Download pdf - NAFTA WorksNAFTA Works September 2013 * Volume 18, Issue 9 INSIDE THIS ISSUE 1 Mexico Reinforces its Commitment with Climate Change Agenda climate-related approach in order to price

Volume 18, Issue 9 Page 1 [email protected]

Mexico Reinforces its Commitment with Climate Change Agenda

A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

NAFTA Works September 2013 * Volume 18, Issue 9

INSIDE THIS ISSUE

1 Mexico Reinforces its

Commitment with Climate Change Agenda

1 Trade Highlights

2 Mexico is Emerging

as a Key World-Player in Tech Services

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 Georgia 6 Profile of State of

Mexico

On June 3, 2013, Mexico's Ministry of Environment and Natural Resources (SEMARNAT) issued a new National Climate Change Strategy aimed at transitioning toward a competitive, sustainable and low carbon emissions economy as established in the National Development Plan 2013-2018 and in compliance with the General Climate Change Law (GCCL). The strategy builds on and strengthens the actions taken by Mexico's previous administration (2006-2012), detailing the lines of action to be implemented at the three levels of government in order to combat and mitigate climate change-related effects in the country in the long-term.

The strategy also establishes guidelines for the private sector, regarding climate change-related criteria in national legislation and environmental damage compensation schemes produced by companies operating in the country. It also provides elements for implementing fiscal policies and economic and financial mechanisms for companies engaged in sustainable productive processes, developing a legal framework on the sustainable usage of Mexican natural resources, and accelerating the adoption of clean energy sources, among others. The Strategy has three chapters:

The climate change national policy pillars detail six courses of action to be implemented gradually in Mexico by the three levels of government and the private sector, including:

The establishment of cross-cutting, coordinated, and inclusive public policies on climate change to be implemented through 18 lines of action, among them: the incorporation of adaptation and mitigation objectives and goals in National and State Development Plans, as well as in sectorial programs; the inclusion of climate change-related criteria in current legislation and policy

instruments on urban, tourist, ecological, transport and energy development; and the access to environmental damage reparation schemes for individuals and legal entities; The development of fiscal policies and economic and financial instruments with a climate-related approach in order to price environmental costs through 18 lines of action, including granting focalized supports, eliminating inefficient subsidies, and promoting sustainable productive processes through economic incentives; The implementation of a platform regarding research, innovation, development, and adaptation to climate-related technologies, as well as the strengthening of institutional capacities. This pillar also includes the promotion of advanced technologies for renewable and clean energy generation; The promotion of a climate-related culture, through wide educational programs, communication campaigns on climate change

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effects, and by providing relevant information to consumers; The development of mechanisms for measuring, reporting, verifying, monitoring, and evaluating climate change, including developing a public policy evaluation system with criteria and indicators on climate change adaptation; and The strengthening of strategic cooperation and international leadership on climate change by contributing to the adaptation and mitigation efforts through Mexico's active involvement in international negotiations and by promoting Mexico's access to international funding sources.

The Strategy's chapter on adaptation to the effects of climate change stresses the negative


impacts that Mexico has faced in recent years due to climate change, and its effects on diverse regions and economic sectors. The Strategy will implement three adaptation measures:

Reduce the vulnerability of the population and increase its resilience to climate change effects by: (i) identifying the most vulnerable areas; (ii) strengthening the enforcement of land use regulations; and (iii) developing public policies focused on reducing risks related to food safety, public health and housing infrastructure; Reduce vulnerability of the strategic infrastructure and productive sector and strengthen their adaptation measures to climate change effects, including systematic vulnerability evaluations and the inclusion of climate change-related criteria in the planning and construction of new strategic and productive infrastructure; and Conserve and sustainably use the ecosystems by providing legal instruments regarding the territory's management in order to reduce ecosystem vulnerability to climate change.

Low Carbon Emissions Development

In 2010, Mexico emitted approximately 748 million tons of greenhouse gases into the atmosphere, 33% more than in 1990. The energy sector is Mexico’s largest source of emissions and gas flaring, waste and transport are the sectors with the fastest growth. The Strategy seeks to achieve the specific goal established in the GLCC of reducing CO2 emissions by 50% by 2050 in comparison to those emissions registered in 2000. Therefore, the strategy includes several mitigation measures:

Accelerate the transition to clean energy sources by: (i) promoting clean energy generation by the public and private sector through the use of renewable energy sources and efficient technologies such as wind, solar, geothermal, and hydroelectric energies; (ii) strengthening the regulatory and institutional framework, as well as the use of economic incentives to promote clean energy sources, among others; and (iii) facilitating electrical interconnection of renewables power plants. Reduce the energy intensity through efficient and responsible consumption schemes. This measure seeks to increase energy efficiency in the country's more energy intensive economic sectors such as the public and private transportation sectors, as well as the steel, chemical, petrochemical, and cement industries, the public services, services industry and residential sectors. It aims to improve legal and regulatory frameworks for those fuels not yet regulated in Mexico, among others; Promote sustainable urban schemes with efficient transport and comprehensive waste management systems, as well as with low-carbon footprint buildings by: (i) improving regulations, and standards of energy-, gas-, and water-saving technologies in new and existing buildings; (ii) promoting energy efficient and zero-emissions public transportation systems, and multimodal and time-saving transportation modes and infrastructure; and (iii) promoting new technologies and infrastructure for waste and wastewater treatment, bio-gas co-investments and self-funding operations; Promote better agriculture and forestry practices in order to increase and preserve natural carbon sinks by: (i) promoting sustainable use of forestry resources, and (ii) implementing energy-efficiency actions and renewable energy use in the agricultural and livestock sectors; and Reduce short-lived climatic pollutants emissions (SLCPs) by: (i) developing regulations on SCLPs generation and use; (ii) encouraging black carbon emission-reducing technologies and fuels in the transport sector; and (iii) regulating SCLPs emissions generated in industrial processes, gasoline service stations, and facilities using or storing solvents, among others.

Mexico has great potential for power generation using renewable sources, and opportunities have opened for private sector participation. These lines of action seek to focus efforts to

overcome the obstacles that have prevented the full immersion of renewable energy in the national energy system.

Mexico is Emerging as a Key World-Player in Tech

Services

The Mexican IT industry is rising as the most important tech services provider to the U.S. and Canada, in large part, due to its geographical proximity, strong intellectual property protection, human capital capabilities and NAFTA market access certainty. As a result, this industry has grown at a pace that is three-fold higher than the global average. Moreover, recent economic reforms adopted by Mexico will speed up its transformation as a world powerhouse.

Mexican IT support and services providers already service companies from four continents, including a wide number of the Fortune 500 firms. In addition to well-positioned global Mexican companies in this sector that have formed important high-tech hubs such as those located in Guadalajara, Monterrey, Mexico City and Queretaro, small start-ups are increasingly dotting the country, forming a network of mini-hubs of innovation centers that create original software to sell on the international markets.

Growth in this sector is driven mostly by the demand from the United States, the world’s largest consumer of tech services. According to IT consulting firm Gartner, 75% of tech outsourcing in Mexico is consumed by U.S. companies. Mexico has developed a critical mass of increasingly sophisticated tech services that also meet global companies' requirements of managing massive computer databases in accordance to the growing use of mobile technologies by consumers. The IT services industry in Mexico nearly doubled revenues from ITO and BPO services from $7 billion in 2006 to $12.2 billion in 2011, a Nearshore Americas study reports.

Mexico is successfully competing with previously unchallenged leadership of the Asian providers of these services. In fact, Mexico has become the fourth-largest producer of IT services worldwide after India, the Philippines, and China, according to Gartner. Therefore U.S. companies are increasingly partnering with Mexican tech providers which highlights the benefits of doing business within the North American region. A number of elements explain this increase of IT support and services.

In addition to a sound economic foundation that attracts both domestic and foreigner investments in the IT services sector, the Mexican economy comprises a large domestic market, a widely diversified economic composition, and a well-developed infrastructure to support tech services exports by a network of innovative companies.

Mexico also has a well-prepared and creative young population highly capable of developing new products and support fast-growing companies. The country’s software and service sector now comprises more than 500,000 IT professionals, and its colleges and universities are producing more than 90,000 graduates annually with IT-related degrees, according to Mexico IT.

In terms of legal framework, Mexico undoubtedly has an advantage vis-a-vis other competitors on having a clear system of rules and regulations to create a thriving business eco-system for innovators. Mexico ranks 36th in the ease of starting a business, according to the World Bank, and the recently approved telecommunications and economic competition overhauls will open up more and better opportunities for startups.

In addition to promoting a robust intellectual property rights regime, Mexico is working on setting strong incentives, clear protections and vigorous law enforcement to encourage investment in the development of information technologies. (Continue on page 3)


NAFTA Related Events

Electricón 2013 October 2 - 4, 2013 Trade show for the electrical construction industry Location: Expo Guadalajara. Guadalajara, Jalisco Phone: 52 (477) 707-3270, 52 (477) 707-3271 E-mail: [email protected] Website: http://www.electricon.com.mx/

Expo CIHAC October 15-19, 2013 Exhibition related to the construction industry specialized on structures and prefabricated building systems Location: Centro Banamex. Mexico City Phone: 52 (55) 4738- 6200 E-mail: [email protected] Website: http://www.cihac.com.mx/

EXPOSICARNE 2013 October 23-25, 2013 Equipment and supplies for the cattle industry and symposium on beef cattle production. Location: Tres Centurias Convention Center. Aguascalientes. Phone: 52 (33) 1617-4073, 52 (55) 4169-1064 E-mail: [email protected] Website: http://www.sicarne.org/exposicarne.php

XXI EXPO IMIQ 2013 October 23-25, 2013 Trade show on products and services for the chemical industry Location: Centro de Convenciones Cancún Center. Cancún. Phone: 52 (55) 5559-0866, 52 (55) 5250 48 57 E-mail: [email protected]; Website: http://www.expoimiq.com/index2.html

For further information visit: http://www.sdchamber.org/events-and-programs/chamber-events.html?go=1380610800

Diario Oficial Notices http://dof.gob.mx

Amendment to the catalog of tariff items that classified goods

subject to import regulations from the Ministry of Agriculture. August 2nd.

Amendments to the General Rules for Foreign Trade for 2012. August 5th.

Resolution that declares the initiation of the sunset review of the countervailing duty order imposed on imports of polyester staple fibers from Korea, regardless of the shipping country (Mexican tariff items 5503.20.01, 5503.20.02, 5503.20.03 and 5503.20.99). August 7th.

Amendment to the tariff-rate quota (TRQ) to import chicken meat. August 8th.

Resolution that accepts and declares the initiation of the antidumping investigation on imports of blenders from China, regardless of the shipping country. (Mexican tariff item 8509.40.01). August 9th.

Notice approving the inclusion of a set of key indicators related to the good’s trade balance in the National Catalogue of Indicators. August 15th.

General Administrative Agreement that regulates the use of the certified electronic signature in the Supreme Court of Justice of the Nation. August 15th.

Final decision on the final determination of the 2008-2009 antidumping duty administrative review regarding light-walled rectangular pipe and tube from Mexico (Docket Nr. USA-MEX-2011-1904-02). August 21st.

Resolution that accepts and declares the initiation of the antidumping investigation on imports of steel wire rope from China, regardless of the shipping country (Mexican tariff items 7312.10.01, 7312.10.05, 7312.10.07 and 7312.10.99). August 22nd.

Resolution that accepts and declares the initiation of the countervailing investigation on imports of metoprolol tartrate from India, regardless of the shipping country (Mexican tariff item 2922.19.28). August 26th.

Notice announcing the entry into force of the Central American FTA between Mexico and Guatemala. August 27th.

Notices announcing TRQ’s to import certain canned products containing tuna, and to import fresh cheese (unripened), including whey cheese, curd and other cheeses, originating from Guatemala. August 27th.

Guidelines for the issuance of not ordinary visas. August 30th. General Rules for Foreign Trade for 2013. August 30th. Program to democratize the productivity 2013-2018. Aug 30th. Program for a close and modern government 2013-2018.

August 30.

Mexican Official Standards

NOM-024-SCFI-2013, commercial information for packaging, instruction guides and warranties for electronic, electric and home appliances products. August 12th.

Amendment to NOM-012-SCT3-2012. Requirements for instruments, equipment, documents and manuals carried on board of an airplane. August 22nd.

In fact, Mexico has implemented many relevant cyber laws, including data privacy legislation that outperform other leading countries.

Mexico is rapidly embracing technology and innovation in order to become a global tech hub. Given the competitive edge that has been obtained by reducing costs and improving core supply chain functions, it is not surprising that Mexico is quickly becoming a favorite destination for companies looking to outsource IT and business process operations in order to strengthen their global competitiveness.


Grupo Bimbo is Building a New Bakery Plant in Pennsylvania Mexico’s Grupo Bimbo through its subsidiary Bimbo Bakeries USA is investing $75 million to build a new state-of-the-art plant in Macungie, PA. The 240,000-square-foot bakery plant will bring more than 150 jobs to the area and produce bread and buns for the Northeast with operations beginning in 2014. Bimbo was attracted to this site by its proximity to major highways leading to big-city markets in the Northeast. The Mexican company operates 70 bakeries across the United States.

Continental will Open an Innovation Center in Jalisco The German auto and truck parts manufacturing company Continental is investing $22 million in a Research, Innovation and Development Center in Jalisco, which will start operations with 400 engineers next year. The project is expected to hire 1,200 researchers within the next three years, making the center one of the most important in the world to develop new technologies. The company estimates that the Mexican center will reach an annual average of one invention for every five researchers.

KYB to Invest in a New Plant in Mexico KYB, a leading Japan-based auto parts company, announced the construction of a manufacturing plant in Mexico that will produce hydraulic pumps for automobiles in 2014. The 21,000 square meters plant will be located in Silao, Guanajuato with an investment of $57 million. In the future, the facility will also produce automotive steering components and hydraulic shock absorbers. KYB decided to manufacture CVT hydraulic pumps in Mexico as part of ongoing investment in emerging countries with good prospects for economic growth.

Toyoda Gosei to Expand Production in Mexico The Japanese auto parts supplier Toyoda Gosei established a new company in Mexico to strengthen the automotive rubber hose production in North America. The new company, Toyoda Gosei Rubber Mexico (TGRMX), is starting production in February 2015 as Toyoda Gosei's 3rd manufacturing base in Mexico. Located in Matamoros, Tamaulipas the, $7 million, new facility will supply auto parts for Toyota in the U.S., Canada and Mexico, and other business partners.

American Tower Corp. Acquired Tower Sites in Mexico American Tower Corporation (AMT) reached an agreement with NII Holdings, Inc. to acquire up to 1,666 wireless communication towers in Mexico, for approximately $398 million. NII subsidiary Nextel Mexico agreed to lease back the towers from AMT for a minimum 12-year initial lease term with additional renewal options thereafter. The majority of the portfolio consists of towers located in and around major population areas and along major highways. On average, the towers have a tenancy ratio of just over one tenant per tower, with Nextel Mexico as the primary tenant, providing significant opportunities for future site leasing growth.

Mexico reform agenda for inclusive and sustainable growth Author: The World Bank September 2013

In these policy notes, the World Bank analyzes several topics going from green growth to social protection. Mexico needs to broaden and deepen its financial system without compromising the financial stability gains of the last decade. Strengthening competition and streamlining key regulations for firms are key to increasing Mexico's competitiveness. This work also contributes to the debate on Mexico's looming fiscal challenges and assesses Mexico's pending subnational fiscal reform agenda.

http://documents.worldbank.org/curated/en/2013/01/18142424/mexico-reform-agenda-inclusive-sustainable-growth

Infrastructure Projects in Mexico

Piedra Larga Phase 2 Wind Farm Sponsor: Renovalia Energy Location: Oaxaca Project Value: $283 million.

The project will generate renewable electric energy through the construction and operation of a 137.5 MW wind farm in the Isthmus of Tehuantepec, Oaxaca. This wind farm is an enlargement of a first phase of 90 MW that once completed will be one of the largest wind projects in Latin America. 69 wind turbines of 2 MW will be installed to generate electric energy that will be evacuated by a new 27.9 km long 230 kV double circuit aerial transmission line. The project will contribute to sustainable development by reducing total emissions by 2.2 million tons of CO2e in the first 7 years.

Business opportunities: financing, civil engineering, construction materials, electrical equipment, wind turbines, substations, transmission lines. Pesqueria Combined Cycle Power Plant Sponsor: Techint Group Location: Nuevo Leon Project Value: $1 billion

Through its subsidiaries Ternium, Tenaris and Tecpetrol, Luxembourg-based Techint Group, the steel and energy conglomerate, plans to invest $1 billion to build a natural gas-fired power plant in Pesqueria, Nuevo Leon. The project, which will generate between 850 and 900 megawatts to supply electricity to the group’s plants in the country by the end 2016, seeks to take advantage of Mexico’s efforts to open up its energy sector. Under current law, energy generated by the plant would have to be sold exclusively through state-owned utility CFE. Under President Enrique Pena Nieto’s proposal, Techint’s plant will be able to sell its electricity directly to buyers.

Business opportunities: financing, civil engineering, construction materials, electrical equipment, turbines, substations, transmission lines, control equipment.

Success Stories Selected Readings


Georgia

In 2012, Georgia's exports to Mexico reached $2,276 million, up $1,865 million from their level in 1993. In the first half of 2013, Georgia exported $1,220 million worth of products to Mexico, an increase of 14.1% in comparison with the same period last year. Among all U.S. states, Georgia was ranked 14th as an exporter of goods to Mexico in the first semester of 2013. In 19 years of NAFTA, Georgia's exports to Mexico have increased by 454%, while the rest of the world rose 340%. This means that the export growth rate to Mexico is 1.33 times higher than its export growth rate for the rest of the world. Since NAFTA was implemented, Georgia's sales to Mexico have grown at an annual average rate of 9.4%. Mexico is an important trading partner to Georgia. It was ranked as the 3rd largest export market for goods from Georgia in the first six months of 2013, illustrating the impact of NAFTA for Georgia's growing businesses. Mexico accounted for 6.6% of Georgia's exports worldwide in the January-June period of 2013.

Exports to Mexico 1993 - 2013 2Q (Millions of US Dollars)

Source: US Census with adjustments made by the World Institute for Strategic Economic Research (Wiser), and SE-NAFTA. 1993-1996 by SIC and 1997-2012 by NAICS.
