#1גמי ثان MEXICO: A TRUSTED ECONOMIC PARTNER July 10, 2020 Dallas, TX Luz María de la Mora Sánchez Undersecretary for Foreign Trade ESTADOS UNIDOS MEXICANOS ECONOMÍA SECRETARÍA DE ECONOMÍA#21. FROM NAFTA TO USMCA#3USMCA Certainty. Clear Rules. Maintains Free Trade. Preserves North American Integration. 1. Initial Provisions and General Definitions 2. National Treatment and Market Access for Goods 3. Agriculture 4. Rules of Origin 5. Origin Procedures 6. Textiles and Apparel 7. Customs and Trade Facilitation 8. Energy 12. Sectoral Annexes 23. Labor 13. Government Procurement 24. Environment 14. Investment 15. Cross-Border Trade in Services 16. Temporary Entry 17. Financial Services 18. Telecommunications 19. Digital Trade 9. Sanitary and Phytosanitary 20. Intellectual Property Measures 10. Trade Remedies 21. Competition Policy 11. Technical Barriers to Trade 22. State-Owned Enterprises 25. Small and Medium-sized Enterprises 26. Competitiveness 27. Anticorruption 28. Good Regulatory Practices 29. Publication and Administration 30. Administrative and Institutional Provisions 31. Dispute Settlement 32. Exceptions and General Provisions 33. Macroeconomic Policies 34. Final Provisions 10 New Chapters 24 Modernized Chapters 3#4From NAFTA to USMCA: Deeper integration among 3 partners Regional Competitiveness Inclusive and Responsible Trade Certainty in Trade and Investments Opportunities of the 21st Century SMES Preferential access Regulatory coherence Investment Temporary Entry SPS TBT Gender Labor Rights Anticorruption Dispute Settlement Mechanisms State-to-State Investor-State Intellectual Property Digital Trade Remedy Laws Financial Services Environment#52. THE NORTH AMERICAN SUCCESSFUL PARTNERSHIP#6President Lopez Obrador´s visit to Washington, D.C. On July 8th, 2020, President Lopez Obrador met with President Trump to reaffirm Mexico's commitment towards the USMCA and the future of the North American economic integration.#7NAFTA created one of the most competitive and dynamic regions in the world NAFTA NEN Population 493 GDP FDI Trade Trade (Intra) Million people $26 Trillion dollars $323 Billion dollars $6 Trillion dollars $1.2 Trillion dollars 6.5% of world population 18.3% of world GDP | 2nd global economy (2019) 23.1% of world FDI (2018) 1st recipient in the world 15.9% of global trade 2nd global exporter (2019) 20% of the región's total trade (2019) Source: IMF, Banco de México, WTO and TradeMap.#8Billion Dollars Foreign Direct Investment under NAFTA . USA and Canada account for more than half of total FDI received by Mexico between 1999- March 2020. 1999-March 2020: 589 B From the US: 277 B From Canada: 41 B NAFTA FDI to Mexico 1999- March 2020 Canada USA ■Rest of the world 589 579 545 510 476 445 410 379 331 310 284 257 239 209 177 156 130 105 86 62 32 14 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 IT Source: SE/DGIE#9NAFTA trade Mexico- NAFTA Trade (Billion dollars) 91 44 46 1993 Exports Imports -Trade Average annual growth rate 19/93: 7.5% 599 601 534 543 507 516 494 502 469 403 377 401 355 313 313 282 262 284 256 257 231 241 385 372 338 329 319 310 313 299 285 249 230 217 227 200 205 216 181 188 193 195 197 184 197 204 189 152 168 124 151 132 161 110 97 10596 123 108 144 118 145 147 147 154 138 125 111 109 116 120 83 84 68 69 53 56 55 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Banco de México. 2014 2015 2016 2017 2018 2019#10In 2019, Mexico was the U.S. Top Trading Partner (614.5 billion in goods, surpassing Canada and China) 700 614.5 B 14.8% 612.4 B 14.8% 559 B 600 13.5% Billion of dollars 500 $358 $320 12.8% 400 14.3% 300 $452 18.1% 218 B 5.3% 200 188 B 4.5% $292 $144 $256 $127 17.8% 5.7% 100 15.6% 5.1% $107 $75 6.5% 4.5% $60 3.5% 0 Mexico Canada Source: Secretaria de Economía with data from the U.S. Census Bureau. China Japan Germany 2019 U.S. Imports U.S. Exports#11Mexico became the US Top Trading Partner in agricultural products In 2019 the U.S. and Mexico traded over 47.5 billion dollars in agricultural goods. Billions of US dollars 50.0 45.0 40.0 47.5 B 17.7% 44.4 B 16.5% 35.0 30.0 $28 B 23% $24 B 18% 17.4 B 25.0 20.0 6.4% 15.0 10.0 $19 B 14% $21 B 15% 5.0 0.0 Mexico Source: Secretaria de Economía with data from the Foreign Agricultural Service, USDA. Canadá 2019 U.S. Imports U.S. Exports $4 B, 4% $14 B 10% China#12Mexico is a key market for U.S. states exports U.S. exports by State, 2019 WA NE Exports 1.7 B Jobs 16,828 Share 23% KS Exports 2.2 B Jobs 16,752 Share 19% MT ND MN WI MI OR Mexico is the largest export market for 7 U.S. states ID SD WY Mexico is the second largest export market for 19 U.S. states Mexico is the third largest export market for 3 U.S. states. CA Exports 27.8 B Jobs NV UT CO 172,162 Share 16% AZ Exports 8.2 B Jobs 172,162 Share 33% Source: Secretaria de Economía with data from the U.S. Census Bureau. NM Exports 2.4 B Jobs 7,783 Share 49% TX Exports 109 B Jobs 509,870 Share 33% ME VT NH MA NY RI CT PA DE IA MD OH IL IN WV VA Washington D.C. KY MO TN OK AR GA AL MS LA Exports 8.4 B Jobs 18,809 Share 13% SC FL NC#13Texas is key for the Mexico - U.S. trade partnership Texas trade with Mexico accounts for 34% of total trade flows between Mexico and the U.S. ESTADOS Mexico - Texas Trade Outlook, 2019 399,500 Jobs supported by trade with Mexico (2017) UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA 108.6 B Exports to Mexico accounting for 33% of its total exports TX 104.3 B Imports from Mexico, 35% of its total imports Source: Secretaria de Economía with data from the U.S. Census Bureau and The Trade Partnership.#14wwwww We produce together to compete globally 38% U.S. content in Mexican auto exports to the U.S. The U.S. sends to Mexico Mexico sends to the U.S. Product Amount Share Product Amount Share Gasoline 27.9 B 10.5% Cars 35.0 B 10.1% Computers 26.4 B 7.6% Autoparts 17.0 B 6.4% Automotive Accesories/computers 11.7 B 4.4% Autoparts 24.7 B 7.1% Trucks 22.8 B X Low cost shipments 7.4 B 2.8% 6.6% Crude oil 14.2 B 4.1% Integrated circuits 6.9 B 2.6% Gas 5.4 B 2.0% Insulated wire 11.4 B 3.3% Electronics Phones/cellphones 10.5 B 3.0% Computers 5.1 B 1.9% Diesel motors 4.5 B 1.7% Televisions 9.0 B 2.6% Electric switches 4.4 B 1.7% Tractors 8.6 B 2.5% Hydrocarbons Phones/cellphones 4.4 B 1.6% Seats 7.0 B 2.0% Source: Secretaria de Economía with data from the U.S. Census Bureau. (2019 data) and De Gortari, A. (2017). Disentangling Global Value Chains.#15STADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA Texas and Mexico are Deeply Integrated Mexico-Texas trade is part of global supply chains specialized in the electronics and automotive sectors, as well as hydrocarbons. Mexico sends to Texas Imports Texas sends to Mexico Exports Amount Share Amount Share Computers 19,631 18.8% Oil 18,975 17.5% Oil 8,534 8.2% Parts for computers 9,319 8.6% Automotive Insulated wire 5,411 5.2% Integrated circuits 6,217 5.7% Cars 5.391 5.2% Autoparts 6,196 5.7% Autoparts 4,674 4.5% Gas 5,143 4.7% Telephones 3,684 3.5% Electronics Televisions 3,185 3.1% Computers →Engines 3,074 2.8% 1,916 1.8% Tractors 3,111 3.0% Insulated wire 1,776 1.6% Trucks 2,381 2.3% Electric switches 1,692 1.6% Hydrocarbons Panels 1,977 1.9% Televisions 1,633 1.5% Source: Secretaria de Economía with data from the U.S. Census Bureau. (2019 data)#16Texas is a strategic trade and logistic hub for North America Top 10 U.S. Ports for US-MX trade flows (Total trade, millions) Laredo - TX 227,441 ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA El Paso, TX 76,649 Otay Mesa - NM CANADA 47,724 Hidalgo - TX 35,269 63% 1-5 1-35 Sta. Teresa -NM 30,239 I-15 1-25 U.S.A. 1-69 (Under Construction) of total US-MX Eagle Pass-TX Texas 29,386 trade flows 1-10 1-20 Nogales - AZ 25,531 cross through Texas Calexico CA 17,405 MEXICO Brownsvile - TX 17,279 New Orleans -... 15,105 • 0 50,000 • 100,000 150,000 200,000 250,000 I-35 Corridor in Laredo Source: US Department of Transportation . Source: Texas Department of Transportation Three main trade corridors cross Texas Western Corridor in El Paso 1-69 Corridor in the Lower Rio Grande Valley#17Texas top metropolitan areas exports rely on Mexico Texas top metropolitan areas exports to Mexico, 2018 Exports Metro Area Amount Share of MA's total exp. Exp. as share of GDP (2017) growth (since 2005) Austin-Round Rock 1.4 B 6% 1% 58% Beaumonth-Port Arthur 3.9 B 18% 15% 186%* * Corpus Christi 3.3 B 13% 13% 99%* Dallas-Fort Worth- 5.8 B 11% 1% 94% Arlington El Paso 25.5 B 85% 74% 243% Houston-The 21.3 B 18% 3% 225% Woodlands-Sugar Land Laredo 8.2 B 75% 90% 182% San Antonio-New 2 B 18% 2% 109%* Braunfels * Beaumont and Corpus Christi growth since 2011, and San Antonio growth since 2008. Source: Secretaria de Economía with data from the International Trade Administration. ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA#18Mexican companies see Dallas as a strategic business ally 3 ARCACONTINENTAL B BARCEL USA 35% of Mexican investments in the US have their corporate headquarters in Dallas ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA gruma LALA ✓ Interceramic Simplemente lo Mejor Softtek ZA MODERNA cinépolis KidZania#19Dallas based companies trust Mexico as a strategic business partner Pizza Hut → MoneyGram. money transfer MARY KAYⓇ 's American Airlines TRINITY INDUSTRIES, INC. Kimberly-Clark ELEVEN Six Flags AT&T Southwest'#203. WHY CHOOSE MEXICO?#211. Mexico: 7th largest exporter in the world and 1st in Latin America STADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA USMCA and other 12 FTAs with 48 countries connect the Mexican economy to more than 1.3 billion consumers (60% of the world's GDP) EFTA JAPAN CP TRANS-PACIFIC PARTNERSHIP NAFTA PANAMA CENTRAL AMERICA PERU COLOMBIA CHILE URUGUAY ISRAEL EUROPEAN UNION VIETNAM MALAYSIA AUSTRALIA NEW ZEALAND#22ECONOMÍA SECRETARÍA DE ECONOMÍA 2. Mexico offers a solid infrastructure and logistics network UNIDOS MEXICAN According to the WEF, Mexico ranks among the top 30% countries with best transport infrastructure. 172,000 km roads, where 62.4% of México´s total exports move. A 27,000 km railway tracks, move 13% of Mexico´s total exports 117 Ports move 19.7% of Mexico´s total exports 76 Airports (64 int. + 12 nat.) move 4.3% of Mexico´s total exports Source: Secretaría de Economía with data from INEGI.#233. Strategic location and competitive logistic costs 160 140 120 100 80 60 40 20 Low shipping costs $140 $9 USD/m3 Source: GBM. Global Value Chains Disruptions China to U.S. ■Mexico to U.S. ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA Maritime days to selected destinations Destination Mexico China India Brasil South Korea New York 5 32 25 15 21 Los Angeles 4 18 31 23 17 Rotterdam 16 32 20 20 Yokohama 19 4 17 27 192 17 33 33 35 3 Source: The Boston Consulting Group in De la Madrid (2014) More than 50 ports of entry between the U.S. and Mexico#24ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA 4. Mexico has a diverse and innovative industrial platform 拿 With more than 2/3 of its exports in high complexity sectors, Mexico ranks as the 19th most complex economy Vehicles Machinery Industry share of Mexican exports by economic complexity, 2018 23% 20% 20% Electronics Agriculture Services Minerals Textiles Chemicals 8% 6% 6% 4% 4% Metals 3% Stone 2% 0% 5% 10% 15% 20% 25% Source: The Atlas of Economic Complexity. High Complexity Sectors Low Complexity Sectors#255. Mexico leads in manufacturing production Mexico became the 6th largest world producer of vehicles (2019)¹ and ranked 4th as exporter worldwide (2018) 2. 6th largest supplier of aircraft parts to the USA (2019)³. 6th largest exporter of information technology products and services (2018)4. 1 Source: http://www.oica.net/category/production-statistics/2018- statistics/ 2 Soure: https://www.wto.org/spanish/res s/statis s/wts2019 s/wts2019 s.pdf 3Source https://legacy.trade.gov/td/otm/assets/aero/AeroTop20SuppliersAnnual.p df 4Source CANIETI https://esemanal.mx/2019/10/desciende-mexico-a-la- sexta-posicion-como-exportador-de-servicios-de-ti/ 5 Source: AMID. https://amid.org.mx/wp-content/uploads/2019/06/Descargable-de-la- secci%C3%B3n-Datos-de-la-industria-.pdf 8th largest exporter of medical devices worldwide (2017)5.#266. Competitive and cost effective manufacturing sector 43.60 Natural gas for industry in USD/(MWh GCV), 2019 43.30 30.20 23.70 20.00 18.50 ESTADOS UNIDOS MEXICAN Global Manufacturing Cost Competitiveness Index, 2019 ECONOMÍA SECRETARÍA DE ECONOMÍA 103 104 100 100 101 94 95 86 87 France Korea Spain Turkey Mexico New Zealand India Source: International Energy Agency and CRE Mexico Vietnam Source: The Boston Consulting Group China US South Korea Canada Brazil Spain#277. Internet connectivity and broadband access supports 4th IR, IOT, digital economy Mexico is third in mobile broadband suscriptions within OECD United States Japan Mexico 223 42 92 Germany 71 United Kingdom 67 Turkey 61 France 61 Korea 59 Italy 53 Spain 47 Poland 43 Australia 36 Canada Colombia Netherlands 20 222 29 26 Chile 18 0 100 200 300 400 STADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA 490 74% 500 Subscriptions, millions mobile penetration rate 17% annual growth in past 5 years 92M mobile broadband suscriptors#288. Young, competitive and skilled workforce ESTADOS UNIDOS MEXICAN ECONOMÍA SECRETARÍA DE ECONOMÍA 50% Economically active population in Mexico by age, Q1 2020 45% 45% 40% 35% 30% 25% 20% 15% 20 200 18 16 14 12% 12% 12 22% 10 16% 8 10% Share of graduates come from engineering programs, 2017 17% 8% 7% 10% 6% 5% 0% 6420 14-19 20-29 Source: INEGI 30-49 Age group 50-59 60+ Mexico India Brazil South Africa Indonesia Source: UNESCO#294. USMCA CHALLENGES AND OPPORTUNITIES#30USMCA opportunities ✓ Stricter Rules of Origin for the automotive sector ✓ Digital Economy ✓ e-commerce ✓ More inclusive trade SMEs, Labor, Environment, Anticorruption A SMES A 30 30#31Actions to face COVID-19 租 USMCA governments work coordinately to: ✓ Close the border for non-essential travel. ✓ Define protocols and conditions that must be met to allow transition towards reopening productive activities. ✓ Increase use of digital services ✓ Implement USMCA#32USMCA opportunities םםם | | | USMCA will be a key factor in the economic recovery of the three countries as it will contribute to: strengthen the productive integration of North America, • incoporate more value-added in the region, • boost new regional value chains in North America to replace imports from outside the region (nearshoring, decoupling). 32#33Thank you Dr. Luz María de la Mora luzma.delamora@economía.gob.mx Made in USMCA. A Business Partnership for Global Success @luzmadelamora O@luzmadelamora TADOS UNIDOS MEXICANO ECONOMÍA SECRETARÍA DE ECONOMÍA