Mexico

1
Mexico

• Chris Stone
• Courtnie Hallendy
• Jim Collins
• Shahar Ben-Dor

2
Agenda

• Socio-cultural/Physical/Demographic
• Business Climate
• Business Opportunities

3
Socio-cultural/Physical/Demographic

• Population 106 Million
• Literacy of 92.2
• Low number of adults with post-secondary
  education (technology)
• Establishing technology based institutions and
  schools
• Spanish
• English
• Boarders
• Northern - US
• Southern Guatemala and Belize
• Connects North America to Latin America
• Eastern Gulf of Mexico
• Western Pacific Ocean
• Median age is 24
• 63 15-64
• Gini Index
• 53.1 (1998)

United States Population 295,734,134 Total
literacy 97 Gini Index 45 (2004)
4
Business Climate

• Main industries
• Agriculture, food and beverage, tobacco,
  chemicals, iron and steel mining, textiles, cars
  and tourism
• 3.8 industrial growth rate
• Government change in 2000
• PRI was defeated and a new president (Vincente
  Fox) took office
• Shifts in priorities for the country
• IT became a major issue
• National Council of Science and Technology
• Develop and promote modern technology and
  information systems
• PROSOFT
• Program for the Development of the Software
  Industry
• IT priority
• In the last four years, Mexico has launched and
  implemented e-government

5
Mexico's Free Trade Agreements
Israel
North America
Switzerland, Liechtenstein, Norway Iceland
Europe
Guatemala, Honduras El Salvador
Bolivia
Nicaragua
Chile
Costa Rica
Colombia Venezuela (G3)
3
6
Mexico's Position as a Manufacturing Center
NAFTA REGION
Finished Products, Parts and Components
EUROPE
ASIA
Parts and Components
MEXICO
Parts and Components
SOUTH AND CENTRAL AMERICA
MEXICO IS ESTABLISHING ITSELF AS THE ELECTRONICS
MANUFACTURING CENTER FOR THE AMERICAS
Finished Products
4
SOURCE 2003 BANCOMEXT
7
Business Climate

• Technology (industry, training, penetration,
  teledensity)
• Microwave relay network, fiber-optic and coax
  networks
• Lack of trained programmers
• Graduates only a small percentage compared to
  China, Russia and India
• 35,000 IT related graduates per year from
  universities and technological schools
• 6.8 million Internet users (2002)
• Quality of these connections?
• Lack of local ISPs
• Per call fees or time based fees
• 15 telephone lines per 100 people (15 million)
• 28 million cellular phones
• 80 PCs for every 1,000 people

United States Telephones 181 million
(2003) Mobile Phones 158 million (2003)
8
Main Electric and Electronics Clusters

• TOTAL COMPANIES 900
• EXPORTS 35,000 MUSD
• IMPORTS 31,000 MUSD
• MAQUILA COMPANIES 837
• NO. OF JOBS 350,000
• LOCAL CONTENT 8

5
SOURCE 2003 Preliminary data from Banco de Mexico
9
Business Climate

• IT industry producer characteristics
• Manufacturing
• Inexpensive source of labor and reduced tariffs
• Largest trading partner is the US
• 23 billion in IT equipment exported to the US
• PCs, networking equipment and printers
• Owned and operated by foreign companies
• Flextronics, IBM, HP, etc facilities locally
• PCs routers, switches, keyboards, etc produced
  locally
• Service
• Mexican based firms owned by Mexicans many
  partnered with foreign firms
• Internet connectivity
• Largest IT service industry
• Telmex
• National phone company privatized in 1990
• Controls 99 of local phone lines
• No competition
• Halting the spread of Internet?
• B2B e-commerce

10
Business Climate

• IT industry strengths and weaknesses (investment)
• Software (weakness)
• Majority of software development done by foreign
  firms
• Education of workforce (weakness)
• Language barriers
• Qualified personnel flight (brain drain)
• NAFTA (strength)
• Entry point into US or South America
• IT industry consumer characteristics
• Business
• 77 of total e-commerce transactions
• Individual
• Digital divide
• Average income is 5,000/year
• Limited disposable income
• Government

11
Trade Balance 2002 Main Products and
Countries (millions of USD)
Imports Origin 19,871
Exports Destination 24,556
US 80.4

• PRODUCTS
• TVs 25
• PCs 23
• Telecom. Sys. 8
• Radios 4

South Korea 4.5
Malaysia 3.1
Others 5.9
Japan 6.1

• PRODUCTS
• Semicond. 24
• CRT 8
• Passive Comp. 4
• PCB 5

US 96.6

Canada 0.6
U.K 0.5
Others 1.8
Taiwan 0.5

• Almost 40 of imports from the US, are originally
  manufactured in Asia.
• Almost 17 of all exports to the US end up in
  Canada, Mexico and Central and South America.

11
Source World Trade Atlas Bancomext
12
Business opportunities evaluated

• Tourism (low risk, capital)
• Can be an out-of-the box installation or a
  monthly service
• VOIP or the like
• Internet access
• Local cell phones
• Customer is not necessarily the high-end resorts,
  they already have this
• More the mom and pop local hotels that serve
  international guests
• Increasing competition
• Call center (medium risk, capital)
• Provide the location, people, and infrastructure
  for the Spanish-speaking call center market
• For those customers who have Spanish-speaking
  customers and would prefer a customer service rep
  who speaks their language
• Improving communication decrease call time
  increase productivity
• Create a perception that the Spanish-speaking
  base is important and worth investing in
• Not a problem with B2B, more with consumer so the
  allocation of these resources would be easier to
  acquire

13
World Languages

• First Language Speakers
• Chinese, Mandarin 13.69
• Spanish 5.05
• English 4.84
• Hindi 2.82
• Portuguese 2.77
• Bengali 2.68
• Russian 2.27
• Japanese 1.99
• German, Standard 1.49
• Chinese, Wu 1.21

Source 2005 CIA World Factbook
14
Business opportunities evaluated

• Software (high risk, capital)
• Create/design software
• Not able to compete with the big providers yet
  and probably wont be able to for a while
• Lack of local technical resources
• Customization/rewrite for the Latin American
  market
• Culture and language based activity
• Availability of trained personnel is limited
• Piracy concerns
• Expand/use PROSOFT initiatives to gain exposure,
  resources, and credibility (FDI)
• Distribution/logistics (high risk, capital)
• NLM model minimize empty trucks, gain
  efficiencies and increase dependability
• Mexican firms and maquiadoras
• B2B as well as B2C on the far end
• Dependable delivery system of goods (consumers)
• Increase on-line shopping and the consumers
  confidence in getting the merchandise
• If you build it, they might come

15
Web sites

• Spanish Language
• http//minegocio.ibs.aol.com/minegocio/index.php
• English Language
• http//www.banamex.com/eng
• http//www.tourbymexico.com/yucatan/chichen/chiche
  n.htmService