THE GLOBAL COMPETITIVNESS

Integration is the Future. Integration is the Future. The Picture.The Picture.Source: World Economic Forum. Source: World Economic Forum. The Global Competitiveness The Global Competitiveness Index: Basic Requirements.Index: Basic Requirements.Some facts: Some facts: The market, the economyThe market, the economy

Industrial redistributionIndustrial redistribution

US US ImportsImportsMarket ShareMarket Share

Source: USDOCSource: USDOC

Source: USDOCSource: USDOC

US Non-petrol ImportsUS Non-petrol Imports

Exports as a Growth DriverExports as a Growth Driver

Market shareMarket share(January-August 2010)(January-August 2010)

Source: World BankSource: World Bank

IntegrationIntegration is the Future is the Future

The PictureThe Picture

Source: World Economic Forum. The Global Competitiveness Index: Basic Requirements. 139 economies are considered.

Macroeconomic Environment 2010-2011Macroeconomic Environment 2010-2011(Score and Ranking)

Emerging market overheating index, 2011Emerging market overheating index, 2011

Source: The Economist

0 20 40 60 80 100

ArgentinaBrazilHong KongIndiaIndonesiaTurkeyVietnamSingaporeThailandEgyptPeruPhilippinesChileChinaColombiaPolandSaudi ArabiaSouth KoreaVenezuelaRussiaSouth AfricaCzech RepublicMexicoPakistanTaiwanMalaysiaHungary

Strong recovery and macroeconomic stabilityStrong recovery and macroeconomic stability

Mexico

Looking for reasons?Looking for reasons?

Source: Countries' Central Banks and National Statistics Offices, JP Morgan and Global Competitiveness Report 2009

Y

With a With a budget deficit of under 3% budget deficit of under 3% of GDP of GDP and a total public debt of and a total public debt of less than 40% less than 40% Mexico would meet the Mexico would meet the MaastrichtMaastricht criteria! criteria!

Despite the perceived economic slowdown in Despite the perceived economic slowdown in the World … the World …

Mexico is in a situation less vulnerable than Mexico is in a situation less vulnerable than other countriesother countries

Forecasted growth of middle income households1 (%, 2010-2015)

Source: Own estimations based on ata from Winning in Emerging-Market Cities, Boston Consulting Group (2010).1/ Middle income households are those with annual income over $10,000 dlls.

Expenditure of households on goods and services for individual consumption

(USD, 2008)

Source: Own estimations based on data from Global Purchasing Power Parities and Real Expenditures, 2005 International Comparison Program - World Bank (2008)1/The original data are for 2005 and the estimations for 2008 were made using the observed growth rates from those countries.

Household expendituresHousehold expenditures

Although income levels in Although income levels in Mexico are similar to those in Mexico are similar to those in

emerging economies, the emerging economies, the level of household level of household

consumption is higher.consumption is higher.

Source: AT Kearney, 2010

Projected average annual GDP growth rate Projected average annual GDP growth rate (% 2009-2050)

In the long run, In the long run, developing countries developing countries

outpace G20 advanced outpace G20 advanced economieseconomies

Source: Goldman Sachs. The N-11: More Than an Acronym. Global Economics Paper No: 153. March, 2007.1/ Estimaciones de Goldman Sachs

20501

5th

plac

e

11th

pla

ce

2010

200620501

2010

Gross Domestic ProductGross Domestic Product(Billion Dollars)

GDP per capitaGDP per capita (US Dollars)

GDP outlookGDP outlook

It is estimated that by It is estimated that by 2050, Mexico will become 2050, Mexico will become the fifth largest economy the fifth largest economy

and its GDP per capita and its GDP per capita will be comparable with will be comparable with

those of developed those of developed countries.countries.

Trade facilitation indicators:Trade facilitation indicators:

Mexico's rank (WEF market access sub index)Mexico's rank (WEF market access sub index)

Source: World Economic Forum 2010Source: Doing bussiness

Trading across borders rankTrading across borders rank

= improvement

Competitiveness: market accessCompetitiveness: market access

Deregulation advancesDeregulation advances

Reduction of norms in Federal GovernmentReduction of norms in Federal Government (number)(number)

Time to open a businessTime to open a business (days)(days)

Source: Doing Business 2011, World Bank.Source: Doing Business 2011, World Bank.Source: Ministry of Public FunctionSource: Ministry of Public Function

58 58 58

27 27 28

139

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009 2010 2011

Source: World BankSource: World Bank

Foreign Trade?Foreign Trade?This speaks for itselfThis speaks for itself

Trade and legal frameworks

Europe: Europe: seize opportunities seize opportunities and deepen FTAsand deepen FTAs

North America: the North America: the competitiveness agendacompetitiveness agenda

Latin America: promote Latin America: promote regional integrationregional integration

Asia: selective and Asia: selective and ad hoc approachad hoc approach

Presence in forae: ( WTO, APEC, OECDPresence in forae: ( WTO, APEC, OECD, LAIA), LAIA)

X: 84.2%M: 51.1%

X: 5.3%M: 12.6%

X: 6.6%M: 4.6%

X: 3.3%M: 30.8%

*Includes Africa, Oceania and other European countriesSource: 2011 Data. Mexico’s Central Bank and Global Trade Atlas.

NAFTA: +$101 billion USD

LATIN AMERICA: +$11 billion

ASIA: -$92 billion USD

EUROPEAN UNION: -$18 billion USD

OTHERS*: -$3 billion

Mexico’s Trade Balance 2011Mexico’s Trade Balance 2011

Mexico is, in a nut shellMexico is, in a nut shell

The Mexican economy has a GDP of The Mexican economy has a GDP of roughly 1 trillion dollars, with a population roughly 1 trillion dollars, with a population of 112 million. of 112 million. The country’s GDP is The country’s GDP is expected to reach 1.4 trillion dollars in 2015 expected to reach 1.4 trillion dollars in 2015 (IMF).(IMF).

A big marketA big market

Mexico has Mexico has 11 FTAs covering 43 countries, 11 FTAs covering 43 countries, which which represents represents more than 60% of world GDP.more than 60% of world GDP.

… … a trade huba trade hubManufacturing costs: Manufacturing costs: Mexico has a Mexico has a business cost advantage of 18.2% business cost advantage of 18.2% average (of 17 industries) relative to average (of 17 industries) relative to the US (Source: Alix Partners 2009).the US (Source: Alix Partners 2009).… … cost efficientcost efficient Mexico enjoys Mexico enjoys macroeconomic macroeconomic

stabilitystability, responsibly managed , responsibly managed state finances and is pushing state finances and is pushing

reformsreforms to further improve the to further improve the business environmentbusiness environment

… … and stable!and stable!

Demography is destiny (2030)Demography is destiny (2030)

Competitive advantagesCompetitive advantages

1.1. Geographic LocationGeographic Location Large U.S. border and coast both at the Pacific and Atlantic Large U.S. border and coast both at the Pacific and Atlantic Oceans and easy access to South AmericaOceans and easy access to South America

2.2. Preferential access to Preferential access to foreign marketsforeign markets

11 FTAs with 43 countries and an approved legal framework 11 FTAs with 43 countries and an approved legal framework with major trading partnerswith major trading partners

3.3. Skilled and competitive Skilled and competitive labour forcelabour force

Skilled workforce at relatively low cost, managerial skills and Skilled workforce at relatively low cost, managerial skills and cultural affinitycultural affinity

4.4. Demographic windowDemographic window In the next three decades, the number of economic In the next three decades, the number of economic dependents will reach a record minimum (2025)dependents will reach a record minimum (2025)

Attractive FDI destinationAttractive FDI destination

Foreign direct investment inflows per capita (1990-2009)Foreign direct investment inflows per capita (1990-2009)

Source: Global Insight

Facts: Facts: •BRICS get all the talkBRICS get all the talk•In spite of the hype, Mexico gets at least as much per capita FDI as they doIn spite of the hype, Mexico gets at least as much per capita FDI as they do

COUNTRYBrazil Russia India China Mexico Indonesia South

Korea Turkey

B R I C M I S T1. Macroeconomic environment

2. Open economy

3. Economic complexity

4. Total manufacturing cost

5. Domestic market

6. Demography

7. Workforce quality

8. Engineering graduates (per capita)

9. Democratic system

10. Human Development Index

Mexico is well positionedMexico is well positioned

20

Equal or above Mexico Clearly under MexicoBelow Mexico, but close

Source: 1. Macroeconomic Environment: WEF The Global Competitiveness Report 2011-2012, Macroeconomic Environment/ 2. Open Economy: Doing Business Source: 1. Macroeconomic Environment: WEF The Global Competitiveness Report 2011-2012, Macroeconomic Environment/ 2. Open Economy: Doing Business 2012, Ease of Doing Business/ 3. Economic Sophistication: The Atlas of Economic Complexity, Harvard University/ 4. Total Manufacturing Cost, Manufacturing 2012, Ease of Doing Business/ 3. Economic Sophistication: The Atlas of Economic Complexity, Harvard University/ 4. Total Manufacturing Cost, Manufacturing Outsourcing Cost Index, Alix Partners/ 5. Domestic Market: WEF The Global Competitiveness Report 2011-2012, Domestic Market Size Index/ 6. Demographic Bonus: Outsourcing Cost Index, Alix Partners/ 5. Domestic Market: WEF The Global Competitiveness Report 2011-2012, Domestic Market Size Index/ 6. Demographic Bonus: UN World Population Prospects. The 2010 Revision. Forecast of total dependency rate in 2025 (population <15 & 65+ years) (15-64)/ 7. Labor availability and quality UN World Population Prospects. The 2010 Revision. Forecast of total dependency rate in 2025 (population <15 & 65+ years) (15-64)/ 7. Labor availability and quality of the DFI Benchmark, Automotive OEM, Skills, attitudes and productivity/ 8. Engineering Graduates (per capita): UNESCO Institute for Statistics, International of the DFI Benchmark, Automotive OEM, Skills, attitudes and productivity/ 8. Engineering Graduates (per capita): UNESCO Institute for Statistics, International Monetary Fund. Engineering, manufacturing and construction graduates per capita 2009/ 9. Democratic System: The Economist, Democracy Index 2011/ 10. Human Monetary Fund. Engineering, manufacturing and construction graduates per capita 2009/ 9. Democratic System: The Economist, Democracy Index 2011/ 10. Human Development Index: UN, Human Development Index.Development Index: UN, Human Development Index.

Currency stability = risk mitigationCurrency stability = risk mitigation

Expected Real Exchange Rate variation (2008-2012)Expected Real Exchange Rate variation (2008-2012)

Source: Global Insight

NaturalNatural HedgingHedging

RISK

RISK

Buy and manufactureBuy and manufacturewhere you intendwhere you intend

to sellto sell

After NAFTA? Automotive leads the wayAfter NAFTA? Automotive leads the way

Proof: what Volkswagen is doingProof: what Volkswagen is doing

Source: Volkswagen de México

This is not due to chanceThis is not due to chance

World wide producer of World wide producer of light vehicles (light vehicles (2.55 2.55 million unitsmillion units))

8t8thh

5t5thh

World wide producer of World wide producer of commercial vehicles commercial vehicles ((136,678 units136,678 units)) 2 2

World´s largest vehicle producerWorld´s largest vehicle producer((2.69 million units2.69 million units)) 1 1

19 19 ofof the top leading the top leading automakers are located automakers are located in 15 states of Mexico.in 15 states of Mexico.

The automotive industry The automotive industry in Mexico accounts for:in Mexico accounts for:6% 6% of the of the Foreign Direct Investment Foreign Direct Investment

(FDI)(FDI) in the country in the country33

4% 4% of the of the national GDP national GDP 44

20% 20% of the of the manufacturing GDP manufacturing GDP 44

23% 23% of Mexican of Mexican total exports total exports 55

6th6th

8t8thh

6t6thh

Exporter of light vehiclesExporter of light vehicles((2.14 million units2.14 million units)) 1 1

Exporter of commercial vehicles*Exporter of commercial vehicles*((95,175 units95,175 units)) 2 2

Occupied workers4: 68,895

States with automotive production

1 Source AMIA 2 Source: OICA 3 Source: Ministry of Economics 4 Source: INEGI 5 Source: Business Monitor International *Estimated

Mexico´s place in the automotive industry (2011)Mexico´s place in the automotive industry (2011)

Highest Highest investment attraction in investment attraction in aerospace manufacturing during the last aerospace manufacturing during the last decade.decade.

66thth destination in the world for research destination in the world for research and development investment. and development investment.

More than More than 240 240 companies are settled in the Mexican aerospace industry, companies are settled in the Mexican aerospace industry,

270% 270% more than those established in the country in 2005. more than those established in the country in 2005.

Mexico is Mexico is top 10 top 10 provider to the American Aerospace Industry, better provider to the American Aerospace Industry, better than all BRIC countriesthan all BRIC countries..

The level of exports The level of exports tripledtripled in 6 years, in 6 years,

reaching reaching 3.2bn dollars 3.2bn dollars in 2010in 2010..

AerospaceAerospace

What has been done to promote the IT sector in Mexico?What has been done to promote the IT sector in Mexico?

PROSOFT 2.0: A long run public policy (2002 – 2013)PROSOFT 2.0: A long run public policy (2002 – 2013)

7 strategies7 strategies Start, progress and goalsStart, progress and goals

Mexico is ranked as the Mexico is ranked as the fourth global player fourth global player in the exports of IT services and BPO after in the exports of IT services and BPO after India, the Philippines and China.India, the Philippines and China.Gartner GroupGartner Group

Mexico is the only Latin American country that scored "Mexico is the only Latin American country that scored "Very GoodVery Good" in the assessment " in the assessment of cost, while other countries have had only a grade of "Good."of cost, while other countries have had only a grade of "Good."Gartner GroupGartner Group

Mexico is set at Mexico is set at position 6 in the Global Services Location Index 2011position 6 in the Global Services Location Index 2011, becoming the , becoming the first North American country due to the availability of human capital and the financial first North American country due to the availability of human capital and the financial attractiveness (costs).attractiveness (costs).AT KearneyAT Kearney

Mexico is ranked as the most Mexico is ranked as the most competitive location competitive location allowing a cost savings of 53.4% in allowing a cost savings of 53.4% in activities of Back Office / Call centers, 31.7% in Software Design and 34.1% in Web and activities of Back Office / Call centers, 31.7% in Software Design and 34.1% in Web and Multimedia, compared to the location of U.S. operations.Multimedia, compared to the location of U.S. operations.KPMGKPMG

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Soft LandingSoft Landing

OmbudsmanOmbudsman

One stop shopOne stop shop

Investor-AftercareInvestor-Aftercare

Cooperation, advice and informationCooperation, advice and information

What is ProMéxico?What is ProMéxico?

Bilateral Business Summit SeriesBilateral Business Summit Series

Where to get informationWhere to get information

http://wiki.promexico.de/http://www.promexico.gob.mx/http://mim.promexico.gob.mx/

Thank you for your kind attention!!!

ADEL ABOUHANA