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Why invest in Mexico? April 17th, 2012 1 Accenture’s formula for profitable growth Geographic expansion is one of the main growth strategies for high profitable growth companies. Mexico represents an excelent business case for those companies. SOURCE: ACCENTURE, The formula for profitable growth. 2 Key considerations for investors 1. Macroeconomic environment 2. Open economy 3. Economic sophistication 4. Total manufacturing costs 5. Engineering graduates 6. Demography 7. Domestic market 8. Workforce quality 9. Democratic system 10.Human Development 3 Solid macroeconomic environment and champions of free trade $400.0 140% $350.0 120% $300.0 100% $250.0 80% $200.0 60% $150.0 40% $100.0 20% $50.0 0% Billion dollars 160% $0.0 1987 SOURCE: INEGI and Central Bank. 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Prepayment of debt 1985 Investment grade 1983 NAFTA Floating exchange rate 1981 GATT Percentage EVOLUTION OF THE INFLATION, EXPORTS AND INTERNATIONAL RESERVES IN MÉXICO (1980-2011) Manufactures Oil Primary Inflation International reserves 4 We are champions of free trade Our FTA’s reach 2/3 of the world’s GDP. Part of the world’s largest economic block (NAFTA). NAFTA market= 17 trillion USD. And we are the gateway to Latin America. With 10 trade agreements, Mexico has privileged access to 44 countries (one billion people). AltamiraPhiladelphia (USA) 7 days Number of FTA’s and countries Altamira-Belem (Brazil) 10 days ManzanilloArica (Chile) 9 days Countries with FTA SOURCE: IMF, OMC, Sea Rates. 5 We have a high economic complexity Mexico ranks in the top 20 of Harvard’s Atlas of Economic Complexity • • Recognizes that our country holds vast amounts of productive knowledge We manufacture and export a large number of sophisticated goods • • 115,000 engineers graduate every year from science and technology programs. 80% of Mexican exports in 2011 were manufactured goods. SOURCE: INEGI, Presidency and Harvard/MIT, Atlas of Economic Complexity. 6 Most competitive total costs Source: Competitive Alternatives 2012, KPMG; Global Benchmark Report 2011, of the Danish Industry Confederation; Manufacturing Outsourcing Cost Index 2010, Alix Partners. Japan -0.1% -3.7% -9.4% Australia 0% Germany 2.1% Italy France Canadá Netherlands UK 5.5% 5.3% 5.0% 3.9% USA Baseline 21.0% Mexico The Alix Partners Manufacturing Outsourcing Cost Index ranks Mexico as the best country (better than BRIC’s). According to KPMG, in 2011 Mexico had an average cost advantage of 21% (over 19 industries), compared to the US. % cost advantage relative to the US The most competitive country in terms of costs and taxes, according to Global Benchmark Report 2011. 7 Where will the future growth be? Economies that represent more than 1% of global GDP MIST Mexico Indonesia South Korea Turkey BRIC Brazil Russia India China 8 The main global indexes are also saying it! KEY VARIABLE INDEX 1. Macroeconomic Environment WEF, The Global Competitiveness Report 2011-2012, Macroeconomic Environment Index 2. Open Economy World Bank, Doing Business 2012, Ease of Doing Business 3. Economic complexity Harvard University and the MIT, The Atlas of Economic Complexity 4. Total Manufacturing Cost Alix Partners, Manufacturing Outsourcing Cost Index 5. Domestic Market WEF, The Global Competitiveness Report 2011-2012, Domestic Market Size Index 6. Demographic Bonus United Nations, World Population Prospects, The 2010 Revision 7. Workforce quality FDI Benchmark, Labor availability and quality of the Automotive OEM’s: Skills, attitudes and productivity 8. Engineering graduates 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 United Nations, Human Development Index 9 Mexico is a well positioned country COUNTRY Brazil Russia India China B R I C Mexico Indonesia M I South Korea S Turkey T 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 Equal or above Mexico Below Mexico, but close Clearly under Mexico Source: 1. Macroeconomic Environment: WEF The Global Competitiveness Report 2011-2012, 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 2011-2012, 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. 10 Mexico will be one of the top 10 economies World's largest GDP measured by PPP (Billion Dollars) • 11th place 2011 • Goldman Sach’s Forecast Gross Domestic Product (Billion Dollars) 5th place 20501 • Goldman Sachs estimates that Mexico will be the 5th largest economy by 2050. According to Accenture, Mexico will be one of the Big Six in 2025. According to HSBC Mexico will be the 8th largest economy in the world by 2050. Source: Goldman Sachs. The N-11: More Than an Acronym. Global Economics Paper No: 153. March, 2007/ HSBC. 1/ Goldman Sachs forecast / International Monetary Fund. 11 Thank you! www.promexico.gob.mx [email protected] @ProMexicoTW +52 (55) 54 47 7000 Camino a Santa Teresa 1679, Col. Jardines del Pedregal CP 01900, México, D.F. 12 We have a favorable economic performance México ranks as a low-risk country in the Market Overheating Index, published by The Economist, which grades 27 countries. . Total debt by country (%GDP) 80 67 60 40 41 36 61 50 52 47 21 34 28 20 0 Canada France Mexico 2000 Spain USA 2010 Mexico’s International Reserves Russia Venezuela South Korea Saudi Arabia Poland Colombia China Chile Philippines Peru Egypt Thailand Singapore Vietnam Turkey Indonesia India Hong Kong Brazil Argentina Hungary Malaysia Taiwan Pakistan Mexico Czech Republic South Africa (billion USD) Source: The Economist, http://www.economist.com/node/21522520 / OECD/ Mexico’s Central Bank 13 Demographics are on our side Population Pyramid, 2005 (millions) Men Population Pyramid, 2005 (millions) Women Population Pyramid, 2030 (millions) 112 million inhabitants with a median of 26 years. 47 million in 2010 were in the labor force. According to forecasts, there will be more than 60 million people of productive age by 2030. Men Women Source: Oxford Economics, Creating Jobs in a Global Economy; INEGI, 2011; Population Projections for Mexico 2005-2050, CONAPO. Men Women 14 Our highly skilled labor force produce complex goods Mexico is the largest exporter in Latin America. • Almost 40% of Latin America’s total trade. • 80% of exports were manufactured goods. More than 115,000 engineers graduate every year from science and technology programs. • Which exceeds the number of graduates in countries such as Germany, Canada, United Kingdom and Brazil. Mexico ranks in the top 20 of Harvard’s Atlas of Economic Complexity report, which recognizes that our country is able to hold vast amounts of productive knowledge, and that we manufacture and export a large number of sophisticated goods. 350 billion USD= The Index of Technological Sophistication of Mexican export products (3.25) is the highest in Latin America and above India (2.61). (OECD) Mexican exports in 2011. SOURCE: Global Trade Atlas/ National Institute of Statistic and Geography (INEGI by its name in Spanish), Statistics on Mexico’s foreign)/ Mexico’s Central Bank, 2012. 15 ProMéxico’s strategy Manufactures Added value Agroindustry (integral) Mining (integral) • Aerospace • Automotive • E&E Services Renewable energies and energy efficiency • Creative industries • IT Life Sciences Infrastructure, educative services and economic policy Sectors Primary Economy Secondary Economy Tertiary Economy 16 Mexico’s Road Maps Supports the design of regional strategies for the development of highly competitive sectors. . Identifies international business opportunities for this sectors. Focuses on innovation. 17 Solid macroeconomic environment: no coincidence EVOLUTION OF THE INFLATION, EXPORTS AND INTERNATIONAL RESERVES IN MÉXICO (1980-2011) Manufactures Oil Primary International reserves Inflation 165 $400.0 150 $350.0 $300.0 105 $250.0 90 $200.0 75 Billion dollars 120 $150.0 60 45 $100.0 30 $50.0 15 0 $0.0 1987 1989 SOURCE: INEGI and Central Bank. 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Prepayment of debt 1985 Investment grade 1983 NAFTA Floating exchange rate 1981 GATT Percentage 135 18