April 28, 2011

1. Opportunities and advantages of investing in Mexico Workshop organized by the Greek – Latin American Business Council in cooperation with the Federation of Greek Industries (SEV) Embassy of Mexico in Greece April 28, 2011

2. Mexico’s Economic Outlook

3. Economic Growth • Mexico was hard hit by the 2009 recession. However, GDP grew 5.5% in 2010. • Expectations for growth in 2011 are around 4.8 – 5%. • The IMF forecasted significantly higher growth for Mexico in 2010 and 2011 compared to the U.S. and Canada. • In fact, some analysts foresee a growth rate of over 4% in the following years for Mexico’s economy. 2010 GDP per capita (thousand dollars) Source: IMF. *Based on purchasing power parity (PPP).

4. External Driver • Recovery is being led by exports. Non-oil exports posted a positive y-o-y growth rate of 24% in January 2011 . • From the cyclical low of Jan 2009 to Feb 2011, non-oil exports have risen 55%. • As a result, Mexico is one of the most competitive countries in manufacturing and mining. • Now, is the biggest producer of smart phones and silver worldwide. Non-Oil Exports (monthly, adjusted, million dollars) Source: Banxico

5. Domestic Driver • Total private consumption has picked up significantly since the second semester of 2009. • Investment is gradually accelerating. Gross Fixed Investment (index, I 2007=100) Private Consumption (index, I 2007=100) Source: INEGI. Source: INEGI.

6. Discipline in Public Finances • Discipline in public finances has led to a moderate deficit and a declining trend in public debt. General Gov. Financial Deficit 2010 (% of GDP) Public Sector Debt (% of GDP) * Observed 2010 ** Approved 2011 Source: SHCP, S&P (May 2010) for the rest. Source: SHCP PSBR: Historical balance of Public Sector Borrowing Requirements

7. Inflation and Interest Rates • Even though inflation suffered a temporary increase at the end of last year due to an increase in agricultural product prices, it remains below the crisis. • Inflation target for 2011 is 3.0% • Domestic interest rates are close to historical minimums, even with the recent increase due to market uncertainty associated with the European crisis and the events in Egypt and Libya. Inflation 2010: 4.40% 2010 Inflation Forecast (%) Government Bonds (%) 2011 Inflation target 2011: 3.0% Source: Banxico and SHCP

8. Sovereign Risk EMBI Global1 (basis points) • Mexico’s sovereign risk and the differential between long term domestic and foreign rates are close their historical minimum. 1. Emerging Markets Debt Index Source: JP Morgan

9. Risk Management • International reserves amount to 125,304.9 thousand million dollars (April 20, 2011). • Additionally, Mexico requested the renewal of the Flexible Credit Line with the IMF for two more years and 72 thousand million dollars. • The Mexican government contracted an oil price hedge for 2011. • The government has the budgetary and financial capacity to respond to natural disasters for up to 4 thousand million dollars. Source: Banxico

10. Mexico’s strengths and opportunities Main strengths of the Mexican economy Advantages for European companies

11. Main Strengths of the Mexican Economy Market size: Population of 112.3 million. Large exporting base: The largest exporter in Latin America. Energy availability: Ranked high in proven oil reserves and renewable sources. Demographic bonus: Barely 5% of workforce are jobless, which has a median age of 27, compared to 29 in Brazil, 35.5 in China or 39 in Russia. Ample network of trade and investment agreements: Free trade agreements with 44 countries (60% of the World’s GDP). Biodiversity. Ranked 4th worldwide. Source: International Monetary Fund

12. Ease of Doing Business • Procedures for opening and closing a business and the time required to obtain building permits, are critical factors in successful international business. • In Mexico, an investor only requires 6 procedures and 9 days to open a business. These numbers are significantly lower than those observed in Brazil, Russia, India or China. Number of procedures to start a business Days to open a business Source: World Bank, Doing Business 2011 Source: World Bank, Doing Business 2011

13. Deregulation and Simplification Mexico is ranked as the best country to establish a business in Latin America. Ranking 2011 Doing Business • The ranking measures the behavior in 183 countries of the following variables: • Starting a business • Dealing with construction permits • Registering property • Getting credit • Protecting investors • Paying taxes • Trading across borders • Enforcing contracts • Closing a business Source: World Bank.

14. Advantages for European Companies • Competitive manufacturing costs. Cost advantage of 25% in Mexico relative to the US (China has a cost advantage of 6% relative to the US). • Same time zone and quick response toward opportunities in North American markets. • Manufacturing in Mexico makes “Just in Time” easy. • Door to door deliveries in less than a week, compared with China where it can take 6 weeks. • Low freight costs • Mexico is located in between the main global consumer markets: Sea freight days to main consumer markets

15. Legal Certainty for Foreign Investment • Agreements on Reciprocal Promotion and Protection of Investments (RIPPA) are an important part of the government’s strategy to provide national and foreign investors a legal framework that offers stronger protection for foreign investment in Mexico and Mexican investment abroad. • Mexico has signed 27 of these agreements: Source: SE (www.economia.gob.mx).

16. Legal Certainty for Foreign Investment • Also, Mexico has signed with Greece an Agreements for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital which came into force on January 1st, 2006. Source: SE (www.economia.gob.mx).

17. Real Exchange Rate Advantage • Mexico's real exchange rate with the dollar and euro is expected to stay mostly between 2008 and 2012. • Countries such as China, South Korea and India are expected to post strong currency appreciation in real terms against these currencies, giving Mexican exports a significant advantage. ExpectedReal Exchange Rate variation; respect U.S market (2008-2012) ExpectedReal Exchange Rate variation; respect Euro (German) market (2008-2012) Source: ProMéxico, Global Insight data Source: ProMéxico, Global Insight data

18. Competitive Labor Costs Real Exchange Rate (index, Jan-05=100) Hourly Wage in Manufacturing (dollars) Source: Central Banks. Source: International Labor Organization Since 2008 Mexico and China have similar labor costs. This turns Mexico into an excellent export platform for North American and European markets

19. Manufacturing Costs Additionally, Mexico has better manufacturing costs than countries such as Canada, China, India and Brazil Average cost advantage /disadvantage relative to the US (27 input items applied to 12 industries) Competitiveness findings: Mexico has a business cost advantage of 20.5% average (of 12 industries) relative to the US. There are also advantages in industrial construction costs, land, rent, and taxes. Source: KPMG Manufacturing cost index relative to the US. (2005) Manufacturing cost index relative to the US. (2008) 100% 100% Note: Index includes raw materials, labor, overhead (energy costs, plant and equipment, taxes), freight, duties, inventory, and exchange rates. Source: Alix Partners 2009

20. Access to Financing • The Mexican banking system is solid and since the second quarter of 2010 positive monthly growth in credit has been observed. Commercial and Development Bank Credit to Private Sector (monthly change, 3m. moving avg., %) Source: Banxico

21. Growing Consumption • The 2010 recovery of the domestic market is observed in the increasing trend of retail sales. ANTAD Sales (index, jan-07 = 100 adjusted, 3m. moving avg.) Wal-Mart Sales (index, jan-07 = 100 adjusted, 3m. moving avg.) Source: INEGI. Source: SHCP with information from Wal-Mart.

22. Good Standard of Living Chile, 0.78 Mexico, 0.75 Russia, 0.72 Brasil, 0.70 China, 0.66 India, 0.52 Source: United Nations Development Program (UNDP) • The Human Development Index measures education, health and per capita income.

23. And the Future is Promising • Mexico has an attractive business environment, legal certainty, one of the largest free trade agreement networks in the world, that combines with a wide array of economic sectors with increasingly competitive cost profile. • All this factors places Mexico amongst the top choices regarding investment location. AT Kearney's “Foreign Direct Investment Confidence Index 2010”ranked Mexico as the 8th most attractive economyfor foreign investment position, an improvement of 11th placescompared to the last index published in 2007.

24. And the Future is Promising Institutional Legal Framework Noruega Suecia Islandia Dinamarca Finlandia Canadá 12 FTA´s Estonia Alemania Letonia 7 ACE´s Holanda Estados Unidos Lituania Reino Unido 27 ARPPI´s Polonia Irlanda Rep. Checa Cuba Eslovenia Bélgica Hungría Luxemburgo Honduras Honduras Liechtenstein Suiza Nicaragua Nicaragua Eslovaquia Rumania Costa Rica Guatemala Guatemala Austria Grecia Portugal Panamá Mercosur Italia El Salvador El Salvador Bulgaria (Acuerdo Marco ) Malta (Acuerdo Automotriz) Trinidad y Tobago España Francia Chipre Belarús Colombia Colombia Israel Japón Australia Perú Brasil Corea del Sur Uruguay Uruguay Chile Chile India China Fuente: Secretaría de Economía Argentina Argentina

25. And the Future is Promising Experts’ opinions… HSBC (2011) “Mexico’s per capita GDP is expected to be 3 ½ times faster than the U.S. this decade. Mexico would lead the charge in Latin America in coming years to become the world’s eight biggest economy by 2050.” BCG / Mexico's Evolving Sweet Spot in the Globalization Landscape (2009) “Mexico's Sweet Spot in global trade owes itself to several converging factors: Privileged geographic location, skilled labor, management talent, labor costs, government incentives, healthy domestic market.”

26. And the Future is Promising Experts’ opinions… AlixPartners / Manufacturing-Outsourcing Cost Index™ 2009 “China’s Total Landed Cost Has Increased to an Average 94% of Current U.S. Cost… While Mexico’s Position Has Improved Dramatically (75% of U.S. Cost).” KPMG / Competitive Alternatives, Guide to International Business Location 2008 “Among the countries studied, Mexico represents the lowest-cost country, with a business cost advantage of 20.5%, on average, relative to the US baseline.”* *The study covers 136 cities in ten countries (Mexico, Canada, USA, Australia, France, UK, Netherlands, Italy, Japan and Germany.

27. Sectors with proven success in Mexico

28. Aerospace Industry Aerospace industries in Mexico have evolved from simple parts assembly to highly complex activities such as parts design, maintenance operations, fuselage assembly, harnesses and landing gear manufacturing. Aerospace exports have increased from $1.26 billion USD in 2002 to $3.1 billion USD in 2008. An average sales growth of 16.3% per year. Mexico has consolidated itself as the 8th largest supplier of aerospace components to the US and the 5th largest to the European Union. Out of the 11 aerospace companies with international operations listed in the Fortune 500, 7 have operations in Mexico. According to KPMG, Mexico has a cost advantage of 30% among the current leading nations in the aerospace industry. Between 1990 and 2009 Mexico was the main destination of aerospace manufacturing projects in the world, a fact that reflects the country's competitive advantages as well as the capacities developed as a center for advanced manufacturing.

29. Aerospace Industry The aerospace industry in Mexico is taking off… • In 2009, industry-leading companies announced major investments in Mexico: • Cessna and Bell expanded its presence in Mexico through investment projects up to $106 million USD. • Aernnova invested more than $100 million USD to set up three factories in Queretaro. Mexican aerospace exports (billions USD) Aerospace companies in Mexico Aerospace jobs in Mexico (in thousands) Source: ProMéxico with data from FEMIA

30. Automotive Industry Mexico’s automotive industry: Among the largest in the world Mexico is the 10th largest manufacturer of motor vehicles. More than 80% of auto parts production is sold abroad. Out of the 28 auto companies listed in the Fortune 500 ranking with international activities, 27 have operations in Mexico. KPMG places Mexico as the #1 destination for auto parts manufacturing. Companies such as GM, Ford and VW have announced more investments. Car production in Mexico will pass from 2 million in 2008 to 3.1 million in 2013 according to CSM Worldwide.

31. Renewable Energies • The renewable energies generate more than 7% of the primary energy. • The availability of renewable sources of energy in Mexico offers a great potential for projects on electrical generation and other applications due to: • High potential for mini-Hydroelectrical plants. • Undeveloped geothermical camps. • High-intensity wind zones. • High levels of insolation. • Big volumes of energy crops. • Need to dispose biomass residues in cities and fields.

32. Renewable Energies • Mexico has an effective generation capacity of 13,400 MW, which represents 24% out of total electrical capacity. • 19% out of total energy for public services is generated by renewable sources. Source: CFE.

33. Renewable Energies Policies and incentives for the development and implementation of renewable energies. Zero duty on equipment to prevent pollution and promote research and technological. Accelerated depreciation for infrastructure projects that use renewable sources of energy: up to 100% in a year. 30% tax credit for research and development (CONACYT). Interconnection contracts for intermittent sources of electricity (CFE). Kyoto Protocol can use the figure of the Clean Development Mechanism for obtaining Certified Emission Reductions. Interconnection agreement for small-scale solar power on the type of net metering.

34. Other Industries with Great Opportunities • Competitive advantages in smaller delivery times, qualified labor force, high quality-high yield production, flexibility. • 18 Fortune 500” firms operate in Mexico. • Between January and October 2009, the sector recorded exports of $62 billion dollars, 41% of Mexico’s manufacturing exports. Electric and Electronic devices • The IT Services market value reach $4.2 billion USD; it grew 14% in 2008. • Mexican IT companies exported $2.9 billion USD in 2008. • Out of 51 Fortune 5000 companies with international operations, 36 operate in Mexico. IT Services • More than 6.5 million Americans live outside the US; out of those 1.2 million live in Mexico. • International Living magazine has ranked Mexico as the best country to retire to for two straight years out of 29 nations. • For the second year in a row, Mexico was granted the Agents’ Choice Award 2009 as the best winter tourist destination Second Homes

35. Other Industries with Great Opportunities That’s not all… ProMéxico has identified great investment opportunities in the following industries: Processed foods Chemical Pharmaceuticals Medical devices Logistics and infrastructure Heavy industries Software BPO’s (Business Process Outsourcing)

36. Next steps: The Mexico’s Government Strategy

37. A New Industrial Policy Coordinated efforts between Federal and State Governments are producing a new Industrial Policy High priority sectors (Focus: Attract investments and promote industrial development) Future bets (Focus: Government support to promote industrial development) Domestic market growth (Focus: To promote a healthy development) • Manufacture of transportation equipment • Manufacture of machinery and equipment • Manufacture of electrical and electronic equipment • Mining (excluding petroleum and gas) • Support services to businesses (i.e., call center) • Food industry • Health care • Temporary accommodation services • Farming of vegetables, fruit and flowers • Software • R & D services • Services of Architecture, Engineering and Design • Music, film, radio and television • Housing • Commerce • Financial services Development platforms (To promote competition, a better regulation and investments) • Infrastructure Education services • Telecommunications

38. Competitiveness Additionally, specific actions to increase Mexico’s competitiveness have been implemented during the last years. Strong investment on infrastructure with the objective of reducing logistic and transportation costs. A Foreign Trade Simplification Program oriented to simplify customs procedures and operations. An aggressive schedule to unilaterally reduce import tariffs (the average tariff will decrease from 10% to 8.3% immediately, and then to 4.3% by 2013) Easing the regulation to start companies, in order to make the business framework more efficient, transparent and predictable Strengthening public finances and macroeconomic stability

39. Competitiveness A Program for the development of Small and Medium Businesses (The “México Emprende” trust will have 628 millions USD to detonate credits for 22.4 billion dollars during the period 2009-2012). Initiative “Better education for life and work” (creates an educational culture based on productivity and promotes student competitiveness since the initial years of education). Higher funding for science, technology and innovation (Federal Expenditure for science and technology is around 3.5 billion USD) Consolidation of the quality of academic bodies (the National System of Researchers is integrated by nearly 15,000 members working on science and technology) Criminal Justice Reform and Public Security (The reform provided new and better tools for reinforcing criminal investigations)

40. Security Matters • During the last years, the Government of Mexico has spared no effort to strengthen public security throughout the country and will continue to do so. The fight against organized crime in Mexico is a necessary part of that effort. • All countries “must shoulder together this responsibility” by increasing cooperation to effectively fight and defeat the cross border drug trade which supplies developed markets and fuels much of the criminal activity and violence in Northern Mexico.

41. Security Matters

42. Final remarks

43. Bilateral Trade and Investment Flows Despite the FTA and the Strategic Partnership between Mexico and the European Union, trade and investment flows with Greece are still low. Source: SE (www.economia.gob.mx). Source: SE (www.economia.gob.mx). • According to the National Registry for Foreign Direct Investment 2009-2010, there are only 20 Greek enterprises in Mexico.

44. Potential Market • According to TradeMap of the International Trade Centre, there is a big potential market between Mexico and Greece in the following economic sectors: • Automotive industry. • Pharmaceutical industry. • Software industry. • Medical devices. • Electrical appliances (televisions).

45. Final remarks México: “Sweet Spot” for higher profits • Production and logistic savings turn Mexico into a solid alternative for higher profits. • This is crucial in a world economy characterized by intense global competition. • Mexico’s competitiveness is being enhanced by the government’s massive infrastructure programs, a growing human capital base and the development of high value added industries. • Among the world’s largest and most dynamic economies for the next decades (BRIC’s and N11), Mexico has a privileged place due to its location and the size of its domestic market. It is because of this advantages that many analysts around the world, consider Mexico to be the “sweet spot” for solid, high yield, high profit operations.

46. 7th World Chambers Congress • Mexico will host the 7th World Chambers Congress (WCC) on 8-10 June 2011. • The WCC will take place in Mexico for the very first time in Latin America. • The WCC is the only international forum for chamber executives worldwide and business leaders dedicated to share best-practice experience, develop networks and learn about new areas of innovation. • This Congress will focus on the new economy, the building of a green economy and social corporate responsibility.

47. Mexico is opportunity

48. How to do business in Mexico RELEVANT DOCUMENTS FOR THE PROMOTION OF THE ECONOMIC AND COMMERCIAL RELATIONS BETWEEN MEXICO AND GREECE Mexico: Business opportunities and legal framework. Basic guide for foreign investors Mexico: Business opportunities and legal framework. Supplementary materials Economic outlook for Mexico, March 2011 Mexico's Strengths Doing Business 2011 Competitive Alternatives. KPMG´s guide to international business location, 2010 edition Mexico's evolving sweet spot in the globalization landscape Manufacturing-Outsourcing cost index. Overview & Highlights Trade Links: Mexico, best place for business in Latin America Negocios ProMéxico: Mexico building its path to success Trade indicators between Mexico and Greece Mexican Web Sites Links ECONOMIC AND COMMERCIAL LEGAL FRAMEWORK BETWEEN MEXICO AND GREECE Economic Partnership, Political Coordination and Cooperation Agreement between the European Community and its Members States and Mexico Agreement between the Government of the United Mexican States and the Government of the Hellenic Republic on the promotion and reciprocal protection on investments Convention between the Hellenic Republic and the United Mexican States for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital • Embassy of Mexico in Greece • Platia Filikis Eterias 14 / 5 • 106 73, Kolonaki – Athens • Greece • Tel: (+30) 210 729 4780 / Fax: (+30) 210 729 4783 • http://portal.sre.gob.mx/grecia

49. For further information please do not hesitate to contact to: Mr. Julio Escobedo Embassy of Mexico Athens, Greece jescobedo@sre.gob.mx Mr. Oscar Camacho Mexican Trade Commission Milan, Italy oscar.camacho@promexico.gob.mx