1. Outlook for the Mexican Economy Octubre, 2011

2. Index I.External Conditions II.Macroeconomic Environment III.Mexican Competitiveness

3. I. External Conditions Industrial Production Index Jan-2005 = 100* Real Gross Domestic Product Forecasts for 2011 and 2012 (a) Percent *Seasonally adjusted. Source: CPB Netherlands. (a) Solid lines refer to the forecast of 2011 and dotted lines correspond to 2012. Source: Blue Chip. 2

4. Forecast I. External Conditions General Government Balance Percent of GDP Gross Public Debt Percent of GDP Source: Fiscal Monitor (IMF) and Mexico’s Ministry of Finance (SHCP). 3

5. Index I.External Conditions II.Macroeconomic Environment III.Mexican Competitiveness

6. Economic Activity Indicators (a) Index 2003 = 100* Manufacturing Exports by Destination Index 2007 = 100* *Seasonally adjusted. (a) Industrial production data up to August, 2011. Total and Services data up to July, 2011. Source: INEGI. *Seasonally adjusted. Source: Banco de México. II. Macroeconomic Environment in Mexico 5

7. Commercial Establishments’ Sales Index 2008 = 100* Gross Fixed Investment and Components Index 2005 = 100* *Seasonally adjusted. Source: INEGI. *Seasonally adjusted. Source: INEGI. 6 II. Macroeconomic Environment in Mexico

8. IMSS-insured Workers (a) Million workers Unemployment Rate Percent* Nominal Average Income per Person Employed (a) Annual change in percent (a) Permanent and temporary workers in urban areas. Source: IMSS and seasonally adjusted by Banco de México. *Seasonally adjusted. Source: INEGI. (a) Data for 2011 are preliminary and are based on population projections from INEGI. Source: Calculated by Banco de México with information from ENOE, INEGI. 7 II. Macroeconomic Environment in Mexico

9. Headline and Core Inflation Expectations Annual Percent Headline Inflation Expectations for Different Time Horizons Annual Percent Source: Banco de México’s survey. 8 II. Macroeconomic Environment in Mexico

10. Nominal Exchange Rate Pesos per dollar Government Securities Holdings of Foreign Investors Billions of pesos Source: Banco de México. 9 II. Macroeconomic Environment in Mexico

11. Index I.External Conditions II.Macroeconomic Environment III.Mexican Competitiveness

12.  Mexico has a number of comparative advantages that position it as an attractive investment destination: Excellent location Market size Openness Strong institutions Competitive infrastructure Increasingly qualified labor force Stable macroeconomic environment III. Competitiveness in Mexico 11

13. Global Competitiveness Index Change in Ranking Position from 2010 to 2011* * A positive change represents a better position in the ranking. Source: World Economic Forum, Global Competitiveness Report 2010-2011, 2011-2012. III. Competitiveness in Mexico 12

14. Global Competitiveness Index Ranking (a) (a) Rank among 142 countries for 2011 and 139 countries for 2010. A lower value in the rank implies a better position in the ranking. Source: World Economic Forum, Global Competitiveness Report 2010-2011. III. Competitiveness in Mexico 13

15. Competitiveness Indicators: Market Size Score according to World Economic Forum Source: World Economic Forum, Global Competitiveness Report 2011-2012. Note: Countries are ranked by the WEF according to their score among the 139 evaluated countries. Macroeconomic environment and market size are the two competitiveness pillars (out of 12) in which Mexico performed best. Countries selected in these graphs are those of Mexico's basket of competitors which are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). For comparisson with Latin American countries, Brazil, Chile and Colombia were also included. III. Competitiveness in Mexico 14

16. Free Trade Agreements: *  Mexico is a gateway to more than a billion consumers and 60 percent of world GDP. Mexico has 11 free trade agreements with 43 countries. It has 6 Economic Complementation Agreements (ACEs, for its acronym in Spanish), it has signed Promotion and Reciprocal Protection of Investments Agreements (to provide legal protection to productive investments) with 25 countries. It has Agreements to Avoid Double Taxation with more than 31 countries. III. Competitiveness in Mexico 15 Source: ProMéxico.

17. III. Competitiveness in Mexico (a) Since November 19, 2006 only Mexico and Colombia participate in the G3 Free Trade Agreement. (b) Agreement between Japan and the United Mexican States for the strengthening of the economic partnership. Source: ProMéxico. Free Trade Agreements 16

18. Clusters and Technology Centers  The large size of the country contributes to various cities functioning as service providers, which benefits Mexico in comparison with other countries that depend on labor force concentrated in one city. III. Competitiveness in Mexico 17 Puebla: Automobile industry Monterrey-Saltillo: Automobile industry Queretaro: Aeronautics Baja California: Tourism Jalisco: Information Technology Quintana Roo: Tourism Mexico: Automobiles And others

19. Ease of Doing Business Change in Ranking Position from 2010 to 2011 Source: Doing Business 2011 IFC. III. Competitiveness in Mexico 18

20. Mexico Number of procedures Latin American Countries, 2011 Number of procedures Main Competitors of Mexico in International Markets, 2011 Number of procedures III. Competitiveness in Mexico: Procedures Required to Register a Firm Note: A procedure is defined as any interaction of the company founders with external parties (for example, government agencies, lawyers, auditors or notaries). Countries selected are those of Mexico's basket of competitors which are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). The observations for 2011 come from the Global Competitiveness Report 2010-2011, and they correspond to June 2010. Source: World Bank. Doing Business 2011. 19

21. Mexico Total number of days Latin American Countries, 2011 Total number of days Main Competitors of Mexico in International Markets, 2011 Total number of days III. Competitiveness in Mexico: Days Required to Register a Firm Note: The measure captures the median duration that incorporation lawyers indicate is necessary to complete a procedure with minimum follow-up with government agencies and no extra payments. Countries selected are those of Mexico's basket of competitors which are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). The observations for 2011 come from the Global Competitiveness Report 2010-2011, and they correspond to June 2010. Source: World Bank. Doing Business 2011. 20

22. Competitive Infrastructure:  63 International Airports.  16 deep-sea ports.  15,000 miles of railways and 84,000 miles of paved roads, with more than 30,000 miles of federal highways.  Mexico increased its spending in infrastructure from an average of 3% (2001 – 2006) to 5% of its GDP with the National Infrastructure Program 2007-2012. III. Competitiveness in Mexico Source: ProMéxico and National Infrastructure Program 2007-2012. 21

23. Cars Trucks Transport Cost Margin of USA Vehicle Imports, 2010 Percentage Note: Transport cost margin is defined as the total expenses in freights and insurance costs as the proportion of the total value of imported vehicles. Countries selected are those of Mexico’s basket of competitors with available information. Source: Estimations with data from U.S. Department of Commerce. 22 III. Competitiveness in Mexico

24. Natural Gas Prices for Industry U.S. Dollars (a) (a) Average price per 10 7 kcal on a gross calorific value basis. Source: International Energy Agency. III. Competitiveness in Mexico 23

25.  Mexico’s labor force has the following advantages: Population of 112 Million people, with an average age 29 years old. Demographics Bonus: By 2030 Mexico will reach its lowest Dependency ratio (Children and seniors / EAP). More than 90,000 engineers graduate every year. 3 times higher than the US in per capita terms. 9th largest talent pool of Information Technology (IT) Professionals in the World. III. Competitiveness in Mexico Source: ProMéxico. 24

26. Hourly Compensation Costs in Manufacturing U.S. Dollars Source: BLS. III. Competitiveness in Mexico 25

27. III. Competitiveness in Mexico Homicide Rate 2010 Per 100,000 Population Sources: United Nations Office on Drugs and Crime; FBI, US; Ministry of Security, Mexico; and Secretaria Nal de Seguranca Publica, Brazil. 26

28. Source: World Economic Forum, Global Competitiveness Report 2011-2012. Note: Countries are ranked by the WEF according to their score among the 139 evaluated countries. Macroeconomic environment and market size are the two competitiveness pillars (out of 12) in which Mexico performed best. Countries selected in these graphs are those of Mexico's basket of competitors which are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). For comparisson with Latin American countries, Brazil, Chile and Colombia were also included. Competitiveness Indicators: Macroeconomic Environment Score according to World Economic Forum III. Competitiveness in Mexico 27

29. III. Competitiveness in Mexico Effective Real Exchange Rate (a) Index June-2007 =100 (a) An increase means a depreciation. For comparison only Latin American countries were selected. Source: Bank of International Settlements. Recent Exchange-rate-induced Changes in Competitiveness 28

30. III. Competitiveness in Mexico Mexican, Chinese and other Mexico’s Competitors Exports Share in Total US Imports Percent Source: Banco de México Note: Mexican competitors are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). 29

31. III. Competitiveness in Mexico Mexican, Chinese and other Mexico’s Competitors Exports Share in Non-oil USA Imports Percent Source: Banco de México. Note: Mexican competitors are Hungary, Thailand, Philippines, South Korea, Turkey, Poland, Portugal, Malaysia, Hong Kong, Taiwan, Indonesia and Singapore. These are the countries with the highest Spearman correlation coefficient of revealed comparative advantage, after dropping China, as calculated in Chiquiar, Fragoso and Ramos-Francia (2007). 30

32. Mexican Share in US Automobile Imports Percentage* * Seasonally adjusted. Source: Banco de México. III. Competitiveness in Mexico 31

33. III. Competitiveness in Mexico JPM X/12/11 July. INEGI gross-fixed inv 9.3% driven by purchases of machinery and equipment. JPM “Even though GFI figure came in lower than expected it continues to reflect investments announced months ago to reallocate from other countries to Mexico. The weaker peso, higher global transport costs, and lower wage differential between Mexico and Asian countries has increased Mexico’s competitiveness. This has created incentives for investors to reallocate production to Mexico or enhance existing operations. Investment continues to expand at a healthy pace, after lagging the externally-driven recovery over the last year. A more promising investment outlook is likely to support better employment conditions in addition to a significant credit expansion.