MEXICO: POWERING UP THE WORLD

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1 MEXICO IN THE WORLD Mexico, the Face of Electronics The Lifestyle Vibrant Mexico City Negocios para exportadores MEXICO: POWERING UP THE WORLD Electronics, Electrical and Domestic Appliances Industries VIIi 2014

2 The government of Mexico has set out to transform our country based on five major national goals: to have a peaceful, inclusive, well-educated, prosperous and globallyresponsible Mexico. In order to build the prosperous Mexico we long for, we must generate sustained high economic growth that results in more and better jobs that will improve the quality of life of our population. Mexico has a solid foundation on which to attain these goals: healthy public finances; a manageable debt level; a budget with no fiscal deficit; a responsible and autonomous monetary policy, as well as adequate international reserves. Our macroeconomic stability and institutional strength are enriched by a wide sociopolitical consensus that favors important transformations required to boost the development of our country. Through the Pact for Mexico, two constitutional reforms have been approved: one in education that will enhance the quality of teaching, and another in telecommunications, radio broadcasting and economic competition that will open up the sector and ensure competition throughout our economy. Furthermore, the Congress is analyzing a financial overhaul to increase the level of credit and make it more affordable. Mexico offers certainty and confidence to investments, a business climate favoring productivity and competitiveness, and an ambitious plan to further develop infrastructure. Moreover, the country s strategic geographic location and optimal legal framework for international trade, through a network of trade agreements with 45 countries, give us access to a potential market of over one billion people. Mexico s exceptional economic and geographic conditions, as well as the talent and quality of its human capital, make it the ideal destination for new productive capital to flourish. This is the time to invest in Mexico. Investors will find the government of Mexico and ProMéxico to be allies committed to the success of projects that create quality jobs and prosperity for the country. Enrique Peña Nieto President of Mexico

3 Table of Contents August Special Report iiifilomena Adopts Mexican Nationality Mexico in the World Mexico, the Face of Electronics Business Tips The Electronics Sector in Mexico cover feature Electronics, electrical and domestic appliances industries Mexico: powering up the world 16 photo archive From ProMéxico 9 10 Briefs 50 figures Mexico s Partner Siemens Schneider Electric Electrolux Flextronics Construlita Delta Conectores Diamond Electronics Electrónica Clarion Manufacturas Especializadas Magnotek Tatung

4 The Lifestyle The Complete Guide to the Mexican Way of Life photo courtesy of museo jumex 58 The Lifestyle Briefs 60 Zabludovsky, Building Modern Mexico photo omar bárcenas photo courtesy of pink magnolia photo archive photo archive 62 An Ancestral 64 Pink Magnolia 66 Local Design Technique and Chiapas with International Appeal Applied to High-End Art Join Forces on the International Catwalks 68 photo archive Vibrant Mexico City

5 Para exportadores LA X DE EX- PORTA- CIÓN 82 Es el momento de cambiar la imagen y la narrativa con la que México se presenta ante el mundo, para transformar la percepción que se tiene del país en el extranjero. 74 De ProMéxico breves 76 Diez acciones para mejorar el comercio exterior 88 Sobre los apoyos y servicios de ProMéxico 78 El Programa Nacional de Infraestructura y su impacto en la región del Bajío 90 Bayas y frutillas: horizontes alternativos para los exportadores mexicanos La importancia de la informática empresarial fotos archivo Panorama de las relaciones económicas internacionales de México 86 fotos archivo Emprendedores de alto impacto: clave para el desarrollo económico 94

6 ProMéxico Francisco N. González Díaz CEO Karla Mawcinitt Bueno Communication and Image General Coordinator Sebastián Escalante Bañuelos Director of Publications and Content Copy Editing Felipe Gómez Antúnez Jorge Morales Becerra Contreras Advertising From proméxico. Cover Photo Courtesy of Government of the State of Tamaulipas Editorial Council consejo editorial Ildefonso Guajardo Villarreal Francisco de Rosenzweig Mendialdua Enrique Jacob Rocha Francisco N. González Díaz Embajador Alfonso de Maria y Campos Castelló Luis Miguel Pando Leyva Francisco Javier Méndez Aguiñaga Rodolfo Balmaceda Guillermo Wolf Jaime Zabludovsky Gabriela de la Riva Adolfo Laborde Carranco Silvia Núñez García María Cristina Rosas González Ulises Granados Quiroz Karla I. Mawcinitt Bueno Negocios ProMéxico es una publicación mensual editada por ProMéxico, Camino a Santa Teresa número 1679, colonia Jardines del Pedregal, delegación Álvaro Obregón, CP 01900, México, DF Teléfono: (52) Portal en Internet: correo electrónico: Editor responsable: Gabriel Sebastián Escalante Bañuelos. Reserva de derechos al uso exclusivo No Licitud de título: 14459; licitud de contenido: 12032, ambos otorgados por la Comisión Calificadora de Publicaciones y Revistas Ilustradas de la Secretaría de Gobernación. ISSN: Negocios ProMéxico año 7, número VIII 2014, agosto 2014, se imprimió un tiraje de 13,000 ejemplares. Impresa por Cía. Impresora El Universal, S.A. de C.V. Las opiniones expresadas por los autores no reflejan necesariamente la postura del editor de la publicación. Queda estrictamente prohibida la reproducción total o parcial de los contenidos e imágenes de la publicación sin previa autorización de ProMéxico. Publicación gratuita. Está prohibida su venta y distribución comercial. ProMéxico is not responsible for inaccurate information or omissions that might exist in the information provided by the participant companies nor of their economic solvency. The institution might or might not agree with an author s statements; therefore the responsibility of each text falls on the writers, not on the institution, except when stated otherwise. Although this magazine verifies all the information printed on its pages, it will not accept responsibility derived from any omissions, inaccuracies or mistakes. August Mexico s decades of experience in manufacturing have brought as a result the development of several sectors. The country is now positioned as a giant of the electrical, electronics, and domestic appliances world industries. Furthermore, Mexico has become one of the leading hubs for research and development related with these industries. Leading electrical and electronics companies from all around the globe have had for many years production plants in Mexico, and they are today expanding their participation. These companies have located their business in various regions of the country, which has led to a concentration that has on its turn given rise to major industrial clusters. Investors long-standing confidence in Mexico is due to multiple factors, among which are: very competitive manufacturing costs, convenient geographical position, macroeconomic stability, ease of doing business, sufficient high-end infrastructure, and Welcome to Negocios! experienced logistics. Mexico also boasts a consolidated supply chain that complies with international standards, meeting thus the needs of evolving industries. Besides that, Mexico has an internationally renowned young and talented workforce which has become a quintessential component in the design and research that these industries require in order to stay updated and respond to customers growing needs. Currently, original equipment manufacturers do not only produce in Mexico, but also engage in design and engineering activities in the country. Today, Mexico is a leading global exporter of electronic products such as flat-screen televisions, computers, and mobile phones first, fourth, and eight largest exporter, correspondingly. And regarding domestic appliancess, Mexico is now the fifth largest exporter. The strategic partnership with the Mexican government has been a significant factor in the development of the electronics and domestic appliancess industries, orienting them towards the export market. Francisco N. González Díaz CEO ProMéxico Download the PDF version and read the interactive edition of Negocios ProMéxico at negocios.promexico.gob.mx. This publication is not for sale. Its sale and commercial distribution are forbidden.

7 BRIEFS BRIEFS ELECTRONICS ALCOM TRUSTs in TAMAULIPAS Japanese firm ALCOM Electronics recently invested 18 million USD to open its second plant in Reynosa, Tamaulipas. The firm will generate 700 job positions during the next two years, increasing its production by 26%. Some of the company s assembly lines have been transferred from Asia to Mexico due to several competitive factors, including operation costs, qualified talent, strategic location among others. With this operation, ALCOM Electronics consolidates its operations in the country. photo courtesy of lego Manufacturing Lego s New Brick in Mexico Danish toymaker Lego inaugurated a new expansion at its production plant in the northeastern state of Nuevo León, increasing the company s total investment in the site to million usd. photo courtesy of government of the state of tamaulipas Automotive Manufacturing MExico: the first choice overseas photo archive Pedaling to Success Taiwanese metal machining and stamping company Sixxon Precision Machinery Co. will establish a new production facility in the northern state of Coahuila. The 20 million USD plant is planned to produce metal bicycle parts. photo courtesy of lg innotek South Korean automotive components manufacturer LG Innotek inaugurated its first overseas production plant in the central Mexican state of Querétaro. The site will produce brake motors, steering systems and gearshifts, among other products. The 34,000-square-meter plant will hold around 600 workers and will begin full operations with the manufacturing of Dual Clutch Transmission (DCT) motors.

8 BRIEFS BRIEFS Medical devices Tourism From Portugal to Mexico Greatbatch in Baja US medical device manufacturer Greatbatch, Inc. will open a new manufacturing plant in the northern state of Baja California. The 35 million USD facility will produce portable medical devices such as catheters and introducers. RENEWABLE ENERGY Borderless Energy IEnova, the Mexican subsidiary of US natural gas utility Sempra Energy, has obtained 270 million USD in financing for the construction of a wind power generation park on the Mexico-US border. The cross-border site is planned to provide power to San Diego Gas & Electric for twenty years. photo courtesy of sempra energy photo archive photo archive Portuguese corporate group Mota-Engil plans to build a major new coastal resort complex in the western state of Nayarit via investment of 2.2 billion USD. Initial plans include a golf course, two beach clubs and over 7,000 hotel rooms. AUTOMOTIVE The Newcomer to Mexico s Automotive Industry South Korean automaker Kia Motors plans to build a new production facility in the northeastern state of Nuevo León. The plant, to be built in Monterrey, will have a capacity of 300,000 vehicles and initially produce two small models. With an estimated investment of 1.5 billion usd, the facility would help meet demand in the US, where Kia s single plant runs at full speed. AEROSPACE Dishon Takes Off Dishon Limited opened new production facilities in Querétaro, Mexico. The new modern, well-equipped manufacturing plant, established in El Marques Industrial Park, supports the company s strategic drive towards growth in Mexico. The 20,000 square feet plant will be fully integrated into the company s manufacturing planning and control (ERP) systems and will be operating under the AS 9100 quality system. The firm is undertaking exten- sive training of its Mexican employees at their Toronto-based facilities so that all of their knowledge and experience is fully deployed, making Dishon a truly extended, seamless enterprise. UTC Aerospace Systems is one of the most important customers for the company and has already placed significant longterm production contracts. photo courtesy of dishon limited photo courtesy of kia motors

9 Negocios ProMéxico Special Report photos courtesy of iiifilomena Special Report Negocios ProMéxico iiifilomena Adopts Mexican Nationality This Argentinean-born software company has moved to the marketplace that offers the most dividends and that will serve as a launch platform for its expansion in Latin America. iiifilomena s strategy consists in offering quality products and consulting services IT solutions their customers can identify with and get the most out of. That formula has paid off in the case of small and medium companies. knowledge of the Mexican market and helped it identify prospective clients. Now that it is a Mexican company, its management team knows it has an ally in ProMéxico as it seeks to expand to other markets. by omar magaña The founding partners of iiifilomena, Javier Loiacono and Alberto Rochas, will soon be uprooting and coming to live in Mexico with their families. Their company, which develops financial and collection software and provides consulting services in these same areas, already has an office here. Mexico is the most important country to iiifilomena on the Latin American market, says software and technology coordinator Loiacono. The country s growth projections, coupled with its ability to attract foreign investment, its geographical location, the professionalism of its programmers and regional demand for iiifilomena s products all came into play when making the decision to invest in Mexico. Loiacono and Rochas see Mexico as a dynamic country, eager to progress in short, the perfect investment destination. Demand for the products iiifilomena custom designs for its clients mainly credit institutions, multi-purpose financial companies (Sofomes), collection and law firms, and small and medium companies is high here and is likely to increase in the near future. We work with data and the statistics say Mexico is the best country for our products, which means it is the best country for iiifilomena, says Loiacono. Financial instruments have become a pressing and priority necessity for Mexico, given that the National Development Plan provides for the implementation of mechanisms to prevent money laundering. Then there are small and medium companies, which are starting to view IT systems as key to their development. According to Rochas, iiifilomena plans to launch solutions for the medical sector in Those products, which will facilitate the transmission of information on clinical parameters between diagnosis centers and authorized physicians, are still at the developmental phase. The outlook for iiifilomena in its new home is more than promising, and while it may take the firm some time to settle in, it is already projecting sales of 320,000 USD by year-end 2014, rising to 450,000 USD in 2015 and 600,000 USD in The company s Buenos Aires unit will continue operating as a development center, which Mexican programmers will have to stay in close contact with, while its unit in Georgia, in the US, focuses on market intelligence solutions. A Host Called ProMéxico Javier Loiacono and Alberto Rochas are quick to emphasize ProMéxico s role in this new phase of the company s history. A few years back, when they realized Mexico s potential, they approached the agency s delegation in Argentina. That marked the beginning of a close relationship that enabled iiifilomena to gain Close Encounters of the IT Kind Mexicans like to do business face to face, at least during initial dealings with a supplier. Loiacono and Rochas acknowledge cultural differences like these and one of the reasons they have moved to Mexico is to be close to their market and to take care of their clientele. iiifilomena s strategy consists in offering quality products and consulting services IT solutions their customers can identify with and get the most out of. We are familiar with the business and have excellent software developers, says Loiacono. That formula has paid off in the case of small and medium companies. It s up to us to detect what a small company needs and offer it a solution, although they tend to come to the conclusion they need certain software on their own, says Rochas. In this business it s not enough to persuade a potential client of the advantages of a given product. The key to a successful client-supplier relationship lies in training and customer support. In addition to programmers and trainers, the 28 members of iiifilomena s team in Mexico are knowledgeable in the areas of business, human resources, law, accounting, administration, and sales. We ve set up a training center for those who visit us and once a month we hold meetings so clients can interact and brainstorm with a view to solving common problems, says Rochas. In Mexico, iiifilomena has found human capital that is not only highly professional, but also has a positive attitude to the job. The programmers hired in Mexico are tenacious and committed to the projects they are working on. More importantly, they know how to treat the customer, which is core to the company s philosophy. Having Mexicans in our employment allows us to adapt our applications to the local culture, they say. iiifilomena is confident it will soon increase its market share in Mexico, competing with quality products at a lower cost than its two main rivals. Another point in its favor are its smart, convenient services that are tailored to the customer s needs, the latter being an attribute Loiacono and Rochas are convinced other companies will have a hard time matching. N 14 August 2014 August

10 Negocios ProMéxico Cover Feature photos archive Cover Feature Negocios ProMéxico Mexico: POWERING UP the world With decades of accumulated experience in manufacturing and the development of sectors with greater added value, Mexico has established itself as a giant in the electronics, domestic appliances and electrical industries. The country has transformed itself into one of the leading hubs of development for high-tech industries and offers excellent, attractive opportunities for investment. munications. The leading firms in the global electronics industry such as Samsung, LG, Toshiba, Foxconn, Flextronics and Intel have a presence in Mexico, and some of them run research and development centers staffed by Mexican researchers, driving the sector into design activities. Gutiérrez indicates that production plants from countries that are leaders in the electronics industry such as the US, Japan and South Korea operate in Mexico. They have concentrated themselves in particular regions of the country, giving rise to major industrial clusters in the north, west and center of Mexico. This has led to a regional specialization by type of product, resulting in five major clusters. In Baja California (north-east), the world leaders in audio and video equipment have set up manufacturing plants; in Chihuahua (north) an industrial cluster has developed focused mainly on the production of video equipment (color televisions) and, to a lesser extent, on telecommunications equipment; Jalisco (west) is home to an important cluster in the electronics sector, comprising some 13 Original Equipment Manufacturers (OEMs), 14 Contract Electronics Manufacturers/Electronics Manufacturing Services (CEMs/EMSs), 26 design centers and over 380 specialized suppliers. In this zone the cluster specializes in the production of computer equipment, becoming known as the Mexican Silicon Valley. In Nuevo León (north-east) a cluster has deby jesús estrada cortés With a consumer market that is hungry for new products and services, the electronics industry has maintained a strong level of growth around the world, reaching a total production of some 3.5 billion usd in It is expected that the sector will keep up this pace to reach 5.57 billion usd by Human activities move ever faster in the digital age and Mexico has consolidated itself as the ideal territory for the design and manufacture of the technologies that drive the world. The international electronics industry began operating in Mexico in the 1960s, when multinationals came to the country to set up local assembly plants for technology products. Those years saw the arrival of production lines for firms such as Kodak. Other giants such as IBM began manufacturing operations in Mexico in the 1970s. Later, with the entry into force of the North American Free Trade Agreement (NAFTA), investments and high-tech production in the country multiplied. Currently nine out of ten of the main international electronics manufacturing services (EMS) companies run operations in Mexico, including firms like Flextronics, Foxconn, Jabil, Sanmina and Benchmark. Today, however, the original equipment manufacturers not only produce in Mexico, but also engage in design, engineering and administration activities in the country. This is the case with companies like IBM, HP, LG, Samsung, Toshiba and Intel. Mexico is competitive above all in the subsector of consumer electronics, and has positioned itself among the leading global exporters of products such as flat-screen televisions of which Mexico is the number one exporter, computers where it is the fourthlargest, and mobile phones for which the country is the eight-largest exporter. The upward growth maintained by the sector saw a slight interruption in 2012 and 2013 that reflected international economic fluctuations, but the forecasts are for a new cycle of growth that will take production to 95.9 billion pesos of nominal GDP in 2014 a little higher than the peak reached in 2011 following the recovery from the 2008 crisis, explains Víctor Gutiérrez, president of the National Chamber of Electronics, Telecommunications and Information Technologies (CANIETI). The Mexican electronics industry is mainly oriented towards export. Mexico is the leading exporter of the electronics industry in Latin America. Foreign sales account for an average of 25.6% of all manufacturing exports in Mexico. In 2012, the sector exported products worth billion usd 6.6% higher than in In 2013 exports of electronic goods felt the negative impact of the global economic slowdown, contracting 3.5% by comparison with 2012, explains Gutiérrez, who is optimistic about the economic recovery in the US the destination for 84% of exports by the Mexican electronics and electrical industries predicted by the OECD Mexico is competitive, above all in the subsector of consumer electronics, and has positioned itself among the leading global exporters of products such as flat-screen televisions of which Mexico is the number one exporter, computers where it is the fourth-largest, and mobile phones for which the country is the eighth-largest exporter. for 2014, and who expects this recovery to boost demand for Mexican electronics to an estimated level of billion usd. Despite the international economic turbulence, investors have maintained their confidence in Mexico. Between 2000 and 2013, accumulated foreign direct investment (FDI) in the sector reached a level of billion usd. In 2013 foreign investments worth 1.18 billion usd were funneled into the electronics industry, 16.9% more than the FDI received in It is estimated that in 2014 the sector will benefit from FDI worth around 1.17 billion usd, Gutiérrez remarks. Between 2002 and 2012, 26.8% of this capital was invested in computers, 24.5% in audio and video and 24% in telecom- 16 August 2014 August

11 Negocios ProMéxico Cover Feature photos archive Cover Feature Negocios ProMéxico veloped that manufactures both intermediate and final products such as telephones, computers and domestic appliancess; while in Tamaulipas the industry produces inputs and final products such as televisions, telecommunications and computing equipment. A domestic appliancess giant One of the most important sectors within the electronics industry is domestic appliancess: high-tech devices intended to meet the needs of human beings for a more comfortable life. The production of domestic appliancess in Mexico was worth 6.69 billion usd in 2012 and forecasts indicate that it will grow at an average annual rate of 8.7% to According to some predictions, the value of domestic appliancess production in Mexico will reach 8.3 billion usd by the end of A large proportion of this output is focused on a growing domestic market. In 2013, the Mexican domestic appliances market was worth 2.15 billion usd and it is estimated that in 2014 it will reach 2.32 billion usd, and will maintain an average annual growth of 8.9% up to In 2012 Mexico headed up the list of domestic appliances exporting countries in the Latin America region, and Despite the international economic turbulence, investors have maintained their confidence in Mexico. Between 2000 and 2013, accumulated foreign direct investment (FDI) in the sector reached a level of billion usd. occupied the sixth position worldwide with foreign sales of 6.54 billion usd, explains Víctor Gutiérrez. According to the Global Trade Atlas, in 2013 Mexico was already the fifth exporter of domestic appliancess in the world the third largest exporter of washing machines, air conditioners, compression refrigerators, gas stoves and electric water heaters in the world. The principal destination for Mexican exports of domestic appliancess is the US. The good performance of production and sales is a reflection of the 2.8 billion usd in FDI received by the domestic appliancess sector in Mexico between 2000 and Estimates by the CANIETI suggest that by the close of 2014 this sector will have received 299 million usd in FDI this year. In Mexico there are 269 economic units focused on the domestic appliancess industry, generating 53,951 jobs. The comparative advantages of the Mexican domestic appliancess sector have driven the development of new projects, Gutiérrez points out. Recent examples of the dynamism of the sector may be observed in Nuevo León, where the Brazilian firm Embraco established a new production plant in 2012, investing 60 million usd of the 90 million it intends to inject into its first factory, producing compressors for domestic appliancess. It will have the capacity to produce five million compressors each year enough to meet demand for the entire NAFTA region and as a result the firm is generating 700 jobs. Meanwhile, in 2013 LG announced an investment of 60 million usd in Nuevo León to construct a third industrial plant for the production of domestic appliancess, while Whirlpool injected eight million usd into its plant in Ramos Arizpe, Coahuila, to expand its refrigerator production line. Alongside these international corporations, Mexico is home to world-class domestic firms, some of which have had the foresight not only to invest in manufacturing plants but in research and investigation centers too. One such company is Mabe, which has established itself as the third-largest supplier of domestic appliancess in Latin America, designing, producing and distributing products under the General Electric, Easy, IEM and Mabe brands. The firm has fifteen manufacturing plants around the world, eight of which are sited in Mexico. Supporting competitiveness To explain the competitiveness of the electronics and domestic appliancess industries in Mexico, Víctor Gutiérrez emphasizes that in 2012 the consultancy Alix Partners declared Mexico to be the most competitive country in the world in terms of manufacturing costs: 21% lower than the US, 11% lower than China and 3% lower than India. One year earlier, KPMG calculated that Mexico offered a 19.4% saving in plastic manufacturing costs and a 19.5% saving in metal components compared to the US. According to the National Council of Science and Technology (CONACYT), in 2012 approximately 110,000 students graduated from engineering and technology courses in Mexico, in response to the industry s demand for human capital figures from UNESCO show that, per capita, there are 18% more graduates in engineering, manufacturing, and construction in Mexico than there are in the US, reveals CONACYT. The support provided by the Mexican government has been a significant factor in the development of the electronics and domestic appliancess industries and their orientation towards the export market. To enter the US, Canadian or European Union markets, devices, parts and components must meet standards and certificates such as UL, CSA, the CE mark, DIN, and others. The Mexican government, through ProMéxico, offers direct grants for training to obtain these certificates. The design and application of programs is the strategy followed by the government to boost the development of electronics and domestic appliancess, says Gutiérrez, who points to programs such as Drawback (return of import taxes to exporters), PRO- SEC (Sectoral Promotion Programs) and IMMEX (Manufacturing, Assembly and Export Services Industries). The production of software has also increased in Mexico, to a large extent with the support of the Ministry of Economy s Program for Development of the Software Industry (PROSOFT). The projects supported with PROSOFT funding include the creation of design centers, setting up of laboratories, human resources training and product design and development. CANIETI is a body that acts to promote the PROSOFT fund, the overall aim of which is to promote domestic economic development through the allocation of temporary subsidies to projects that boost creation, development, consolidation, viability, productivity, competitiveness and sustainability of firms in the information technology and related sectors, and to promote its use in different economic sectors, explains Gutiérrez. Energy on the increase Sometimes people confuse the electronics and electrical industries, when in reality there are major differences between the two. In the former, the products or components process some kind of information, while in the latter devices transform electrical energy into a different form of energy. The electrical industry comprises three major segments: electric motors and generators, electricity distribution and control equipment, and wires, cables and batteries. Worldwide production in this sector reached 1.68 trillion usd in With data from Global Insight, it is calculated that between 2013 and 2020 this output will grow at an average annual rate of 10.5%. The demand for electrical products is entirely connected to the generation of electricity around the world. In 2013 total world electricity output stood at 20,181 Terawatt-hours (TWh), and projections indicate that this will rise to 24,975 TWh in 2015 and 31,775 TWh by Mexico is the leading producer in the electrical sector in Latin America. In 2012, production in the Mexican electrical sector was valued at billion usd, and it is anticipated to grow at an average annual rate of 7.9% between 2013 and During this period, the electricity distribution and control equipment segment will grow at a rate of 8.8%, while for the electric motors and generators, wires, cables and batteries segments the figures will be 8.6% and 7.1% respectively. These levels of production may be explained by the country s energy consumption, 18 August 2014 August

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