Discussion and Presentation to the Consul General of Tijuanaof the People’s Republic of China

The Honorable 領事瓊斯Ned McDonnell III, CFA y PMP

el 17 de febrero de 2015

Introducing Ned McDonnell, CFA y PMP1. International banker and risk manager for non-bank

financial institutions (primarily insurers) for twenty years2. Foreign Service Officer (Limited Appointment) for

Economic Development and Capacity Transfer in Iraq and Afghanistan

3. Technology Transfer Consultant for a public-sector Research and Development Center in México

4. Entrepreneur in digital marketing in Tijuana to promote Tijuana as a future hub for the Inter-net of Things (IoT)

Converging constraints can mean a common opportunity

1. Failure of Bombardier’s C-Series mid-sized passenger jet2. Bombardier’s suspension of building advanced technology

business jet in Central México3. COMAC’s growing need for an operations center outside of

China4. Tijuana’s ageing industrial sweat-shop base (maquiladoras)5. Brain drain from México, especially engineers6. Boeing and Airbus largely ignoring México

Traditional Military Strategy FrameworkDesired End-state (Victory)

Strategy to reach the End-state

Tactics (milestones) aligned with strategy

Activities to achieve the tactical milestones

DESIRED END-STATE

Extending the COMAC-Bombardier partnership into Tijuana, Baja California, México

Strategy to reach the desired end-state of friendly competition1. Support toward elevating the

current aeronautics cluster in Baja California to global R&D facility

2. Progressive construction of joint maintenance and customer attention facilities supported by the Chinese, Mexican and Canadian governments

3. Increased economic ties between Québec, Baja California and China

Tactics thus-far identified1. Engineering exchanges between universities2. Incentives from the Mexican government to build

a maintenance plant in Tijuana at least to service both the Bombardier C- Series and the COMAC C-919

3. Financial support from Mexico and Canada to Volaris Airlines (low-cost carrier in Tijuana) to purchase equal numbers of C-Series and C-919 jets with a total of six-to-ten aircraft

4. Investments in an aeronautics research center funded in part by COMAC or AVIS

Anticipated Initiatives over the longer termBased upon the attainment of performance milestones, to show the continued good-faith of all parties, construction over time by Bombardier and COMAC:1. An aeronautics R&D facility, primarily in

materials and turbo-fan technologies

2. An operations center for client support

3. An operating maintenance plant

4. A joint facility for producing the C-919 and the C-Series narrow-bodied jets

Benefits for Bombardier1. An engineering hub in Tijuana,

adjacent to Southern California (a former aviation hub)

2. Platform for selling new jets, the LearJet87 and the C-Series made of advanced composites around the Pacific Rim

3. Reduced supply-chain costs with less expensive talent pool

Tijuana + Shanghai = a tech corridor competitive

with that of Seattle-Vancouver

Benefits for COMAC1. Marketing platform to

enter the Latin American market

2. Mitigating non-tarrif trade barriers in the U.S.

3. Acceleration of capacity ramp-up in maintenance and client services

Shanghai-Tecnojuana Xpress

Benefits for China and México1. Commercial bridge from China

to the Americas as well as from México to China

2. Re-set of recently disturbed investment relationship between China and México

3. Converting Tijuana from the world’s largest sweat-shop to an IoT-manufacturing hub

4. Enhanced leverage for both vis à vis the U.S.A.

Why RIGHT Now?China / COMAC TIJUANA / BOMBARDIER

• Looming Trans-Pacific Partnership

• Financial crisis facing Bombardier

• U.S. protection of BOEING (2012 with Aeromexico)

• Canada open to a solution avoiding a bail-out

• Need to accelerate production of the C-919 and ARJ21 jets

• Tax reforms in México inhibiting Tijuana’s sweat-shop economy

• Extend the production / trade reach beyond China proper

• Lowers break-even volume of the C-Series, perhaps the C-919

Comparative AdvantagesCHINA MÉXICO

• Financial resources • Trained engineers in Tijuana• 2012 partnership agreement

between Bombardier & COMAC• Most free trade agreements

(entrée into other markets)• Large domestic travel market • Door-step status to U.S. market

through NAFTA• Still superior economic growth

(GDP growth 2x the average)• Strong economic relationships

with the E.U. and Latin America

Immediate hurdles:1. Local and municipal governments gone AWOL2. Reneging by Mexican government on two or three

large contracts with Chinese companies3. Many of the business leaders in Tijuana stuck in a

combination of fear and complacency 4. Intellectual autarchy pursued by México5. Tech investments less than 1% of the amounts for

San Diego or Vancouver6. U.S. and Japan inviting themselves into the Trans-

Pacific Partnership7. Slow-down hitting border states with tax reforms

Next Steps, if anyOpen contacts and discussions with other likely stakeholders1. Bombardier in Canada?2. Managers for Bombardier in México?3. Counterparts in the Embassies located in Ottawa,

Beijing and México City?4. Leaders of civic groups in Tijuana?5. Counterparts in the Development Banks of China

and Canada?6. OTROS