Mexico Investment opportunities

Special Report!

Aerospace Industry in Mexico

AerospacecompaniesarestreamingtoMexico,drawnbylowerwages,enthusias9cgovernmentpromo9on,anewsafetyagreementwiththeUnitedStatesandanincreasinglysophis9catedworkforce.

Mexico'saerospace‐relatedexportshavemorethantripledsince2004,from $146.2 million to $683.2 million last year, and exports areaccelera9ng quickly asmanufacturersmove into big‐9cket items liketailsandfuselages.OneaircraLmaker,Canada'sBombardierInc.,saysithopestoeventuallyassemblecompletejetsinMexico.

AtBombardier,newassemblyworkersearn6,000pesosamonth,orabout$560,accordingtoplantmanagerMichaelMcAdoo.That'sabout$3.50anhour. Engineers can earn $925 to $1,390 a month, according to aBombardier job ad. That's $5.80 to $8.70 an hour.The lower costs havetranslated intoa30percentsavings onpartsmadehere,evenaLertheaddedtransporta9oncosts,Gervaissaid.

Aerospace Facts

•  Aernnova, a Spanish firm thatmakeswings, tails and other sec9ons forBoeing,Airbus,Embraerandothers. It isbuildingan$84millionplant inQuerétaro.

•  CessnaAircraLCo.andHawkerBeechcraLCorp.,bothmakersofbusinessjets,whichhavebothmovedsubassemblyworkfromtheirWichitaplantstonewfactoriesinthenortherncityofChihuahuasince2006.

•  MD Helicopters, based in Mesa, which began making fuselages nearMonterreyin2006.

•  GoodrichCorp.,whichsbuildinga350,000‐square‐footfactoryinMexicalito make engine nacelles for the Boeing 787 Dreamliner. The Charlo]e,N.C.,companymakesaircraLinteriorsandenginepartsinArizona.

SOURCE: U.S. Census Bureau, Foreign Trade Division, Data Dissemina<on Branch, Washington, D.C. NOTE: All figures are in millions of U.S. dollars, and not seasonally adjusted unless otherwise specified.

SOURCE: FTD WebMaster, Foreign Trade Division, U.S. Census Bureau, Washington, D.C. 

U.S. – MEXICO TRADE

16.4%

14.0%

11.7%

5.6%4.4%

3.6%

2.3%1.9%1.8%1.8%1.5%1.5%1.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Canada China Mexico JapanGermany UnitedKingdom France NetherlandsTaiwan Brazil Italy SingaporeIndia

2009U.S.TopTradingPartners(Goods,%ofTotalTrade)

120,248133,722 135,918

151,220128,998

‐170,109‐198,253 ‐210,714 ‐215,942

‐176,537

‐250,000

‐200,000

‐150,000

‐100,000

‐50,000

0

50,000

100,000

150,000

200,000

2005 2006 2007 2008 2009

Exports Imports Balance

U.S.TradeBalancewithMexico(MillionsofUSD)

Mexico has significant labor cost advantage over USChina'sedgeoverMexicoinlaborcostsexpectedtoshrinkincomingyears

2002 2004 2006 2008E 2010E

China

Mexico

US$perhour

China'slaborratetoincreasefasterthanMexico's

1.IndexedtoJanuary1,2007exchangerate(MX$10.82=US$1;CH$7.81=US$1)Note:ManufacturinglaborrateSource:TheEconomistIntelligenceUnit;Interna9onalLaborOrganiza9on;FXHistory,OandaCorpora9on;BCGanalysis

Largelaborcomponent

CAGR(02‐10E)

2%

18%

Mexicorate2xChina'stoday,butexpected~1.2xin2010

USrate($/hr)

21.6 23.1 23.8 25.6 27.3

USDperpeso

USDperYuan

Indexedexchangerate1

0

Pesosharpdevalua9onalsoreducingChina'scostadvantage

LaboreconomicsandYuanapprecia9onquicklyerodingChina'scostadvantage

Mexico'sadvantageinbulkyproducts

Considerablepor9onofglobaltradeconsistsofhighvolume‐to‐weightra9oitems(i.e.bulky)

Shippingfortheseproductsrepresentsasizablecomponentofretailprice

Freightdifferen9alscanoutweighhigherlaborcostrates

"As[U.S.]retailpricesbeginfallingtowards$600[perPC

unit],thecostoflogis9csinvolvedwillputMexicobackonthemap"

–  PeterWiegandt,DellLa9nAmerica

Mexico's advantage greatest for high volume-to-weight ratio products where freight costs are significant

‐8%

Other1

Labor

Freightcosts

Mexico

US$

307283

China

1.Rawmaterials,deprecia9on,electricity,tariffsNote:Assumes4hoursoflaborperunitSource:Pressandwebresearch,BCGanalysis

Keywillbetofindcheapestlaborforcewithinreasonableshippingdistancetofinalmarket

Significantlogis9cscosts

Costofproducingarefrigerator

Commerciallyconnectedwith75%oftheGDP,44countriesthroughit'sfreetrade

agreements.

Why Mexico?

Doing business in Mexico Industry Clusters Policy

AGS.

TLAX.MEX.

PUEBLA

QRO.

COAHUILA

HERMOSILLO FORD (AUTOS)

SALTILLO (MOTORES & UV)

NISSAN (AUTOS & MOTORES)

GTO.

GM (UV)

DAIMLERCHRYSLER (CAMIONES)

SILAO

AGS.

V.W. (AUTOS & MOTORES)

PUEBLA

HONDA

GUADALAJARA

SONORA

FORD (MOTORES)

CHIHUAHUA

MOR.

NISSAN (AUTOS & UV)

CIVAC

DURANGO

ZACATECAS

S.L.P.

TAMPS.

COLIMA MICHOACAN

GUERRERO

OAXACA

CHIAPAS

TABASCO

CAMPECHE

YUCATAN

HIDALGO

NUEVOLEON

RAMOS ARIZPE G.M.

(AUTOS & UV)

TOLUCA G.M. (MOTORES)

TOLUCA DAIMLERCHRYSLER (AUTOS & UV)

TOLUCA BMW (AUTOS)

CUAUTITLAN FORD (AUTOS& UV)

CHIHUAHUA

TOLUCA

CD. SAHAGUN DINA (CAMIONES)

GARCIA

TULTITLAN MASA (CAMIONES) TOLUCA VOLVO (CAMIONES)

KENWORTH (CAMIONES)

MEXICALI

S.L.P. SCANIA

(CAMIONES)

INTERNATIONAL (CAMIONES)

JALISCO

G.M. (AUTOS)

GM (PRUEBAS)

MICHOACAN

DAIMLERCHRYSLER (AUTOBUSES)

AutomoWve finalassembly locaWonmap

GeographicLocaWonofElectronicsIndustry

CANCÚN

Vitelcom

EDO. MÉXICO

Ericsson Alcatel Pantech AMP Sony Scientific Atlanta Olimpia

QUERÉTARO

Clarion Siemens

Audio & video Home Appliance Computer Telecommmunications Automotive CEM Foto & impresion Others

AGUASCALIENTES

White Westinghouse Texas Inst. Xerox Siemens Flextronics Volex

GUADALAJARA

IBM HP Nec Lucent Technologies Kodak Siemens MTI Electronics Solectron Méx. Flextronics Jabil Circuit SCI Sanmina ECMM Benchmark

Technicolor Universal Scientific Motorola Cumex

TIJUANA

Sanyo Sony Hitachi Matsushita JVC Samsung Pionner Mitsubishi Sharp Delta Ichia Merry Tech Wistron Display Orion Amphenol ADI Systems Philips Kyocera Rectificadores Intern. Vigobyte Bourns Bose Skyworks Panasonic Kodak Delphi

MEXICALI

Sony Mitsubishi LG Thomson King Cord Mex BenQ

SONORA

Alcatel Motorola Volex Molex AMP Amphenol

JUÁREZ

Toshiba Philips Thomson Kenwood Asus Keytronics Tatung Lite on Enlight Elamex Plexus ECMM Elcoteq Delphi

CHIHUAHUA

Foxconn Honeywell Altec Jabil SMTC

TORREÓN

Thomson

REYNOSA

Philips Sony Jabil Celestica Nokia Lucent Technologies Fujitsu Condura Delnosa Delco Matsushita Delphi Keytronics Tyco

CUERNAVACA

Nec

MONTERREY

Pionner Kodak SCI – Sanmina Celestica   Elcoteq AFL Nippon Denso Axa Yazaki

TheuseofrenewablesourcesofenergyinMexicorepresents10%ofthetotalprimaryenergyconsump9on.

Thegreatestpoten9alsforthecountrycomefromhydro,biomass,geothermalandwind.

ThePNIsetsthetargettohave25%ofourtotalpowercapacityonrenewablesourcesofenergy.

Oil

Coal Nuclear

Source:PNI,andSener:“Balancenacionaldeenergía2006”

Hydro

Geothermal

Bagasse Wood

PJ:Petajoules;Mbp:millionbarrelsofoil

7071PJ=1155.4Mbp

Renewable sources of energy are one of the greatest goals of the energy sector in Mexico.

Aerospaceindustry

Contact

Boston 711 Atlantic Av. �Boston, MA 02111�T.  617.275.8960 �F.  617.292.2300