Main strenghts of the Mexican economy

Main strenghts of the Mexican economy Strenghts of the Mexican economy 1. Market size: Popula'on of 107 million; GDP above 1 trillion usd. 2. Large expor4ng base: One of the 15 largest exporter na'ons in the world. 3. Energy availability: Ranked 17th in proven oil reserves. 4. Demographic bonus: Economic dependant popula'on of 46.1% in 2025 (US will be 58%). Private Consumption / BRIC s and N11 selected by Goldman Sachs (2008, USD Billions) 1560 956 819 713 675 509 506 311 159 127 119 111 62 59 53 Source: The Economist (EIU) Demographic Bonus in Mexico 5. Ample network of trade and investment agreements: Free trade condi'ons with 44 countries. 6. Biodiversity. Ranked 4th worldwide. Source: Consejo Nacional de Población

Mexico: The high profit alternative The profit making ability that Mexico offers is the answer to price pressures and higher compe''on. 1. The Global Economy has been in a state of deflation throughout 2009. 2. However, some production costs have risen: Energy 6.6%, gasoline 18.5%, labor 2% (guillotine effect due to deflation). 3. A slow world economic recovery is expected, tied to a correction in the public debt. 4. Lower production costs and high productivity will be key to survive. Guillotine effect 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2008/01 2008/02 2008/03 2008/04 2008/05 2008/06 2008/07 2008/08 2008/09 2008/10 2008/11 2008/12 2009/01 2009/02 2009/03 2009/04 2009/05 2009/06 2004/01 2004/03 Prices in the US (annual % variation) Consumer Price Index 2005/01 2005/03 2006/01 2006/03 Producer Price Index U.S. Employment Cost Index (annual % variation) 2007/01 2007/03 2008/01 2008/03 Source: Dallas Federal Reserve -1.2% -4.3% 2% 2009/01

Mexico: The high profit alternative Since mid 2008, Mexico has a better manufacture costs profile than countries such as Canada, China, India and Brazil Competitiveness findings: 1. Mexico has a business cost advantage of 20.5% average (of 12 industries) relative to the US. 2. Advantages in industrial construction, land, rent, labor costs and taxes. -20.5% Mexico Average cost advantage /disadvantage relative to the US (27 input items applied to 12 industries) -0.6% Canada Source: KPMG 0.0% 0.2% U.S.A. Australia 3.6% France 7.1% 7.3% 7.9% U.K. Netherlands Italy 14.3% 16.8% Japan Germany 100% Manufacturing cost index relative to the US. (2005) Manufacturing cost index relative to the US. (2008) 100% 96% 112% 82% 82% 74% 75% 80% 94% Brasil México India China Brasil México India China Note: Index includes raw materials, labor, overhead (energy costs, plant and equipment, taxes), freight, duties, inventory, and exchange rates. Source: Alix Partners 2009

World Bank Doing Business 2009 Ranking Country Mexico Ease of doing business Start business Constructi on permits Protecting investors Enforcing contracts 56 115 33 38 79 Brazil 125 127 108 70 100 China 83 151 176 88 18 India 122 121 136 38 86

FDI in Mexico The levels of FDI in Mexico reflect the high profit making opportuni4es the country offers (more than 114 billion USD in 5 years). FDI in Mexico (USD Billions) Stock FDI 2004-2008 in different sectors 120 100 80 60 Cumulative Flow Annual Flow 45.6 64.9 92.2 114.1 Commerce 8% Mining 6% Other services 11% Communicat. 6% Manufacture 48% 40 20 23.7 21.9 19.3 27.3 21.9 0 2004 2005 2006 2007 2008 Financial Services 21% Source: Ministry of Economy Source: ProMéxico with data from the Ministry of Economy

Aerospace industry Aerospace industries in Mexico have evolved from simple parts assembly, to highly complex ac4vi4es such as parts design, maintenance opera4ons, fusselage, harnesses and landing gears manufacturing. 1. Aerospace exports have increased from $1.26 billion USD in 2002 to $3.1 billion USD in 2008. An average sales growth of 16.3% per year. 2. Mexico has consolidated itself as the 8th largest supplier of aerospace components to the US and the 5th largest to the European Union. 3. Out of the 11 aerospace companies with interna'onal opera'ons listed in the Fortune 500, 7 have opera'ons in Mexico. 4. According to KPMG, Mexico has a cost advantage of 30% among the current leading na4ons in the aerospace industry*. 5. The Mexican Government s commitment to the aerospace sector has led to the crea'on of the Na'onal Aeronau'cs University in Queretaro. a. We also have 15 universi'es with programs focused in aeronau'c engineering (graduate and major degrees) * KPMG s Guide to International Business Location, 2008

Automotive Industry 1.9 The high produc4on volume is due to the level of maturity and development of the auto industry in Mexico. 1.8 Light Vehicles Production (millions of units) 1.8 1.5 1.5 1.6 2.0 2.0 2.1 21.6 20.5 20.4 Autoparts production (billions USD) 19.5 22.4 23.5 26.1 28.7 29.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Ministry of Economy with data from the AMIA Source: Ministry of Economy with data from INA

Automotive Industry Mexico s automo4ve industry: Among the largest in the world 1. Mexico is the 10th largest auto, trucks, parts and components producers in the world. 2. Mexican production surpassed 2 million units in 2008 (a 4% annual growth). a. Sales in autoparts reach almost 30 billion USD (80% is sold to the US). 3. Out of the 28 auto companies listed in the Fortune 500 with international activities, 27 have operations in Mexico. 4. KPMG places Mexico as the #1 destination for autoparts manufacturing*. 5. Companies such as GM, Ford and VW announced investments for more than 7 billion USD between 2006 and 2008. 6. Car production in Mexico will pass from 2 million in 2008 to 3.1 million in 2013 according to CSM Worldwide**. * KPMG s Guide to International Business Location, 2008 ** Estimated in 2008

Other industries with great opportunities Electric and Electronic devices Compe44ve advantages in smaller delivery 4mes, qualified labor force, high quality- high yield produc4on, flexibility. 18 enterprises from Fortune 500 operate in Mexico. Exports from these industries are above $90 billion USD. Exports grew 5.9% in 2008. The IT Services market value reach $4.2 billion USD; it grew 14% in 2008. IT Services Mexican IT Companies exported $2.9 billion USD in 2008. Out of 51 companies with interna'onal opera'ons listed in the Fortune 500, 36 operate in Mexico. More than 6.5 million Americans live outside the US; out of those 1.2 million live in Mexico. Second Homes Interna4onal Living magazine published 2 years in a row that out of 29 countries, Mexico was considered the best country to re4re to. It is expected that in the next years 5 million re'rees will come and live in Mexico. For the second year in a row, Mexico was given the Agents Choice Award 2009 as the best tourist de'na'on in winter 'me.

Infrastructure Development Tijuana Mexicali San Luis Río Colorado San Luis Rio Colorado- Mexicali Punta Colonet Coal Fire Hydro power Puerto Peñasco Combined cycle (Gas) Liquefied Natural Gas (LNG) Terminal Pipelines in Planning stage Wind driven power in opera4on Hydric Sustainability Plan Integral Sanita4on Wastewater Treatment Plants (WTP) in Opera4on Dam Aqueduct Cerro Prieto V (Planning stage) Caborca I.B. San Luis Rio Colorado II Guaymas Nogales Santa Ana La Paz Cd. Obregón Durango- Mazatlan Zacatecas- Sal4llo Los Mochis Includes Baluarte Bridge Torreón Culiacán Mazatlán El Cajon (Opera4on) La Yesca (Construc4on) Cd. Juarez Hermosillo Cd. Juarez - Chihuahua Chihuahua La Paz- Todos Santos Cd. Juarez bypass El Molinito Aqueduct (Opera4on) Picachos Dam (Construc4on) Tepic Puerto Vallarta 1 / This map shows projects started or concluded construc'on and planning stage or bidding process in 2007-2009 that stand out because of their high investment or regional impact. 2 / Na'onal Infrastructure Program 2007-2012 3 / FONADIN Highway Concession Package (FHCP). 4/ The Hydric Sutainability Plan for the Yalley of México includes the WTP of Atotonilco (bidding process), the East Emi'ng Tunnel (construc'on), 5 mores WTP s and water supply works. El Porvenir Norte. La Trinidad Sal4llo (Construc4on) WTP Durango Las Arcinas - San Luis Potosí Villa Unión Advances in Infrastructure 2007-2009 1 / Norte II. Chihuahua (Bidding Process) Monterrey- Sal4llo Tepic- Villa Union Zacatecas Zapo4llo (Bidding Process) Guadalajara Queretaro- Irapuato Marava4o- Atlacomulco Irapuato- La Piedad Tecpan bypass Airport expansions Airports under construc4on Hydric Sustainability Plan for the Valley of Mexico 4/ (Construc4on) Airports in Planning stage process I.B. Reynosa- Anzalduas Reynosa Monterrey West bypass of San Luis Potosi Sanita4on in Guadalajara Morelia- Manzanillo Salamanca Colima WTP Manzanillo, LNG Terminal Toluca Morelia (Construc4on) Cuernavaca Arcediano AICM (T2), (Planning stage) Coal Fire in the Pacific Lázaro Cárdenas Cuernavaca y Toluca (Construc4on) Tecpan Tula Rio Verde- Ciudad Valles El Limon Tampico Tamazunchale San Luis Potosí (Opera4on) Tuxpan Nuevo Necaxa- Tihuatlan Aqueduct II (Construc4on) North Arc of Mexico City Tejocotal- Nuevo Necaxa Guanajuato Pachuca Amozoc - Perote D.F. Tlaxcala Jalapa Veracruz Chilpancingo WTP Oaxaca Mexico- Acapulco Acapulco Integral Sanita4on of Acapulco Bay I.B. Rio Bravo- Donna Tula- Ocampo- El Limon Huatulco Oaxaca- Huatulco Mul4modal projects in bidding process Port moderniza4ons FHCP 1. 3 / highways - Concession FHCP 1. 3 / highways - Construc4on FHCP 2. 3 / highways Concession FHCP 2. 3 / highways Construc4on FHCP 3. 3 / highways - Concession FHCP 3. 3 / highways Construc4on Matamoros Coatzacoalcos Puebla La Venta- Topilejo- Atlixco- SM Texmelucan Ocozocuautla Palenque Tuxtla Gu4érrez Arriaga Salina Cruz La Venta II (Opera4on) Hydric Sustainability Plan for Tabasco Concluded highways in 2007-2008 Construc4on or moderniza4on of highways in process Moderniza4on of concluded mul4modal corridors Expansion, moderniza4on or construc4on of highways through 2012 according to the NIP 2 / Interna4onal Bridge (I.B.) under construc4on Suburban Train. System 1 (Opera4on) Systems 2 and 3 (bidding process) FHCP 4. 3 / highways - Concession FHCP 4. 3 / highways Construc4on Merida- Progreso Escarcega- Champotón Villahermosa Tapachula Merida- Kantunil Mérida Chetumal Arriaga- Ocozocoautla Ciudad Hidalgo Tulum- Coba I.B. Rio Hondo Xcan- Playa del Carmen Cancun Riviera Maya Tapachula- Ciudad Hidalgo

Other industries with great opportunities That s not all ProMéxico has iden'fied great investment opportuni'es in the following industries: 1. Processed foods 2. Chemical 3. Pharma 4. Medical devices 5. Logistics and infrastructure 6. Heavy industries 7. Alternative energies (solar, eolic, hidraulic, thermal) 8. Software 9. BPO s (Business Process Outsourcing)

Tourism and Travel Opportunities 1. Mexico is the 8th largest tourist destination in the world 2. Last year alone we catered more than 21 million foreign tourists who spent more than 12 BN USD.* 3. Tourism currently accounts for 8% of our GDP and 9% of our labor force.** 4. The current administration plans to invest 20 BN USD, from both public and private sectors 5. By 2020 will grow to 282 million travels to America *Source: World Tourism Organization, 2006. **Source: Consejo de Promoción Turística

Opportunities in real state developement for 2nd homes 1.There are currently more than 1 million americans living in Mexico.* 2.More than 1 million homes in our country are owned by americans. ** 3.There are 78.2 million Baby Boomers in the US who are in their retirement process.*** *US Department of State **National Association of Realtors *** US Census Bureau

Social Development Strong commitment to reduce poverty and improve the well-being of all Mexicans. Social development expenditure: increased 9% annually on average from 2007 to 2009. Health: universal coverage by 2012. Child care: subsidized program to improve labor opportunities of lowincome households. Education: increase average years of schooling by 2.8 years. Housing: 6 million loans. Human Development Index (sample of 179 countries,1 = best) Source: United Nations Development Program 2008.

Environmental Sustainability Mexico has an aggressive agenda to promote environmental sustainability and mitigate climate change. Reforestation. An unprecedented effort with 253 million trees planted in 2007, 290 million in 2008 and a goal of 300 million for 2009. Water treatment. Increase coverage from 36% to 60%. Renewable energy sources. 25% of all energy generation. Green Fund. Creation of global fund against climate change. Climate Change Program. To be announced on March 2009 with the goal of reducing emissions by 50% in 2050.

Investment support programs (examples) Name Import taxes for exporters payback (DRAWBACK) Sectorial Promo'on Program(PROSEC) Maquila Industry exports promo'on decree (IMMEX) Immediate deduction of capital expenditures Duty free Income Tax reduc'on (ISR) First Employment Program Workers Training SME s Fund (Fondo PyME) Descrip4on Foreign Trade Import duties paid for bearing components will be refunded when finished bearings are exported Gives companies access to a preferential import duty (duty free in most cases) on foreign imports, regardless of whether the final product is exported or sold domestically. Zero VAT (IVA)for services. Also includes measures for administra've simplifica'on, fiscal neutrality, and easier controls and verifica'ons over goods sold. Fiscal Incen4ves Immediate deduc'ons are applied to investments made outside the three largest metropolitan zones in Mexico (Monterrey, Guadalajar y D.F.) Tax exemptions are allowed for environmentally-friendly technologies For maquila companies, elligible under certain condi'ons. Important Income Tax reduc'ons can be given Employment Promo4on Companies that hire employees that work for the first time, will receive a subsidy up to 100% of the social security liabilities for those employees. Up to 1.5 times the minimum wage during 3 months could be covered by the Government in order to provide training. Compe44veness Promo4on Temporary support to programs and projects that foster developement, compe''veness and sustainability to SME s

Another BRIC in the Wall Along with the BRICs, Mexico will be among the most important economies in the world. Foreign trade is a key element in their growing importance. GDP in 2050 (2006 US trillion dollars) Per capita GDP in 2050 (2006 US dollars) Foreign Trade / GDP (%, 2005-2007) Source: The N-11: More Than an Acronym, Goldman Sachs, March 2007 and World Trade Organization.