MEXICO - FLORIDA

September 2006

www.naftamx.org/fl.htmlwww.naftamexico.org/fl.html

Mexico today

Mexico is a middle-income country with the world's eleventh-largest population.

Mexico's income per capita is larger than all other major economies in the region (7,100 dollars in 2005).

After Brazil, Mexico is the second-largest market in Latin America by population (106.385 millions in 2005)

The average age of the population is 24.7 (2005) and 30% is aged 14 years or under.

This large proportion of young people will represent a pool of effective consumers in the long term.

Mexico is classed by the World Health Organization (WHO) as a "low mortality developing country".

The rate of population growth has slowed from more than 3% (per year) in the 70s to a 1.26% in 2005.

Mexico is the 10th economy in the world.

In terms of territory is the 14th (equals to France, Spain, Germany, Italy and UK all together)

Mexico’s evolution is evident

Gdp

Gdp per capita

Inflation

Interest Rate

Exports

Imports

Trade balance

Public deficit

1987

200

1900

159

120

28

19

7.2

16.1

2005

769

7229

3.3

9.2

214

221

-7.6

0.2

Billions of US dollars

% of Gdp

US dollars

Annual %

Annual %

Billions of US dollars

Billions of US dollars

Billions of US dollars

Nominal wages are growing and real wages are stable. This supports the strengthening of the domestic market

Source: INEGI

Avarage daily base salary of Workers insured at IMSS

(2002-2006, US Dollars)

J uly, 2006

18.39

14.00

15.00

16.00

17.00

18.00

19.00

20.00

20

02

/01

20

02

/06

20

02

/11

20

03

/04

20

03

/09

20

04

/02

20

04

/07

20

04

/12

20

05

/05

20

05

/10

20

06

/03

Real wages in the manufacturing sector

(Annual growth, three-month moving average) May, 2006

0.82%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

20

00

/01

20

00

/06

20

00

/11

20

01

/04

20

01

/09

20

02

/02

20

02

/07

20

02

/12

20

03

/05

20

03

/10

20

04

/03

20

04

/08

20

05

/01

p/

20

05

/06

20

05

/11

20

06

/04

Economic growth and positive expectations translated into a stronger labor market

Source: INEGI

Workers insured at I MSS (Millon workers)

J une, 2006

13.70

12.1

12.3

12.5

12.7

12.9

13.1

13.3

13.5

13.7

13.9

2003/0

1

2003/0

5

2003/0

9

2004/0

1

2004/0

5

2004/0

9

2005/0

1

2005/0

5

2005/0

9

2006/0

1

2006/0

5

J obs Creation(Monthly, Thousand of jobs)

J une, 2006 855

790

747772

657645

590574

531

488447

413

316305

283

176

276249

20

05

/01

20

05

/02

20

05

/03

20

05

/04

20

05

/05

20

05

/06

20

05

/07

20

05

/08

20

05

/09

20

05

/10

20

05

/11

20

05

/12

20

06

/01

20

06

/02

20

06

/03

20

06

/04

20

06

/05

20

06

/06

For the first time in 35 years inflation in Mexico was less than in the U.S.

3.33

3.123

5

7

9

11

13

15

Jan-00M

ar-00M

ay-00Jul-00S

ep-00N

ov-00Jan-01M

ar-01M

ay-01Jul-01S

ep-01N

ov-01Jan-02M

ar-02M

ay-02Jul-02S

ep-02N

ov-02Jan-03M

ar-03M

ay-03Jul-03S

ep-03N

ov-03Jan-04M

ar-04M

ay-04Jul-04S

ep-04N

ov-04Jan-05M

ar-05M

ay-05Jul-05S

ep-05N

ov-05

Consumer Price Index (CPI) and Core Inflation(annual % change)

Core Inflation

CPI Inflation

Upper limit of theInflation target (4%)

December

2005

The stock market recovered strongly due to good expectations of the economic performance in Mexico and the United States

Returns in the Mexican stock market

(nominal and in USD)

Period%

MXP

%

USD

Cumulative January-December 2004 return

46.5 45.6

Cumulative January-December 2005 return

36.7 42.3

Cumulative July 2006 return

12.1 10.2

Source: Banco de Mexico

Source: Nafta with data from BMV

Mexicos's stock market leading index - I PyC

August 23, 2006

20,742.44

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

17

/09

/20

01

8/2

/20

02

3/7

/20

02

21

/11

/20

02

16

/04

/20

03

5/9

/20

03

29

/01

/20

04

21

/06

/20

04

8/1

1/2

00

4

30

/03

/20

05

16

/08

/20

05

4/1

/20

06

30

/05

/20

06

As a result of sound economic policies, the economy is strong and stable

Better economic fundamentals, a promising international environment, and more ambitious government programs have contributed to stronger growth and employment

Source: INEGI

Mexico‘s GDP grew 4.7% in the second quarter of 2006, reaching twelve consecutive quarters of growth

1.9

0.2

-1.3-1.4

-2.3

1.91.7

22.4

-0.1

1.0

2.1

3.6 3.7

4.54.8

2.4

3.3 3.4

2.7

5.5

4.7

2001/0

1

2001/0

2

2001/0

3

2001/0

4

2002/0

1

2002/0

2

2002/0

3

2002/0

4

2003/0

1 p

/

2003/0

2

2003/0

3

2003/0

4

2004/0

1

2004/0

2

2004/0

3

2004/0

4

2005/0

1

2005/0

2

2005/0

3

2005/0

4

2006/0

1

2006/0

2

2006 GDP growth by economic sector

(2nd Quarter % change)

SectorSector %%

Total 4.7

Agriculture 7.6

Industry 3.9

Services 4.8

Quarterly Gross Domestic Product(Real annual growth)

Mexico’s country risk is low and stable due to its differentiation from other emerging markets

Source: JP Morgan

Risk indicators for emerging markets(EMBI+ JP Morgan, base points )

Levels at August 18, 2005

150

406

426

0 100 200 300 400 500

Mexico

Brasil

Argentina

Levels at August 18, 2006

111

216

314

0 100 200 300 400

Mexico

Brasil

Argentina

COAHUILA

D.F.

QRO.

HERMOSILLOFORD(PC)

SALTILLOCHRYSLER(ENGINES & UV)

AGS.

NISSAN(PC & ENGINES)

GTO.

G.M.(UV)

SANTIAGOM.BENZ (PC & UV)

SILAO

AGS.

V.W.(PC & ENGINES)

PUEBLA

HONDA (PC) GUADALAJARA

SONORA CHIHUAHUA

G. PALACIO LINAMAR(ENGINES)

MOR.

NISSAN(PC & UV)

CIVAC

BAJA CALIFORNIA NORTE

BAJA CALIFORNIA SUR

SINALOA DURANGO

NAYARIT

ZACATECAS

S.L.P.

TAMPS.

VERACRUZ

COLIMA MICHOACAN

GUERRERO

OAXACACHIAPAS

TABASCO

CAMPECHE

YUCATAN

QUINT

ANA

ROO

HIDALGO

TLAX.MEX.

PUEBLA

NUEVOLEON

RAMOSARIZPE

G.M.(PC & UV)

TOLUCAG.M. (ENGINES)

TOLUCACHRYSLER (PC & UV)

TOLUCABMW (PC)

CUAUTITLANFORD

(PC & UV)

CHIHUAHUA

GARCIA

TULTITLANMASA (TRUCKS)

TOLUCAVOLVO (TRUCKS)

KENWORTH (TRUCKS)

MEXICALI

S.L.P.SCANIA

(TRUCKS)

NAVISTAR (TRUCKS)

JALISCO

TIJUANA TOYOTA

(PICK-UP BOXES

OF TRUCKS)

Clearly distinguish

3 clusters in Mexico

Automotive Industry: Geographic Location

Querétaro VISTAR VITROMATIC (2)

CuernavacaCuernavaca

NEC

Torreón THOMSON

Monterrey PIONNER DANFOSS COMPRESSORS VITROMATIC (3) MABE (2) KODAK NIPPON DENSO (Automotriz) AXA YAZAKI (Automotriz)

Mexicali

SONY DAEWOO(SLRC) MITSUBISHI GOLDSTAR

Aguascalientes WHITE WESTINGHOUSE MEX* TEXAS INTS. XEROX SIEMENS

Querétaro CLARION DAEWOO BLACK & DECKER MABE (2) SINGER SIEMENS

Estado de M Meexicoxico MABE BRAUN ELECTROLUX SUNBEAM KOBLENZ ERICSSON ALCATEL/INDETEL AMP

Puebla GESTAR SINGER VITROMATIC

SaltilloSaltillo MABE HAMILTON

BEACH*

Reynosa

VITROMATIC NOKIA

DELCO (Automotriz) PHILIPS SONY MATSUSHITA (Automotriz)

LUCENT TECHNOLOGIES FUJITSU (Automotriz) CONDURA (Automotriz) DELNOSA (Automotriz)

SanSan Luis PotosíLuis Potosí

MABE GEMABE SANYO

Chihuahua MOTOROLA ALTEL KIOCERA JABIL

Juárez

KENWOOD ELECTROLUX ACER

TOSHIBA PHILIPS THOMSON

ELAMEX PLEXUS

Tijuana SANYO SONY HITACHI MATSUSHITA JVC SAMSUNG PIONNER

SANYO ELECTRODOMÉSTICOS PHILIPS CASIO KODAK CANON KIOCERA INTERNACIONAL RECTIFIER

MITSUBISHI SHARP

Guadalajara

I.B.M H.P. NEC

LUCENT TECHNOLOGIES MOTOROLA KODAK CUMEX SIEMENS SOLECTRON DE MEXICO FLEXTRONICS JABIL CIRCUIT MTI ELECTRONICS SCI SANMINA

Estado de MEstado de Mééxicoxico

ELECTROLUX FILTER QUEEN HOOVER IMAN KOBLENZ MABE PHILIPS SUNBEAM OLIVETTI

PANASONIC

OLIMPIA

Electronic Industry location ……(700 + companies)

AUDIO & VIDEO

ELECTRODOMESTICS

COMPUTERS

TELECOMUNICATIONS

OTHERS

Baja CaliforniaChihuahuaCoahuilaNuevo LeónTamaulipasSan Luis PotosíGuanajuatoQuerétaroJaliscoEdo. de MéxicoDistrito FederalTlaxcalaPuebla

Home Appliances IndustryLocation ...(32 + Companies)

Ventiladores Copacabana

Merrytech

G.S.E.B

TIMCO

Mexico’s network of FTAs is one of the largest in the world

Transformation responds to a strategy

El Salvador

Costa Rica

Nicaragua

Honduras

Guatemala

Israel

Canada

United States

South Korea

Chile

Argentina

Bolivia

VenezuelaColombia

Portugal

Netherlands

Switzerland

Austria

Spain FranceItaly

Greece

Germany

Belgium

Luxembourg

Finland

Denmark

Ireland

United Kingdom

Sweden

Norway

Iceland

Liechtenstein

Brazil

Cuba

Czech Rep.

Australia

Peru

Mercosur

Uruguay

Japan

Mexico is among world's most open economies

20 BITs

12 FTAs

6 CEAs

0.80.8

0.60.7

0.9

1.1 1.1

1.7 1.7

1.5

1.8 1.8

2.0

1.1

0

1

1

2

2

3

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 '05 2006**

Florida’s Exports to Mexico1993-2006*(Billions of US Dollars)

Source: US Census, WISER and SE-NAFTA Series.* 2000-2006, NAICS series. ** 2006 Jan-Jun

Chemicals11%

Transportation Equipment

10%

Others29%

Machinery, Except Electr

9%

Electrical Equipment, Ap

9%

Computer And Electronic

32%

Florida’s Exports to Mexico by Sector (NAICS)2005

Source: US Census, WISER and SE-NAFTA Series.

104.2

144.9

90.6

89.5

71.2

63.6

53.147.2

45.4

43.4

32.7

28.2

0 20 40 60 80 100 120 140 160

Video Games Used W Tv Rceivr & Pts And Accessories

Digital Monolithic Integrated Circuits

Ferrous Waste & Scrap Nesoi

Automatic Data Processing Units, N.E.S.O.I.

Pts,Ex Antenna,For Trnsmssn,Rdr,Radio,Tv,Etc Nesoi

Gas Turbine Parts Nesoi

Automatic Data Processing Storage Units, N.E.S.O.I

Motorboats, Other Than Outboard Motorboats

Parts & Accessories For Adp Machines & Units

Elect Appr F Prtct To Elect Circt Nov 1000 V Nesoi

Fertilizers, Exports Only Incl Other Crude Matls

Transmission Appr Incorporating Reception Apparats

Florida’s Exports to Mexico – 2005(Millions of US Dollars)

Source: US Census, WISER and SE-NAFTA Series.

Florida’s Opportunities in Mexico

Source: Ministry of Economy with data from WISER and USDOC

Sector

Total

Computer And Electronic Prod.

Transportation Equipment

Machinery, Except Electrical

Chemicals

Miscellaneous Manufactured

Electrical Equipment, Appliances

Food And Kindred Prod.

Fabricated Metal Prod.

Paper

Agricultural Products

Plastics And Rubber Prod.

Textiles and Fabrics

Florida’s Total Exports

33,377

9,729

5,652

3,588

3,489

1,736

1,205

1,100

845

806

633

520

509

Florida’s Exports to Mexico

2,025

662

194

186

215

106

188

29

52

74

2

33

27

Mexico Imports from U.S.

120,049

23,298

14,455

11,494

12,899

2,727

8,071

5,641

5,059

3,206

3,590

5,817

3,067

Millions of US DollarsMexico Total

Imports

221,249

50,065

16,073

33,082

21,924

4,096

9,360

8,873

10,073

5,181

4,869

7,477

5,141

Share .

54%

47%

90%

35%

59%

67%

86%

64%

50%

62%

74%

78%

60%

Incentives to promote the competitiveness

SME Financing Consulting Training, R&D

ProsecClusters

ITA +

Business Acelerator Program

Fiscal Incentives

OPIC Eximbank Nafin Bancomext

Design Centers

Prosoft

Fiscal Incentives

Automotive*

Electronics* Software*

Aerospace

Textile

Agriculture

Tourism

Commerce

Construction Maquiladora* Chemical

Shoe & Leather*

Elements to ease key imports for the industry: ITA PLUSPROSECRULE 8th

Elements of Government support30% TAX Credit on Engineering design, R&D Reduced Income tax on Maquiladoras Immediate Deduction of AssetsGrants to help location on designated areas Training incentives Federal-StateFederal-State mixed funds on technology based projects (grants)

University and Research Centers InvolvementWorking closer to understand industry needsFederal Funds for Research Centers

Many Companies are Taking Advantage of the Mexican Strategy to Attract Businesses…

We offer:

Mexico: a World of Economic Opportunity

TijuanaTijuanaPopulation:Population: 750,000 750,000Key Industries:Key Industries: beverages, processed beverages, processed foods, metalworking, radio and television foods, metalworking, radio and television manufacture, electrical machinerymanufacture, electrical machinery

HermosilloHermosilloPopulation: Population: 600,000600,000Key Industries: Key Industries: automotive, meat, automotive, meat, cement and derivatives, electrical cement and derivatives, electrical machinerymachinery

CuliacánCuliacánPopulation: Population: 600,000600,000Key Industries: Key Industries: food processing, cereal food processing, cereal milling, sugar, beverages, edible oils milling, sugar, beverages, edible oils and fatsand fats

AguascalientesAguascalientesPopulation:Population: 500,000 500,000Key Industries: Key Industries: electronics, automotive, electronics, automotive, dairy, textiles, carpetsdairy, textiles, carpets

LeónLeónPopulation: Population: 1 million1 millionKey Industries: refining, footwear, leather and Key Industries: refining, footwear, leather and tanning, bakery goods, beveragestanning, bakery goods, beverages

GuadalajaraGuadalajaraPopulation: Population: 4 million4 millionKey Industries: Key Industries: high-technology, edible high-technology, edible oils and fats, plastic products, oils and fats, plastic products, chemicals, dairy products, processed chemicals, dairy products, processed foods, textiles, footwearfoods, textiles, footwear

Mexico CityMexico CityPopulation: Population: 20 million20 millionKey Industries: Key Industries: retail, financial retail, financial services, food, automotive, plastic services, food, automotive, plastic products, paper and cellulose, products, paper and cellulose, chemical derivatives, basic chemical derivatives, basic chemicalschemicals

PueblaPueblaPopulation: 1.5 millionPopulation: 1.5 millionKey Industries: automotive, Key Industries: automotive, textiles, iron and steel, bottled textiles, iron and steel, bottled water, chemicals, meat processingwater, chemicals, meat processing

VeracruzVeracruzPopulation: Population: 450,000450,000Key Industries:Key Industries: petrochemicals, refining, basic petrochemicals, refining, basic chemicals, iron and steel, chemicals, iron and steel, sugar, beef, processed foods, sugar, beef, processed foods, tourism, transportation tourism, transportation services (maritime)services (maritime)

Ciudad JuárezCiudad JuárezPopulation: Population: 800,000800,000Key Industries: Key Industries: electrical machinery, transport equipment, meat, electrical machinery, transport equipment, meat, electronics, dairy productselectronics, dairy products

MéridaMéridaPopulation: Population: 600,000600,000Key Industries: Key Industries: beverages, edible oils and beverages, edible oils and fats, processed foods, cement and fats, processed foods, cement and derivatives, plastic productsderivatives, plastic products

ChihuahuaChihuahuaPopulation: 650,000Population: 650,000Key Industries: Key Industries: electrical machinery, electrical machinery, automotive, meat, electronics, dairy products, automotive, meat, electronics, dairy products, timbertimber

TorreónTorreónPopulation: Population: 880,000880,000Key Industries: Key Industries: automotive, bricks, clay, automotive, bricks, clay, refractory, general machinery, cement and refractory, general machinery, cement and derivativesderivatives

TolucaTolucaPopulation: Population: 850,000850,000Key Industries:Key Industries: automotive, plastics, automotive, plastics, paper and cellulose, chemical paper and cellulose, chemical derivatives, basic chemicalsderivatives, basic chemicals

MonterreyMonterreyPopulation:Population: 3 million 3 millionKey Industries: Key Industries: oil refining, iron and steel, oil refining, iron and steel, electrical machinery, glass and derivatives, electrical machinery, glass and derivatives, breweries, meat products, cement, bankingbreweries, meat products, cement, banking

San Luis PotosíSan Luis PotosíPopulation: Population: 670,000670,000Key Industries: Key Industries: iron and steel, iron and steel, non-ferrous metallurgy, tobacco non-ferrous metallurgy, tobacco products, electrical machinery, products, electrical machinery, automotive, livestockautomotive, livestock

QuerétaroQuerétaroPopulation: Population: 460,000460,000Key Industries:Key Industries: automotive, paper automotive, paper and cellulose, synthetic fibers, and cellulose, synthetic fibers, general machinery, electrical general machinery, electrical machinery, processed foods, dairy machinery, processed foods, dairy products products

Tampico-Madero-AltamiraTampico-Madero-AltamiraPopulation: Population: 340,000340,000Key Industries:Key Industries: chemical, industrial chemical, industrial machinery, electronic & electrical machinery, electronic & electrical equipment, oil and refinery, equipment, oil and refinery, agriculture, cattle, fishing agriculture, cattle, fishing

Source: SE-NAFTA.

DR. HÉCTOR MÁRQUEZ

1911 PENSYLVANIA AVE. 8TH FLOOR

WASHINGTON, DC, 20006.

TEL. (202)728-1776

FAX (202)728-1712

E-MAIL hmarquez@economia.gob.mx

Web page: http://www.economia.gob.mx

CONTACT POINT