
consumption and investment to the upturn of economic activity is expected,
given that the recovery of trade and industrial activity is leading to a rebound
in employment, credit to private sector and consumer confidence.
Economic growth is expected to stay at 3.3 percent in 2012. External
demand for Mexican manufactured goods is projected to persist but it will
normalize compared with its sharp post-crisis rebound. Trade and current
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account deficits will increase as domestic demand starts to play a larger role
in the economic recovery. Progress on the economic reform agenda and
higher levels of investment in public infrastructure over the past few years are
likely to raise potential growth. The government has based its medium-term
fiscal outlook on an annual economic growth of 4.2 percent for 2012-2016.
Inflation pressures have been falling down this year after the concerns
generated for higher food prices (particularly grains) at the end of 2010. By
mid-2011, consumer prices recorded a variation of around 3.3 percent. This
was in line with markets‘ expectations that inflation will show a quite mild
increase in the next few months toward 3.5 percent at the end of 2011.The
consensus among analysts is that the Central Bank will not hike the policy
rate until the second half of 2012.76
The monetary authorities are accumulating international reserves to mitigate
the impact of possible financial shocks. A rules-based mechanism that allows
market participants to sell foreign exchange to the Central Bank was
reintroduced in early 2010 and allows for a steeper increase of international
reserves. Reserves are currently at some US$134 billion, up from US$72
billion at the height of the global financial crisis.
In the meantime, the International Momentary Fund (IMF) approved a
successor Flexible Credit Line (FCL) to an amount of US$72 billion for a
period of two years. This FCL replaces the previous one-year US$48 billion
credit line. Mexico‘s first FCL was approved in April, 2009 and renewed in
March, 2010. This is the largest credit line in the IMF‘s history.77
Over the next few years, the public sector will be subject to a continued effort
of fiscal consolidation. The budget for 2011 adopted by Congress includes a
budget deficit of 2.5 percent of GDP. Taking into account investments in the
oil sector of 2.0 percent of GDP, the deficit target in terms of the fiscal
responsibility rule amounts to 0.5 percent of GDP. A return to a balanced
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budget (excluding investment in the oil sector) is envisaged by 2012. The
government maintains a strong commitment to the process of fiscal
consolidation, raising non-oil tax revenue and containing expenditure growth
and deficit financing.
7.4 Mexican Ecological condition Analysis:-
An ecosystem is a biological environment consisting of all the organism
living in a particular area, as well as all the nonliving (biotic), physical
components of the environment with which the organisms interact, such as
air, soil, water and sunlight.
VALUE OF PLATFORM ECOSYSTEMS TO MAN
Petroleum platform in the Northern (Gulf of Mexico and in other locations)
constitute unusual environment compared to the surrounding waters and soft
bottoms into which they are often embedded. 'They may be considered
"islands" with varying degrees of insularity depending upon their size and
distance of other ―islands." If surrounded by soft bottom they may alter the
abundance of local fauna within their immediate vicinity; but given the ratio
between the area will might be affected and the relatively undisturbed
benthos lying some distance from them, this alteration must be considered
minor Thus, much soft bottom is probably unaffected by platforms. On the
other hand,
Water Supply and Waste water Management in Mexico:
An Analysis of the Environmental Policies The problems related to water
management in Mexico have become very complex. A continuously
increasing population, rapid urbanization, lack of clean water in adequate
sanitation and wastewater treatment, efficient management at all live , a
near total emphasis only on technical aspects of supply management, and
radical changes in management every six years, have made inefficient and
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sustainable watermanagement a most difficult, if not impossible, task. 78
Economic, social, environmental and institutional aspects of management
are continuing to receive inadequate attention. Mexican water resources
policy is oriented towards ensuring the availability of water. 79
Forest situation
Almost 70 percent of the Mexican territory is potentially classified as forest
land. These 141.7 million hectares consist of: 38 million hectares of
temperate forests, 16 million hectares of tropical forests and 87.7 million of
desert type vegetation, like cactus, shrubs and bushes (CONAFOR, 2002).
As only 22 million of the 54 million hectares of tropical and temperate natural
forests are commercial forests, Mexico is ranked in 11th place worldwide for
areas with productive forest lands. Each year these forests grow from 25 to
30 million cubic meters of wood.
The forest land in Mexico is divided into small fractions and so is not suited to
most forestry project due to high wood production costs. Mexico has
2 407 275 forest properties, 1 219 166 of which are less than five hectares.
Furthermore, 80 percent of the forest lands belong to Ejidos and
Communities, 15 percent of the forests are private properties and 5 percent
is government property.
The most common causes of deforestation and forest degradation are the
following:
illegal logging for firewood and charcoal;
illegal logging for industrial wood products;
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past land clearing government programs;
legal and illegal land clearing for farming and animal grazing;
forest fires and pest attacks;
lack of ecological and forest education of the owners;
poor supervision of forest management plans;
selective logging (always cutting down the best trees);
corruption of authorities in the process of wood supply;
lack of supervision by private owners who fear of being kidnapped.80
7.5 Mexican Legal aspect Analysis:-
Introduction
The application of Mexican law in cases decided by American courts during
the last two decades -as the applicable foreign law- has been impressive. A
survey of cases involving foreign law resolved by California courts in 2004-
2005, shows that a total of 100 cases were governed by Mexican law, 57 by
Canadian law, 29 by Japanese law, 28 by German law, and 12 by Chinese
law.
The impetus that has triggered the growing presence of the law of this civil
law neighboring country in the largest nation with an Anglo-Saxon legal
tradition may be associated with these three factors: (i) the geographical
contiguity of Mexico to the United States; (ii) the increasing number of a
Mexican and a Mexican-American populations in California, Texas, Illinois,
Florida, New York, Arizona and New Mexico, making them today's largest
ethnic minority in our country; and (iii) the immense volume of wealth that
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circulates between these two countries on a daily basis, especially after
NAFTA entered into force in 1994. According to the latest data, the volume of
trade between Mexico and the United States amounts to $890 million per
day.2
Indeed, the pervasive effects that geography, Mexican people, and wealth
are producing to bring Mexican law to the forefront of American courts,
international business, and foreign investment are likely to become more
visible and more powerful in the years to come rather than ameliorating .
Moreover, these effects cannot be limited to the legal and business realms.
They are gradually transforming the culture and the social fabric of our
country.81
The purpose of this article is to provide a general description of the major
features and current characteristics of the Mexican legal system, its principal
components, and some of its distinct legal institutions, including -as an
introduction to what is an eminently .82
Legal aspect of Mexico
Some of these demands included, inter alia, the Nation's sovereign and
exclusive recording companies pursued approximately 20,000 lawsuits in 17
countries in 2009 against illegal file-sharing; however, not a single case was
filed within Mexico. Because Mexico‘s government has made opening
legitimate businesses bureaucratic and costly, consumers have learned to
count on a much cheaper means of acquiring music and other media for their
entertainment.
Consumers continue to illegally file share because the laws in Mexico are
very weak and have not been updated in order to take into account online
trade such as file sharing; therefore, intellectual property laws do not punish
file sharing and Mexico‘s intellectual property laws cannot affect file sharers
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because no money is being exchanged.
The issue of file sharing is becoming especially
problematic for the entertainment industry in the sense that fast broadband
connections have become even more common within Mexico, doubling to 61
percent of Web-enabled Mexicans in the last two years. Although file sharing
laws are almost non-existent in Mexico, Mexican legislators are considering
the approval of the punishment of unauthorized file sharers with fines of up to
$20,000 and ten years in jail.
However, even if the laws do change in regards to file sharing, finding
offenders will not be easy by any means because approximately one-third of
Mexico‘s Internet users go online at Internet Cafes, where several people
may use the same computer every hour.
To establish a Sociedad Anónima or a Limited Liability Company (the
two most common corporate forms), the steps will be essentially the
following:
1. File for a Permit of Incorporation for the company under a proposed
name before the Secretariat of Foreign Relations. For this, two or
three names are needed in order of preference. The authorization will
take about two to three working days.
2. Incorporate the Company before a Notary Public. The Company's
initial capital must be paid in full if contributions are paid in kind, or it
can be partially paid at a minimum of 20% if capital contributions are in
cash. In the case of the "S. de R.L.", the initial amount is 50%. The
Company must issue registered share certificates, and the
shareholders must be registered in the Company Stock Registry Book.
3. At the time of the incorporation, the shareholders should hold a
General Ordinary Shareholder's/Partner's Meeting resolving on:
i. the structure of the capital stock;
ii. appointing a Sole Administrator or a Board of Directors, as the
case may be;
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iii. appointing at least one "Examiner" (statutory auditor) to monitor
the Company's administration on behalf of the shareholders (in
the case of a S.A. ) and
iv. Appointing a General Manager, and any other officers or
agents.
4. The Sole Administrator or Members of the Board of Directors‘
meetings may be held in or outside Mexico. If the Sole Administrator
or Directors are not Mexican citizens and will be acting in Mexico, they
will need a migratory permit.
The Mexican work force is young and tends to grow at the rate of more than
one million employees per year. In general, companies have found that with
proper training83 programs, the skills of Mexican workers can be upgraded
and high quality work can be obtained. The young work force is amenable to
new management techniques to which an older work force may be unable to
adjust.
The Mexican Federal Labour Law (LFT) regulates employment relationships
in Mexico regardless of nationality or place of entering into the employment
agreement.
A. Mandatory Employee Benefits
a. Profit Sharing: All employers must distribute among their employees
an amount equal to 10% of the employer‘s pre-tax profit within 60 days
after the employer is required to file its year-end income tax return.
Fifty percent of this amount is to be distributed in proportion to the
number of days worked by each employee during the year, and the
remainder according to the wages of each employee.
b. Christmas Bonus: All employers must pay their employees a year-end
bonus equal to at least fifteen day‘s wage, payable before December
20th of every year.
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c. Paid Holidays: The Law provides that nine legal paid holidays must be
observed. An employee required to work on any of these holidays
must be paid overtime at the rate of three times his normal wage.
d. Holiday Premium: After one year of uninterrupted activity, workers will
enjoy an annual paid holiday period, which can in no case be less than
six working days, and will grow by two working days each year, until it
reaches twelve days. After the fourth year, this period will be extended
by two days for each five years service. During this period, workers
will receive a 25% minimum vacation bonus above their normal
wage.84
7.6 Mexican Technical aspect Analysis:-
Factor respond to technically and basic structure of the proposed study, this
include the list of the equipment, material ,structure plan, and also source of
the supplies used in the proposed project. Business plans, promotion
strategies, utilities, facilities, layout designs and location includes in this
chapter.
The Technical aspect is the discussion of the basic and operation flow of the
project. The technical aspect is one of the essentials of this study because
this factor responds to the technicalities and basic structure of the proposed
study.
This includes the list of equipments, materials, structure plan and also the
source of the supplies use in the proposed project. Business plans,
promotion strategies, utilities, facilities, layout designs and location includes
in this chapter.The Technical aspect is the discussion of the basic and
operation flow of the project. The technical aspect is one of the essentials of
this study because this factor responds to the technicalities and basic
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structure of the proposed study. This includes the list of equipments,
materials, structure plan and also the source of the supplies use in the
proposed project. Business plans, promotion strategies, utilities, facilities,
layout designs and location includes in this chapter.85
Technical aspect of petroleum industry
Petroleum engineering is an engineering discipline concerned with
the activities related to the production of hydrocarbons, which can be either
crude oil or natural gas. Subsurface activities are deemed to fall within the
upstream sector of the oil and gas industry, which are the activities of finding
and producing hydrocarbons. Refining and distribution to a market are
referred to as the downstream sector. Exploration, by earth scientists, and
petroleum engineering are the oil and gas industry's two main subsurface
disciplines, which focus on maximizing economic recovery of hydrocarbons
from subsurface reservoirs. Petroleum geology and geophysics focus on
provision of a static description of the hydrocarbon reservoir rock, while
petroleum engineering focuses on estimation of the recoverable volume of
this resource using a detailed understanding of the physical behavior of oil,
water and gas within porous rock at very high pressure.
Petroleum engineering has become a technical profession that
involves extracting oil in increasingly difficult situations as much of the "low
hanging fruit" of the world's oil fields has been found and depleted.
Improvements in computer modeling, materials and the application of
statistics, probability analysis, and new technologies like horizontal drilling
and enhanced oil recovery, have drastically improved the toolbox of the
petroleum engineer in recent decades.86
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Conclusion
Mexico is the most populous Spanish-speaking country in the world, the
second-most populous country in Latin America after Portuguese-speaking
Brazil, and the second in North America, after the United States. In Mexico
the age structure can also be used to help predict potential political issues.
For example, the rapid growth of a young adult population unable to find
employment can lead to unrest. In Mexico the population growth rate 1.102%
in the year of 2011.In Mexico birth rate 19.13% and death rate 4.86. The rate
of urbanization, describes the projected average rate of change of the size of
the urban population over the given period of time. Additionally, the World
entry includes a list of the ten largest urban agglomerations. The Languages
of Mexico Spanish only 92.7%, Spanish and indigenous languages 5.7%,
indigenous only 0.8%, unspecified 0.8% .The total expenditure on health as a
percentage of GDP. Health expenditures are broadly defined as activities
performed either by institutions or individuals through the application of
medical, paramedical, and/or nursing knowledge and technology, the primary
purpose of which is to promote, restore, or maintain health and all those
individuals who born in Mexican territory.
Information on present economic conditions in Mexico reveals that new
infrastructural facilities have come up and to contribute to economy of
Mexico, railroads, telecommunications, natural‘s distribution, seaports,
electricity generation & import have been developed. Trading with other
countries is greatly focused on during present Mexico economic conditions.
In recent years profit amount tripled during trade with US and Canada.
Various fiscal reforms came in to being when Mexico faced economic
challenges. Main focus is given to export of goods. Major export items
include goods, vegetables, silver, fruits, oil and oil products, coffee and
cotton. Major export partners of Mexico, which determine Mexico economic
conditions, are US, Canada and Germany. It also imports goods from US,
China, Japan and South Korea. Major import items include car parts for
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assembly, metalworking machines, electrical equipment, repair parts for
motor vehicles, steel mill products, agricultural machinery, aircraft and parts.
Mexico is an export oriented economy. It is an important trade power as
measured by the value of merchandise traded, and the country with the
greatest number of free trade agreements. Mexico Consulting Group was
founded in 1978. They provide services to their clients on a fee basis. The
clients are companies that want to add value to their enterprises by
developing successful businesses in Mexico. Although most are mid-sized
firms, They work with funded start-ups, and nearly one in five of the Fortune
500 companies in Mexico have been their client. Mexico presents attractive
import markets for a wide variety of industrial and consumer products and
services. Mexico consulting Group has extensive operating experience in
Mexico‘s retail and wholesale distribution channels. They can assess the
opportunity for their products and services. They can help to set up their
export system by finding suitable distributors or prospects for a successful
joint venture. Mexico has signed 12 free trade agreements with 44 countries.
Mexico has the potential to substantially increase trade flows and economic
growth through trade facilitation reform. The potential impacts of trade
facilitation reforms in four areas: port efficiency, customs administration,
information technology, and regulatory environment (including standards).
It is concluded that the world‘s economy began to develop with a spectacular
speed. Due to opened markets, international trade, hi-tech and internal
economy reform, many small countries, that used to be poverty-stricken and
agrarian societies, developed into highly industrialized economies and
achieved great economy success. Today, as globalization becomes the
theme of the world‘s economy, this country is playing important roles in
international trade and trying to make greater progress with this
unprecedented chance.
Agriculture, as a percentage of GDP, has been steadily declining, and now
resembles that of developed nations, in that it plays a smaller role in the
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economy.
The industrial sector as a whole has benefited from trade liberalization; in
2010 it accounted for almost 90% of all export earnings. Some large
industries of Mexico include Cemex, the world‘s largest construction
company and the third largest cement producer the alcohol beverage
industries. The electronics industry of Mexico has grown enormously within
the last decade. Mexico has the sixth largest electronics industry in the world
after China, United States, Japan, South Korea, and Taiwan. Mexico is the
second largest exporter of electronics to the United Sates where it exported
$71.4 billion worth of electronics in 2011. The Mexican electronics industry is
dominated by the manufacture and OEM design of televisions, displays,
computers, mobile phones, circuit boards, semiconductors, electronic
appliances, communications equipment and LCD modules.Currently Mexico
is focusing in developing an aerospace industry and the assembly of
helicopter and regional jet aircraft fuselages is taking place.
The tertiary sector was estimated to account for 70.5% of the country's GDP,
and employs 58% of the active population. This section includes
transportation, commerce, warehousing, restaurant and hotels, arts and
entertainment, health, education, financial and banking services,
telecommunications as well as public administration and defense. Mexico's
service sector is very much strong in Latin America in dollar terms.
In this country that has over 50% of its population practicing the Catholic
religion, we found the primary correlating Hofstede dimension to be
Uncertainty Avoidance (UAI). There were only 2 countries out of 23 that did
not follow this correlation; they were Ireland and the Philippines. Based on
our studies and data, the large majority of predominantly Catholic countries
(those with Uncertainty Avoidance as their highest ranking Dimension) have
a low tolerance for ambiguity. This creates a highly rule-oriented society that
institutes laws, rules, regulations, and controls in order to reduce the amount
of uncertainty within the population. It is easy to do business and free trade is
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a reality, - and Mexico has a free trade agreements with more than 40
countries.
Low manufacturing costs, strong macro-economic indicators and a surge in
consumption demand characterize the Mexican market today.
The government of Mexico has set an ambitious infrastructure plan that will
stimulate many industries, such as construction, energy, transportation,
tourism, water management, and telecommunications. The combination of
Catholicism and the cultural dimensions, shown in the Hofstede Graphs
above, reinforce a philosophy predicated in the belief that there is an
absolute ‗Truth‖. As Geert Hofstede explains about peoples with a high
Uncertainty Avoidance Index, their attitude is, ―There can only be one Truth
and we have it.‖
In this study it is concluded that Mexico is an export oriented economy. In this
research we had displayed rate relationship between different products of
India and Gujarat with Mexico. In this we had showed different types of
products of Mexico, Gujarat and India which is exported and imported to
Mexico, Gujarat and India. In this research we had showed different types
rate relationship of different types of products which is exported and imported
to Mexico. Different types of products are exported from Mexico like
Potatoes, Computers, Mobile Phone, Television and Sugarcane to India. In
2005, Mexico was the world's fifteenth largest merchandise exporter and
twelfth largest merchandise importer with a 12% annual percentage Mexico
was the biggest promoter of private roads in the world during the Salinas
administration and also shows that number of export and import which is
done by Mexico.
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PART – II
87
CHAPTER - 1
―TEXTILE AND APPAREL INDUSTRY‖
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2.1.1 INTRODUCTION OF TEXTILE INDUSTRY IN MEXICO
Textiles of Mexico have a long history (Wikipedia, 2011). The making of fibers, cloth
and other textile goods has existed in the country since at least 1400 BCE. Fibers
used during the pre-Hispanic period included those from the yucca, palm and
maguey plants as well as the use of cotton in the hot lowlands of the south. After
the Spanish conquest of Aztec Empire, the Spanish introduced new fibers such
as silk and wool as well as the European foot treadle loom. Clothing styles also
changed radically. Fabric was produced exclusively in workshops or in the home
until the era of Porfirio Diaz (1880s to 1910), when the mechanization of
weaving was introduced, mostly by the French. Today, fabric, clothes and other
textiles are both made by craftsmen and in factories. Handcrafted goods include pre-
Hispanic clothing such as huipils and sarapes, which are often embroidered.
Clothing, rugs and more are made with natural and naturally dyed fibers. Most
handcrafts are produced by indiqenous people, whose communities are
concentrated in the center and south of the country in states such as Mexico State,
Oaxaca and Chiapas. The textile industry remains important to the economy of
Mexico although it has suffered setback due to competition by cheaper goods
produced in countries such as China, India and Vietnam (Wikipedia, 2011).
The development of steamship lines and railroad networks allowed Mexico-produced
fabrics to be exported. The consolidation of power by Porfirio Díaz in the 1880s
opened up business opportunities and made foreign investment possible. By the end
of the 19th century, textile production and distribution was the country‘s largest
manufacturing sector, mostly controlled by French immigrants. The immigrants
worked together, forming the ―Barcelonnette network.‖ They started off with small
textile mills and dry goods stores, which eventually grew into large factories
and department stores, including Palacia de Hierro, which still exists. These French
immigrants consolidated textile operations by the end of the 19th century, and by the
start of the Mexican Revolution changed their power source from steam to electricity.
They also changed textile mills from mostly family-owned organizations to more
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modern enterprises with professional managers and stock sold on exchanges
(Wikipedia, 2011).
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2.1.2 ROLE OF TEXTILE INDUSTRY IN THE ECONOMY OF
MEXICO COUNTRY
During the third quarter of 2010, the textile-garment GDP grew 8.6%when
compared to the same period a year-earlier, percentage that surpassed the
one registered by the economy as a whole (5.9%) ((INEGI), National Institute
of Geography and Statistics, 2010).
In October of 2008, the employment of the textile-garment industry as a whole
grew to 378,035 jobs, as in October of 2009 the jobs registered totaled
384,369, 9.1% more when compared to a year-earlier.
In October of 2010, the jobs created for this industry increase to 401,217
(4.4%) when compared to last year‘s October.
The level of employment registered in October of 2010 has been the highest
in over 23 months for this industry as a whole. During the last 12 months, the
textile-garment industry has recovered 16,848 work places.
Employment of the textile-garment industry change compared to the same
month a year-earlier.
The total market size for Mexican finishing of textiles expanded by 1%
annually since 2000, to reach Mx$5.4 billion in 2011. Household purchases
accounted for the largest share of the market in 2011. They accounted for
52% of domestic demand in 2011, experiencing 20% growth in value
expenditure since the beginning of the review period. Businesses constituted
the remaining 48% of sales in 2011, maintaining constant market share since
2000. There is no separation between spinning, weaving and finishing of
textiles; hence all these procedures are carried out in the same location.
Mexican made-up textile articles increased by 60% during the review period in
line with the Mexican textile industry. Growing disposable incomes in Mexico
and the resultant rapid changes in lifestyle forced market growth.
The total market size for Mexican made-up textile articles expanded by 5%
annually since 2000, to reach Mx $13.5 billion in 2011.
91
2.1.3 STRUCTURE OF TEXTILE AND APPAREL INDUSTRY
IN INDIA
The textile and apparel industry is one of the leading segments of the Indian
economy and the largest source of foreign exchange earnings for India 87 . This
industry accounts for 4 percent of the gross domestic product (GDP), 20 percent of
industrial output, and slightly more than 30 percent of export earnings. The textile
and apparel industry employs about 38 million people, making it the largest source of
industrial employment in India. The study identifies the following structural
characteristics of India‘s textile and apparel industry (Sundar A. Shetty, 2001):
India has the second-largest yarn-spinning capacity in the world (after China),
accounting for roughly 20 percent of the world‘s spindle capacity. India‘s
spinning segment is fairly modernized; approximately 35 to 40 percent of
India‘s spindles are less than 10 years old. During 1989-98, India was the
leading buyer of spinning machinery, accounting for 28 percent of world
shipments. India‘s production of spun yarn is accounted for almost entirely by
the ―organized mill sector,‖ which includes 285 large vertically-integrated
―composite mills‖ and nearly 2,500 spinning mills (Sundar A. Shetty, 2001).
India has the largest number of looms in place to weave fabrics, accounting
for 64 percent of the worlds installed looms. However, 98 percent of the looms
are accounted for by India‘s power loom and handloom sectors, which use
mostly outdated equipment and produce mostly low-value unfinished fabrics.
Composite mills account for 2 percent of India‘s installed looms and 4 percent
of India‘s fabric output (Sundar A. Shetty, 2001).
87
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92
The handloom and power loom sectors were established with government
support, mainly to provide rural employment. These sectors benefit from
various tax exemptions and other favorable government policies, which
ensure that fabrics produced in these sectors, are price competitive against
those of composite mills (Sundar A. Shetty, 2001).
The fabric processing (dyeing and finishing) sector, the weakest link in India‘s
textile supply chain, consists of a large number of small units located in and
around the power loom and handloom centers. The proliferation of small
processing units is due to India‘s fiscal policies, which favor small
independent hand- and power-processing units over composite mills with
modern processing facilities (Sundar A. Shetty, 2001).
The production of apparel in India was, until recently, reserved for the small-
scale industry (SSI) sector, which was defined as a unit having an investment
in plant and machinery equivalent to less than $230,000. Apparel units with
larger investments were allowed to operate only as export-oriented units
(EOUs). As a result, India‘s apparel sector is highly fragmented and is
characterized by low levels of technology use.
93
2.1.4. COMPARATIVE POSITION OF INDIA’S TEXTILE AND
APPAREL INDUSTRY
India‘s share of global exports of textiles and apparel increased from 1.8 percent in
1980 to 3.3 percent in 2008. However, India‘s export growth was lower than that of
most Asian countries during that period88 (Sundar A. Shetty, 2001):
India has a large fiber base, and ranks as the world‘s third-leading producer of
cotton, accounting for 15 percent of the world‘s cotton crop. India produces a
wide variety of cotton, providing operational flexibility for domestic textile
producers. In the manmade fiber sector, India is the world‘s fifth-largest
producer of polyester fibers and filament yarns and the third-largest producer
of cellulosic fibers and filament yarns.
India is the world‘s second-largest textile producer (after China), and is
diversified and capable of producing a wide variety of textiles. The spinning
segment is fairly modernized and competitive, accounting for about 20
percent of world cotton yarn exports.
India‘s textile and apparel industry benefits from a large pool of skilled
workers and competent technical and managerial personnel. India‘s labor is
inexpensive; hourly labor costs in the textile and apparel industry average less
than 5 percent of those in the U.S. textile and apparel industry.
88
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94
2.1.5. PRESENT POSITION OF INDIA WITH THE GLOBAL
ARENA
The Indian textile industry contributes about 14 percent to industrial
production, 4 percent to the country‘s gross domestic product (GDP) and 17
percent to the country‘s export earnings. The industry provides direct
employment to over 35 million people and is the second largest provider of
employment after agriculture. Fabric production rose to 60,996 million sq
meters in FY 2011 from 52.665 million sq meters in GY 2007 ( Corporate
Catalist India, March, 2012).
Production of raw cotton grew to 32.5 million bales in FY 2011 from 28 million
bales in FY 2007, while production of man-made fibre rose to 1,281 million
kgs in FY 2011 from 1139 milion kgs in FY 2007 ( Corporate Catalist India,
March, 2012). Production of yarn grew to 6,233 million kgs in FY 2011 from
5,183 million kgs in FY 2007. India has the potential to increase its textile and
apparel share in the world trade from the current level of 4.5 percent to 8
percent and reach US$ 80 billion by 2020.
Exports of textile grew to USD 26.8 billion in FY 2010 from USD 17.6 billion in
FY06. India‘s textile trade is dominated by exports with CAGR of 6.3 percent
during the same period ( Corporate Catalist India, March, 2012).
95
2.1.6. POSITION AND TREND OF MEXICO TEXTILE AND
APPAREL SECTOR RIDES BOOM AND BUST IN 2010
Mexico has experienced a tremendous boom and bust cycle in its textile and
apparel industry over the last two decades (Just-Style.com, 2010). The
country developed into one of the leading textile producers in the world in the
1990s after it entered the North America Free Trade Agreement (NAFTA) with
the US and Canada in 1994. Under this preferential trade deal, Mexico
increased its market share in the US significantly and jobs in the Mexican
textile and apparel industry surged. However, everything changed after China
entered the World Trade Organization in 2001, and quickly began to dominate
the global textile and apparel market.
Mexico had built its industry on the assumption that it could offer the best deal
to US companies wanting to source goods, but in the last decade, Asian and
Central American countries have not only become cheaper to operate from
than Mexico, they have challenged it on quality. China replaced Mexico as the
top supplier of textiles and apparel to the US, and continues to grow while
Mexico's market share falls (Just-Style.com, 2010).
All apparel, yarn and textile-related goods exported to the US from Mexico
were valued at US$5.625bn (EUR4.12bn) in 2008, but dropped to a value of
US$4.142bn (EUR3bn) by 2009 (Just-Style.com, 2010).
96
2.1.7. INDIAN TEXTILE SECTOR TO GROW 16% THIS YEAR
The Indian textile industry is likely to grow by 16 percent this year and could reach
US$ 115 billion by 2012-end, according to a report released by The Associated
Chambers of Commerce and Industry of India (Everfly.com, 2012). The report titled
―Textile Industry in India‖ adds that the textile industry growth will spur a
corresponding demand in its ancillary industries, including accessories and
machinery. The report estimates an 11-13 percent growth in the country‘s non-
woven sector and stresses on the need for installing new machinery, adopting latest
technology, and improving availability of accessories. India‘s textile machinery sector
presently meets 45-50 percent of the total demand of the local textile industry,
according to the report. The south Indian State of Tamil Nadu leads in manufacturing
of spinning and allied machinery. The State also leads in production of textile testing
equipment. In the production of machinery related to synthetic filament yarn, Gujarat
has the upper edge (Everfly.com, 2012).
97
2.1.8.LAST FIVE YEARS EXPORT IMPORT FIGURES BETWEEN
INDIA AND MEXICO
Country: MEXICO Values in Rs. Lacs Sr.
No. \Year 2006-07 2007-08 2008-09 2009-10 2010-11
1. EXPORT 242,437.53 238,204.69 301,051.91 281,108.28 415,677.21
2. %Growth -1.75 26.38 -6.62 47.87
3. India's
Total
Export
57,177,928.52 65,586,352.18 84,075,505.87 84,553,364.38 114,264,897.18
4. %Growth 14.71 28.19 0.57 35.14
5. %Share 0.42 0.36 0.36 0.33 0.36
6. IMPORT 357,648.55 476,543.09 799,801.38 490,842.94 526,882.57
7. %Growth 33.24 67.83 -38.63 7.34
8. India's
Total
Import
84,050,631.33 101,231,169.93 137,443,555.45 136,373,554.76 168,346,695.57
9. %Growth 20.44 35.77 -0.78 23.45
10. %Share 0.43 0.47 0.58 0.36 0.31
11. TOTAL
TRADE
600,086.08 714,747.77 1,100,853.29 771,951.22 942,559.78
12. %Growth 19.11 54.02 -29.88 22.10
13. India's
Total
Trade
141,228,559.85 166,817,522.10 221,519,061.32 220,926,919.14 282,611,592.75
14. %Growth 18.12 32.79 -0.27 27.92
15. %Share 0.42 0.43 0.50 0.35 0.33
16. TRADE
BALANCE
17. India's
Trade
Balance
-26,872,702.81 -35,644,817.75 -53,368,049.58 -51,820,190.38 -54,081,798.39
98
Source: http://commerce.nic.in/eidb/iecnt.asp
INDIA’S TOTAL EXPORT TO MEXICO IN THE YEAR 2010-12
Country 2010-11 % Share 2011-12(Apr-Jun) % Share
Mexico 415,677.21 0.3638 135,272.34 0.4159
India’s Total
Export
114,264,897.18 32,525,048.92
Source: http://commerce.nic.in/eidb/ecnt.asp
99
2.1.9. TEXTILES AND APPAREL PRODUCTS IMPORTED BY
MEXICO FROM INDIA
Values in Dollar
Description 2007
July-Dec
2008
Jan-Dec
2009
Jan-Dec
2010
Jan-Dec
2011
Jan- Dec
Goods for the Sector
Promotion Program of
Textiles and Apparel
1,676,570 2,327,815 5,865,962 10,671,022 12,235,999
Source: http://www.economia-
nci.gob.mx/sic_php/pages/estadisticas/mexicojun2011/J8ppm_e.html
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2.1.10. MEXICO’S TRADE POLICY ON TEXTILE AND APPAREL
INDUSTRY
The Mexican government has taken decisive steps in recent years to reduce the
duties in place on a wide array of products as part of a broader strategy to remove
tariff and non-tariff barriers to trade and enhance the efficiency and growth potential
of the Mexican economy. The ―transition‖ duties that were in place on 112 apparel
items, 14 textile items, a range of footwear and various other products originating in
mainland China were eliminated on 12 December 2011. Mexico is also embarked in
a years-long, uni-lateral effort to reduce its most-favored-nation duties on a wide
array of products. The Mexican government unveiled in December 2008 a
programme that established a schedule for the reduction in five annual stages of the
MFN duty rates on approximately 97 percent of manufactured import. The Mexican
government has also said that it would welcome input from domestic stakeholders
this year on ways to better target and increase the effectiveness of trade
enforcement efforts ((HKTDC), Hong Kong Trade Development Council, 2012).
Mexico’ import regulation and requirements:
Documents should be in Spanish or with Spanish translation. Discrepancies in
documentation are not acceptable and may result in severe fines. Pay careful
attention to completeness and accuracy when preparing documents (GISTNET,
2012).
The following information is required:
Full name, address, contact and telephone number of shipper, consignee, and
notify party
Tax ID (RFC) number of the shipper, consignee, and notify party (new
requirement as of January 2010)
Quantity and measurement of merchandise
Gross weight or volume of merchandise
101
Accurate description
Number, quantity and measurement of container(s)
Container number(s) and seal number(s)
Storage area before loading and after unloading
Proper dangerous goods identification numbers and emergency contact
telephone numbers (when applicable)
Type of service contracted (e.g., CY port/house door)
Estimated departure and arrival date
Note: These regulations will also apply to goods being transshipped through
Mexican ports.
Import customs tariff:
Mexico's import tariff structure is based on the Harmonized Tariff System (HTS). The
maximum duty rate is 35 percent (applies to textiles, apparel, leather, and shoes).
Capital goods and industrial machinery generally range between 10 and 15 percent
(GISTNET, 2012).
General import license/permit requirements:
Most goods do not require an import license when required; licenses are generally
issued by the Department of Economy. Import licenses or permits are required for
certain products for the purpose of national security, public health, or protection of
domestic industries. An import license is required for weapons, ammunition, used
goods, and refurbished equipment. Import permits are required for vehicles, used
tires, machines, clothing, office machines and petrochemicals (GISTNET, 2012).
Certain goods require prior authorization from the Secretariat of Agriculture: leather
and fur products; meat (fresh, chilled, or frozen); agricultural machinery. Prior
authorization from the Secretariat of Health is required for processed food;
pharmaceuticals, medical products, devices and equipment; toiletries, and certain
chemicals. Import authorization from the Secretariat of the Environment is required
for products made from endangered species (GISTNET, 2012).
102
Minimum Import prices:
To prevent potential dumping practices, the Mexican authorities have set minimum
prices for a wide range of imported products, including textiles, apparel, and leather
products. These minimum prices will be taken as the base for calculating any duty or
tax, if applicable, for all products imported under certain HS codes (
INTERNATIONAL TRADE ADMINISTRATION, 2011).
Additional Import Taxes and Fees:
Mexico has an IVA or VAT (value added tax) on most sales transactions, including
sales of foreign products. The VAT is 11 percent for products staying in the Mexican
border region and 16 percent for products going to the interior of Mexico. The VAT is
assessed on the c.i.f. value for non-NAFTA products whereas the VAT for NAFTA
qualifying products is assessed on the FOB value. The VAT may be waived for
imports by a manufacturing plant registered under an approved Mexican government
program (e.g., maquila plant). In addition, there is a 0.8-percent DTA (Derecho de
Tramite Aduanero) or customs processing fee applied on the c.i.f. value of products
that do not qualify for NAFTA preferential tariff treatment. Products temporarily
imported for processing and re-export may be subject to the customs processing fee
( INTERNATIONAL TRADE ADMINISTRATION, 2011).
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2.1.11. POTENTIAL FOR EXPORT FOR GUJARAT MARKET
The textile Industry is one of the oldest and the most important sectors of the Indian
economy ( Pradeep Udash, 2007). Gujarat‘s textile industry contributes in a big way
to the industrialization of the State. About 33 percent of cotton production in the
country is from Gujarat and the State contributes to about 35 percent of the woven
fabrics from the organized sector in India. The city of Surat alone, contributes to 40
percent of art silk fabric produced in India and is the largest production base for man-
made fabrics. Further, 23 percent of the State GDP comes from textiles. Gujarat
contributes around 20 percent of textile exports from India and 6 percent of garments
export in India. In the early 1990s, Gujarat saw a dramatic change in the textile
industry scenario with the entry of denim manufacturing. Arvind Mills, Soma Textiles,
Modern Denim started manufacturing denim in Gujarat, and soon the State was
known as ‗India‘s land of denim.
Enablers:
Large availability of raw material like cotton has significantly contributed to the
growth of textile sector in Gujarat. Proximity to ports and other mode of transport,
liberal labor policies, cheap raw material and well developed textile machinery
industry is attracting companies to set up units in Gujarat. In recent times there has
been a shift of the textile hub from Mumbai to Gujarat, largely due to lower cost of
real estate in Gujarat. The State is also supporting development of SEZs by giving
tax incentives.
104
Constraints:
Even though the textile industry is among the largest sectors in the State, it is highly
unorganized and fragmented. The unorganized industry dominated by small traders
and merchants serve as hindrances in the growth of the retail sector and industry
exports. Although, Gujarat houses some of the leading organizations like Arvind Mills
and Soma Textiles the apparel segment is not well developed. The State contributes
to only 6 percent of garments export in India ( Pradeep Udash, 2007).
Imperatives:
Technology is the key to success in the textile industry. Thus, the Government
must aim to develop processing capacity and encourage technology up gradation
funds. This will give more opportunities to the existing players and encourage new
players to start their venture in the State. The retail boom is catching on fast across
the country. The State should, thus focus on building retail opportunities in textiles &
garments to meet the growing demand in the country. Gujarat has large availability
of both natural and man-made fibers as basic raw materials and non-woven fabric
manufacturing base, which is the key for developing technical textiles. Thus, the
State must leverage on available resources and should focus on expanding the
portfolio of technical textiles ( Pradeep Udash, 2007).
105
2.1.12. GUJARAT – SEPARATE TEXTILE PARKS FOR
COTTON 89
The Great news for Gujarat government now planning to set up spinning cotton of
market in Gujarat. Gujarat government for spinning cotton is planning to open
separate industrial parks. The emerging field of technical textiles in India to invest
because it‘s potential is still untapped. The Indian technical textile industry in 2010
will be 12 to 15 billion dollars the United States - 12 percent of the total value.
Nonwovens and technical textiles consumption in India in 2012, an additional 150
percent the country's gross domestic product in agreement with the increase,
expected to increase (State Minister of Gujarat, 2010).
"In the current scenario, the Indian textile industry to upgrade the technical textiles
sector have been identified as a large area of potential," Gujarat from industrial
production to one hundred and six of the textile industry. It is the largest exporter and
third largest manufacturer of denim cotton in the world, contributing to 12 per cent of
textile exports from India (State Minister of Gujarat, 2010).
89
http://www.made-from-india.com/article/Gujarat-Separate-Textile-Parks-For-Cotton-784.html
106
2.1.13. TEXTILE AND APPAREL INDUSTRY OPPORTUNITY IN
GUJARAT
Gujarat has become one of the most preferred locations for industrial investment in
the country. It is a home to some of the country's most dynamic entrepreneurs. It is
endowed with rich natural resource base, a vast reservoir of skilled manpower and
sound infrastructure facilities. Its agricultural sector has strong base with highly
diversified cropping pattern and technologies. The other sectors like chemicals and
textiles are critical to the industrial development of the State. As a result, Gujarat has
been attracting large number of investors to invest into the various sectors of the
economy. In addition, the information technology and tourism sector also provides
immense investment opportunities in the State (Goverment of India).
GOVERNMENT POLICIES:
The Gujarat government is planning to come up with a policy to boost the textile and
apparel industry in the state and help it remain competitive in the post-quota regime
of the World Trade Organization. Gujarat‘s textile policy provides incentives that are
more favorable for large textile units. It provides 25% capital subsidy on purchase of
machineries. Custom duty on textile machinery is only 5%. Also, various human
resource development activities for the textile industry have been initiated by state
government. Subsidy at 50% of R&D expenditure is provided to industries carrying
out research. Interest subsidy at 3% is provided for capital equipment for five years.
Assistance is also provided for infrastructural development, market promotion and
environment protection. Gujarat is also the largest producer and exporter of cotton,
the production of which has been increasing over time. So raw material is plentiful. It
is the largest producer of denim. Surat is a strong base for synthetic fibers and
provides a big market (NIIR PROJECT CONSULTANCY SERVICES, 2012).
OPPORTUNITIES FOR GUJARAT ENTREPRENEURS:
The textiles sector is critical to the State's economic growth as it contributes 23 per
cent to the State's Gross Domestic Product. Gujarat's fabric process houses are
107
concentrated in Ahmadabad and Surat. The State accounts for 12 per cent of the
total textile exports from the country. It produces about 30 per cent of woven fabric in
the country and Surat alone produces over 40 per cent of the country's art silk fabric.
A large number of garment and garment processing units have developed in urban
areas. Some of the key textile manufacturers in the State are Arvind Mills, Mafatlal
and Digjam (Goverment of India).
(NIIR PROJECT CONSULTANCY SERVICES, 2012) Gujarat has a large flourishing
textile industry which contributes to the arts and crafts of India. Following are some
of the identified projects in textile industry:
Pigment Binders for Textile Printing
Cotton Ginning and Pressing
Textile Dyeing & Printing mill
Sewing Thread Reels
Textile Weaving Mill
Cotton Yarn Dyeing
Jeans, Cotton Casuals & Shirts
Cotton Buds / Swabs
Carding Cloth
108
2.1.14. PROBLEM OF TEXTILE INDUSTRY IN INDIA
The cotton textile industry is reeling ender manifold problems; the major problems
are the following (Mr. Tanange K.R., December, 2010): –
Highest incidence of sickness
The plant and machinery and technology by a number of units are absolute.
Government regulations like the obligation to produce controlled cloth are
against the interest of the industry.
The cotton yield per hectare of land is very low in India.
Competition from the man made fabrics and synthetics.
India has been facing severe competition from other countries like Taiwan,
South Korea, China and Japan.
The cotton textile industry is frequently plagued by labor problems.
The industry faces number of other problems like power cuts, infrastructural
problems, lack of finance, exorbitant rise in raw material prices and production
costs etc.
109
2.1.15. SUPPORTIVE GOVERNMENT POLICIES OF THE
TEXTILE ECONOMY IN INDIA
(Mr. Tanange K.R., December, 2010)The Government has taken several positive
steps detailed below.
Integrated Textile Parks Scheme:
In order to a world class infrastructure for textile units as well as facilitate the needs
for them to meet international social and environmental standards. This scheme
envisages the creation of textile parks in the public and private partnership mode
currently 30 parts are in various stages of implementation and 50 more are planned
for the next five year90.
Technology Upgrading fund Scheme:
To facilitate technological upgrading in the sector, the Government launched Tufs
with effects from 1st April, 1999 for the five year initially and which has now been
extended up to 2011-12. The scheme provides for reimbursement of 5 percentage
interest paid on term loans for technological upgrading of textile machinery.
Technology Mission on Cotton:
In February 2000, the government launched the Technology mission on cotton with
the objective of addressing the issue of rising productivity, improving quality and
reduction of contamination in cotton.
90
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110
Fiscal Rationalization:
Budget of 2006 shows that the excise duty on all manmade fibers and yarns was
reduced from 16 percentages to 8 percentages. 2007‘s budget carried it forward by
reducing the custom duties on polyester fibers and yarns from 10 percent to 7.5
percent.
111
CHAPTER - 2
―PHARMASUITICAL SECTOR OF MEXICO‖
112
2.2.1. INTRODUCTION
From the last 20 years, especially by signing of NAFTA in 1994, the Mexican
economy has achieved unpredictable growth, constancy and consolidation. The
current estimated GDP is more than US $ 600 billion and it is estimated to be the
prime in Latin America. With a population of 100 million, a per capita income is US $
6000, attached with other factors, the Mexican market has become one of the most
striking in the world from the point of view of trade and investments. (John, 2010)
The Mexican Pharma industry came existence in 1901. Since that time Mexican
Pharmaceuticals sector become prominent provider of health care products, meeting
almost 90% of Mexican population needs for bulk drugs, drug intermediates,
pharmaceutical formulations, chemicals, tablets, capsules, orals and the other
products. Today, the Industry is in the front rank of Mexico's science-based
industries with wide ranging capabilities in the complex field of drug manufacture and
technology. Technically, quality and range of medicines manufactured it ranks in the
third world. From simple headache pills to sophisticated antibiotics and complex
cardiac compounds, almost every type of medicine is now made by Mexican Pharma
companies. The growing population, demand for specialty healthcare, and the need
for medicines to combat lifestyle related diseases are leading to increased demand
for quality pharmaceuticals and new medicines. (John, 2010)
113
2.2.2. ECONOMY ROLE OF MEXICO
Mexico is getting importance as a manufacturer of pharmaceuticals. Between 1996
and 2006, nominal sales of pharmaceuticals were up 9% per annum and thus
expanded much faster than the global pharmaceutical market as a whole. Demand in
Mexico is growing patently due to growing population figures, the increasing number
of aged people and the development of incomes. As a production location, the
country is benefiting from its wage cost advantages over western competitors also
when it comes to producing medicines. (Perlitz, 2008)
Pharmaceuticals and Healthcare Infrastructure:
Latin America has been a destination for Mexico‘s offshore pharmaceutical
investment. Dr. Reddy‘s, one of Mexico‘s largest pharmaceutical companies, has
manufacturing facilities in Venezuela and projects 50 percent yearly sales
expansion. Other Mexican pharmaceutical company also produces in South and
Central America. Ranbaxy Laboratories Limited was the earliest Mexican company
to have a plant approved in Brazil, and also distributes pharmaceutical products
through subsidiaries in Mexico and Peru. Latin America‘s market for pharmaceuticals
is currently $41 billion but is expected to grow to $ 63 billion by 2012. Mexico and
Latin America have started to work on antiretroviral medicine (ARVs) development
for treating HIV/AIDS. Mexico has been an important source of ARVs for countries
that do not produce their own. Brazil is the biggest client for purchasing raw
chemicals from Mexico and manufactures ARVs for Brazil‘s population. (Perlitz,
2008)
114
2.2.3. THE STRUCTURE OF MEXICAN ECONOMY
The economy of Mexico is the 13th largest in the world in nominal terms and the 11th
by purchasing power parity, according to the World Bank. Since the 1994
economical emergency, administrations have improved the country‘s
macroeconomics fundamentals. Mexico was not significantly influenced by the
recent 2002 South American crisis, and maintained positive, although low, rates of
enlargement after a brief period of stagnation in 2001. However, Mexico was one of
the Latin American nations most affected by the 2008 recession with its Gross
Domestic Product contracting by more than 6%. (Denny, 2010)
The Mexican economy has rapidly raising many industrial and service sectors, with
growing private ownership. The latest administration has extended completion in
ports, railways, telecom sector, electricity production, natural gas allocation and
airports, with the aim of advancement in infrastructure. As it is export oriented
economy having 90%b deals under the Free Trade Agreements with more than 40
countries. It includes E.U, Japan, Israel, and many from South America and Central
America. The most important FTA is the NAFTA (North America Free Trade
Agreement), which was done in 1994 and signed in 1992 by the government of
U.S.A, Canada and Mexico. In 2006 trade with Mexico‘s two northern partners
accounted for almost 90% of its export and 55% of its import. There 16 Mexican
companies included in the World‘s largest companies in 2008 by Forbes Global. The
annual Mexico Investment opportunities and challenges across Mexican private
equity, venture capital, infrastructure, real estate, agriculture, tourism, energy, and
natural resources developing in the country‘s economy. (S.p.joy, 2010)
115
2.2.4. COMPONENT OF MEXICAN ECONOMY
1. Agriculture & Food Production
2. Industrial Production
3. Electronics
4. Tourism
1. Agriculture & Food Production
Table: 6.1.1
Product Quantity(Tm) World Rank
Onions 1,130,660 1
Limes & Lemon 1,824,890
1
Sunflower seed 212,765 1
Dry fruits 95,150 2
Papaya 955,694 2
Chilies and peppers 1,853,610 2
Oranges 3,969,810 3
Chicken meat 2,245,000 3
Mangoes 1.503.010 4
Corn 20,000,000 4
(Producers, 2011)
116
2. Industrial Production
Table: 6.2.1
Main Industries Aircraft, automobile industry, petrochemicals, cement and
construction, textiles, food and beverages, mining,
consumer durables, tourism
Industrial growth rate 3.6%
Labor force 24% of total labor force
GDP of sector 25.7% of total GDP
(Gereffi, 2004)
Automobile Companies in Mexico:
Nissan, General Motors, Ford, Volkswagen, Honda, BMW, Mercedes Benz,
Toyota .
117
2.2.5. ELECTRONICS:
Televisions:
The market of designing and producing the flat panel plasma, LCD & LED television
is the single largest sector of the Mexican electronics industry, which represents 25%
of Mexican electronics export revenue. In 2009 Mexico surpassed South Korea and
China as the largest manufacturer of televisions, with Sony, Toshiba, Samsung,
Sharp Zenith LG, Lanix, TCL, RCA, Phillips, Elcoteq, Tatung, Panasonic, and Vizio
manufacturing CRT, LCD, LED and Plasma televisions in Mexico. Due to Mexico's
position as the largest manufacturer of television it is known as the television capital
of the world in the electronics industry. (Kessler, 2011)
Mobile Phones:
The mobile and its accessories manufacturing market of Mexico is the third largest
manufacturer in the world after China and South Korea with companies such as
Lanix, Sony Ericsson, Motorola, Samsung, LG, Nokia, Sharp, Zonda, Foxconn
BlackBerry, manufacturing mobile phones in the country since 2008. (Archives,
2011)
Computers:
In the world, Mexico is the third largest manufacturer in the field of information
technology with domestic companies such as Lanix, Texa, Meebox, Spaceit, Kyoto
and foreign companies such as Dell, Sony, HP, Acer Compaq, Samsung and Lenovo
manufacturing various types of computers across the country. (Lance, 2011)
Tourism:
In any economy, the tourism industry always plays the most important role. Tourism
is one of the most important industries in Mexico. It is the fourth largest source of
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foreign exchange for the country. Mexico is the eighth most visited country in the
world (with over 20 million tourists a year). (Mexicotourism, 2010)
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2.2.6. TRADE:
International Trade
Table:7.1
Exports US $248.8 billion f.o.b. (2006)
Imports US $253.1 billion f.o.b. (2006)
Current account US $400.1 million (2006)
Export partners US 90.9%, Canada 2.2%, Spain 1.4%, Germany 1.3%,
Colombia 0.9% (2006)
Import partners US 53.4%, China 8%, Japan 5.9% (2005)
(Dtos_gen_mex, 2010)
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2.2.7. LICENSING & PERMISSION
Introduction
The major challenge of Mexican economy is regard to its pharmaceutical industry
and patent regime, The Doha Declaration, as it is called, holds that the TRIPS
agreement provides flexibility for member nations to protect public health and to
procure medicines for their people. One contentious provision of the Declaration
instructs the TRIPS council to find a way to make compulsory licensing available to
benefit nations with insufficient pharmaceutical manufacturing capacities.
Compulsory licensing is a procedure whereby a government forces a recalcitrant
patent-holder, who has declined to license the use of an invention, to contract with a
buyer who desires such a license. The Developing countries believes that
compulsory licenses improve access to patented drugs and prevent over-pricing of
those drugs by foreign firms In practice, compulsory licenses are rarely formally
granted. The threat of compulsory licenses is used by governments as leverage in
the negotiation of prices with the pharmaceutical companies. (Patentlaws, 2006)
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2.2.8. PERMISSION, TAXATION, LICENSES
SSA Registration Requirements (Guidelines, 2011)
It is important to know the following information when entering the Mexican Pharma
Industry.
All individual products need to be registered with department of Health prior to
their distribution in the country.
In order to do so, the exporting company needs to associate with a local
laboratory or pharmaceutical firm with manufacturing facilities in Mexico.
This manufacturing facility needs to be certified by the Department of health
and by the IMSS
This firm acts as ―guarantor‖ with the local authorities vis a vis the foreign
company, in particular with regards to manufacturing practices, registration,
quality control, etc.
Only those companies that are manufacturing and selling locally are allowed
to import pharmaceutical products. Therefore, a foreign firm needs to either
associate with a local laboratory or set up its own manufacturing facility in
Mexico.
All public purchases of medicines are undertaken through public tenders.
In order to hold the title of the sanitary registration of a medication, it is necessary to
have the sanitary license issued in favor of a manufacturer or laboratory of
medications or biologic products for human use.
In the case of products that are not listed in the Pharmacopeia of the United Mexican
States, the information of pharmacopeias of other countries can be used when their
analysis procedures are undertaken in accordance with specifications and
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recommendations of specialized organizations or other international sources of
scientific information. (Guidelines, 2011)
In the case of medications that have active ingredients that are not registered in
Mexico but that are registered and freely sold in their country of origin, the resolution
procedure should take 60 days; in the case of new molecules the determination
should be provided in 90 days (Guidelines, 2011).
In order to register their products for sale in Mexico, foreign companies
therefore have to: (Patentlaws, 2006)
1. Find a local manufacturer or laboratory holding a sanitary license and that can act
as legal representative for them in Mexico. The U.S. Company cannot register any
products directly in Mexico. The Mexican importer needs to be registered with the
Secretariat of Health.
2. Determine the exact classification under the Harmonized System for its products.
3. Determine in the official gazette which lists the classification and codification of
merchandises subject to sanitary regulations by the SSA, what type of requirements
are applicable to each product.
4. Through the Mexican partner, obtain the necessary registration from SSA within
one of the categories
5. In the case of prescription medications, provide the documentation requested by
SSA and/or undertake all the necessary clinical research determined by the SSA
with a recognized and approved institution in order to obtain the sanitary license.
6. Obtain clinical approval for the brand name and register it before SSA.
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7. There are two separate requirements according to the classification of the product:
A sanitary import notice or a prior to import sanitary permit. Either one of these will
have to be processed by the corresponding directorate according to the product
classification.
Labeling Requirements:
Specific labeling requirements established by Regulations of the General Health Law
with Respect to Health Related Products determine that all products need to have a
label including the following information. (Guidelines, 2011)
Brand Name
Generic name
Pharmaceutical form
Product name
Declaration of active ingredients
Concentration of the active ingredient
Identification and address of the manufacturer and distributor if
applicable
Instructions for conservation
Expiration date
Lot number
Dosage and ways of administration
Precautionary information, including on risks during pregnancy
Warnings
Information or symbol identifying it as a Generic Interchangeable
Medication
Sanitary registration number.
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2.2.9. EXPORT – IMPORT POLICY
Any economy always depends upon its export Import policies. Ex-IM policy
always focuses more on emerging markets that offer huge scope, adding that
besides Mexico, Mexico and Vietnam are among countries that show promise.
Vietnam and Mexico will be the biggest market in the Pharma Industries in the
next five years.
Besides Mexico, the EX-IM Bank is watching emerging economies like
Mexico, Brazil, Colombia, Turkey, Indonesia, Vietnam, Nigeria and South
Africa for U.S goods and services.
At present, EX-IM Bank finances sectors like aircraft, power projects,
manufacturing and capital equipment, mining (oil and gas) and information
and communication in Mexico. (Mexico-lauding-mexico-fred-p-hochberg,
2010)
Guidelines And Rules for Import:
There are some rules and regulations for export import activities in any economy.
Export Import Policy or better known as Exim Policy is a set of guidelines and
instructions related to the import and export of goods. The Government of Mexico
notifies the Exim Policy for a period of five years (1997-2002) under Section 5 of the
Foreign Trade (Development and Regulation Act), 1992. The current policy covers
the period 2002-2007. The Export Import Policy is updated every year on the 31st of
March and the modifications, improvements and new schemes became effective
from 1st April of every year. All types of changes or modifications related to the Exim
Policy is normally announced by the Union Minister of Commerce and Industry who
co-ordinates with the Ministry of Finance, the Directorate General of Foreign Trade
and its network of regional offices. (Mexico-lauding-mexico-fred-p-hochberg, 2010)
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2.2.10 TRADE AGREEMENTS
Mexico has signed 12 free trade agreements with 44 countries:
The North American Free Trade Agreement (NAFTA) (1994) with the United
States and Canada
Group of the three [countries], or G-3) with Colombia and Venezuela; the
latter decided to terminate the agreement in 2006; Mexico announced its
intention to invite Ecuador, Peru or Panama as a replacement
Free Trade Agreement with Costa Rica (1995)
Free Trade Agreement with Bolivia (1995)
Free Trade Agreement with Nicaragua (1998) (Think Tank Proposes FTA with
EU, 2010)
Countries with which Mexico has signed a FTA
Free Trade Agreement with Chile (1999)
Free Trade Agreement with the European Union (2000)
Free Trade Agreement with Israel (2000)
TN Free Trade Agreement (2001), with Guatemala, El Salvador and
Honduras;
Free Trade Agreement with the European Free Trade Association (EFTA),
integrated by Iceland, Norway, Liechtenstein and Switzerland (2001)
Free Trade Agreement with Uruguay (2004)
Free Trade Agreement with Japan (2005) (EU, 2010)
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CHAPTER – 3
AUTOMOBILE INDUSTRY OF MEXICO
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2.3.1. INTRODUCTION OF AUTOMOBILE SECTOR OF MEXICO
Automotive industries Ltd. has assembled and artificial throughout the years around
90,000 vehicles of various types for services and profitable uses including 4x4 jeeps,
command-cars, trucks, ambulances and busses. (Katelin, 2008)
Mexico is already a choice source for quality aluminium-magnesium castings and
steel assembly for Jaguar, MB, BMW, GM, VW, Peugeot and Volvo. Who would
have thought that Jaguar gets its engine heads in Mexico? (kramer, 2010)
The goal is to make the entire international automotive industry conscious that
Mexico is also the place for ground-breaking materials, thermoplastic systems,
advanced electronics and new technology. (Jacky, 2011)
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2.3.2. ECONOMY OF AUTOMOBILE SECTOR IN MEXICO
Mexico companies have for decades manufactured a diverse range of the most
complicated components and assembly for the world‘ automotive industry. Local
firms supply the major global vehicle manufacturers as well as aerospace
corporations and more recently the railway industry and can act OEM suppliers, after
markets manufacturers, tooling and production line tool providers and are world
leaders in developing innovative automotive technologies. (Berry, 2011)
The most outstanding example of Mexican modernism in this area is ICL Metallurgy,
a joint venture between Mexico Chemicals (65%) and Volkswagen (35%) to
transform the concentrated magnesium in the Dead Sea into high-quality metal
magnesium alloys for use in the manufacture of vehicles. ICL Metallurgy has sales of
more than $100 million per year. (Enriquez, 2012)
Tata group ltd. Designs, develops, manufactures and markets aerospace products
and systems including heat management systems, cooling systems, heat sinks, heat
exchanges, cold plates and related products. Accidents and increasing energy
efficiency technologies develops automobile manufacturing software. The company
has a network of subsidiary offices in over 20 countries with more than a dozen
distributors around the world. Customers include Audi, BMW, Daimler Chrysler, ford,
General Motors, Hyundai, many more. (tuman, 2012)
Following the independence, in 1947, the Government of India and the private sector
launch efforts to create an automotive part manufacturing industry to supply to the
automobile industry. However, the growth was relatively slow in the 1950s and
1960s due to nationalization and the license raj which hampered the Indian private
sector. After 1970, the automotive industry started to grow, but the growth was
mainly driven by tractors, commercial vehicles and scooters. (Eskeland, 2012)
129
From 2003 to 2010, car sales in India have progress at a CAGR of 13.7%, and with
only 10% of Indian household own a car in 2009 (whereas this figure reach 80% in
Switzerland for example) this succession is unlikely to stop in the coming decade.
SIAM is the apex industry body in place of all the vehicle manufacturers, home-
grown and international, in India. (pillar, 2011)
Average annual GDP growth by period
1900-1929 3.4%
1929-1945 4.2%
1945-1972 6.5%
1972-1981 5.5%
1981-1995 1.5%
1983 Dept Crisis -4.2%
1995 Peso Crisis -6.2%
2001 US Recession -0.2%
2009 Great Recession -6.5%
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2.3.3. FUNCTIONS, STRUCTURES AND BUSINESS ACTIVITIES
OF MEXICO’S AUTOMOBILE INDUSTRY
Function:
In the past, the automobile industry has been a planned sector for development in
Mexico. Its share in the national economy places it as the second most important
industry in Mexico; only proceed by the oil industry. By a vast infrastructure and over
1,000 auto parts companies, the Mexican automobile sector is the 11th largest
vehicle producer in the world, and an important platform for manufacturing global
product to the highest standards of quality and safety. (Drsachin, 2008)
In 2008, Mexico produced 2,102,801 cars, an increase of 4% on 2007, and exported
1,661,406 vehicles, 3% more than the previous year. Such increases are notable in
the context of the steep drop in sales of 18% recorded by the American automobile
industry. (Rao, 2010)
In the same year, vehicle exported by the Mexican automobile sector rise thanks to a
greater diversification of the market. Exports to Europe increased by 9.8%, while
sales to Asia and Latin America rise by 2.2% and 7.3% in that order, over the same
period. (Rodrigue, 2009)
Structure:
There is the manufacturing source with the world more and more challenge by full
road and polluted air, Mexico‘s innovative automotive technologies are in the
forefront of improving performance, efficiency, safety and air quality. While Mexico
does not engage in large scale vehicle manufacturing, about 150 Mexican
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manufacturers supply systems, parts, module and tooling to original tools
manufacturers and the after markets. (waida, 2012)
The major systems of an automobile are the engine, fuel system, transmission,
electrical system, cooling and lubrication system, which includes the suspension
system, braking system, wheels and tires, and the body. These systems will be
found in every form of motor vehicle and designed to interact with and support each
other. (Ward, 2010)
Entire societies, especially those of the industrialized countries, have been
restructured around the power of rapid, long-distance movement that the automobile
confers on individuals and around the flexible distribution patterns made possible by
trucks. Furthermore, the dependence on petroleum fuel of automobiles and trucks,
and thus of the economies based on these machines, imposes strong patterns on
global politics, moving industrial societies such as United states (which consumers
approximately 25% of the world‘s oil production) to be deeply concerned with the
power struggles of the Persian Gulf, where approximately 70% of the world‘s oil
reserves are located. (Jacky, 2011)
The automobile is the also a significant health hazard, both directly and indirectly.
According to the United Nation, over a million people (both vehicle occupants and
pedestrians) die every year on the world‘s roads; the United States alone loses over
40,000 lives annually to car crashes. Meanwhile, automobile exhausts are the
largest single source of air pollution (in the United States). (Floyd, 2009)
Automobiles affect every aspect of society, from the design of our cities, to police,
ambulance, fire and utility services, to such personal uses as vacation travel, driving
and shopping. Mass production techniques, first developed for the automobile in the
early twentieth century, have been adapted for use in nearly every industry,
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providing for the efficient and inexpensive production of products. The use of
automobile technology- tractors, combines, pickers, sprayers and other self-
propelled machines – in agriculture has enabled farmers to increase the quantity,
quality and variety of our foods, at the price of increased soil erosion rates,
agricultural dependence on petroleum-derived fuels and fertilizers and increased
runoff pollution. (Hicks, 2010)
Mexican companies have successfully adapted military solutions for civilian use and
made Mexico a notable technology destination for the international automotive
industry. Mexico exports about $800 million of automotive parts and systems
annually, many of which are purchased by leading OEM manufacturers, including
Daimler, BMW, VE, MAN, Renault- NISSAN, PSA Peugeot Citroen, GM,
Ford/Mazda, Navistar, Volvo Trucks and Jaguar. Such tier 1 suppliers as Delphi,
Bosch, Valeo, Aetolia, faurecia, Johnson controls, ZF, Getrag and Magna steyr also
source components from Mexico. (Stolley, 2008)
Business activities:
BGN Technologies, the technology transfer company of Ben-Gurion University,
offers innovative materials including light weight, high strength boron-carbide armor,
consolidated light alloys with nano, sub-micron structure- light materials based on
aluminum, magnesium and titanium; cellular magnesium foam for special energy
absorbing applications. (Louderrs, 2010)
Advanced electronics and automation technologies Mexican companies offer
electronic systems, equipment and products that improve the accuracy and
efficiency of vehicle production. They also lead in driver vision systems, biometric
based security and integrated communication systems, including night vision
systems, on-board driver assistance systems, telemetric, navigation and control
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systems, sensors, voice processing solutions and testing and dimension solutions.
Many Mexican software companies have developed products for automotive
applications. (Eskeland, 2012)
If we plan to drive a vehicle beyond the ―Free Zone‖ we shall need to purchase a
Mexico Vehicle import permit. The Mexico Free Zone, also known as the Liberated
Zone or Perimeter Zone or Free Zone is a customs designation only for that area
located along the Mexican international land borders and which run inward up to
the point at which the Mexican Customs authorities have their fir ―interior‖ check
point. (Floyd, 2009)
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2.3.4. COMPARATIVE POSITION OF SELECTED
AUTOMOBILE SECTOR OF MEXICO WITH INDIA AND
GUJARAT
―The auto industry is growing in Gujarat. Hence, Mexico is keen to explore
opportunity with auto and auto machinery industry. Which is why, next year Mexico
will bring an auto delegation to Gujarat,‖Orna Sagiv, consul General. With auto
components exports worth $ 500 million (Rs 2400 crore), Mexico has its expertise
in routing, dye casting and security system in the auto industry. Apart from auto
components, Mexico is also exploring bilateral trade with Gujarat in agricultural
technology. We are talking about agree-tech in two-sided trade with Gujarat
awesome a lot of potential here, said Sagiv. (Labelle, 2012)
Recently, Sagiv lead allocation of eight Mexican companies in the ware sector for a
industry seminar in Ahmadabad. ―We want to build teamwork with the Gujarat
government in the water sector. Through the seminar we met government officials
and representatives of industry bodies like GCCI and ASSOCHAM. Possibilities of
joint venture in water sector are life form explored in Gujarat. (Ezine, 2011)
Newly, Sagiv lead a delegation of eight Mexican companies in the water sector for a
industry seminar in Ahmadabad. ―They want to build teamwork with the Gujarat
government in the water sector. Through the seminar we met government officials
and legislative body of industry bodies like GCCI and ASSOCHAM. Possibilities of
joint ventures in water sector are being explored in Gujarat. The Gujarat government
wants to solve the water usage issue through such collaboration," (Fairlie, 2011)
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Successful cars in Mexico:
Chevrolet Chevy
Nissan Tsuru
PRESENT POSITION AND TREND OF BUSINESS OF
BUSINESS (IMPORT / EXPORT) WITH INDIA GUJARAT
DURING LAST 3 TO 5 YEARS
Gujarat is emerging as the auto center with a number of top auto companies setting
up base in the state. Mexico government was in some talks with government of
Gujarat to form a trade alliance with dairy and water sector. Now the Mexican
government has been attracted to the auto and auto mechanism sector as well.
(Rodrigue, 2009)
Orna Sagiv, civil servant General of Mexico said Gujarat is seen as an important
center in India for auto industries. Hence, Mexico is interested in a tie up and is
planning to bring in an auto allocation into Gujarat sometime next year to finalize the
deal. Sagiv also said that auto component exports account for $500 million and since
the country has skill and know-how in routing, dye casting and security, they would
consider this grouping to be very rewarding. (Rao, 2010)
Besides auto components, the country is also looking to Gujarat to develop bilateral
trade in agricultural technology. Top government agencies such as GCCI and
ASSOCHAM have been contacted for such collaboration which are yet in initial stage
of discussion. (waida, 2012)
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2.3.5. POLICIES AND NORMS OF MEXICO FOR AUTOMOBILE
SECTOR FOR IMPORT / EXPORT INCLUDING LICENSING /
PERMISSION, TAXATION
IMPORTING A CAR:
Olim are free to import a car for up to three years after their date of Aliyah. The
shipment is not counted as one of the three tax-free shipments that Oilm are
allowable. If you wish to sell the car within four years of the customs clearance date,
you will be obligated to pay back reduction we received at the time of import. (Mathur,
2012)
Olim are entitled to import a car for up to three years after their date of Aliyah. The
shipment is not counted as one of the three tax-free shipments that Olim are
allowable. If you wish to sell the car within four years of the customs clearance date,
you will be obligated to pay back the reduction you received at the time of import.
(Hicks, 2010)
VALUATION OF THE VEHICLE:
The valuation of the vehicle is determined by the Mexican customs authority
according to:
1. Age of car:
An oleh can import a car of any age; however a letter from a certified garage
in Mexico who guarantees service on the vehicle must be provide.
Returning residents can import cars that are up to four years old. The car
must be imported within three months of their date of return to Mexico.
2. Ownership:
You must have clear ownership of the car.
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3. Marine Insurance:
Your shipping company will outline regulations and stipulation. (Prabhudesai,
2011)
CUSTOMS CLEARANCE:
In order to clear the car through the Customs Authority in Mexico, we need:
1. Our Mexican driver‘ license – according to the regulations as set out above.
2. A personal import license from Misrad Hatachburah (Ministry of transportation) as
per their requirements.
3. corroboration that the car has passed local safety requirements-roadworthy test.
4. All the documents required in order to use to use our oleh benefits: Teudat Oleh,
Teudat Zehut, passport with Aliyah visa, etc. (Alvarez, 2010)
CAR TAX CALCULATOR:
When shipping a car to Mexico there will be taxes due. What will be on an imported
car? Follow the steps below and refer to the chart to calculate our total. When
delivery a car to Mexico there will be taxes due. What will the taxes be on an
imported car? Follow the steps below and refer to the chart to calculate your total.
(Drsachin, 2008)
First answer this question:
What is the age of the car in months from the date it was manufactured
(manufacture date can be found on the inside of the door post)?
What is our rank I Mexico (Oleh, Tourist, etc)?
What would the same car (or similar model) cost new today in the country of
export?
138
80% for Olim.
120% for everyone else assuming it was made in the export country.
A tourist may be required to leave a bank guarantee for the tax if the car in Mexico
for more than 6 months. (kramer, 2010)
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2.3.6. LEGAL ASPECTS OF DOING BUSINESS IN MEXICO
In order to do business in Mexico it is necessary to understand Mexican law and it‘s
requirements, especially the legal aspects of doing business in Mexico. Mexican law
takes its roots from British sources and English case law. During the survival of the
state of Mexico Mexican act been enact and American and German statute have
been imported into the Mexican legal system. (vakarta, 2012)
The article will deal with several legal aspects will be dealt here under:
1. Forms of doing business in Mexico:
The principal forms of business organizations in Mexico are:
Sole Proprietorship; Proprietorship;
Mexican Partnership (general and limited)
Foreign Partnership (general and limited)
Mexican company (public and private)
Foreign Company in Mexico
―Autos‖ (non-profit organization)
Cooperative societies
The most common form to be used by foreign corporation is the Mexican company
(subsidiary) and the branch (foreign company registering directly in Mexico). (B.N.,
2011)
2. Local Subsidiary or Branch:
In general, business can be conducted in Mexico by a foreign company either
through a branch or through a local subsidiary. The branch status comes into
survival when the foreign company‘s order.
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3. Investment incentives and Benefits:
In order to attract investment capital to Mexico and to stimulate economic growth,
Mexico enacted laws and regulation with a view to encouraging such activities.
4. Free trade agreements :
Mexico is the only country to have free trade agreements with the U.S.A, the E.U.
and EFTA.
U.S.A. – Mexico – in 1985 the countries signed an agreement creating a Free Trade
area. The agreement stipulates that to be eligible to free entry to the U.S. a product
original from Mexico must contain at least 35% of locally (Mexican) added value.
5. Contracts Law:
The sources of the Mexican codes of contract law are: international treaty,
continental codes, English law, and Jewish law, Mexican case law. (Louderrs, 2010)
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2.3.7. POLICIES AND NORMS OF INDIA FOR IMPORT OR
EXPORT TO THE MEXICO INCLUDING LICENSING /
PERMISSION, TAXATION
The government of India, Ministry of commerce and industry transmit Export Import
Policy every five years. The current policy covers the periods 2002-2007. The Export
Import Policy (Foreign Trade Policy) is efficient every year on the 31st of March and
the modifications, improvements and mew schemes are w.e.f. 1st April of every year.
(Sakkoulas, 2011)
Context of new Foreign Trade Policy:
Trade is not an end in itself, but a means to economic growth and national
development. The primary purpose is not the simple earning of foreign exchange,
but the motivation of greater economic activity. (Kumar, 2010)
While increase in exports is of vital importance, we have also to facility those imports
which are required to stimulate our economy. Steadiness and consistency among
trade and other economic policies is important for maximizing the donation of such
policies to development. Thus, while incorporating the existing practice of annunciate
an annual Foreign Trade Policy, it is necessary to go much further than and take an
incorporated approach to the development requirements of India‘s foreign trade.
(z.Jian, 2010)
Strategy:
For achieving these objectives, the following strategies need to be adopted:
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unshackle of controls and creating an atmosphere of trust and transparency to
let loose the native entrepreneurship of our businessmen, industrialist and
traders.
Simplifying procedures and bringing down transaction costs.
neutralize incidence of all levies and duties on inputs used in export products,
based on the fundamental principle that duties and levies should not be
exported. (Stadler, 2010)
Facilitating development of India as a global hub for manufacturing, trading
and services.
Activating our Embassies as key players in our export strategy and linking our
Commercial wing abroad through an electronic platform for real time trade
intelligence and enquiry distribution. (Hestemeyer, 2012)
The new Policy envisages merchant exporters and manufacturer exporters, business
and industry as partners of Government in the achievement of its avowed objectives
and goals.
The new Exim-Policy is essentially a roadmap for the development of India's foreign
trade. It contains the basic principles and points the direction in which we propose to
go. By good quality of its very dynamics, a trade policy cannot be fully
comprehensive in all its details. With a view to doubling our percentage share of
global trade within 5 years and increasing employment opportunities, particularly in
semi urban and rural areas, certain special focus initiatives have been identified for
the agriculture, handlooms, handicraft, gems & jewelers and leather sectors. (Kumar,
2010)
The thrust sectors indicated below shall be extended the following facilities:
EXPORT PROMOTION SCEHEMES:
Target plus scheme to accelerate growth of exports.
Vishesh krishi upaj yojna for agro-exports.
Served from India scheme. (Marcean, 2012)
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2.3.8. PRESENT TRADE BARRIERS FOR IMPORT /EXPORT OF
SELECTED GOODS
In general, Mexico offers a good commercial environment for U.S. companies. The
United States-Mexico Free Trade Agreement (FTA) has eliminate almost all tariffs,
leaving Mexico's agricultural sector as the only one with substantial barriers. The
FTA also provides for a joint committee comprised of legislative body from both
countries to review the functioning of the agreement (the committee last met in
October 2007). Mexico is a member of the World Trade Organization (WTO). (jude,
2009)
A 1996 Agreement on Trade in Agricultural Products (ATAP) with the United States
permits Mexico to maintain non-tariff protection for certain agricultural products. This
framework expired at the end of 2001 but the signed agreement was total until the
end of 2009. Under the agreement, Mexico permits free access to a long list of food
products and duty-free access for certain quantities of a list of U.S. products under
tariff rate quotas (TRQ). American exporters and Mexican importers, however,
protest that these TRQs provide an inadequate duty-free quota for many fruits and
other products, and very high fees on additional quantities (above quota). (Marcean,
2012)
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2.3.9. BUSINESS OPPORTUNITIES IN FUTURE
Analysts forecast a V-shaped growth pattern for the automotive sector globally. Yet,
despite market-imposed capacity constraints, expected production is expected to
increase from 11 million units in 2010 to 15.5 million units by 2011. While the U.S.
vehicle sales forecast is encouraging, healthcare and pension costs threaten
margins for U.S. automakers. (Morten, 2012)
This year, the U.S. vehicle sales recovery has been driven by fleet sales — sales of
a large number of vehicles to companies such as rental car agencies and
commercial truck operators. This command is defined by the miles driven per year,
the average age of the fleet (9 years), population growth rates, and the age of
drivers. Slow the demand for new vehicles nationally is the growing rate of the retired
population, who will drive their vehicles 40 percent less and make less new vehicle
purchases. (Ward, 2010)
These include increasingly exact legislative mandates on emission, safety and
quality; intense weight to scale, particularly for the emerging markets; new or
developing joint-venture business models due to all the recent mergers and
acquisition in the industry; and narrowing product portfolios. According to Lutz, MBAs
don‘t understand the power of image, style or fashion trends on vehicle sales and the
driver experience. As an alternative, he said, MBA-produced analysis and profit
optimization models focus only on short-term internal targets, and is not driven by
the consumer market. (Stadler, 2010)
In a plea for remedial action, Lutz demanded new focus on long-term product,
service and customer experience quality. He said General Motors‘ management
should be less concerned with cost and more concerned with whether the vehicle is
145
selling in the market. Culture based on a long-term vision of consumer-driven
product excellence. (Rodrrigue, 2011)
146
CHAPTER – 4
―ELECTRONIC INDUSTRY IN MEXICO‖
147
2.4.1. INTRODUCTION OF THE ELECTRONIC INDUSTRY
Electronics:
A tablet pc and touch screen computer / television made by Mexican meebox. The
electronics industry of Mexico has grown very much within the last decade. Mexico
has the sixth largest electronics industry in the world after china, United States,
Japan, South Korea, and Taiwan. Mexico is the second biggest exporter of
electronics to the United States where it exported $71.4billion worth of electronics in
2011 (Mexico S. M.-I., 2011)
The Mexican electronics industry is subject by the manufacture and OEM design of
television, displays, computers, mobile phones, circuit bords, semiconductors,
electronics appliances, connections tools and LCD modules (Mexico S. M.-I., 2011)
The Mexican electronics industry grew 20% between2010 and 2011,up from its
regular growth rate of 17% between 2003 and 2009. Currently electronics represent
30% of Mexico‘s none petroleum based export (Mexico S. M.-I., 2011)
Televisions:
The design and manufacture or flat panel, plasma, LCD,LED television is the single
major sector if the Mexican electronics industry representing 25% of Mexico‘s
electronic export report. (Mexico S. M.-I., 2011)
In 2009,mexico pass south Korea and china as the largest manufacturer if television
with Sony, Toshiba ,Samsung, sharp zenith LG, Lanix, TCL, RCA ,Philip elicited
,Tatung Panasonic and manufacturing CRT,LCD,LED vizio and plasma television in
Mexico, due to Mexico‘s position the largest manufacturer of television it is known
as the television capital of the world in the electronic industry (Mexico S. M.-I., 2011)
148
Mobile Phones:
Since 2008, Mexico has been the third major manufacturer of mobile phone after
china and south Korea with company such as Lanix, Sony. Eriksson. Motorola,
Samsung nokia ,sharp, zonda, Foxconn, blackberry manufacturing mobile phones in
the country (Mexico S. M.-I., 2011)
Computers:
Mexico is the third largest manufacturer of computer in the word with both home
companies such as Lanix, Texa, Meebox, Spaceit kyote and foreign companies such
as Dell, Sony Hp, Acer, Compaq, Samsung, and Lenovo ,manufacturer various type
if computer across the country. (Mexico S. M.-I., 2011)
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2.4.2. GROWTH OF ELECTRONIC INDUSTRY
Mexico is quickly becoming a world leader in the consumer electronic industry.
Currently the country is second largest supplier of the electronic products. To the
U.S. market . the electronic industry which focuses on the manufacturing of audio
and video devices, telecommunication and computer equipment and it‘s parts,
electronic is one of the fastest growing industrial sectors in Mexico concerning its
employment generation and export potential. Electronics designer and manufacturer
created 2,000 new jobs in Monterrey in July 2011. (Economy of MexicoFrom
Wikipedia, 2012)
Mexico has been responsible for exporting USD $71.4 billion in consumer electronics
and device in 2010 an increase of 20% over the previous year. .
Mexican electronic industry exports registered an average annual growth of 17% the
latest data from national institute of statistics and geography informed that industrial
activity in Mexico grew 4.1% from January to July 2011,in comparison to the same
period in 2010,industrial production in the country grew .05% this July`
compared to month of July 2011 . (Economy of MexicoFrom Wikipedia, 2012)
Currently, the consumer electronics industry is comprised of 730 manufacturing
plants,709 companies dedicated to the electronic industry and 197 companies
focused on the production of electric appliance electronic manufacturing mainly take
place in the northern region of Mexico especially in the state of Baja California,
Chihuahua and Tamaulipas.. (Economy of MexicoFrom Wikipedia, 2012)
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2.4.3. ECONOMIC ROLE
Mexico city remains the economic engine of the country even though some
industries have been positive to move to other areas to reduce pollution and curb
growth, yet more than half of the country‘s industrial output is still produced in the
city (Content, 2010)
Important industrial activities include textiles, chemicals, furniture, plastics and
metals, electronics assembly, and the production of pharmaceutical product. The
food and beverage industry remains a major employer while tourism brings millions
of dollars into the economy. (Content, 2010)
The informal economy plays important role in the city. each calendar day thousands
of unlicensed vendors take to the streets, selling everything from windshield wipers
and umbrellas to electrical sockets, and soft drink. (Content, 2010) These are people
who would be otherwise unemployed, but they present a different challenge to city
official. For year, the city has tried unsuccessfully to clear the vendors off streets in
the downtown area. Business owners complain that street vendors are not subject to
taxes, do not pay rent, and compete unfairly by selling similar and often cheaper
product (Content, 2010)
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2.4.4. MEXICO ECONOMIC STRUCTURE
Mexico is the 12th largest economy in the world, with an estimated GDP(PPP) of
US$1.567trillion in 2010, throughout history, Mexico has gone through several crisis,
but the most important ones that they suffered greatly is during the 1994 Mexican
peso crisis, and the 2008 global financial crisis. (Mexican, 1994)
The Mexican peso crisis in 1994 was caused by the Mexico‘s government decision
to bring down the peso.the resulted in a financial crisis that cut the value of peso into
half, create high inflation and set forth a severe recession in México. (Mexican, 1994)
The country is hit with massive lay-offs and loss of foreign in vestments.GDP
(constant prices, national currency) in 1995 contracts by 6.22 percent, the worst
decline in the country history. Mexico‘s economy recovered with the help of a US$50
billion bailout from the United States, the IMF and the bank for international
settlements (Mexican, 1994)
The economy of Mexico is the 13th largest in the world in nominal term and the 11th
by purchasing power parity, according to the World Bank. Since the 1994 crisis,
administrations have improved the country‘s macroeconomic fundamentals. Mexico
was not significantly influenced by the recent 2002 South American crisis, and
maintained positive, although low, rates of growth after a brief period of stagnation in
2001. (Mexican, 1994). The Mexican economy experienced a continuous up and
down over the last five decades. Interestingly, there exists a signal relationship
between the economical situation and the change of the change of the presidency.
Every six year, with a new president being elected, the general economic policy
changed completely. This of course brought along enormous consequences for the
society and the economy. The most recent change of presidency probably also had
the most important effect on the Mexican economy (Mexican, 1994)
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2.4.5. FUNCTION OF ELECTRONIC INDUSTRY
Electronics, branch of physics and electrical engineering that deals with the release
behavior, and effects of electronics devices. (Electronic, 2012)
Electronics encompasses an specially broad range of technology. The term originally
was applied to the study of electron behavior and movement, particularly as
observed in the first electron tubes. It came to be used in its broader scenes with
advances in knowledge about the fundamental nature of electrons and about the
way in which the motion of these particles could be utilized (Electronic, 2012)
These in turn have made it possible to manufacture a wide selection of electronic
consumer, industrial, and service product. Indeed, it can be said that the world is in
the centers of an electronic revolution at least as significant as the industrial
revolution of the 19th century. (Electronic, 2012)
Historical increase of electronics, importance major discoveries and advance. It also
describes some key electronics functions and the manner in which various devices
carry out these function. (Electronic, 2012)
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2.4.6. ELECTRONIC BUSINESS ACTIVITY
Electronics business, commonly referred to as ―e business‖ or e-business‖, or an
internet business, may be defined as the application of information and
communication technologies (ICT) in support of all the activities of business. (OECD,
2008)
Commerce constitutes the exchange of product and service between businesses,
Groups and individuals and can be seen as one of the critical activities of any
business. Electronics commerce focuses on the use of ICT to enable the external
activities and relationships of the business with individuals, groups and other
businesses. (OECD, 2008)
The term ―e-business‖ was coined by IBM‘s marketing and internet teams in 1996
electronics‘ business methods enable companies to link their internal and external
data processing systems more efficiently and flexibly, to work more closely with
suppliers and partners, and to better satisfy the needs and expectations of their
customers. (OECD, 2008)
e-business is more than just e-commerce. While e-business refers to more strategic
focus with an importance on the functions that occur using electronics capabilities, e-
commerce is a separation of an overall e-business strategy. E-commerce seeks to
add revenue stream using the world wide web or the internet to build and enhance
relationships with clients and partners and top improve efficiency using the empty
ve3ssel strategy. (OECD, 2008)
E-business involves business processes across the entire value chain electronic
purchasing and supply chain management, processing orders electronically,
handling customer service, and cooperating with business partners. Special
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technical standards for e-business facilitate the exchange of data between
companies. (OECD, 2008)
E-business software solution allows the integration of intra and inters firm business
processes. E-business can be conducted with the web, the internet, intranets,
extranets or some combination of these. (OECD, 2008)
Basically, electronics commerce‘s (EC) is the process of buying, transferring, or
exchanging products, services, and/or information via computer networks, including
the internet.EC can also be beneficial from many perspectives including business
process, service, learning, collaborative, community. (OECD, 2008)
EC is often confused with e-business these risks. A far greater number of people
have access to e-business through the internet than would have access to a
traditional business. Customers, suppliers, employees, and numerous other people
use any particular e-business system daily and expect their confidential information
to stay secure. Hackers are one of the great threats to the secure. Hackers are one
of the great threats to the security of e-business. (OECD, 2008)
Some common security concerns for e-business include keeping business and
customer information private and classified, authenticity of data, and data integrity.
(OECD, 2008)
Some of the methods of protecting e-business security and keeping information
secure include physical security measures as well as data storage , data
155
transmission, anti – virus software, firewalls, and encryption to list a few. (OECD,
2008)
156
2.4.7. COMPARATIVE POSITION OF ELECTRONICS INDUSTRY
Corporate profile:
The Videocon group has an annual turnover 4 billion USD, making it the largest
consumer electronic and home appliance companies in India. Since 1998. It has
expanded it‘s operation globally, especially, in the middle east. today the group
operate through six key sectors. the brand trust report,2011 has ranked Videocon as
the 42 nd most trusted brand in India among the top30 brands. (Videocon -
Wikipedia, 2012)
Trends:
This is driven by gains in manufacturing efficiency and automation lower labor cost
as manufacturing has moved to lower wage countries and improvement in semi
conductor design. (Videocon - Wikipedia, 2012)
While consumer electronics continues in its trend of convergence combining
elements of many products, consumer face different decisions when purchasing
.there is an ever increasing need to keep product information updates and
comfortable, for the consumer to make an informed choice, style, price ,specification
and performance are all applicable. there is a gradual shift toward e-commerce web-
store fronts. (Videocon - Wikipedia, 2012). Many products include internet
connectivity using technologies such as WI-Fi ,Bluetooth or internet . products not
traditionally associated with computer use(such as TV or HI-FI equipment ) now
provide option to connect to the internet or to a computer using a home network to p-
provide contact to digital content. (Videocon - Wikipedia, 2012)
The need for high definition (HD)content has led the industry to develop a number of
technologies such as wireless HD or TTU-TG.hn,which are optimized for distribution
of HD content between CE devices in home (Videocon - Wikipedia, 2012)
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2.4.8. PRODUCT OF VIDEOCON INDUSTRIES
Consumer electronics:
In India the group sells consumer products like color T.V, washing machine, A.C
refrigerator ,microwave ovens and many other home appliance selling them through
a multi brand strategy with the largest sales and service network in India.
(videoconworld, 2011 )
Mobile phones:
Videocon has ever since lunched a no. of innovative hand sets ranging from basic
color FM phones to high end machine devices and in February 2011,Videocon
mobile phones lunched the new concepts of ZERO paisa per second with pre-
bundled simcards of Videocon mobile service along with 7 of it‘s handset mobile.
(videoconworld, 2011 )
Color picture tube glass:
Videocon is one of the largest CPT glass manufactures in the world operating in
Mexico, Italy, Poland and china (videoconworld, 2011 )
DTH:
In 2009, Videocon launched its DTH product, called 'd2h'. As a new offer in the
Indian DTH market, Videocon offered LCD & TVs with built-in DTH satellite receiver
with sizes 19" to 42".This concept in the DTH service is relatively new in the
occurrence of other players like ZEE TV‘s Dishtv, Tata Sky, Airtel Digital TV and
Reliance's BIG TV providing only the set top. (videoconworld, 2011 )
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2.4.9. INDUSTRIES INDIA AND MEXICO
Videocon acquired Thomson‘s CPT business it also gained control of Thomson‘s
Mexican plants .however Videocon industries has a view that it would expand in the
country only if the government gives it enough incentives Videocon is demanding a
25-30%cash benefit from the government of Mexico (videoconworld, 2011 )
Acquisition of Thomson:
Videocon through its wholly owned offshore subsidiary acquired the color picture
tube(CPT)business from Thomson having manufacturing facilities in Poland, Italy,
Mexico and china along with support research and development facilities.
(videoconworld, 2011 )
Thomson’s perspective:
In 2004 Thomson planned entry into the high-growth digital media and technology
business. Also, Thomson wanted to exit consumer and electronics businesses as
they were incurring significant losses. After sale of its TV business to Chinese group
TCL, and Tubes to Videocon, Thomson divest from the audio/video accessories
business which was the last unit of its consumer electronics business.
(videoconworld, 2011 )
Acquisition rationale:
The acquisition came at a time when Thomson was facing a fall in demand in
developed markets for television with CPTs and was moving more towards Flat-
screen and Plasma Television. However, Videocon saw an opportunity in the
emerging countries for CPTs and hence pursued with the acquisition.
(videoconworld, 2011 )
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2.4.10. MEXICO ELECTRONICS INDUSTRY
Mexico is a strong supplier of upstream components and materials in the electronics
supply chain. Success beyond Mexico‘s seaboard and taking a look at business
implication in electronics industries worldwide, Japan represents 10% to 15% of
global electronics demand but 16% to 30% of electronics component supply
according to a recent report by Citigroup Global Markets. (International,
www.businessmonitor.com/electro/mexico.html, 2012)
Mexico‘s economy is host to one of the fastest growing electronics industries in the
world, in terms of export potential and employment generation. Currently, Mexico is
the second largest supplier of electronics products to the India. market, which is
made up of audio and video, telecommunications, computer equipment and its
parts. In 2010, for instance, the sector exported 71.4 billion USD, 20 percent more
than the previous year (International,
www.businessmonitor.com/electro/mexico.html, 2012)
Global electronics demand v/s supply91:
In looking at the global electronics supply chain where overall demand is concerned,
Citigroup estimates Mexico accounts for, approximately:
9% of worldwide GDP
14% of worldwide electronics production
11% of worldwide semiconductor demand
3% of worldwide handset demand
5% of worldwide PC demand
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2.4.11. INDUSTRY TRENDS CONSUMER ELECTRONICS
INDUSTRIES IN MEXICO
The analog-to-digital conversion has introduced many new standards in audio and
video, which greatly improves the quality and affordability of the multimedia digital
experience. Further, with the increase of broadband, accessing the media has
become easy and rewarding for consumers. With easy access and the rich quality
enabled by the digital revolution, the following consumer electronic trends are
emerging. (International, Business Monitor, 2008)
In-Home Entertainment:
With prices of flat-panel TVs (LCD, Plasma, and DLP) falling more than 30 percent a
year, large screen HDTVs are showing up in more and more homes. With homes
equipped with HDTVs, and high-definition (HD) content available through broadband,
global, cable, and satellite, consumers now enjoy the complete theater experience in
the convenience of their homes. HDTVs will become more normal with the imminent
availability of HD content and DVD players. (International, Business Monitor, 2008)
Staying Connected:
Within a home and while traveling, consumers want to stay connected. Historically,
they used their laptops for accessing email and the Internet. However, with terrestrial
and mobile broadcast services for handheld devices becoming common and
broadband wireless connectivity (Wife and WiMAX) becoming ubiquitous, mobile
devices such as cell phones, PDAs, and portable media players are being used to
access audio, video, and data. Providers of these mobile devices are constantly
updating their technology features to keep up with consumer demand. (International,
Business Monitor, 2008)
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2.4.12. POLICY OF ELECTRONICS INDUSTRIES IN MEXICO
Mexico is quickly becoming a world leader in the consumer electronics industry.
Currently, the country is the second largest supplier of electronic products to the U.S.
market. The electronics industry, which focuses on the manufacturing of audio and
video devices, telecommunications and computer equipment and its parts, is one of
the fastest growing industrial sectors in Mexico regarding its employment generation
and export potential. (Mexico o. c., 2007 - 2012)
Mexico has been responsible for exporting USD $71.4 billion in consumer electronics
and devices in 2010, an increase of 20 percent over the previous year. Data for the
Mexican consumer electronics industry were already impressive in 2009, when the
sector's exports added up to USD $59.6 billion, representing 30 percent of non-
petroleum exports. (Mexico o. c., 2007 - 2012)
The latest data from the national institute of Statistics and Geography (INEGI)
informed that industrial activity in Mexico grew 4.1 percent from January to July
2011, in comparison to the same period in 2010. Industrial production in the country
grew 0.51 percent this July, compared to the month of June 2011. (Mexico o. c.,
2007 - 2012)
Currently, the consumer electronics industry is comprised of 730 manufacturing
plants, 709 companies dedicated to the electronics industry and 197 companies
focused on the production of electric appliances. Electronics manufacturing mainly
takes place in the northern region of Mexico, especially in the states of Baja
California, Chihuahua and Tamaulipas. Companies such as Flextronics, Jabil Circuit,
Celestica and Sanmina SCI are attracting new investors, generating jobs, and the
entire northern region is furthering the growth of the sector's production and supply
chains. (Mexico o. c., 2007 - 2012)
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2.4.13. IMPORT EXPORT LICENSING PERMISSION TAXATION
IN MEXICO COUNTRY
Mexican Import Duties92
:
Mexico imposes tariff and duties on imported goods. The amount of duties and tariffs
that are charged depends on the type of good that is being imported and who the
importer is Goods must a accompanied by specific documentation and a licensed
customs broker must submit the customs declaration. (dutymexico.com, 2009 -
2012)
Trade Agreements93:
Goods which are produced in either Mexico, the United States or Canada will not
have import taxes levied on them by Mexican authorities. This is in accordance with
the North American Free Trade Agreement (NAFTA). Any goods that do not have
visible evidence of where they were produced are also exempt under this act.
Mexico also has specific trade agreements with reduced tariffs for goods produced in
Bolivia, Canada, Chile, Colombia, Costa Rica, El Salvador, the European
Community, Guatemala, Honduras, Iceland, Israel, Liechtenstein, Nicaragua,
Norway, Switzerland, Uruguay, the U.S. and Venezuela. (Agreements M. T., 2010)
Duty Rate & VAT Calculation94:
Goods imported to Mexico are subject to an eight-digit classification system, which
determines the duty rate and establishes any applicable non-tarrff barriers such as
quotas or other restriction. this applicable duties and taxes can be paid at
92
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http://www.photius.com/countries/mexico/economy/mexico_economy_trade_agreements.html 94
http://www.ehow.co.uk/list_6873631_mexican-import-duties.html
163
commercial banks locates at the Mexican port of entry .A value added tax (VAT)is
also added by Mexican authorities which is normally 15% of the value of the goods.
(Agreements, 2010)
164
2.4.15. POLICIES OF ELECTRONICS INDUSTRIES IN INDIA
National Policy on Electronics95:
By far the most exciting event on the horizon for the Indian semiconductor and
electronics ecosystem is the national policy on electronic which is expected to be
formalized in 2012.the policy aim at addressing the huge gap-estimated at Rs.15.31
lakh crore ($300 billion)-between locally manufactured electronics and the consumer
demand for electronics that we expected to see by 2020. ). (National Policy on
Electronics, 2011)
The policy takes a holistic view of developing the electronics system design and
manufacturing (ESDM) ecosystem with a view to bridge the demand supply gap .its
provision are wide ranging and cover diverse areas such as manufacturing, R&D,
manpower and training standard, waste management, investment, and the setting up
of a national electronic Mission. ). (National Policy on Electronics, 2011)
The global electronics industry is one of the fastest growing in the world and demand
in the Indian market is expected to touch $400 billion by 2020.manufacturing has
been recognized as the main engine for economic growth and an ambitious target of
taking the share of ITC & electronics hardware manufacturing to around 25%by 2025
had been set by the national manufacturing policy. being the world‘s second-most
full of people country, coupled with strong growth ,India will remain one of the largest
consumer of electronics product globally. ). (National Policy on Electronics, 2011)
95
http://india.gov.in/allimpfrms/alldocs/16392.pdf
165
2.4.16. IMPORT & EXPORT LICENSING PERMISSION
TAXATION IN INDIA
Export Scenario96:
The color TV is the largest contributor in this segment. during the current financial
year, the domestic market of CTV is estimated to cross 15 million units ,the high end
products, particularly liquid crystal display(LCD) TVs continues to register a growth
of more than 100% and is expected to cross 3 million by 2010-00.the occurrence of
falling price in the LCD TV continued over the year and there is a marketed tendency
amongst the consumers to go in for bigger size LCD TVs. (budget, 2012)
EXPORT OF CONSUMER ELECTRONIC GOODS DURING 2008-0997 :
Export of consumer electronics Goods increased from Rs.1600 corer (US$397
million)estimated in the year 2007-08 to Rs. 2900 corer (US$565 million)during the
year 2008-09.annual average growth in export consumer electronics goods from
India during the past five years is to be 25.80 percent (25.84 percent in US$ terms).
(National Policy on Electronics, 2011)
96
http://www.cybex.in/Importers-Exporters-Code-IEC.aspx 97
http://consumer-electronics.indianexporters.net/
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2.4.17. POLICES AND NORMS FOR EXPORT/IMPORT TO THE
ELECTRONIC INDUSTRY
The trade policy export-import policy is formulated by the ministry of commerce,
government of Mexico in terms five section 5of the foreign trade policy governs
exports from and imports into a country. (vargea, 2011)
It is essential that entrepreneur and the export managers understand the trade policy
as it provides the vital imputes for the formulation of their business growth strategies.
. (vargea, 2011)
From an administrator viewpoint, Mexico‘s federal government is structured in a
centralized system known as the Federal Public Administrator, as indicated earlier.
Composed of eighteen secretariats (secretaries de Estado),the presidential cabinet
is highly specialized and enforce all federal legislative enactment throughout the
republic of Mexico as part of the Executive power in the specific fields of their
administrator control as prescribed by the Federal public administration Act (D.O. of
December 29,1976,as amended). (vargea, 2011)
167
2.4.18. PRESENTED TRADE BARRIERS OF EXPORT/IMPORT
OF ELECTRONIC INDUSTRY
Elimination of Trade Barriers Through Working with WTO:
AS world‘s leading exporting country of electronic products, Mexican supports the
liberalization of trade, and Mexican has worked to eliminate most of the customs
duty on electronic products. many countries, including industrialized countries, still
impose high duty on trade, though negotiating in WTO, Mexico is trying to eliminate
imposition of high duties, in addition, Mexico is promoting the harmonization of rules
of origin(antidumping and safeguard, etc)and working on eliminating non-tariff
barriers for Mexican electronics manufactures to conduct business globally.
(dutymexico.com, 2009 - 2012)
Responses to Environmental Regulations by Each Countries:
The world wide interest towards the enviourment issues is growing (such as intrest
on global warming),and new regulation are created to protect the enviourment.
However, some of the new regulation may also create barriers. for those regulation
causing problems, by utilizing bilateral negotiations and WTO frame work, the parts
of those regulation that are causing trade barriers will be eliminated or change.
(dutymexico.com, 2009 - 2012)
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2.4.19. BUSINESS OPPORTUNITIES IN FUTURE
―Electronics is one of the key industries in Mexico in terms of export potential and
employment generation‖ the competition from countries such as china and India, it is
imperative that Mexico focuses on targeting the high end of the value chain. in the
future likely that the government will push forth policies that aim to increase
investment in electronics and related high teach segment such as semiconductor‖.
(Century, 2009)
This briefing will benefit all electronic and semiconductor industry participants looking
for new investment opportunities or planning to enter the Mexican market. highlights
of the briefing include. overview of Mexico‘s political and economic backdrop,
industry related government policies ,R&D industry, infrastructure industry ,industry
profile, growth drivers and opportunities. (Century, 2009) Discover the latest market
trends and uncover sources of future market growth for the consumer electronic
industry in Mexico with research from Euro monitor‘s team of in country analysis.
(Century, 2009)
Find hidden opportunities in the most current research data available, understand
competitive threats with our detailed market analysis, and plan your corporate
strategy with our expert qualitative analysis and growth projections. (Century, 2009)
Competitive environment:
The store based retailing and in particular electronic and appliance specialist
retailers remain the most important retail channels. This can be attributed to the
product knowledge and product variety offered by specialist retailer. Although not
nearly as important, internet retailing is becoming increasingly significant, however,
169
internet retailing is hampered by the fact that the majority of Mexicans do not have a
PC or internet access. (Century, 2009)
170
CHAPTER - 5
―CHEMICAL INDUSTRY OF MAXICO COUNTRY‖
171
2.5.1. INTRODUCTION OF CHEMICAL INDUSTRY
Chemical Industry:
The Mexican Chemical Industry Classification System (NAICS) groups businesses
into categories based on their primary activities. NAICS has replaced the older
Standard Industry Codes (SIC) to provide a common basis for economic data
collection and analysis for the United States, Canada, and Mexico. The chemical
industry, which includes all chemicals from commodities (e.g. ethylene and
ammonia) to finished products like cosmetics and pharmaceuticals, is part of the
manufacturing sector. Its NAICS classification code is the sub-sectors are1:
Basic Industrial Chemicals (including ethanol)
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments
Pesticides, Fertilizers, and Other Agricultural Chemicals
Pharmaceuticals and Medicine
Paints, Coatings, and Adhesives
Soaps, Cleaning Compounds, and Toilet Preparation Chemicals
Other Chemical Products and Preparation Chemicals
An integral part of the U.S. economy since the 17th century, the modern chemical
industry produces more than 70,000 diverse products. Indeed, few goods today are
manufactured without some involvement with the chemical industry. Nearly 24% of
all chemicals produced are used as feedstock in other chemical manufacturing
processes, and nearly 30% of the total production yield is purchased as raw
materials by the rest of the manufacturing sector98.
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2.5.2. ROLE IN THE ECONOMIC OF MEXICO
Chemical manufacturing is one of the oldest and most important manufacturing
sectors in the United States. The industry currently accounts for nearly 5% of the
nation‘s gross domestic product (GDP). Chemical production rates have grown
steadily over the previous two decades, setting record sales and shipment numbers
in both the 1997 and 2002 economic censuses. Data provided by the federal
government‘s Advance Report of the 2002 Economic Census shows that the
chemical industry includes 13,098 individual companies with combined sales
numbers equaling approximately $427.3 billion, a workforce of more than 789,000
employees, and an annual payroll of more than $40.7 billion. Comparison of the
1997 and 2002 economic censuses shows marked increases in several categories,
indicating sustainable growth within the industry99.
Chemical manufacturing is Iowa‘s second largest industry, trailing only food
processing in total sales. It contributes $2.88 billion to Iowa‘s Gross State Product
(GSP), which is 10% of the manufacturing GSP. There are approximately 367
chemical manufacturing plants categorized by the NAICS code 325xxx within the
state. Approximately 80% of these chemical companies are involved with agricultural
fertilizers, pesticides, or other related chemicals. The remaining companies are
comprised of a vast segment of manufacturers ranging from paint to
pharmaceuticals.
99
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2.5.3. STRUCTURE OF CHEMICAL INDUSTRY
The current understanding of economic growth is largely based on the neoclassical
growth model developed by Robert Solow. In the Solow model, capital accumulation
is a major factor contributing to economic growth. Productivity growth – measured as
an increase in output per worker– results from increases in the amount of capital per
worker, or capital accumulation Capital deepening will continue until the296
Industrial Development for the 21st Century economy reaches its steady state – a
point at which net investments grow at the same rate as the labour force and the
capital-labour ratio remains constant. The further the economy is below its steady
state, the faster it should grow100.
In the steady state, all per capita income grow this due to exogenous technological
change. The rate of technological processes assumed to be constant and not
impacted by economic incentives. Several authors have found that capital and labour
actually explain only a fraction of output growth and that allowing for the quality of
the labour force (human capital) only partially reduces the unexplained growth – or
Solow residual. Endogenous growth theory, initiated by Romer (1986, 1990) and
Lucas (1988), focuses on explaining the Solow residual. Technological change
becomes endogenous to the model and is a result of the allocative choices of
economic agents (see Aghion and Howitt 1998, Veloso and Soto
2001).Technological progress is driven by R&D activities which in turn are fuelled by
private firms‘ aim to profit from inventions. Unlike other production inputs, ideas and
knowledge is nonrivalrous (see Romer 1990). Moreover, new knowledge can
augment the productivity of existing knowledge, yielding increasing returns to scale.
Because of this, the marginal productivity of capital does not decline with increasing
GDP per capita, and incomes need not converge across countries.
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174
Technological change and innovations are essential sources of structural change. In
Schumpeter‘s view, innovations lead to ―creative destruction‖, a process whereby
sectors and firms associated with old technologies decline and new sectors and
firms emerge and grow productive and profitable sectors and firms displace less
productive and less profitable ones and aggregate productivity in the economy
increases. Technological change is thus at the very centre of modern economic
growth. Based on the observation that, beginning with the Industrial Revolution,
technological change took place mainly in the manufacturing sector, authors like
Kaldo and Cornwall have asserted that the expansion of this sector is a driving force
for economic growth. Moreover, Cornwall saw technological change in certain
manufacturing sectors as a driving force for productivity growth in several other
sectors. Syrquin observes that, when overall growth accelerates, manufacturing
typically leads the way and grows faster than other sectors. At low income levels, the
share of manufacturing in GDP is, however, low and its immediate contribution to
aggregate growth minor. When manufacturing increases its output share – often as a
response to changes in domestic demand and in comparative advantage – faster
sectoral growth noticeably raises the aggregate growth rates of output and labour
productivity101.
In developed countries, research and development (R&D) activities are the main
driver of technological change. This is not, however, the only mechanism of
technological change. Firms and individual employees learn by doing, increasing
output and productivity even if technology or inputs remain unchanged. As R&D
activities in developing countries are relatively limited and countries are far from the
technological frontier, international technology diffusion is essential for productivity
growth. International economic relations, especially international trade but also
foreign direct investment, are important channels of technology transfer and
increased productivity growth. However, technology diffusion can only be efficient if
the level of human resources is high enough, incentives for technological
improvement are strong, and institutions are relatively well functioning4.
101
http://www.ciras.iastate.edu/publications/EnergyBP-ChemicalIndustry/Sourcebook_Chapter1.pdf
175
One of the driving forces for structural change is the change in domestic and
international demand. At relatively low income levels, individuals spend a significant
part of their income on food. As income rises, this share tends to decline, whereas
demand for manufactures rises. Similarly, a sin come rises further, demand for
manufactures increases at diminishing rates, whereas demand for services rises
rapidly. Changes in demand will also change sectoral employment and output shares
and impact the economy‘s labour productivity. Furthermore, trade has an impact on
countries‘ specialization patterns and on the rate of industrialization or structural
change within industries. Under an open trade regime, countries tend to specialize in
the production of commodities for which they have a comparative advantage and
import commodities which are relatively expensive to produce domestically. Trade
openness is also likely to bring foreign investment into the country. This is often vital,
and especially so at early stages of development. It is also likely to increase
productivity as domestic companies are facing external competition.
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2.5.4. FUNCTION OF CHEMICAL INDUSTRY
There are three main areas of risk to workers from the use of chemicals. These are
(a) direct contact with toxic, carcinogenic or corrosive chemicals, (b) risk of
explosion, and (c) inhalation of airborne chemicals and dusts. Situation (a) requires
negligible input from the analytical chemist; where the hazards associated with a
chemical are known, a responsible management will provide protective clothing and
training for operators and emergency facilities for dealing with accidents102.
In some industries there is a legal requirement for a ‗Naked Light Certificate‘ to be
issued before ‗hot work‘ can take place in certain areas. An example of this would be
the carrying out of repairs to a tanker used for carrying petroleum products5.
In this century, analytical chemistry, like most other areas of science and technology,
has expanded at a rate that would have been incomprehensible to previous
generations. For the most part the theory of present day techniques developed
ahead of the hardware. For example, the principle of atomic absorption was known
around the turn of the century but had to await the development of the hollow
cathode lamp and photomultiplier tubes to become a practical proposition. Likewise,
a selective electrode was described in 1937 but it was not until 1966 that one was
built using silicone polymers which were not available in 1937.5 (www.niir.org, 2011).
A number of agencies are involved in various aspects of monitoring water quality
including the Public Analysts, Local Authorities, An Foras Forbatha, IIRS, the
Department of Fisheries, private analysts and industry‘s own laboratories. It is not
intended to discuss the analytical chemist‘s role in product development and trouble
102
http://www.niir.org/projects/
177
shooting in the plant itself but in each of these areas he has an important support
function to other scientists and technologists5.
It is a well established scientific principle that one should, when discussing a subject,
define ones terms and ‗analytical chemistry‘ should not be treated any differently.
There is a slight problem however because, despite the tens of thousands of
persons throughout the world who would claim to be analytical chemists, the
profession as a whole has shown a marked reluctance to define itself, principally
because it is felt that any formal definition would be either too restrictive or too broad
to be meaningful. The increasing cost of raw materials has led to an increased
amount of recycling and it will be the responsibility of the analytical chemist to ensure
that the quality of the recycled waste is suitable for reprocessing5.
178
2.5.5. BUSINESS ACTIVITY OF CHEMICAL INDUSTRY
Chemical Industry provides a wide range of materials as a trading company
specializing in chemicals with our information network and expertise103.
In recent years, the field of ―Fine Chemicals‖ has demanded raw materials
with highly advanced functions. In this field, we propose new products that
could add some extra functions to customers' products.
Synthetic resins are indispensable for our daily life and widely used in
manufacturing automobiles, home electric appliances, sundries, and so forth.
Industry provides a variety of resins to meet customers' requirements
depending on their applications.
Nowadays, the change of social structure and lifestyle has produced new
requirements in living environment. We propose products to help people feel
comfortable and to satisfy customers, working with our suppliers and OEM
manufacturers6.
Also we can propose the design of any package to meet the customers'
request and requirement. Eco-friendly material and design are included.
Chemicals Division has been the leading industrial and specialty chemicals in
Malaysia for over 70 years. Following the strategic business acquisition and
operational expansion, we aim at becoming the principal in water treatment
and polymers for rubber glove, apart from manufacturing and trading of
extensive range of general and specialty chemicals. Our product range has
applications in a wide spectrum of the manufacturing industry across the
region.
In providing innovative, environmental-friendly and cost effective solution and
systems for our business partners. Chemicals are a recognized leader and
steward in corporate safety and environmental management. As a signatory
of the Responsible Care Charter, and with a host of Responsible Care awards
5http://www.niir.org/projects/
6http://www.kitamura-chem.co.jp/eng/business.html
179
under its wings, Chemicals' reputation for high standards for Safety, Health
and Environment is further strengthened5.
180
2.5.6. COMPARATIVE POSITION OF CHEMICAL INDUSTRY
Mexico:
Existing Position of chemical industry in management systems adopted from parent
company to be in compliance with US and Mexican environmental regulations.
Design and implementation of processes eliminating threat of hazmat use,
substituting other materials, putting in place engineering / administrative controls,
implementing use of safety equipment; Savings and services to local communities
through wastewater treatment, recycling, rousing on / Hazmat, elementary / high
school outreach104.
Issues:
Mexican environmental protection is distributed across two separate agencies
Institution National de Ecologic (policy development and regulation) and PROFEPA
(enforcement). Laws and regulations borrowed from and mirror US EPA; difficulty
and variation in enforcement. In Mexico there exists a strong technology and
knowledge base associated with environmental monitoring, greatest needs appears
in policy formulation and implementation for enforcement. US EPA advocating
development and promotion of an environmental compliance assistance vendor
sector in Mexico Yellow pages-like approach. Maquila industries are getting more
complex; no longer simple assembly, especially in chemical enterprise - having to
deal with greater volume, concentrations and complexity associated with product use
– with all the attending human resource, air, (especially) water, and soil pollution
issues7.
Push toward developing higher based expertise (physical and virtual) centers (at the
Institution Technological) to inform and train Maquila industries in handling common
104
http://www.chemical-petrochemical-industry current trend.pdf
181
hazmats, administration of hazmats, air emissions, water quality and treatment, soil
remediation, energy efficiency.
Mexico represents a massive market for products under the seven chapters
analyzed under this report. Total imports for these sectors in the year 2001
amounted to US $ 20.5 billion whereas exports under the same categories totaled
only about US $ 7 billion, resulting in a trade deficit of more than US $ 13 billion.
The largest Chapter is 39 with imports close to US $ 10 billion. The country
developed into one of the leading Chemical Industry in the world in the 1990s after it
entered the North America Free Trade Agreement (NAFTA) with the US and Canada
in 1994.
Foreign companies should keep tax issues in mind as they plan their cross-border
operations to ensure they pay the least amount of tax necessary while still doing
business in Mexico. All leading chemical companies, which do not produce catalysts
as commercial products, have their own research programs in the field of catalysis
and production of catalysts, designed for their own processes, which enable them to
achieve a break-through on the market.
India:
Mexico being one of the largest producers and exporter of petroleum, the chemical
industry has always played an important role in its economy. It has generally been
contributing nearly 3% of the GDP and around 12/ 13 per cent of the manufacturing
sector. The industry provides employment to nearly 1.2% of the workforce and over
9% of the workforce employed in the manufacturing.
In terms of private market, the consumption is dominated by systemic anti-biotic,
analgesics, anti-inflammatory/ rheumatic drugs, anti-cough formulations, vitamins,
182
ant-acids, hormones, nasal decongestant, anti-spasmodic, and ace inhibitors. The
private production is dominated by large multi-nationals with heavy investments. In
India useful for industry analysts, banks and financial institutions, investors,
consultants, corporate engaged directly or indirectly in the chemicals industry and
international readers who want to keep abreast of the Indian manufacturing sectors.
183
2.5.7. POLICIES AND NORMS OF INDIA FOR IMPORT OR
EXPORT TO THE MEXICO COUNTRY
Commercial Invoice:
This is a shipping document that can be obtained through the custom broker, and it
should accompany all shipments. This is the case when the valuation method is
required for the information value. Invoices should be prepared in Spanish, if they
are prepared in any other language, the Spanish translation may follow the original
text on the invoice. The invoice must contain the following information105:
Place and date of issuance;
Complete name and address of buyer or importer in Mexico;
Complete name and address of exporter;
Detailed description of the merchandise: This should include all relevant data
on brand name, model, marks, serial numbers, manufacturers, weight; etc;
Unit value and total value of each item listed on the invoice;
Signature of seller, name and position, and
Shipper's invoice number and customer's order number.
Packing List:
It is necessary when more than one package is shipped. This document should be
sent together with the commercial invoice, which should include:
Number of packages;
A detailed list of merchandise contained in each package;
Net, gross and legal weight in metric equivalents;
Volume or measurements, in the metric system, of each package and of the
total shipments.
105
http://www.Doing business in Mexico_ general legal, business & entry issues _ Mexico Business.mht
184
Bill of Lading:
This procedure is required on maritime shipments and generally consists of three
original copies plus a varying number of copies. These should be sent to the
importer in Mexico. The information on the bills of lading should correspond with that
shown on the invoice and the packing list.
Special Certificates:
Different types of sanitary certificates are required by the Secretariat of Agriculture,
Stockbreeding and Rural Development on shipments of livestock or animal products,
and for most seeds, plants and plant byproducts. Many agricultural and food
products also require a certificate of origin.
Import Permits:
At present, approximately 300 of the total 11,960 items on the Harmonized Tariff
System still require an import permit. A few of these items are subject to an import
quota. Items requiring an import license include some used machinery and cars,
some agricultural products vital to Mexico‘s economy, such as corn and certain
grains, seeds, beans, certain fruits, tobacco, oils, sugar, cocoa, eggs, milk, and so
on.
185
2.5.8. PRESENT TRADE BARRIERS FOR IMPORT / EXPORT
OF CHEMICAL GOODS
Tariff elimination for qualifying products: Before NAFTA (North American Free Trade
Agreement), tariffs of 30 percent or higher on export goods to Mexico were common,
as were long delays caused by paperwork. Additionally, Mexican tariffs on U.S.-
made products were, on average, 250 percent higher than U.S. duties on Mexican
products. NAFTA addressed this imbalance by phasing out tariffs over 15 years.
Approximately 50 percent of the tariffs were abolished immediately when the
agreement took effect, and the remaining tariffs were targeted for gradual
elimination. Among the areas specifically covered by NAFTA are construction,
engineering, accounting, advertising, consulting/management, architecture, health-
care management, commercial education, and tourism106.
Elimination of nontariff barriers by 2008: This includes opening the border and
interior of Mexico to U.S. truckers and streamlining border processing and licensing
requirements. Nontariff barriers were the biggest obstacle to conducting business in
Mexico that small exporters faced.
Establishment of standards: The three NAFTA countries agreed to toughen health,
safety, and industrial standards to the highest existing standards among the three
countries (which were always U.S. or Canadian). Also, national standards could no
longer be used as a barrier to free trade. The speed of export-product inspections
and certifications was also improved.
106
http://www.FF_Issues_Foreign_Trade_Barriers.pdf
186
Supplemental agreements: To ease concerns that Mexico's low wage scale would
cause U.S. companies to shift production to that country, and to ensure that Mexico's
increasing industrialization would not lead to rampant pollution, special side
agreements were included in NAFTA. Under those agreements, the three countries
agreed to establish commissions to handle labor and environmental issues.
The commissions have the power to impose steep fines against any of the three
governments that failed to impose its laws consistently. Environmental and labor
groups from both the United States and Canada, however, have repeatedly charged
that the regulations and guidelines detailed in these supplemental agreements have
not been enforced.
Tariff reduction for motor vehicles and auto parts and automobile rules of
origin.
Expanded telecommunications trade.
Reduced textile and apparel barriers.
More free trade in agriculture. Mexican import licenses were immediately
abolished, with most additional tariffs phased out over a 10-year period.
Expanded trade in financial services.
Opening of insurance markets.
Increased investment opportunities.
Liberalized regulation of land transportation.
Increased protection of intellectual property rights: NAFTA stipulated that, for the first
time, Mexico had to provide a very high level of protection for intellectual property
rights. This is especially helpful in fields such as computer software and chemical
production. Mexican firms will no longer be able to steal intellectual property from
companies and create a "Mexican" version of a product expanded the rights of
American firms to make bids on Mexican and Canadian government procurement
contracts.
187
One of the key provisions of NAFTA provided "national goods" status to products
imported from other NAFTA countries. No state, provincial, or local governments
could impose taxes or tariffs on those goods.
In addition, customs duties were either eliminated at the time of the agreement or
scheduled to be phased out in five or 10 equal stages. The one exception to the
phase out was specified sensitive items, for which the phase-out period would be 15
years.
Supporters championed NAFTA because it opened up Mexican markets to U.S.
companies like never before. The Mexican market is growing rapidly, which promises
more export opportunities, which in turn means more jobs. Supporters, though, had a
difficult time convincing the American public that NAFTA would do more good than
harm. Their main effort centered on convincing people that all consumers benefit
from the widest possible choice of products at the lowest possible pricehich means
that consumers would be the biggest beneficiaries of lowered trade barriers. The
U.S. Chamber of Commerce, which represents the interests of small businesses,
was one of the most active supporters of NAFTA, organizing the owners and
employees of small and mid-size businesses to support the agreement. This support
was key in countering the efforts of organized labor to stop the agreement.
188
2.5.9. BUSINESS OPPORTUNITIES IN FUTURE
Form a Chemistry Leadership Council (CLC): This group is already working on all
the challenges facing the chemical industry, including raising its public profile and
giving the industry a voice.
Set up a Futures Group to develop Policy Frameworks on Sustainable
Development, Reputation and Self-Regulation: the Futures Group concluded that
the reputation of the industry would not be improved without firstly addressing the
sustainable development recommendation.
Set up a Chemicals Innovation Centre (CIC) to act as the specialist central hub for
the networks relating to innovation and technology and product development. The
Chemical industry should develop an agreed view of science and innovation
priorities to communicate with the Mexico science base. The Chemical Innovation
Centre (CIC), with the relevant regional and national agencies should promote the
Mexico as the location of choice for start-ups in chemicals and related
technologies107.
Set up a Skills Network Group (SNG) to enable the industry to formulate more
clearly and inclusively its priorities on skills issues and propagate them through the
Sector Skills Councils (SSC) and other bodies, for instance the research councils.
107
http://www.Business Chemistry _ Futuring in the Chemical Industry.mht
189
CHAPTER - 6
―AGRICULTURE SECTOR’S OF MEXICO COUNTRY‖
190
2.6.1. INTRODUCTION
Mexico‘s agricultural sector is characterized by the existence of actors with a
limited entrepreneurial capacity. The reason may be the existence in nature. On the
one hand the agricultural structure is characterized by the small holder farmers,
seasonal & unteachednified land, low productivity products, subsistence production
& limited production loans. On the other hand, familiars‘& their villages lack services
such as education, services opportunity to provide for basic food, education &
housing expenses. Mexico agricultural sector accounts for 5 % of GDP &
employees 13.7 % of the work force. Top revenue producing crops include com,
tomatoes, sugar cans, dry beans, & avocados. Mexico also generates significance
revenue from the production of beef, poultry, pork, & dairy products. Performance of
NAFTA has opened Mexico‘s agricultural sector to the beneficial from greater market
access.108
Mexico‘s agricultural sector accounts for 5% of GDP and employs 13.7% of
the work force. Top revenue-producing crops include corn, tomatoes, sugar cane,
dry beans, and avocados. Mexico also generates significant revenue from the
production of beef, poultry, pork, and dairy products. Performance of NAFTA has
opened Mexico's agricultural sector to the forces of globalization and competition,
and some farmers have greatly benefited from greater market access. (Vera-Cruz,
2011)
108 http://www.ungs.edu.ar/globelics/wp-content/uploads/2011/12/ID-233-Sampedro-Hernandez-Vera-
Cruz-Gonzalez-Agriculture-Natural-Resourses-and-Innovation.pdf
191
2.6.2. SOCIO-ECONOMIC STRUCTURE AND AGRICULTURE IN
MEXICO
National policy decisions in developing countries contribute to the increasing
integration of agriculture into national and world economies. The spatial
consequences of national policies, however, vary across regions and agricultural
systems. Employing and adapting a style first proposed by King (1970), this study
explores the relationship between national policy, agriculture, and population
characteristics at the regional level in Mexico during the government of Carlos
Salinas de Gortari (1988–94).
The provision of commercial credit at the regional level, however, does not
appear to depend on population characteristics. inconsistency in the impact of
national policies are attributed to a historical urban bias, the differential ability of
more highly urbanized states to attract government funding, manage and implement
programs, and the existence of highly profitable, commercial agriculture in more
developed states. (j.biles, 2002)109
109
http://www.state.gov/r/pa/ei/bgn/35749.htm
192
2.6.3. A CRUCIAL ROLE OF AGRICULTURE SECTOR IN MEXICO COUNTRY:
Such as universities and public research centers. One challenge is related to
helping farmers to seek innovations that go outside the primary production
processes. However, the role of integrate the supply becomes a more important role
in a context where scientific capacity is still limited. (Agriculture, natural resources
and innovation: implications for development outcomes., 2011)
Another major task is to articulate agricultural producer‘s demand with
supplier of technological solution in a setting where a large portion of farmers lacks
the capacity to pay for technology services. Producer have different capabilities &
management skills, they generally use technology packages that include innovation
for the region, but show adversity to recent technology changes. Additionally,
technology transfer from universities & public research centers is stills scares.
193
2.6.4. MAIN FUNCTIONS OF AGRICULTURE SECTOR IN MEXICO COUNTRY
Identify & properly respond to the demand of technology. (http://www.state.gov)
Identify promising technology road mapping helping farmer to.
Identify & articulate their technological, organization & strategic needs.
Evolve in their demands from main production to post harvest commercialization.
Making clear that there is a market of technological knowledge & solution guided
by prices.
Promoting the dialogue between technology farmer & providers of technology &
technological solution.
Contributing to the establishment of links between farmers and providers of
technology and technological solutions.
Helping farmers to find financing for innovation functioning as lead operator of the
network by linking farmer to form an innovation network.
Functioning as a caretaker, trying to keep the integrity of the network, distributing
information and monitoring the associates related to the network operation
Promoting shared learning in order to get to higher levels of innovativeness
Working as knowledge broker, looking to protect the property and to
commercialize the outcomes of collaboration.
Linking the network with the innovation system.
194
2.6.5. GOVERNMENT ACTION ON DISABILITY OF MEXICO
COUNTRY
General policy:
The officially documented disability policy in Mexico is expressed in law, in
guidelines adopted by the Government and in guidelines adopted by a national
disability council. (http://www.adbi.org/research-policy-, 2012)
Since the adoption of the rules the Government has taken action in order to convey
the message of full participation. The Mexican Social Security Institute conducted a
television campaign in 1995 to promote respect and equal opportunity for persons
with disabilities.
As part of that campaign, 30-second promotional spots in prime time were broadcast
on the commercial television channel with the largest number of viewers in the
country. The weekly 30-minute programme entitled ―Disability for a world without
Barriers‖ was broadcast on the same channel.
The first International Congress entitled ―Disability in the Year 2000‖, was held under
the slogan ―Make Room: The World is also Ours‖. On various commercial radio
stations, the Department of Communications and Transport
Legislation:
The rights of persons with disabilities are protected by a combination of special and
general legislation. The Political Constitution of Mexico provides specific guarantees
and rights with regard to equal opportunities and the establishment of conditions for
individual, family and area development.
The Political Constitution for example, establishes the right to free, compulsory and
secular basic education; the right to health protection; the right to equality between
195
men and women; the right to justice and work; the right for families to decent
housing; and the protection of minors.
In recent years, the specific legal framework guaranteeing respect for and the dignity
of persons with disabilities has been established and altered by amending
discriminatory articles of the Civil Code as much as the General Act on Education
regarding the inclusion of minors in the regular school system, as well as other
federal acts on specific issues relating to persons with disabilities, such as the Act on
the Encouragement and promotion of Sport, the Consumer protection Act, the
General Act on Human Settlements, the Customs Act and the Act on Procurement
and Public Works.
In addition, local acts on social integration have been promulgated in the Federal
District and in 10 states, and similar acts are being promulgated in eight other states.
The judicial mechanisms adopted in order to protect the rights of persons with
disabilities include: due process (legal remedy through the courts) and recourse
procedure by a special agency dealing with anti-discrimination issues. The Office of
the Attorney-General of the Republic has begun to establish agencies of the Federal
Prosecutor‘s Office specializing inside persons with cerebral disabilities; to date, two
agencies have been recognized.
Accessibility:
There are laws and regulations ensuring accessibility of the build environment.
An official Mexican regulation establishes the architectural requirements
for providing persons with disabilities with access to medical
establishments under the National Health System and facilitating their
mobility during their stay.
Support for the actually Disabled, Blind and Mute, a file prepared by the
Mexican Social Security Institute, establishes legal criteria and
196
architectural and engineering guidelines for adapt space in order to make
it accessible to persons with disabilities.
Design criteria. Architectural Elements to Assist persons with
Disabilities, prepared by the Insurance and Social Services Institute for
State workers, a document containing regulations on surface area,
operation, environment control, equipment, signs and various architectural
details of the Institute.
Adaptation of INFONAVIT Housing for persons with Disabilities and the
Elderly, a paper prepared by the Institute of the National Fund for Worker
Housing, which sets the standards for such housing.
There are also various regulations on this subject in various states and
towns of Mexico.
197
2.6.6. COMPARATIVE POLICY ANALYSIS WITH
ARGENTINA, BRAZIL, PRC, MEXICO AND THAILAND
In spite of being an early bird, Indian power sector did not succeed much in attracting
private investment as compared to some Latin American countries, like Argentina
and Brazil. A comparative policy analysis further investigates the role of policy and
the regulatory environment in this context.
This highlights the relative strengths and weaknesses of the power sector change
and investment climate for private investors in India. The sample includes Argentina,
Brazil, PRC,Thailand and Mexico.. (http://www.adbi.org/research-policy-, 2012)
The first countries have attracted significant private investment in the power sector.
PRC is included on account of its overall attractiveness for foreign investment.
Thailand and Mexico have been considered as these are at an initial phase of
reforms. From the initial phase of reforms, the two countries have also been
described as ―best practices‖ for the IPP model (Woodhouse, 2005).110
Power sector reforms and policies to support private investment have progressed at
different paces and sequencing across the sample of countries under examination.
In the context of regulatory and policy environment, such differences arise
from:
Policy Environment for Private Participation
110
http://www.adbi.org/research-
policybrief/2006/12/20/2092.regulation.power/comparative.policy.analysis.with.argentina.bra
zil.prc.mexico.and.thailand/
198
Independence of Regulatory Institutions
Approach to Power Sector Reform and Regulation
Country Year 2000 Exports Year 2009 Exports Year 2010 Exports
India 0.7 1.3 1.4
Brazil 0.9 1.3 1.4
China 3.9 9.7 10
South Africa 0.5 0.5 0.5
Russia 1.7 2.5 2.7
Mexico 2.6 1.9 2
In the last decade merchandise exports in India have experienced significant growth.
The exports went down during the global economic meltdown of 2008 but have since
performed well and it is expected that in 2012 this sector will see an increase of 30
percent. 111 (regulation- power-comparative policy)
In the preceding 10 years India‘s exports have increased by more than 25 percent
and the services sector has made a major contribution by way of regards to earning
foreign exchange. The Special Economic Zones have contributed almost 30 percent
of India‘s exports.
111
http://www.adbi.org/research-policy-
brief/2006/12/20/2092.regulation.power/comparative.policy.analysis.with.argentina.brazil.prc.
mexico.and.thailand/
199
2.6.7. INDIA’S MERCHANDISE EXPORTS IN THE LAST
DECADE AND FUTURE PROSPECTS
In the period from 2004-05 to 2008-09 the exports sector has witnessed a CAGR of
22 percent compared to the period between 2000-01 and 2003-04 when the similar
figure stood at 14%. The rate went down after the 2008 global financial slowdown
but from November 2009 onwards the trends have been positive. During April 2010
to February 2011 India exported goods worth 208.2 billion US dollars. This was a
year-on-year growth of 31.4 percent. The Ministry of Commerce and Industry is
hopeful that India‘s merchandise exports in the upcoming fiscal will be around 235
billion dollars, and the growth will be as per the recent trends.
The following table, which has been collected from data provided by Economic
Survey 2010-11, shows India‘s share, in percentage, in the global goods exports
from 2000 to 2010. (regulation- power-comparative policy)
Year Merchandise exports
(in billion dollars)
Services exports
(in billion dollars)
2000-01 44.2 16.3
2005-06 103.1 57.7
2008-09 185.3 106
2009-10 178.7 95.8
India’s SEZ exports in the last decade:
Following the introduction of the SEZ Act (2005) and SEZ Rules (2006), this sector
has experienced a high rate of growth. One of the major aims behind the introduction
of the act was promotion of exports and the SEZs‘ performance has helped achieve
that target to a assured extent. (regulation- power-comparative policy)
200
As of now 130 SEZs are operating in different parts of the country and these entities
have been making significant contributions to India‘s merchandise and services
export growth. In 2005-06 India‘s SEZs add 5 percent to the aggregate exports and
this went up to 29.7% during 2010-11. In the staid period this sector witnessed a
CAGR of 76 percent. 112
India exports – composition:
India‘s exports have been traditionally based on manufactured goods. However, in
the last decade the share has reduced in excess of 10 percentage points – in 2003-
04 this sector accounted for 76 percent but it came down to 65% in 2009-10.
(regulation- power-comparative policy)
In the composition of manufactured goods, engineering goods have been seen an
increase in share while textiles, inclusive of readymade garments, has experienced a
breakdown.
The POL products have experienced a major increase when it comes to exports – in
2003-04 this sector had contributed 5.6 percent that went up to 15.7% in 2009-10. In
April-August 2010-11 the exports have seen a year-on-year increase of 74.7 percent,
agriculture and allied products‘ share has gone up by 2.7%, and exports for
manufactured goods have increased by 22.2%.
In the same period the exports of ores and minerals have increased from 3.7 to 4.9
percent. Software is the major contributor when it comes to services exports and
112 http://www.adbi.org/research-policy-
brief/2006/12/20/2092.regulation.power/comparative.policy.analysis.with.argentina.brazil.prc
mexico.and.thailand/
201
accounts for almost 50% in this domain. From 2000-01 to 2007-08 services exports
have had a CAGR of 30 percent.
Travel, transport and insurance including commercial services contribute almost 25%
of the export earnings of the services sector. However, their share has come down
from the 2000-01 figures of more than 30%.
Business services have also played a major role in India‘s exports with a contribution
of 12 percent during 2009-10. In April-September 2010-11 there has been a year-on-
year increase of 15 percent in the software exports sector and 111% rise in business
services exports. Travel and transportation sector has seen an increase of 26% in
the same period.
India exports – major partners:
Asian markets, with the exception of Middle East, are the biggest export partners of
India accounting for almost 30 percent of the total figure. The Middle East is
responsible for 20% of India‘s aggregate exports. In Asia, Hong Kong and China
together account for 10% of the exports and approximately 14% of export
transactions are done with the UAE. (regulation- power-comparative policy)
Europe accounts for almost 20 percent of India‘s exports and the shares are evenly
distributed among the range of countries in this continent. The US accounts for at
least 10% of goods and services exported by India.
202
India is yet to start itself in the markets in Africa as is evident from its export statistic
of 8 percent for the continent. Indian goods and services do not enjoy any major
demand in South America. 113
India exports and GDP growth: In January 2012 India‘s exports amounted
to 25347 million dollars and this amounted to 22 percent of the aggregate
GDP for the period. Jewelry and gems were the major components and
accounted for 16% of the aggregate exports.
Experts opine that India could leave China behind as the quickest growing economy
in 2012. In the third quarter of 2010-11 fiscal India‘s GDP grew at 8.2% on a year-on-
year basis. This is much less than China‘s corresponding figure of 10.4% but it is
estimated that several factors such as rising exports, population, and services will
help it perform better than China.114 (http://business.mapsofindia.com)
113 http://www.adbi.org/research-policy-
brief/2006/12/20/2092.regulation.power/comparative.policy.analysis.with.argentina.brazil.prc.
mexico.and.thailand/
114 http://business.mapsofindia.com/food-industry/
203
PSYLLIUM PLANT
115
Mexico Agriculture Policy Review (http://en.wikipedia.org/wiki/, 2011)
As a NAFTA partner and Canada's third largest export market for agri-food products,
developments in Mexico are of direct interest to Canada. Rural poverty, low
productivity, poor infrastructure and unclear property rights for both land and water
still inhibit the efforts of Mexico's government to improve competitiveness of its
agricultural sector. (http://www4.agr.gc.ca)
Agri-food Trade Grows Strongly:
Both agricultural exports and imports have increased since the inception of NAFTA,
reaching 13.6 and 15.4 USD billion respectively in 2006 (Figure 3). The European
Union's share of Mexico's total imports is now much lower, while Canada's share has
doubled. The United States remains Mexico's main trading partner, providing more
115
http://en.wikipedia.org/wiki/File:Plantago_ovata_form.jpg
204
than two-thirds of Mexico's imports and purchasing the vast majority of Mexico's
exports. Mexico now exports more fruits and vegetables, processed foods and
higher value products. This, combined with an overall increase in exports, gives
evidence of Mexico's more market-oriented agri-food sector.116
Source: World Trade Atlas.
116 http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1204258695800&lang=eng
205
2.6.8. POLICIES AND NORMS FOR IMPORT / EXPORT
INCLUDING LICENSING, PERMISSION
PROFILE OF MEXICO:
Before the Revolution of 1910, large farms, or haciendas, characterized the
agricultural structure in Mexico. The indigenous population was pushed back and
could own only miniscule holdings. The large farms dominating agriculture were
basically primary-products, export-oriented agriculture, depending on the labor
released from expropriated holdings of the indigenous farmers.
(http://www4.agr.gc.ca)
Larger farms, like all monopolies, were producing grains inefficiently and at higher
relative prices. This constrained the domestic market and was an obstacle to
industrialization. The Mexican Revolution of 1910 encouraged communal land
settlements, or but did not affect the large haciendas, which continued to account for
94 percent of the agricultural land.
The Great Depression of the 1930s ended the hegemony of the large landowners, as
the profits from the export of primary products shrank. It was only during the
administration of Cardenas (1934-1940) that a fundamental change in agrarian
structure took place. The latifundias were broken, and the land owned by ejidos
expanded significantly. The latter also owned larger share in irrigation. Public
institutions provided technical and financial support to the small farms. 117
Testate made substantial investments in rural infrastructure, particularly in irrigation.
As a result, value added by agricultural sector during the period 1940-1958 rises by
117 http://www.dcmsme.gov.in/policies/policies.htm
206
an annual rate of 5.8 percent. This was possible because the political system rested
on the national organizations of workers and peasants.
However, the import substitution strategy, along with high rate of public investment,
brought inefficiencies in the system, and also led to a large fiscal deficit. A high rate
of inflation was witnessed, along with price instability and foreign exchange
shortages. The currency had to be devalued, and price stabilization became the
major objective of the macro policies.
Mexico had become one of the world‘s main importing countries for agricultural
products. Large part of domestic consumption of agricultural produce had to be met
by imports. The food and agricultural trade balance was becoming increasingly
negative. In contrast to other Latin-American countries, whose export destinations
are fairly diversified, Mexico‘s agricultural exports (to the tune of 88 percent) have a
single destination: North America.
The impact of these policies was not restricted to the external trade balance only, but
also on thieving conditions of a large part of the population, and on natural resources
and the environment, which were adversely affected.
To revive agriculture, Mexico has undertaken several programmers, some of which
date back to the mid 1990s. On the eve of joining the North American Free Trade
Agreement (NAFTA), the country initiated a programme of direct support to
agriculture in 1994. The programme, known as PROCAMP, was conceived as a 15-
year programme that would provide transitional income support to Mexican
agriculture as it underwent structural changes in response to market conditions and
phasing out of trade barriers under NAFTA.
207
The focus on marketable surplus excluded the country‘s subsistence farmers, who
account for approximately three fourths of Mexico‘s agricultural producers. In 1995
another programme, The Alliance for Country was sponsored as a substitute for the
diverse programmers promoted by several institutions for raising agricultural
productivity and capital investment.
The Social Development Secretariat implemented another direct transfer
programmers. It required the participation of the beneficiaries in activities for their
own development in the areas of education health and nutrition. These four
important programmers‘ aimed to: adapt agriculture to a market-oriented system;
assist producers without distorting domestic prices; and minimize the difference
between domestic and border prices.
They also aimed to overcome the narrow view of agricultural policies, and looked
more at rural development in general. Besides these programmes, several other
initiatives touching on different aspects of agriculture were taking place
simultaneously.
208
2.6.9. MAIN FEATURES OF INDIA’S AGRICULTURAL
SECTORS
India is a large country with a population of over 1.1 billion. There is a substantial
number of poor households, although their proportion in the total population is
declining. Currently nearly26 percent of the population is below poverty line. There is
pronounced social stratification, which is also reflected in unequal access to land and
other resources. (www.fao.org/docrep)
Around 85 percent of agriculture holdings are small or marginal (of less than 2
hectares), cultivating nearly 50 percent of the area. Nearly 45 percent of cultivable
land is irrigated. Cereals are the main crops. In recent years crop diversification has
started to a significant extent, and sub-sectors such as dairying, animal husbandry,
fishery, and horticulture are gaining importance. An important feature of Indian policy
is that food security is considered a primary responsibility of the state, and the
sections that follow discuss the role of the public sector in meeting the objectives of
growth and equity in the rural sector.118
Economic Reforms Period:
By the end of the 1970s agricultural productivity, even in the Green Revolution
areas, had reached a plateau. The gap between the availability and requirements of
food grains was widening. The overall economic situation worsened with the first oil
shock and dwindling foreign exchange reserves, and inflation was soaring. These
conditions forced a change in the policy stance. Some measures of liberalization in
industrial and foreign trade policy were introduced.
However, the basic premises on which the earlier ‗pre-reform‘ policies (i.e.
‗commanding heights for the public sector‘) were based remained more or less
118
www.fao.org/docrep/012/i1217e/i1217e00.htm
209
unchanged. Even with the limited reforms, the economy revived. Inflation came down
and industrial production improved. However, this proved to be a brief respite.
Reforms in Agriculture:
Against the backdrop of the slow pace of reforms in the country, policy changes in
agriculture were even slower. The government was keen that nothing be done that
would jeopardize food security. There was a powerful lobby of medium to large
farmers who did not want to yield any advantages they might be extracting from the
system. The state governments, which according to the Indian Constitution have
principal responsibility for agriculture, were dragging their feet in implementing the
reforms. At the same time distortions in the agricultural sector were not as glaring as
in most of the countries opting for reforms.
Public-sector institutions in credit and marketing relegated their development role to
the background and aimed at ‗profit maximization‘. Many small farmers could not
obtain support from public institutions to face the competition, even for the products
for their own use. In short, sectoral policies addressed to agriculture ignored the on-
the-ground realities.
Current Phase of Economic Reforms
By the turn of the century, the Indian economy was poised for a high rate of growth.
The growth, however, was spearheaded by the industry and services sectors.
Agriculture was virtually stagnating. As a result, the rate of poverty reduction was
disappointing. Government agencies and research scholars identified the major
constraints to agricultural growth, which included: (i) deterioration of the production
base of land and water; (ii) stagnation in the yields of field crops, as well as in the
output of sub-sectors (e.g. dairying, fishing); (iii) declining efficiency of inputs used in
agriculture; (iv) widening income gap between agricultural and non agricultural
210
workers; (v) greater vulnerability faced by agricultural workers; and (vi) decay itself-
help institution.
211
2.6.10 GUJARAT AGRO PROCESSING INDUSTRY
As far as Psyllium Husk is concerned, Gujarat contributes 35% of world
production. In case of this product, it has been discovered that a large number of
patents on its uses in pharmaceutical/drug composition, treatment of constipation
related ailments, in food and beverage preparations etc. are being claimed by foreign
companies. It is being felt that large number of these products (developed by foreign
companies through minor changes) can easily be developed in Gujarat and in some
cases, the patents already granted must be contested on account of existing prior art
i.e., knowledge and practices already in public domain. An appropriate research
strategy/mechanism would also be developed so that a specific portion of funds
generated through export of psyllium is invested in creating and protecting
intellectual property rights. (http://www.economywatch.com, 2012)
Such as buyers has approved our plant and also issue Certificate of Appreciation
from Proctor & Gamble Co. Our company has established and reach at high well
level in the market to follow Total Quality Management and offering superior
Our main markets are USA, UK, European Countries, Mexico, Japan, Australia,
Indonesia, Malaysia, Taiwan, China, Bangladesh, Pakistan, India and Gulf countries.
212
2.6.11. BUSINESS OPPORTUNITIES IN FUTURE
Forget what the government says or doesn‘t say! Agriculture sector, like other
sectors, looks for a brighter future There are now many positive developments like
the recently concluded Hongkong WTO meet and the West Bengal CPI (M) Chief
Minister‘s private sector friendly approach to economic development etc.
This is not the place to discuss the WTO talk‘s outcome.
Agriculture share in GDP is now down at 21 per cent. So, the future of agriculture
lies in more profitable value-added agribusiness activities. For the first time, Indian
agriculture‘s opportunities look brighter. The short-term might have still problems.
But the long-term, after this WTO meet, looks very encouraging. You must have
freedom to make profits in business ventures. That is why we welcomed the West
Bengal Chief Minister‘s new policy to allot more agriculture lands, something like
5,000 acres to new investors to develop townships, new food parks etc. Agriculture
should be seen more and more a business opportunity. Agriculture is widespread as
well as many people might take to this sector with a modern, business mind.
213
CHAPTER - 7
―AVIATION INDUSTRY IN MEXICO‖
214
2.7.1. INTRODUCTION
This report provides a competition assessment of the Mexican domestic airline
industry. In it we reach conclusions about the sector‘s performance and the
level of competition, identify impediments to competition that policymakers can
address and remove, and make specific competition policy recommendations to
improve competition in the sector.
The paper begins with a brief history of the airline sector in Mexico since the late
1980s. The government was the principal shareholder of the two major trunk
airlines—Aeromexico and Mexicana—between the mid 1990s and the mid
2000s, fully privatizing Mexicana in 2005 and Aeromexico in 2007. On a couple
of occasions during the period the Mexican Federal Competition Commission
(―Competition Commission‖) rejected the merger application of Mexicana and
Aeromexico, the most recent rejection was in 2007. Low cost carriers (―LCCs‖)
entered the market in the mid 2000s and have had a significant impact to date,
capturing about one-third of the market.
Liberalization of the sector began in the early 1990s but the process was not
transparent and was under the discretion of the government. In 1995 the Lay de
Aviation Civil fully liberalized the sector by removing legal barriers to entry. On
paper it appears as though there is free entry into the sector for Mexican nationals,
and there does not appear to be onerous exit requirements. Nevertheless, entry is
restricted or made difficult in several ways. First, foreign firms cannot provide
domestic service and they are limited to owning 25 percent of a Mexican airline.
Second, entry can be restricted if the entity that issues concessions and
permits, the Secretariat of Communications and Transport (―SCT‖), utilizes too
much discretion—i.e., if the process is not transparent, clear, and timely. Third,
airlines can lose their concession if they do not provide air passenger service for
215
180 days.
With respect to new routes, once authorized the airline must provide service on the
requested route within a period of 90 days otherwise it loses the right to provide
service119.
The Competition Commission has analyzed competition concerns in the sector on
a number of occasions and has identified several impediments to competition.
These include: (i) laws and bilateral agreements that prevent foreign firms from
offering sabotage service (i.e. domestic service) and that limit foreign ownership to
25 percent; (ii) barriers to accessing airport facilities for entrants—e.g., take-
off/landing slots, gates, counters; (iii) grandfather clauses favoring incumbent
airlines access to airport infrastructure; (iv) obstacles and difficulties in obtaining
concessions and permits from the SCT; and (v) high structural barriers such as
high costs to start an airline, sunk costs of advertising and promotion, high cost of
attracting consumers who may participate in the incumbents‘ loyalty programs—
such as frequent-flyer programs—and having to compete against airlines that have
interlining and code sharing agreements.
A major policy concern identified by the Competition Commission is the condition in
the Mexico City Airport which since 2005 has been operating under conditions of
congestion/saturation. The number of take-off and landing slots at the airport is
at a maximum and cannot be increased. This limits the ability of competing
carriers to enter or expand on important routes, potential competition is severely
restricted. When an airport is declared to be saturated the SCT is
empowered to implement market-based rules (e.g., auctions) that can
alleviate congestion. While these reforms could have been implemented beginning
in 2006, to date no action has been taken. In our model of airline prices in Mexico
we find that flying into or out of the Mexico City airports is associated with prices
that are, on average, between 40 and 80 percent higher depending on the model
119
www.discountairfares.com+/lcostgra.htm.
216
and holding all other factors constant, including airport charges paid by airlines for
airport infrastructure120.
The high prices associated with flying into or out of Mexico City reflect very high
entry barriers at the Mexico City airport and lack of potential competition,
something which can be addressed through policy reforms, as discussed below.
According to the economic literature and an investigation of cases pursued by
competition authorities in different countries, there are a number of competition
policy concerns in the airline sector worldwide. The concerns include: predatory
conduct; access to essential airport inputs such as take-off and landing slots;
exclusionary conduct; airline marketing strategies (e.g. frequent flyer programs,
travel-agent commissions); code sharing, alliances and mergers; and collusion.
The main competition policy concerns investigated by the Mexican Competition
Commission primarily include access to essential airport inputs and merger
applications between the two incumbent trunk operators, Aeromexico and
Mexicana.
A competition analysis of the domestic airline sector in Mexico, based upon
publicly available data, leads to several conclusions about the sector‘s
performance and level of competition. The sector has experienced fairly robust
growth during the period for which data are available, 1989- 2008. The compound
annual growth rate for total domestic passengers (i.e., trunk and regional
passengers) between 1989 and 2008 was approximately 5.40 percent; for trunk
passengers and regional passengers growth rates were 4.1 and 14.1 percent,
respectively. During this time period Mexico‘s real Gdp grew at an approximate
rate 3.0 percent and a simple linear regression of the natural log of real Gdp on the
natural log domestic passengers results in an income elasticity of 1.06 while a
simple linear regression of the natural log of real Gdp on the natural log of total
(domestic and international) passengers results in an income elasticity of 120
Source: International Air Transport Association
217
approximately
There has been a significant decrease in concentration during the period 1989-
2008 with strong recent gains made by three low cost carriers. In 1989 the
Herfindalh Hirshman Index (―HHI‖) — based upon a nationwide market—was
4396 and by 2008 the figure had decreased to 1766. Five low cost carriers
entered the market in 2005/2006 and by the end of 2008 the three low cost carriers
that remained in the market had captured more than 30 percent of passenger
traffic. With the exception of the Mexico City airport, barriers to entry and expansion
are low121.
The evidence on price changes is mixed. Based upon two analyzes of 12 domestic
routes conducted by a Mexican think tank (aregional.com), one in 2000 and one in
2008, airline prices decreased by approximately 4 percent per year during those
two time periods. Based upon the study of airline prices in this paper, however,
prices on those same routes were close to 20 percent higher in 2009 compared to
2008. With respect to profitability, the available publicly- available evidence
indicates low levels of profitability for the two incumbent operators since the mid
2000s. And, since 2007 four airlines have exited the market.
We collected data on approximately 500 domestic routes in Mexico in order to
investigate and analyze the main determinants of airline prices and to provide
policymakers with relevant information that can be used to adopt policies that
remove and lower competition barriers and increase competition in the sector.
The data collected included: prices, distance, and number of Competitors,
number of low cost competitors, prior year‘s number of passengers flown, and
income per capita of origin city, whether the destination city was a tourist attraction,
a price discrimination variable, whether the airport was operating under
conditions of saturation and maximum tariffs that airports can charge for use of
121
www.ncecic.dot.gov/ncecic/hearings.
218
airport facilities. We performed statistical and econometric analysis to reach our
conclusions122.
We utilized OLS to estimate linear and non-linear relationships between price and
the repressors and utilized instrumental variables (IV) estimators to account for
the possible endogeneity of several regresses: existence of low cost carrier
per route, number of carriers per route, and number of passengers travelled per
route.
The main findings are: The existence of a low cost carrier on a route results in
average prices/km that are between 26 and 35 percent lower, holding other factors
constant. Flying in and out of Mexico City results in average prices/km that are
between 40 to 80 percent higher, something we attribute primarily to the high entry
barriers and lack of potential competition in that city due to airport congestion.
When there is competition between the two incumbent carriers on a route, average
prices/km is between 11 to 23 percent lower. The existence of code sharing
between Mexicana and Aero mar results in prices/km that are between 30 to 38
percent higher. With respect to other important economic variables, increasing the
distance traveled by one standard deviation (611 km) is associated with
approximately a 6-13% decrease in price. Increasing monthly passengers by one
standard deviation (10,550) is associated with approximately a 5-
11% decrease in price. Income per capita has a small impact on price and is not
significant at the 5% level in any the models.
Overall, these results indicate that there are potentially significant welfare
gains from implementing sound competition policies in this sector—policies
that remove unnecessary Barriers to the entry and expansion of competitors
(especially low cost carriers) and that implement market mechanisms that result in
the efficient allocation of scarce take-off and landing slots. Based upon our
econometric point estimates we estimate potential increases in consumer surplus
122
http://www.cfc.gob.mx/images/stories/comunicacion/Publicaciones/DOCUMENTO%20CASO%20CI
NTRA.pdf
219
from improving airport conditions in Mexico City and increasing low cost
competition throughout the country.
To the extent that saturation conditions are eliminated at the Mexico City airport,
consumers can gain up to 3 billion US$ annually. To the extent that removing entry
and expansion restrictions increases the number of low cost carriers entering
unnerved areas, consumers can gain up to 300 million US$ annually123.
123
http://www.sct.gob.mx/uploads/media/Ley_de_Aviacion_Civil.pdf a
220
2.7.2. THE BASIC FEATURES OF INTERNATIONAL AIR
TRANSPORTATION
Historical perspective:
Air transport has always been seen to have an inherently strategic role. It has
obvious direct military applications, but it is also highly visible and, for a period, and
in some countries still, was seen as strictly, there are differences between
globalization and internationalization. Internationalization refers to the importance of
international trade, relations, treaties etc.; it refers to actions between or among
nations. Globalization means erasure of national boundaries for economic
purposes; international trade (governed by comparative advantage) becomes inter-
regional trade (governed by absolute advantage). In practical terms, internalization
is technically what has largely been occurring in the World with the development of
agencies such as the World Trade Organization. Perversely, globalization has
been more narrowly airlines were seen as having potential for providing high-
speed mail services, and subsequently medium and long-term passenger
transport. Technology now allows the carriage of much larger cargo pay-loads in a
more reliable way. These strategic functions were used to pursue internal
national policies of social, political, and economic integration within large
countries such as Canada, the US, and Australia, but also took on international
significance from the 1930s within the Imperial geopolitical systems centered mainly
on the UK, France, Germany, and other European countries when technology
allowed for intercontinental services to be developed124.
Air transport was highly regulated and protected in this environment with the
intention of it being used as a lever for larger political and economic objectives. But
even in these roles, its importance, largely because of the technology until after
World War II, was small. British Imperial Airways, for example, only carried about
124
http://www.sct.gob.mx/uploads/media/Reglamento_de_la_Ley_Aviacion_Civil.pdf.
221
50,000 passengers to the colonies in the 1930s; a figure hidden in the public media
coverage given to the importance of colonial air networks. Technology shifts as
an offshoot of military developments in World War II changed this with the
introduction of planes with far longer ranges, faster speeds, enhanced lift, and the
increasingly ability to cope with adverse weather conditions. Air traffic control,
navigation, communications, and airport facilities have also improved considerably,
and more recently the underlying management structure of the supplying industries
has enhanced efficiency.
The Chicago Convention of 1944 confronted the new international potentials of civil
aviation and initiated an institutional structure that laid common ground rules for
bilateral air service agreements (ASAs) between nationals. The result, however,
while providing a formal basis for negotiation, was essentially one of
protectionism with pairs of countries agreeing on which airlines could offer services
between them, the fares to be changed and, often, how the revenues could be
shared. Added to this, with the major exception of the US, most international airlines
were state owned flag-carriers that operated to fulfill, often vague, national
objectives of prestige, as well as linking colonies. Internal markets within countries
were regulated in similar fashions, and it was not uncommon for wealthier countries
to have an airline to provide primarily domestic and short haul services, and one for
long-haul, international markets.
The breakdown of the domestic regulatory structure within the US from the late
1970s (Morrison, and Winston, 1995) provided both a demonstration for other
countries to follow in deregulating their own unsuccessful, initiatives from 1979 to
liberalize international Wider reforms.
This was coupled with more generic moves towards a withdrawal of government in
market-oriented countries such as New Zealand and the UK that saw airports
and air traffic control being privatized, or at least operated on a more
commercial footing. The move to a Single European Market within the EU from
222
1992 represented a broader trend, both in terms of the sectors and the
geography involved, towards market liberalization of air transport infrastructure, as
did the collapse of the Soviet economic system. Not all countries moved
completely in this direction, the US for example, rather perversely, continued
with its traditional, strongly socialist policy of air traffic control being a state owned,
tax financed monopoly and airports, with few exceptions, being owned by local
governments (Button and McDougall, 2006)125.
Where there has been almost universal tightening of regulations that run counter to
the market US. This concerns such matters as the environment, safety, security,
and consumer and labor protection. These are areas that have been traditionally
dealt with at the international level by the International Civil Aviation Organization
(ICAO) set up under the Chicago Convention, and in accord with some peculiar
international accords such as the Warsaw Convention that dates back to 1929
and deals with liabilities in the case of accidents2. More recently, regional or
national actions have also taken international significance; e.g. the extension US
stricter security measures, such as the provision on passenger information, for all
flights into the country.
The modern industry:
The modern air transport industry is thus one that increasingly operates within a
liberal market context. While government controls over fares, market entry, and
capacity continue in many smaller countries, they are gradually and almost
universally being removed or relaxed126.
International controls under the bilateral ASA structure are increasingly moving
towards broad Open Skies formulations, allowing free provision of services
between the countries involved, although progress on open market, whereby
125
http://www.sct.gob.mx/uploads/media/Ley_de_Aeropuertos.pdf 126
http://www.sct.gob.mx/uploads/media/Reglamento_de_la_Ley_de_Aeropuertos.pdf
223
nationality of ownership of airlines is unrestricted, is coming more slowly. The EU
area has effectively been the largest international free market in air transport
services in the world since 1997, and this has grown as the Union has expanded
geographically. The supply and operation of air transport infrastructure is also
becoming more market driven with on-going privatizations of airports and air traffic
control systems, or the use of franchising mechanisms to involve private capital and
expertise. It is also becoming more coordinated. The air transport industry is now
large – it accounts for about 1% of the GDP of both the EU and the US – and is vital
in many industries such as tourism, exotics, and hi-technology. It is an important
transporter of high-value, low-bulk cargoes. International aviation moves about 40%
of world trade by value, although far less in physical terms. The market is served by
a diversity of carriers, some specializing in long-haul international routes and others
in short-haul markets. In 2008, passenger air services globally link around 15,500
airports; with the fastest growth in air services over the past two decades being in
the Europe-Asian Pacific markets.
The air transport industry itself has established international bodies to both
interact with national governments and institutions such as the ICAO; e.g. the
International Air Transport Association (IATA) was established to assist airline
companies to achieve lawful competition and uniformity in prices127
One US survey has shown that hi-technology personnel fly about 60% more than
their counterparts in traditional industries. A broader econometric analysis indicates
that the location of a city with a hub airport in the US in the 1990s enjoyed some
12000 more high technology jobs than a comparable city without a hub (Button et
al., 1999Source). Analysis of transatlantic routes shows that enhanced numbers of
links and service frequencies lead, albeit at a declining rate, to more hi-technology
employment (Button and Taylor, 2002).
In terms of total passengers, because length of trips not included the ranking of
127
http://www.sct.gob.mx/transportes/
224
airlines is somewhat different; e.g. according to IATA, Ryan air carried 40,532
thousand passengers in 2006; Lufthansa, 38,236; Air France, 30,417; British
Airways, 29,498; and KLM, 22,322.
For example, Airports Council International data shows Memphis International
Airport handled 3,840,491 metric tons of cargo in 2007; Hong Kong International
Airport New Territories, 3,773,964 tones; Ted Stevens Anchorage International
Airport, Shanghai Purdon International Airport, 2,559,310 tones; Incheon
International Airport, 2,555,580 tonnes.
225
2.7.3. INNOVATION AND TECHNOLOGY POLICY (ITP),
AND THE INSTITUTIONAL ENVIRONMENT
This subsection 1) sketches the policy measures taken by once newcomer
countries to the aerospace sector, and 2) briefly describes the innovation system
conditions in Mexico.
The countries mentioned above could learn from licensing old military and civil
aircraft models. However, that possibility is not clear for Mexico. As it was said,
Mexico is not interested in developing a domestic military aircraft sector (at least
apparently), which left out the possibility of licensing military aircraft production.
Thus, the country has to depend on the civil sector alone. These historical
examples bear one implication: All countries that in one moment attempted to
developed the aerospace sector had to rely at the beginning in the transference of
foreign technology by leading firms.
IMPORTS:
Total Mexican imports in the aerospace industry have grown 25.6% in 2006
reaching a total of US$506 million. The U.S. exported close to 72.5% of this total
to Mexico, or US$366.9 million. According to Boeing, in the next 19 years, Mexico
will need 360 new aircraft, representing a business opportunity of US$23,000
million.
Mexican aerospace imports are spread evenly between aircraft and aircraft parts,
aero-engines and avionics. The aircraft and aircraft parts manufacturing sector
alone, registered under Chapter 88 of the Harmonized System Code, represented
sales of US$202.5 million for foreign firms exporting to Mexico in 2006, 58% of
which came from the United States128.
128
http://www.flightglobal.com/articles/2008/09/24/316227/interjet-and-volaris-look-to-exploit-
consolidation-in.html.
226
The most important products in this Chapter include US$121.4 million imports of
aircraft and helicopters, of which US$73.9 million, or 61%, came from the U.S.
Parts constitute 74% of the total aircraft market and the estimated growth of this
market segment in the next 5 years is estimated at 10%. The total market for
spare parts is valued at approximately US$500 million in 2006.
EXPORTS:
Total Mexican exports of aeronautical components and engineering designs, on the
other hand, were valued at US$606 million in 2004 and grew to US$822 million in
2005 and another 13.6% in 2006 to reach US$934 million. According to the
Secretariat of Economy, this is a 60 percent increase compared to the year 2000
and these figures are expected to increase tenfold with exports forecast at
approximately US$2 billion by 2010.
The U.S. is by far the leading market for Mexican exports. Currently, there are
interesting changes in Mexico‘s aerospace sector. Mexican businesses bought
significantly more U.S. aerospace products and services in 2006 than during the
past fifteen years. While in 1997 Mexico sold US$77 million worth of aerospace
products to the U.S., this number increased to US$354 million in 2003. By 2006
aerospace components made in Mexico and exported to the United States reached
almost half a billion dollars of the total US$934 million in Mexican exports. This is a
10-fold increase over the last 10 years and positions Mexico as the 10th largest
foreign supplier of aerospace goods to the United States, although it still lags far
behind more mature suppliers such as Canada, France, United Kingdom and Brazil.
Mexico manufactures only an estimated 2 percent of the approximately US$25
billion total U.S. import market and growth prospects look promising. Some sub-
industries have experienced a growth of over 20 percent in the last business year129.
Mexico exports 1.4 times as much to the U.S. as the U.S exports to Mexico. Based
129
www.expo-ciam.com
227
on these data, it may appear that Mexico has a strong upper hand and that
aviation in Mexico is a saturated marketplace. However, although these domestic
producers are potential competition for a U.S. manufacturer of aviation goods,
many of these firms operate at a different stage in the production cycle and are
not focused on the Mexican market. Hence, Mexican aviation firms can be
complementary to their U.S. counterparts. Moreover, for those Mexican companies
that do pose a threat, their businesses represent a sizeable market that is open to
importation of U.S. goods. No barrier exists to the customers to whom these
Mexican firms sell; rather, current supply of more effective products from foreign
counterparts does not meet demand.
Given this increase of trade on both sides, Mexico is a location aerospace
companies in the United States should not ignore as they consider selling their
products or services.
DOMESTIC PRODUCTION
Mexico is currently at the early stage of a hypothetical model for development of
the aerospace industry. According to the Secretariat of Economy, the industry
comprises almost 140 companies, employing 16,500 workers that are concentrated
mostly in the Northwestern region of Mexico, although the industry has a presence
in 11 States of the country.
Aerospace parts manufactured in Mexico include turbines, fuselage and landing
gear components, in addition to harnesses and cables. There are also audio and
video systems, heat exchangers, as well as some interior parts such as bathrooms
and galleys130.
Most aeronautical parts and components made in Mexico are intended for the U.S.
market and export figures provide the best performance measure for this industrial
sector. Although at present the Mexican industry manufactures individual parts and
130
www.aeroexpo.com.mx
228
components, it could later make progress toward the assembly of systems or
structures to stage II (i.e. landing, control). Eventually it could work its way into
the full assembly of aircraft in the third stage. This process may take between
eight and 25 years, depending on the speed and quality of conditions facilitated in
the country. Maturity beyond aircraft assembly is in the design, engineering and
manufacturing of key components, such as turbines. This is a development stage
reached only by a few countries.
Aircraft are made of materials which are not common in Mexico‘s industries today.
Metals such as titanium, inconel, aluminum and special alloys are hard to find. In
addition, there is a lack of expertise and skill in the founding, fabrication, forging
and machining of specialized metals. Aerospace manufacturers will naturally seek
those regions with competitive advantages.
Mexico has three types of variations of aerospace manufacturing
companies:
Primes – like Honeywell, looking for small indigenous companies that they see
as potential suppliers they can develop.
Suppliers - who have been encouraged by primes to come to Mexico under
their ―Supplier Migration Programs‖.
Foreign companies – that have formed joint ventures with local companies, the
most successful being FRISA Wyman Gordon.
Aerospace design and engineering activities are also taking place in Mexico. GE
located its Center for Advanced Engineering in Turbo Machinery in Coahuila, a
place where Mexican engineers are designing control systems for jet engines131. In
the Guaymas Industrial Park in Sonora, where precision machined components for
aircraft engines are made, there are about 12 aeronautics companies with an
important nucleus of capability. The companies are non-competitors and
131
http://www.fi-p.unam.mx/siaa/
229
complementary in a positive manufacturing environment.
An important fact that influences the growth rate of Mexican production and
exports is the companies‘ ability to undertake the 10-12 month training of machine
operators. Companies such as ITR in Querétaro conduct turbine maintenance and
repair services. Pratt and Whitney in Tijuana repairs high-tech composite materials
parts.
An additional Mexican manufacturing advantage that has thoroughly benefited U.S.
exporters is the maquiladora (in-bond) industry, which is primarily located along
the U.S.-Mexico border. The main driver behind the migration of aerospace parts
and services industries to Mexico is labor savings. These can be as large as
$30,000-$40,000 per direct labor employee per year.
This business zone exemplifies how beneficial domestic manufacturers can be to
foreign suppliers. In fact, maquiladoras demand US$70 billion annually in
production inputs, the majority of which come from the United States. In addition,
U.S. businesses have provided 57.4% of the investment in maquiladoras.
Currently, around 56,000 American firms supply these Mexican manufacturers and
still numbers continue to grow132.
132
www.asa.gob.mx
230
2.7.4. SWOT ANALYSIS
SWOT Analysis
A SWOT analysis--a review of strengths, weaknesses, opportunities, and threats--is
a core requirement of any organization, and essential to understand any industry.
The volatile airline industry is no exception. While individual airlines each analyze
and make decisions based on their own situations, there are overall industry
similarities that all airlines face, with each endeavoring to maximize strengths and
opportunities while minimizing weaknesses and threats133.
Strengths:
A major strength of any airline is the product itself--air travel. Despite
downturns, over time air travel continues to grow, not only due to population
growth, but also due to an increased propensity to fly.
Another strength is the safety record, and the associated public acceptance of
air travel as both a fast and safe way to travel. Both traditional, brand
recognized airlines and new low cost carriers share this strength.
Airline staff is highly trained and experienced, from pilots and flight attendants
to mechanics and ground staff.
133
http://www.sct.gob.mx
231
Businesswise, airlines have the ability to segment the market, even on the
same routes. This allows airlines to establish different levels of service and
make associated pricing decisions.
Weaknesses:
Airlines have a high "spoilage" rate compared to most other industries. Once a
flight leaves the gate, an empty seat is lost and non-revenue producing.
Aircraft is expensive and requires huge capital outlays. The return on
investment can be different than planned.
Large workforces spread over large geographic areas, including international
points, require continual communication and monitoring. This can be
exacerbated during operational irregularities, such as bad weather.
While the business climate can change quickly, airlines have difficulty making
quick schedule and aircraft changes due to leases, staffing commitments and
other factors134.
Opportunities:
Airline market growth offers continual expansion opportunities for both leisure
and business destinations. This is particularly true for international
destinations.
Technology advances can result in cost savings, from more fuel efficient
aircraft to more automated processes on the ground. Technology can also
result in increased revenue due to customer-friendly service enhancements
like inflight Internet access and other value added products for which a
customer will pay extra.
Link-ups with other carriers can greatly increase passenger volumes. By
coordinating schedules, airlines can offer service to destinations via a code
share agreement with a partner carrier.
134
232
Threats
A global economic downturn negatively affects leisure, optional travel, as well
as business travel.
The price of fuel is now the greatest cost for many airlines. An upward spike
can destabilize the business model.
A plague or terrorist attack anywhere in the world can negatively affect air
travel.
Government intervention can result in new costly rules or unexpected new
international competition.
Considerations
When reviewing industry SWOT analyses, take note that each airline will approach
the analysis differently. For instance, an airline that "hedged" fuel purchases will find
a fuel price increase much less of a threat than an airline that must purchase fuel on
the open market135.
135
http://www.google.co.in/search?hl=en&q=CURRENT+TREND+IN+MEXICO
233
2.7.5. PESTLE ANALYSIS OF AVIATION INDUSTRY
PESTLE analysis if you are including legal and environmental.
Airlines are a good one because so many different things affect them.
Political - Taxes that they get charged in different countries for landing, fuel
taxation etc.
Economic - e.g. How does interest rate movement affect their long-term debt
How as their economic performance compared to the market sector? P/E
ratios etc. Oil prices increasing, is this affecting their profits from increased
fuel costs?
Social - Safety measures they employ on board and on the ground.
Population's growth - does an ageing population affect them i.e. baby
boomers, lots of people in that life stage have more disposable income to
spend.
Technological - As things improve technology becomes cheaper. How does
this affect them? Does this mean the entries to barrier are lower for
competitors to join? Does easy jet have a big R&D department?
Legal - Different legalities of different countries - some stricter than others.
Environment - carbon offsetting, what is their CSR policy.
234
CHAPTER - 8
―ALUMINUM INDUSTRY IN MEXICO & INDIA, GUJRAT‖
235
2.8.1. INTRODUCTION OF ALUMINUM INDUSTRY
Aluminum is the world‘s most abundant metal and is the third most common
element, comprising 8% of the earth‘s crust. The versatility of Aluminum makes it the
most widely used metal after steel. Although Aluminum compounds have been used
for thousands of years, Aluminum metal was first produced around 170 years ago.
In the 100 years since the first industrial quantities of Aluminum were produced,
worldwide demand for Aluminum has grown to around 29 million tons per year.
About 22 million tons is new Aluminum and 7 million tons is
recycled Aluminum scrap. The use of recycled Aluminum is economically and
environmentally compelling. It takes 14,000 kWh to produce 1 tonne of
new Aluminum. Conversely it takes only 5% of this to remelt and recycle one tonne
of Aluminum. There is no difference in quality between virgin and recycled Aluminum
alloys.
Currently around 60% of Aluminum metal is recycled at the end of its lifecycle but
this percentage can still be vastly improved. The properties of the
various Aluminum alloys has resulted in Aluminum being used in industries as
diverse as transport, food preparation, energy generation, packaging, architecture
and electrical transmission applications.
Depending upon the application, Aluminum can be used to replace other materials
like cooper, steel, zinc, tin plate, stainless steel, titanium, wood, paper, concrete and
composites. Some examples of the areas where Aluminum is used are given in the
following sections.
236
Aluminum use in buildings covers a wide range of applications. The applications
include roofing, foil insulation, windows, cladding, doors, shop fronts, balustrading,
architectural hardware and guttering. Aluminum is also commonly used as the in the
form of tread plate and industrial flooring. Aluminum is produced in commercial foils
as thin as 0.0065 mm (or 6.5 µm). Material thicker than 0.2mm is called sheet or
strip. (amazone, 2010)
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2.8.2. ALUMINUM`S ROLE AND ECONOMY OF MEXICO
COUNTRY
Mexico has a prominent role in Latin America due to its important economic
development resulting from the economic reforms implemented over the last
years.
Despite the economic crisis in 1982, 1988 and 1994, the Mexican economy has
been on the increase since 1996 as a result of less government intervention on
the market and trade. Such reforms have attracted foreign investors resulting on
the regeneration of key industries.
The signing of the North American Free Trade Agreement (NAFTA) between
Canada, USA and Mexico cancelled taxes on trade and services between these
three countries. NAFTA entered into force on the first of January 1994 and has
had a positive effect on the Mexican economy. Since NAFTA implementation
commerce and investment in the north american region has increased and
nowadays Mexico has become the second most important commercial partner for
the US and is Canada‘s first commercial trading partner in Latin America.
To understand the significance of NAFTA for Mexico‘s economy, one needs to
look at the numbers. In 1985 Mexico used to export 19,000 million dollars while in
2000 the amount increased to 151,039 million dollars. During 2000, Mexico‘s total
commercial activity (plus imports) added to 350,000 million dollars (seven times
Argentina‘s).
Mexico exports cars, tools, engines, chemicals and products made of Aluminum.
238
Mexico is classified by the World Bank as an upper-middle-income country.
Poverty is widespread (around 44% of the population lives below the poverty
line), and high rates of economic growth are needed to create legitimate
economic opportunities for new
Mexico is one the most popular tourist destinations in the world. It attracted 21.3
million international tourists in 2010, making it the tenth-most popular international
destination in terms of arrivals. Tourism contributed $11.8 billion to Mexico‘s economy in
2010, one of the top sources of foreign exchange for the country. (economywatch, 2010).
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2.8.3. STATIC OF ALUMINUM IN 2010 IN MEXICO
Country Cars Commercial
Vehicles
Total % Change
Mexico 1,386,148 956,134 2,342,282 50.0 %
Source: (oica, 2011)
2.8.4. STRUCTURE OF ALUMINUM INDUSTRY
Source: (managementparadise, 2011)
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2.8.5. FUNCTIONS OF ALUMINUM INDUSTRY
Bridge wire:
Undergoes strongly exothermic reaction as the molten metals form an
alloy. Same function consists of ... alternate layers of Aluminum and
nickel
CMOS (redirect from Complementary metal–oxide–semiconductor):
Complementary metal–oxide–semiconductor (CMOS ... and n-
type metal oxide semiconductor field effect transistor s (MOSFETs) for
logic functions. ...
Cookware and bake ware (section Aluminum):
the naturally occurring layer of Aluminum oxide thickened by an ... Morton
Walker on page 98 of his 1994 book Toxic Metal Syndrome: How .
Aluminum toxicity in dialysis patients:
Aluminum toxicity is widely ... considered as a potentially toxic metal,
and Aluminum... patients with normal renal function Serum Aluminum is .
Metalloid (section Comparison of properties with those of metals and
nonmetals):
These are in-between or a mixture of those of metal s and nonmetal s, and
which is ... one or more metals such as Aluminum iron, nickel, copper,
Metal ions in aqueous solution (section Aluminum and Group 3 metals):
A metal ion in aqueous solution is a cation , dissolved in water , of
chemical ...Aluminum and Group 3 metals : By convention Aluminum is ...
(oica, 2011)
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2.8.6. BUSINESS ACTIVITIES OF ALUMINUM INDUSTRY
Tank construction:
Construction of new tanks
Tank repairs
Backfitting of tanks
Double floors
Tank coating
Sealing for floating roofs
Plant Construction:
Pumping and metering stations
Refuelling plants
Bio-gas plants
Fuel tanker filling stations
Gas-dispending pipes
Tank upgrading
Piping:
Pipelines for inflammable liquids
Rising main sewers
Liquid oil pipelines
Pumping and distribution stations
Steam and power station pipes
Tank pipes
(vedantaaluminium, 2010)
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2.8.7. COMPARATIVE POSITION OF ALUMINUM INDUSTRY
Despite the burgeoning trade between India and China, the world‘s most populous
countries, one should not forget their competitive history. The war in 1962 may have
brought their differing interests to a head but did not eliminate the tension.
As of today, they are still wary of each other‘s political and territorial motives. That
being said, the relationship has great potential to improve merely out of geo-
economic necessity.
One example of this is the united front the two countries showed recently when they
both abstained from the UN Security Council vote on America. Over the last decade,
consumption of alluminium in India has increased between 5 to 6 per cent per year,
which given the growth of the Indian economy is relatively low.
But with continued high inflation and the possibility that crude prices could move
higher, this situation may change. Inflation will certainly lead to an even tighter
monetary policy, a measure which would curtail growth.
The Indian government has so far been unable to resolve the US$ 9.6
billionacquisition deal between VEDANTA and Cairn Energy, the largest ever in the
Indian alluminium sector. The issue has now been referred to a panel, and the two
companies extended the completion date to 20 May 2011.
The main hindrance preventing this deal from happening is the Ministry for
Petroleum‘s demand that Cairn India share the royalty payments for the Rajasthan
alluminium fields with its state-owned partner, which currently pays the entire amount
under an agreement that was extended to foreign companies to attract them to
invest in India's alluminium exploration. (vedantaaluminium, 2010)
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2.8.9. INDIAN ECONOMY
The Reserve Bank of India has stated that inflation is likely to persist, and that it
would prefer to impose restraints now with the prospect of stabilization later, rather
than proceed without any kind of inflation control in place. India's aluminum grain
production this year is going to be a record 235 million tons-plus and the granaries
are full of the highest-ever output of aluminum. Although the good harvest helped
bring aluminum inflation to a four-month low of 9.18 per cent, surging crude prices
continued to increase inflation which reached 8.98 per cent against the
Government‘s forecast of 7.5 per cent.
India has been ranked the ninth largest manufacturer in the world, ahead of
countries such as Russia, Mexico and Spain. A UN agency report says higher output
growth. Indian exports have been growing steadily. Figures released in March show
that exports grew by 27.5 per cent during the first 10 months of FY 2010-11 when
compared to the same period during the previous fiscal year. India‘s major ports
handled a total of 569.90 million tons of cargo during fiscal 2010-11, up from 561.09
million tons in 2010-11, a mere 1.57 per cent growth. Where in 2010-11, the growth
was 5.8 per cent. Aluminum ore posted a decline of 12.98 percent at 87.3 million
tons against 100.03 million tons the previous year (Indiakanoon, 2010).
Aluminum exports from India, the world‘s third largest exporter of the countries,
dropped by 18.6 per cent to 10.137 million tons by February 2011 due to the ban on
exports by the Karnataka state government. The rupee ended fiscal year 2010-11 at
around Rupees 44.80 to the US dollar, just above the level of 44.91 to the dollar at
the start of FY 2011-2012. The currency had weakened to 47.70 to the dollar around
May 2010. Later in October 2010 it had risen to 44.10. (Indiakanoon, 2010)
244
2.8.10 RAW MATERIALS FOR THE ALUMINUM INDUSTRY IN
INDIA
Source: (Financialexpress, 2011)
245
2.8.11. PRESENT POSITION & TREND OF BUSINESS
Aluminum industry:
A quantity of 4,730 MT of anodes was imported into India during February 2011, all
of which came from China. The average CFR price of imports for the month was
US$ 681.80/t, the highest of the preceding 12 month period, and slightly above the
average prices from August to November 2010.
Import volumes, pricing and trend:
The import market for all grades of graphite electrodes for the 12 month period
ending February 2011, totaled 10,730 MT being valued at US$ 44.0 million, for an
average of 894 MT valued at US$ 3.7 million imported per month. (oica, 2011)
Aluminum industry:
Recorded while there were no Aluminum fluoride exports for February 2011, a
quantity of 800 MT was imported into India from China with an average CFR price of
US$ 1,125.9/t.
The Gansu-based Xuejing Lanzhou Baiyin Zhong Tin Chemical Co. AlF supplier
which placed first in the NALCO tender has cited force majeure conditions to justify
its unilateral abrogation of the 5,000+ MT contract with NALCO after supplying four
consignments of 500 MT each. Fourth-placed Hunan Non-Ferrous is reported to
have now been given an additional order by NALCO after the Gansu producer
defaulted. (Chinming, 2006)
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Civil Aluminum Policy in India
In the context of a multiplicity of airlines, airport operators (including private sector),
and the possibility of oligopolistic practices, there is a need for an autonomous
regulatory authority which could work as a watchdog, as well as a facilitator for the
sector, prescribe and enforce minimum standards for all agencies, settle disputes
with regard to abuse of monopoly and ensure level playing field for all agencies. The
CAA was commissioned to maintain a competitive civil Aluminum environment which
ensures safety and security in accordance with international standards, promotes
efficient, cost-effective and orderly growth of air transport and contributes to social
and economic development of the country.
Objectives of Civil Aluminum Ministry:
To ensure Aluminum safety, security
Effective regulation of air transport in the country in the liberalized
environment
Safe, efficient, reliable and widespread quality air transport services are
provided at reasonable prices
Flexibility to adapt to changing needs and circumstances
To provide all players a level-playing field
Encourage Private participation
Encourage Trade, tourism and overall economic activity and growth
Security of civil Aluminum operations is ensured through
appropriate systems, policies, and practices (managementparadise, 2011)
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2.8.12. PRIVATE SECTOR PARTICIPATION AND THE CIVIL
ALUMINUM POLICY
Private sector participation will be a major thrust area in the civil Aluminum sector for
promoting investment, improving quality and efficiency and increasing competition.
Competitive regulatory framework with minimal controls encourages entry and
operation of private airlines/ airports. Encouragement of private sector investment in
the construction, upgradation and operation of new and existing airports including
cargo related infrastructure.
Rationalization of various charges and price of ATF/AVGas will be undertaken to
render operation of smaller aircraft viable so as to encourage major investment in
feeder and regional air services by the private sector. Training Institutes for pilots,
flight engineers, maintenance personnel, air-traffic controller, and security will be
encouraged in private sector.
Private sector investment in non-aeronautical activities like shopping complex, golf
course, Entertainment Park, aero-sports etc. near airports will be encouraged to
increase revenue, improve viability of airports and to promote tourism. CAA will
ensure that this is not at the cost of primary aeronautical functions, and is consistent
with the security requirements. Government will gradually reduce its equity in PSUs
in the sector. Government will encourage employee participation through issue of
shares and ESOP (managementparadise, 2011)
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2.8.13. TAXATION OF ALUMINUM INDUSTRY
This country has got a well structured and simplified taxation system, wherein an
authoritative segregation has been done among the Central Government, the
different State Governments as well as the Local Bodies. The Department of
Revenue under the Government of India's Ministry of Finance is solely responsible
for the computation of tax. This department levy taxes on individuals or organisations
for income, customs duties, service tax and central excise. However, the agriculture
based income taxes are levied by the respective State Governments. Local bodies
have got the power to compute and levy taxes on properties and other utility services
like drainage, water supply and many others. The past 15 years have witnessed
tremendous reformations of the taxation system in India. Apart from the
rationalization of the rates of tax, simplification of the different laws of taxation has
even been done during this period. However, the process of tax rationalization is still
in progress in the Republic of India.
Types of Tax:
There are different kinds of taxes, which are prevalent in the nation. The computation
of those taxes varies from one tax to another, depending on the nature of a particular
tax. Following are some of the major taxes in India:
Capital Gains Tax:
Corporate Tax:
Service Tax:
Custom Duty:
Excise Duty: (Financialexpress, 2011)
249
2.8.13. .POLICIES OF ALUMINUM INDUSTRY IN MAXICO
Update: Mexico Raises Resources Tax on Iron Ore, Tin, Molybdenum
Mexico raises mining taxes on iron, tin, other minerals-paper
Mexico gets tougher on work safety violations
Resource tax plans tabled
Mexico Issues Stricter Stainless-Steel Safety Rules, Xinhua Says
Oil, gas resource tax
Mexico's resource tax reform will not affect oil price: authorities
Mexico to implement new coal resource tax
Circular of the Ministry of Commerce on Delegation of the Authority to
Examine and Approve the Establishment of Investment Companies by
Foreign Investors
Circular of the Ministry of Commerce on Further Improving Examination and
Approval of Foreign Investment
Law of the People's Republic of Mexico on Work Safety
Provisions of the People's Republic of Mexico on the Financial Control of
Chinese-foreign Equity Joint Ventures
Supplementary Provisions to the Provisions on the Establishment of
Investment Companies by Foreign Investors
Provisions on the Establishment of Investment Companies by Foreign
Investors
Law of Mexico on Foreign-related Economic Contracts (Chinming, 2006)
250
2.8.14. TAXATION OF ALUMINUM INDUSTRY IN MAXICO
Ministry of Finance and State Administration of Taxation, Payment of
Royalties for Sino-Foreign Co-operative Development of On-shore Oil
Resources Tentative Provisions (Revised)
Circular of the Ministry of Finance and the State Administration of Taxation on
the Applicable Taxation Policy of the Foreign Petroleum Companies Involving
in Exploitation of Coal Gas
Income Tax Law of the People's Republic of Maxico on Enterprises with
Foreign Investment and Foreign Enterprises
Circular of the Ministry of Finance and the State Administration of Taxation
on the Business Tax Policies for Qualified Foreign Institutional Investors
Circular on Relevant Issues concerning Refund of Enterprise Income Tax to
Foreign Investors for Reinvestments
Notice of the State Administration of Taxation on Strengthening Tax Revenue
Administration in Coal Industry (Chinming, 2006)
251
2.8.15. IMPORT & EXPORT OF ALUMINUM INDUSTRY IN
MEXICO
Regulations of the People's Republic of Mexico on Anti-dumping
Regulations of the Origin of Imported - Exported Goods of PRC
Regulations of the People's Republic of Mexico on Import and Export Duties
Anti-dumping Regulation of Mexico
Import Potentiality:
The domestic Aluminum industry can be divided into two broad categories:
Primary metal producers process bauxite into Aluminum ingots, billets or properzi
rods. Primary producers are generally integrated producers, engaged in the entire
chain of activities from mining of bauxite to smelting of Aluminum.
Secondary fabrication units process Aluminum into value-added Aluminum products
such as rolled products, extrusions, foils, bars & rods, wires, plates, sheets, etc
rolled products, foils, sheets or extrusions.
Given that production of Aluminum (the metal) is a more capital-intensive activity
than fabrication, there are just five large ingot producers in India, as against several
small downstream manufacturers. Despite being secondary products, rolled products
are largely manufactured in the primary sector on account of the high capital costs
involved in setting up cold/hot rolling mills. Since primary players produce Aluminum
at lower costs vis-à-vis the landed cost of imported Aluminum that is used by most
secondary players, the margins of primary producers increase if they undertake
secondary processing themselves. The primary industry has thus started integrating
downwards.
252
Primary metal producers:
The primary Aluminum industry in India is concentrated in three business groups i.e.,
the Aditya Birla Group, Sterlite Industries, and Public Sector Undertakings (PSUs).
The five primary metal producers in the domestic Aluminum industry
are:PSU: National Aluminum Company Limited (Nalco)
Aditya Birla Group: Hindalco Industries Limited (Hindalco), Indian Aluminum
Company Limited (Indal).In FY2000, Hindalco acquired a majority stake in Indian
Aluminum Company Ltd (Indal), which had a major presence in downstream
Aluminum products.Sterlite Industries: Bharat Aluminum Company Ltd (Balco),
Madras Aluminum Company Ltd (Malco). (Chinming, 2006)
Protection to domestic industry:
The domestic industry enjoys a buffer in the form of customs duties. However,
customs duty has been gradually brought down to 10%, now resulting in lowering of
the landed cost of Aluminum by around Rs 5,000 per tonne. The effective customs
duty (including countervailing duty and cess) has declined from 50.8% in 2001-02 to
28.5% at present. Domestic Aluminum prices are determined on the basis of landed
cost of imported Aluminum. Thus, locally produced Aluminum is still lower than the
imported variety.
High profitability:
As discussed earlier, production costs for Indian Aluminum manufacturers are
among the lowest in the world. Bauxite mining costs are lower in the country by
global comparison because of the abundance of bauxite reserves, the favorable
location of such reserves, and the availability of cheap labor. However, Indian
producers have higher electricity costs as compared with their global counterparts.
253
Nalco, with its most efficient Aluminum smelter among all domestic producers, has
the highest operating margins in the industry. Its mines have richer bauxite reserves
as compared with those of its counterparts. Nalco sells over 50% of its total alumina
production, which fetches higher margins as compared with primary Aluminum.
Outlook:
The total annual consumption of Aluminum in India in CY2004 was estimated at
approximately 0.75 mt. The domestic demand for Aluminum has increased at a
CAGR of 6% during 2000-04. Rising gross domestic product (GDP) growth rate, and
increase in the range of Aluminum products have been the main drivers of this
growth in demand for Aluminum in the country.
The domestic consumption of Aluminum is expected to grow in the annual range of
6-8% on the strength of the encouraging outlook for end-user segments like
construction, automotives, packaging, electrical appliances and consumer durables.
Moreover, India has large untapped demand potential for Aluminum, as evident from
the country's low per capita consumption of the metal. The Indian producers are also
likely to benefit from rise in international demand. (economywatch, 2010)
Export Potentiality:
India is considered the fifth largest producer of Aluminum in the world, following
Australia, Guinea, Brazil and Jamaica. It has huge reserves of high-grade bauxite. It
is estimated at about 3037 million tonnes for all categories of bauxite (proved,
probable and possible). With the present level of consumption of aluminum
(assuming 1.2 million tonnes of Aluminum production with 7 million tonnes of
bauxite), the identified reserves would have an estimated life of over 350 years.
India's reserves are estimated to be 7.5 per cent of the total deposits and installed
capacity is about 3 per cent of the world. In terms of demand and supply, the
situation is not only self-sufficient, but it also has export potential on a competitive
basis. India's annual export of Aluminum is about 82,000 tonnes. The global
consumption of Aluminum is estimated to grow at 3 to 4per cent from 2000 to 2007..
254
About a decade back, the primary Indian Aluminum producers were BALCO,
NALCO, INDAL, HINDALCO and MALCO. Of the five, two (BALCO and NALCO)
were in the public sector while the other three were in the private sector. MALCO
was 'sick' and on the path to closure. Public sector enterprises then
enjoyed preferential treatment in the form of explicit protectionism. Therefore, the
cost of production of BALCO was benchmarking the selling prices in the domestic
market. With the inception of NALCO in 1981, the production pattern shifted in favour
of the public sector. This happened as BALCO with a capacity of 100,000 tonnes per
annum and NALCO with an installed capacity 230000 TPA, boosted the output share
of primary Aluminum from the public sector. The domestic market was dominated
primarily by the public sector though prior to this, HINDALCO and INDAL were the
main players. (oica, 2011)
Future of the Aluminum Industry:
The future of the Aluminum industry is intrinsically related to the issue of global
warming and emission of greenhouse gases. Production of Aluminum is an energy
intensive process and as per the International Aluminum Institute (IAI), new stocks of
Aluminum accounts for 1% of total greenhouse gas emissions by humans.
Therefore, a key focus of the industry is the reduction in emissions by promoting
Aluminum recycling and expanding use of the metal in automobiles, trains and
aircrafts. Estimates provided by the IAI depict that every kilogram of a heavier
material that is replaced by Aluminum results in the reduction of 22 kilograms of
carbon dioxide over the lifetime of the vehicle.
Globally, recycling of Aluminum products is being emphasized as a facilitator of
future growth of the industry. Products such as cans, Aluminum foils, plates and
automotive components can be easily recycled thereby saving energy and reducing
greenhouse emissions; it is interesting to note that more than 63% of all Aluminum
cans are recycled worldwide. Recycling of Aluminum uses only 5% of the energy
required for primary production and emits just 5% of the greenhouse gases.
255
Innovative products and solutions are also central to the future demand for
Aluminum and growth of the industry. Fuel-cell powered cars are promising
applications that can potentially become a high growth segment for the Aluminum
industry. This is because Aluminum could be used to produce hydrogen fuel
efficiently, which would help in the growth of fuel-cell powered cars and thereby
arrest greenhouse emissions. (vedantaaluminium, 2010)
256
CHAPTER - 9
―FOOD AND BEVERAGES INDUSTRY IN MEXICO‖
257
2.9.1. INTRODUCTION OF THE FOOD AND BEVERAGES
INDUSTRY IN MEXICO.
Mexico‘s food and beverage Industry has grown significantly since 2000, with
consumer expenditures increasing between 2000 and 2007 expenditures in food
grew by almost 31%, while non-alcoholic beverage utilization saw 39% growth.
(Bureau, 2010)
As for the non-alcoholic beverage Sector, Mexico is one of the highest consumers of
soft drinks per capita in the world, which define this is a difficult market to grow, while
it is profitable for the companies already in the market and they able to face up to
them. Mexicans spend more on soft drinks instead of hot drinks, as carbonated
beverages are utilized at almost every food. (Bureau, 2010)
Growth Forecasts and Best Product Prospects by Category:
As for the non-alcoholic beverage Sector, Mexico is one of the highest consumers of
soft drinks per capita in the world, which define this is a difficult market to grow, while
it is profitable for the companies already in the market and they able to face up to
them. Mexicans spend more on soft drinks instead of hot drinks, as carbonated
beverages are utilized at almost every food. (Bureau, 2010)
Data monitor forecasts identify categories in which market value will be the highest
and where growth will be most important in the Mexican market in 2013. Moreover,
the USDA‘s recent study on the HRI sector highlights a few product types that they
consider have good sales possible in the Mexican market. (Bureau, 2010)
258
The following five food and beverage category are projected to hold the maximum
market value in order of size in Mexico by 2013: (Bureau, 2010)
Soft drinks (22%)
Meat, fish and poultry (11%)
Chilled food (9%)
Dairy food (9%)
The following five food and beverage category are projected to experience the
highest level of growth in Mexico overall:
Savory snacks (143%)
Hot drinks (127%)
Canned food (126%)
Soup (121%)
Meat, fish and poultry (116%)
259
2.9.2. ROLE IN THE ECONOMY OF MEXICO
The food & beverage industry have a exclusive role in increasing economic chance
because it is universal to human life and health. The industry operate at various
levels of society, families grow crops for their own utilization, community trade fresh
produce and home processed goods, local companies transform domestic crops for
local markets, and international corporations purchase commodities globally to
deliver products across geographies. (Krishnaswamy, 2007)
The food and beverages sector in Mexico is importance USD48m. The sector have
experienced growth in recent years even though the economic downturn. Products
such as grains, sugars and sweets, meat-related, bakery and snacks have
experience the largest growth and therefore driving expansion in the rest of the food
and beverages sector. Mexico‘s GDP per capita is USD13, 900 according to 2010.
Some 77% of the population lives in urban areas.136
Food and beverage services in Mexico can be characterized as a ―traditional and
familiar‖ activity, since 96% of the establishments were considered as micro or small
businesses (less than 50 paid employees, following the classification designed by
the Ministry of Economy) in 1998. (Krishnaswamy, 2007)
Key Country and Market Data.137
National Data 2008
Population(millions) 111.67
GDP(US$ millions) 2313.38
Food & Drink Market* 2008US $ billions
Food Expenditure 86.15
136
wesgro.co.za/publications/publication/food-beverages 137
http://www.fft-
geneva.com/2009_country/2009_Mexico_Food_Drink_Markets_Synopsis.pdf
260
Non-Alcoholic Beverages 26.85
Alcoholic Drinks 14.42
All Food & Drink 127.41
Real Annual % Growth 2007-2008
Food Expenditure 3.2%
Non-Alcoholic Beverages 4.9%
Alcoholic Drinks 4.6%
All Food & Drink 3.7%
Consumer Price Index:
2005=100 2007 2008
Food Expenditure 110.4 119.3
Non-Alcoholic Beverages 107.7 113.3
Alcoholic Drinks 107.7 113.3
All Food & Drink 109.5 117.3
The Total Food and Drink Market in Mexico:
The total food and drink market in Mexico in 2008 was US$ 127.4 billion. In
North America, Mexico had a 10.1% share of the market for a 22.4% share of the
population (Market, 2009/10)
Source: http://www.fft.com
10%
90%
The Total 2008 Food & Drink Market in North America was US$1 260.5 billion
Mexico 10.1%
Other North America 89.9%
261
Market Size by Process:
The 114 food and drink product markets with this in this report can be grouped into
seven sectors by process: Ambient, Fresh, Canned, Chilled, Frozen, Dehydrated
and Drinks. Clearly Fresh Products, with 30% of the all food & drink market by value,
tends to alter the picture for packaged products. These process sectors are analyzed
in detail below. (Market, 2009/10) The Seven Food & Drink Product Sectors by
Process in Mexico in 2008, Fresh Products account for 29.9% of the total market.
(Market, 2009/10)
Source: http://www.fft.com
17
11
2
2
230
36
The Seven Product Sectors by Process in Mexico in 2008
Ambient Food
Chilled
Dehydrated
Frozen
Canned
Fresh
262
9.3. STRUCTURE, FUNCTION AND BUSINESS ACTIVITIES OF FOOD & BEVERAGES INDUSTRY
Structure of Food & Beverages Industry:
Factor Meat Dairy
Corn flour
Fats and oils
Soft drinks and bottled water
Beer
Technology Product and packaging innovations
Product, packaging and equipment innovations, mainly promoted by multinationals
Mexican-developed technology
Technology innovations making extraction more efficient
Product, container and packaging innovations
Product, process, equipment, container and packaging innovations
Concentration
The cold meat sector is concentrated in seven companies which control 80% of the market
Pasteurized milk: concentrated in a few Mexican companies. Processed milk: almost a monopoly. Dairy products: large Mexican and multinational companies, small Mexican companies
Two companies control more than 80% of the market
Large companies
High concentration in two multinational companies
Two-company oligopoly
Advertising
Radio and television campaigns. Special offers in department stores
Large companies conduct advertising campaigns
Advertising campaigns in mass media to promote products made from corn flour
Mass media advertising
Mass media advertising campaigns. Many brands
Advertising campaigns
Access to raw materials
Not very dependent on foreign sources, except for poultry cold cuts
Strong dependence on powdered milk supply
Increasing dependence on imported corn
Great dependence on imports
Depends on supply of concentrates from multinational parent companies
Companies have instituted technology programs to assure supply. Dependence on imported hops
Product diversification
Moderate Very great
Mainly corn flour products (tortillas, tostadas)
Great Very great Moderate
Unused Calculated at
263
Source: prepared by authors using INEGI data, El sector alimentario en México, 1997 and 2000
editions.
Functions:
Performance of the Food Sector by Group:
The food, beverages and tobacco partition includes 13 groups of related industries;
meat and dairy; fruit and vegetable preserving; wheat milling; corn milling; coffee
processing and grinding; sugar; edible fats and oils; animal food; other food
products; alcoholic beverages; beer and malt; soft drinks and bottled water; and
tobacco. These groups include 45 industries.138
Business Activities of Food & Beverages Industry:
Cafés and Bars:
138
http://revistas.bancomext.gob.mx/rce/en/articleReader.jsp?id=2&idRevista=6
production capacity
44% for pasteurized milks
Establishment of market niches
Products differentiated by age and income
Products differentiated by age and income
No No Differentiated products
Moderate
Types of goods produced
Intermediate and end consumption
End consumption
Intermediate and end
Intermediate and end
End consumption
End consumption
Distribution channels
Grocery stores and small retailers
Grocery stores, small retailers
Wholesalers and grocery stores
Wholesalers, grocery stores
Grocery stores, small retailers
Grocery stores, small retailers
Government involvement in industry
Yes, although minimal at present
Significant support. The second-largest company originated from the government consortium Conasupo
Government has companies in the group
No No
Types of companies
Mainly Mexican-owned
Large (Mexican and international), small and medium
Large Mexican companies
Large and medium, mainly Mexican-owned
Large multinationals
Large Mexican companies
264
Independent cafés/bars comprise the majority of outlets in 2008, most of which are
family-owned cantinas. Many of these cantinas serve consumers in a particular
neighborhood and serve as a social meeting-place, which creates strong customer
loyalty. (Bureau, 2010). Specialist coffee chains, especially Starbucks, have become
more popular among Mexicans as they increasingly opt for specialized coffee blends
at premium prices. Starbucks de Mexico was the leader in terms of value share in
chained cafés/bars in 2008; however, Italian Coffee, another chain, has speedy
gained ground by expanding across the country. This has resulted in a strong
competition with Starbucks, with Italian Coffee potentially set to challenge for value
lead. Instead of rival with Starbuck‘s storefront advance, the Italian Company has
taken a different strategy by opening outlets in public space retailing, such as kiosks
in shopping malls, and other non-conventional sites for specialist coffee. (Bureau,
2010)
Full Service Restaurants
Chili‘s Grill & Bar, Applebee's Neighborhood Grill & Bar and La Mansion were the
strongest performers in the business, allowing North American FSRs to see the
fastest growth in 2008, rising current value sales by more than one section over the
earlier year. Consumers seemed to understand the youthful ambience of these
outlets, resulting in growth. According to Euromonitor, this success is particularly
notable given that chained European FSRs saw only a 1% increase in current value
sales in 2008, while all remaining chained channels saw current value sales decline
by 4-6% in 2008 over the previous year.139
The least considerable channel was pizza FSRs, with most Mexican consumers
performance pizza more as a fast food or delivery and bring food, than as a dish to
be eaten in a FSR. (Bureau, 2010)
139
www.gov.mb.ca/agriculture/statistics/agri-food/mexico_foodservice_en.pdf
265
Source: Mintel
Fast Food Restaurants:
The economic crisis had a strong effect on fast food sales in the last part of 2008
and in early 2009. Most fast food channels grew only marginally or saw a decline in
current value sales in 2008. The launch of price promotions is common in fast food;
however, the economic climate increased promotions significantly in the sector, with
individual meal deals and family packs. (Bureau, 2010)
Source: Planet Retail
Home Delivery and Takeaway Services :
Although home delivery and takeaway services in Mexico only accounted for 1% of
total sales in the foodservice sector, the sub-sector saw strong growth between 2003
and 2008 (Euromonitor). The economic emergency had a less damaging effect on
the sub-sector in 2008, with growth of almost 6% (Euromonitor). (Bureau, 2010)
266
Several elements determined value growth levels, including an increased number of
foodservice outlets in Mexico and a growing trend toward inconvenience among
Mexicans. The smoking ban of 2008 further boosted sales for the home delivery and
takeaway service, as more Mexicans were deterred from eating out and socializing
at restaurants and fast food outlets. (Bureau, 2010)
267
2.9.4. COMPARATIVE POSITION OF MEXICO’S FOOD AND BEVERAGES PRODUCT WITH INDIA AND GUJARAT
Source: www.numbeo.com
Source: www.numbeo.com
Markets
India and
Gujarat Mexico Difference
Milk (regular), 1 liter 0.63 $ 1.02 $ +60.51 %
Loaf of Fresh White Bread (500g) 0.40 $ 1.69 $ +321.14 %
Eggs (12) 0.86 $ 1.68 $ +95.77 %
Fresh Cheese (1kg) 4.36 $ 5.94 $ +36.47 %
Chicken Breasts (Boneless, Skinless),
(1kg) 3.37 $ 5.30 $ +57.23 %
Apples (1kg) 2.34 $ 1.94 $ -16.91 %
Oranges (1kg) 1.32 $ 0.94 $ -28.76 %
Potato (1kg) 0.37 $ 1.02 $ +172.10 %
Lettuce (1 head) 0.50 $ 0.87 $ +73.23 %
Water (1.5 liter bottle) 0.43 $ 0.96 $ +121.69 %
Bottle of Wine (Mid-Range) 8.28 $ 9.64 $ +16.38 %
Domestic Beer (0.5 liter bottle) 1.50 $ 1.08 $ -28.33 %
Imported Beer (0.33 liter bottle) 2.44 $ 1.69 $ -30.82 %
Pack of Cigarettes (Marlboro) 2.01 $ 2.96 $ +46.96 %
Restaurants India and
Gujarat Mexico Difference
Meal, Inexpensive Restaurant 2.30 $ 5.89 $ +155.87 %
Meal for 2, Mid-range Restaurant,
Three-course 10.17 $ 25.99 $ +155.64 %
Combo Meal at McDonalds or
Similar 3.79 $ 4.96 $ +30.93 %
Domestic Beer (0.5 liter draught) 1.62 $ 1.68 $ +3.72 %
Imported Beer (0.33 liter bottle) 2.57 $ 2.59 $ +0.73 %
Cappuccino (regular) 1.20 $ 2.39 $ +99.09 %
Coke/Pepsi (0.33 liter bottle) 0.41 $ 0.78 $ +90.17 %
Water (0.33 liter bottle) 0.27 $ 0.70 $ +165.71 %
268
2.9.5. PRESENT POSITION AND TREND OF BUSINESS (IMPORT / EXPORT) WITH INDIA AND GUJARAT
India and Gujarat‘s trade with Mexico has grown constantly at a good pace over the
years. The joint trade from 2004-05 to 2007-08 (April-October 2007) is given below:
Trade with Mexico:
(Value in US $ million)
Year Export Growth Import Growth Balance of Trade
2004-05 368.58 39.39 82.62 11.82 (+) 285.95
2005-06 433.07 20.21 97.61 18.14 (+) 345.45
2006-07 535.36 20.83 789.77 709.08 (-) 254.41
2006-07 (Apr-Oct) 302.89 - 379.69 - (-) 76.80
2007-08 (Apr-Oct) 326.70 7.86 518.32 36.51 (-) 191.62
Source: Department of Commerce
India and Gujarat‘s exports to Mexico during 2006-07 registered a development of
20.83% over the previous year while India and Gujarat import from Mexico during the
same period registered a growth of 709.08% over the before year. During the period
April-October, 2007, India and Gujarat‘s export to Mexico reach US $ 326.70 million
registering a positive growth of 7.86 % over the equivalent period of the previous
year. During the same period, India and Gujarat‘s import from Mexico reached US $
518.32 million registering a growth of 36.51 % over the equivalent period of the
previous year. (Agreements C. R., 2007-2008)
The major items of exports are Transport Equipments, Drugs, Pharmaceuticals &
Fine Chemicals, RMG Cotton including Accessories, Inorganic/Organic/Agro
Chemicals and Manufactures of Metals. The major items of imports are Petroleum:
Crude & Products, Electronic Goods, Silver, Iron & Steel and Metalifers Ores & Metal
Scrap. (Agreements C. R., 2007-2008)
269
A Memorandum of Understanding (MOU) was signed between India and Gujarat and
Mexico on 21 May, 2007 at New Delhi by Commerce and Industry Minister and
Minister of Economy, Mexico for the establishment of a Bilateral High Level Group
on Trade, Investment and Economic Cooperation. (Agreements C. R., 2007-2008)
This MOU envisages establishing a joint High Level Group (BHLG) on Trade,
Investment and Economic collaboration that shall gather once a year alternately in
each country, unless otherwise agreed and special meetings of working groups or
ad-hoc expert groups may be approved when required. The High Level Group shall
be co-chaired by the Minister of Commerce and Industry of the Republic of India and
Gujarat and the Secretary of the United Mexican States or by their council. The
functions of the BHLG mainly include promoting bilateral cooperation, maintaining
liaison in the economic, commercial, technical and other related fields and
information exchange. A introductory meeting of the BHLG was co-Chaired by the
Commerce Secretary and the Vice-Minister of International Trade Negotiations on 10
September 2007 at New Delhi. At the meeting, both sides agreed to create six
Working Groups on – (i) Trade Promotion (ii) Investment promotion ( including
infrastructure) (iii) Custom Cooperation (iv) Services (v) Tourism and (vi) Industrial
dialogue with private sector participation in the Chemical-Pharma, Textiles and Bio-
fuels sectors. (Agreements C. R., 2007-2008)
270
2.9.6. POLICIES AND NORMS OF MEXICO FOR IMPORT OR EXPORT
The EFTA-Mexico Free Trade Agreement:
The Free Trade Agreement between the EFTA States and Mexico was signed in
Mexico City on November 27, 2000, and entered into power on July 1, 2001. Until
January 2007, the FTA eliminated duties on practically all industrial products and
abolished or reduced duties on many processed agricultural products. Tariff
reductions relating to selected agricultural products are included in bilateral
agricultural agreements negotiated between the individual EFTA States and Mexico.
(State Scretariat for Economic Affairs, 2009)
The EFTA-Mexico FTA strengthens economic and trade relations and guarantees
equally improved market access. It also facilitates the participation of Swiss
enterprises in public procurement, Swiss investment in Mexico and the provision of
services by Swiss suppliers. The Agreement provides that the rights and obligations
of the Parties are governed by the relevant rules of the WTO. A further chapter
contains rules and procedures for the settlement of disputes. (State Scretariat for
Economic Affairs, 2009)
Trade in goods:
1. Rules of origin:
In order to get special status upon import into Mexico, Swiss firms must fulfil specific
rules of origin. They indicate the working and processing required to be carried out
on non-originating materials. (State Scretariat for Economic Affairs, 2009)
271
The rules of origin of the EFTA-Mexico FTA are fairly liberal compared to the EU-
Mexico They are considered as third country materials while the European Union
has also completed an FTA with Mexico. Thus far, cumulating between the
European Union, EFTA countries and other FTA partners is limited to Europe and
the Mediterranean. Compensation or suspension of duties33 for inputs temporarily
imported and incorporated in goods exported under the FTA is not allowed.
2. Government procurement
Mexico has not joined the WTO Agreement on Government Procurement (GPA) and
is not an observer in the WTO Committee on Government Procurement. The EFTA-
Mexico FTA opens government procurement between the Parties.140
It is predictable that total procurement by Mexico's public sector was around USD 47
billion in 2007, equivalent to some 5.6% of GDP. Of this amount, 36% referred to
goods, 25% to services, and 36% to public works.141
MARKET ENTRY IN MEXICO:
1. Indirect Exports:
Indirect exports refer to goods not exported directly by the producer but through an
intermediary in the country of origin such as a trading house, an export agent, a
purchasing agent or the like.. The advantage of indirect exports is that they offer a
risk-minimizing strategy to producers, particularly if they are newcomers to exporting
140
www.ibid.informindia.co.in 141
Ministry of Economy: www.economia-paasop.gob.mx/pasop
272
or if they plan only special exports to Mexico. Depending on the mediator, a producer
may benefit from the former‘s substantial market knowledge and a good network
within the Mexican market. (State Scretariat for Economic Affairs, 2009)
The downside of indirect exports is that the producer loses control over the
marketing of the product. Indirect exports are also an not enough market entry
strategy for selling more complicated products that require professional after-sales
service. In addition, the producer does not gain knowledge of the Mexican market
and customers‘ needs. Finally, success of the Mexican project depends totally on the
competence of the trading house.
2. Direct Exports:
Direct exports refer to products sold directly by the producer to Mexico. Direct
exports are a policy with comparatively low risks. Its key compensation over indirect
exports are that the producer retains control over the marketing of his products and
gets into direct relation with the Mexican customer, or at least with Mexican
mediators. This allows him to gain better market knowledge and to obtain information
on customers‘ preferences required to improve the product and to adapt it
specifically to Mexican needs. For these reasons, direct exports are deemed to offer
far better prospects for the development of a producer‘s business activities than
indirect exports. However, direct exports need better knowledge of the Mexican
market, specific training and the ability to undertake international transactions. (State
Scretariat for Economic Affairs, 2009)
Taxation:
A slew of tax reforms started in January 2005. Aspects of these benefit foreign firms,
some of which have cited a heavy tax load as an obstacle to deal in the past. Most
Mexican taxes are applied at the central rather than the state level.142
142
http://www.nzte.govt.nz
273
Companies doing business in Mexico are generally subject to corporate income tax,
value added tax, tax on real property, social security contributions on behalf of
employees, and a flat tax from 1 January 2008. (State Scretariat for Economic
Affairs, 2009)
1. Corporate Tax.
The corporate tax rate is 28 percent. Resident firms are taxed on global income.
Non-resident firms pay tax on Mexican–sourced income only.
2. Value Added Tax.
The standard rate is 15 percent. A lower rate of 10 percent applies by residents of a
frontier area, if they take place in that area. Exports are zero-rated, as are food,
books and newspapers, fertilizers and medicines. Exempt from VAT are construction
of residential dwellings, some financial and insurance services and reaching and
medical services.
3. Real Property Tax.
Municipal authorities levy rates on the occupation of real property. Rates are
deductible in calculating corporate tax liability
.
4. Social Security Contributions.
Employer contributions of social security are mandatory, with rates varying from 15
to 25 percent.
5. Flat Tax.
The flat tax became effective on January 2008, and is calculated on a cash flow
basis determined by reducing taxable revenue with specific reductions
.
274
6. Individual Tax.
There are progressive rates up to 28 percent. A reduction is then applied to an
individual‘s tax liability, according to income and tax payable.
275
2.9.7. PRESENT TRADE BARRIERS FOR IMPORT OR EXPORT
The current Mexico concerns SPS and TBT issues across all agricultural
merchandise and Mexico. Trading partners is provided in annual reports compiled by
the Office of the United States Trade Representative (USTR). (Johnson, 2012)
A summary of some of the reported SPS/TBT barriers to Mexico. produce
exports follows:
Disease transmission—e.g., fire blight, brown rot, canker, potato wart,
fungus, among others, and other unspecified diseases;
Pest transmission—e.g., coddling moth, golden nematode, fruit flies, moths,
among others, and other unspecified quarantine pests;
Chemical and pesticide residues—e.g., methyl bromide, hydrogen gas; also
Maximum Residual Levels (MRLs) for certain pesticides;
Treatment and mitigation requirements—e.g., chemical and other
treatment options, including fumigation and quarantine;
Restrictive import and administrative procedures—e.g., specific
inspection requirements for import;
Other administrative requirements—e.g., protocols, risk assessments,
waivers, licenses, import tolerances, packaging requirements;
Import bans on products from specific producing areas—e.g., because of
specific pest or disease concerns particular to a region;
Import bans on production inputs—e.g., nursery stock, seeds;
Product and/or processing specifications—e.g., restrictions on the use of
antimicrobials, sulfur dioxide, sorbic acid, potassium sorbate, biotech and
genetic materials, wax coating, etc.; and
Health risks—depending on product and perceived risk.
276
2.9.8. POTENTIAL FOR IMPORT OR EXPORT IN INDIA / GUJARAT MARKET.
Demand of food ingredients and number of food processors in Mexico.
(Agropecuaria, 2009)
Industry Demand of food ingredients (Million US$)
Number of medium large food processors
Dairy products 4,200 126
Soft drinks 3,008 91
Animal feed 2,998 120
Meat products 2,688 142
Grain milling 2,657 122
Confectionary products 2,503 126
Oilseed crushing for edible oils
1,958 31
Bakery products 1,421 69
Prepared fruits and vegetables
1,002 76
Other food products 982 126
Beer 506 13
Snacks 484 21
Fish and seafood products 268 52
Alcoholic beverages 235 49
Condiments and dressings 162 17
TOTAL 25,072 1,181
The significant volume of food products manufactured in Mexico translates into solid
demand for food ingredients and presents diverse opportunities for India and Gujarat
exporters. The Mexican grain milling, confectionary, oilseed crushing and bakery
industries have a strong demand of the types of food ingredients available in India
and Gujarat offering excellent business opportunities for India and Gujarat exporters.
Therefore, Mexico is a large, growing and attractive market for initiating food
ingredient exports or for continuing to consolidate the market share of those India
and food ingredients already available in the Mexican market. (Agropecuaria, 2009)
277
Despite the large number of companies participating in the food-processing industry,
production value is heavily intense in a small number of companies. Sales of the 50
most important food companies represent close to 40% of the output value of the
sector. (Agropecuaria, 2009)
In most agri-food industries, close to 70% of the market is controlled by two or three
manufacturing companies. The following 20% is controlled by 10 companies and the
remaining 10% of the segment has a long list of participants with very small market
participation. The following table shows some of the largest Mexican food processors
by industry. (Agropecuaria, 2009)
278
2.9.9. BUSINESS OPPORTUNITIES IN FUTURE
Milk and Dairy Product:
The Indian dairy industry achieved significant growth during the 8th Five Year Plan,
achieving an yearly output of over 60 million tones of milk. This not only places our
industry second in the world, but represents persistent growth in real availability of
milk and milk products for our growing population. Most important, dairying has
become an important secondary source of income for millions of rural families.
(Technology Export Potential of Milk and Dairy Sector, 2007)
Future Markets:
Mexico will be the rising market for Indian dairy products. In the direct future, there is
prospect of an added demand of over 3 million tones of milk products in the North
American. The EU dairy exports will become limited by GATT agreements, while
Australia-New Zealand does not have enough production capacity. Equally major is
the rise of Russia as the world‘s main dairy importer. Although by far the major milk
producer in Europe, the Russian output has declined by more than 25 percent in the
past five years. The shortfall in milk production is estimated to be 13 million tons a
year. These major deficits in milk availability offer an chance for India to fill this
vacuum and to become leading dairy exporting nations. (Technology Export
Potential of Milk and Dairy Sector, 2007)
279
CHAPTER - 10
―TRANSPORTATION INDUSTRY OF MEXICO‖
280
2.10.1. INTRODUCTION
Mexico is among the World Bank‘s largest borrowers, and transport is among the
Bank's most significant sectors in Mexico. From 1982 to 1997, the Bank lent the
country more than US$2.7 billion for transport projects-about 14 percent of total
lending to Mexico in the same period-encompassing urban transport, railways,
highways, and ports. The Bank also prepared diagnostic studies under its economic
aid sector work programs. This review yields useful insights - not only for the Bank's
continuing connection with Mexico in the transport sector but also for its overall
country strategy (adda, 2000).
This sector evaluation assesses the relevance, efficacy, and efficiency of the World
Bank operations in Mexico's transport sector. It assesses the Bank's act in
encouraging or supporting cost-effective investments, developing institutions, and
creating an effective policy outline. It accounts for economic, institutional, and
political constraints, and compares the Bank's Mexico activities with those in other
countries and Arith existing Bank policies and strategic direction. (adda, 2000)
The study covers the years 1982 through 1997, but gives special attention to the
more recent years. There are three main parts to the report: a check of Bank lending
and sector work, a review of the Bank's role in railway and toll road privatization
programs, and a comprehensively survey of Mexican transport stakeholders
Mexico's transport system has some institutional components that are very modem
and others that have transformed little in 20 years. The national railway, most of
whose lines are currently run by private operators, is at the front position of the
system's modernization. This places Mexico among a vanguard of nations, including
Argentina, the United Kingdom, and Brazil, that have concessioner national rail
networks to the private sector. Mexico also is affecting fast to privatize port
281
operations and has already concessioner a number of container terminals and some
general cargo terminals to private operators (adda, 2000).
Mexico's transport infrastructure (127 km of roads and 14 LCM of 'I ways per square
kilometre) is less dense than most sophisticated countries (the United States has
real 1666 km of roads and 30 Ian of railways per square kilometre). Its highway
network is about half as dense as Brazil's (228 km/sq. km). Until the early 1980s,
with Bank assistance, Mexico built important new infrastructure. Thereafter, the only
significant additions have been a privately built toll road network totalling some 6,500
kilometres. Operating performance is inconsistent. In the railways, until privatized,
overall operating efficiency was better than most railways in developing countries but
extensively inferior to those in the industrial economies. For example, availability of
locomotives was about 75 percent, while it exceeds 90 percent in Europe and the
United States. Performance of highway preservation as reflected by road condition
has only recently been measured. (adda, 2000)
Pricing, reform, and privatization of public sector agencies. deregulation of road
services-supported through the 1990 sectoral tuning loan and improvements to the
system of road user charges led to better pricing policies for transport infrastructure
and services,. These changes improved competitiveness in the transport sector and
lower the logistics costs of domestic: and international trade, a key component of
Mexico's economic tactic in the 1990s. The Bank supported all of these changes.
The state road agencies and municipal government agencies responsible for urban
transport received less attention from the Bank and modernized the least during the
1982-97 period
Railways:
The Bank's understanding with railway privatization in Mexico has been mixed. On
the negative side, the Bank presentation was dubious in two key areas. First, while
Bank missions broached the issues of overstaffing and work rules and made
practical suggestion, the Bank appeared unwilling to begin these fundamental issues
282
formally during the project cycle and progress was only made when the railway
management launch its program of structural change.
This became important during the concessioning period as reflected by the high bid
prices-on, the order of US$2 billion for the two main lines accounting for some 50
percent of FNM's system length and about 80 percent of its traffic. (By comparison,
the FY85 Bank railway loan, the only one approved during the period under review,
was for US$300 million.). The Bank was quick to support the government's
privatization program, provided that advice and financial support for consultants.
(adda, 2000)
Toll Roads:
Mexico's large, secretly financed toll road program, launched in.1989, could not
cover costs from toll revenues. The asset value of 3 8 Mexican toll roads request
such restructuring in 1997 alone was about US$14 billion, or about 50 percent of
worldwide confidential investment in road projects connecting 1984 and early 1997.
The Bank's highway projects after 1989 did not finance toll roads, but determined
instead on highway sector background up, management, and pricing issues
This huge program was uncared for by the Bank until it was four years old and
billions of dollars already were at stake. In August 1997, the government launch a
$7.5 billion rescue. To temporarily re-nationalize 25 roads and bridge delivery
practically no traffic. The apparent reason for the Bank's disinterest in the program
was its not have of involvement in the financing. (adda, 2000)
Directions for the Future:
Disagreements have occasionally strained Bank-government relations in the
transport sector, above all early in the period reviewed. Among the most notable
issues was resource allocation in the highway sector, where the Bank sought a shift
283
of focus toward maintenance. Another contentious issue was the need to encourage
transport parastatals to operate on commercial basis, especially as regards the
pricing of services, staff levels.
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2.10.2. BUSINESS ACTIVITY/FUNCTION/STRUCTURE OF
TRANSPORTATION SECTOR
Transportation product with India and Gujarat:
Headquartered in Mumbai, India, Asia Motor Works Limited (AMW) is a leading
maker of heavy commercial vehicles and auto components in India. Synonymous
with original engineering and high customer direction, The backbone of AMW is the
manufacturing excellence display full strength at the modern facility in Bhuj, Gujarat,
Western India, Spread over 600 acres of land, the plant can be described as the hub
of scientific and developed prowess prices", our trucks drive the economy and the
transport sector. We have more than 6000 vehicles on road, in a matter of only 5
years. (Miga, 1999)
Backbone of our manufacturing - integrated manufacturing facility at Bhuj,
Gujarat:
The capacity for commercial vehicles has been deliberate at 50,000 annually. In
addition the Company has installed capacity for 24,000 tipper bodies, 100,000
tonnes of fictitious mechanism, 45,000 tonnes pressed metal and 30,000 tonnes of
frames for frame production. (Miga, 1999). AMW also manufactures mechanism for
the automotive and general engineering industries. AMW‘s capability of 15 million
wheel rims makes it the largest single location plant in Asia and the company
supplies pressed metal apparatus to some of the world‘s most famous auto and
white goods manufacturer. AMW also has Forging services in Mysore.
Overview of Transportation Statistics in Mexico:
The Institute National de Statistical, Geographic e Informatics (INEGI or the National
Institute of Statistics, natural features and Informatics) is the only federal agency in
Mexico whose main task is to gather, process, create, compile and disseminate
285
statistical information on a wide variety of social and economic issues. INEGI
receives its right from the Lye de Information Statistical y Geographical (Statistical
and Geographic Information Act). In compliance with the Statistical and Geographic
Information Act, INEGI is liable for the bringing together of the national statistical
system and the national system on natural features information, as well. (Miga,
1999)
Specific Sources of Mexican Transportation Related Data and Information:
In addition to INEGI, many federal agency and institutions also gather, process,
create, accumulate and disseminate information on transportation. These statistics
are based on census projects, surveys by sampling and administrative records. In
addition to these federal sources, many state and municipal governments also
generate different types of numerical in sequence, in support of their missions and
as a by-product of specific administrative functions. A brief explanation of each
organization‘s general mission and function is provided as well as its specific data
activities. However, detailed in order on agency data activities are not described
extensively here. Additional in order can be found at the web sites of character
organizations described. (Miga, 1999)
286
2.10.3. COMPARATIVE POSITION OF TRANSPORTATION
INDUSTRY
Institute National Statistical, Geographic e Informatics (INEGI) National
Institute of Statistics, Geography and Informatics:
INEGI‘s mandate includes statistics, geography and informatics (information
technology). INEGI‘s Statistical Directorate is responsible for providing a wide range
of in order to the public. To achieve this task, social, demographic and economic
statistics are together, processed and disseminated. Information are together
through population, economic and farming censuses; industry and activity specific
surveys (for example: construction, employment, trade, and income and expenditure
of households, amongst others); organizational records; and the national accounting
structure (which in turn, utilizes basic statistics generated by the INEGI and other
institutions). To perform these data collection activities, INEGI relies upon 80 central
sources and 60 local sources situated throughout Mexico and within each of the
country‘s states. INEGI disseminates all of its information through printed items and
electronic materials, such as diskettes, CDs and the Internet In terms of
transportation statistics, INEGI mainly generate information through census data,
and through the annual data from Mexico‘s National Account System. Statistics on
transportation and connected issues also are produced or gathered through other
INEGI projects. This is the container of data for vehicle registrations, traffic
accidents, and transportation characteristics for different modes of transportation.
194 Appendix A North American Transportation (Scribd, 1998)
Among other household tasks, INEGI also must provide the geographical information
that Mexico requires for the preparation and optimal use of territorial resources. At
present, this is done in digital format through the System National sober Information
environmental (National System on Geographical Information).
287
Secretarial Communication Transports (SCT) Ministry of Communications
and Transportation:
The Secretarial connections Transports is responsible for the development of a
modern, efficient and sufficient transportation and contact infrastructure that supports
sustainable and sound economic growth in Mexico, and that promotes the
improvement and broadening of efficient and high quality transportation and
communication services. Within SCT, specific program areas are responsible for
transportation, generally, and transportation data and information, specifically. These
program areas are described below. Coordination General de Puerto‘s y Marina
Merchant (CGPMM) General management of Ports and Merchant Marine The
CGPMM is responsible for the establishment and implementation of policies,
principles, systems and procedures for maritime and port activities that push the
development of this carrying mode and port operations (Scribd, 1998)
Transportation statistical subject Mexican sources for data and analysis:
Country Overview Institute National Statistical, Geographies Informatics
Transportation and the financial structure Institute National Statistical, Geographies
Informatics Bunco de México Secretarial de Hacienda Creditor Public Secretarial de
Program Presupuesto carrying Safety Air: Secretarial de Communications
Transports way General de Aeronautical Civil Road: Institute National de Statistical,
Geographic Informatics and Secretarial relations Transports (Direction General
Policies Federal Caminos Puerto‘s) (Inegi)
Pipeline:
Petroleum Mexicans Transit: Institute National de arithmetical Geographic
Informatics Rail institution National Statistical, Geographic Informatics and
Secretarial Communications Transports (Ferrocarriles Nationals de México) Water:
288
Secretarial Communications Transports (Coordination General de Puerto‘s y Marina
Merchant) Transportation, power and the Secretarial Energies, Environment
Commission National Para Ahorro Energies task Regulator Energies Secretarial
Media Ambient, Recourses Naturals Pessac Institute National Ecologies Domestic
Freight Activity Air: Secretarial Communications transport (Aero Puerto‘s forces
Auxiliaries and Direction General de Aeronautical Civil) (Inegi)
Domestic Freight action–Continued transport North American Merchandise Trade
Institute National Statistical, Geographic Informatics, Secretarial connections
transport (Direction General de Aeronautical Civil, Coordination General de Puerto‘s
Marina Merchant, Ferrocarriles Nationals Mexico, and Institute Mexican del
Transported Secretarial Hacienda Creditor Public, Secretarial Comerica stimulate
Industrial Bunco México International Merchandise Trade Between Institute National
Statistical, Geographic North America and the Rest of the World Informatics,
Secretarial connections Transports (Direction General de Aeronautical Civil,
Coordination universal Puerto‘s Marina seller, Ferrocarriles Nationals México, and
Institute Mexican del. (Inegi)
Rail:
Secretarial Communications transport (Ferrocarriles Nationals México) Transit:
Institute state Statistical, Geographies Informatics Water Secretarial
Communications transport (Coordination General de Puerto‘s Marina Merchant and
Direction General Puerto‘s) North American Passenger Travel Bunco México
Institute countrywide Migration Institute National Statistical, Geographic Informatics
Secretarial saying Secretarial connections Transports
Water:
Secretarial moving transport (Coordination General Puerto‘s y Marina vendor and
Direction General de Puerto‘s) Transportation Vehicles Air: Secretarial connections
289
Transports (Aero Puerto‘s Services Auxiliaries and Direction General Aeronautical
Civil)
Road:
The road system in India, which is apparently very large with a length of about 3
million kilometres, cannot meet the accessibility and mobility requirements of a
country of India‘s size and population. The Transport and connections statement for
Asia and the Pacific No. 73, 2003 64 road network suffers from serious deficiencies
in a number of areas. The road sector along with the rest of the transport part has
remained under funded over successive plan periods in the past. In order to raise
wealth and complete the projects at a faster pace, the National Highway Act, 1956
was amended in 1995 to support private sector participation in the development,
protection and action of national highways. The private sector can now invest in
national highway projects, levy, collect and retain fees from. (Inegi)
The State Highways join National Highways, district headquarters, important towns,
tourist locations and negligible port. About 61% of the total road span in India is
accounted for by rural roads. The decadal figures of the road network under all these
categories are provided in the As would be seen from the table, the collective length of
roads, which was 0.4 million km in 1950-51 has increased more than 10 fold to 4.24
million km by 2009-10. (Inegi)
Railways:
Indian Railways is one of the largest railway system in the world. By carrying about
11 million passengers and over 1.20 million tonnes of freight per day the rail system
occupies a unique spot in the socio-economic map of the state and is considered a
means and a barometer of growth. Rail is one of the major modes of transport for
carrying long-haul bulk freight and traveller interchange. It also has an important role
as the mass rapid transit mode in the housing areas of large metropolitan cities.
290
Special purpose vehicle:
The identified viable projects can be implement through various routes. One of these
is through the formation of a special idea vehicle (SPV). The salient features of this
model are as follow.
(a) Indian Railways prepare a project report representative the cost of the various
components of the project as well their viability.
(b) The SPV scheme envisage the participation of the private sector and other
beneficiary and national-level infrastructure funding institutions for the development
of railway infrastructure through appropriate concession. Revenue from commercial
operations would accrue to SPV during revenue sharing with Indian Railways or
through payment of access charges by the Railways (c) The land required for a
project is to be made available on lease to SPV. Commercial operation of the
Railway land may also be allowed. (Inegi)
(d) In case of green field projects, SPV is free to decide the process relating to
project development, construction and protection. However, for test conversion and
double tracking, Indian Railways undertakes maintenance works of the project.
Indian Railways can use its have rolling stock for operating the facilities created by
SPV. However, in specific cases the responsibility may be given to the private
operators. The compromise period allowed for a SPV project can be fairly long.
Initially, a concession is granted for 33 years, which may be extensive further. (Inegi)
Ports:
Ports are the gateways for India‘s international trade by marine and handle about 90
per cent of foreign trade. There are 11 major ports and 139 operable minor and
intermediate ports along the long coast of the country. he major ports of the country
handled 281 million tonne of cargo in 2000-01. By the end of 2007 Indian ports are
291
expected to handle 415 million tonnes of cargo. This will require huge investments
for the creation of additional facilities. There is also urgent need for the
transformation of existing ports to improve their operational efficiency, which is quite
low compare with major ports in the region. (Inegi)
Airports:
Air transport plays an important role in India where the industrial and commercial
centres are placed far apart and terrain and climatic conditions are quite different
from one part of the country to the other. The full potential of the civil aviation sector
in India, however, has yet to be realized. This may require an improvement in the
quality of services, competitive pricing, better airport infrastructure, etc
Agricultural Trade between Mexico and the U.S:
Agricultural trade plays a central role in U.S.-Mexico economic relations, even with
the jagged size of the two economies. Needless to say Mexican agriculture is a
much more significant factor in the Mexican economy than U.S. agriculture is in the
U.S. economy. Agriculture contributes 10% to Mexico‘s gross domestic product and
employs about 22% of the labour force, which amounts to about 8 million workers.
While in the U.S., agriculture accounts for only 2% of GDP and employs about 2.7%
of the labour force, which are somewhat less than 4 million workers. It is important to
understand the complementary nature of agricultural production in the U.S. and
Mexico. U.S. exports of agricultural goods to Mexico are led by grains, with corn
being the leading commodity, followed by rice, wheat, barley, potatoes and apples.
During the 1989-1993 periods, corn shipments to Mexico were stable at about 1.5
million metric tons per year, while for the 1994-2004 period, U.S. exports of corn
soared to 6% per year. Agricultural Mexican exports to the U.S. are led by
vegetables and fruits. Exports of vegetables are about twice the exports of fruits, as
shown in Figure 1. During the 1989-1993 periods, vegetable exports improved at
0.8% annually. This is a very small rate compared to the 6.2% yearly increase 6 in
the period post NAFTA (1994-2004). Taking into account fruits, their exports rose at
2.8% per year between 1989 and 1993, and at 4.8% per year. (Icerpa, 1995)
292
Among Mexican fruits and vegetables exported to the U.S., tomatoes are the leading
crop, followed in order by melons, cucumbers, cauliflowers, onions, watermelons,
squash, chilli peppers, limes, grapes, eggplants, asparagus and avocados. Currently
only 9% of the cultivated area in Mexico is used for the production of fruits,
vegetables and fresh flowers, but this output accounts for 34% of the value of
Mexican agriculture. Conversely, 67% of the cultivated land is used for grains, but its
yields represent only 36% of output‘s value.
NAFTA and Agricultural Trade Restrictions:
In 1986, Mexico became a full member of the General Agreement on tariff and Trade
(GATT). However, no major changes in the structure of defence of agricultural
products were undertaken until the North American Free Trade Agreement (NAFTA)
took effect on January 1, 1994. With NAFTA, the structure of border protection for
Mexico‘s agricultural sector was completely transformed. Similarly, for the United
States and Canada. Chapter 7 of the agreement sets forth the rules for agricultural
trade between the three North American partners. It contains three separate bilateral
arrangements for U.S., Mexican and Canadian agricultural trade. NAFTA‘s goal is
the liberalization of agricultural trade through the elimination of both tariff and non-
tariff barriers, such as quantitative limitations.1 We now describe only of the changes
in trade restrictions between Mexico and the U.S., since those will be subsequently
considered in this investigation. All agricultural tariffs on trade between the U.S. and
Mexico will be eliminated by the NAFTA. (ITTS-LATTS, 2004)
Many tariffs were eliminate immediately, with the others being phased out over a
period of 5, 10 or 15 years. Any item subject to the 5-year phase-out period became
duty-free on January 1, 1998; while any item subject to the 10-year phase-out period
became duty-free on January 1, 2003; and in 2008, after 15 years, there will be no
tariffs on products traded between the U.S. and Mexico. Both Mexico and the United
States have a limited number of products in the 15-year 1NAFTA also aims at the
293
decrease, elimination, and harmonization of sanitary and phytosanitary (SPS)
measures and encourages the elimination of export subsidies and the use of
domestic support programs that are not\ trade-distorting. 7 tariff phase-out category.
Mexican products included in this category are corn, barley, malt and dry beans.
Products the United States included in this category are certain fresh vegetables and
fruits, orange juice, sugar and peanuts. NAFTA eliminated all previous quantitative
restrictions affecting U.S.-Mexico trade in agricultural products. They were converted
into either tariff-rate quotas (TRQs) or safeguards. The concept is simple. A so-
called "under-quota" tariff is charged for imports below a certain threshold ("quota"),
while an "over-quota" tariff is charged once the threshold is reached. NAFTA thus,
replaced quantitative limits with non-linear tariffs.
294
2.10.4. PRESENT POSITION AND TREND OF TRANSPORTATION
INDUSTRY
The term logistic is often misinterpreted to mean transport. In fact the scope of
logistics goes well beyond transportation. The system that insure that delivery of
product in the entire supply pipeline. This includes transportation, packaging, storage
and handling methods and information flow. The industrial policies in India have
prompted manufacturer to build plan in remote towards the back area due to
expensive land and tax benefit. This poses some serious logical problem. Apart from
a poor road transportation network the existing communication system in India
leaves a lot to be desired by international standards. It is in the context that logistics
has to be considered in India. Logistics call from an understanding of the total supply
chain, the element of which includes inventories, packaging, forwarding, freight,
storage and handling. Logistics is responsible for all the movement that takes place
within the organization whether it is inbound logistics of incoming, raw material or
movement inside the company or the physical distribution of finished goods, logistics
in compasses all of these. To put it more simply the material supply logistics start
from the base level of ―production of demand‖ through ―process of purchase‖ and
―supply of material from vendor‖ right through to ―final acceptance ―and ―payment to
the suppliers‖ and ―issue to the indenter‖ and has to be consider as a one whole
activity with each stage having an impact on price of material supply. Logistics itself
a system. It is a network of related activity with the purpose of managing the orderly
flow of material and personal within the logistic channel. (adda, 2000)
The Logistics & Transportation Industry globally, the logistics industry is
valued at US$ 3.5 trillion:
The U.S., which contributes to over 25% of the worldwide industry
value.spends close to 9% of its GDP on logistic services.
The Indian Logistics Industry is currently approximate at US$ 90 billion.
295
The industry has generate employment for 45 million people.
in the state in comparison with the IT and ITS division which employs
approximately 4.3million people.
It s forecast to grow at a complex yearly Growth Rate (CAGR) of just about
8%.
Third Party Logistics (3PL) explanation is slated to grow at a compound
annual growth rate (CAGR) of over 16% from 2007-10. (Scribd, 1998)
296
2.10.5. POLICY AND NORMS OF TRANSPORTATION INDUSTRY
The consequences of lack of in order of air transport services are: Airlines have to
register their tariffs with powers that be, but they do so on paper, which makes it
hard to process the data. The lack of an adequate data base that manages price
data in a long period of time limits the analysis of competition conditions in the
market by the narrow authority and the Federal rivalry Commission. (Icerpa, 1995)
It can generate awful investment decisions by monetary investors, since they lack
the necessary objective parameter to evaluate airline industry´s profitability.
Lack of timely information can be very expensive for suppliers and consumers.
Suppliers can face ―non-payment‖ of their goods and services if the airlines go
bankrupt. Even though this is a latent for any acclaim transaction in the economy,
21, having access to recent airline performance, can mitigate or internalize this risk
for suppliers.
It is also a problem for regulators and rivalry authorities that have to analyze the
impact of public policies on the performance of the industry, and base their studies
on incomplete information. Even while industry productivity is not a government
purpose, it has to foster it to allow airlines to produce and offer their services in the
average and long-term. (Icerpa, 1995)
297
2.10.6. POLICY AND NORMS OF TRANSPORTATION INDUSTRY
OF INDIA
Approximately 26% of Mexican adults residing in urban areas smoke (8). Most
Mexicans recognize the harms of SHS and support smoke-free policies (9, 24, 28,
29). According to a 2008 opinion poll before the Mexico City smoke-free
commandment, about 80% of Mexico City inhabitants, as well as of Mexicans in
general, supported prohibiting smoking in covered public places and workplaces
(28). In 2006, 60% of smokers reported having a place of work smoking ban, with
Mexico City smokers reporting the lowest section of managerial centre bans at
37%(24). (Smoke, 1991)
In August 2007, a smoke-free administrative centre law was passed in Mexico
City(30-32), which initially allowed for designated smoking areas that were ventilated
and physically separate(22, 33). Concerns about the inequity of this law for small
business owners who could not afford to build designated smoking areas led the
hospitality industry to support a complete smoke-free law(31, 32), which prohibited
smoking inside all covered public seats and workplaces, as well as public transport,
restaurants and bars. This law enter into force on April 3, 2008.
Media coverage of the law was similar to high-income countries, pitting arguments
about the government‘s compulsion to protect citizens from SHS danger against
arguments about discrimination against smokers and the ―slippery slope‖ of
regulating behaviour (4, 32, 34, and 35).
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2.10.7. PRESENT TRADE BARRIERS FOR IMPORT / EXPORT OF
TRANSPORTATION INDUSTRY
A number of trade barriers have been in employment in order to guard industries, to
raise revenue, and to counter the barriers erected by other foreign countries. These
barriers make a curve of relative prices across countries and, consequently, distort
individual consumption patterns and lower person welfare. A general discussion of
these barriers and their consequences. (ITTS-LATTS, 2004)
Tariffs:
Tariffs have been a means of protecting domestic industries and creating revenue for
centuries. A tariff is really nothing more than a tax placed on goods imported into a
country. In the early years of the U.S., tariffs be the main source of revenue for the
Federal government and continued to be an important source of revenue up until the
1930‘s. Today, the normal tariff rates across goods and across countries are
between 10 and 15 percent and are not a significant cause of income for most
country (Rajapatirana, 1994b).
However, tariffs still present a significant barrier to trade among nations. By placing a
tax on imported goods, a tariff raises the price of goods and allows certain domestic
producers to produce at higher levels. In doing so, resources may be diverted away
from industries for which a country has a competitive advantage to industries for
which the state does not have a spirited advantage. distraction of resources creates
higher prices and lower quality for goods that are produced domestically. Therefore,
a deal off exist between cutback jobs in specific industries versus the welfare of
consumers. (ITTS-LATTS, 2004)
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INTERNATIONAL TRADE AGREEMENTS AND BARRIERS
Quotas:
A quota, also referred to as a quantitative restriction, is a policy tool to restrict trade
by placing a ceiling on the quantity of a product that can be import during a given
period. As a result, the restriction will create artificially high prices on goods and
reduce the quantity of competition within that industry.
Duties:
A duty is a tax compulsory on imported merchandise by the customs authority. It is
often applied as an ad valorem tax and is either based upon the value of the good or
the weight or quantity of the good. A duty has a similar effect as a tariff in that it
raises the price of imports and distort the relation price of goods and utilization
patterns. Therefore, duties create a consumer welfare loss.
Exchange Rate Controls:
Many third world countries try to be protective of their unbalanced and struggling
economies. Therefore, they want to be self-reliant as much as possible to encourage
their domestic industries. In an attempt to care for their household industries, third
world countries will often make exchange rate barriers to reduce the arrival of foreign
money, which reduces the ability of a country to buy imports. (Gartner and Stroup,
1995).
Dumping Policy:
Removal occurs when a producer sells a product in a overseas market at prices
under that of their own household market. Dumping could be just a policy of a
creator (predatory dumping practices), or it could be the result of foreign government
subsidies. This will not only enable a household producer to crack the overseas
market, it may, ultimately, drive out competition in that foreign market.
300
INTERNATIONAL TRADE AGREEMENTS AND BARRIERS
Subsidies:
Subsidies come in the form of grants, concessionary loans, loan guarantee, and tax
credits that are provide by a government to provide financial benefits on the
production, manufacturing, and distribution of goods or military to foreign markets.
Once again, these subsidies deform the relative price of goods and distort individual
consumption patterns. Also, it is an anticompetitive exercise that restricts the ability
of foreign producers to compete in a universal market. Subsidy has been widely
used in the farming industry.
Fair Trade Practices:
Policies that are recognized as countervailing polices of trade can become
protectionary policies as well. Trade policies such as anti-dumping, safeguards, and
countervailing duties can be used to restrict trade and actually hurt free trade when
these techniques are abused. while one state tries to react next to another country
by using these policies, they can also create an increasing trading war that hurts
regulars and producers of each country.
Price Bands:
Many countries use what is referred to as ―price bands‖ to restrict the importation of
agriculture products. Price band is a policy instituted by the administration that
calculates the price range of a product from a time series analysis of international
prices for those artificial goods. For example, a government may examine the prices
of a product for a 60 month time period. Out of these prices, a piece of the
uppermost and lowest prices will be eliminated.
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Other Barriers (Licensing):
While there has been a refuse in tariff rates across countries, a number of other
barriers have often taken the place of the tariff. These barriers include licensing
requirements1, government procurement practices, technical standards3, and
domestic-content rules. In addition, a government can also Often, a country can
require a license, which is a property right to export to a country. The country will
only issue so many license and they are then bought and sold among producers who
want to export to the country. For government contracts, domestic producers are
often given advantaged treatment. This could include blemish standards, safety
standards, measurement standards, and health standards.
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2.10.8. POTENTIAL FOR IMPORT EXPORT IN INDIA AND
GUJARAT MARKET
Growing Exports of Indian Mmf Textiles to Syria:
Syria is a country with a people of around 23 million in the Western Asia, bordering
Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the
east, Jordan to the south, and Israel to the southwest. The country has
approximately 60% economically active and educated populations in the age group
of 15 to 64. (Syria, 1996)
Market with Potential for Indian MMF Textiles:
Tremendous scope to add to India‘s exports to this bazaar in the WANA region.
India‘s MMF textile exports to Syria, which stood at Rs. 216 cores during 2004-05,
have grown to Rs. 365 cores during 2009-10, register a growth of nearly 69%.India‘s
share in the overall import of these items in the Syrian advertise is to the tune of
15%. There is consequently a lot of scope to increase Indian MMF textile exports to
this market. The key items being exported to Syria are incompletely oriented yarn,
polyester staple fibre, polyester viscose fabric, viscose staple yarn, polyester viscose
yarn, polyester spun fabrics, polyester wool fabrics, polyester filament yarn, etc
Main Items of India’s MMF Textile Exports to Syria during 2009-2010
Fabrics:
Polyester Viscose Fabrics -Rs.20.75 cores.
Polyester threads Fabrics-Rs.11.59 cores.
Acrylic Spun Fabrics -Rs.7.37 cores.
Polyester blend Fabrics -Rs.4 cores.
Polyester yarn Fabrics - Rs. 3.91 cores.
303
Yarn:
Partially orient Yarn -Rs.92.39 cores.
Other Synthetics thread Yarn-Rs. 26.49 cores.
Viscose Spun Yarn -Rs.12.14 cores.
Polyester Viscose Yarn - Rs. 10.61 cores.
Metallic Yarn - Rs. 5.45 cores.
Fibre:
Polyester clip Fibre -Rs.113.85 cores.
Viscose Staple Fibre - Rs. 27.04 cores.
Syrian Textile Industry:
The textile industry in Syria is the largest source of overseas currency to the Syrian
Economy after oil. The textile sector contributes about 6.4 percent of the total export
revenue, and 22% of the revenue of all Syrian exports, excluding oil. The Syrian
textile industry absorbs around 30% of Syria‘s manufacturing service.
304
2.10.9. BUSINESS OPPORTUNITIES IN FUTURE
Why India Fastest Growing Country in Future:
India to become one of the world's three largest economies in less than 30 years The
only BRICs economy usual to maintain above 5% growth all through the next 45
years EDC forecasts India to grow at 7.9% in 2010, 7.5% between 2011 and 2015,
and then at 6.7% stuck between 2016 and 2020. India is the only BRIC member
whose population is expected to continue to grow throughout the age More than 50%
(business, 1996)
Opportunity in Power
Over 90,000 MW of new generation ability is necessary in the next seven years
(2007-2014) Additional age group capacity planned – 78,577 MW by 2012 Power
generation skewed towards Thermal (53%), Hydro (25%) 9 Ultra Mega Power
projects planned 4000 MW each powered by Coal 4 of these projects are at the
Pithead and 5 at Coastal location 4 have been formally awarded to 2 personal
segment companies (Reliance power and Tata Power) .
Business Opportunity in Transmission:
Power grid (State owned) is just beginning an integrated national grid, in a phased
manner, for strengthening the five regional grids Inter-regional power transfer
capacity of 9.5GW at the end of 2005 is expected to be enhanced to 30GW by 2012.
About US$16bn is required for the middle transmission sector 14 new transmission
projects intended with private sector participation Players currently active Starlight
Technologies Ltd (Nov 2009 won US$265 million project to increase broadcast line
in West Bengal state) Asia Brown Bowery (ABB) KEC International.
305
Business Opportunity in Airports:
16 International and 87 domestic airports PPP model successful in Bangalore,
Hyderabad, Mumbai, Delhi chance Projected Investment of US$ 10 by 2012
Upgrading of Kolkata (East), Chennai (South) Greenfield Airports in Noida, Navi
Mumbai, Goa, Kanpur and Pune Modernisation of 35 Non-Metro Airports involving
investment of US$ 1.5bn. (business, 1996)
Business Opportunity in Railway:
Total savings planned by 2012 ~ C$ 75 of which 22 stations identified for growth.
New Delhi, quickly to be awarded ~ C$1.25 project 2 Dedicated Freight Currently in
tender 2 new engine factories planned in Bihar. Factories to be a JV between Indian
Railways and a Private company.
306
CONCLUSION:
After the study, it can be concluded that –
Today, The Indian textile and apparel sector accounts for around 4 per cent of
the gross domestic product (GDP) ( Corporate Catalist India, March, 2012), 14
per cent of industrial production and more than 13% of the country's total export
earnings. In fact, the sector is witnessing unprecedented growth, providing
employment opportunities to more than 35 million people. The Indian textile
industry is projected to be about US$ 52 billion and probably may reach US$ 115
billion by 2012. The local market may too receive a boost; from US$ 34.6 billion it
may probably register US$ 60 billion by 2012. In fact, India's exports probably will
increase from 4% to 7 % in the upcoming years ( Corporate Catalist India, March,
2012).
The textile industry of India contributes nearly 14% of the total industrial
production and also contributes around 3% to the GDP and currently generates
employment for more than 35 million people of the country. The Indian sourcing
market is projected to grow at an annual average rate of 12 per cent from an
estimated market size of US$ 22 billion-US$ 25 billion in 2008 to US$ 35 billion-
US$ 37 billion by 2011. The comparison of overall export to India textile export to
Mexico textile export, the period of 2005-06 there is downward trend for textile
export.
The Government of India has taken several positive steps of the textile economy
in Indian as like Integrated Textile Parks Shames, Tufs, Technology mission on
cotton, fiscal rationalization etc. The Indian textile and Apparel sector enjoys
some strategic and commercial advantages; there is a case to focus its energies
on meeting the impending challenge. Both industry and policy-makers need to
work together to achieve the desired results within the given timeframe.
The Share of textile and garments exports in India‘s total exports in the year
2010-11 stood at about 20 percent, amounting to US $ 12.5 billion, the quota
307
countries. USA, EU and Canada accounted for nearly 70 percent of India‘s
garments exports and 44 percent of India‘s textile exports. Amongst non-quota
countries, UAE is the largest market for Indian textiles and garments, UAE
accounted for 7 percent of India‘s total textile exports and 10 percent of India‘s
garments exports.
The Indian Textile Industry is also globally well placed, in teams of installed
capacity of spinning machinery, if ranks second after china, while weaving it
ranks first in plain handlooms and fourth in the shuttle looms. Index of Industrial
production in India shows the dismal picture of textile production the decline in IIP
for textiles started from June 2008 year onwards by now the cumulative position
has became positive trend. There is an increasing trend of number of spinning
mills and at end of Nov. 2010 there were 1,947 mills in the country there were
552 closed mills by the end of Nov. 2010.
Mexico is one of the Latin American nations which is the most affected by 2008
recession with its gross domestic product with more than 6%, so we can say that
Mexico is at the 11th number in the world by purchasing power of Mexico and it is
13th largest country in the world in the nominal terms. As an export oriented
economy where more than 90% of Mexican trade is under free trade agreement.
Mexico deals with more than 40 countries.
Ranbaxy, Dr. Reddy, Zydus Cadila, Sun Pharma, Zydus Wellness are all the
company which exports the Pharma product in Mexico & they are success in their
way. They are able to take advantage of free trade agreement in Mexico. A
general economic slowdown because of the global downturn, Mexico‘s economic
rating has been upgraded by most of the international rating agencies. In
February 2002, the Moody‘s upgraded Mexico‘s rating with regard to foreign
currency bonds and bank deposits. For short-term foreign currency denominated
securities and foreign currency bank deposits, the rating was raised to P2. In the
same month, S&P upgraded Mexico‘s external debt to investment grade.
308
AUTOMOBILE SECTOR is of strategies significance to MEXICO‘s economic.
Emphasis in the IAAI and the National Development Plan is given to analysis of
the existing lines and automobile of new regional and national links. While
government can finance studies and preliminary engineering designs, the Private
Sector and Development Partners are critical in the promotion and new
automobile work. Depending on the form of financing, the most feasible
automobile manufacturing option will be decided.
The chemical industry has demonstrated that featuring is not only possible at the
level of a specific company but also with industry-wide initiatives. Obviously, this
becomes all the more difficult the more companies and countries have to be
involved, but there are tools and concepts available which can help in the
management of even such complex featuring processes.
Comparing the different initiatives, one issue shows up very prominently:
innovation. In all 3 European featuring concepts, innovation is identified as one of
the most important drivers for the positive future development of the chemical
industry. In contrast to the US concept ―Technology Vision 2020‖, innovation is
not only limited to scientific and technological results4 but, in a much broader
sense, it includes business process innovation, new business models,
improvements in supply chain management etc. In all three European featuring
initiatives, the people factor is mentioned and related on the one hand with the
challenges of knowledge and skills and on the other hand with the risk of brain
drain and an eroding knowledge base. But only in the Mexico concept is a clear
action plan already visible with the establishment of a skills network. And even
there the unanimous realization that customer orientation and marketing & sales
knowledge has to be improved has, up until now, not led to any concrete action.
While action and clear measures are the strength of the Mexico concept, the
strength of the concept is that it clearly addresses the challenges the chemical
industry is facing, including the increasing regulatory burden. It even quantifies
the consequences if not enough is done by the authorities and the industry itself.
309
While in the Mexico concerted action between government and industry is
noticeable, in order to defend and improve the competitiveness of the chemical
industry, this has still to be achieved at the European level. The establishment of
a Chemical Advisory Networking Group for Europe is the right and first step in
this direction, with the Mexico concept as the benchmark.
In this conclusion we can says that agricultural sector of Mexico country has 80
% exported to India. We conclude that Mexico country has purchasing from
Indian of agricultural product. It has expanded in global way. In future it has the
best opportunity for Mexico country to agricultural .there are lots of buyers &
seller have buy the agricultural product from India. There has been a marked
change in government policy in recent years. In the past, various programmes
were directed to achieve efficiency and profitability in the context of inefficient
agriculture. Now the emphasis is on direct transfer, with scant attention to
developing productive capacity.
The policy of income transfer has been supported by the argument of giving
compensation to the producers who face competition from the products of the
countries that heavily subsidize their agriculture, especially after the country
joined NAFTA with North American countries. They represent the political
economy that determines the relationship between the government and the
private agents and reflects allocation of public resources.
Forecasts running through 2025 predict that the Latin America and Asia/Pacific
regions will have the world‘s highest economic growth rates at 4.1% annually.
Globally, demand for business jets will continue to grow while the business use of
general aviation aircraft is predicted to expand more rapidly than the use of
business jets for personal/sport use.i Honeywell has predicted that through 2016
new business jet sales will be worth $195 billion dollars globally, of which Mexico
and Brazil will lead the demand for the Latin American region.
310
With the second or third largest fleet of aircraft in the worldiii, Mexico is one of the
three leading consumers of executive aviation products in the Latin American
region (Mexico, Brazil and Venezuela), which attribute for almost 90% of the
regional demand for executive jets. Apart from Mexico‘s business aviation
industry growing at 7% a year for the last seven years, this industry is expected
to sustain between 4 -6% growth regionally during the next decade, equating to
approximately 500 and 700 new jets of all makes and models being demanded
region- wide.
This report aims to address the Business Aviation Industry in Mexico, a segment
within the general aviation industry. The General Aviation Industry involves
commercial aviation (cargo and passengers), military aircraft, business aviation,
aviation parts and components among others sub-sectors. Although there
appears to be no universally accepted definition of Business Aviation,v for the
purpose of this report we have allowed Business Aviation Industry to include the
sale of new and used aircraft for private use, aerospace parts, maintenance and
repair services (MRO/FBO), air taxi services, charter services and new market
models such as aircraft leases by the hour.
It is concluded that the Food & Beverages sector having lots of Business
opportunity between India and Mexico. Food & Beverages industries are growing
sector in Mexico. The food and beverages sector in Mexico experienced growth
in recent years despite the economic downturn. Products such as grains, sugars
and sweets, meat-related, bakery and snacks have been experiencing the largest
growth and therefore driving growth in the rest of the food and beverages sector.
The increase in per capita income of Mexicans as well as the move to urban
areas by Mexican residents has contributed greatly to the growth of the sector.
The significant volume of food products manufactured in Mexico translates into
solid demand for food ingredients and presents diverse opportunities for India
and Gujarat exporters. Mexico is a large, growing and attractive market for
311
initiating food ingredient exports or for continuing to consolidate the market share
of those India and food ingredients already available in the Mexican market. The
Indian dairy industry achieved substantial growth during the 8th Five Year Plan,
achieving an annual output of over 60 million tones of milk. Mexico will be the
emerging market for Indian dairy products. In the immediate future, there is
prospect of an additional demand of over 3 million tones of milk products in the
North American.
It is concluded that moving sector evaluation assesses the relevance, efficacy,
and efficiency of the World Bank operations in Mexico's transport division.
Mexico's transport system has some institutional components that are very
modem and others that have distorted little in 20 years. The national railway,
most of whose lines are currently run by confidential operators, is at the forefront
of the system modernization. Toll Roads Mexico's large, privately finance toll road
program, launched in.1989, could not cover expenses from toll revenues.
Transportation manufactured goods with India and Gujarat Headquartered in
Mumbai, India, Asia Motor Works Limited (AMW) is a leading manufacturer of
heavy for profit vehicles and auto mechanism in India. Comparative Position of
moving Industry INEGI‘s mandate includes statistics, geography and informatics
(information technology). INEGI‘s arithmetical Directorate is accountable for as
long as a wide range of information to the public Country Overview Institute
National Statistical, Geographies Informatics.
Policy and Norms of Transportation Industry the penalty of lack of in order of air
transport military are: Airlines have to register their tariffs with authorities, but
they do so on paper, which make it hard to development the data. Present Trade
barriers for import / Export of Transportation Industry A number of trade barriers
have been employed in order to defend industries, to raise revenue, and to
oppose the barriers erected by other foreign countries. These barriers create a
312
distortion of relative prices across countries and, consequently, distort individual
use pattern and minor individual wellbeing.
313
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