Mexico House View. Living the Mexico Moment. Francisco Rios Centre Director, Mexico Overseas Centre

Transcription

1 Mexico House View Living the Mexico Moment Francisco Rios Centre Director, Mexico Overseas Centre

2 Land area of 1.9 million km 2 in a snapshot 120 m population Strategic location at the gate of NAFTA Trade with the USA is over 1million USD per minute! Rich on natural resources Committed to free trade Access to 45 countries through 12 FTAs Investment Grade USD 1.2 Trillion economy S&P BBB+, Moody s A3, Fitch s BBB+ with stable outlook

3 Singapore's stock of Direct Investment Abroad (DIA) in Mexico was S$1.14 billion S$ 4.2 Bi S$ 1.7 Bi Trade between Singapore and Mexico has doubled over the past decade Growing Bilateral Ties

4 Political Environment the new PRI year one The Teacher - Elba Esther Gordillo Pact for Mexico Dec 2 nd stock take 17 structural reforms more reforms in one year than in 20 years before 5 will require constitutional amendments Fight for professionalization and to lessen the power of the unions El Chapo Captured

5 A country under reform

6 Economic Outlook 2013 a year of contradictions 2014 to 2019 important positive sentiment FDI USD billions Economic Strengths An Open Economy that continues to welcome new partners in search for diversification Important Energy producer with increased emphasis on investment and technology adoption through new partnerships enabled by the recent reforms Strong integration with North America (4.7) GDP % Growth An internationally strong private sector

7 Economic Strengths - An Open Economy that continues to welcome new partners in search for diversification 1 2 NAFTA North America Free Trade Agreement Pacific Alliance Pro-tempore Presidency in 2014 Top exporter in Latin America and the 16th largest exporter in the world 3 Trans-pacific Partnership (TPP) Exports of goods and services - 1/3 of GDP Imports of goods and services - 1/3 of GDP 12 FTAs covering 45 Economies

8 Economic Strengths - Energy Outlook Important Energy producer with increased emphasis on investment and technology adoption through new partnerships enabled by the recent reform How to increase production? The Mexican approach Short term Long term Shallow waters and onshore Deep waters (Strategy with USA) Source: Pemex Business Plan Investment in new equipment (platforms) New tools from Energy reform Renewal of fleets (ten year cap) Partnership with foreign companies Possibility for private firms to get a variety of contracts (i.e. licenses) Possibility for companies to book oil reserves for financial-reporting purposes (though hydrocarbons remain state property) Ends monopolies of PEMEX (NOC) and Federal Electricity Commission, which must now compete against private power-generators Creation of sovereignwealth fund to invest oil revenues for the long term Removal of powerful and murky oil-workers union from PEMEX s board

9 Economic Strengths - Energy Outlook Expected investment by PEMEX PEMEX Investment (USD Bi) % E&P Industrial Processes (est) % Increase in purchase of equipment Estimated requirements Drilling Equipment Type of Platform chartered by Pemex Worst case Best case (pure leasing) scenario scenario Semi submersibles Jack ups Fixed platforms Total

10 Economic Strengths - Manufacturing Outlook Strong integration with North America for 20 years has developed the industry into a manufacturing powerhouse 18% of the economy Automotive Production: 2.6 million units Export: US$ 78.5 billion (2011) Investment: US$ billion ( ) Auto Components Market Size: US$ 32.6 billion (2011E) US$ 60 billion (2020E) internal sales Manufacturing cost (compared to the USA) 87% (2012) Investment: US$ 8.4 billion ( ) Med Tech Production: US$ 8.56 billion (2011) Export: US$ 6.07 billion (2011) Consumption: US$ 6.45 (2011) US$ (2020) E Aerospace Export(1): US$ 4.3 billion (2011) US$ 12 billion (2020E) Investment(1): US$ 6 billion ( ) Growth rate(2): Average of 20% annually over the last seven years Ranking(2): 15 th in 2009 Global producer Increasingly competitive vs china Sources: (1) BMI Mexico Business Forecast Report Q (2) CIA World Factbook, th Largest Exporter Worldwide 93% Manufacturing Labour Costs of China 1st Largest Manufacturing Country in Latin America USD 15 Bi Market opportunity in Machining and injection molding alone

11 Mexico and its relationship with the USA Area Mexico 2 million sq km, 14 th largest country Close to USD 400 billion in bilateral trade Main supplier of med devices to the USA Population GDP (2012) GDP composition 115 million (2012 E), 11 th most populous country US$ trillion (2012 E), 12 th largest economy Agriculture 3.8% Industry 34.5% Services 61.7% One of the most dynamic border regions in the world FDI US$ 277 billion ( ) Over USD 100 billion in combined FDI

12 Made in.north America? Cars manufactured in Mexico are said to cross the US border up to 8 times during the manufacturing process. USA 40% of the content of Mexican exports to the USA was originally made in the USA. About 30% of the content imported from the USA was originally made in Mexico Complementary industries that encourage intra-regional manufacturing.

13 Nearshoring to Mexico vis a vis China Stable costs. Stronger IP protection Faster delivery to USA customers More transparent government regulations. Closer contact with USA customers Increasing costs. Undervalued currency. Difficulty to implement just in time delivery for US customers. Long delivery times. Increasing logistic cost.

14 Light vehicles plants location in Mexico. *Fiat producirá vehículos en la planta de Chrysler en Saltillo

15 Auto parts players and capabilities (1) Northeast Region 198 plants Products/Systems: Air condition, automotive systems, plastic parts, electric systems parts, motor parts and machining. Northwest Region: 70 plants Products/Systems: Air conditioner and heating systems, interiors, electrical systems and accessories.

16 Auto parts players and capabilities (2) Central Region: 101 plants Products/Systems: Seats, air conditioning, car jack, interior components, motor parts, electric systems,, metal stamping and suspension. Bajío Region: 142 plants Products/Systems: Metal stamping, electric components, breaks, rubber parts, motor parts, automotive transmission.

17 Electronic devices plants in Mexico.

18 Aerospace companies in Mexico Aerospace industry: Over 500 companies across Mexico Products/Systems: Metal stamping, electric components, breaks, landing gears

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20 Investment opportunities in Mexico (Automotive) 71% of the total demand are imported processes, therefore there exists investment opportunities for foreign companies. Some of the processes with the highest demand are: stamping, foundry, forging and machining Total market value and business opportunity in the supply chain for the Mexican automotive industry (billion dollars) 18.1 Billion dollars Opportunities for Singapore companiesforoverusd 15 Domestic Production billion Market Opportunity * Stamping Foundry Forging *Level of demand not produced in Mexico Machining Injection Molding (Plastic) Die casting Other/Parts/Co mponents Automotive Interiors (seat covers and Electronic Assembly Cable and/or wires

21 Economic Strengths Strong Private Sector Yet dominated by a limited number of players 2 state companies and 14 conglomerates control 75% of the top 13 Mexican billionaires are worth US$145.8 billion 100 companies net sales

22 Mexico is undertaking major reforms which, if successful, will alter Mexico s growth trajectory. Mexico will continue to be a key trading hub with NAFTA. Mexico has a history of trade across the Pacific and Atlantic; and can act as a conduit between North and South America. Similarly, Singapore is a key trading hub for Southeast Asia and ASEAN. Singapore and Mexico are well placed to provide this important bridge across the Pacific Minister K Shanmugam visit to Mexico May 2014

23 Thank You