1.Doing Business in Mexico Why Invest in Mexico ? Opportunities & Risks

2. Doing Business in MexicoOutline1 General Overview2 Infrastructure for Services and Manufacture3 Business Environment4 Quality of Life5 How can we support your Company? 3. Doing Business in Mexico1 General OverviewA General InformationB Government StructureC Economic IndicatorsD Strategic IndustriesE Competitive Economy 4. General OverviewGeneral Information Territory1: 1,964,375 km2(14th largest Country worldwide) Administrative Divisions2:Monterrey 31 States and the Capital City Major Cities by Population1,3: CancunGuadalajara Mexico City (18,972,473)Mexico CityPuebla Guadalajara (4,380,600)Acapulco Monterrey (4,003,517) Puebla (2,273,066)1 Source: INEGI, 2011 (Economic Yearbook)2 Source: Mexican Presidency, 20123 Source: Metropolitan Zones, CONAPO, INEGI, 2005 5. General OverviewGeneral Information Population20111: 114,259,114Weather(% of territory)inhabitants Gender Distribution1: Man 49%; Women23.01%51% Population Growth Rate1: 1.8% (2005 2010 period) 51.08%25.90% Religion2: Catholic 89.7%; Protestant4.9%; Non Religious 3.2%; VariousReligious Associations 2.1%; Jewish 0.1%0.01% Languages2:Spanish (official);Warm Temperate Dry ColdIndigenous Languages (unofficial, atleast 68). Source: Mexican Presidency, 20121 Source: INEGI, 20112 Source: Mexican Presidency, 2012 6. General Overview Government StructureGovernment Type: Federal RepublicExecutive Branch: Chief of State and Head of Government, 6 year terms.Legislative Branch: Bicameral National Congress Chamber of Senators: 128 seats, 6 year terms Chamber of Deputies: 500 seats, 3 year terms Judicial Branch: Supreme Court of Justice: 11 ministers, 15 year terms Main Political Parties: Institutional Revolutionary Party (PRI), National Action Party(PAN) Democratic Revolution Party (PRD). Oncoming Presidential Election: July 2012Source: Mexican Presidency and Federal Electoral Institute, 2012 7. General OverviewEconomic Indicators Currency1: Mexican PesoGDP Growth Rate(Exchange Rate: $13.01 Pesos / USD)8% Gross Domestic Product2: $1.039 trillion5.2% 5.5% 6%(current USD) 3.3% 4% Gross Domestic Product per Capita2: 1.5%$9,166 (current USD) 2% 0% Exports2: 30% of GDP-2% 200620072008 20092010 Main Exports: Oil, AgriculturalProducts, Machinery, Minerals -4% Imports2: 31% of GDP-6% -6.1% Main Imports: Agricultural and-8%Industrial Machinery and Equipment Source: The World Bank, 20101 Source: Mexican Central Bank, April 20122 Source: The World Bank, 2010 8. General OverviewEconomic Indicators GDP Composition by Sector Gross Capital Formation1: 21% of GDP 3.4% 8.3% Inflation2: 3.7% (annual, consumer 6.4%38.7% prices)17.2% Central Government Debt3: 33% of GDP Cash Deficit3: 2.8 % of GDP3.5% 15.7%6.8%Agriculture Mining Foreign Direct Investment 20114:Constuction Industry $19,439.8 Million USD (current USD)CommerceTransportationFinancial ServicesOthers1 Source: The World Bank, 2010Source: INEGI, 20102 Source: Mexican Central Bank, March 20123 Source: Standard and Poors, 20114 Source: Foreign Investment National Commission, Ministry of Economy, 2012 9. General OverviewStrategic IndustriesAerospaceAutomotive Agricultural Represents 3% of the GDP and It is composed by two main Comprises14% oftheNationalsectors: fresh food andManufacture, MRO1, Design &Manufacturing Production.processed foods, beveragesEngineering and R&D. Mexico is the 10th Largest and tobacco. Accounts over 238 companies automobileworldwidewith 29,000 workers.producer,6th largest Mexico is the 12th worldwideworldwidecommercialproducer and exporter. The level of exports tripled invehicles producer and 2ndonly 3 years, growing 16.5% Mexico is the main worldwideon 2010.vehicle producer in Latin producer and exporter ofAmerica. The sector includes leadingavocado and lemon. Exports increased 52% incompanies (i.e. Bomardier 2010, being the 4th worldwide The sector has more thanAerospace,Safranexporter.750,000 trained engineersGroup, Goodrich, Honeywell). Main exports market: USA and 30 related universities.1Maintenance, Repair and OverhaulSource: ProMexico and Aerospace Industry Mexican Federation (FEMIA), 2012 10. General Overview Strategic IndustriesElectricalIT - SoftwareMedical Comprises the manufacture of Estimated market value for IT The production value of thehomeServices Production (including Industry reached $590 millionappliances, transformers, gen BPO): $4.03 billion US. USD in 2010. erators, regulators andengines. Estimated increase in exports Exports reached $6 billionof IT and BPO Services in 2010 USD in 2010, ranking on the The GDP of the sector had anreaches 12%. 11th place worldwide.annual growth rate of 7.9% Exports had an annual growth from 2003to Morethan 2,000IT2010, accounting to the 0.6%companies, including worlds rate of 11.4% from 2003 toof the National GDP.leading companies(i.e. 2010.IBM, HP, Accenture, SAP). Mexico is the leading exporter Mainexports were in Latin America and primary refrigerators and vacuum The sector includes Softwarecleaners, being the mainProduction, Call Centers, Data supplier to the US.destinations USA and Canada.Centers, ERP Software, etc.Source: ProMexico, 2011 11. General Overview Competitive Economy Transparency InternationalWorld Economic ForumCorruption Perception Index Competitiveness Index Score: Fell from 3.1 to 3.0(0 - Highly Corrupt to 10 - Very Clean). Score: Improved from 4.2 to 4.3(1-Less desirable to 7-Most desirable) Rank: Improved from 98 / 178to100/183. Rank: Improved from 66/139 to 58/142Source: Transparency International, 2012 Source: World Economic Forum, 2011 12. General Overview Competitive Economy Standard and Poors The World Bank Mexico (Analysis) Ease of Doing Business Ranking National Scale Grade CaVal: mxAAA/Stable/- Ranking: Improved from place 54 to 53 Strengths:Macroeconomic stability supported by all political parties; stable Progress: Dealing with construction fiscal debt and interests levels.permits was improved, the access forcredit information was streamlined and Weaknesses: Limited fiscal flexibility due tothe procedures and costs in trading a low non-oil tax base; lower real GDP across borders were improved. growth rate than other emerging economies; political scenario could hinder Source: The World Bank, 2012 deep reforms until the next presidential administration.Source: Standard and Poors, 2011 13. Doing Business in Mexico2 Infrastructure for Services and ManufactureA Industrial Parks and UtilitiesB Human CapitalC Logistics and International Trade 14. Infrastructure for Services and Manufacture Industrial Parks and UtilitiesUtilitiesThere are morethan 250 privateWater and Sewer. Provided by localIndustrial Parks in Government in all Industrial Parks.Mexico. Wastewater Treatment Plants. Available in Many of them operate under the Plug & some private Industrial Parks for services Play concept: water only. Certainty of Land ownershipElectricity. Provided by the Federal Quality infrastructure Government, serving different capacities Proximity to trade routes and laboraccording the Industrial Park orindependent project. Private securityNatural / LP Gas. Distributed by dealers all Speculative buildings for lease / saleover the country, available in most Shelter services Industrial Parks. Built-to-suit schemesOptic Fiber. Provided by dealers in someSource: ProMexico, 2012Industrial Parks but in most offices spaces. 15. Infrastructure for Services andManufacture Human Capital Economic Active Population Distribution of Employed Labor 50,273,465Force by Economic Sector Economic Active (44% of total Population (EAC) population)10.1%3.1% Agriculture EAC Average Age 37.7 years 5.6% 25.9% Industry Employed 95.15% of EACConstruction Unemployed 4.84% of EACCommerceSource: INEGI, 2011Services24.8%9.1%Transport Available Labor Force: 21.4%Others2,437,409 Source: INEGI, 2012 16. Infrastructure for Services andManufacture Human Capital Working Day Annual Variation of Employed Daily: 8 hrs Labor Force6% Weekly: 48 hrs 4.7%5%4.2% 4.3%3.8%4% Minimum Wage by Geographical Zone3% 2.1%Zone AZone B Zone C2%62.33 60.57 59.081%Source: INEGI, 2012 (Pesos per day)0% -1% 2006 2007 2008 2009 2010 2011 Strikes and Labor Disputes 2011 -2% -3%Strikes13 -4%-3.1%Disputes 10,950Source: INEGI, 2012Source: Ministry of Labor, 2012 17. Infrastructure for Services andManufacture Logistics and International Trade74 Airports Roadway The adequate 11 Domestic 133,000 km ofcombination 63 International paved roads.of operational114 Sea Ports49 Customhousesinfrastructure,a 19 North Border 53 Cabotage firm regulatoryframework and an 2 South Border 61 Grand Cargo 17 Coastsand Cabotage extensivenetwork ofFreeTrade 11 In-land Agreements positions Mexico as one of Access to the USthe most competitive countries worldwideRailroad 54 access points 27,000 km mainlyin the context of international trade.troughout 3,000 for cargo.km of border.Source: ProMexico and Ministry of Finance, 2012 18. Infrastructure for Services andManufactureLogistics and International TradeFree Trade Agreements % World GDP Free Trade Agreements Network27.7 Mexico has signed 11 FreeTrade 1.9 Agreements, covering 43 countries. 1.7 The network allows to access a market of 2.1 more than 1,000,000 potential consumers (60% of the Worlds GDP). 1.6 1.7 The network includes 6 Economic Complementation Agreements, Reciprocal 1.7 Protection Investment Agreements with 25 1.9 countries and Double Taxation Avoidance Agreements with 31 countries.27.6Source: ProMexico, 2012Source: ProMexico, 2012 19. Infrastructure for Services and Manufacture Logistics and International Trade Legal Certainty for Foreign Investment FDI Inflows by Country of Origin Protection Investment Agreements were created to protect foreign investments in 3.4% 6.3% Mexico for:10.2% 3.4% Investment Treatment; Expropriation and Transfers; 6.7% Investor-State and State-State disputes.15.0%Duty Reduction Programs 55.0% The Mexican Government has created many mechanisms to encourage manufacturing and exporting of local companies:CanadaSwitzerland Japan IMMEX: Avoidance of import tax and VAT Netherlands Spain USA Prosec: Reduction of import taxOthers 8th Rule: Reduction of import taxSource: Ministry of Economy, 2011Source: ProMexico, 2012 20. Doing Business in Mexico3 Business EnvironmentA Education and R&DB Taxation SystemC Process to Set up a CompanyD Government Incentives 21. Business EnvironmentEducation and R&D Higher Education Level Literacy Rate1: 93% Distribution7.0%3.8% Technician Average Level of Schooling2: 8.7 years Undergraduate Total Enrollment in the National Graduate 89.2% Education System2: 34.4 million students Areas of Study (31.7% of Total Population) 9.5% Social and Higher Education Level2:8.7% of Total 33.4% AdministrativeMedical Population enrolled in the NationalEngineering and Education System.TechnologyOthers 46.9% 10.2%1 Source: The World Bank, 20102 Source: Ministry of Education, 2011 Source: Ministry of Education, 2011 22. Business EnvironmentEducation and R&DPublic Expense in Science and Budget for Research Areas by Technology per Sector CONACYT29%8% 35% 3% 1%5%61%18%1%4% 35%Experimental R&DAgriculture Economy Scientific and Technical EducationPublic EducationSocial SecurityEnvironment1EnergyScientific and Technical ServicesCONACYT OthersCONACYT (Science and Technology National Council)Source: INEGI (Economic Yearbook), 20111CONACYT (Science and Technology National Council)Source: INEGI (Economic Yearbook), 2011 23. Business EnvironmentTaxation SystemGovernment Income by Source Government Income 2011: $0.217trillion USD (21.6% of GDP) 20% 48% Taxable Income 2009: 13.9% of GDP(including Oil Rights)Non Oil (33%) Oil Average Taxable Income of OECD1(67%)Countries in 2009: 19.2% of GDP 3% 13% 16% Fiscal Reform in 2007: Leaded to theadoption of the IETU Flat TaxPEMEX (State-owned Oil Company) Government (Oil Yields Tax) Tax Payers Base 2010: 33.5 million Taxable Revenues(18% increase compared with 2009)Non Taxable (Rights and Duties) Instututions and Companies1Organization for Economic Co-operation and Development Source: Ministry of Finance, 2011Source: Ministry of Finance, 2011 24. Business Environment Taxation System Main Federal TaxesTaxable Revenue Income Distribution Income Tax (ISR): 30% of Income 1%38% 4% (varies according to income level) Flat Tax (IETU): 17.5% of Income5% (Complementary tax to ISR) 47%2% 3% Tax on Cash Deposits (IDE): 3% overIncome Tax (ISR) excess of cash deposits over $1,000 USDIncome Tax (IETU)Tax on Cash Deposits (IDE)Value Added Tax (VAT) Value Added Tax (VAT): 16% overNon Oil IEPS (Production / Services Tax)Imports products and services. OthersSource: Ministry of Finance, 2011Source: Ministry of Finance, 2011 25. Business EnvironmentProcess to Set up a Company Incorporation Procedure1 Issuing AuthorityQuick Opening ofMinistry of Foreign Business Office1. Corporate Name SelectionAffairs Some local Governments2. Public Notary Incorporation Public Notary have improvedtheir3. Public Property and Commerce OfficePublic Notary /services by providing(PPCO) Registration PPCO counseling over4. Federal Taxpayer ID Registration Ministry of Finance proceduresand5. Foreign DirectInvestment National Registry ofRegistrationForeign Investment timeframes to set up a6. Importers / Exporters List Registration Importers / Exporters company(if applicable)Registry(legal,corporateand1 Procedure to set up a company under Corporation (S.A.) or Limited LiabilityCompany (S.R.L.) schemes. fiscal advice).Source: Mexico Citys Secretariat of Economic Development, 2011 26. Business EnvironmentProcess to Set up a CompanyNumber of Procedures for Number of Procedures needed toOpening a Business obtain Construction Permits151213403417107 17 66101520 5 00 Mexico USA ChileIndia Brazil Mexico USA Chile India BrazilTime needed for Opening aRecovery Rate (cents per dollar Business (days) recouped by bankruptcy)150119100 8267100 2950 2518 50 9 67200 0Mexico USA Chile India Brazil Mexico USA Chile India BrazilSource: The World Bank, Doing Business, 2012 27. Business Environment Government IncentivesMain Government IncentivesDescriptionIncentive Branch Payroll Tax 2.5% over Payroll ReductionState Real Estate TaxFee based on Property ValueReductionState Real Estate Transfer Tax Fee based on Property ValueReductionState Public Property and Commerce RegistrationFee based on Property ValueReductionState Depreciation of Fixed AssetsAccelerated Rates ReductionStateMain Government Support Programs Description Branch Financial ServicesDiverse Financing Programs (customized) Federal Entrepreneurship, Incubators, Innovation, Training and Counseling FederalFranchises, Commercialization, Exports Training of Human Capital (BECATE Program) Working-Training ScholarshipsFederal Software Industry Development ProgramIncrease competitiveness of IT IndustryFederalSource: Mexico City s Secretariat of Economic Development and Ministry of Economy, 2012 28. Doing Business in Mexico4 Quality of LifeA Tourism and CultureB Living in MexicoC Current Situation in Mexico 29. Quality of Life Tourism and Culture Tourism Relevance (January - June 2011 period): International Visitors: 38.2 millions International Tourists: 11.4 millions Main Origin of Tourists: USA (57.4%) and Canada (18.2%) Earnings from International Tourists: $5,195 million USD Surplus on Tourism Trade Balance: $2,523 million USD Air Traffic: 19 million of passengersSource: Ministry of Tourism, 2011 30. Quality of LifeLiving in Mexico Extensive Foreign Community with no Immigrated Status Resolutions:major difficulties of integration into the 453 (Jan Feb 2012)Mexican society. A variety of International Schools26.7%38%(American, German, Swiss, Japanese). Recreational Facilities: Golf6.2%Courses, Stadiums, Arenas, ConcertHalls, Shopping Malls, Parks, Ridging 3.1%6.0%Clubs. 6.0%4.0% Worlds Cultural Heritage1: 27 cultural 4.9% 5.3%places and 4 Natural attractionsUS China(including PrehispanicArgentinaAlemaniaArchitecture, Tequila Region LandscapeEl SalvadorCanadand the National University Campus).Colombia Espaa1 Source: UNESCO, 2012 Source: Immigration National Institute, 2012 31. Quality of Life Current Situation in Mexico National Security Program 2009 201210th Survey on Insecurity Perception The National Security Program has 67% of the surveyed citizens consider identified the main challenges faced bythe Army as the best force to fight crime. the Mexican Society: Up to date, there are more than 397,664Public Security Officers. Threats:OrganizedCrime, Drug Traffic, Armed Groups, Terrorism and For most of the surveyed citizens, the Border Vulnerability.main problem in Mexico is Insecurity(33.5%), over passing Economic Crisis Risks: Social and Politic Conflicts, Lost of (20.1%), Poverty (8.5%) or Corruption SocialCohesion,Migratory (5.1%). Dynamics,Pandemicsand 43.2% of the surveyed citizens consider Epidemics, Environment and Socialthe Police Operatives to confront the Warming and Imbalances on theorganized crime as failures. National Development.Source: National Security and Research Center, Ministry of Source: Mitofsky Consulting, November 2012the Interior, 2009 32. Quality of Life Current Situation in Mexico National Security System It is the set of instances, policies, capabilities, processes and tools established by law with the explicit mission of preserving the integrity, stability and permanence of the Mexican State, through the creation of public policies and implementation of coordinated actions aimed at addressing threats and risks that could harm it. Objectives: Preserve sovereignty and national independence and defend the territory; Maintain the constitutional order and the strengthening of democratic institutions; Keep the unity of the Federation; Provide security and maintain the operation of strategic facilities in the county; Make the legitimate defense of the nations vital interests with no outer pressures; Disable inertia that hinder the economic, social and political development to preserve democracy.Source: Ministry of the Interior, 2009 33. Doing Business in Mexico5 How can we support your Company?A 1. Financial Advisor to CEOs and CFOs2. Fraud Prevention and Detection3. Mergers and Acquisitions4. Financing and Investment5. Project Management6. Business Process Improvement 34. How can we support your Company?1. Financial Advisor for CEOS and CFOsProvide value-added advice on accounting and financial matters, offering an independentpoint of view with and international perspective and enriching the decision-makingprocess.2. Fraud Prevention and DetectionPerform special reviews focused on fraud prevention/detection or on any other arearepresenting a specific concern for management.3. Mergers and AcquisitionsAdvise companies contemplating to merge, acquire or be acquired by other companies. Ican help on valuation, due diligence, negotiation and integration. 35. How can we support your Company?4. Financing and InvestmentSupport in the identification of the best sources of financing for business projects, at thedomestic or international level, and also help to make quantitative and qualitativeanalyses of investment projects.5. Project ManagementManagement of the implementation of specific projects such as informationtechnology, compliance programs or certifications, particularly focusing on deliverytimes, deadlines, and deliverables quality.6. Business Process ImprovementPerform analysis and reengineering of business processes, identifying potentialopportunities for cost savings, efficiencies, optimization, and streamlining. 36. How can we support your Company?Professional ProfilePublic accountant, certified in Mexico and the U.S., ex-PwC, former internal auditor forcompanies such as WPP, Bombardier, IPG, and Syngenta, and former CFO in theadvertising, consulting, and manufacturing industries. Multilingual and multicultural withmore than 16 years of professional experience in international environments. Working asindependent consultant since 2003.Academic BackgroundB.S. in Accounting, graduated with honors (UNAM, Mexico)Certified by the Illinois State Board of AccountingCertified by the Mexican Institute of Public AccountantsCertified Fraud Examiner (ACFE) 37. How can we support your Company?Unique Value Proposition Strategic solution to address accounting, financial, tax or administrative matterseffectively and with a highly-personalized level of service. Independent point of view with an international perspective. Brings solid technical capabilities, broad experience in several industries and severaltypes of organizations, and the possibility of transferring high value-added knowledgeto your organization. Several strategic partnerships at the domestic and International level make it possibleto propose and implement multidisciplinary and personalized solutions to complexproblems. Excellent communication skills in several languages and first-hand knowledge of theMexico and Latin American markets. Flexible compensation totally based on results and on the specific needs of eachproject. Our 100% satisfaction warranty eliminates the risk for your business. 38. How can we support your Company?Contact InformationAddress: Plateros 16 Suite 504, San Jose Insurgentes 03900, Mexico CityOffice: +52 (55) 5339 5839Mobile: +52 (55) 5453 6309E-mail: armando@nuricumbo.com; Web: www.nuricumbo.comSkype: nuricua ; BB Pin: 21BD8276