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Mexico: Investment and Business Opportunities

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Mexico: Investment and Business Opportunities Mexico: Investment and business opportunities Second edition October 2014 Acknowledgements This publication compiles information published by PwC and other organisations that dedicated time and effort to promote Foreign Direct Investment (FDI) in Mexico. The Mexican Government setup a series of significant and challenging reforms to transform the country and help it become an even more attractive economy to investors that are seeking to expand their presence in Mexico, also for newcomers to the Mexican market to produce and sell their goods or products within Mexico, and at the same time take the Mexican competitive advantage of Nafta, Pacific Alliance and the more than 40 commercial agreements that distinguish the Mexican Economy to expand to other markets. We hope this publication helps you on your path to success. Special thanks to my colleagues that invested their time and dedication to put together this publication: Walter Alejandro Heredia, Senior Manager, International Business Centre Natalia Moncada, Business Intelligence, International Business Centre Lisamaria Markula, Leader Nordic Desk, International Business Centre Carlos Parrodi, Commercial Assurance Services, International Business Centre Guilherme Romeo, Commercial Assurance Services, International Business Centre Gabriel Muñozcano, Designer PwC Mexico Chris Williams, United States Practice Leader, International Business Centre Juan Luís García Martínez Lead Partner of International Business Centre Content Introduction to the Mexican economy United Mexican States 7 Country profile 8 Market information 9 Foreign direct investment 10 Social security system 11 Legal framework 13 Tax system 15 Incentives for Foreign Direct Investment (FDI) 18 Main industry summaries Trends, opportunities and challenges of the following industries: Aerospace 21 Agribusiness & food 25 Automotive 29 Consumer products 32 Energy 37 Health 44 Infrastructure 48 Mining 52 Telecommunications 55 Our clients share their challenges 58 Tools for successful entry into the Mexican market 59 Acronyms 60 Bibliography 62 Introduction to the Mexican economy 6 Mexico: Investment and business opportunities United Mexican States Mexico is one of the most competitive countries in the world for productive investment due to its macroeconomic and political stability, low inflation, size and the strength of its domestic market, economic growth rate, and capacity to produce advanced manufacturing (high-tech products). Mexico is an open economy that guarantees access to international markets through a network of free trade agreements. The country boasts a strategic geographic location and competitive costs to service global markets. It also has a large pool of young and highly skilled human capital. Moreover, Mexico’s commercial openness has benefited Mexicans by creating jobs and promoting their products and services in international markets. Mexico’s industrial sector has also benefited from the free trade and economic cooperation agreements the country has signed in recent years. Mexico offers countless opportunities thanks to the commitment of President Enrique Peña Nieto’s government to promoting reforms that foster the country’s economic outlook. The government has set five major goals for the country: a peaceful, inclusive, well-educated, prosperous and globally-responsible Mexico. This is Mexico’s moment. The country has an historic opportunity to undertake a profound national transformation to help trigger its integral development in the coming decades. Within this context, the conditions are in place to transform and move Mexico forward towards a future that is ripe with opportunities. Source: ProMexico. PwC Mexico/International Business Centre 7 Country profile 75 80 Internet Population: Life expectancy: domain: 75 years (men), 116 million .mx 80 years (women) (UN, 2012) (UN) Major Monetary unit: International languages: 1 peso dialing code: Mexico City Spanish (Capital city) = 100 Cents +52 Capital: Mexico City Major religions: GNI per capita: Main exports: Machinery and Christianity, US $9,420 Country Area: Roman transport 1.96 million sq km (758,449 sq miles) Catholicism (World Bank, 2011) equipment, mineral fuels and lubricants, food and live animals Source: BBC News 8 Mexico: Investment and business opportunities Market information Mexico is the gateway to the Mexico is one of the seven most world’s most important market attractive countries to invest in (UNCTAD) • It is part of the largest economic block in the world • Mexico climbed 5 positions to rank 7th, after (NAFTA). occupying the 12th spot in the previous survey. • NAFTA Market = almost 18.7 trillion dollars (IMF). • In 2012, Mexico ranked 23rd among the main receiving countries on a global scale. • Mexico has a network of free trade agreements which grants preferential access to 45 countries (almost 1.2 billion people). • It is an ideal export platform to reach two thirds of global Gross Domestic Product (GDP). Mexico ranks 9th among the 25 most attractive countries Mexico has a favorable business for investors worldwide, environment according to a consulting firm • Mexico is one of the best places for doing business • Mexico outdid Japan, Russia, France, Switzerland in Latin America. and Poland, among others, in this Index. - Ranked 48th in the World Bank’s “Doing Business 2013” report. - Investors only need nine days and six procedures to start up a business. Pacific Alliance is today • Mexico obtained its best ranking in the World the eight’s largest economy Economic Forum’s Global Competitiveness Report in the world 2012-2013. - The country climbed five positions, from 58th to 53rd place. • Is a regional integration initiative whose member states are Chile, Colombia, Mexico and Peru. • Mexico climbed five positions in the 2013 World Competitiveness Yearbook done by IMD. • It seeks to integrate services, capital, investment - It ranks above countries like India, Brazil and movement of people. and Russia. • It is a dynamic initiative with high business potential. The combination of the member state Source: Promexico economies is the eighth largest in the world. Source: http://alianzapacifico.net/ PwC Mexico/International Business Centre 9 Foreign direct investment Accumulated FDI in Mexico by state from 2000 - 2014 (until June, 30) in million of USD Baja California $13,032.3 San Luis Potosí $2,352.4 Nuevo León $32,690.0 Sonora $4,594.5 Chihuahua $17,352.2 Tamaulipas Coahuila $5,823.4 $4,921.9 Baja California Sur $5,043.1 Sinaloa Durango $1,161.4 $2,689.9 Querétaro $4,732.4 Zacatecas Yucatán $3,797.6 Campeche $558.0 Aguascalientes Hidalgo $-11.7 $3,502.4 $144.2 Nayarit Tlaxcala $1,292.4 Jalisco $625.9 $11,399.7 Veracruz Quintana Roo $1,476.4 $3,699.5 Colima $316.8 Michoacan Tabasco Oaxaca $1,952.9 Chiapas $778.1 Guerrero $492.8 $160.6 $723.6 Guanajuato Puebla $4,271.1 $7,006.0 Estado de México Distrito Federal $17,709.0 $198,510.3 Morelos Total accumulated $1,466.6 FDI in Mexico in Source: Ministry of Economy. million of USD $354,265.9 10 Mexico: Investment and business opportunities The Social security system The Mexican Social Security Pensions tax-exempt upon withdrawal, Institute (IMSS) was established Old-age and disability pensions together with any other in 1942, and is in effect across have increased in recent years. retirement payments received all of Mexico’s industrial areas The pensions are normally from the employer, in and agricultural zones. In these payable from age 65 if the accordance with the general rule areas, the employers statutory person has paid social security for taxation of pension payments obligations related to premiums for the required (i.e., pensions are taxable only to occupational risks are covered minimum of 1,250 weeks. Early the extent that they exceed nine by social security premium retirement at reduced rates of times the minimum wage). payments. The Institute provides pension can be taken from the Employees may elect a company for employees and their age of 60. authorised to manage the fund dependents’ medical care, (individual account) for the SAR including hospitalisation and There are minimum guaranty (Sistema de Ahorro para el limited unemployment pensions equal to monthly Retiro—SAR). compensation in the event of minimum salaries. Employees currently qualify for one of two illness and maternity, Housing occupational disease and different pensions. Employees On May 1, 1972, the National accidents, in addition to who began working after July 1, Workers’ Housing Fund Institute disability and old-age pensions. 1997 receive their pension (INFONAVIT) was inaugurated A separate social security system through an AFORE; employees under the terms of amendments operates for employees of the who started working before that to the Federal Labour Law and a government and its agencies. date can receive their pensions through the AFORE or through law establishing the Institute. the traditional system Benefits Employer obligations Sickness and disability Retirement Savings System The Mexican Constitution The IMSS provides medical and (SAR) and old age provides that all agricultural, hospital services throughout the In order to supplement industrial, mining, and other country alongside private retirement pensions under the enterprises are required to hospitals and many physicians in regular social security system, provide adequate housing for private practice. It maintains which has been deemed their employees; this obligation modern hospitals and clinics inadequate in providing must be met by means
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