Opportunities

Some facts The market, the economy

Industrial redistribution US Imports Market Share Source: USDOC

US Non-petrol Imports Exports as a Growth Driver Market share (January-August 2010) Source: World Bank

Integration is the Future The Picture

Source: World Economic Forum. The Global Competitiveness Index: Basic Requirements. 139 economies are considered. Macroeconomic Environment (Score and Ranking) Emerging market overheating index, 2011 Source: The Economist Argentina Brazil Hong Kong India Indonesia Turkey Vietnam Singapore Thailand Egypt Peru Philippines Chile China Colombia Poland Saudi Arabia South Korea Venezuela Russia South Africa Czech Republic Mexico Pakistan Taiwan Malaysia Hungary Strong recovery and macroeconomic stability Mexico Despite the perceived economic slowdown in the World … Mexico is in a situation less vulnerable than other countries

Looking for reasons? Source: Countries' Central Banks and National Statistics Offices, JP Morgan and Global Competitiveness Report 2009 Y With a budget deficit of under 3% of GDP and a total public debt of less than 40% Mexico would meet the Maastricht criteria!

Forecasted growth of middle income households 1 (%, ) Source: Own estimations based on ata from Winning in Emerging-Market Cities, Boston Consulting Group (2010). 1/ Middle income households are those with annual income over $10,000 dlls. Expenditure of households on goods and services for individual consumption (USD, 2008) Source: Own estimations based on data from Global Purchasing Power Parities and Real Expenditures, 2005 International Comparison Program - World Bank (2008) 1/The original data are for 2005 and the estimations for 2008 were made using the observed growth rates from those countries. Household expenditures Although income levels in Mexico are similar to those in emerging economies, the level of household consumption is higher.

Source: AT Kearney, 2010 Projected average annual GDP growth rate Projected average annual GDP growth rate (% ) In the long run, developing countries outpace G20 advanced economies

Source: Goldman Sachs. The N-11: More Than an Acronym. Global Economics Paper No: 153. March, / Estimaciones de Goldman Sachs th place 11th place Gross Domestic Product (Billion Dollars) GDP per capita (US Dollars) GDP outlook It is estimated that by 2050, Mexico will become the fifth largest economy and its GDP per capita will be comparable with those of developed countries.

Trade facilitation indicators: Mexico's rank (WEF market access sub index) Source: World Economic Forum 2010 Source: Doing bussiness Trading across borders rank = improvement Competitiveness: market access

Deregulation advances Reduction of norms in Federal Government (number) (number) Time to open a business (days) (days) Source: Doing Business 2011, World Bank. Source: Ministry of Public Function Source: World Bank

Foreign Trade? This speaks for itself

Trade and legal frameworks Europe: seize opportunities and deepen FTAs North America: the competitiveness agenda Latin America: promote regional integration Asia: selective and ad hoc approach Presence in forae: ( WTO, APEC, OECD, LAIA) X: 84.2% M: 51.1% X: 5.3% M: 12.6% X: 6.6% M: 4.6% X: 3.3% M: 30.8%

*Includes Africa, Oceania and other European countries Source: 2011 Data. Mexico’s Central Bank and Global Trade Atlas. NAFTA: +$101 billion USD LATIN AMERICA: +$11 billion ASIA: -$92 billion USD EUROPEAN UNION: -$18 billion USD OTHERS*: -$3 billion Mexico’s Trade Balance 2011

Mexico is, in a nut shell The Mexican economy has a GDP of roughly 1 trillion dollars, with a population of 112 million. The country’s GDP is expected to reach 1.4 trillion dollars in 2015 (IMF). A big market Mexico has 11 FTAs covering 43 countries, which represents more than 60% of world GDP. … a trade hub Manufacturing costs: Mexico has a business cost advantage of 18.2% average (of 17 industries) relative to the US (Source: Alix Partners 2009). … cost efficient Mexico enjoys macroeconomic stability, responsibly managed state finances and is pushing reforms to further improve the business environment … and stable!

Demography is destiny (2030)

Competitive advantages 1.Geographic Location Large U.S. border and coast both at the Pacific and Atlantic Oceans and easy access to South America 2.Preferential access to foreign markets 11 FTAs with 43 countries and an approved legal framework with major trading partners 3.Skilled and competitive labour force Skilled workforce at relatively low cost, managerial skills and cultural affinity 4.Demographic window In the next three decades, the number of economic dependents will reach a record minimum (2025) Attractive FDI destination

Foreign direct investment inflows per capita ( ) Source: Global Insight Facts: BRICS get all the talk BRICS get all the talk In spite of the hype, Mexico gets at least as much per capita FDI as they do In spite of the hype, Mexico gets at least as much per capita FDI as they do

COUNTRY BrazilRussiaIndiaChinaMexicoIndonesia South Korea Turkey BRICMIST 1. Macroeconomic environment 2. Open economy 3. Economic complexity 4. Total manufacturing cost 5. Domestic market 6. Demography 7. Workforce quality 8. Engineering graduates (per capita) 9. Democratic system 10. Human Development Index Mexico is well positioned 20 Equal or above Mexico Clearly under Mexico Below Mexico, but close Source: 1. Macroeconomic Environment: WEF The Global Competitiveness Report , Macroeconomic Environment/ 2. Open Economy: Doing Business 2012, Ease of Doing Business/ 3. Economic Sophistication: The Atlas of Economic Complexity, Harvard University/ 4. Total Manufacturing Cost, Manufacturing Outsourcing Cost Index, Alix Partners/ 5. Domestic Market: WEF The Global Competitiveness Report , Domestic Market Size Index/ 6. Demographic Bonus: UN World Population Prospects. The 2010 Revision. Forecast of total dependency rate in 2025 (population <15 & 65+ years) (15-64)/ 7. Labor availability and quality of the DFI Benchmark, Automotive OEM, Skills, attitudes and productivity/ 8. Engineering Graduates (per capita): UNESCO Institute for Statistics, International Monetary Fund. Engineering, manufacturing and construction graduates per capita 2009/ 9. Democratic System: The Economist, Democracy Index 2011/ 10. Human Development Index: UN, Human Development Index.

Currency stability = risk mitigation Expected Real Exchange Rate variation ( ) Source: Global Insight NaturalHedging RISK Buy and manufacture where you intend to sell

After NAFTA? Automotive leads the way

Proof: what Volkswagen is doing Source: Volkswagen de México

This is not due to chance

World wide producer of light vehicles ( 2.55 million units ) 8th 5th World wide producer of commercial vehicles ( 136,678 units ) 2 World´s largest vehicle producer ( 2.69 million units ) 1 19 of the top leading automakers are located in 15 states of Mexico. The automotive industry in Mexico accounts for: 6% of the Foreign Direct Investment (FDI) in the country 3 4% of the national GDP 4 20% of the manufacturing GDP 4 23% of Mexican total exports 5 6th 6th 8th 6th Exporter of light vehicles ( 2.14 million units ) 1 Exporter of commercial vehicles* ( 95,175 units ) 2 Occupied workers 4 : 68,895 States with automotive production 1 Source AMIA 2 Source: OICA 3 Source: Ministry of Economics 4 Source: INEGI 5 Source: Business Monitor International *Estimated Mexico´s place in the automotive industry (2011)

Highest investment attraction in aerospace manufacturing during the last decade. 6 th destination in the world for research and development investment. More than 240 companies are settled in the Mexican aerospace industry, 270% more than those established in the country in Mexico is top 10 provider to the American Aerospace Industry, better than all BRIC countries. The level of exports tripled in 6 years, reaching 3.2bn dollars in Aerospace

What has been done to promote the IT sector in Mexico? Exports & investment Human capital Legal certainty IT promotion Competitiveness and innovation Quality impulse Funding Positioning Latin American leader developer of IT solutions and services with high processing capability. Investment in IT as GDP % Billing (MUSD) 2,29610,87015,000 Employment 124,245600,000625, PROSOFT 2.0: A long run public policy (2002 – 2013) 7 strategies Start, progress and goals

Mexico is ranked as the fourth global player in the exports of IT services and BPO after India, the Philippines and China. Gartner Group Mexico is the only Latin American country that scored "Very Good" in the assessment of cost, while other countries have had only a grade of "Good." Gartner Group Mexico is set at position 6 in the Global Services Location Index 2011, becoming the first North American country due to the availability of human capital and the financial attractiveness (costs). AT Kearney Mexico is ranked as the most competitive location allowing a cost savings of 53.4% in activities of Back Office / Call centers, 31.7% in Software Design and 34.1% in Web and Multimedia, compared to the location of U.S. operations. KPMG Testimonials

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Thank you for your kind attention !!! Erwin Feldhaus