Mexico Potable & Wastewater Issues and Opportunities

Vincent Lencioni WEFTEC, October 2011 Los Angeles, California

Outline
I. II. III. IV. V. VI.

Brief Mexico Economic Overview Mexico Water Overview, Clean Water Issues Municipal Wastewater Issues Industrial Wastewater Issues Opportunities & Market Size Channel Strategies & Tips for Doing Business in the Water Segment

I. Key Mexican Indicators

Intermediary & Capital Goods Imports up

Intermediary = Full Recovery since 2010 Capital Goods up and growing again, full recovery in 2012 (growth) 2008 = 15%, 2009 = -19%, 2010 = -4.7%, 2011 = 14%

Mfging GDP full recovery since 2010 (Growth)

2008 = -.7%, 2009 = -10%, 2010 = 10%, 2011 (1Q) = 7.6%; (2Q) = 4.7% Exports stable for now, but US 80-85% and US economic situation problematic

Mexico Purchasing Power: Up & Down

Peso revalued against dollar following crisis (11 to 16 to 13 to 11.5) Euro crisis = devaluation (11.5 to 13.5); when/if will readjust down again

Government Spending: Up & Down

Pemex Income Up = 1/3 federal spending Mexican budget & indicators = healthier than US 2012 Presidential year how will it impact spending both public & private?

I. Mexico/Latam Economic Growth

Latin American Indicators GDP (US$ bn) Real GDP growth Imports (US$ Trilllon) 2009 4,106 -1.7 0.724 2010 4,820 6.1 0.91 2011 2012 5,526 6,166 4.4 4 0.995 1.09

GDP
Country Mexico Argentina Brazil 2010
1,040 349 2,090

Growth %
2011
1,203 396 2,369

2012
1,358 467 2,649

2009
-6.1 0.9 -0.6

2010
5.5 9.2 7.5

2011
4.1 7.0 3.8

2012
3.6 4.1 3.6

Colombia
Chile Venezuela Peru Central America Caribbean Area USA

288
205 235 148 152 159 14291

328
247 315 162 167 175 15604

350
273 335 185 184 194 15595

1.5
-1.5 -3.3 0.9 -0.5 -1.3 -3.5

4.3
5.2 -1.4 8.8 3.9 3.9 3.0

4.7
5.9 2.8 6.2 3.9 2.8 1.5

4.5
4.8 2.3 4.9 3.9 3.6 1.8

I. 4 Mexico Misconceptions

Latin America/Mexico is insignificant vs. US market

US Market: Latam = 36%; Mexico/Brazil > 25% Mexico = 10% of US GDP / US Market GDP Growth, Brazil vs Mexico

Brazil is much more dynamic/important than Mexico

2010: 7.5% vs 5.5%; 2011: 3.8% vs 3.8%; 2012: 3.6% vs 3.6% US Exports (2010) to Brazil = $35 B; Mexico = $165 B > 4.5x

Brazil GDP = 2x Mexico BUT Brazil Imports = 2/3 of Mexico

Mexico is a less important market than BRIC markets

2011 US Exports as % of total: BRIC 14.9% Mexico 13.1% 2011 US Exports % Increase: BRIC 18.6%; Mexico 22.6%

Mexico too insecure for business or for business travel

I. Murders per Capita Context (2010)

50 WORST LATIN AMERICA COUNTRIES (ABOVE MEXICO), MEXICAN AND US STATES
HONDURAS 77 Chihuahua* 74 SALVADOR 70 Durango* 60 VENEZUELA 48 Sinaloa* 47 Guerrero 46 T&TOBAGO 37 COLOMBIA 32 BRAZIL 25 Wash D.C. 24 Baja Calif* 24 Puerto Rico 22.6 Oaxaca 21 Sonora* 20 Morelos 19 MEXICO 18 Michoacan 18 Nayarit 15 Quintana Roo 13 Louisiana 11.8 Chiapas 10 Coahuila# 9 Mexico(State) 9 Tamaulipas# 9 Colima 9 New Mexico Mexico City Guanajuato Jalisco Maryland Tennessee Puebla Alabama Mississippi Missouri Michigan So Carolina Arkansas 8.7 8 8 8 7.7 7.3 7 6.9 6.4 6.4 6.3 6.3 6.2 Oklahoma Nuevo Leon# Tabasco Illinois Georgia Florida Arziona Texas California Pennsylv. Queretaro 6.2 6 6 6 5.8 5.5 5.4 5.4 5.3 5.2 5

1. Mexico better than Brazil, Colombia, Venezuela, & Central America 2. Mexico business travel locations (underlined) similar to US locations

3. Problems in Northwest Mexico states(*) spike Mexico average badly

II. Mexico Water Overview

II. Mexico Water Issues & Challenges

1. Geographical Challenges: North (30/87/75) vs South (70/13/25) Altitude, precipitation, population, urban growth issues 2. Per Capita Water: 18,000 m3 (1950) to 4,400 m3 (2010) BUT: 15,000 South; 1700 Central, only 500 North 3. Overexploited aquifers: 15%; will reach 25% soon 4. Water Use: 80% Agri (US: 40%) vs 8% Industrial (US: 46%) 5. Delivery Systems: 50% losses: Potable (43%), Agri (55%) 6. Metering: Potable (obligatory, < 2/3) vs WW Industrial (0%) 7. Wastewater Treatment: < 40% Municipal; < 20% Industrial 8. System efficiency = Medium to lower half of Latin America

II. Potable & Sewerage Coverage

Potable: 91%

Sewerage: 87%

2012: 92%; 2030: 100 Urban: 95 (05), 94 (09) Rural: 72 (05), 79 (09)

2012: 88%; 2030: 100 Urban: 89% (05), 94% (09) Rural: 58% (05), 63% (09)

90: 51%, 2000: 68%

1990: 18%, 2000: 37%

8 states (25%) < 90% Veracruz, Guerrero < 80%

7 states (15%) < 80% 19 states (60%) < 90%

Challenges

Challenges

Bottled water tendency Compete with other areas Delivery System Pollution

Comparatively small Rural: Pros & Cons Wastewater treatment next

II. 2030 Water Priorities

All municipal water treated
All rivers % lakes without trash

Increased Irrigation technology

River Basin auto administration

Contamination sources under control

100% Clean Rivers

All treated water reused

River Basin Equilibrium Efficient regional order

All industrial water treated Urban suburbs connected to the network All rural areas with potable water Universal Water Coverage

Habitable areas free from floods

Flood zones without habitations Disaster alert systems and prevention

Operating organisms functioning efficiently

II. Mexico Water Goals: 2012 & 2030

5 Year Plan

(2007-2012)

2030 Water Agenda

Potable water coverage: 92%

Current: 91%
Current: 87% Current: 40% (may be)

Sanitary/sewer coverage: 88%

Wastewater treatment: 60%

Rehabilitate 500 Dams (420) 8% increase: utility efficiency

Water infrastructure Ranking

Latin America context

Mexico 64 vs Chile 35, Pan 46

20% < Latam standard below Peru

By 2016: all major urban areas free from risk of flood By 2015, All Irrigation technified, 100% water reuse 2024: Complete rural potable water and sewage access 2025: All Industrial and Municipal wastewater treated 2030: All aquifers and contamination in balance

System Competitiveness

2011 Adjustment to Agenda

Target dates moved back Problems vs Ambitiousness

Latam Green City Treatment Average: 52%; Mexico: 43%

II. Impact of Funding Issues

2011 Total Mexico Water Budget

Local vs Federal Projects

$6 Billion US = 2x Conagua budget Sources: Federal (Conagua) 49%; State 18.5%; Local 12%; Other 20.5%

Municipal/State: 95% 64% Federal Matching Funds Federal: Large Projects Only

2011 Conagua Water Budget

Funding vs Finance Argument

Total: 36.8 Billion pesos ($3 B US)

States: 62%; Federal 38% Urban: 80%; Rural: 20%

Distribution: 48% Projects; 33% Admn; 19% HidroAgriculture Projects: 39% Potable; 49% Sewerage; 12% Treatment Growth Up: slowed by economic crisis

Funding Sufficient - Conagua Financing Available - Fonadin Still BOT vs Traditional Bid Debate

Payment, Local Government concerns Supposedly $2 Billion US: 2008-2012

Revenue Sources & Water Prices

Since 2002 250% and 2007: 69% 2011: 5.5%; 2010: 14%; 2008: 22% Hidroagriculture: 2008: 46%; 2011: 4%;

Domestic: Low, not close to costs Industrial: Higher but still too low Agriculture: Almost free 80% total use < 2% revenues Billing vs Collected (See Graph)

II. World Domestic Water Prices

(13 pesos:$1 USD), 2008 prices
Price (pesos/m3)
2.76 Mexico City/Federal District = 20 cents 20.4 20.98 24.2

Washington D.C. Lisbon Madrid Los Angeles Istanbul

46.44

28.67 31.7

London

20

40

60

II. Mexican Domestic & Industrial Water Prices

II. Water Revenue Problems

II. Clean Water Issues

Potable Plants: 650+

Water sources

2/3 Convention Clarification 133m3/s capacity; 90 m3/s treated 1/3 Northwest, only 15% in South

2/3 surface vs 1/3 subterranean but 2/3 drinking from subterranean 3000 kms, capacity: 112m3/s 3 major cities (Cutzamala), Rural 4500 dams 536-667 large dams = 13th world

Aqueducts

Sinaloa = 142 or 22.5% of all plants

Disinfection Coverage

1991: 84%; 2009: 97% Leading Country in Latin America Chiapas & Guerrero only concerns Tyfoid, Salmonela Problems Population relocation challenges 1500: Subterranean Bodies 2000: BOD, COD, TSS

Dams & Reservoirs

Brazil = 635, 40% electricity

Infectuous Diseases

90% capacity in 2009 = growth

Altitude Challenges

Water Monitoring

Cutzamala: from 1600 to 2700 meters 50% munis > 1 mile high

Aquifer Replacement & Water Reclamation Concept Stages

II. Water & Wastewater Regulations

Wastewater Regulations

Potable Regulations

By where water goes:

NOM 127

NOM 001: Federal bodies

Rivers, Lakes, Coasts All towns > 2500 inhabs (2600+) & all companies Sewer/Drainage System

Water quality and disinfection rules; treatment options

Monitoring/sampling Storage rules, samples, sanitary restrictions

NOM 002: Municipal

NOM 179

Translations Available
If NOM 001: Federal If NOM 002: Local NOM 003 = Water Reuse NOM 004 = Sludge/Mud

NOM 230

Discharge Rights Fees

By Reuse Applications

Challenges
Metering/Sampling
Enforcement Public

Indifference

III. Municipal Wastewater Issues

III. NOM 001: Discharges into Federal Bodies

As of 2010, all companies & municipalites with 2500+ (3200 total) supposed to be compliant; Reality is much, much less, numbers unclear
M.A. = Monthly Average; D.A. = Daily Average (1) Instantaneous (2) Simple sample weighted average (3) Absent as per the Test Method defined in the NMX-AA-006.

III. NOM 001 (continued)

(*) Measured in full. D.A. = Daily Average M.A.= Monthly Average NA = Not applicable (A) (B) and (C): Receiving Body type according to Government Service Charges Law.

III. NOM 002: Discharges into Municipal Systems

PERMISSIBLE MAXIMUM LIMITS PARAMETERS (miligrams per liter) unless specified otherwise Fats and Oils Sediment Solids Total Arsenic Total Cadmium Total Cyanide Total Copper Monthly average Daily Average Instantaneous

50 5 0.5 0.5 1 10

75 7.5 0.75 0.75 1.5 15

100 10 1 1 2 20

Hexavalent Chrome
Total Mercury Total Zinc

0.5
0.01 6

0.75
0.015 9

1
0.02 12

As of 2010, all companies are supposed to be compliant

III. Wastewater Standards: US vs Mexico

Significant differences between systems:

Standards

Levels & Materials Tested

BOD: Fauna, Agricultural Reuse, Fecal Coliform Others: Copper, Nitrogen, TSS, Mercury, Fats/Oils
Samplying

Frequencies Metering Requirements Viable Regulations & Enforcement

Local vs State vs Federal

Fines,

Civil & Penal Liabilities, Closures

III. Municipal Treatment Evolution

2000 Collected* Treated* %Treated % Treated @
200 46

2005
205 71.8

2007
207 79.3

2008
208 83.6

2009
209 88.1

2010
210 91.2

2012
220 132

23.0%
NA

35.0%
NA

38.3%
NA

40.2%
NA

42.1%
NA

43.4%#
36.5%

60.0%
NA

# = 2010 Latin America Green City Index Average 52% vs Mexico 43.4%; 2011 estimate Mexico: 44.8% = Collected, Treated, Increase = m3 per second Note: Collected amount increases discrepancy between Conagua information for this table and 5% flow increases reported elsewhere (see % Treated @ above)

III. Municipal Wastewater Plants

2010: How Much/Where

43.4% Waste Treated

200% increase since 1992 100% Increase since 2000

Treatment capacity need: 196m3 = 71m3 deficit

5% annual flow Increase North > 50% treatment Center: 33% treatment 48% Treatment in Ro Bravo/Lerma Basins

Treatment Areas

III. Type of Municipal Plants (Total: 2186 plants)

III. Municipal Plants by State

III. State Treatment Good & Bad:

Refining Coverage & More Basic Needs

Good: 10 States > 2/3

Positive but Reversals

100%: Nuevo Leon, Baja California, Aguascalientes 75-65%: Guerrero, Nayarit, Chihuahua, Sinaloa, QR, Tamaulipas, Durango

Quintana Roo: 73 to 69% Nayarit: 82.6% to 70.3%

Bad: < 25% treatment

Evolutions (2003-2010)

Aguascalientes: 77 to 100% Baja California: 72 to 100% Chihuahua: 32 to 72% San Luis Potosi: 22 to 63% Tamaulipas: 37 to 65% Sinaloa: 40 to 69.4%

< 10%: Yucatan, Campeche, Hidalgo 14.4% Mexico City 20-15%: Zacatecas, Tabasco, Morelos, Chiapas 22.2% State of Mexico 24.1% Jalisco

III. State Wastewater: Good/Bad

Which States are doing better than others

BOD (Oxygen Demand: Urban wastewater)

Bad (> 30*): DF, Mexico, Guanajuato, Tlaxcala Good: Jalisco, NL, Tamps, VC, AGS, CHI, BC
Bad (> 40*): DF, Mexico, Jalisco, Guanajuato, Baja California, Aguascalientes, Chihuahua, Puebla, Tlaxcala Good: Nuevo Leon, Queretaro, Tamaulipas, Veracruz Bad (> 150*) only Hidalgo = result of DF/Mexico Wastewater

COD (Chemicals: Industrial wastewater)

TSS (Suspended Solids: Both, more urban)

Overall

Good: Campeche, Coahuila, Colima, Chiapas, Durango,

Guerrero, Nayarit, Oaxaca, Quintana Roo, San Luis Potos , Sinaloa Sonora ,Tabasco and Yucatan.
* Miligrams per liter

III. Major Urban Wastewater:

Projects, Coverage, Future Trends

Mexico City / Valley of Mexico

Atotonilco: 2013 ($785 Million US); El Caracol: 2013 (Cost: $130 Million US) plus Zumpango, Nextlalpan & Vaso el Cristo (2012)

Area Coverage: < 15% in 2011; 40-60% in 2013/2014 Flows: 26m3 dry season; 38m3 wet season.

Guadalajara

El Ahogado: 2012 ($150 M US) & Agua Prieta: 2013 ($280 M US)

Area Coverage: < 25% in 2011; 70% in 2012; 100% in 2013 (tunnels) Capacity: 11m3; ability to treat 10,000 liters/second each.

Monterrey

Plants 5 & 6 expansion projects: 2012 = 25% increase in capacity

Current Targets: State Capitals, Tourism Centers, Medium-size

2nd Tier: 8 Cities: 2.5 to 1 million; 20 Cities > 750,000; 30 Cities > 500,000; 45 Cities > 250,000; Over 60 Cities > 100,000 population.

IV. Industrial Wastewater Issues

IV.Industrial Wastewater Treated:

40 35 30 25 20 15 10 5 0

Up 66% since 1999

(m3/s)

19 99

20 01

20 03

20 05

20 07

Industrial Wastewater since 1997: Flow up 195% (64.5 to 190m3 p/s) Treated amount up 592% (5.3 to 36.7m3 p/s) = Good sign Wastewater/BOD Treatment up from 8% to 19% = Not so positive sign

20 09

IV. Industrial Plants by State

Operating Capacity & Treatment %: Very low, even in industrial states Total Treatment: 190m3 flow p/s with 36.7m3 p/s treated = 19.3% Total BOD: 6.95 million tons with 1.33 million tons treated = 19.1%

CurrentOperating Capacity: 50% (Installed: 72.5m3; Treated: 36.7m3)

IV. Industrial Plants by Type

2010 Total Industrial Plants: 2186 (100%)

Primary: 731 (33.4%) Adjusting PH levels & removing materials > .1mm > 50% in Veracruz & Chiapas: Basic Treatment Secondary: 1193 (54.6%) Removing colloidal & dissolved organice materials 57% in 4 states: Mexico, Veracruz, N.L., Hidalgo Tertiary: 88 (4%) Removing dissolved materials, driven by incentives 32 Mexico City/State of Mexico; up 25 a year Other: 174 (8%)

IV. Industrial Sectors Priorities

Top Priorities, heaviest polluters
1. Sugar Requires regular, on-going investments, but spending questionable.
2. Paper - $50 million US* Highly regulated, improved Mfging processes, maintenance 3. Metalworking / Automotive Large & Growing, Tier 1 & 2 issues, OEM compliant 4. Food & Beverage / Dairy $50 million US*

High Frequency & Flow Priorities

1. Pork / Agriculture / Aquaculture Target area for enforcement, Conagua investment increases. Problems worse than expected
2. Textile / Clothing / Leather $40 million US*; many medium & small producers who are not compliant 3. Petroleum / Petrochemical (Pemex) Increasing discussion, some investments, and hope for significant work in wastewater 4. Chemicals / Pharmaceuticals / Plastics $50 million US*

V. Wastewater & Clean Water Opportunities

V. Municipal Wastewater Opportunities

2011 Tendencies, Budget and Plant Projects

Treatment up: potable reality, urban sewerage needs met, leakage being addressed New: 50 Plants in process, another 25-50 expected: Rehab: 43% Plants ($225 million)

185 New and Rehab Projects programmed with funding for 2011: 55 storm drain, 25 pumping plants Conagua will want to push things through in last year of Calderon; Cities & States will be obstacles

2012: Really unclear some say better, some say worse than 2011 betting on slow down

2013: New Presidential Administration: considerable slow down / adjustments

In Vogue Treatment Processes / Tendencies

90% of Municipal Treatment in six categories:

Sludge = 46% treatment (546 Plants); Stabilization Ponds = 16% treatment (707 Plants); Advanced Primary = 10% treatment (16 Plants); Aerated Ponds = 8% treatment (32 Plants); Dual Plants (10) & Biological Filters (97) = 10% treatment Plants with significant numbers but low treatment: RAFA/WASB (162), Wetlands (160)

New Plants and Plant Growth (2008 to 2009)

1. Biological Filters (55, up 100%+); 2. Aerated Ponds (up 33%); 3. Sludge (92, up 20%); 4. Wetlands (26, Up 20%)

Info on state preferences for treatment technology (see LGA Consulting website) Problem Physical/Chemical used over Biological driven by upfront costs

Medium Size, 2nd Tier Cities and Tourism Destinations: Next/Current Targets

10% of the world`s medium-size cities: 45 Cities > 250,000; Over 60 > 100,000 population

V. Industrial Wastewater Opportunities

-

Commercial & Industrial Traditional Wastewater

-

450,000 mfging companies discharging, 15,000 large companies

-

Driving Factors: Corporate Culture vs Scarcity vs Cost vs Regulatory Secondary Strong - Activated Sludge, Aeration Lagoons, Extended Aeration Tertiary low but growing (2009: 66 Plants; 2010: 88 Plants = 25 a year?) Reuse: 5 billion m3 a year, 75% muni vs 25% industrial; 10% of wastewater Reclamation systems up - higher prices but prices & incentives insufficient Resorts, Residential, Hotels, Restaurants, Golf Courses Small vs Large
-

Types of Plants & Technologies

-

Industry Water Reuse & Savings

-

Infrastructure Projects Waste & Desal Projects

-

40 new plants in 2011, 100 New plants in 2012-2014

Real Estate Development was down, coming back in 2011 D.F., Monterrey, Chihuahua, Guanajuato, AGS, Queretaro 173 Cities participating in PROSANEAR Program

States & Cities with best enforcement reputations

-

V. Public Potable Water Opportunities

Municipal

Challenges & Drivers: Competition with sewerage & treatment; lower demand,

urban demand met but rural needs; metro challenges:tankers, pressure/elevation Needs - Monitoring, leakage, efficiency, metering, flood, testing, reclamation, aquifer maintanence & recharge (beginning stages)

Potable: 8 states below 90%; Sewerage: 19 states below 90%; 7 below 80%

In Vogue Technologies

Convention Clarification: 70% treatment, 30% plants Direct Filtration (15% treatment) Nuevo Leon & Baja California Patent Clarification ( 22% Plants) Sinaloa & Tabasco Reverse Osmosis (28% Plants) Colima, Durango, DF, Guanajuato

Hydro-Agricultural

Challenges & Drivers: 77% use but only 3% revenue, metering Needs: Water technifiation, efficiency, reuse, some wastewater 20% of Total Conagua Budget (vs 50% for all other projects)

Funding still insufficient: 2008 up 46%, 2011 up 4%

V. Private Clean Water Opportunities

Industrial/Mfging Processes/Ultra Pure

Higher Prices, Greater Need, easier targets Some but lower clean water & high purity demand

US industrial water use: 46% vs Mexico only 8%

High use: Paper, Sugar, Agriculture, F&B, Chemicals

Electricity/CFE Mexican National Utility

90% capacity in 2009, need new and rehabs (750: 2012-2030) High use, commitment to efficiency and 0% discharge Much easier to work with than Pemex or municipal Business Opportunities with Consumer Barriers

Residential

Evangelism but with economic sense and potential Smoking and switch from soft drinks to water in Mexico

V. Muni Wastewater Market Size

Size: $220-546 Million US (Average: $383 Million US) Three Base Models for Equipment Market Size, Five Scenarios: A. From 2011 Conagua Budget Elements

From Total 2011 Mexico Water Budget

Total Municipal Wastewater Market $220-293 Million Total Municipal Wastewater Market = $228-300 Million Total Municipal Wastewater Market = $382-500 Million

From 2011 Saneamiento Budget Concept

From 2011 Specific Conagua Wastewater-related Concepts

B. From 2010 US Embassy Study on Mexico Water & Wastewater Imports

Total Municipal Wastewater Market = $280 Million

C. From Latin America Municipal Wastewater Equipment Study (Frost & Sullivan)

Total Municipal Wastewater Market (48% x 80% x 12%) = $546 Million

V. Industrial Wastewater Market Size

Four Models - Size: $280-$455 Million (Average: $367 Million)
A. From 2011 Conagua Budget (with Industrial = 50% of Municipal; 33% Total)
Total Industrial Wastewater Market: $110-150 Million
B. From

2005 Mexico Industrial Wastewater Equipment Study (US Embassy) Total Mexico Water & Wastewater Equipment Imports (2010) (US Embassy) 2010 Latin America Industrial Wastewater Equipment (Frost & Sullivan)
Latam: 2011: $1.12 Billion; 2012: $1.17 Billion; 2014: $1.27 Billion
Mexico: (millions US$) 25% of market 33% of market 2011 280 375 2012 295 390 2014 320 425

Total Industrial Wastewater Market: $370 Million

C. From

Total Industrial Wastewater Market: $336 Million (5% Annual Growth estimate).
D. From

Total Industrial WW Market: $280-375 Million

________________________________________________________________________________

*Industrial & Municipal Wastewater Equipment Market: $575-750 Million

V. Clean Water Market Size

Public/Municipal

Private/Industrial

Market Size Estimations

Market Size Estimation:

Budget: $3 Billion US x 50% = Projects x 40% = Potable Projects = $600 million US; with local funds = $800-900 million US

25-33% of wastewater treatment $100-120 million US

Construction (domestic) = more than half of spending Mexican procurement rules = no more than 35% product sales; 60% projects can be foreign 35% = $300 M; 60% = $500 M $370 million in imported products

Drivers

US Embassy: 2005: $470 million

Important, in demand, but generally smaller in value & size than wastewater projects Good market, less price sensitive Growing with Mexico water quality problems and water scarcity

HydroAgriculture

19% $3 Billion = $570 million US Up 60% since 2008 but only up 4% in 2011

Hardest category to judge; least studied area by our firm

VI. Tips for Business

1. Government Procurement National Content Issues 2. Channel Strategy Issues 3. General Water Segment Busines Tips

VI. Problems for NAFTA Companies Selling to Mexican Government

Buy Mexican Rules

Licitation Problems
Compranet

More, higher % and enforcement up National Bid Issues NAFTA Ineffective US/Canada vs Mexico

Bid System

Decisions already made Opening/Closing dates New 5.0 System better?

Low

Result: Govt Bid Opportunities down

Mexico

reported vs. high budgeted

Where are projects? Lack of Transparency? Local vs Conagua issue Spent vs budgeted info

hypocritical?

VI. Channel Realities

Private Sector Sales Full Range of Options

Pros

& Cons: Distributor vs Rep vs Integrator v Direct Private Sector Intermediaries work in Public Sector?

Public Sector Sales Focus on Integrators

Local/State Bids are 95% = Local intermediary need Early bid knowledge, complex bid process, project servicing Sale will often be based on who you know at that level National Content Rule = Need for Integrator Products: Must be made in Mexico with 60% local content

Distributors moot: Increased need for integrators/EPCs

Projects: 40% local content; more feasible for local content Reports that local enforcement is not consistent, spotty

VI. Tips for Mexico Opportunities

Good Market for Imported Goods

Water Sector: 70% Imported, 2/3 from the US Get in/stay in despite insecurity concerns

Follow the enforcement indicators

Prosanear (173), Problem areas, Scarcity, Prices

Local Sales Office or Rep

Find in-country sales support..

Service, intermediary support/monitoring; client support (push/pull)

Integrators key for foreign companies in Public Distributors Viable in Private, not in Public

Don`t rely solely on intermediaries for market analysis, business development: push & pull to gain clients

Bring financing/credit plan: Private & Public

Can survive without but will thrive with

Contact Information
Vince Lencioni
Email: vlencioni@lgaconsulting.com Website: www.lgaconsulting.com Mexico Water Report Electronic Access: http://www.lgaconsulting.com/water/report.html

Mexico City Toll Free Number in the US: 1-888-750-0988; or 011-52-555-378-3840 or 90