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Export and FDI Promotion Institutions: Are there any success stories? World Banks Seminar on Policies to Promote Export Growth and Diversification May.

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Presentation on theme: "Export and FDI Promotion Institutions: Are there any success stories? World Banks Seminar on Policies to Promote Export Growth and Diversification May."— Presentation transcript:

1 Export and FDI Promotion Institutions: Are there any success stories? World Banks Seminar on Policies to Promote Export Growth and Diversification May 9-10, 2006 Héctor Reyes Retana President and CEO Mexicos National Bank for Foreign Trade BANCOMEXT

2 2 Contents Exports and FDI evolution Bancomext: some findings in trade promotion Bancomext results

3 3 Attraction of FDI Coordination of different organizations – Federal and local governments – Private-public sectors Promoting the competitiveness of Mexican firms – Financing – Promotional tools – Technical assistance MEXICOS EXPORT STRATEGY Has relied on stability, liberalization, trade agreements and promotion Macroeconomic stability Free floating exchange regime Trade liberalization Market access – Multilateral system – Bilateral trade agreements

4 4 e/ Estimated Source: Banco de México Due mainly to trade liberalization and NAFTA Between 1990 and 2005 total exports increased from 40 to 214 billion dollars – Average annual growth rate: 12% Exports of manufactures account for 82% of total exports – While in 1981 oil exports share reached 73% For 2006 total exports are estimated around 235 billion dollars (billion dollars) Total exports (billion dollars) DYNAMIC EXPORT GROWTH NAFTA

5 5 Foreign direct investment, (million dollars) In the last decade Mexico has received 140 billion dollars in FDI – And remains as the second FDI recipient among emerging economies The U.S. is the main FDI source for Mexico – With 63% of total – And Mexico is the leading destination of U.S. investment Source: Secretaría de Economía NAFTA TRADE LEADS TO INVESTMENT OPPORTUNITIES So Mexico has become a major recipient of FDI

6 6 MAIN CHALLENGES AHEAD Decreasing share in world exports Mexico ranks as tenth world exporter (considering the European Union as a whole) But has started to decrease its share in world exports – From 3.3% to 2.8% between 2000 and 2005 This is due to: – Loss of competitiveness arising from pending domestic reforms – Participation of new countries in international trade, such as China – The impact of Nafta started to fade out and other countries have obtained similar advantages Source: WTO

7 7 MAIN CHALLENGES AHEAD To incorporate a greater number of small and medium size firms to the export chain – 543 firms account for 80% of non-oil exports – The other 20% comes from 22,854 firms To diversify export markets – 86% of total exports go to United States To increase the national contents of exports


9 9 BANCOMEXT OVERVIEW Founded in 1937 Own resources generation Export credit and guarantees Information, advise and training Promotion in Mexico and abroad Focused on small and medium size exporting firms Attraction of foreign direct investment into Mexico 35 representative offices in Mexico and 31 offices abroad With the irrevocable full faith and credit obligation of the Mexican Government

10 10 Mexican exporter Services in Mexico: Information Consulting Training Technical assistance Financing Services through the Overseas Trade Commissions Business agendas International events Promotion of exportable goods Commercial brokerage 22 Bancomext Centers in Mexico 31 Trade Commissions abroad Corporate Headquarters Export Projects Corporate Headquarters Coordination Development of new products Follow up and feed back Foreign importer BANCOMEXT TRADE PROMOTION WORKS A COORDINATED SYSTEM Involving domestic and international infrastructure

11 11 Developing export capabilities Market research Export market development Commercialization Start Diversification Information Consulting Training Technical assistance Publications FIRST TIME EXPORTER: EXPORT DEVELOPMENT PROCESS Export services vary according to the firms development and experience in international business PICKING AND CONTACTING CLIENTS: Business agendas International trade fairs Exporters missions International PYME Insurance Letters of credit Guarantees Credit SALES AND DIVERSIFICATION Trade mediation Financing Letters of credit Financing of Mexican investments abroad MARKET PROSPECTS: Market opportunities Market studies Promotion of exportable goods Marketing

12 12 INTERNATIONAL TRENDS IN EXPORT PROMOTION ORGANIZATIONS To offer a more efficient support to exporting firms Greater collaboration between the public and private sectors – The private sector has an increasing role in the design of export strategies and its related services – And has started to cover some export promotion costs To concentrate in one single entity all tasks related to export promotion – On this regard the following quotation from the U.S. National Export Strategy may be helpful: (U. S. firms)... expect seamless service across agencies and are frustrated that the U.S. Government does not always function as if it were one entity. They expect government personnel to be fully trained to take them through the maze of government programs and to understand the big picture. Finally, they want more proactive government involvement from the earliest stages of project development through the entire life cycle of a project 1/ 1/ U.S. Department of Commerce, The 2002 National Export Strategy, p. vii

13 13 INTERNATIONAL TRENDS IN EXPORT PROMOTION ORGANIZATIONS To offer a more efficient support to exporting firms To provide services that support the whole export chain and not only one isolated stage – This promotes overall competitiveness due to a more efficient operation along the productive chain Focus on the development of exportable goods and competitiveness To bring together in one single organization export promotion and the attraction of FDI Improved systems to keep track of export promotion and evaluate results – Performance indicators

14 14 BANCOMEXT APPROACH TO EXPORT PROMOTION Close collaboration with the private sector and local governments – The leading private organizations are in our Executive Board – In many cases we develop joint promotional activities – We have gradually increased the share of products and services that are sold to our customers Bancomext solves Mexican exporters needs regarding financial and promotional services – Offers trade promotion, financing and attraction of FDI – One stop shop for those firms looking for services that would help them compete abroad

15 15 BANCOMEXT APPROACH TO EXPORT PROMOTION Our services cover the whole export cycle – The coordinated work of our offices constitutes an important value added to the export chain The comprehensive approach has resulted in efficiency gains – For Mexican exporters – In the attraction of FDI, since trade and investment flows are closely linked Promotional services are provided in Mexico and abroad – In order to facilitate the contact between exporters and importers Financing is offered directly or through financial intermediaries

16 16 BANCOMEXT APPROACH TO EXPORT PROMOTION Promotion is focused on specific export projects –Matching highly competitive exports and the specific markets demanding those products –Project management and supervision through an electronic network that involves: Our foreign offices around the world, our national branches all over the country and the central headquarters in Mexico City Follow-up, evaluation and feed back –To improve process operation and customer satisfaction we systematically measure the impact of the Banks services and their performance –A whole system of performance indicators has been implemented There is no central government budget for export promotion


18 18 BANCOMEXT SHARE IN MEXICOS FOREIGN TRADE LOANS, (%)* % * Share in total foreign exchange outstanding loans granted by the banking system The Bank has had an increasing role in overall export financing One out of five dollars granted by the banking system are channelled through Bancomext %

19 19 TOTAL CREDIT, (Million dollars) 4,939 5,049 5, ,986 5,254 5,800 p/ Program Bancomext grants credit either directly or through a network of financial intermediaries The Ministry of Finance has asked Bancomext to strengthen second-tier financing – So we are increasing the number of our financial intermediaries and developing new financial products to fulfill this mandate

20 20 TRADE PROMOTION CONTRIBUTES TO EXPORT DEVELOPMENT Exports generated by Bancomext services (Million dollars) *Considering firms with annual exports between 200 thousand dollars and 20 million dollars p/ Program Bancomext services generate annual exports over 6 billion dollars This amount represents 38% of SMEs exports* Each year Bancomext promotional services enable, on average, 2,000firms to export

21 21 BANCOMEXT: NUMBER OF FINANCIAL AND PROMOTIONAL SERVICES PROVIDED TO SMEs BETWEEN 2001 AND 2005 In the last five years services granted to SMEs have multiplied by three

22 22 ATTRACTION OF FDI * 935 Million in extraordinary investments in automotive, autoparts and aerospace In 2002 Bancomext received the mandate to promote FDI We work in coordination with: – The Ministries of Economy and of Foreign Relations as well as with state governments Between 2002 and 2005 FDI projects reached five billion dollars – Mostly in export oriented activities such as automotive and autoparts, electronics, textile and apparel, food and agribusiness and metal-mechanic

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