Doing Business in NAFTA Gerardo Prado

September 2013

NAFTA

NAFTA has provided North American businesses with better access to materials sourcing, technologies, skilled workforce, capital and management talent available across North America. This has helped make our businesses more competitive, both within North America and around the world. With rapidly growing economies in Asia and South America challenging North America’s competitiveness, NAFTA remains an important key to sustained growth and prosperity in the region.

•Canada: One in five jobs in Canada is in part linked to international trade, and Canada’s prosperity is built on its openness to international trade and investment.

•The United States: The largest and most diversified economy in the world. The United States is a market economy whose businesses are world leaders in the manufacturing and high-tech sectors, especially electronics, software and hardware, medical equipment and devices, and aerospace, and in services, including financial services and telecommunications, as well as in agriculture.

•Mexico: Trade liberalization has transformed and modernized Mexico’s vibrant economy by successfully boosting trade and investment flows. Within just a few years, Mexico’s exports have diversified from primarily oil to include an array of manufactured products, making Mexico one of the largest exporters in the world.

North American Free Trade Agreement

NAFTA

• Canada and the United States implemented a free trade pact in 1989. In 1994, NAFTA broadened the free trade area to include Mexico.

• Today NAFTA covers a North American economy with a combined output of US$17.0 trillion. There are other countries in Latin America lobbying to become a party to the NAFTA.

• Since 1994, Mexico's gross domestic product has increased at an average annual rate of 2.7 percent, below the average growth rates of 3.3 percent and 3.6 percent in the United States and Canada, respectively.

• Mexican exports to the United States have quadrupled since NAFTA's implementation, from $60 billion to $280 billion per year. American exports to Mexico have also increased sharply, more than tripling as Mexico's economy has grown.

Before and after NAFTA

*Source: Ministry of Economy

NAFTA

Commercial information Mexico – United States

* Source: Mexico´s Central Bank and the Ministry of Economy**2011 latest data avilable

• U.S. goods and services trade with Mexico totaled $500 billion in 2011. Exports totaled $224 billion; Imports totaled $277 billion.

• Mexico is currently the 3rd largest goods trading partner with $494 billion in total during 2012.

NAFTA

Commercial information Mexico – Canada

Mexico's trade surplus dropped 2.6%, going from USD$8.1 billion in June 2012 to USD$7.9 billion in the same month in 2013.

Mexico kept its position as Canada’s 3rd greatest trade partner in the world, covering 3.8% of the Canadian market, only after the United States (62.4%) and China (7.2%).

NAFTA

Foreign Direct InvestmentDuring 2011 and 2012 the FDI in Mexico from NAFTA was located in:

Mexico CityChihuahuaState of MexicoNuevo LeonBaja CaliforniaSonoraQueretaroZacatecas

•From January 2000 to June 2013, Canada’s cumulative FDI in Mexico reached USD$14.3 billion, becoming the fifth largest foreign investor in Mexico.

•From 1999 to 2012, the U.S. cumulative FDI in Mexico reached USD$153 billion.

• 23,910 Companies with U.S. Capital (2011 latest data available)

• 3, 225 Companies with Canadian Social Capital

* Source: Ministry of Economy

NAFTA

Leading Companies with FDI in Mexico

AerospaceAutomotiveDomestic appliancesHeavy machinery and equipment & transportation equipmentElectric and electronic equipment Semiconductors, etc.Food and BeveragesInformation TechnologiesMedical DevicesMedical TourismMetal-Mechanic MiningPharmaceuticalRenewable EnergiesTextilesTourism & second homes

Strategic Investment Sectors in Mexico

NAFTA

• Since NAFTA came into effect, merchandise trade among the NAFTA partners has more than tripled. Over that period, Canada-U.S. trade has nearly tripled, while trade between Mexico and the U.S. has more than quadrupled.

• The first semester of 2013, total trade in the NAFTA Region recorded a value of USD$535.9 billion, representing a growth of 0.6% compared to the previous year's same period.

• Since NAFTA came into effect, the North American economy has more than doubled in size. The combined gross domestic product (GDP) for Canada, the United States, and Mexico surpassed US$17 trillion in 2008, up from US$7.6 trillion in 1993.

• Within the North American block, Mexico's trade, along with its partner countries, went from 30.3% of the region's total back in June 1993 to 46.4% in the same month in 2013, reflecting the importance of Mexico as a trading partner of Canada and the United States.

• North American employment levels have climbed nearly 23% since 1993, representing a net gain of 39.7 million jobs.

NAFTA Facts and Figures

Gerardo Pradogph@sanchezdevanny.com