NAFTA Works - .NAFTA Works August 2013 * Volume 18, ... Events Mexico ranks 68 ... Expo Franquicia-T

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  • Volume 18, Issue 8 Page 1 nafta@naftamexico.net

    Mexicos Infrastructure Strategy: Opening Investment Opportunities

    A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

    NAFTA Works August 2013 * Volume 18, Issue 8

    INSIDE THIS ISSUE

    1 Mexicos

    Infrastructure Strategy: Opening Investment Opportunities

    1 Trade Highlights

    2 The Electrical

    Manufacturing Industry in Mexico

    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 Oklahoma 6 Profile of Sonora

    On July 15, 2013, Mexican President Enrique Pea Nieto announced a six-year plan to invest over $300 billion dollars in infrastructure with public and private funds in the transport, telecommunications, water and energy sectors. The program aims to boost competitiveness for producers and exporters, promote nationwide economic growth, and foster social development by better integrating more people, regions and markets to the global economy.

    The Investments and Infrastructure Plan 2013-2018 (IIP) was designed to transform Mexico into a world-class 21st Century logistics center that attracts further flows of investments. Mexicos long-term goal is to be ranked in the top 20% of the World Economic Forums Global Competitiveness Index by 2030. Currently, Mexico ranks 68th out of 144 countries surveyed. The amount of investment is significantly larger than the six-year plan submitted by the previous administration that involved about $200 billion in infrastructure spending (According to Mayer Brown). Mexico requires even more investments to keep pace of its economic growth, the current program is expected to equal annual investments of 5% of Mexicos GDP.

    The Transport and Communications Infrastructure Investment Program, which is part of IIP, is earmarking about $100 billion to develop Mexicos transportation and telecommunications infrastructure under the current administration. It will give the private sector greater involvement in carrying out projects to build thousands of miles of new roads, railways, telecoms infrastructure and expanding and upgrading ports and airports. Transportation infrastructure will receive investments of $46 billion and the telecom sector will benefit from resources estimated at over $55 billion. Earlier this year, President Pea Nieto

    signed a reform of the countrys telecom laws aimed at opening up the sector to greater competition and allowing more foreign investment.

    The program has five lines of action aimed to modernize, expand and maintain the communications infrastructure as well as the different modes of transport, taking into consideration Mexico's multimodal logistics requirements:

    In terms of road infrastructure, the goal is to have a safe, complete and integrated road network in good condition that serves as the backbone of the Mexican economy, better connecting the countrys regions and bringing remote communities closer to global markets. Approximately 19,000 kilometers of roads will be built and modernized, including 5,500 kilometers of 34 new highways and expressways which will incorporate smart signaling to increase users safety and provide better transit information, and nearly

    Continues on page 2

    13,000 kilometers of rural roads. As for railways, the program seeks to bring

    back passenger rail transport and encourage greater use of freight trains. The plan oversees a passenger rail renaissance in Mexico after announcing new projects that encompass setting up over 567 kilometers of railroads, including three high-speed trains that will link Mexico City with Queretaro, about 200 kilometers north of the capital, and with Toluca, about 50 kilometers to the south. A third line will cross the Yucatan Peninsula to connect Merida with the Riviera Maya, Mexicos busiest tourist region. Likewise, six massive public transportation projects covering 95 kilometers will be built, such as a light rail in Guadalajara and the

  • Volume 18, Issue 8 Page 2 nafta@naftamexico.net

    third metro line of Monterrey, the countrys second and third most populated cities. The program also has as a key goal of cutting travel costs and times for the freight rail system, which has become a strategic trade thoroughfare with the United States. Thus, the program will build infrastructure covering 322 kilometers that will improve the speed of this competitiveness-enhancing mode of transportation, including four rail bypasses to avoid congested urban areas, shortening rail corridors, and building and modernizing railroads across the country.

    In terms of seaports, the program aims to make Veracruz, Altamira, Manzanillo, and Lazaro Cardenas world-class ports, develop three new ports, and increase the capacity of the port system to support the needs of a growing economy. The program comprises the construction of 12 specialized maritime terminals, including containerized and multi-use facilities to handle super post-panamax vessels, vehicles, fluids and bulk cargo, as well as cruises, in different ports on both the Pacific and the Atlantic coastlines. The investments will improve Mexicos overall cargo-handling capacity up from the average of 85 containers per hour currently registered. The program also encourages the development of the Mexican merchant fleet and coastal shipping services.

    With regard to airports, the goal is to achieve a better service, lower costs and increase frequency in air transportation. It also seeks to solve traffic congestion in Mexico City International Airport and promote regional interconnections. The program includes the expansion and modernization of 19 airports and the completion of the Palenque Airport in Chiapas.

    In the telecommunications sector, Mexico is expecting to achieve universal telecommunications and narrow the digital gap access by expanding network coverage and fostering competition. The program also aims to contribute in effectively implementing the recently approved telecommunications reform. Among the projects included in the program are two new satellites to be put in orbit, a tender process for launching two new national television networks, installing a shared fiber optic network, expanding broadband internet access, and transitioning to digital TV.

    The flow of investments during the 2013-2018 period could be even higher if a fiscal reform that will be sent to the Mexican congress in the fall this year is approved.

    President Pea Nietos infrastructure plan brings an ambitious investment agenda that will generate high-value and long-term business opportunities for both national and foreign investors in Mexico. With better infrastructure, more investment and transformational reforms, Mexico will be able to grow at its full potential.

    The Electrical Manufacturing Industry in Mexico The electrical manufacturing sector is becoming increasingly important to the Mexican economy due to its growing share in the industrial output and international markets. Additional prospects of further growth bring companies and other stakeholders in Mexico together to cooperate on various topics, such as harmonized standards, to expand production and facilitate trade. These efforts will help to make this sector one of the most competitive manufacturing industries in the world.

    Currently, the Mexican electrical sector successfully competes at a global level. In the last decade, Mexicos exports of electrical equipment have more than doubled, growing from $17.8 billion in 2003 to $37.5 billion in 2012, according to Mexicos Chamber of Electrical Manufacturing (CANAME). The United States is Mexicos largest export market, absorbing over 90% of total exports. This makes Mexico the second largest supplier of electrical equipment of the U.S. comprising 25% of its total

    imports. Likewise, Mexico imports over $30.6 billion of electrical products, about half from the U.S., strengthening the North American supply chains. However, exports to other markets such as Canada, China, Brazil, and Colombia have grown significantly in the past few years.

    Mexicos network of free trade agreements with 44 countries grants duty free access to the worlds most important markets such as the North American, European, and Japanese markets, making the Mexican electrical industry highly attractive to global investment. Due in part to the highly integrated supply chains in North America, Mexico, the United States, and Canada have agreed to join the Council for Harmonization of Electrotechnical Standards of the Nations in the Americas (CANENA) to provide higher quality services and products in the industry.

    CANENA works with other national institutions, such as the National Electrical Manufactures Association (NEMA), the Association for Standardization and Certification (ANCE), and Electro-Federation Canada (EFC) to develop regulations that will facilitate trade among NAFTA partners. Consumers are more likely to buy from international markets if they know products are safe and reliable. Harmonized standards will instill the necessary international confidence in the goods produced by countries that follow these standards.

    In addition, the pooling of resources streamlines the development of standards and shortens the length of time for the adoption of new technologies. CANENA also ensures that the benefits of establishing standards outweigh the costs. As a result, these standardized products appeal to investors who know that they will gain more from investment in high quality products.

    The collaboration of various agencies has resulted in over fifty tri-national standards and 27 bi-national standards with multiple countries. The synchroniz