MEXICAN Aerospace: An Industry on the rise. Special Feature Investment Opportunities in the Mexican Space Industry. Negocios para exportadores

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1 Special Feature Investment Opportunities in the Mexican Space Industry The Lifestyle Feature Five Essential Exemplars of Mexican Folk Art Negocios para exportadores MEXICAN Aerospace: An Industry on the rise V

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3 Table of Contents Guest Opinion Mexico: A Competitive Platform for Clean Energy Projects Mexico in the World The French Aerospace Connection Business Tips Mexico Gains Altitude Figures 20 photo archive COVER FEATURE Mexico s Partner Mexican Aerospace: an industry on the rise Safran Volare Engineering Soisa Radiall 34 Tecnum photo aem 24 Special Feature Investment Opportunities in the Mexican Space Industry 9 8 From ProMéxico Briefs Frisa Hyrsa Especialistas en Turbopartes Pinnacle O3b Hughes Network Systems

4 The Lifestyle The Complete Guide to the Mexican Way of Life photo archive photo omar bárcenas photo archive 50 The Lifestyle Briefs 54 photo ana carmen foschini Mexican Architects without Borders Two Silver Droplets Impossible to Tell Apart Underneath the Pitaya Thorny Exterior, a Nutritious Interior photo courtesy of consejo nacional del deporte 64 Five Essential Exemplars of Mexican Folk Art 62 DDI, Acting Out Design Fantasies photo courtesy of ddi

5 Para exportadores ProMéxico Karla Mawcinitt Bueno Image and Communications General Coordinator Sebastián Escalante Director of Publications and Content Advertising Natalia Herrero Copy Editing Download the PDF version and read the interactive edition of Negocios ProMéxico at: negocios.promexico.gob.mx 78 This publication is not for sale. Its sale and commercial distribution are forbidden. fotos archivo ilustración oldemar Asia: Oportunidades de diversificación comercial ProMéxico y la cooperación económica internacional Certificación de empresas y comercio exterior en México México en el mundo El comercio internacional de México en cifras 70 De ProMéxico Negocios ProMéxico es una publicación mensual editada en inglés por Pro- México, Camino a Santa Teresa número 1679, colonia Jardines del Pedregal, Delegación Álvaro Obregón, C.P , México, D.F. Teléfono: (52) Página Web: Correo electrónico: Editor responsable: Gabriel Sebastián Escalante Bañuelos. Reserva de derechos al uso exclusivo No Licitud de título: Licitud de contenido: 12032, ambos otorgados por la Comisión Calificadora de Publicaciones y Revistas Ilustradas de la Secretaría de Gobernación. ISSN: Negocios ProMéxico año 6, número V, mayo 2013, se terminó de imprimir el 21 de mayo de 2013, con un tiraje de 14,000 ejemplares. Impresa por Cía. Impresora El Universal, S.A. de C.V. Las opiniones expresadas por los autores no reflejan necesariamente la postura del editor de la publicación. Queda estrictamente prohibida la reproducción total o parcial de los contenidos e imágenes de la publicación, sin previa autorización de ProMéxico. Publicación Gratuita. Prohibida su venta y distribución comercial. ProMéxico is not responsible for inaccurate information or omissions that might exist in the information provided by the participant companies nor of their economic solvency. The institution might or might not agree with an author s statements; therefore the responsibility of each text falls on the writers, not on the institution, except when it states otherwise. Although this magazine verifies all the information printed on its pages, it will not accept responsibility derived from any omissions, inaccuracies or mistakes..

6 BRIEFS LOGISTICS Reinforcing Mexico s Ports From proméxico. Hutchison Port Holdings (HPH), part of Hong Kong-based conglomerate Hutchison Whampoa, is investing over 15 million usd in three mobile harbor cranes to reinforce ports on Mexico s Pacific coast. HPH s Lázaro Cárdenas Multipurpose Terminal will receive two cranes, each with a capacity of over 100 tons, while the third crane will operate at the Manzanillo International Terminal. In September 2012, HPH Mexico invested 15 million usd to upgrade the infrastructure at Manzanillo with eight rubber-tyred gantry cranes with a capacity of up to 40 tons each. The Mexican aerospace industry is booming. Mexico offers, unlike other nations in the globe, countless advantages and favorable conditions for the sector s development, many of which have attracted the attention and investment of global industry giants. Mexico s competitive production costs; its network of trade agreements that facilitates the import of raw materials and the export of advanced manufacturing to the world s leading markets; a supply chain that is consolidating quickly and strongly; world-class logistics infrastructure; a clear promotion policy that encourages productive investment; and what is acclaimed by most aerospace companies, its specialized and highly qualified personnel. In short, Mexico boasts a business environment that has enabled the safe landing of leading aerospace companies in the country. Furthermore, the sector s rapid development and short and medium-term growth expectations have led Mexican companies with long track records and experience in specialized manufacturing and design for sectors such as the automotive, to explore opportunities in the aerospace industry s supply chain. Mexico s aerospace industry is rapidly gaining altitude, driven by three main engines: investments from large global companies in the sector, the development of Mexican suppliers and the ability and talent of the Mexican workforce. And as if that were not enough, a smooth flight is forecast for the industry thanks to the synergy that has been created between the public, private and academic sector to boost its development and secure its growth. RENEWABLE ENERGY Latin America s Biggest Solar Plant Will be located in Mexico Welcome to Negocios! Gauss Energía, a Mexican business development firm specialized in the energy sector, will begin operations in its 100 million usd-30 megawatt (mw) Aura Solar I photovoltaic plant in August The company closed financing on the project after signing deals with Nafin, the Mexican development bank, and the International Finance Corporation (IFC) for about 75% of the cost. Mexican investment fund and project owner Corporación Aura Solar will fund the remainder. Aura Solar I is expected to be the largest photovoltaic plant in Latin America. The plant is located on a 100-hectare site in La Paz, Baja California Sur a region where average daily global horizontal radiation tops 5.7 kilowatt-hour per square meter, one of the most suitable for solar energy generation in Mexico. It will consist of 131,800 polycrystalline modules with single-axis trackers, to produce an estimated 82 gigawatt-hour per year enough to supply energy to 164,000 people, roughly 64% of the population of La Paz. gauss.com.mx

7 BRIEFS photos archive CHEMICAL Airs of Expansion French industrial gas producer Air Liquide plans up to 100 million usd worth of investment to expand Mexico operations in Air Liquide recently inaugurated a new air separation plant in the northern state of Coahuila. LOGISTICS The DHL Mexican Family Grows ELECTRIC Engineered Success German courier company DHL Express inaugurated a new operations center in Mexico City built at a cost 7.3 million usd. The center is part of a larger ongoing 160 million usd investment to upgrade and modernize the company s infrastructure and equipment in Mexico. French electrical engineering multinational Schneider Electric will invest 80 million usd in Mexico in Projects include completion of a research center in Monterrey as well as work on plants and clean energy projects for state-owned oil monopoly Petróleos Mexicanos (Pemex). AUTOMOTIVE Indian Investment Gets strong in Mexico Indian auto part manufacturer Samvardhana Motherson Group has opened a new plant in Puebla, Mexico joining the burgeoning list of Indian investors including Bajaj Auto and JK Tyres. The company will manufacture automotive products to cater to large auto assemblers operating in Mexico, such as Volkswagen and Audi. Investment for the new facility reached 30 million usd and, according to the company, is likely to go up to 70 million usd in the near future.

8 BRIEFS photos archive BRIEFS FOOD & BEVERAGE Sweet Achievement MEDIA & ENTERTAINMENT Cinépolis All-Time Box Office Chocolate Ibarra was granted the FSSC (Food Safety System Certification) from the Food Safety Management System (FSMS), which guarantees that every product manufactured by the company is free of physical, chemical and biological contamination. chocoibarra.com.mx Cinépolis, the largest movie broadcaster in Mexico and Latin America has officially launched Cinépolis Klic, its new online streaming service, which arrives to compete against other VOD providers such as Netflix, AxtelTV, Clarovideo, Totalmovie and Vudu. With 3,100-plus screens, Cinépolis ranks among the world s leading exhibitors. With Cinépolis Klic, the company will be able to buy broadcasting rights to movies, shortening the time between online and theatre premiere dates. In addition, the company is planning to expand the online services to the 11 countries where it operates. MEDICAL CONSTRUCTION Bet on Biotechnology Dupont HIRES ICA Fluor ICA Fluor, the industrial construction joint venture of Empresas ICA and Fluor Corporation, has been awarded a 130 million usd contract for the construction of a new titanium dioxide train to be built in Du- Pont s complex located in Altamira, Tamaulipas, on the Gulf of Mexico. ICA Fluor will be responsible for the construction, construction management and material management services for the production facility that is scheduled for completion in IT redit s New DataPark in Mexico redit, the emerging leader in secure, customizable cloud computing and data center services, has opened a DataPark in Tultitlán, Estado de México. The first of its kind in the country, the Tultitlán complex will house eight PODs (Performance Optimized Data Centers), totaling 95,000 square feet, to service a wide range of companies and government institutions. The redit DataPark employs a cooling system that leverages Tultitlán s mild weather conditions to increase its energy efficiency by 45%. The complex s proximity to a substation of the Federal Electricity Commission (CFE) also ensures a highly reliable energy supply, which will provide up to 9 MW to the redit Data- Park when in full operation. The redit DataPark PODs are also certified ISO 27001, ISO 9001, ISAE3402 and ICREA Tier IV certified. us.redit.com US-based Scantibodies Laboratory initiated construction on the company s second laboratory in Mexico. The 16 million usd facility is planned to produce antibody products and will include a cancer treatment center. scantibodies.com AUTOMOTIVE Success is Where Clients Are Furukawa Electric plans to break ground on a new auto parts manufacturing plant in Mexico to supply Japanese automakers operating in the country. Furukawa, which supplies products to the automotive, construction, electronics, energy, materials and telecom industries, expects the 12.2 million usd plant to be finished in January The company currently has two auto parts plants in Mexico. The new plant will initially employ 300 people but, according to the company, the payroll could climb to about 1,000 within a few years. Wires and cables produced at the new plant will be sold in Mexico and exported to Latin America and Europe. Furukawa also plans to manufacture parts for vehicle air bag systems and battery sensors at the new plant.

9 Negocios ProMéxico Guest Opinion photos archive Guest Opinion Negocios ProMéxico Mexico: A Competitive Platform for Clean Energy Projects Mexico s commitments towards reducing emmisions and using cleaner energy sources represent an important business niche. by enrique rebolledo* The rapid growth of emerging countries has caused an increase in the energy demands of their population, a demand that has already surpassed the current supply of energy generation and use. That imbalance has created a window of opportunity around energyefficient systems worldwide. Cities are significant energy consumer nodes. They are suitable for potential microgeneration and use of energy efficient devices on the side of demand. In urban areas, the services, building and industrial sectors have crucial opportunities in solar thermal power generation and utilization, while the public services sector can also leverage water pumping, public lighting, water and waste treatment and massive public transportation systems. On the supply side, Latin America has important manufacturing clusters that could incorporate technologies which are common in industrialized countries but non-existent in the region, mainly due to a lack of information about their benefits, technical knowledge and commercial efforts. In the international arena, Mexico has made commitments to reduce emissions and use cleaner energy sources, setting goals to those ends. Companies with high energy consumption or large CO 2 emissions are searching for proven technology options that enable them to reduce both their energy consumption and the risks associated with greenhouse gas emission regulations. The evermore obvious opportunities include the integration of renewable energies, co-generation, energy assessment of waste and a new approach to processes that increase energy efficiency. According to Ernst & Young s Renewable Energy Country Attractiveness Index for 2012, Mexico has the highest rates for solar power (18th globally) and the second (25th globally) for wind power in Latin America, only after Brazil. In 2012, installed wind capacity came to 1GW, with investment growth estimates in the industry at 20 billion usd for the next decade. Mareña Renovables has launched the most ambitious project in Latin America, with more than 396 MW in wind power, and a value of 961 million usd. For its part, Gamesa has installed more than 74MW with an investment of close to 160 million usd. Finally, by the end of 2012, the framework for small-scale renewable energy tender offers (<30MW) was created to promote investments by allowing installations to contribute to the power grid through the use of technologies such as solar photovoltaic and thermal, co-generation and small hydro. Mexico is committed to generating 35% of its electricity through renewable sources by 2024 (currently at 12%). In order to do so, several laws and regulations have been passed, above all to facilitate interconnection to the power grid. Wind power potential is estimated to reach a capacity of 12 GW by 2020, while in thermal solar energy, more than 1.66 million square meters have been installed with a potential for a further 23.5 million square meters by Resulting from the approval of the General Climate Change Law (2012) in Mexico, an internal emission trading system is planned, possibly linked to other international initiatives, as a tool for the country to achieve its goal of reducing carbon dioxide (CO2eq) emissions by 30% in 2020 and by 50% in Since 2011, every new house built with Esta es tu casa government housing grants must incorporate ecological criteria, such as solar water heaters, efficient lighting, thermal isolation and low-consumption appliances, based on the climate and region in which they are built or remodeled. Furthermore, and resulting from the approval of the General Climate Change Law (2012) in Mexico, an internal emission trading system is planned, possibly linked to other international initiatives, as a tool for the country to achieve its goal of reducing carbon dioxide (CO 2 eq) emissions by 30% in 2020 and by 50% in That system would define a method to distribute emission rights at facility level, defining a cap for regulated sectors and promoting trade between installations that show different cost structures to improve their energy and environmental performance. Trade arises from the options offered by regulated entities, either by assessing costs of an onsite reduction, or through the acquisition of reduction certificates in the market as a more convenient option. Entities with lower emissions than those assigned will be able to sell their excess certificates to other entities that find purchasing certificates more profitable than reducing emissions on an internal level. Exchange would be made through a mechanism similar to the stock exchange. In addition, that market could be linked to the Californian market through the Climate Action Reserve (an experienced, trusted and efficient offset registry to serve the carbon market), and to the North America 2050 (NA2050) partnership in the long term (a group of US states and Canadian provinces committed to policies that move their jurisdictions toward a low-carbon economy), creating an important opportunity for technology transfer and investment in the Mexican industry. Within that context, the Mexican energy sector accounts for close to 67% of greenhouse gas emissions (CO 2 eq) and energy consumption is expected to increase by 3.3% annually until In other words, this market could reach a value of billion usd by 2020 (equal to 153 million of tco 2 eq) associated to the energy sector alone, based on prices of emission reduction certificates observed in California during the first tender of Even more interesting is the possibility of approaching international markets in other sectors that require investment such as agriculture and transport which could improve its financial and environmental performance through sustainability practices. In short, the closeness and availability of supply chains related to trade with North America and the Asian Pacific Corridor make Mexico a potential partner to leverage knowledge, manufacturing and export in the energy efficiency and renewable energies market. Between 2005 and 2011, more than 4.77 trillion usd were invested in clean energies in Mexico (92% in wind power). Mexico is a competitive destination for strategic alliances with American companies. The country s growth potential also demands technical skills and specialized training which, combined with potential energy and tax reforms, natural growth in consumption and technological advances, make Mexico a place of operations and growth. But most importantly, this landscape illustrates an important niche in the area of renewable energies and energy efficiency management that hasn t been tapped into as yet. N * CEO of Bajo en Carbono

10 Negocios ProMéxico Mexico in the World photos archive Mexico in the World Negocios ProMéxico The French Aerospace Connection The French aviation industry has Mexico as a strategic partner due to the country s advantages, such as free trade agreements, competitive production costs and highly skilled workforce. by guillermo garza garcía* When talking about the global aviation sector, one cannot help but think about France as one of the industry leaders. Firms such as Airbus, Eurocopter, Dassault, Thales, Safran and Zodiac Aerospace are just a few of the world-class players that have positioned France s aerospace industry among the global elite. The sector s economic activity accounts for 77% of France s total exports and created 162,000 jobs in Meanwhile, Mexico s aviation sector, although young, shows great promise. In just one decade, the country has built an industrial platform of 270 companies and supporting entities that employ 31,000 people with an annual growth rate of almost 20% (since 2004). That has made it the favorite destination of the global aviation industry, with more Foreign Direct Investment (FDI) received than any other nation in the last decade. Mexico has some major advantages for international markets, such as free trade agreements with 44 countries, competitive production costs, a highly skilled workforce and a geostrategic location due to its closeness to the US. These conditions have been essential for the French aviation industry to see a strategic partner in Mexico. The first approach took place in 1991 with the arrival of Safran group s Labinal in the state of Chihuahua. Two decades later, said group has become the main aerospace employer in Mexico, with 4,000 positions. Other French companies followed, such as Eurocopter, Zodiac Aerospace, Daher, Radiall, Latecoere, Manoir Aerospace, Hutchinson and Axon cable, among many others, strengthening the local aerospace segment. Currently, Mexico s aerospace industry has a sustained growth strategy based on three pillars. The first is the creation of an integral supply chain that will lead to shorter integration times and significantly lower logistics costs. The second pillar is the construction of a stronger industrial fabric that will result in the foundation of globally competitive local companies. In order to achieve that, attracting foreign companies is crucial, alongside the manufacture of local products. The third pillar is the regional consolidation of capacities. For that, France developed a remarkable concept called competitiveness poles which is based on the triple helix model (government, academia and companies). The cities of Paris, Toulouse and Marseille are currently the prototypes of the French aerospace industry. At the same time, it is necessary to work with an industrial strategy based on high added value that strengthens aerospace production and research while encouraging a shift from Made in Mexico, to Designed in Mexico. Honeywell s successful engineering and research centers in Baja California, General Electric s (GE) in Querétaro, Labinal s in Chihuahua and Bombardier s in Querétaro, are great examples of that strategy, where Mexican talent designs, develops and reinvents today s aviation sector. It is clear that France and Mexico have a mythical past, a dynamic present and a promising future in the aerospace Mexico s aerospace industry has a sustained growth strategy based on three pillars: the creation of an integral supply chain, the construction of a stronger industrial fabric and the regional consolidation of capacities. industry. However, it is Mexico who has more recently shown the elements and tools required to go even further on the global aviation scene. The country has already taken off and is quickly gaining altitude. As economist Philip Kotler duly says: the future is already here. N *Trade Commissioner at ProMexico s Trade & Investment Office in Paris, France

11 Negocios ProMéxico Business Tips photos archive Business Tips Negocios ProMéxico Mexico Gains Altitude Mexico has become a strategic option for the global aerospace industry. With a solid and fast paced development in the industry, the country offers high added value and is regarded as a very cost-efficient and innovative solution to the sector s strict manufacturing demands. by luis eduardo archundia* Mexico is becoming a major supplier of the global aerospace industry. In 2012, it was the sixth provider of aerospace components and services to the US, considered the world s largest market. The country is also becoming increasingly relevant due to its combined offer of specialized engineering services, talent and legal certainty. Currently, there are 270 aerospace companies and supporting entities in Mexico, most of which manufacture high-technology components, avionics and electronics, as well as harnesses and cables, heat exchangers, engines, flight control systems and wings, among many other products. The aerospace sector has become one of the main economic activities in the country due to its interrelation with other industries. In 2012 alone, Mexican exports in said industry reached 5.04 billion usd. Mexico has become a strategic option for the global aerospace industry operating in a fragile economic environment (caused by the financial crises in Europe and the US), coupled with the rise of unpredictable commercial and defense scenarios. This global economic turbulence has exerted unprecedented pressure on the sector s closed circle of strategic production partners worldwide to deliver with an equation of cost efficiency and innovation, which only a few countries are able to provide. Mexico is up to the challenge. According to a study by KPMG, Mexico is the most competitive country in the Americas in terms of aerospace manufacturing costs. Also, the nation s macro-economic stability, its solid reputation as a competitive destination, as well as several local and federal government incentives, academia and business strategies have all come together to foster the creation of highly competitive hubs across Mexican territory mainly in the states of Baja California, Chihuahua, Nuevo León, Querétaro and Sonora which operate within a world class, certified ecosystem. Mexico emerges as a safer and more attractive aerospace investment market. With a solid and fast paced development in this industry, the country offers high added value to the global aerospace industry and, now more than ever, is being regarded as a very cost efficient and innovative solution to the sector s strict manufacturing demands. Industry leaders such as Honeywell, B.A.E. Systems, Bombardier, Eaton, GKN, UTC Aerospace Systems, Hawker Beechcraft, Labinal, Meggit, Volare and Zodiac, among many others, operate in Mexico. The country s credentials speak volumes. It is a nation that has progressed leaps and bounds in terms of skilled labor and international treaties to guarantee quality production standards. It has a world renowned reliability as a member of the Bilateral Aviation Safety Agreement (BASA) signed with the US and also as part of the Wassenaar Arrangement presently composed of 41 countries which was signed last year in record time. The Wassenaar Arrangement has been established in order to contribute to regional and international security and stability by promoting transparency and greater responsibility in transfers or exports of sensitive technologies. Participating states seek to ensure that transfers of these items do not contribute to the development or enhancement of military capabilities. Export controls are implemented by each participating state, although the scope of export controls in every member country varies from nation to nation in accordance with domestic procedures. Mexico s participation in both legal mechanisms is proof of the trust that the international community has put on the country, viewing it as an optimal destination for the manufacture of sensitive technologies for the aerospace industry. Several US and European companies, especially those with government contracts, are looking for competitive locations to settle their operations and to generate more cost efficient products also to boost innovation in the industry. Only a handful of countries are in a position to do that. Mexico has an extensive pool of talented engineers, over 31,000 skilled professionals registered with the Performance Review Institute from the National Aerospace and Defense Contractors Accreditation Program (NADCAP) and also with the Aerospace Standard (AS9100) certification. Both standards, coupled with an effective legal framework for the protection of industrial property, have placed Mexico as a manufacturing, engineering and development hub of great strategic value for the aerospace industry. Any efforts related to the Mexican aerospace industry cannot be understood without referring to the strategy that was outlined in Mexico s aerospace flight plan (back in 2009) when ProMéxico made a sector-wide consultation and undertook a project to analyze said industry. The first edition of Mexico s aerospace industry road map was then launched and it has been updated annually ever since, marking the latest trends and impacts on the national aerospace industry and providing a matrix of capabilities useful to understand the evolution of the sector. Mexico s challenge now is to ramp up the supply chain and, when possible, develop national suppliers to consolidate its position as a destination that serves the complete aircraft cycle (from design to the manufacturing of parts and structures and their assembly, aircraft maintenance, recycling and/or conversion). These are some of the reasons why Mexico has captured the spotlight at important events such as the 2012 Farnborough International Air Show, where exhibitors attracted further interest in aerospace and defense manufacturing in the country. The same positive impact is expected to be achieved this summer at Le Bourget Air Show in France, which will undoubtedly present a convincing showcase of expanding capabilities in the industry for the next 10 to 20 years. By 2020, it is expected that 12 billion usd of aerospace exports will come from Mexican aerospace design, engineering, Maintenance, Repair and Overhaul (MRO) and manufacturing facilities. Mexico has sophisticated technology and well known foreign providers which are doing an excellent job of complementing the supply chain. The country s natural advantages are also attracting other players from the US, France and Canada with high technology platforms. In short, Mexico s aerospace industry is here for the long run. The nation s entrepreneurs have come to understand that fact by looking at the country s trade potential and its capability to integrate cost efficiency and innovation results in the aerospace area. The national industry is well on its way to bringing a complete plant to Mexico and creating the whole aerospace solution in the country. Mexico has taken off and is flying higher than ever, making a difference in the aerospace world. N *Industry analyst, Business Intelligence Unit (UIN), ProMéxico

12 Negocios ProMéxico Cover Feature photos archive Cover Feature Negocios ProMéxico mexican aerospace: an industry on the rise Mexico is beginning to reap the benefits of the joint commitment of government, businesses and universities to bring the aerospace industry to the highest levels of competitiveness with a single strategic program. by jesús estrada cortés Vladimiro de la Mora, president of FEMIA, underlines other advantages that Mexico offers the aerospace industry, such as its geostrategic location. We are next door to the world s largest economy, the US. And our costs are extremely competitive, he points out. Aerospace companies can produce in Mexico at costs that are 30% lower than in the US, 40% than in Europe and 50% than in Japan. The Mexican aerospace industry is on cloud nine, soaring with sustained dynamism in terms of production, exports, investment attraction and job creation, its course firmly set to follow the Strategic Program that was designed by the industry and government and which also receives support from the academic sector. With an average 20% annual growth rate since 2004, Mexico has become a global leader in the aerospace sector, boasting 270 companies and supporting entities, most of which are internationally certified with NADCAP and AS9100. In 2012, exports from Mexico s aerospace industry reached billion usd, a 16.3% increase compared to Meanwhile, Foreign Direct Investment (FDI) exceeded 1.3 billion usd, according to data from the Ministry of Economy (SE). During 2012, the aerospace sector created 32,000 jobs and Mexico was ranked 14th largest industry supplier worldwide, according to information from the Mexican Federation of the Aerospace Industry (FEMIA). The industry is flying high thanks to a combination of competitive advantages, such as Mexico s vocation as a manufacturing, engineering and development center with high strategic value. That is due to the degree of technological sophistication of the country s exports, its engineering talent Mexico has the largest number of graduates in the Americas, with more than 100,000 new professionals every year and the quality and competitiveness of its workforce. Moreover, Mexico holds strong as the most competitive country in the hemisphere in terms of aerospace manufacturing costs and it guarantees the optimal use of produced and exported goods thanks to a legal framework that efficiently protects industrial property. Investment Landing The confidence shown by hundreds of companies in these competitive advantages has translated into more than 19.3 billion usd in accumulated foreign investment, which according to data by FEMIA, has been received by the aerospace industry in Mexico up to The increasing investment attraction has led to important projects. For instance, General Electric (GE), the global leader in airplane engine production, has its largest Research and Development Center (GEIQ) outside the US in the State of Querétaro. Also, its Advanced Engineering Center in the same state GE Aviation s largest global engineering complex employs several engineers in charge of testing the GEnX turbine, which saves close to 15% in fuel and reduces its carbon footprint by 30%. The center achieved a significant expansion in 2011, hiring more than 240 engineers and designers and enabling the center to ramp up sales to 80 million usd for the year. Some of the areas of specialization include mechanical, electric, controls and software engineering. Other business operations in Mexico include Honeywell in the northern state of Chihuahua, which focuses on new large engines and their repairs; Churchill in the northwestern state of Sonora, which manufactures turbine blades for Rolls Royce and their application to new products; Snecma/ Safran with projects involving new mediumsized engines and their repairs and ITP which manufactures and repairs low-pressure turbines, both in the state of Querétaro. With regard to turbines, Honeywell has the Mexicali Aerospace and Technology Center, an engineering and technology complex that includes a design center, a system integration lab, test facilities and a business support team. At the center, the company does a full-scale simulation of an aircraft s many systems, which allows for the testing of its inter-operability, control and technical maturity. As for the European Eurocopter within its Aerospace Aerocluster, it has a maintenance center to perform small and medium inspections equivalent to 150 to 600 flight hours, plus one or two years of use, for aircraft of the Ecureuil family AS350, AS355 and EC130 and with the capacity to inspect six helicopters simultaneously. It also has an AS365N3 helicopter (Dauphin model). In terms of design, engineering and manufacturing, many companies have earned success in Mexico. Such is the case of the giant Bombardier, whose plant in Querétaro manufactures the fuselage, assembles the wings and horizontal and vertical stabilizers and manufactures and installs the electrical harnesses of the Learjet 85. terials Research (IIM) of the Universidad Nacional Autónoma de México (UNAM), among others. That opens up opportunities to develop new latest generation materials by integrating into international innovation networks. For example, Helicópteros y Vehículos Aéreos Nacionales (HELIVAN) is developing graphene, a carbon fiber that is 200 times more resistant than steel and that is used in the defense aerospace industry, according to information by ProMéxico. Joint Work An essential element of the buoyancy shown by the Mexican aerospace sector is the design and implementation of the Strategic Program for the Aerospace Industry, also known as Pro- An essential element of the buoyancy shown by the Mexican aerospace sector is the design and implementation of the Strategic Program for the Aerospace Industry, also known as Pro-Aéreo, whose core was created by the authorities and industry working together to define what we expect from the industry in the near future. In addition to manufacturing, engineering and design activities, aerospace companies in Mexico are strengthened by the work of many research centers and labs that specialize in new materials and nanocomposites, such as the Mexican Corporation of Materials Research (COMIM- SA), the Advanced Materials Research Center (CIMAV) and the Institute of Ma- Aéreo, whose core was created by the authorities and industry working together to define what we expect from the industry in the near future. The plan establishes the creation of over 110,000 jobs, exports in excess of 12 billion usd and Mexico s ranking among the top 10 suppliers for the global industry, in addition to placing national content close to 50%, explains de la Mora

13 Negocios ProMéxico Cover Feature Cover Feature Negocios ProMéxico National and Regional Flight The national strategy has set its sights on turning Mexico into a destination that serves an aircraft s complete cycle: design and engineering, parts manufacturing, maintenance, airplane assembly and recycling and reconversion. Added to national plans are the regional strategies of the country s main clusters, which are based on their production vocations. According to ProMéxico, the country s main clusters are Baja California, Chihuahua, Sonora, Querétaro and Nuevo León. Close to 60 companies operate in Baja California and have recorded close to 1.4 billion usd in annual exports, close to 28% of national exports. Their main destinations are the US, Canada, the United Kingdom, France and Germany, among other countries. Through the strategy developed between industry, academia and government, Baja California will focus its innovation capacities on knowledge process outsourcing (KPO) for the aerospace and defense (A+D) industry and stimulate its potential to develop fuselage systems and power plants. In addition, more than 24,000 young people are enrolled in engineering and technology programs in the state. There are 28 aerospace companies operating in the state of Chihuahua, including four original equipment manufacturers (OEM): Cessna, Textron International Mexico, Beechcraft and Honeywell. In 2012, the state s exports reached 568 million usd. Currently, Chihuahua has over 8,300 employees related to the aerospace industry. Honeywell s Aerospace Chihuahua Manufacturing Operation (HCMO) consists of a highly complex machining manufacturing facility. The facility hosts a warehouse, labs and Quality Control Operations as well as Engineering. The HCMO is one of the most advanced machining operations in the aerospace industry. It features a state-ofthe-art blade manufacturing cell as well as numerous highly advanced aerospace machining cells. The site manufactures engine assembly ducts, gears and shafts, blade manufacturing, impellers, nozzles, disks, stators, seals and nozzle segments, among others. Sonora has one of the most important and integrated machined aviation parts clusters in the country. With casting, machining and special processes, Sonora has become a center for excellence in the manufacture of blades and components for airplane turbines and engines. More than 48 companies operate in the state, exporting close to 174 million usd, and supported by more than 29,000 students enrolled in engineering and technology programs. The Sonora Institute for Advanced and Aerospace Manufacturing was recently created in the state capital, Hermosillo. In Querétaro, the joint work of government and industry has triggered important projects such as the Universidad Aeronáutica en Querétaro (UNAQ), which offers four education levels basic technician, advanced technician, engineering and graduate programs with more than 2,800 graduates since The Aviation Technologies and Test Laboratory In terms of supply, the goal is to increase the development of local suppliers to take them to Tier 2 and Tier 3. To achieve that, the program includes support from the SE to help companies obtain the necessary certification. Another strategy is how we help these companies obtain the funds they need to become suppliers, explains de la Mora, adding that several automotive and electronics firms two sectors in which Mexico is highly competitive have already experienced success by migrating to the aerospace sector. Within the framework of Pro-Aéreo, businesses and government together define support for the aerospace industry. An example is the lab that the President [Enrique Peña Nieto] announced recently to Eurocopter. A new test center will be opened in Querétaro to support the aerospace sector with government investment 50 million pesos initially. Once again, we were invited as an industry to define what the complex should have: we are involved in the process, adds the president of FEMIA. As part of the actions within Pro- Aéreo, We have identified critical areas on which we need to work, such as staff development. We have to collaborate with universities to develop the future talent required by the industry, not only in engineering and masters programs but with technicians, he explains. (LABTA) is a unique project in Latin America, comprising three research centers that join their specialties to present a comprehensive range of laboratory tests and services that will strengthen the development of the supply chain. In addition, the Querétaro Aerocluster is constituted by 30 manufacturing companies and suppliers of structures, parts and components; three MROs, five design and engineering centers; three innovation and development facilities; five service companies; three education institutions and one innovation and research network. The state s aerospace exports total 673 million usd a year. Meanwhile, the state of Nuevo León is one of the leading industrial bastions of Mexico. Twenty-eight aviation companies operate in the state and export their products mainly to the North American Free Trade Agreement (NAFTA) market. The sector exports 555 million usd a year. The Nuevo León aerospace cluster was established in High Specialization Mexico has been training aviation technicians and engineers since According to information from ProMéxico, there are currently 21 education institutions that offer 52 aerospace programs, which range from basic courses, high school and technical programs to advanced technical degree programs, professional licenses, undergraduate programs in engineering and some Masters programs. Baja California is perhaps the state with the most notable range of aerospacerelated courses, not only because of the large number of companies established there but also due to the joint work of the private, public and academic sectors to contribute to train professionals and technicians that will populate the industry and are the main driver behind the sector. This is all handled with the triple helix model: government, academia and industry. As a university, we must contribute with continuous training for the people who comprise the sector and to do so we are constantly looking at what s new, what does the industry need, what new projects will they bring, to learn what type of professionals they will require when the time comes. In that way, classrooms feed manufacturing facilities with the staff they need, explains Omar Mata, professor and researcher at the Universidad Autónoma de Baja California (UABC). The UABC s faculty of engineering offers education to close to 50,000 students and aerospace engineering is one of the newest programs, with 150 registered students, 15 of whom make up the first generation, who graduated in. In the coming years we will be graduating between 15 and 20 young people each semester. It is an upward trend and the idea is to supply the complete Mexicali-Tijuana-Ensenada corridor to satisfy its requirement for professionals, says Juan de Dios Ocampo, coordinator of the Aerospace Engineering program at UABC. After pointing out that from 2014 onwards the UABC will begin to offer a Master s Degree in aerospace engineering, de Dios Ocampo explains that creating a program such as this one required the industry s participation. These are flexible models that enable us to modify courses and content depending on the rhythm of the industry, he says. Baja California s successful model is a reflection of the joint effort of companies, governments and universities in Mexico and that partnership is what drives the aerospace industry to cruising speed. We know for certain that the new government will follow up on this program; Pro-Aéreo is not stopping, concludes de la Mora. N Part of the statements and data published in this text were taken from the National Flight Plan (version 4, 2013), which includes several industry, academia and government contributions. This strategic line of the aerospace sector will be launched shortly

14 Negocios ProMéxico Special Report photo aem Special Report Negocios ProMéxico Investment Opportunities in the Mexican Space Industry The study and development of the Mexican space industry is a key factor in boosting telecommunications, expanding the connectivity and inclusion of marginalized communities in remote areas of the country, in addition to the proven use of low orbit satellite observation to alert the population and mitigate the impact of nature-related disasters or monitor atmospheric phenomena, among other benefits. by jorge sánchez gómez* The accelerated entry into the space economy has created a new challenge for Mexico. It implies the exploration, use and exploitation of outer space for scientific research; technology development and application; design, manufacture and operation of telecommunication systems; as well as satellitebased navigation, GPS, and earth and cosmic observation via vehicles launched and placed in space. The Law that created the Mexican Space Agency (Agencia Espacial Mexicana or AEM) on July 30, 2010 and the initiatives gathered in several public forums produced the General Guidelines of Mexico s Space Policy published on July 13, 2011 and AEM s National Space Activity Program (Programa Nacional de Actividades Espaciales or PNAE), stating the national strategy for the promotion of space exploration, use and exploitation. The PNAE is based on five strategic axes: 1. Human capital training and development in the area of space. 2. Space scientific research and technology development. 3. Industrial, commercial and competitiveness development in the space sector. 4. International affairs, regulations and safety in space matters. 5. Funding, organization and information technologies in space matters. Each axis has well defined goals, strategies and lines of action. The first year of operations involved the organizational structure of the AEM and its five general coordinating offices one for each strategic axis. That year also marked the beginning of works related to creating synergies between the various players. The industrial-commercial and competitiveness development coordinating office adopted the roadmap methodology, which establishes a mechanism to integrate and document the current situation of the space industry while defining the path to follow and criteria needed to achieve this goal. Strategic Milestones of Mexico s Space Sector The Orbit Plan: Roadmap for the Mexican Space Industry 2012, in which a multidisciplinary group of academics, public servants and business owners expressed their prospective vision of the sector, established five strategic goals: 1. For Mexico to have a world-class, high-technology validation and standardization center for the space industry with the capacity to provide services on an international level [five years]. 2. To establish a company that operates in Mexico with the technological capacity to design and manage space projects with the Public-Private Partership (PPP) model, which will be the nucleus and interface with those involved in space projects [two years]. 3. To integrate a low orbit multifunctional satellite platform with 50% of critical technologies developed in Mexico [five years]. 4. To create a PPP institution to coordinate the triple helix (government, industry and academia) for innovation in advanced materials for aerospace applications [five years]. 5. For Mexico to have a 1% (1 billion usd) share in the space industry [five years]. To achieve this, there must be public policies and production coordination models that acknowledge the scope of the sector, align its players, stimulate innovation and integrate new forms of commercial partnership. Technical-commercial alliances are essential for seeking partners capable of contributing with human capital, technologies and proposals to develop solutions and leverage the opportunities offered by the global space market (in 2011 sales were estimated at billion usd). To create a comprehensive vision and comply with the recommendations of the Organisation for Economic Co-operation and Development (OECD), Mexico must create a space infrastructure, that is, the set of tangible and intangible goods that are required for the study, access, exploration, use and exploitation of space: Mexico is committed to the development of the space sector; there is a clear view of the space innovation ecosystem with collaboration spaces, merging synergies of the various stakeholders, and attracting investment and talent to position the country in the global space economy. Tangible assets include rocket engines, launching platforms and systems, sub-orbital vehicles, satellites and other spacecraft, their instruments, payloads, master stations, teleports, receiving antennas, user terminals, observatories and other liaison and control devices. Intangible assets include orbital positions and their related frequencies, laws, regulations, technologies, patents, licenses, concessions, brands and know-how. The Importance of Space Infrastructure Space infrastructure is the backbone that holds and links satellite space systems and national security applications; as well as connectivity, social coverage, environmental sustainability and scientific and technological research. It is constituted by projects that focus on national needs, such as the Early Alert System and the replacement of the MEXSAT System satellites at the end of their useful lifecycle (estimated at years) within an innovation ecosystem that favors and encourages joint work. The development of space infrastructure requires funding and PPP similar to those established in road and port development. Specialization is indispensable for the space and aviation industries; it ensures quality and competitiveness of the technological areas in which Mexico can be attractive. Five technology areas have been initially selected, encompassing 113 technologies to be developed and applied, based on their technology-readiness level, their individual roadmaps and feasibility analyses to incorporate them into the Mexican space infrastructure and business plans that promote investment opportunities in this sector. Mexico is committed to the development of the space sector; there is a clear view of the space innovation ecosystem with collaboration spaces, merging synergies of the various stakeholders, and attracting investment and talent to position the country in the global space economy. The flow of foreign and domestic investment will enable the development of high added-value jobs and technology-based companies, well-paid specialized employees, and accelerate value chain integrations, with impacts in other economic sectors. According to the AEM s estimates, the Mexican space industry could reach 1 billion usd in the next five years. Mexico is slated to become an attractive pole of space development, internationally renowned for its capacity to coordinate and carry out high-impact work with state-ofthe-art quality and innovation. N * Deputy Director, Industrial and Commercial Development, Mexican Space Agency (AEM) 24 25

15 Negocios ProMéxico Mexico s Partner photos courtesy of safran Mexico s Partner Negocios ProMéxico Aerospace Giant Hails Mexico Engine Just over 20 years after opening for business in Mexico, French aerospace giant Safran is now the country s largest aeronautics company with 5,000 employees expected by the end of Not content to rest on its laurels, Safran has plans for even further expansion. by graeme stewart Mexico is for Safran the main engine for its aerospace activities in Latin America and second of the Americas, only behind the US, according to the senior Vice President of one of the world s leading aeronautics companies who adds that he expects Mexico to continue to be a leader in global aeronautics. Olivier Piepsz, senior VP for Latin America of the French aerospace firm Safran Group, told Negocios that the performance of the aerospace sector in Mexico has been so impressive that Safran is now considering developing more activities in the country. Speaking at Safran s headquarters in Paris, France, the VP confirms: So far, we are studying this possibility and the idea, of course, is to create synergies between the companies of the Group and to also consolidate our footprint in Mexico. Piepsz enthuses about Safran s Mexico operations and continues: We have two principal markets in Latin America, Mexico and Brazil; 80% of the Group s number of employees in the region are in Mexico. Of what we produce in said area, 60% is in Mexico. For Safran, Mexico is the continent s engine and we are very proud to be the most important aerospace company in the country. This year we have 4,400 people in employment with us in Mex- ico and we plan to increase that to 5,000 by the end of the year. Safran is today the top French investor in Mexico. The key figure for us is 25%. In the past year we grew 25% in production and in the number of our Mexican employees Piepsz continues. When asked about Safran s goals in Mexico, he answers: We have three main objectives in Mexico: education and training, innovation and supply chain. That mirrors the very objectives of the Mexican government. Adding, we invest heavily in Mexico but we gain a lot of confidence from the country s authorities. We meet on a regular basis with representatives of the federal and state governments, as well as with heads from small and medium enterprises to find solutions to any problems and to plan common strategies. In addition to the close relation between private and public sectors towards the industry s development, Mexico has some other advantages. Mexico has a fantastic pool of talent. It has more than 100,000 engineers graduating every year, which is fantastic for the country and for Latin America. They are highly qualified, well motivated and incredibly enthusiastic to get into the aeronautics industry, which is a great bonus for us because in the US, for Safran Group s Presence in Mexico The Safran Group has operated in Mexico for more than 20 years. Today, it is the first aerospace employer in Mexico with over 4,400 workers in 10 companies and is also active in the defense and security sectors. Several of the Group s companies have subsidiaries or affiliates in Mexico: J J J J J Labinal in Chihuahua. Snecma, Messier-Bugatti-Dowty, Messier-Bugatti- Dowty Services and Snecma America Engine Services in Querétaro. Globe Motors in Tamaulipas. Morpho in Estado de México. Safran Mexico, Turbomeca and Morpho in Mexico City. example, graduates are more interested in getting into the computer industry or into finance. In Mexico, there is no shortage of engineers wanting to get into the factory to begin work. That is a great advantage for us, explains the VP. As for Safran s plans in Mexico, Piepsz says: We want to expand our industrial footprint in Mexico and to that end we opened an extension of our plant in Chihuahua, last month, reaching a total of 3,000 employees in this state. It is the largest wire-making factory in the world and shows our commitment to Mexico. Safran is also deepening its industrial presence in Mexico through its activities in security. Morpho, one of the world leaders in security solutions through smart cards, biometry, and detection, is highly active in the country. Indeed the Group has great expectations in this field in Mexico thanks to its industrial presence and considers the country as a key base to address the regional market in Central America. Additionally, the Safran Group is heavily involved in sustainable development projects and training programs. For instance, it is leading the creation of a French-Mexican Aeronautical Campus in Querétaro, to develop a highly-skilled and trained workforce in aviation and MRO jobs. Furthermore, the Group welcomes a number of interns and participates in professional training programs. It has also been a leader in the foundation of an aeronautical cluster in Querétaro. The Group also works with Mexican industry on various sustainable development initiatives to provide greener solutions; more specifically it has been working with the airline Interjet on a green flight project of an A320 powered by a CFM56 engine using biofuel. A sector in which, once again, Mexico shows great potential. We want to expand our industrial footprint in the country in many areas. We want it all in Mexico, Piepsz concludes. N SAFRAN MEXICO FACTS: Safran is today the top French investor in Mexico. The key figure for us is 25%. In the past year we grew 25% in production and in the number of our Mexican employees, Piepsz says. J Number one player in Mexico s aeronautical industry. J 4,400 employees. J A growth rate of 25% per year in Mexico (production & employees) over the last two years. J Largest French investor over the last years in Mexico. J Nine plants and three main hubs (Chihuahua, Querétaro and Mexico City). J 10 inaugurations/extensions since

16 Negocios ProMéxico Mexico s Partner photos archive Mexico s Partner Negocios ProMéxico Volare: More Projection, Less Weight Three Mexicans, the founders of the aircraft and train interior company, Volare Engineering, have managed to foresee market movements and visualize the opportunities that could arise from adjustments. They have also succeeded in satisfying two different sectors with one product and one goal. by omar magaña Company specialization is of the utmost value in the aerospace industry. The key to success is focusing on one goal. Volare Engineering s comes down to reducing weight in transportation. The firm that Sergio Segura founded in Mexicali, in the state of Baja California, and that he now manages with Roberto Corral, sales and marketing director, and Edgar Paz, head of special projects, moves in one direction and without any distractions, strengthening its core business: the design and manufacture of furniture for passenger aircraft and train galleys and cabins. Partnerships and trade relations are welcomed. Only recently, the partners visited the Aircraft Interiors Expo in Hamburg, Germany, from April 9 to 11, 2013, and returned with the confidence that they would soon close deals with companies to produce furniture for low-cost European airlines, who must lighten the weight of increasingly smaller aircraft. Screens, dividing walls, storage furniture and luggage compartments made with lightweight composites are just a few of the products that carry the Volare brand. This is the chance to complement the new generation of products in the aerospace industry, not only in terms of design but also in terms of weight, says Roberto Corral. On the other hand, the secuester approved by the US Congress on March 1, 2013, has resulted in hundreds of cancelled flights, thousands of delays and the future reduction of air traffic volume due to the closing of control towers. But these are good signs for Volare because they represent opportunities for its sector: passenger railways will experience a spike in demand for tickets that will result in an increased need to buy light compartments for train cars. According to Corral, Volare had already become involved in the redesign of the Amtrak wagons that travel from Boston to Philadelphia and New York. The train s interiors will be very similar to first class [in an aircraft], he explains. Currently the profit margin from the company s activities in the aerospace and train sectors is 75% and 25%, respectively. After a year of uncertainty and frozen projects, Corral says that the firm will see many doors open and important plans resume their course in In the last two years we have practically doubled our income and it s very likely that we ll match it again this year, as we did in 2011, says this entrepreneur who also chairs the small and medium-sized businesses (SMB) commission of the Mexican Federation of the Aerospace Industry (FEMIA). Suddenly everything fell into place and this has been an extraordinary year; our projections for April are very similar to those of 2011, when we doubled our income compared to 2010, he adds. An Unstoppable Flight Among countless others, Volare Engineering partners with Driessen Aircraft, an affiliate of the multinational Zodiac Aerospace, that specializes in aircraft interior and galley equipment. In addition, Corral explains that the Mexican corporation is undergoing consolidation with another partner in San Diego, California, that will result in a more extensive catalog and broader participation in the industry with the integration of engineering and electronics solutions. When we receive a project, we take the model, improve it and make material recommendations, he says of the activities of a company that offers engineering, design, testing, manufacturing and assembly solutions, backed up by the work of 20 permanent collaborators and a temporary pool of 20. Volare Engineering has ISO: and AS9100 certifications and is preparing to obtain the Six Sigma certification for cost reduction and innovation in its projects and processes. An article by the National University of La Jolla, California, recently highlighted the experience of Volare Engineering s managers in global aerospace companies such as Airbus, Mc- Donnell Douglas, Fokker and Boeing, particularly Corral, who is an expert in continuous improvement processes. With the eventual acceleration that the firm would experience from its new commitments, we will incorporate more efficiency mechanisms to increase our productivity, explains Corral. Volare foresees a future filled with opportunities. According to Corral s projections, China will experience new increases in labor costs due to pressure from unions, which will lead to a situation that will continue to divert investments to Mexico. Another piece of good news for companies like Volare, which currently import a large portion of their raw materials, is that the businesses located on the border aerospace cluster and universities in the area, particularly the Universidad Autónoma de Baja California (UABC), are now creating projects to boost the production of materials with special rigidity, resistance, performance, durability and weight. An article by the National University of La Jolla, California, recently highlighted the experience of Volare Engineering s managers in global aerospace companies such as Airbus, McDonnell Douglas, Fokker and Boeing, particularly Corral, who is an expert in continuous improvement processes. Everything indicates that new materials will appear shortly. Meanwhile, Volare s three partners remain active both in Mexico and abroad, establishing agreements and looking for new customers. So fasten your seatbelts, and put your seats and tray tables in their upright positions, because Volare is taking off! N

17 Negocios ProMéxico Mexico s Partner photos courtesy of soisa Mexico s Partner Negocios ProMéxico modifies and manufactures over 450 different products for the aerospace industry. Jesús and Javier Mesta of Soisa, remember: We began in the aerospace sector because that was the area of opportunity in Mexico. After several analyses and studies we decided to go from manufacturing to crafting. Located in the northern state of Chihuahua, Soisa s tradition spans decades. It was born in 1949 as a manufacturing business and, over the years, has consolidated relations with companies in the US and Europe. Currently, after taking the leap to becoming an aerospace product manufacturer, Soisa now exports to various Asian and European countries, as well as the US. As Jesús Mesta indicates, We engineer, design and manufacture airplane seats for more than 70 international airlines. He adds that Soisa has two chief markets; one of them is The company performs a series of tests with software, we send off our designs, the customer approves them and then we deliver a sample; 90% of what we do is aimed at these two markets, seats for new airplanes and seat replacement for existing aircraft, says Mesta. A key element in Soisa s success is that it uses the concept low volume high mix unlike countries with high maquila volumes, such as China, which reduces costs for airlines. The average purchase order is for approximately 15 pieces; imagine changing your production lines for 15 pieces for one airplane and then for another aircraft. This gives us a huge competitive advantage over other countries such as China or the US, which do not offer low volumes due to the high cost of these changes, explains Mesta. Soisa s geographic location is another added value passengers who need to travel around the world and the need to replace old airplanes with new ones, he says. Soisa s CEO adds that manufacturing costs are lower in Chihuahua than in the US and Europe, and that there is highly-skilled human talent in the state. Workers in Chihuahua believe that the product has to come out with perfect quality and on time. That is a great advantage because we don t have to teach that to people, it is already ingrained in their culture. There are also various technical schools and universities with huge capacity, he explains. Soisa also works with the Tecnológico de Monterrey s aerospace research center, where together with the firm s designers, engineers and creators, university students innovate, design and manufacture new seat prototypes and other products. AS9100 certified (the standard for the aerospace industry), Soisa intends to conquer 35% of the global market in the coming years. According to Jesús Mesta, the company wants to be recognized not only for its production volume, but for its innovation, design and patents. He adds that a few months ago an airline launched a call for tenders to replace seats in 100 commercial passenger airplanes. While it took Soisa just ten days to send in its bid, the competition took three months. We will experience more growth in design, patent registration and new product innovation. We are constantly working to improve airplanes and make them lighter, he concludes. N Soisa, Like Sitting on a Cloud 20% of all new airplane seats in the world are manufactured by the Mexican Soisa. AS9100 certified (the standard for the aerospace industry), Soisa intends to conquer 35% of the global market in the coming years. According to Jesús Mesta, the company wants to be recognized not only for its production volume, but for its innovation, design and patents. by antonio vázquez Two out of every 10 new seats in airplanes that fly around the world bear the stamp of Soisa, a Mexican company that is currently the trusted supplier of quality products to 70 international airlines. In 2006, the firm began manufacturing airplane seat covers. Seven years later, with more than 190 employees, Soisa engineers, designs, supplying seat covers for airlines and OEM s such as Boeing and Airbus. We produce seat covers for newly manufactured airplanes. I can safely state that we have 20% of the global seat market, affirms Mesta. Soisa s other strong market is redesign. The company helps airlines reinvent the image of their airplane seats, from design to cushion and cover manufacturing. for the company. Some 250 miles from El Paso, Texas, the state of Chihuahua is a development center where deals can be closed with American and European companies. Mexico s great advantage is that it is one of the countries with the largest investment in the aerospace sector. The global aerospace market grows at an annual rate of 5.5%, boosted by two areas: the increase in the number of 30 31

18 Negocios ProMéxico Mexico s Partner photos courtesy of radiall Mexico s Partner Negocios ProMéxico Radiall, Connecting Airplanes in the Air This company located in the state of Sonora exports close to 70% of its production to the US; aviation giants such as Boeing and Airbus are among its main customers. by antonio vázquez When you are onboard a commercial Boeing or Airbus flight, chances are that the pilot s orders are travelling through wires and connectors manufactured by the Mexicanbranch of Radiall. Radiall is a French company that manufactures and assembles electrical connectors, coaxial cables, optical fiber and communication antennas for the aerospace industry. It has several expertise centers and manufacturing locations on three continents and 13 countries. In Mexico, it is currently located in Ciudad Obregón, in the state of Sonora. The company is part of Collectron International Management Inc., a pioneer of Sonora s Shelter Plan with over 45 years of experience. It offers administrative and legal support for Radiall s operations in Mexico. The company exports close to 70% of its annual production to the US, and another portion to its affiliates in France, which, in turn, distribute to other parts of Europe. Radiall in Ciudad Obregón serves mainly the US aerospace industry, both civil and military. A percentage goes to the European market; through our affiliates in France, these become end products for customers in the region, says Ildefonso Leyva, Radiall s plant manager in Sonora. Radiall is the main supplier of several families of connectors for large companies and has a number of patents in this area. Its main customers include top aerospace firms like Boeing, Airbus, Embraer and Safran Group s Labinal. Leyva explains that Radiall s connectors can be placed in any part of an aircraft; invisible to the human eye, they are installed in the body, windows and throughout the airplane s structure, helping it to function. Radiall began operating in 1999 in Nogales, another city in the state of Sonora. The company s goal was to increase its production capacity and quality in Mexico to offer its main aerospace customers greater logistics and cost advantages. At that time, Radiall had a workforce of 90 employees. Since then it has grown exponentially; so much so that in 2007 it moved to Ciudad Obregón, where it currently has 560 employees and hopes to grow to 600 by the end of Ildefonso Leyva is an optimist and a visionary. He believes that the aerospace industry is primed for huge growth in the near future and that this is a unique opportunity for Mexican businesses. Boeing and Airbus have sales scheduled for five to ten years. This industry has a stable future and this reassures us to continue working. The Boeing 787 alone, our main project, has sold 1,040 airplanes, of which 50 are already flying. We are not the only suppliers, but this is a demanding sector that requires cutting-edge technology, and that is a huge commitment for us which helps us stay at the forefront, he says. One of the advantages of closing a deal with Radiall is that it commits to reducing costs for its customers and proposes new ideas. Going back to the case of the Boeing 787, it has forced us to innovate to make a lighter and more fuel-efficient airplane. A significant number of the technology components that we manufacture are lighter; we use plastic instead of aluminum, and that represents cost savings for the customer, explains Leyva. Radiall s geographical location gives it an advantage over companies in other countries. The Mexican firm can serve its customers in the US in less time -mainly Boeing in Seattle-, reducing transportation costs and delivery times. But the main advantage of operating in Mexico is its people, their ability to learn the processes, how quickly they become efficient and effective and, most of all, their great loyalty towards the company and willingness to face new challenges, says Leyva. Leyva states that professionally, Ciudad Obregón has a large number of universities and technical schools that enable Radiall to develop employees with a high degree of technical knowledge on a par with any other part of the world. One of Radiall s goals is to design the first aerospace product made completely in Mexico in its Ciudad Obregón plant over the next two years. Meanwhile, the company focuses on satisfying the demand that the industry will have in the coming years, gradually reducing costs for its customers and innovating in the use of materials. N Radiall is the main supplier of several families of connectors for large companies and has a number of patents in this area. Its main customers include top aerospace firms like Boeing, Airbus, Embraer and Safran Group s Labinal

19 Negocios ProMéxico Mexico s Partner photos courtesy of tecnum Mexico s Partner Negocios ProMéxico Tecnum: The Importance of Visibility Tecnum, like other companies who have started to explore the aerospace sector propelled by government bodies or academic institutions, understands that the road is long and risky. However, the firm wants to power through by facing the challenges ahead and increasing its presence on a global scale. by omar magaña The time has come for Mexican small and medium-sized businesses (SMEs) from the aerospace sector to gain visibility with Original Equipment Manufacturers (OEMs) and Tier 1 s to ensure their involvement in the future activities of an ever-changing industry. There is a great appetite in the aerospace sector and a remarkable trend for reductions in the supply base; OEMs want to deal with less suppliers and possibly one stop shops says Guillermo Bonilla, CEO of Tecnum Service, a subcontract machining shop specialized in the manufacturing of prismatic components in hard materials located in Querétaro, Mexico. The visibility of Mexican SMEs seeking to lock into the sector, says Bonilla, will come from their ability to position themselves as high-technology manufacturers based in innovation, not only relying on the low labor costs which won t last long. Partnerships with bigger international players could lead to a faster and more intensive growth resulting in more solid, productive and qualified companies. The task is to persuade large international players to invest in Mexico to gain market and increase their global competitiveness taking advantage of a solid, young and certified workforce including well educated engineers. Tecnum Service has just about the right attributes to earn a spot in this race. It is a business that has made a name for itself in the automotive sector by supplying OEMs such as TRW, Case New Holland, Cummins and GM with products ranging from prototypes up to medium volume production parts. Through the experience gathered during many years machining cast iron and steel parts for a demanding sector such as the automotive, Tecnum has acquired an expertise that allows it to face the challenge of entering the aerospace market, leveraging its know-how to comply with the high demanding requirements of that industry. Bonilla believes that consolidating Tecnum as a high-ranked supplier which satisfies the strict productivity and quality standards of the automotive industry, adding a premium to the mainly quality-focused but less productive aerospace sector is no utopia but a real possibility. According to our roadmap we will move from the automotive and commercial sectors in which we have worked so far, gradually integrating aerospace products, Tecnum service s conversion to an aerospace supplier has involved changes within the company, where the most significant are those related to retraining its human capital. so to have a good balance of both explains Bonilla. Tecnum has the right equipment: robust and flexible manufacturing cells to machine complex parts and a team of engineers with the competences required to produce prototypes and small batches typical of the aerospace industry. This has given the company the confidence to become a supplier of relatively large components out of hard materials such as titanium for OEMs that specialize in products such as landing gears, flats and slats assemblies, among other. The introduction to the aerospace industry programs supported by Querétaro s Secretariat of Sustainable Development (SEDESU); the participation in trade shows and benchmark studies carried out by the company itself have been key elements to identify niche markets and opportunities in the aerospace industry. However, Bonilla states: the transition from our traditional market to one on the rise has had its key challenges. What does this change imply? Tecnum service s conversion to an aerospace supplier has involved changes within the company, where the most significant are those related to retraining its human capital. Like other up-and-coming SMEs in the sector, Tecnum intends to put its 36 collaborators in sync with the new organizational culture inspired by continuous improvements through constant training. On the other hand We have been forced to adapt and complement much of our equipment. We have made some very heavy investments, explains Bonilla. [Integrating into the sector] is very expensive, as we have to undergo certification processes and adapt our equipment to meet the standards he adds, but it s the only way to meet the objectives established by the company in light of the changes: being competitive, staying within the niche that other companies with Mexican equity have not explored: going from Tier 3 to Tier 2 and increasing profits from aerospace products, exceeding what has been Tecnum s production axis so far. Bonilla believes he belongs to the group of Mexican entrepreneurs who want to transform the profile of Mexican manufacturing; who want to escalate to more value added processes that integrate better trained human capital. We have to focus more on innovation and technology. Our medium-term goal is to create better-paid and higherquality job positions, he says. According to his plans, Tecnum Service will be a more integrated company in the same niche by mid or end 2014, after an internal restructuring and collaborations with Tier 1 and Tier 2 businesses seeking partnerships in Mexico. In addition, Bonilla believes, a closer and more collaborative participation between the private sector and research institutions such as the National Council of Science and Technology (Conacyt). The actions of these bodies must contribute to the certification processes and match the efforts in favor of innovation stimulated by entrepreneurs. N

20 Negocios ProMéxico Mexico s Partner photos courtesy of frisa Mexico s Partner Negocios ProMéxico Frisa: A Perfect Fit Frisa is an integral piece of the soul that puts aircraft in the air. Its hi-temp seamless rolled rings and high-tech products meet the needs of some of the world s top aircraft engine manufacturers. by omar magaña Frisa is the perfect match for aircraft engine manufacturers. The Mexican company has the experience needed to forge metals with special properties, supported by a highly-skilled workforce which has made a career out of it, an unbeatable geographic location (some 200 kilometers from the Mexico- US border) and the best production technology in its field. Since 2003, Frisa has supplied seamless roll formed rings made from nickel and titanium alloys to Original Equipment Manufacturers (OEMs) such as Rolls-Royce, General Electric (GE) and Pratt & Whitney, for the outer shells of turbines and inner areas such as combustion, transmission and exhaust chambers. Frisa is growing in a market it entered somewhat recently, after a decision taken to diversify its export locations. Its products, rolled rings, contour rings and open die forgings are now supplied to the aerospace, oil, wind, energy, construction, mining and general machinery markets. Oswaldo Ramírez, manager of Frisa s aerospace unit mentioned that the aerospace sector accounts around 15% of the firm s annual turnover. I remember that when we began operations in this new plant, our knowledge of the [aerospace] industry in Mexico was very limited, he points out. When we decided to venture into this industry, we knew of the tremendous challenges ahead of us he adds. Founded in 1971, the company has three plants in the state of Nuevo León: Santa Catarina, García and Superalloys. It has the technology to cut the raw material and heat, press, roll, heat treat, machine (pre-machining and semifinal machining), analyze and test. The company has developed its own logistics by ground, sea or air for a worldwide delivery of large and small parts. New Opportunities With the launching of Boeing and Airbus s new large projects, Frisa sees another promising window of opportunity and with it a new challenge: to increase the size of their workshops and machinery. The firm is in the middle of a growth project that involves boosting alliances with machining companies in Nuevo León to develop in the terminal or more complex phases of machining, an area they haven t fully explored. Ramírez explains that, with regard to the aerospace sector, Frisa delivers semi-finished components, rings that the customer will finalize and assemble in the engines. He adds that until now, we have found a dimensional difficulty to subcontract machining for parts the size of ours. Frisa s strength comes from the expertise it has gained through four decades of treating raw materials like carbon, low-alloy, stainless steels and, recently, titanium and hi-temp alloys also known as superalloys. Its manufacturing processes, quality standards (ISO 9000, ISO and AS9100) and engineering development are designed to match customer needs to the specifications established by the industry it serves. The company works with pressure, heat and wear-resistant metals for the engine market. If you open an engine and analyze what the metallic components are made of, you d realize that approximately 70% are nickel-based alloys, 20% titanium-based and 10% aluminum-based and special steels, explains Ramírez. If Frisa s aerospace competitors, which are all located in the US and Great Britain, are noted for a long history in the sector, the Mexican corporation s advantage, says Ramírez, is the region s experience in metallurgy. The company s process controls are supported by the latest information technology and the customer service expertise has been developed thanks to a wide portfolio of consumers from diverse sectors for which they have worked. Furthermore, while large sums of capital are required to participate in the aerospace sector, the investment needed to build production plants in Mexico is relatively lower than in countries where most of Frisa s competitors are located. We have a great deal of space available in Mexico and construction costs are lower compared to other countries, says Ramírez. Moreover, companies such as Frisa have benefited from the education and training efforts that Mexican universities have made specifically for the rapidly growing aerospace industry. Frisa s aerospace unit has some 200 employees, including engineers who work alongside customers to analyze the geometries and specifications of the components to be developed, and structure the best processes in terms of costs and quality. Ramírez recognizes that the aerospace industry is designed to remain unchanged, where the margins to innovate and propose new designs are somewhat reduced given the years of research that go into every prototype. It is a strict industry that demands products that comply with previously validated and approved standards. Innovating in this industry means constantly seeking for new ways to benefit customer production processes; something Frisa does only too well. This enables it to visualize an optimistic future within the aerospace sector. The next decade will bring about a period of higher growth. What is certain is that Frisa s potential is engineered to last at least for the next two decades, concludes Ramírez. N

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