NAFTA Works, April 2011

Volume 16, Issue 4 Page 1 [email protected]

The Success of the Mexican Federal Inspection Type System

A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

NAFTA Works April 2011 * Volume 16, Issue 4

INSIDE THIS ISSUE

1 The Success of the

Mexican ... 1 Trade Highlights

2 Mexico’s

Cogeneration... 3 NAFTA Related

Events 3 Diario Oficial

4 Success Stories 4 Selected Reading 4 Infrastructure

Projects in Mexico 4 Mexico Economic

Update 5 Profile of North

Carolina

6 Profile of Coahuila

Mexico is engaged in the production of high quality agricultural goods, including meat products. The meat being processed in Mexico fulfills all requirements and complies with the regulations for domestic consumption as well as for export in the world’s highest quality markets, such as the US, EU and Asian meat markets. In recent years, Mexico has shown the world the quality of its sanitary and epidemiological system and the level of food safety achieved.

The Mexican Federal Inspection Type System (TIF), with 60 years in practice, is a procedure that guarantees a safety control for meat products in slaughterhouses and meat processing plants with label certification and verification. The TIF determines the regulations and inspection procedures which are set at the highest sanitary level for cattle for slaughter and uses oversight of the construction, maintenance and hygiene of meat facilities, as well as for machinery, equipment, apparatus, tools, clothing

and utensils used in the slaughtering and meat production processes. These procedures ensure meat, meat products and byproducts comply with all hygiene and sanitary controls and they are coming from healthy and disease-free animals.

TIF certification is the result of intense coordination among TIF plants, SENASICA (National Health Service, Safety and Quality food from Mexico) and certification bodies on setting, implementing, reviewing and verifying procedures and regulations.

The methods established by TIF plants are able to track origin, slaughterhouse, packaging, safety inspections records, among other sanitation methods. The sampling process conducted by TIF plants provides sufficient evidence to show the world that the Mexican meat processing procedure complies with food safety and quality standards.

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The TIF inspection staff are constantly trained and evaluated in order to provide quality services to the meat industry, they have the skills to monitor and verify that all facilities related to the meat industry are in accordance with the most current and innovative safety and update regulations.

Presently, Mexico has almost 400 TIF plants distributed in 27 states across Mexico. Of those plants, 122 are slaughterhouses, 111 are engaged in cutting and boning meat, 70 are refrigerated


warehouses and 159 are involved in meat processing. Some of these plants are capable of handling more than one stage of processing.

The TIF certification system created the possibility for Mexican meat processors to enter into the international market. Approximately 150 plants are approved and recognized to export to 21 countries like the United States, Japan, Russia, South Korea, China, Israel, and some Central American and European countries. During this year alone, the United States has approved 38 TIF plants to export their product directly to the US market. In the same breath, Russia has recognized 14 plants with four more in the approval phase.

In 2010, Mexico exported more than $650 million of meat and meat products, which includes red and white meats like cattle, pork, and poultry; an increase of 38% from the previous year. Mexico ranks 26th worldwide in meat exports and is showing sustained growth of 13% from 2005 – 2010.

Last year, Mexican exports to Japan, the largest export market for meat raised and processed in Mexico, amounted to 84,388 tons, with a commercial value of $306 million, up 19% from 2009. Likewise, Mexican exports to the US summed up to 51,087 tons, with a value of nearly $250 million, a remarkable increase of 63% which reaffirms the US as the second largest export market for Mexican meat.

Meat industry has also obtained additional benefits from TIF certification by promoting more investments aimed to keep meat processing plants operating with the best technology and practices. Such investments are directed to improve plant efficiency, profitability, adoption of good practices, and product quality in order to face competition successfully and extend presence in the international market, particularly in the Asian growing markets.

The supermarket chains operating in Mexico have also identified the TIF label as one of the requirements to become a supplier to its stores, broadening a huge market to TIF plants which is growing strongly as the Mexican middle class continues to expand as well.

Mexican TIF certified plants are taking the industry to new heights. As more domestic and international companies recognize the level of safety and sanitation standards of products coming out of Mexico, it will allow for the expansion of the meat industry globally with the goal of improving the quality of the food we eat and boosting job creation.

Mexico's Cogeneration Potential for Energy Efficiency and Investment Opportunities

Today, electric power cogeneration is considered a significant and cost-effective option for energy conservation within the Mexican economy, and simultaneously supports Mexico’s strategy to achieve sustainable development. Mexico has an enormous potential to produce economically feasible electricity through cogeneration with a capacity up to 10.164 MW.

Consumption of electricity in Mexico is vast and growing rapidly. Thus, combined heat and power (CHP) electricity, known as cogeneration, is a more efficient technological innovation option to address the rising demand for electricity in Mexico through the use of excess thermal energy, produced by fuel, otherwise wasted.

Mexico allows power cogeneration to private investment for self-use or to deliver their excess power to the Federal Commission of Electricity (CFE), the state-owned utility. As a result, cogeneration

installed capacity has expanded to more than 3,300 MW. However, President Calderon’s ambitious goals to make Mexico more energy efficient and to reduce its carbon footprint have placed cogeneration capacities as a key strategy. In this regard, Mexico has established a set of public policies and improvements in the regulatory framework which promotes investments to achieve a significant development of cogeneration potential by 2012.

By using less fuel to get the same energy, cogeneration brings significant benefits to the country, both environmental and economic. Thus, Mexico would be able to save on fuel consumption and reduce imports by up to 74% in natural gas alone; decrease carbon emissions into the atmosphere by 12,000 tons of CO2 annually; free installed capacity of the grid and power plants by almost 6,000 MW; reduce transmission losses and distribution of electricity by 18%; and encourage new investments and job creation.

Tapping into Mexico’s potential cogeneration electricity represents business opportunities for new investments by more than $11.2 billion. Estimated foreign investment up to $7 billion will lead the cogeneration expansion in Mexico, as well as spur an outlay in domestic materials, construction, and engineering services by nearly $4 billion. These investments would provide strong impetus to job creation by generating an estimated 12,000 jobs in engineering services and more than 100,000 jobs in construction.

Not only does the entire economy feel the benefits of investment in cogeneration, but the individual companies see critical and tangible benefits as well. Companies that operate using cogeneration systems experience higher efficiency and reliability of the energy used in the production processes. Less energy is used and it is of higher quality. Thus, companies lead the way in competitiveness as production costs are reduced.

The industrial sector presents the greatest opportunity for cogeneration development, with a feasible capacity of up to 6.09 GW if industries inject excess power into Mexico's grid. The industrial sector would improve cash flow and reduce their environmental footprint as their savings skyrocket with the investment in cogeneration electricity. Clearly, this is a win-win situation all around. For example, the chemical industry would internally benefit from $715 million a year with cogeneration; the food industry would gain $352 million annually, and the cellulose and paper industry would see $472 million in savings per year.

Regarding Pemex, the Mexican state-controlled oil company and one of the country’s largest electricity consumers, which already has a 2,150 MW installed capacity to generate electricity, accounting for 4% of Mexico’s total. An agreement reached with CFE allows Pemex to sell electric surplus for assimilation into the national grid, enabling new investments for an expected cogeneration installed capacity of 3,100 MW. The 300 MW cogeneration plant at the Nuevo Pemex gas processing complex is the first large scale project for self-supply purposes. The development of the remaining potential for cogeneration in eight oil refining and petrochemical complexes will be focused on selling electricity to CFE and will require the joint participation of Pemex and the private sector.

Finally, the sugar industry also has an estimated potential of nearly 1,000 MW of installed capacity for cogeneration. This technology would increase the profitability of the industry and also enables the use of waste pulp as a renewable fuel resource. The implementation of cogeneration technology in sugar mills would outline a clear cut example of efficiency at its best.

The benefits of investing in cogeneration in Mexico would be monumental and critical to economic growth and environmental improvement. Increased energy savings mean greater investment into the Mexican economy which would trigger a better quality of life and prosperity for not only Mexico but North America as a whole.


NAFTA Related Events MDM Expo 2011 May 2 – 4, 2011 Trade show of women´s apparel, footwear and accessories Location: Expo Guadalajara. Guadalajara, Jalisco. Phone: 52 (33) 3824 6040 E-mail: promoció[email protected] / [email protected] Website: www.modama.com.mx

Fabtech / Metalform / AWS Weldex - México 2011 May 11 – 13, 2011 Exhibitions focus on welding and cutting products, tool and die, metal stamping, metal forming equipment, and related technologies and services. Location: Cintermex. Monterrey, Nuevo León Phone: 52 (81) 8369 6900/ 52 (81) 8191 0444 E-mail: [email protected] / [email protected] Website: www.fabtechmexico.com / www.metalform.com / www.awsweldmex.com

COATech 2011 May 11 – 13, 2011 International event for the coating and paint industry, industrial cleaning and corrosion control Location: Cintermex. Monterrey, Nuevo León. Phone: 52 (81) 8333 4400 E-mail: [email protected] Website: www.coatechmexico.com

Wind Power Mexico May 12 – 13, 2011 Conference and exposition that will bring together industry representatives and key stakeholders in the wind power value chain to discuss how to drive this dynamic market forward. Location: Marriot Reforma. Mexico City Phone: +44-20-3384-6214 E-mail: [email protected] Website: http://www2.greenpowerconferences.co.uk

Expo Proveedores del Transporte Monterrey 2011 May 18 – 20, 2011 Trade show displaying equipment, spare parts, accessories and services for the transportation industry. Location: Cintermex. Monterrey, Nuevo León. Phone: 52 (81) 8365 5522 E-mail: [email protected] Website: www.expoproveedores.com.mx

Expo Mecánico Automotriz 2011 Irapuato May 20 – 21, 2011 Spare parts and automotive accessories trade fair. Location: Inforum. Irapuato, Guanajuato. Phone: 52 (462) 124 4747 E-mail: [email protected] Website: www.expomecanicodelbajio.com

Expo Publicitas May 25 – 27, 2011 Advertising industry trade show Location: Centro Banamex. Mexico City Phone: 52 (55) 5575 9305 E-mail: [email protected] Website: www.expopublicitas.com Habitat Expo 2011 Mexico May 26 – 28, 2011 Exhibition of interior design, architecture and decoration products Location: World Trade Center. Mexico City. Phone: 52 (55) 4629 7750 E-mail: [email protected] Website: www.habitatexpo.com

DIARIO OFICIAL NOTICES

Resolution complying with the Federal Court of Fiscal and Administrative Justice decision ruled on November 27, 2009 within proceedings: 28978/07-17-02-1/1277/09-S1-05-01, initiated by the National Association of Plastic Industries. March 7th.

Clarification to the Rules for international public biddings and the rules for the application of the set-asides covered in the government procurement chapters of the FTA’s signed by Mexico. March 8th.

Resolution that accepts and declares the initiation of the antidumping investigation on imports of ethylene glycol monobutyl ether originating from the USA regardless of the shipping country (Mexican tariff item 2909.43.01). March 11th.

Blank forms for manufacturers and importers to submit information of electric equipment and appliances. March 14th.

Notice announcing a TRQ to import duty free roasted ground coffee in individual containers of 40 grams or less. March 14th.

Decision Nr. 63 of the G3 FTA Commission, regarding temporary use of non-originating materials to manufacture certain textile and apparel goods and exporting them under the FTA’s preferential treatment. March 18th.

Resolution amending the General Rules and Criteria for Foreign Trade issued by the Ministry of Economy. March 18th and 23rd.

Parcel and courier regulation. March 29th.

Preliminary determination of the ex officio review of the countervailing duty order imposed on imports of certain types of longitudinal seam carbon steel line pipes originating from the USA, regardless of the shipping country (Mexican tariff items 7305.11.01 and 7305.12.01). March 29th.

Amendments to Appendix IV on trade in the automotive sector between Uruguay and Mexico. March 30th.

Notice announcing the preferential import rate for originating goods of Japan, applicable from April 1, 2011. March 31st.

Mexican Official Standards

Conformity assessment procedures draft for NOM-001-SEDE-2005, electric installations. March 3rd.

NOM-008-FITO-1995 (modification draft). Phytosanitary requirements and specifications to import fresh fruit and vegetables. March 3rd.

NOM-249-SSA1-2010, nutritional and medicinal sterile mixtures, and preparation facilities. March 4th.

NOM-139-SCFI-1999 (amendment). labeling of vanilla natural extract, byproducts and substitutes. March 9th.

NOM-169-SCFI-2007 and NOM-149-SCFI-2001 (amendments) Chiapas coffee and Veracruz coffee. March 9th.

NOM-084-SCFI-1994 (amendment). Specifications, commercial and sanitary information for pre-packed tuna and bonito products. March 11th.

NOM-173-SCFI-2009 (amendment). Denomination, specifications, commercial information and test methods for canned fruit juices. March 11th.

PROY-NOM-020-ENER-2010 (draft). energy efficiency in buildings – residential buildings envelope. March 14th.

NOM-158-SCFI-2003 (amendment). Hams, denomination and commercial information and classification, specifications, and test methods. March 14th.

NOM-145-SCFI-2001 (amendment). Labeling for honey. March 14th.

NOM-155-SCFI-2003 (amendment). Milk, dairy formulations and dairy combined products. Denominations, specifications, commercial information and test methods. March 14th.

Simplified procedures for enterprises located at the border zone to verify the product information of NOM-051-SCFI/SSA1-2010. March 23rd.


Nissan Boosts Investment in Mexico Operations Nissan Motor Co., Japan's second-largest automaker, is increasing investment in assembly operations in Mexico by $400 million as it seeks to boost sales in the Americas and offset the yen's strength. Overall, Nissan will spend $1.05 billion at its plants in Aguascalientes and Cuernavaca through 2013, up from a $600 million plan announced last year. Aguascalientes has already started production of the March subcompact. "The additional investment is to add production of a small sedan and a small ‘multi-purpose' vehicle at Aguascalientes, off the March platform." Last year Nissan set a goal of boosting annual production in Mexico to about 700,000 vehicles, seeking higher sales there and in other Latin American markets.

IBM Opens Innovation Center in Mexico to Fuel Growth As part of efforts to fuel global innovation, IBM opened the first IBM Innovation Center in Mexico. Local start-ups, venture capitalists, developers and academics gathered there to begin building new skills that will drive innovation across industries such as banking, communications, healthcare, retail and government through the IBM Global Entrepreneur initiative. The Mexico center joins a worldwide network of 39 IBM Innovation Centers in 32 countries. "Mexico is experiencing significant growth in IT opportunities," said Hugo Santana, General Manager, IBM Mexico. "With access to the right skills and resources, we can build a stronger Mexican IT community that is prepared to compete on the global IT innovation stage."

Danone Will Increase Investment in the State of Guanajuato Danone, the French food-products multinational corporation, invested $24 million in a new distribution center at the State of Guanajuato to expand their distribution network in Mexico. Through this facility, Danone will reach 45 distribution points in Mexico and abroad. The 118,402 square feet distribution center will include the largest refrigeration system in Mexico. It has capacity to deliver 20,000 tons of yogurt per month. Mexico is the fifth most important country for Danone, due to consumer response to yogurt brands such as Danonino and Activia, among others, as well as to Bonafont bottled water.

Iberostar to Expand in Mexico The Spanish group Iberostar will invest, through its real-estate division Iberostate, more than $7 million in a new residential complex at Riviera Nayarit, Mexico. This new project, named Iberostate Litibu, will offer 33 residences and 130 condos as of the first quarter of 2015 and will generate 300 direct jobs. This new development will also have direct access to a golf course, designed by golf player Greg Norman. Iberostate Litibu will join another real estate development the Spanish group already has in operation in Riviera Maya, Mexico which required an investment of over $100 million.

The Greening of U.S. Retirement Destinations in Mexico: Emerging Issues and Trends in Coastal Communities Author: Richard Kiy and Anne McEnany, International Community Foundation February 2011

This report analyzes environmentally specific consumer perceptions and preferences among US retirees and second home buyers in Mexican coastal communities, including recycling, reducing consumption, and green building. In addition, it reviews how developers can capitalize on growing consumer interest in “greener” living. The focus on Mexican coastal cities and towns reflects their consistent and growing popularity with Americans seeking to retire. This report is one of the first to analyze US retiree consumer preferences and priorities when it comes to the environment.

http://www.icfdn.org/publications/environment/

Infrastructure Projects in Mexico

La Caridad Cogeneration Power Plant Sponsor: Grupo Mexico Location: La Caridad, Sonora Project Value: $300 million

Grupo Mexico and Siemens signed a contract for $300 million dollars for the construction of a cogeneration power plant at La Caridad, Sonora. The power plant will have a generating capacity of 250 MW and will enable the mining company to reduce electricity costs by 40%. This is a “turnkey contract” where Siemens is responsible for the design, construction, operation and maintenance of this asset to generate electricity.

Business opportunities: Construction materials, civil engineering, turbines, generators, electrical equipment. Pipeline Maintenance Sponsor: Petroleos Mexicanos (PEMEX) Location: 11 states Project Value: $120 million

Pemex began an international public bid to contract a company to do the complete maintenance of 785 km of pipelines as part of a two year working plan. The plan was conceived to complete the certification of 12 thousand kilometers of pipelines. The contract includes providing maintenance to 706 km of natural gas pipelines, 35 km for liquefied gas, and 44 km for basic petrochemicals throughout 11 states of Mexico.

Business opportunities: construction materials, civil engineering, inspection equipment, precision instruments, products, heavy machinery.

Success Stories Selected Readings


North Carolina

In 2010, North Carolina's exports to Mexico reached $1.8 billion, up $1.3 billion from their level in 1993 and an increase of 26% in comparison with the previous year. Among all U.S. states, North Carolina was ranked 16th as an exporter of goods to Mexico in 2010. In 17 years of NAFTA, North Carolina's exports to Mexico have increased by 261%, while the rest of the world rose 118%. This means that the export growth rate to Mexico is 2.2 times higher than its export growth rate for the rest of the world. Since NAFTA was implemented, North Carolina's sales to Mexico have grown at an annual average rate of 7.8%. Mexico is an important trading partner to North Carolina. It was ranked as the 3rd largest export market for goods from North Carolina in 2010, up from 7th in 1993, illustrating the impact of NAFTA for North Carolina's growing businesses. Mexico accounted for 7.4% of North Carolina's exports worldwide in 2010.

Exports to Mexico 1993 - 2010 (Millions of US Dollars)

Source: US Census with adjustments made by the World Institute for Strategic Economic Research (Wiser), and SE-NAFTA. 1993-1999 by SIC AND 2000-2010 by NAICS.


Documents

NAFTA Works, April 2011