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March 11th supply-chain disruptions, an
opportunity for Mexico-Japan business
collaboration
Raúl Urteaga
Minister
Office of Mexico-Japan Economic
Partnership Agreement
Embassy of Mexico
Tokyo
April 2011
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March 11th events exposed vulnerabilities
of Japan’s supply-chain
• Reduced input supply and inventories are affecting
firms in Japan and elsewhere
• Infrastructure bottlenecks at ports and highways
are serious concerns
• Planned electricity power cuts will greatly affect
manufacturing and the supply-chain process. This
is the biggest concern.
• Risks associated with relocation of production
(technology transfer, IPR protection, labor quality, clients’
satisfaction, on-time delivery)
2
Alternative plans for Japanese supplychain companies
• Reduce outside contractors in Japan but
especially in low-labor countries with
deficient infrastructure and legal
uncertainties.
• To base supply operations in Mexico:
1.
2.
3.
4.
5.
Low cost manufacturing
Excellent labor skills
Legal protections guaranteed, including IPR, FD Investors
Enhanced export market access trough its FTA network
Hundreds of Japanese suppliers already in Mexico (automotive,
electronics)
6. Mexico – Japan EPA
3
JBIC Survey 2010 for overseas
business operations
Ranking
Country
2010
2009
1
1
2
No. of companies
responses
2010
2009
China
399
353
2
India
312
278
3
3
Vietnam
166
149
4
4
Thailand
135
110
5
6
Brazil
127
95
10
11
Taiwan
29
21
12
12
Mexico
25
20
14
13
Philippines
14
14
15
17
Turkey
8
8
18
14
Germany
7
9
20
23
Poland
5
4
Source: 2010 JBIC Survey
JBIC Survey on Japanese Companies
Overseas Investment
Auto Assembly
1.
2.
3.
Reducing costs for
parts & raw materials
Achieving
environmental energy
savings
Reinforce brand
dynamic
Source: 2010 JBIC Survey
Auto parts
1.
2.
3.
Reducing costs for
parts & raw materials
Employing personnel
capable of working in
the international arena
Increasing overseas
production
MEXICO TOTAL VEHICLE EXPORTS AND
PRODUCTION
Vehicle production and exports
2.50
2 .2 6
2 .1 0
2 .0 2
2.00
1.50
Millions
1.61
1 .5 1
1.66
1.86
1.22
1.00
0 .6 3
0.50
0.51
0.00
2007
2008
2009
Total Production
Exports
2010
Year
Jan-Mar
2011
Last year, 81% of Mexico’s automotive
production was exported to more than 50
countries, including Japan
Source: Mexican Automotive Industry Association (AMIA)
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Mexico’s GDP
Mexico's Economic Performance
2007
2008
GDP Growth
2009
2010
5.5%
3.3%
2011
4.6%
1.5%
1
-6.0%
Source: Mexico’s Ministry of Finance, International Monetary Fund
Note: 2011 and 2012 indicators are forecasts
2012
4.1%
Foreign Direct Investment registered
in Mexico
Unit: Billion USD
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Strengths of the Mexican Market
Mexico’s internal demand growth:
• Recovery of employment and income
• Wider credit and financing availability
• Investment in infrastructure
• Structural measures to increase competitiveness
• Population growth and demographics:
• 112.6 million population (2010 Census)
• Almost 1 million young Mexicans become consumers
every year
Mexico’s Macroeconomic Variables
INFLATION
2010
2011
4%
3.9%- 4.3% (projected)
COUNTRY RISK
EXPORT PERFORMANCE 2010
Exports:
US$ 298 billion
Imports:
US$ 301 billion
JP Morgan EMBI + Index Spread, Basis Points
TOTAL
April 1st 2011
Mexico
131
Argentina
517
Brazil
168
US$ 599 billion
Mexico is the largest exporter in Latin America, even above Brazil
Extensive FTA Network
Mexico has an extensive network of free trade agreements (13
FTAs in three continents) with preferential tariff access to 45
countries, including Japan.
EPA
Japan
FTA EU
NAFTA
NAFTA
FTA
Honduras
El Salvador &
Guatemala
FTA
Nicaragua
FTA
Colombia
FTA
Costa Rica
FTA Bolivia
FTA Chile
MERCOSUR:
- Brazil
- Argentina
- Uruguay
- Paraguay
On July 1st 2011, the Mexico-Peru FTA will enter into force
FTA Israel
Mexico-Japan Trade 2005-2011
(Unit: Billion USD)
Mexico-Japan Bilateral Trade
Unit: US$ Billion
15.6
18.1
19.5
20.1
3.2
3.8
14.2
20
2.8
15
2.6
18.5
5.6
3.0
3.5
2.8
10
13.1
15.3
16.4
16.3
15.0
11.4
Mexico's Exports to Japan
5
0.6
Mexico's Imports from Japan
2.4
0
2005
2006
2007
2008
2009
2010
2011
Source: Mexico's Secretary of Economy and Japan's Ministry of Finance
*Data is based on registered imports in both countries
In February 2011, bilateral trade grew by 20.4% compared with the same period of 2010.
Mexico's exports to Japan increased by 32% to US$634.6 million, while imports from Japan
increased by 17.6% to US$2,354 million.
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THANK YOU!
Office of Mexico-Japan
Economic Partnership Agreement
Tokyo, Japan
Tel: 03-3506-6681
www.mexicotradeandinvestment.com
[email protected]
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