Development Program for the Isthmus of Tehuantepec General Overview and Perspectives Emerging Opportunities in Mexico Webinar 26 October, 2020 Initial task: Definition and description of the target region Methodological approaches Port of Municipalities Coatzacoalcos 33 in Veracruz (1825) 79 46 in Oaxaca million 2.4 inhabitants 34.6% Indigenous and afro-mexican people Railway of the Isthmus of Tehuantepec 59% (1907) of the population live in poverty conditions (CONEVAL-2015) All of the welfare indicators are below the national averages Port of Salina Cruz (1871) Unused competitive advantages… Geo-strategic location of global significance in the global economy Main access point to the southeast region of the country and a key crossing point for other regions Resource availability: human, energetic and natural (water, soils, seacoasts, biodiversity) Access for regional producers to the northern, central and southeastern markets within Mexico, other regions and other countries Competitive positioning through the ocean freight’s global routes among continents Industrial approach to produce oil products and gas, clean energies, agroindustry and logistic services A new way to understand development • More fair, more equitable, solidary and sustainable • Regionally and sectorially balanced • Focused on a social and mutually supportive economy • Aimed to improve wellness • Respectful of traditions and the local way of life • Committed to taking care of the natural environment of the region • Endogenous: using local resources, local capacities, local strengths and local productive vocations • Capacity to attract, integrate and make the most out of resources from other regions and countries General objective To boost regional economic growth, with full respect to the history, culture and traditions of the Isthmus of Oaxaca and Veracruz, in pursuit of productive inclusion, equitable benefit distribution and the overall well-being of the population General strategy 1. To modernize and strengthen physical infrastructure (ports, roads, highways, railroads, telecommunications) 2. To increase investment and reinforce productive capacity of the region (add value) 3. To initiate aligned, transparent and efficient public policies and programs 4. To enhance inter-agency and intergovernmental coordination 5. To reinforce regional culture and natural capital 6 Main components of the strategy Development zone Human capital Development poles Social infrastructure Reactivation of productive Community Integration sectors Centers Social communication Multimodal interoceanic corridor INVESTIGACIÓN, DESARROLLO TECNOLÓGICO Physical infrastructure E INNOVACIÓN Research, technological development and innovation 7 ENVIRONMENTAL AND LAND PLANNING Logistics platform: key component in the strategy • It will enable interoceanic mobilization of goods, approaching producers and consumers across the globe. • It will bring the isthmus goods production closer to national and international markets. Conditions to join worldwide transportation services: • Supply of competitive and high quality services (pricing and shipping time) • Simplified and efficient regulatory and administrative systems • Equipment, facilities, logistic services and "frontier technologies” • Single management to boost efficiency and security Unprecedented Investment in infrastructure in the Isthmus Railway Highways Electricity Ports Refineries Digital communications Logistics platform Logistics Natural gas Social infrastructure, urban development and public services Infrastructure is essential for the reinforcement of the local productive capacity Progress on the logistics platform Unprecedented Investment: 20 billion pesos Ports Total 854 MDP Total 11,251 MDP investment investment 3 current works Implementation 4 años time Physical progress 75% Ending date Dic 2023 (average) Investment 319.9 MDP Salina Cruz Coatzacoalcos Rail road Total 3,133 investment MDP The railway renovation, from Medias Aguas to Existing contracts Salina Cruz, covers 189 5 civil works kms., which are divided in 1 supervision 5 sections. Operation starts* 1st semester Rairoad 2021 *with road renovation concluded Progress on the logistics platform Cont. Roads Digital connectivity Upgrading the Isthmus main highway: Structure for optical fiber along the railroad, “Transisthmic highway” in order to offer broad band network in all the region: Total investment 3,197.8 Million pesos Ø Industries Starting Ø Productive activities Ends 2021 Ø General population that currently lack of basic connectivity. With support of The Isthmus of Tehuantepec will be a competitive alternative § Asian maritime routes to the United States USA Intermodal are around 8,000 km shorter crossing Corridor through the Isthmus, than crossing through Panama. CIIT § Crossing through the Isthmus of Tehuantepec will save around 1 million dollars in fuel per trip, which represents Panama Channel two more trips per year. § The realignment of the global economy has intensified the mobilization of goods from Eastern producer countries to westerns consumers countries. Fuente: Istmo de Tehuantepec, Mckinsey&Company, 2015. Perspectives for the Logistics Platform Los Ángeles 3.9 días marítimo q Inertial Growth: Of the logistics demand of Tijuana New York 3.6 días marítimo 4 días marítimo the Corridor, which is expected to continue CONECTIVIDAD NACIONAL E INTERNACIONAL Japón Galveston Tampa until it reaches 4% of GDP by 2050. 14 días marítimo 1.3 días marítimo 1.8 días marítimo q Panama Channel: Mazatlán § Use of the Corridor as a cheaper, more 1,750 km Progreso Carretera 759 km Ferrocarril Carretera agile alternative - 5% of the total volume Ferrocarril Veracruz CDMX 210 km of the Channel in 2019. 510 km Carretera Lázaro Cárdenas Carretera Ferrocarril 986 km Ferrocarril § Carretera Mexico cargo currently using the Panama Ferrocarril Channel (we’re their 3rd. best client - 30 million tonns a year). Managua 0.9 días marítimo q USA Effect: Cargo currently crossing from Panamá 1.6 días marítimo coast to coast in the USA that will benefit from the use of the Corridor. Long-term proyections: q Industrial Development of the Isthmus: Containers: Bulk: General Cargo: Through Development Poles, adding value to 2,920,000 TEUs 43,300,000 goods in transit. 3,730,000 toneladas toneladas Development Poles for Welfare: another key component Establishment of 10 poles along the Isthmus Coatzacoalcos II Agroindustry • Optimal location through the corridor Food Oluta • Availability of resources and services for Metal production Coatzacoalcos I Wood • One stop shop, favorable business Sayula de Plastic and rubber Alemán Cosoleacaque environment and public security Textile • Suitable conditions for the development Petrochemical of SMEs El Barrio de Machinery and la Soledad • Associated to existing vocations and Equipment Ciudad Ixtepec productive chains within the region Chemical Santa María Mixtequilla • Transportation Availability of fiscal and non fiscal equipment Asunción incentives Ixtaltepec • Environmental sustainability and Salina respect for the Isthmus cultural identity Cruz Industrial ecosystems 5 ecosystems are planned to be developed, in order to expand the value chain of the business sectors with more potential along the region of the Isthmus Program Short term Medium term Long term <3 years 3 to 10 years >10 years Agricultural and beverages Agroindustry production and processing, Food and beverages processing Functional food production and forestry forestry (wood) selection Forestry (Pulp and paper) Logistics and packaging Energy Renewable energy Energy storage Textile and leather Transport equipment Construction of buildings, Manufacture (Including handicrafts) Consumer products Pharmaceutical materialy and supplies Chemical / Petrochemical Household appliances Transport equipment Agro-Tourism Health Tourism Services Financial services, BPO, TIC Cultural Tourism Financial center Material management, Logistics and Logistics automation packaging, storage, Interoceanic route packaging Exports distribution Integration with trade flows and global value chains In the current context of the world, there is an important opportunity for Mexico to take a stand in the global value chain and redirect with greater participation and added value for mexican companies. The Logistics Corridor and the Productive Platform of the Isthmus are a key factor to achieve this. New Trade Context: q USMCA q USA – China q CPTPP q Mex-EU Modernization q Pacific Alliance Expected Impact of the Isthmus Program Direct and indirect Investment job creation Attraction of 1.2 - 1.8% aditional 550,000 direct and 50,000 millon contribution to indirect jobs will be dolars of additional Mexico’s GDP in attracted investment. 2050. 240% increase in The Corridor will per capita income contribute with of the Isthmus 6.6% of the total inhabitants. GDP of Mexico. Development Program for the Isthmus of Tehuantepec General Overview and Perspectives Emerging Opportunities in Mexico Webinar 26 October, 2020.