MARKET RESEARCH COUNTRY REPORT

MEXICO

CONTENTS

Main Industry SectorsEconomic OverviewForeign Direct Investment [FDI]FDI Government MeasuresCountry Strong PointsCountry Weak PointsForeign Trade Overview

MAIN INDUSTRY SECTORS Agriculture accounts for approximately 4% of the GDP and employs

13.5% of the active population, however, the scarcity of credit

continues to penalize this sector.

Mexico ranks amongst the world's largest producers of coffee, sugar,

corn, oranges, avocadoes and limes.

Mexico is the world's 5th biggest producer of beer and its number

two exporter.

It is amongst the world's leading producers of many minerals,

including silver, fluorite, zinc and mercury, and its oil and gas

reserves are one of its most precious possessions: Mexico is the

world's fifth largest producer of oil.

The oil company PEMEX is the second most powerful company in

Latin America, according to the industry journal América Economŕ a.

Cattle farming and fishing are also important economic activities.

MAIN INDUSTRY SECTORS

The aerospace sector has grown sharply in the last five years, due to

the presences of almost 190 companies, such as Bombardier, Goodrich,

the Safran group and Honeywell, which together employ 30 000 people.

Mexico is also one of the 10th major car producers.

The hi-tech, information and software development sectors are also

experiencing a real momentum, driven by the quality of the workforce,

clusters and low operating costs, which allow for the establishment of

call centers.

The tertiary sector contributes to around 60% of the GDP and the

construction sector is coming up again due to real estate investments.

ECONOMIC OVERVIEW

Mexico became the 12th world economic power. Although the

GDP fell sharply in 2009 (-6.5%), the GDP is predicted to rise

by about 4% in 2010.

Resumption of exports, especially car sales and US tourism

are encouraging signs.

The general economic outlook is relatively good. According to

the different rating agencies, Mexico enjoys the investment

grade status.

The Doing Business 2010 report considers it the best country

to do business in in Latin America; nevertheless, the growing

security issues discourage investments and tourism.

The corruption and inefficiency of Mexican bureaucracy

are also among the country's weaknesses

FOREIGN DIRECT INVESTMENT [FDI]

Mexico is one of the emerging countries most open to foreign direct

investment.

Over the last few years, its competitiveness has been slowed down

due to the increase of organized crime and a lack of reforms in the

energy, professional and financial fields.

The areas where foreign investments are concentrated the most are the

border towns with the United States (where assembly factories are

located), as well as the capital.

The Yucatan peninsula continues to receive foreign investments

thanks to its tourism appeal.

These investments come especially from the United States

and Spain (mainly from the banking sector).

The sectors receiving significant foreign investments are

finance, automobile industry and electronics services.

FOREIGN DIRECT INVESTMENT [FDI]

The major investors in Mexico were the Netherlands with 7.461

million dollars, or 52% of total FDI and the United States with up to

30% for the year 2010.

This reflects Heineken's significant acquisition of the beer operations

of the Mexican group Femsa. Spain, on the other hand, has significantly

reduced its investments in the country.

The 14.362 million dollars of FDI in 2010, Mexico's appeal has again

increased, compared to the last two years.

According to the 2010 global competitiveness report of the

World Economic Forum, Mexico ranked 28th in terms of

foreign investor confidence.

FDI GOVERNMENT MEASURES The Mexican Government has created an open and safe environment for

foreign investors.

The recently undertaken economic policies should allow investors to

manage the safety of their operations despite the unfavorable global

external environment.

Public treasury funds have been made available to private companies

that have been heavily affected by the crisis.

In November 2008, the Mexican government saved the Vitro company,

one of the world's biggest glass producers, which was having liquidity

problems because of its debts.

The amount disbursed to save it was evaluated at 100 bn $.

The cement corporation, Cemex, in turn registerd a 15 bn $

debt, a debt which is higher than the value of the company,

due to the collapse of the world construction sector.

COUNTRY STRONG POINTS

Mexico forms a bridge between North America and Latin

America due to its geographical location;

Mexico has an extensive variety of natural resources

allowing for the development of all types of industries at

competitive prices;

Mexico is very open to direct foreign investments;

Labor costs are not high and in general, there is a skilled

labor force;

Positive structural reforms have been made during the

current presidential term;

Mexico is the world's 8th tourist destination.

COUNTRY WEAK POINTS

The country depends excessively on its partnership with the

United States;

There is a high level of corruption;

During the last few months, violence has increased especially the

drug cartels;

The country is encountering significant structural problems

(economic and social).

FOREIGN TRADE OVERVIEW

Mexico is one of the countries that most depends on foreign

trade.  Foreign trade represents around 60% of its GDP. 

Mexico has 11 free-trade agreements with 43 countries of the

world.

It is a member of NAFTA - the free-trade agreement that

unifies the United States, Mexico and Canada, since 1994.

The country signed a free trade agreement with the

European Union in 2000 and a commercial agreement with

Japan came into force in April 2005.

FOREIGN TRADE OVERVIEW

The United States buys 80% of Mexico's exports. Its main

export partners are the NAFTA and the European Union.

The main export goods are electrical and electronic

equipment, vehicles, mineral fuels, oil and machinery. 

Its three main import partners are the NAFTA, China and

Japan. 

It mainly imports electrical and electronics equipment,

machinery, vehicles and plastic products.

In 2010, Mexican exports increased by 32% on the previous

year.

During the same period, international car sales increased

sharply by 76.8%, which may also represent a threat of

dependency for the Mexican economy.

RELATED MEXICO REPORTS

Market Opportunities of products and Services in

Mexico

Export and investment sector opportunities in Mexico

Overview of Trade Regulations, Customs and Standards

in Mexico

Mexican Investment guide for beginners

Business and Project Financing in Mexico

Business Travel Advisory in Mexico

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