NAFTA Works

A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

March 2010 * Volume 15, Issue 3

INSIDE THIS ISSUE Mexico Improves Its Attractiveness for Investments

1 Mexico Improves Its
Attractiveness for...
1 Trade Highlights
2 Agricultural Trade is
Flourishing under...
3 NAFTA Related
Events
3 Diario Oficial
4 Success Stories
4 Selected Readings
4 Infrastructure
Projects in Mexico
Mexico has notably risen to the top-ten most
attractive nations in the world for foreign direct
investment (FDI) and maintained its number one
position as US low-cost outsourcing for the year
of 2009, according to A.T. Kearney’s 2010
Foreign Direct Investment Confidence Index and
the AlixPartners’ 2010 US Manufacturing-
Outsourcing Cost Index. In addition, the World
Bank 2010 Logistics Performance Index (LPI)
has Mexico improving six positions since 2007.
The largest cause for the overall changes in
rankings, according to A.T. Kearney, is that in
today’s depressed economy the market has
moved towards safer markets, encouraging
companies to invest closer to home. This
approach along with NAFTA market access
advantages has made Mexico a sound choice for
US and Canadian investments. Mexico’s
geographic proximity, duty free trade and its
comparatively lower labor costs are a draw for
these nearby trading partners.
One sector of improvement in Mexico was
logistics performance. According to the latest
World Bank’s LPI, Mexico is ranked 50th out of
the 155 countries measured in the index,
scoring 3.05. This is an improvement from its
2007 ranking of 56th, when scored 2.87.
Mexico has advanced in both international and
domestic areas of the LPI, showing significant
improvement in tracking and tracing, general
logistics infrastructure, rate of physical
inspection and logistics competence, among
others. It also slightly improved in the areas of
customs and timeliness.
Mexico’s attractiveness for investment ranks 8th
worldwide this year, up from 19th in 2007,
according to A.T. Kearney’s FDI Confidence
Index for 2010. Mexico has moved back into the
world’s top 10 most attractive countries as US
companies seek low-cost production closer to
their core activities. There is a global tendency
to invest in nearby countries and also to

4 Mexico Economic
Update
5 Profile of New
Mexico
6 Profile of Michoacan
USTR KIRK VISITED MEXICO TO FOSTER COMPETIVENESS IN NORTH AMERICA
In a visit to Mexico on February 8 and 9, US Trade Representative, Ambassador Ron Kirk, met President Felipe
Calderon and Economy Secretary Gerardo Ruiz. They highlighted the importance of promoting and
strengthening North America’s competitiveness as the way to speed up economic growth, and praised the
strong conviction that the NAFTA partners have shown to work together.
Delegations of both countries discussed topics of relevance for the good performance of the bilateral trade
relationship.
Mexican and U.S government representatives agreed to drive efforts in five important areas:
1. Intensify efforts in regulatory cooperation and intellectual property.
2. Increase custom facilitation in order to make trade more efficient and safer.
3. Increase export capacity of small and medium size companies.
4. Improve productivity along the supply chain to increase competiveness, and
5. Work diligently to solve existing trade disputes

Continues on page 2

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consolidate and deepen the supply chain.
One the principal reasons this happened is the high preference of
US companies to invest in Mexico. Among North American
investors, Mexico is ranked as the fifth most-favored destination
for investment in the 2010 index. In the last two years, Mexico has
received over 34 billion dollars of accumulated FDI with over 55
percent coming from US and Canadian companies. Industrial
manufacturing has been the largest recipient economic sector,
accounting for just over 35 percent of the total FDI. This sector
attracts high levels of investments for Mexico largely due to
foreign companies looking to manufacture for the US market with
the benefits of the NAFTA free trade framework.
Low-cost outsourcing is also a strong point for Mexico. In 2010,
Mexico has taken the number-one position, surpassing India and
China for the second year in a row, according to the newest
AlixPartners’ Index. Reasons that account for Mexico gaining so
much ground include an advantageous shift in the peso-dollar
exchange rate and the fact that it was not vastly affected by
increases in material and transportation costs. Again, the
improvement is also due to Mexico’s geographic position, which
makes it a convenient location for North American companies
looking for cost-effective outsourcing regions.
In this year’s AlixPartner’s index, with more countries and higher-
value added products, there is an improvement in the measuring
of current and up-and-coming low-cost countries. Mexico held
strong at number one in the index’s lowest manufacturing cost
rankings, with India and Vietnam retaining their 2nd and 3rd
places respectively. China, which recovered slightly in numbers
but fell in position from number 4 in 2008 to number 6 in 2009,
has been facing an adverse turn in exchange rates, rising material
and transportation costs, and increased taxes.
With such improvements and growth, Mexico is quickly becoming
a significant competitor in the world market. The close-to-home
business model is bringing more investment to the country.   Integration is not limited to production agriculture. US and
Agricultural Trade is Flourishing under NAFTA
For example, US consumers are purchasing fresh tomatoes and
peppers produced by Mexican farmers during the winter,
Mexican livestock producers feed their animals with US coarse
grains, and many North American pastures and feedlots contain
cattle that have lived in more than one NAFTA country.
Difference in landscape and climate allows both US and Mexican
consumers to have a broader selection of food throughout the
year at better prices. Thus, Mexico is the US’ largest supplier of
fresh fruits and vegetables with exports that exceeded $4.9
billion in 2009, an increase of almost 9% in the last two years
and more than 4 times higher than those reached in 1993.
Since NAFTA, Mexico’s market share in fresh produce imported
by the US has increased to 46 percent last year, up from 39
percent in 1993. Today, two out of three mangos or papayas,
half of the avocados, two out of five lemons and limes, one out of
every three asparagus, eggplants or bell peppers, and one out of
every four cucumbers or squashes that U.S. consumers eat
were raised in the Mexican countryside.
The region has also seen a rapid integration of North American
grain markets. During the NAFTA period, US grain exports to
Mexico have quadrupled, reaching $4 billion last year. The
catalyst for this trade has been a dramatic expansion of Mexico’s
hog and poultry industries, driven in turn by a rising domestic
demand for meat. In order to complement domestic meat
production, Mexico also buys more than $2 billion a year of red
meat and poultry from US ranchers.
The main drivers of integration in North American livestock
markets have been harmonization of sanitary standards and
industry restructuring. As a result, Mexico ships rising numbers
of feeder calves to the US for finishing the last stage of
production and slaughter.
Mexican processed food industries are increasingly interwoven
trough substantial direct investment in each other’s industry, as
well as large and growing flows of intra-industry trade in products
such as bread, beer, dairy products, mixes, and confectionary
products. Between 1999 and 2009, US firms have invested more
than $9 billion in Mexico’s processed food sector.

The North American Free Trade Agreement (NAFTA) has had an
enormous impact on the agricultural sector throughout the region.
Agricultural trade between the US and Mexico has multiplied by
four in the 16 years of NAFTA, reaching 24.3 billion dollars in
2009. The steady growth of the bilateral trade at an annual
average rate of 8.8 percent has made Mexico the US’ second
largest trading partner in agricultural products.
With the completion of NAFTA’s implementation, additional steps
are necessary to promote more trade and further integration
within the region such as better regulatory coordination,
improvements to the cross-border transportation system and
more investment in border infrastructure.

Since the final NAFTA transition period ended on January 1st,

2008, when remaining tariff and quantitative restrictions on
exports of corn, dry beans, milk powder, sugar, and orange juice
were fully phased out, US-Mexico agricultural trade have
increased by 6.4 percent despite the adverse economic situation
during that period.

This dynamic trade performance is speeding up an important long

-term development in which the agricultural sectors of both
countries are increasingly behaving as if they form one market.
Not only is US agricultural trade with Mexico on a clear upward
trend, but also North American producers are reorganizing their
economic activities more efficiently through the region for both
inputs and outputs, taking advantage of the complementary
nature of both economies.

Volume 15, Issue 3 nafta@naftamexico.net Page 2

NAFTA Related Events
EXPO JOYA 2010
DIARIO OFICIAL NOTICES
 Amendments to the temporary transition measure on imports of several
goods originating from China. Feb. 2nd.

April 13-15
 Notice that formally declares the municipalities of Hidalgo, Irimbo,
Parácuaro and Tangamandapio, Michoacán as large avocado seed
Exhibition of jewelry, silverware, watches, imitation jewelry and supplies
weevil (Heilipus lauri), small avocado seed weevil (Conotrachelus
Location: Expo Guadalajara, Guadalajara, Jalisco.
aguacatae and C. persea), and avocado seed moth (Stenoma
Phone: 52.33.31219238
catenifer) free territories. Feb 8th
E-Mail: Mabel@expojoya.com.mx
Website: http://camaradejoyeria.com.mx/expojoya/  Notice announcing two tariff rate quotas and their allocation mechanism
to import sugar in 2010, one from originating sugar of Nicaragua, and
EXPO LICENSING LANTINOAMERICA 2010
the other one from the rest of the world. Feb. 9th
April 14-15
The largest owners and operators of licenses and brands will come  Clarification to the Mutual Recognition Agreement for the acceptance of
together to show their licenses, brands and services. conformity assessment results in electrical and electronic products held
Location: Centro Banamex, Mexico City. between UL de Mexico, S.A. de C.V., and UL International Demko A/S
Phone: 52.55.5557.7734 and Underwriters Laboratories Inc., published on November 24, 2009.
E-Mail: crivera@comunicacionintegral.com.mx Feb. 9th
Website: www.licensingmexico.com  Amendments to the Mexican Tariff Schedule and to the Sectoral
EXPO MASCOTAS Promotion Programs. Feb. 9th.
April 17-18  Decree enacting the Protocol Amendment to the Free Trade Agreement
Animal exhibition and sales; products, accessories and foods for pets. between Mexico and Israel, signed on November 18, 2008. Feb. 11th.
Location: Expo Guadalajara, Guadalajara, Jalisco.
Phone: 52.81.1669.6734  Decree enacting the Strategic Partnership Agreement between Mexico
E-Mail: eliastenorio@gmail.com and Uruguay, signed on August 14, 2009. Feb. 11th.
Website: http://www.expomascotas.com.mx/index.php  Decree enacting the Strategic Partnership Agreement between Mexico
MEXICO SAFETY EXPO 2010 and Costa Rica, signed on July 30, 2009. Feb. 11th.
April 20-22  Notice
announcing a tariff rate quota for 2010 to import duty free
Exhibition of industrial safety, occupational health and hygiene in Mexico powdered milk originating from WTO members. Feb. 15th.
Location: Centro Banamex, Mexico City.
Phone: 52.55.5268.2000
 Notice announcing a tariff rate quota for 2010 to import under
preferential treatment certain dairy products preparations containing
E-Mail: emartinezo@centrobanamex.com
over 50% by weight in milk solids. Feb. 15th.
Website: http://www.safetymexico.com/
 Decree enacting the Agreement between Mexico and the United States
EXPO FARMA INTERPHEX 2010
for the promotion of safety in aviation, signed in Montreal on September
April 21-23
18th, 2007. Feb. 23rd.
Exposition of products and services related to the pharmaceutical
industry.  Resolution amending the General Rules and Criteria for Foreign Trade
Location: World Trade Center, Mexico City. issued by the Ministry of the Economy. Feb. 25th.
Phone: 52.55.9183.2060
E-Mail: apalomo@afmac.org.mx Mexican Official Standards:
Website: www.expofarmainterphex.com
 Modifications to point 2.4.3 of Normative Appendix A of the NOM-040-
SAPICA, LA FERIA DE AMERICA SSA1-1993, related to iodized salt and iodized fluoridated salt. Sanitary
April 22-25 specifications, published on September 23, 2003. Feb. 2nd.
Fashion exhibition of the footwear industry for the 2010 fall/winter season
Location: Poliforum Leon, Leon, Guanajuato.
 NOM-005-ENER-2010, related to Energy Efficiency for household
Phone: 52.447.152.9005 laundry machines. Limits, test methods and labeling. Feb. 3rd.
E-Mail: info@ciceg.org  Draft PROY-NOM-086-SCFI-2009, related to new radial tires of a kind
Website: http://www.sapica.com/english/index2.html used on vehicles with a gross weight not exceeding 4,536 kg (10,000
lb) - Safety specifications and testing methods. Feb 9th.
EXPO OFICINAS
April 23-24  Extension of the NOM-EM-047-FITO-2009, related to phytosanitary
Commercial expo features stationary, services, supplies and related measures to mitigate the risk of introduction and spreading of
office products. Huanglongbing (HLB) / Greening of citrus fruits (Candidatus
Location: Cintermex, Monterrey Nuevo Leon. Liberibacter spp.) in the national territory, published on July 08, 2009.
Phone: 52.81.8289.8420 Feb. 12th.
E-Mail: ventas@expooficinas.com.mx  NOM-009-SCT2/2009, special and compatibility specifications for the
Website: http://www.expooficinas.com.mx storage and transportation of substances, materials and hazardous
MODAMA waste of class 1 explosives. Feb 12th.
April 26-28  NOM-032-SCT2/2009, specifications and characteristics on the design,
Exhibition of women’s footwear, leather products and accessories construction, inspection and testing of portable tanks intended for the
Location: Expo Guadalajara, Guadalajara, Jalisco. transport of substances, materials and hazardous waste of classes 1, 3
Phone: 52.33.3343.3000 to 9. Feb. 16th.
E-Mail: direccionmodama@gmail.com
Website: http://www.modama.com.mx/  NOM-027-SCT2/2009, special and additional specifications for
containers, packaging, intermediate bulk containers, portable tanks and
6to. EXPO FORO ELECTRICO. transportation of substances, materials and hazardous waste of division
April 28-29 5.2, organic peroxides. Feb 17th.
Technical conferences related to technological developments of the
Energy Sector and exhibition of products and services of the electrical  Draft PROY-NOM-053-SCT-2-2003, Land transportation.
industry. Characteristics, technical and security specifications of towing
Location: Expo Tampico, Tampico Tamaulipas. equipment, tow and rescue. Feb 23rd.
Phone: 52.55.5280.6775  NOM-030-SCT2/2009, specifications and characteristics on the design,
E-Mail: caname@caname.org.mx construction, inspection and testing of refrigerated liquefied gas
Website: www.caname.org.mx/imagenes/sextoexpoelectrico.html portable tanks. Feb. 25th.

Volume 15, Issue 3 nafta@naftamexico.net Page 3

 Success Stories
Wal-Mart Mexico to Open 300 New Stores in 2010
Wal-Mart Mexico (Walmex), Latin America’s largest retailer,
plans to invest a record $970 million in 2010. The investment
plan for new and remodeled stores and distribution
improvements is a 28 percent increase from 2009. Walmex will
open 300 stores and restaurants this year, adding to its current
total of almost 1,500. “We expect a gradual economic recovery
for this year,” CEO Scott Rank said, “but our investment plan
doesn’t depend on a revived economy.” Walmex also plans to
open 168 branches of its bank, Banco Walmart, increasing its
total by 88 percent.
Praxair to Invest in Mexico
US industrial gases producer Praxair, the largest industrial gases
company in North and South America and one of the largest
worldwide, will invest $150 million in Mexico in 2010. From this
amount, $12 million will be spent in building an air separating
plant in Monterrey. The largest amount, $70 million, will be
invested in another air separating plant in Sahagun, Hidalgo. $20
million more will go to a hydrogen plant in Tepeji del Rio,
Queretaro while $10 million will be used in facilities for gas fill-up
in Altamira, Tamaulipas. The remaining $38 million will be
allocated to several projects. The investments will generate
around 150 direct jobs and 900 indirect jobs.
Jafra Opens New Plant in Mexico
Jafra Cosmetics International, an international manufacturer and
marketer of personal care products, has opened a new $30
million manufacturing facility in Queretaro, Mexico to meet the
demand for its products. The 254,000-square-foot plant will
employ 800 workers and be the main supplier for Westlake
Village, CA-based Jafra’s global sales and operations. “This
significant capital project investment supports our planned
course of expansion and it will accommodate our anticipated
growth for decades,” said Walter Muyres, a managing partner
with the Vorwerk Group, Jafra’s parent company.
IBM Expands Investments in Jalisco
In a project which required $20 million investment, IBM officially
inaugurated the facilities where XIV Storage System is
manufactured. Production started last summer in the plant
located in El Salto, Jalisco and the equipment is already
exported to the United States, Germany, United Kingdom,
Malaysia, New Zealand, India, Korea, Canada and Colombia.
100 jobs were created for this new project, specialized in
management, manufacturing engineering, tests, quality
assurance and systems engineering, among other areas. "This
campus is recognized for its operative excellence", said Eugenio
Godard, IBM Campus Guadalajara Director, "and it is based on
Mexican abilities and talent".
Volume 15, Issue 3 nafta@naftamexico.net
Selected Readings
NAFTA Implementation: The Future of Commercial Trucking
across the Mexican Border
Author: John Frittelli, Congressional Research Service.
February, 2010
NAFTA set forth a schedule for implementing its trucking
provisions what would have opened the border states to cross-
border trucking competition in 1995 and all of North America in
2000, but full implementation has been stalled because of
concern with the safety of Mexican trucks. One truck safety
statistic, “out-of-service” rates, indicates that Mexican trucks
operating in the United States are now safer than they were a
decade ago. The data indicate that Mexican trucks and drivers
have a comparable safety record to U.S. truckers. If Mexican
carriers do eventually receive long-haul authority, the short-term
impact is expected to be gradual. In the long run, use of drayage
companies at the border is likely to decline as they lose part of
their market share to Mexican long-haul carriers.
http://www.naftamexico.net/NAFTAImplementationTruckingFeb-2010.pdf
Infrastructure Projects in Mexico
Manzanillo Power Plant
Sponsor: Electricity Federal Commission (CFE)
Location: Manzanillo, Colima
Project Value: $981 million
CFE granted the consortium of companies formed by ACS, GE and
Alstom the project for the conversion of units 1 and 2 of the Manzanillo
power plant, which will become the largest generation plant in the
country, with a capacity of 1,500 megawatts. The project consists of
replacing the turbines that now generate electricity from fuel oil to natural
gas and rehabilitate the steam turbines which will increase generation
capacity. The natural gas for use by the project will be imported in liquid
form by vessel from Peru and will be regasified at the LNG plant, which is
currently under construction in the same place. The project also includes
upgrades of the transmission network.
Business opportunities: construction, civil engineering, engineering
services, electrical equipment.
Durango Solar Project
Sponsor: Durango State Government
Location: State of Durango
Project Value: NA
The Government of the State of Durango and the company OPDE, a
Spanish solar photovoltaic developer, have signed a collaboration
agreement under which the solar company has committed to study, plan,
build and launch 45 megawatts (MW) of solar projects between now and
2013. The first 1 MW photovoltaic solar farms that OPDE will build in the
state will be located in the Logistics and Industrial Park in Durango
(CLIP) and will be fully operational in 2010.
Business opportunities: construction, electrical equipment, solar
equipment.
Page 4
 New Mexico
In 2009, New Mexico's exports to Mexico reached $385
million, up $308 million from their level in 1993, and Exports to Mexico
registered a flat performance in comparison with the 1993-2009 (Millions of US Dollars)
previous year.

Among all U.S. states, New Mexico was ranked 35th as

an exporter of goods to Mexico in 2009

In 16 years of NAFTA, New Mexico's exports to Mexico

have increased by 401%, while those to the rest of the
world rose 173%. This means that the export growth
rate to Mexico is 2.3 times higher than its export growth
rate for the rest of the world.

Since NAFTA was implemented, New Mexico's sales to

Mexico have grown at an annual average rate of
10.6%.

Mexico is an important trade partner to New Mexico. It

was ranked as the largest export market for goods from
New Mexico in 2009, up from 2nd in 1993, illustrating
the impact of NAFTA for New Mexico's growing
businesses. Mexico accounted for 30.3% of New Source: US Census with adjustments made by the World Institute for
Mexico's exports worldwide in 2009 Strategic Economic Research (Wiser), and SE-NAFTA.
1993-1999 by SIC AND 2000-2009 by NAICS.

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