NAFTA Works. M exico Economic Update. Inside this issue: May 2006 Volume 11, Issue 05

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1 NAFTA Works A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES May 2006 Volume 11, Issue 05 The Connectivity Zone, a new logistic platform project in Durango, México The northern zone in Mexico has great resource diversity, as well as many industries. Some examples of these various industries are: mining (gold, silver and steel), wood, paper, construction, food processing machinery, industrial gases, car parts, beer brewers, pipes, and furniture, among others. In 2002, this zone produced: 8% of the nation s electricity, 37.4% of the cars and light trucks of the country, and 51.5% of the automobile motors produced in the country. In the last 4 years the investment has been greater than US$5.253 million. 298 companies have settled, generating over 90 thousand formal jobs. In 2002, though the national economy grew at a rate of 0.9%, the region grew at a rate near 2.1%. The milk industry of the zone is one of the most important of Latin America. The region has one of the more important iron and steel companies of the country in addition to being an important farming center. The geographical location of this zone gives a special advantage for commerce within the country as well as with the outside. This zone is one of the central axes of the country due to the connections that is has. Also, it is one of the most prosperous zones in the country due to the proximity to the United States and the opportunities that NAFTA has created. It is through NAFTA that many of the most recognized services companies have found this zone as an excellent business opportunity. In addition, this region has most of the assembly companies plants as well as their suppliers and distributors. In the last few years, a lot of infrastructure investment has been done in this region to achieve a better result. Looking to take advantage of the opportunities that this region offers, and considering that it is a strategically important point in the distribution of merchandise in the national and international market, several businessmen launched a project called the Connectivity Zone in Gomez Palacio, Durango. The Connectivity Zone is a project specifically focusing on the installation of non polluting light industries and specialized warehouses for logistics and distribution merchandise products in local, nation and global markets. In addition, the zone will promote the development of clusters that take advantage of the region s benefits. It already is using an agreement with the harbor authority of Valencia which gives advantages in dealing merchandise between Mexico and the Mediterranean in addition to being able to serve as a continental platform for the Asian products that look to enter in the American market. continues on page 2 Inside this issue: The Connectivity Zone, a New Logistic Platform in Durango, Mexico Mexico Economic Update 1 Diario Oficial Notices 3 Success Stories 3 Profile of San Luis Potosí 4 Profile of South Carolina 5 Selected Readings 5 Related Events 6 1 M exico Economic Update

2 This project will be able to benefit from an important network of highways, railroads, and airports as well as proximity to the main ports of the country, which facilitated the commerce. Since 70% of American-Mexican commerce transport is via road transportation, the proximity of highways is a definite asset of the industrial park. Connectivity with Mexican Cities City Miles Saltillo, Coahuila 172 Monterrey, Nuevo Leon 225 Chihuahua, Chihuahua 283 Guadalajara, Jalapa 487 Ciudad Juárez, Chihuahua 510 México City 626 Connectivity with US Border Cities City Miles Eagle Pass, Texas 360 McAllen, Texas 365 Laredo, Texas 374 Del Rio, Texas 415 Brownsville, Texas 426 El Paso, Texas 519 Connectivity with Ports City Miles Mazatlán, Sinaloa 340 Altamira, Tamp.*** 580 Manzanillo, Col.*** 710 Houston, Texas 715 The industrial park will have a surface of 34 ha. The power will be supplied by Comisión Federal de Electricidad division del Norte, and water has been authorized for 3,586,600 cubic meters per year. In addition the zone counts on a gas capacity of 5,000,000 ft 3. As it mentioned above, the region has an important industrial zone that lodges important companies of different sectors like the automotive, metalmechanical, textile, electronic, and food. Moreover, it houses a customs agency, insurance agencies, and telecommunications infrastructure, among other communications services. For instance, lodging services, internet, frame relay links, point-topoint digital links, multipoint digital links, and analogical lines will be offered in order to make the project more efficient. The Connectivity Zone has an investment that surpasses the $40 million for the construction of the necessary infrastructure in order to facilitate the commercial activities. The local government offers some supports for those companies that invest in this zone. In addition, it is anticipated that there will be a need for universities to cover the necessities that the zone presents, since it is estimated that this project generates more than 12,000 direct jobs and 60,000 indirect ones, which leads to the development of a new technological organization in the zone. In addition to being a project that promotes commerce and businesses, the zone of connectivity also offers housing for executives. It is planned to construct commercial sites, country clubs, and a cultural center with all the services such as: a babysitting area; gas stations; restaurants; collective maintenance, lighting, and cleaning services; surveillance; and security. This will serve as an incentive to the sector services and the development of the zone. The industrial park is currently in the first stages of development. If you are interested in knowing more about this project, please contact: Connectivity Zone Carretera Gómez Palacio, DGO Chihuahua Km. 6.5 (Ejido El Vergel), Calle 5 de Mayo s/n en Casa Grande del Vergel, C.P México Tel: 52 (871) Contact person: Eduardo Holguin zonadeconectividad@yahoo.com Los Angeles, California 1,994 Volume 11, Issue 05 Page 2

3 D iario Oficial Notices Decree approving the Agreement on Promotion and Mutual Protection of Investments, between México an Australia signed on 23/08/2005. (April 11) Decree approving the Agreement on Customs Cooperation and Mutual Assistance, between Mexico and Korea, signed on 9/04/2005. (April 11) Decree modifying, adding and revoking certain provisions of the Federal Telecommunications Law and the Radio and TV Law. (April 11) Decree approving the Treaty on Criminal Law Assistance, between Mexico and Switzerland. (April 11) Project of the Mexican Official Standard PROY-NOM-044- SEMARNAT-2006, establishing the allowed maximum limits of hydrocarbons, carbon monoxide, nitrogen oxides from the exhaust pipes of new engines using diesel as fuel, used in new vehicles with a gross weight of more than 3,857 kilograms, including all new units equipped with such type of engines. (April 26) Agreement modifying the existing one which identifies the tariff lines of the import/export Tariff Law subject to the compliance of Mexican official standards when such goods are exported or imported. (May 3) Decree promulgating an Agreement on Maritime Transportation between México and China, signed on 24/01/05. (May 8) Decree promulgating an Agreement on Cooperation and Mutual Assistance on Customs Matters, between Mexico and Korea, signed on 09/09/05. (May 11) Annexes 2, 4 and 5 of the Fiscal Resolution for 2006 published on 28/04/06. (May 12) Success Stories KMG Chemicals, Inc. expands plant in Matamoros KMG Chemicals, Inc. is a global provider of specialty chemicals in carefully focused markets. Just this last month (April 2006), they announced that a pentachlorophenol (penta) plant in Matamoros is now fully functional. KMG is the only producer of penta in North America. The expansion was an investment of approximately one million dollars and will add a minimum of 30 percent more penta production capacity. The company grows by acquiring and managing stable chemical production lines and businesses with established production processes. Neal Butler, President and COO of KMG, stated, While the plant has been operating at record production levels for several months, we are now operating at sufficiently high levels as to reduce our backlog of penta orders and ensure our ability to meet market demand going forward. Steris Corporation (STE) transfers to the State of Nuevo Leon The Steris Corporation (STE) has announced the selection of the Monterrey area of Mexico as the future site for manufacturing operations that are to be transferred from Erie, Pennsylvania. The Avante Group, a Monterrey-based real estate development company, located in the City of Guadalupe, has agreed to lease a facility to STE that comprises approximately 13 acres in the Guadalupe Industrial Park. This site was selected because of the many advantages it offers to the company including an excellent infrastructure, supply base, and access to distribution points, as well as the availability of skilled labor. The plan is to transfer the operations in phases, which are expected to continue through the summer of Once the phases are completed, the facility will manufacture sterilization equipment for use in healthcare institutions, pharmaceutical production facilities, and research laboratories. Toyota expands production capacity in Baja California Created in 2004, Toyota Motor Manufacturing de Baja California (TMMBC) produces Tacoma pick-ups for sale in the United States and Mexico. They recently announced their plans to expand production capacity of Tacoma pick-up trucks by 20,000 units, for a total annual capacity of 50,000 vehicles and 200,000 Tacoma truck beds. This increase will require an additional investment of 37 million dollars. TMMBC s current operations include welding, paint and assembly, and the plant now employs approximately 800 workers. Thanks to a close partnership with local, state and federal governments, our sales operations in Mexico and the US, and our excellent asociados, each of these expansions has been successful, said Bob Ried, vice president of TMMBC. Estimating an additional 200 jobs to be filled, Toyota also approximates that by 2008 they will have the annual capacity to build 1.83 million cars and trucks, 1.44 million engines, and 600,000 automatic transmissions in North America. Volume 11, Issue 05 Page 3

4 San Luis Potosí Major exports: Electrical machines and equipment, chemical products,apparel, textiles, iron products, plastics, Exports: US $1857 Millions (2004) Imports: US $1446 Millions (2004) Maquiladoras: employing 13,138 w orkers Capital: Main cities: San Luis Potosí Population: 2,410,414 (2005) 59% in the urban area 63% under 30 years old 36 persons per square kilometer Education: Households w ith: SLP, Soledad de Graciano Sanchez, Valles, Rioverde, Matehuala. 89% Literacy rate 180,199 w ith more than High School 9,252 Masters or Ph.D. 16% Computers 86% TV 73% Refrigerators 61% Washing Machine FDI Companies: 188 Foreign Direct Investment (Millions of US Dollars) Infrastructure: 6,738 km of paved roads 320 km of highw ays (4 lanes) 1 International Airport Foreign Direct Investment by Sector Universities and technological institutes (Percentage) 60 Hospitals 327,845 Fixed telephone lines 30 Radio stations 18 TV stations Gross Domestic Product Commerce, 3.0 Transportation & communications, 0.9 Other services, 0.5 Mining, 0.2 Others, 16.8 Transportation & communications, 11.3 Financial services, 13.6 Other services, 15.3 Manufacturing, 24.1 Commerce, 18.9 Manufacturing, ,151 Millions of US Dollars Web-site: w w.sdeslp.gob.mx sedeco_dppe@slp.gob.mx (fpalau@sdeslp.gob.mx) Tel/Fax: (444) / (444) Volume 11, Issue 05 Page 4

.1.2.3 South Carolina From 1993 to 2005, South Carolina s exports to Mexico grew at an average annual rate of 19% Mexico is the third largest market for South Carolina s goods.

5 South Carolina From 1993 to 2005, South Carolina s exports to Mexico grew at an average annual rate of 19% Mexico is the third largest market for South Carolina s goods. Exports to Mexico (Billions of US Dollars).3.6 Others, Plastics And Rubber Prod, Source: US Census, WISER and SE-NAFTA Series , NAICS series. By Sector (NAICS) 2005 Selected Readings World Economic Outlook : Globalization and External Imbalances (International Monetary Fund, April 2006) /index.htm The World Economic Outlook (WEO) presents the IMF staff's analysis and projections of economic developments at the global level, in major country groups (classified by region, stage of development, etc.), and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects. It is usually prepared twice a year, as documentation for meetings of the International Monetary and Financial Committee, and forms the main instrument of the IMF's global surveillance activities. World Development Indicators 2006 (World Bank, April 2006) DATASTATISTICS/0,,contentMDK: ~pagePK: ~piPK: ~ thesitepk:239419,00.html Looking for accurate, up-to-date data on development issues? This indispensable statistical reference allows you to consult over 800 indicators for some 150 economies and 14 country groups in more than 80 tables. It provides a current overview of the most recent data available as well as important regional data and income group analysis in six thematic chapters: World View, People, Environment, Economy, States and Markets, and Global Links. The CD-ROM editions contain 43 years of time series data, covering 1960 to 2004, and offers mapping, charting, and data export formats. Machinery, Except Electr, 9.5 Little Data Book 2006 (World Bank Press, April 2006) catalog/product?item_id= Textiles And Fabrics, 10.2 Computer And Electronic, 12.4 Chemicals, 17.8 A pocket-sized reference on key development data for over 200 countries that provides profiles of each country with 54 development indicators about people, environment, economy, technology and infrastructure, trade, and finance. Source: US Census, WISER and SE-NAFTA. SIC Series NAICS series Volume 11, Issue 05 Page 5

6 N AFTA Related Events May Logística2006 Juárez, Chihuahua The largest tradeshow and conference dedicated 100% to promote Logistics Services in Cd. Juárez, Chih. Two days packed with educational and innovative solution sessions focused specifically on logistics and distribution operations. This conference provides the tools and techniques the maquiladora industry needs to improve logistics and distribution knowledge, solution development, and operating performance. Maquiladora s representatives will heart from expert speakers, exchange ideas with suppliers in an open panel, and network with vendors. May 30 PXI TAC Juárez, Chihuahua The PXI TAC is a series of free, full-day events in 15 cities across the United States, Canada, and Mexico featuring in-depth informational sessions on the latest PXI platform technologies and roadmaps, case study presentations, hands-on technical training, and networking with industry executives. June 6 8 ALIMENTARIA MÉXICO This is the biggest international food and beverage event in Mexico. It attracts manufacturers, producers, distributors, import & export companies of food, beverage, and equipment. Phone: (52) June EXPO AMPIMM The bi-annual tradeshow for international suppliers to the furniture and wood industries. Phone: (52) June INTERPHEX MEXICO Bringing together the top buyers from the leading Mexican pharmaceutical manufacturers and more than 125 technology vendors and pertinent and timely education sessions. Phone: (203) May 31 WELDMEX Monterrey, Nuevo Leon May 31 June 2 EXPOLOGISTICA June 2 PXI TAC Juárez, Chihuahua Hosted by systems integrators, end users, and PXI Systems Alliance members, the PXI TAC offers engineers, managers, and technicians a change to network with colleagues and industry experts in design, validation, test, and controls. A monthly newsletter on NAFTA and related issues 1911 Pennsylvania Ave. NW Washington, D. C Phone: (202) Fax: (202) naftadsk@naftamexico.net Visit us at Volume 11, Issue 05 Page 6

Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries

Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries Follow the conversation live on Twitter: @MexicoInstitute @NARPartnership #UsMxMapping Background Bilateral trade