Mexico as a market area and production site
for Finnish Companies
August, 2007
NINA JAAKKOLA
FINPRO MEXICO TRADE CENTER
Mexico is the platform for
Americas
•
Mexico has a strategic location as
the neighbor of the US and as a port
to Central and South America
USA and Canada
Border 3000km
107.5
million
consumers
Central and South America
/2
/ © Finpro ry
Mexico has a stable and growing
economy
•
•
•
•
•
•
•
•
•
•
14th largest economy in the world (measured in GDP)
The economy has been growing steadily during the past ten
years. 2006 GDP growth rate was of 4,8%.
Mexico's Foreign Direct Investment for 2006 was 19 billion USD, according to
figures of UNCTAD. It was the highest FDI in Latin America
Strategic location – Port to North America (3,000 km border with the United
States), Central America and South America
2nd largest exporter in Latin America
The total trade between Mexico and USA was 332 billion USD in 2006. Mexico is
the 2nd commercial partner of the USA after Canada
Large internal market of 110 million consumers with standard of living rising
Mexico is one of the countries with the highest number of free trade
agreements; these cover 43 countries and 1,3 billion consumers. NAFTA (North
American FTA) and EU FTA are the most important ones
Low foreign debt (21% of the GDP)
World‘s 9th largest foreign exchange reserves (67,5 billion USD)
/3
/ © Finpro ry
Mexico, from economic reforms
to a network of free trade
agreements
•
Mexico has reformed its economy through privatization, deregulation
and opening to international markets
•
Mexico has several free trade agreements; in total these cover 43
countries and 1,3 billion consumers. NAFTA (North American Free
Trade Agreement) and the European Union Free Trade Agreement
are the most important ones
•
EU – Mexico Free Trade Agreement has been in force since July
2000
The last import taxes for industrial products were eliminated 1st
of January of 2007
•
/4
/ © Finpro ry
Recent news about Mexico
•
Mexico jumped 19 places to the 43rd position on the Doing Business 2007
report, a global ranking of 175 countries made by the World Bank to measure the
ease of doing business.
Behind Mexico were Brazil on place 121, Romania 49, Czech Republic 52,
Poland 75, Italy 82, China 93, Russia 96, Ukraine 128 and India 134.
•
On 8th August 2007, Fortune magazine reported that Mexican Carlos Slim Helú
had overtaken Bill Gates as the world's richest man. Slim's estimated fortune
soared to US$67.8 billion.
•
One of Slim´s companies, América Móvil, was
ranked number 1 Information Technology
company in 2005 by the Business Week
magazine. On February 25, 2007, it became the
biggest corporation in Latin America by market
capitalization, surpassing giants like Petrobras.
América Móvil provides services to over 130 million
wireless subscribers in America, primarily in Latin
America and the Caribbean.
/5
/ © Finpro ry
Trade between Finland and
Mexico
Currently Mexico counts for only 0,3% of total exports of Finland. There is much more
export potential that has not been taken advantage of. 2006 represents the first year with
a negative trade balance for Finland due to the increased imports of cellular phones and
components, motor vehicles and increase in prices of mining products.
300
250
200
150
100
50
0
Imports
JanuaryDecember
2006
JanuaryDecember
2004
JanuaryDecember
2002
Exports
JanuaryDecember
2000
million EUR
Annual Trade between Finland and Mexico
/6
Source: National Board of Customs, Finland
/ © Finpro ry
Trade between Finland and
Mexico
180 million Euros (+35% from 2005)
Exports from Finland to M e xico 2006*
Machinery and
transport
equipment;
39,80 %
Basic
manuf actures;
46,90 %
Chemicals and
related
products; 7,40 %
Beverages and
tobacco; 0,10 %
Miscellaneous
manuf actured
articles; 5,90 %
Source: National Board of Customs, Finland
* Data. Cumulative Nov 2006
/7
/ © Finpro ry
Trade between Finland and
Mexico
204 million Euros (+87% from 2005)
Imports of
to Finland
Finland from
2006*
Imports
fromMexico
Mexico
2006*
Machinery and
transport
equipment;
72,30 %
Basic
manufactures;
1,30 %
Chemicals and
related
products; 2 %
Source: National Board of Customs, Finland
* Data. Cumulative Nov 2006
Miscellaneous
manufactured
articles; 3,60 %
Food; 0,50 %
Crude material
inedible, except
fuels; 19,40 %
Beverages and
tobacco; 0,90 %
/8
/ © Finpro ry
Finnish companies established in
Mexico
Finnish companies established in Mexico belong to the following industries:
Others; 4 %
ITC; 11 %
Multi-industry;
7%
Metallurgic,
Machinery
and Capital
Goods; 37 %
Electronics;
19 %
Forest &
Paper; 11 %
Chemistry &
Plastic; 11 %
/9
/ © Finpro ry
Finnish companies established in
Mexico
There are 27 Finnish companies established in Mexico, 12 of these have one or
more production sites in Mexico:
1. Assa Abloy
2. Benefon
3. Dynea
4. Elcoteq
5. Exomi
6. Filtros Larox
7. Fiskars
8. Hiab
9. Kemira de México
10. Konecranes
11. Kone Industrial
12. Kone México
13. Metso Minerals
14. M-real Alliance México
Sales
Production
14. Nokia Enterprise Solutions
(Networks and Mobile Phones)
15. Nokia Mexico
16. Outokumpu Heatcraft
17. Outokumpu
18. Perlos México
19. PKC (through Canadian acq.)
20. Raisanen y Asociados
21. Savcor
22. Stora Enso
23. UPM Raflatac
24. Visko
25. VTI Technologies SA de CV
26. Wärsilä de México SA de CV
27. Amer Sporting Goods
/ © Finpro ry
/ 10
Finnish companies‘ operations in
Mexico
Operations of the Finnish Industry in
Mexico
Maintenance;
17 %
Production;
25 %
Assembly in Mexico
Other; 6 %
Yes; 29 %
Sales; 53 %
No; 71 %
Years operating in Mexico
(Average)
30
25
20
15
10
5
0
er
s
O
th
tr
y
du
s
1.1% of them are foreign.
M
et
a
M
ul
ti
-i n
ac
hi
ll u
rg
ic
,M
an
d
tr
y
m
is
C
he
ne
ry
ic
Pl
Pa
nd
re
st
a
Fo
as
t
pe
r
er
gy
En
El
e
ct
ric
Approx. 4,820 people work
for the Finnish companies
established in Mexico.
Source: Finnish Companies in Mexico - Analysis of Trends and Expectations
August 2006, Finpro & Finnish Embassy in Mexico
/ 11
/ © Finpro ry
Finnish companies‘ expectations
about the Mexican market
•
•
•
•
•
72% of the interviewed Finnish companies think that in the future the number of
company personnel will grow in Mexico.
28% of the interviewed Finnish companies think that in the future the number of
company personnel will stay the same.
None of the interviewed Finnish companies consider that the number of
company personnel will decrease
90% of the interviewed Finnish companies think that in the future their business
volume will grow in Mexico.
10% of the interviewed Finnish companies think that in the future their business
volume will diminish in Mexico.
Source: Finnish Companies in Mexico - Analysis of Trends and Expectations
August 2006, Finpro & Finnish Embassy in Mexico
/ 12
/ © Finpro ry
Finnish companies‘ expectations
about the Mexican market
Expectations: Number
of personnel
Electric Industry
100%
Energy Industry
Forest and Paper
Industries
33%
Chemical and
Plastics
Industries
100%
Metallurgic,
Machinery and
Capital Goods
80%
Multi-Industry
100%
Other Industries
66%
Expectations:
Business volume
100%
100%
100%
66%
66%
33%
100%
20%
100%
100%
33%
Source: Finnish Companies in Mexico - Analysis of Trends and Expectations
August 2006, Finpro & Finnish Embassy in Mexico
100%
/ 13
/ © Finpro ry
Strengths and weaknesses of the
Mexican market identified by the
Finnish companies
Strengths observed by the Finnish companies in Mexico:
•
•
•
•
•
•
•
•
Country with great possibilities of growth
Geographically strategic – Close to the client (North and South America)
Economic stability – Exchange rate stability
Quality Human Capital – Low wages
Rich country in natural resources
Low manufacture/production cost
Strategic demographic situation – Young Population
Investment potential in the private sector
“Country with excellent growth possibilities”
“ Close to the US and good free trade agreements”
“Economic Stability”
“Availability and qualified work force”
“Population/Demographic potential = the majority Is less than
30 years old”
Source: Finnish Companies in Mexico - Analysis of Trends and Expectations
August 2006, Finpro & Finnish Embassy in Mexico
/ 14
/ © Finpro ry
Strengths and weaknesses of the
Mexican market identified by the
Finnish companies (cont.)
Weaknesses observed by the Finnish companies in Mexico:
•
•
•
•
•
•
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Corruption
Insecurity
Bureaucracy – Complicated business management
High infrastructure costs, especially in energy
Labor laws complicated
Legal, political and fiscal uncertainty
US dependency
“Bureaucracy”
“Infrastructure” (highways, railways)”
“Management complexity”
“Corruption”
Source: Finnish Companies in Mexico - Analysis of Trends and Expectations
August 2006, Finpro & Finnish Embassy in Mexico
/ 15
/ © Finpro ry
Finnish companies represented in
Mexico
Finnish companies represented in Mexico belong to the following industries:
Chemistry &
Plastic; 4 %
Metallurgic,
Machinery
and Capital
Goods; 28 %
Others; 17 %
Forest &
Paper; 9 %
Electronics; 6
%
Environment
and
renew able
energy; 7 %
Health Care;
24 %
ITC; 6 %
/ 16
/ © Finpro ry
Finnish companies represented in
Mexico
There are at least 56 Finnish companies represented in Mexico:
1. Abloy
2. Aquamec
3. Asko (Indoor Group)
4. Datex-Ohmeda
5. DWT-Engineering
6. Elecster
7. Farmi Forest
8. Fermion
9. Fimet
10. Finlandia Vodka
11. Finn-Power
12. F-Secure
13. Icareus
14. Iittala
15. Indau
16. Inter Express
17. Jaakko Pöyry Consulting
18. Junttan
19. Kekkilä
20. Kemira Grow How
21. Marioff
22. Meclift
23. Merivaara
24. Mirka Abrasives
25. Naps Systems
26. Nextrom Technologies
27. Nokka
28. Normet Corporation
29. Orion Corporation
30. Orion Diagnostica
31. Outokumpu Stainless
32. Oxford Instruments Analytical
33. Paulig - Teriaka Ltd
34. Planmeca
35. Planmed
36. Polar
37. QPR Software
38. Rapala
39. Raute Precision
40. Robit Rocktools Ltd.
41. Sabik
42. Sanako
43. Savcor Indufor
44. Savu
45. Stalatube
46. Stresstech
47. Säteri
48. Thermo Labsystems
49. Tooler
50. Tramigo
51. UPM-Kymmene
52. Uponor Wirsbo
53. Vaasan&Vaasan
54. Vacon
55. Vaisala
56. Wipak
/ 17
/ © Finpro ry
Mexico has a large internal
market with a lot of opportunities
•
•
Mexico is an attractive and potential market.
However it is not an easy market -> Companies should get enough
information and understand the way of doing business
• Tough competition
• Marketing and sales oriented market
• A good product is not enough. The buyer must be convinced of the
product’s superiority against the competitors products.
• Local presence required for consistent results
• E-mailing is not enough
• Good partner is a key to success
• Business culture
• Business decisions are based a lot on trust & relationship
• Purchase decisions are made on the top
• Patience, Politeness, Persistence
/ 18
/ © Finpro ry
Mexico – Potential markets and
opportunities for Finnish
companies
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Energy / renewable energy sectors
Off shore and naval sector
Water and waste water
Forest, pulp and paper
Mining and minerals
Automotive market
Construction
Electronics industry
Metal mechanical industry
Health care
Food and food retail
/ 19
/ © Finpro ry
Mexico´s market potential –
Energy / renewable energy sector
Energy prices are high in Mexico due to a governmental monopoly. Comisión Federal de
Electricidad (CFE) and Luz y Fuerza del Centro (LFC) control the electricity generation and
Petroleos Mexicanos (PEMEX) control the oil and gas production.
CFE and LFC have an old infrastructure and major modernization plans are taking place.
Recently Mexico was awarded up to 8 billion dollar credit line for major infrastructure
projects from the Interamerican Development Bank for public private partnerships. Mexico
is also developing renewable energy sources in order to diversify its energy production.
Energy Production in Mexico Year 2004
Hydrocarbon 90.6%
Primary Electricity 4.1 %
Biomass 3.4 % Coal 1.9 %
• Crude oil
• Nuclear energy
• Hydraulic energy
• Geoenergy
• Eolic Energy
• Sugar cane
bagasse 0.9 %
• Forestry
residues 2.5 %
71.9 %
• Condensated
1.7 %
• Gas not associated 5.5 %
• Gas associated
11.5 %
1%
2.5 %
0.6 %
NA
/ 20
/ © Finpro ry
Mexico´s market potential –
Energy / renewable energy
sector
Public power plants:
The CFE reported that its 2007-16 works and investment program will require USD 50.1
billion. Of the total requirement, 44.4% would go to generation, 20.7% to distribution,
19.1% for transmission, 14.9% to maintenance and 0.9% to other areas. CFE expects 40%
of total investment to be carried out through the public works financing model, 8.8%
through the independent power producer setup and 38.5% from its own budget.
CFE announced that in 2007 it will increase investments in updating and maintaining its
current power plants instead of building new ones that would entail greater expenses. With
this decision, the CFE will reportedly save the construction of new plants representing
5,108 MW of capacity. According to a CFE report, adding new technology to old plans
increases efficiency by 10 to 15%.
CFE is bidding to revamp the 1,365MW Laguna Verde nuclear plant. Fourteen groups
have registered for the tender. Among them are Siemens, ICA Fluor Daniel, Techint,
Alstom, GE, Schneider Electric, Iberdrola and Mitsubishi. The project aims to increase the
plant's capacity to 1,620MW. Reports have placed investment at some USD 350 million.
Private power plants:
Recently some changes have been made in legislation in order to allow companies to
produce their own electricity and to sell the excess to CFE.
This is providing business opportunities for example for Wärtsilä.
/ 21
/ © Finpro ry
Mexico´s market potential – Off
shore and naval sectors
Platform construction in Mexico has been lively in the last three years and is expected to
continue this way. PEMEX has made major investments in platform construction for the
Ku-Maloob-Zaap business asset located in the Ciudad del Carmen Region
Since 2002 Pemex has tendered 47 new offshore platforms, of which all have now been
awarded
The projects worth 6 Billion USD include drilling, accommodation, telecommunication and
production platforms
PEMEX will start to explore the deep-waters in the Mexican Gulf – Offshore Platform
Construction will continue lively
PEMEX estimates to make capital expenditures of approximately $45.3 billion in
exploration and production over the next five years
Marine and off shore
In December 2006 Pemex said it installed the country's largest offshore platform in the
Sonda offshore field in Campeche State. The USD 250 million, 250,000b/d-capacity
platform is part of the Ku-Maloob-Zaap (KMZ) project. The platform will increase KMZ's
crude production to 800,000b/d from 300,000b/d. Swecomex, a unit of Mexican
construction and engineering company CICSA, built the platform.
/ © Finpro ry
/ 22
Mexico´s market potential – Water
and waste water
The government has approved a record budget of 1.7 billion USD for the national
water commission, Conagua. The budget's main targets will be to increase
potable water coverage and to rehabilitate and modernize the irrigation
infrastructure. The agency hopes to use the funds to build new water networks
for urban and agricultural usage, as well as to protect existing water sources and
the environment.
President Felipe Calderón has promised that 100 % of the waste water will be
treated by 2012 (actual level of treatment Is 37%).
The administration of President Calderon plans to resume the construction of
four megaplants to treat wastewater in Mexico Valley. The project plans to
construct four facilities to treat 40,000l/s of sewage from Mexico City, and then
supply it to neighboring Hidalgo State to help resolve its present water-shortage
problem. The treated water would be used for irrigation and similar purposes.
/ 23
/ © Finpro ry
Mexico´s market potential –
Forest, Pulp and Paper
opportunities
Forest sector is one the priorities of the Mexican government:
• Mexico is ranked in 11th place worldwide for areas with productive forest lands,
however Mexico has a deficit in wood, pulp and paper products.
• Forest industry has been relatively stagnant due to lack of raw materials, but is
waking up as a result of important governmental support programs:
• By the year 2025 the Mexican government will invest 500 million USD to
develop the commercial plantations through Prodeplan program which is
designed to support the development of 875,000 ha by providing subsidies to
cover as much as 65% of start up costs and machinery costs. Currently there
are 110,000 ha planted, 95% eucalyptus
• Plantations are starting to acquire the machinery required for the harvesting
and production phase
• National 25 year forest strategy was prepared by Indufor – Finland has a
very good reputation in the sector
• The government also has support programs for making more efficient the
production based on the 54 million ha of natural forests
• Paper and Board production in 2003 was of 4.080.000 metric tons (Spain
5.347.000 metric tons). There were 64 pulp and paper plants in Mexico
employing 27.600 people. The use of recycled fibers has been increasing in
paper production.
• Mexico is the 2nd most important tissue paper producer in Latin America, not too
far from Brazil, number one producer in this sector.
• The growth rate in pulp and paper industry is expected to be high due to high
demand, the demand in 2008 is expected to be of 7,590,000 tons and the
installed capacity for production is expected to be 5,505,000 tons.
/ © Finpro ry
/ 24
Mexico´s market potential –
Mining and Minerals
Mining is the oldest industry in México, yet only 20% of its territory has been
explored in the search of mineral resources.
137 foreign enterprises are contributing to the investment and exploration of
Mexico's mining sector. International demand and high (rising) prices for mineral
raw materials boost production.
Mexico is within 10 biggest producers in 7 minerals
Sandvik/Tamrock, Larox, Metso subsidiaries
Cementos Mexicanos (CEMEX) no. 2 in the world
Strong glass industry, Grupo Vitro
There are opportunities for supplier in the mining sector:
-> Results expected to increase the infrastructure of R&D in the mining sector
-> Competition and modernization expected to rise
-> Promotes the incorporation of new corporations and new uses of metals and
minerals, by including new technologies and processes, as well as by generating
products with a high added value
/ 25
-> Companies have more resources to be used in investment
/ © Finpro ry
Mexico´s market potential –
Automotive
Mexico is one of Latin America’s leading automobile producers and the industry
has experienced solid growth in production, export and sales.
Mexico has a privileged position in the North American car-component market
A total of 23 companies produce and assemble vehicles, and nearly 1,000
companies make components.
The automotive sector employs around 500,000 workers and is Mexico’s single
largest foreign-exchange earner, ahead of oil.
The component manufacturers have good opportunities – Mexican automotive
industry invested 3 Billion USD year 2006 in up-dating technologies,
manufacturing new models and expanding existing markets according to the
Finance Ministry
Auto production rose 23.2% in 2006 to 1.98 million units, as exports expanded
by nearly a third and domestic sales edged higher.
In 2007 production is estimated to rise about 30%, boosted by export growth of
between 32% and 35%.
/ 26
/ © Finpro ry
Mexico´s market potential –
Construction and infrastructure
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•
•
•
•
•
•
There is a deficit of 6 million houses in Mexico according to Construction
Association.
Housing construction will continue lively. The private sector estimates to build
1 million new homes each year.
Complete villages, consisting of 500-7000 apartments with infra are
constructed
Potential for prefabricated, plumbing/piping, roofing, infra design, etc.
Projects for strategy and entry concept development
Large investments in infrastructure (railway, road) scheduled for the next
years
Grupo México, which manages Ferromex – Mexico’s largest railway
company – plans to invest US$ 15 million annually for the next three years to
convert the railroad network into a globally competitive one with 10 state-ofthe-art terminals by 2009
/ 27
/ © Finpro ry
Mexico´s market potential –
Electronics industry and ICT
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•
•
•
ICT is one of the fastest growing market segments in Mexico (12% in
2006), especially the mobile market 19.8% growth rate in 2006
650 manufacturers of equipment, parts and components
All leading companies present (Aiwa, Sony, Daewoo, Sharp, JVC,
Samsung, etc.)
Finnish investments in the industry have increased – Nokia cluster in
Reynosa, Tamaulipas
Border Zone:
Mostly Audio / Video
Manufacturing (TV-sets,
computer monitors and glass)
Western Region:
Focus on IT industry,
High tech electronics
industry,
Telecommunications &
electronic
subassemblies
Center Zone: Home
appliances and
consumer
/ 28
electronics
/ © Finpro ry
Mexico´s market potential – Metal
mechanical industry
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•
•
•
•
•
Crucial industry for the Mexican economy; serves industries such as mining,
electric-electronic, steel, automotive and transportation, among others.
High competitiveness in foundry and machining of steel, aluminums and
bronze, tubes, metal structures, valves and metallic tanks
Local production methods have developed from simple processes to more
sophisticated ones
Highly focused on exports towards the USA
More than 30,000 companies in the industry
Several Finnish companies looking for Mexican component suppliers
95 % of the metal mechanical
industry is concentrated in
Northern and Central Mexico
/ 29
/ © Finpro ry
Mexico´s market potential –
Health care opportunities
Main market trends in Mexico in the Public Health Sector:
• Upgrading existing facilities and replacing obsolete equipment and systems
• Installing state-of-the-art equipment in all high-specialty medical centers
• Upgrading medium and small clinics with equipment necessary to provide first
level service
In the Private Health Sector:
• Updating of techniques and systems
• Large hospitals are expanding facilities, modernizing equipment and building
new clinics
• Medium and small clinics are adding and diversifying services to increase the
number of patients served
/ 30
/ © Finpro ry
Mexico´s market potential – Food
and beverage
Large population: Mexico has a population of 107 million people.
The target market for most of the Finnish products is urban wealthy households, with high income, well
educated, etc. That represents around 7.5% of the total population in Mexico (8 million people).
Developed retail market: Mexico has 7,562 grocery stores in the modern market channel (hypermarkets,
supermarkets, clubs, etc.).
Market demand for international products: The Mexican consumers are open to new and from their
perspective exotic products. The retail opportunity is boosted by a young population driving demand for
fashionable goods.
International offering: Nordic / Finnish products have a specific niche in the Mexican market for having
the image of being healthy, exotic, upscale and made by using high technology.
Supplier tendencies: Suppliers will be challenged to adapt and respond to growing pressure from
retailers to push down costs, develop more private label products, increase global sourcing and improve
supply chain efficiency.
Mexico is an extremely attractive market to beverage producers—it is, along with the US, one of the
largest soft drink markets in the world on a per-head basis, and the tenth-largest beer market worldwide.
Mexico is the 2nd largest market for bottled water.
Trend is towards healthy, low fat and organic foods
/ 31
/ © Finpro ry
Mexico as a production site for
Finnish companies
/ 32
/ © Finpro ry
Maquila / In Bond Industry
attracts FDI
CONCEPT
Synonymous with
Mexico manufacturing,
maquiladoras are
assembly plants that
manufacture finished
goods for export.
Maquila operations
involve the importation
of foreign merchandise
into Mexico on a
temporary basis where
it is assembled,
manufactured or
repaired and then
exported, either to the
country of origin or to a
third country.
HISTORY
The Maquiladora Program was established in the year
1965 by the Border Industrialization Program.
MAIN BENEFITS
• Plants take advantage of low-cost Mexican labor,
advantageous tariff regulations, and proximity to the US
market
• 100% ownership by non-Mexican firms is permitted
under the law.
• An import permit is granted for raw materials, assembly
parts and other inputs. An exemption or subsidy of up to
100% of the General Import Tax for raw materials and
machinery and equipment is granted.
• The fiscal regime allows maquiladoras to sell their
products in the Mexican market without any restrictions
(since year 2000).
• Location of the plant near the border allows key
personnel to live in the US. Up to 10% of the technical
and administrative personnel in the plant may be
foreign.
/ 33
Source: Secretary of Economic Development of the City of Reynosa
/ © Finpro ry
Key drivers - why to produce in
Mexico?
Mexico is attracting increasing amounts of FDI due to the following drivers:
Stable economy
Stable exchange rate, low country risk, investment protection treaties. In
short Mexico is very different from other developing countries
Location, logistics and
infrastructure
Ideal location between North and South America. In Northern Mexico where
the manufacturing activities are concentrated, there is good highway and
railway infrastructure. Customs procedures with the USA are constantly
developed and simplified
North American Free Trade
Agreement
North American Free Trade Agreement (NAFTA) permits companies to
import and export tax free within NAFTA area, also most production inputs
from outside countries have preferential treatment
High productivity and
manufacturing integration
Long industrial tradition, manufacturing companies count with international
quality certificates such as six sigma, ISO, etc.
Abundance of skilled labor
(blue and white collar)
Young labor force of 38 million people, technical and university programs for
training
Low total production costs
Compared to EU and the USA, the production costs are much lower, this is
one of the main reasons why production is moving from the USA to Mexico
Local sourcing
Local supplier network, the government provides funding for developing
suppliers in case there are not adequate ones available
Incentives
Tough competition between the manufacturing states which makes it
possible to negotiate attractive incentive packages
Financing of manufacturing
establishment projects
Many finance sources available (Finnish, Mexican and international), also
for R&D centers
/ 34
/ © Finpro ry
Maquila manufacturing plants
Number of maquiladora plants and employees in different Mexican states:
Sonora
Employees: 86,965
Plants: 213
Chihuahua
Employees: 310,195
Plants: 397
Coahuila
Employees: 96,166
Plants: 227
Zacatecas
Employees: 5,541
Plants: 6
Nuevo Leon
Employees: 75,960
Plants: 215
Baja California
Employees: 254,173
Plants: 903
Other States (not
mentioned here):
Maquiladora Plants: 80
Employees: 30,390
Tamaulipas
Employees: 186,881
Plants:339
Sinaloa
Employees: 5,237
Plants: 8
Yucatan
Employees: 26,499
Plants: 75
Durango
Employees: 18,011
Plants: 42
San Luis Potosi
Employees: 15,050
Plants: 30
Jalisco
Employees: 50,761
Plants: 98
Aguascalientes
Employees: 14,628
Plants: 36
Total:
Maquiladora Plants: 2,811
Employees: 1,212,125
Guanajuato
Employees: 11,855
Plants: 38
Estado de Mexico
Employees: 3,129
Plants: 26
Distrito Federal
Employees: 831
Plants: 17
Puebla
Employees: 19,853
Plants: 61
/ 35
Source: Twin plant magazine
/ © Finpro ry
The most important maquilas in
Mexico
Finnish maquilas include
for example:
•Nokia (2 plants)
•Perlos
•Elcoteq (2 plants)
•Kone
•Outokumpu Heatcraft
Source: Maquilaportal
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Foreign Direct Investment (Billion
USD)
Manufacturing, most of it related to maquiladoras, is the most important
FDI by foreign companies and counts for 49,90% of all the FDI.
United States counts for 62.6% of the FDI, followed by Canada with 8.6%
and the Netherlands with 8.4%. As a block the European Union is the
second most important investor.
2006e
2005e
18.0
17.8
16.6
2004
2003
10.7
14.4
2002
24.4
2001
2000
13,5
1999
12
10,7
1998
13,2
1997
1996
9,7
9,5
0
5
10
1995
15
20
25
Source: Bancomext, Secretaria de Economía
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Finnish investment in Mexico
• In 2000 investment protection treaty (investointisuojasopimus) was put into force
• In 1999 a treaty avoiding double taxation was put into force
Finnish Direct Investment in Mexico Net Investment Flow (Millions of Euros)
140
120
100
80
60
40
127
M EUR
90
M EUR
42
M EUR
20
0
-51
M EUR
-20
-40
-60
20021
20031
20041
20052
Source: Bank of Finland, Financial Markets and Statistics 15 March 2006
1) Preliminary 2) Forecast
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Finnish investment in Mexico
Finnish Direct Investment in Mexico
Stock of investment at the end of year (Millions of Euros)
250
200
150
205
M EUR
100
50
0
93
M EUR
20021
126
M EUR
20031
76
M EUR
20041
20052
Source: Bank of Finland, Financial Markets and Statistics 15 March 2006
1) Preliminary 2) Forecast
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Mexico is a convenient option for
the Finnish companies to enter
the North American market area
•
•
Mexico has a stable economy and offers many advantages as a
production site for the North American market
The new government that started in office in December 2006 has on its
agenda several structural changes such as a energy reform and
infrastructure modernizing
TRENDS:
•
During the past years the production has been moving from the USA
and Canada to Mexico
•
Significant amount of R&D investments have been moving to Mexico
•
Most Finnish companies that have established production sites in
Mexico during the past years focused initially on the US market (Nokia,
Visko, PKC, etc.) and many of them have discovered the potential
internal market
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Production is moving from the
USA to Mexico
During the past years production in main industrial sectors has been moving from the USA to
Mexico. Mexico offers advantages such as low cost and well educated labor force, strategic
location, lower production costs, extensive coverage of free trade agreements, suppliers,
large internal market, incentive programs, etc.
Nokia cluster has been reducing operations in Texas and moving production to Northern
Mexico city of Reynosa where are located two Nokia plants, Perlos and Savcor plants and
other foreign suppliers.
Some other examples of companies from different industries moving south of border:
•
•
•
Siemens Energy To Move Production To Mexico December 8, 2006
Siemens Energy & Automation said it plans to close two plants in western Ohio in the United States
The company, which makes industrial circuit breakers at the plants, intends to move production of the
products to existing facilities operated by Siemens Mexico or other third-party suppliers. Siemens
Energy said it is forced to make these changes to keep being in a competitive position.
Kone To Move North American Lift Production To Mexico October 9, 2006
Finnish lift and escalator maker Kone said it will move all lift manufacturing for North America to its new
Mexican factory. Kone's plant in Torreon, Coahuila, started production in the second quarter of this
year, and Kone said it will move the component manufacturing from Texas to the Mexican facility by the
middle of 2007. The lift maker said it will also cut 55 jobs in Texas.
British American Tobacco Moves Production To Monterrey September 11, 2006
Cigarette maker British American Tobacco (BAT) said it had moved production for its Canadian market
to Mexico in order to lower costs. BAT said its new USD 90 million plant in Monterrey will produce 18
billion cigarettes a year for sale in Canada, where the company has seen sales falling amid bans on
smoking in indoor places in Quebec and Ontario.
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Production is moving from the
USA to Mexico (cont.)
•
•
•
•
•
Whirlpool To Shift Some Production From Tennessee To Mexico January 5, 2007
Whirlpool said it will eliminate 370 jobs at a cooking products factory in Tennessee, as it shifts production
to another facility in Oklahoma and Mexico.
Whirlpool To Move Jobs To Coahuila Plant October 4, 2006
Whirlpool will cut about 1,200 jobs in Arkansas and Indiana, while increasing production and jobs at its
side-by-side refrigerator plant in Ramos Arizpe in Coahuila state early next year. The company recently
completed the voluntary layoff of about 940 workers in Arkansas as some work was transferred to the
Ramos Arizpe plant.
Honeywell Spark Plug Operation Moving To Mexico January 31, 2007
U.S. conglomerate Honeywell is planning to move its nonpremium spark plug lines at Fostoria, Ohio, to a
new plant it is building in Mexico. The company will leave only the platinum spark plug lines at the Ohio
plant. Moving work to the Mexico operation will allow Honeywell to lower its costs and compete better in
the nonpremium spark plug segment. Production in Mexico will begin in 2008.
Dana To Move Two Plants To Mexico December 12, 2006
Bankrupt U.S. auto and truck parts maker Dana announced plans to close two plants in the U.S. and move
that work to its facilities in Mexico as part of its reorganization. Dana plans to close its Syracuse, Indiana,
plant by September, eliminating 65 workers, and the Cape Girardeau, Missouri, plant by June 2008,
cutting about 200 jobs. Dana produces axle components at both plants.
Continental To Move Telematics Operations From Texas To Sonora November 3, 2006
German auto industry supplier Continental Automotive Systems said it is realigning its North American
electronics operations and plans to move the company's telematics operations from Seguin, Texas to
Nogales in Sonora state. James O'Toole, vice president of operations, said the move will improve the
company's financial performance. The move will happen throughout 2007.
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Production is moving to Mexico
from other countries also (cont.)
Mexican Company To Assemble Chinese Trucks December 13, 2006
Mexican truck manufacturer Giant Motors has entered an agreement with Chinese automobile producer First
Automotive Works (FAW) to assemble light trucks and vans, with design, technology and parts made by FAW
at its plant in Ciudad Sahagun, Hidalgo State. Giant Motors would make 2,800 FAW vehicles for sale in
Mexico, Central and South America next year. The company has invested about MXN 600 million in the
project.
Spanish Toy Maker To Build Two Plants In Mexico December 6, 2006
Spanish toy company Famosa is planning to build two toy manufacturing plants in Mexico to increase its
share in the Latin American toy market. The company expects Mexico to become a strategic production site
from which to supply the United States and Canada. Investments in the plants could reach USD 50 million.
Mexico is the fourth largest market to Famosa worldwide.
Czech Hospital Bed Producer To Build Plant In Mexico December 4, 2006
Linet, a Czech producer of hospital beds, will next year build a production facility in Mexico, the company's
CEO Zbynek Frolik said. Linet exports its products to 70 countries. The only continent it has not moved to yet
is North America. "Mexico is an ideal gateway to the continent, costs are low and the United States is near,"
said Frolik. Linet is the leading producer of hospital beds in Europe.
Norway's Yara Buys Mexican Fertilizer Firm October 30, 2006
Norway's fertilizers group Yara International said it had acquired Mexican fertilizer firm Olmeca from Sociedad
Quimica y Minera de Chile for an undisclosed sum. Olmeca, which is engaged in specialty fertilisers, has a
4% total domestic market share and a 9% market share in the central region of Mexico where it is most active.
Total revenues exceeded USD 50 million in 2005.
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Production is moving to Mexico
from other countries also (cont.)
Belgian Auto-Parts Company Opens Plant In Guanajuato October 6, 2006
Belgian auto-parts company VCST has officially opened a USD 50 million plant in Leon, Guanajuato that
will focus on the production of Aluminum Valve bodies, especially MK25E for EBS system for passenger
cars and light vehicles. VCST expects to quickly expand the facility to start manufacturing powertrain
components.
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Source: Manatt Jones
/ © Finpro ry
R&D / engineering in Mexico
Mexico is increasingly attracting R&D investments due to:
• Qualified labor force (especially engineers)
• Low costs
• Governmental incentive programs
Over the past 10 years, Mexico has been building up enrollment in four-year
degree programs in engineering, developing a network of technical institutes
that confer two-year degrees, and expanding advanced training programs
with multinationals from the U.S. and elsewhere.
Currently 451,000 Mexican students are enrolled in full-time undergraduate
engineering programs, vs. just over 370,000 in the U.S.
The Mexican students benefit from high-tech equipment and materials
donated to their schools by foreign companies, which help develop course
content to fit their needs. Many of these engineers graduate knowing how to
use the latest computer-assisted design (CAD) software and speaking fluent
English.
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R&D / engineering in Mexico
(cont.)
This expanding workforce is changing the way multinationals view the
country. They can now shift more complex production to Mexico, along with
higher-skilled jobs. But it goes beyond manufacturing: Companies such as
General Electric, General Motors, Honeywell, and Delphi have created large
research and development centers employing hundreds of Mexican
engineers to carry out sophisticated design modifications and handle the
testing of everything from new car models to military and commercial jet
engines.
Companies are creating or expanding research and development and testing
centers. The young engineers being hired are capable, earning on average
one-third what their U.S. counterparts do. A new engineer earns around
$15,000 a year, and those with experience earn $25,000 to $35,000 which is
30% to 40% less to do the work than in the U.S.
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R&D / engineering in Mexico
(cont.)
• GE employs 550 engineers at a tech center in the city of Querétaro to help
design and test jet engines and energy turbines. It's one of a handful of
Global Engineering Centers that the company has worldwide, including
India, Poland, and Russia.
• Honeywell Aerospace recently broke ground on a $40 million systems
integration and testing laboratory in Mexicali. It will employ 300 Mexican
engineers and run simulations for aircraft systems developed by Honeywell
worldwide.
• Canadian aircraft maker Bombardier Inc. is relocating all electrical wire
harness work for its planes to Querétaro from Montreal, Toronto, and
Wichita, and shifting fuselage assembly to Mexico from Belfast. To win the
Bombardier investment, Mexico even pledged to build a new aerospace
university nearby.
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