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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
19
97
19
98
19
99
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
1801
99
4
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
Bil
lio
n d
oll
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
d
U.K
.
Can
ada
Jap
an
Ger
man
y
Bil
lio
n d
oll
ars
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