Sharing More than Just a Border: U.S. Commercial Opportunities in Mexico

Karen L. ZensMinister Counselor for Commercial Affairs

U.S. Embassy – Mexico

Asia Pacific Business Outlook Conference

University of Southern CaliforniaMarch 26-27, 2007Los Angeles, CA

Mexico – Just What Your Real Estate Agent Told

You…

• NAFTA! Access to Goods/Services/Market in U.S.• Proximity to World’s Best Consumer Market.• Shared Culture: Western, Hispanic.• Large installed base of manufacturing in various sectors.• Perception of stronger legal protections (China, Russia..)• Seen as politically stable.• Macroeconomic stability.

Location, Location, Location…

Pop: 104 millionGDP per capita: $8,135Adj for Purchasing Power: $9,80074 percent urbanUnder 20: 44 %Wealthy/Upper Middle: 23%Middle Class: 37%Poor: 40%

Mexico – A Snap Shot

TOP U.S. TRADING PARTNERS in 2006 (Goods)

230.6

55.2

134.2

59.641.3 45.4 32.5 24.2 23 12.6

303.4

287.8

198.3

148.1

89.1

45.837.1 38.2

36.5

53.4

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

BIL

LIO

N D

OLLAR

S EXPORTS IMPORTS

Source: U.S. Bureau of Census

5146

57

7179

87

111

101 98 97

112120 134

0

20

40

60

80

100

1201

99

4

19

95

19

96

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19

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20

00

20

01

20

02

20

03

20

04

20

05

20

06

Billio

n D

ollars

U.S. Exports to Mexico

Source: International Trade Administration, U.S. Department of Commerce.

Accumulated FDI 1994-2006

10.618.9

26.738.8

47.160.3

77.1

104.6

119.6130.6

148.1

166

185

0

30

60

90

120

150

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04

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Bil

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ars

Foreign Direct Investment in Mexico

Source: Secretariat of Economy, General Directorate of Foreign Investment.

Accumulated FDI 1994-2004 by Country of Origin94

15 137.3 7 5.5 5.2

0

20

40

60

80

100

U.S

.

Sp

ain

Ho

llan

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U.K

.

Can

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Jap

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Foreign Direct Investment in Mexico by Country

Source: Mexico’s Secretariat of Economy, General Directorate of Foreign Investment.

68%

32%

The U.S.

Others

Mexico’s 2006 Bilateral Trade

Source: Mexico’s Secretariat of Economy.

Mexico: Outlook for 2007

•U.S. economy •GDP growth – 3.5% (4.8% in 2006)•Inflation –4.1% (4.05% in 2005)•Macroeconomic stability•Remittances, oil and tourism•New Calderon Administration: 2040 goal - 5th largest economy in the world• Economic reforms - Congressional split

Almost no tariffs on U.S. exports to MexicoMore than 85% of U.S. Goods enter duty-freeBy 2008, 100% will enter duty-freeElimination of BarriersInstitution of Dispute Resolution ProcessU.S-Mexico trade increased 377%: from $88 billion

to $332 billion in 2006

The Impact of NAFTA

U.S. EXPORTS TO WESTERN HEMISPHEREEXCEEDING THOSE TO OTHER REGIONS

2006

Other10.8%

Pacific Rim24.8%

NAFTA35.2%

Other West Hem8.6%

European Union20.6%

Source: U.S. Bureau of Census

Western Hemisphere: 43.8%

Clearly not about cheap labor It is about integration of the North American marketplace It is about moving up the value-added chain It is about maintaining and increasing competitiveness and productivity Mexico, like the U.S., fears losing its manufacturing sector to other

countries – why? Over the last 5 years:– China’s exports to the U.S. grew 300%– Mexico’s exports to the U.S. grew 30%

The Future of NAFTAThe Future of NAFTA

Beyond NAFTA: Beyond NAFTA:

Security and Prosperity Security and Prosperity Partnership Partnership

Security and Prosperity Partnership of North America

• Trilateral Initiative• Building on NAFTA• Security – Led by DHS• Prosperity – Led by Commerce

North American Competitiveness Council

• Trilateral private sector representation

WWW.SPP.GOV

SPP –Prosperity SPP –Prosperity Working GroupsWorking Groups

Manufactured GoodsMovement of GoodsEnergyEnvironmentE-Commerce and ICTFinancial ServicesBusiness FacilitationFood and AgricultureTransportationHealth

U.S. Commercial Service Mission

• Agency of the U.S. Department of Commerce.• Helps small and medium size U.S. companies export goods and

services.• Protects U.S. business interests abroad.• Network of 100+ offices in the U.S. and 160 worldwide.

Tijuana

Monterrey

GuadalajaraMexico

City

Mexico - A Large and Complex Market

Products & Services

• Trade Counseling & Advocacy.• Qualified Appointments for U.S. Companies.• Partner Searches and Background Checks.• Market Research.• Single U.S. Company Promotions.• International Buyer Program (IBP) for Mexican Companies.• Trade Missions for U.S. Companies.

www.buyusa.gov/mexico/en

• 160 days of appointments arranged for U.S. companies.• 103 trade events (trade missions, seminars, etc.).• 20 Mexican delegations to U.S. trade shows.

Interagency Representation:• U.S. Export-Import Bank.• U.S. Trade Development Agency (TDA).• U.S. Overseas Private Investment Corporation (OPIC).

CS Mexico ResultsOct 2005 – Sept 2006

We helped U.S. companies obtain 500 distinct export sales worth over $360 million in sales for American small and medium size firms

Upcoming Trade Events in Mexico

• Tijuana Border Program April 16-19Tijuana, B.C.

• Expo Logistica 2007 - Customs and LogisticsMay 7-9Mexico City, Mexico

• Aeroexpo Aviation Trade Show May 24 – 26Mexico City and Toluca, Mexico

• World of Concrete Mexico June 19-21Mexico City, Mexico

• Enviropro / Power Mex - Environmental and Energy Industries

September 26-29 Mexico City, Mexico

The Market for U.S. Exporters:Best Prospects

Automotive Parts and SuppliesElectronic componentsEnergy SectorAirport & Ground Support EquipmentTravel & Tourism ServicesPlastic Materials/ResinsTelecommunications Equipment

More Best ProspectsMore Best Prospects

Environmental SectorLow-Income Housing & Rapid/Prefab

ConstructionSafety & Security Equipment/ServicesHotel & Restaurant EquipmentIntermodal Transportation EquipmentEducation & Training Services

Manufacturing Remains Strong in Mexico

• Mexico’s Industrial GDP has grown over 5% last year .• In 2005, Industrial GDP reached $176 billion.

– $87 billion was exported to the US .– $7 billion exported to other countries.

Leading manufacturing sectors: autos/ auto parts; computer hardware;electronic components; home

appliances; tool,die and moldings; Maquiladoras: U.S. and foreign firms

The Manufacturing Sector

Imports $87 billion of machinery, componants and inputs annually56,000 companies in the U.S. supply this sectorCompetition is strong but opportunities are great

0

20

40

60

80

100

1999 2000 2001 2002 2003 2004

Per

cen

tag

eU.S. Share of

Maquila Imports

Source: Banco Mexicano de Comercio Exterior

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004

Per

cen

tag

e

China Japan South Korea Taiwan Malaysia Singapore Thailand

Asian Share of Maquila Imports

Source: Banco Mexicano de Comercio Exterior

How Do You Sell to Mexican Manufacturers?

• Good local representation.• Knowing where purchasing decisions are made.• Identification of your customers – 1st or 2nd tier?• Finding out what your customers need.• Understanding what financial tools are at your disposal

to offer financing.• Following up!

How We Help US Suppliers

Goal: Increase US exports of goods/services to Mexican Manufacturers.

• Identify key sectors and market trends through company visits, association partnerships (AMT, NAM, MIT, etc.), and market research.

• Publicize opportunities to export to these companies through Trade Leads system.

• Locate qualified reps and customers through our services. • Promote relevant trade shows like Expo Manufactura.• Give updates on our findings through teams, USEACs, electronic

newsletters, and web/videoconferences.

Some Tips on Mexican Business Customs

• Mexico has its own customs.

• Importance of establishing personal relationships before business is done.

• Breakfast, Lunch and Dinner!

• Time is Flexible

• Patience pays off

• Physical contact: “un abrazo” – you can (air)kiss the ladies!

Business Customs:Some Hazards

• Indirectness - difficulty in saying “no”

• Push for easy credit terms – be careful

• Follow up quickly with your Mexican partner – there is lots of competition – not an “American preserve”

• Use a qualified interpreter if needed

• Keep in contact: visit, phone not just e-mail

A Sus Ordenes!Let us Help You