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NAFTA WorksAug 08, 2010  · roads. Concessions are granted through public bid and for thirty years...

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Volume 15, Issue 8 Page 1 [email protected] Mexican Highways: Paving the Way for Economic Growth A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES NAFTA Works August 2010 * Volume 15, Issue 8 INSIDE THIS ISSUE 1 Mexican Highways: Paving the Way... 1 Trade Highlights 2 New Winds Blow in Mexico’s Energy... 3 Mexico 2010 Events: Bicentennial of its Independence and the Centennial of its Revolution 3 NAFTA Related Events 3 Diario Oficial 4 Success Stories 4 Selected Readings 4 Infrastructure Projects in Mexico 4 Mexico Economic Update 5 Profile of Idaho 6 Profile of Oaxaca Mexico’s highway network is the backbone of the transportation system and is key in the country’s strategy to increase its global competitiveness. Through the highways nearly 500 million tons are carried through the length and breadth of the country annually which represents 53% of the transported national weight. 70% of the $1 billion in products traded between Mexico and the U.S. is also carried by land daily. Therefore, Mexico is giving high priority to the modernization of its road infrastructure in order to enable it to become one of the main logistics platforms of the world and take full advantage of its geographical position and free trade agreements. To meet this objective, Mexico established the National Infrastructure Program, a 5- year working plan that started in 2007, to perform important upgrades and to construct priority highways. The program defines a sector strategy in order to complete the modernization of the highway corridors to better link the country’s major cities, ports, border crossings, and tourist destinations with high specification roads. It is also focused to develop inter-regional highways to improve communication and connectivity of the road network, give priority to the construction of bypasses to facilitate the continuity of traffic flows in the road network, as well as improve the physical condition of the entire road system. Recently, investments in roads have experienced remarkable growth. For example, in 2009 the approved budget was 26% more than 2008, reaching approximately $4 billion. Since 2005, higher investments have resulted in increases of around 25% in kilometers performed per year, meeting the goal of 1,618 kilometers set for 2008. Public funds in recent years for maintenance have also improved the physical condition of the network of federal roads. Currently, over 78% of the total Continues on page 2 kilometers are in good condition, up from only 57% in 1999. Despite the record increases of the investments, Mexico requires about $6 billion per year for road construction and maintenance. Hence, the Mexican government has made systematic efforts to design and identify new sources of investment and increase the amounts available for the new highway projects that complement fiscal resources.
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Page 1: NAFTA WorksAug 08, 2010  · roads. Concessions are granted through public bid and for thirty years by the government which also provides an initial contribution with public funds

Volume 15, Issue 8 Page 1 [email protected]

Mexican Highways: Paving the Way for Economic Growth

A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

NAFTA Works August 2010 * Volume 15, Issue 8

INSIDE THIS ISSUE

1 Mexican Highways:

Paving the Way... 1 Trade Highlights

2 New Winds Blow in

Mexico’s Energy... 3 Mexico 2010 Events:

Bicentennial of its Independence and the Centennial of its Revolution

3 NAFTA Related

Events 3 Diario Oficial

4 Success Stories 4 Selected Readings 4 Infrastructure

Projects in Mexico 4 Mexico Economic

Update 5 Profile of Idaho

6 Profile of Oaxaca

Mexico’s highway network is the backbone of the transportation system and is key in the country’s strategy to increase its global competitiveness. Through the highways nearly 500 million tons are carried through the length and breadth of the country annually which represents 53% of the transported national weight. 70% of the $1 billion in products traded between Mexico and the U.S. is also carried by land daily. Therefore, Mexico is giving high priority to the modernization of its road infrastructure in order to enable it to become one of the main logistics platforms of the world and take full advantage of its geographical position and free trade agreements. To meet this objective, Mexico established the National Infrastructure Program, a 5- year working plan that started in 2007, to perform important upgrades and to construct priority highways.

The program defines a sector strategy in order to complete the modernization of the highway

corridors to better link the country’s major cities, ports, border crossings, and tourist destinations with high specification roads. It is also focused to develop inter-regional highways to improve communication and connectivity of the road network, give priority to the construction of bypasses to facilitate the continuity of traffic flows in the road network, as well as improve the physical condition of the entire road system.

Recently, investments in roads have experienced remarkable growth. For example, in 2009 the approved budget was 26% more than 2008, reaching approximately $4 billion. Since 2005, higher investments have resulted in increases of around 25% in kilometers performed per year, meeting the goal of 1,618 kilometers set for 2008. Public funds in recent years for maintenance have also improved the physical condition of the network of federal roads. Currently, over 78% of the total

Continues on page 2

kilometers are in good condition, up from only 57% in 1999.

Despite the record increases of the investments, Mexico requires about $6 billion per year for road construction and maintenance. Hence, the Mexican government has made systematic efforts to design and identify new sources of investment and increase the amounts available for the new h i g h wa y p r o j e c t s t ha t complement fiscal resources.

Page 2: NAFTA WorksAug 08, 2010  · roads. Concessions are granted through public bid and for thirty years by the government which also provides an initial contribution with public funds

Volume 15, Issue 8 Page 2 [email protected]

Thus, three models of public-private partnerships have been designed consisting primarily of attracting private investment to the development of new road infrastructure and the modernization of existing roads free of toll. They are also helping to better distribute and manage highway project risks.

The first is a concession model to build, maintain, and operate toll roads. Concessions are granted through public bid and for thirty years by the government which also provides an initial contribution with public funds and offers a minimum revenue guarantee to facilitate involvement by private banks. Under this model, more than $1.2 billion have been invested in 9 projects to construct over 817 kilometers currently in operation. Another 10 projects are under construction with a value of $1 billion that will add 386 kilometers to the highway system.

The second model is by asset utilization, which integrates packages of high specifications existing freeways and highways to be built. It is the key for financing 35 projects encompassing the construction of 2,193 kilometers of new roads. The authority organizes public bids to transfer these packages to the private sector and the winning bidder operates and maintains existing roads. The company also builds, operates, and maintains the new roads in the package. Two packages with a offer of over $3.6 billion has been awarded for a total of 891 kilometers, and the bid processes for another two packages of 270 kilometers total are currently in progress. Additionally, 23 highways are under consideration to shape more packages encompassing more than 1,400 kilometers with an expected bidding value of over $3.2 billion.

The last model is a public-private partnership in which a concession is awarded through a public bidding process. The concessionaire also receives the exclusive right to sign the service contract for a fixed period of 15 to 30 years. The contract establishes a partnership between the authority and the winning bidder to design, finance, build, maintain and operate a highway with the firm performing services for periodic payment. Up to date, a 75 kilometer highway is under operation and six more with a value of over $2.6 billion are under modernization that once completed will add 530 kilometers of world-class new highways to the country’s network.

These models are operative and are increasing investments to expand and modernize more than 20,000 kilometers of highways. As a result, the country’s 14 main corridors, one of the most important components of the federal network, will be completed with private participation by 2012. With a total length of 19,245 kilometers, the corridors are integrated by roads that connect the major areas of industrial and agricultural production as well as trading ports of entry and tourist destinations.

The projects will construct new and improved roads to increase the coverage, quality, and competitiveness of Mexico’s infrastructure, as well as establishing new business opportunities for the private sector and securing a brighter economic future for Mexico.

New Winds Blow in Mexico’s Energy Sector

The need to invest in the research and development of alternative energy sources has become paramount in recent years. A capable and committed leader in this endeavor has proven to be Mexico. Despite being a developing country and one of the world’s leading oil producers, Mexico is responsible for only 1.6% of the world’s greenhouse gas emissions. In 2008, Mexico even adopted a strategy to reduce these emissions by 50% from its 2000 level by 2050.

To address this goal, Mexico has taken various steps to diversify

its energy matrix. In 2008, a mere 3.3% of total installed capacity for generating electricity came from renewable sources. Mexico’s Renewable Energy Program aims to more than double this level by 2012, to 7.6%, with wind power intended to play a significant role.

Mexico is uniquely prepared to develop its wind energy industry. The southern state of Oaxaca, for example, has average wind speeds of almost 75 kilometers per hour and gusts of up to 200 kilometers per hour. Other areas with high wind speeds include La Rumorosa in Baja California, as well as the states of Zacatecas, Hidalgo, Veracruz, Sinaloa, and the Yucatán peninsula. Together, these areas have the potential to contribute up to 40,000 MW to Mexico’s electricity capacity, which could amount to 17% of current installed capacity. Large expanses of desert in the north-west and north-east of the country provide an ideal location not only for solar panels but also wind turbines.

Mexico currently has just over 200 MW of wind energy capacity in operation, representing 0.09% of the country’s total generated electricity. This figure is, however, over double the installed capacity of 2008, according to the Global Wind Energy Council. This increased capacity is the result of the construction in Oaxaca of three new wind parks: Parques Ecológicos de Mexico, the first phase of the Eurus project and the first two phases of the La Venta project.

With greater focus now being given to wind energy development, wind energy as a percentage of total generated electricity is expected to increase to between 1.74% and 2.91% by 2012. Moreover, business opportunities are growing due to investments in this sector increasingly encouraged by the Mexican government.

One of the biggest challenges Mexico faces in terms of wind farming as well as other renewable sources of energy is that many of the regions with the highest energy potential are situated far from the regions where the energy is in fact demanded. This offers, however, additional investment opportunities in expanding and improving transmission capacity.

In order to promote investments in infrastructure, the Mexican government has established new public policies and is committed to guaranteeing the financial viability of the projects. These measures aim to reduce risks and costs involved in project development, and provide a simple and transparent administrative procedure, thus offering investors the long-term certainty needed.

As a result, a wide range of projects are being developed with the participation of financial institutions such as the Inter-American Development Bank (IDB). In March 2010, the IDB granted a $102 million loan to support the Mexican government in developing two wind farm projects expected to generate some 318 MW in total in the State of Mexico and Oaxaca. It also approved a $50 million loan for the 250.5 MW Eurus wind park currently under development by the Mexican branch of the Spanish energy company, Acciona Energia. This will be the largest wind power project ever built in Latin America and the Caribbean. And, finally, the IDB separately approved approximately $21 million for a 67.5 MW wind farm currently under development in Oaxaca by a local subsidiary of Électricité de France. The energy produced at this wind farm will supply electricity to Wal-Mart de Mexico, the country’s largest retail chain, in order to comply with Wal-Mart’s goal of using 100% renewable power in its Mexico operations.

Mexico recognizes the necessity of finding a solution to the threat of climate change. Promoting wind energy as well as other sources of clean energy are steps in the right direction towards ensuring sustainable economic growth and a better quality of life for current and future generations.

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Volume 15, Issue 8 Page 3 [email protected]

NAFTA Related Events

Media up Front Mexico September 1-3, 2010 A forum for media and other industry-related companies to submit latest innovations, content/programming, and business proposals Location: Centro Banamex, Mexico City Phone: 52 (55) 5203-2180, 52 (55) 5203-2320 Email: [email protected] Website: www.mediaupfrontmexico.com/

Mexialimentos 2010 September 1-3, 2010 An expo on technology, machinery, and equipment for the food industry Location: Cintermex Convention Center. Monterrey, Nuevo León Phone: 52 (81) 8369-6660, 52 (81) 8369-6664 Email: [email protected], [email protected] Website: www.mexialimentos.com.mx/

XXIV Expo Internacional RUJAC September 2-4, 2010 Exhibition of auto parts and automobile products Location: Expo Guadalajara, Guadalajara, Jalisco Phone: 52 (33) 3343-3030 Email: [email protected] Website: http://www.rujac.net/

Expo Gourmet Show September 2-4, 2010 Event to showcase gourmet products and specialized retail of gourmet products and services Location: World Trade Center, Mexico City Phone: 52(55) 5604-4900 ext 122, 124 Email: [email protected] Website: http://www.gourmetshow.mx/

Expo DICLAB September 9-10, 2010 Exhibition of Scientific and Laboratory Instruments and Equipment Location: World Trade Center, Mexico City Phone: 52 (55) 5564-7310 Email: [email protected] Website: www.expodiclab.com

Expo Locaciones y Servicios de Producción Audiovisual September 22-24, 2010 Trade show to promote audiovisual production for television, theatre, radio and movies Location: World Trade Center, Mexico City Phone: 52 (55) 564-4900 ext 151 Email: [email protected] Website: www.proa.tv/

SAPICA 2010 September 23-26, 2010 An international fair devoted to the retail of leather goods and footwear Location: Poliforum León. León, Guanajuato Phone: 52 (477) 152 9000 Email: [email protected] Website: www.sapica.com/

DIARIO OFICIAL NOTICES

Annexes, glossary and acronyms related to the General Rules for Foreign Trade for 2010, published on June 30, 2010. July 1st, 5th, and 7th.

Resolution that accepts and declares the initiation of the safeguard investigation on imported helical seam welded steel pipe (Mexican tariff item 7305.19.01). July 2nd.

Resolution that declares the initiation of the sunset review and the ex officio countervailing duty order review imposed on imports of liquid caustic soda (Mexican tariff item 2815.12.01) originating from U.S.A., regardless of the shipping country. July 5th.

Official announcement to participate in a public bidding process granting mining concessions (Nr. DGM/C02-10). July 9th.

Circular letter INDAUTOR-08 announcing modifications to ten formats used in National Copyright Institute’s procedures. July 14th.

Amendments to the Resolution that establish estimated prices in several goods in order to ensure the tax payment. July 20th.

Resolution that declares the initiation of the sunset review and the ex officio countervailing duty order review imposed on imported epoxidized soybean oil (Mexican tariff item 1518.00.02) originating from U.S.A., regardless of the shipping country. July 28th

Mexican Official Standards

Amendment to NOM-134-SCFI-1999, valve stems for inner tubes and valves for wheel rims used for tubeless tires. Safety specifications and test methods. July 2nd.

Explanatory note to NOM-005-ENER-2010, energy efficiency of household washing machines. Limits, test methods and labeling. July 6th.

Amendment to NOM-154-SCFI-2005, fire extinguisher equipment. Refilling and maintenance service. July 12th.

Abstracts of several Bilateral Mutual Recognition Agreements in the area of product safety test results in the electrical and electronic sector: the Mexican Chamber of Telecomm and IT Electronic Industry (CANIETI) and Centre Testing International Corporation in China; CANIETI and Nemko USA Inc.; Labotec Mexico, S.C. and TUV Rheinland of North America; and Standardization and Certification Association (ANCE) in Mexico and Kema Quality B.V. in Netherlands. July 12th.

Draft PROY-NOM-069-SCT3-2010, related to the use and features of the Airborne Collision Avoidance System (ACAS) in fixed-wing aircrafts operating in Mexican airspace. July 14th.

Amendment to NOM-003-SSA1-2006, environmental health. Labeling sanitary requirements for paints, inks, varnishes, lacquers and enamels. July 14th.

Amendment to NOM-247-SSA1-2008, products and services. Cereals and its products, and Bakery products. Sanitary and nutritional provisions and specifications. Test methods. July 19th.

Draft to modify NOM-022-ZOO-1995, characteristics and zoosanitary specifications for facilities, equipment and performance of stores that sell chemical, pharmaceutical, biological and food products for use in or feeding to animals. July 20th.

Draft PROY-NOM-182-SSA1-2009, labeling of plant nutrients. July 21th

Throughout 2010, Mexico will be celebrating both the Bicentennial of its Independence and the Centennial of its Revolution with a series of exciting events in several cities around the U.S. Through this celebration, Mexico will share its heritage and vibrant contemporary culture.

To find out more about these upcoming events in some of the main U.S. cities, please visit:

Washington DC: http://portal.sre.gob.mx/imw/

Chicago: www.mexico2010inchicago.com Dallas: http://portal.sre.gob.mx/dallas/

Denver: http://portal.sre.gob.mx/denver/ Houston: http://portal.sre.gob.mx/houston/

Los Angeles: http://sre.gob.mx/losangeles/ Miami: http://portal.sre.gob.mx/miami/

San Antonio: http://portal.sre.gob.mx/sanantonio/ San Francisco: www.mexico2010sf.com/

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Volume 15, Issue 8 Page 4 [email protected]

Volkswagen Expands Production Capacity in Mexico

Volkswagen will invest another $1 billion over the next three years in its Mexican operations, in part to fund production of the VW Beetle's successor, due in 2011. The announcement was made at the opening of a new section of VW's massive Puebla manufacturing complex. VW has spent $1 billion over the past three years to expand the Puebla plant in preparation for production of the redesigned 2011 Jetta. The Puebla complex, with an annual production capacity of 525,000, is one of the world's largest assembly plants. The company also plans to build a new engine plant to support vehicle assembly in Puebla and at the new Chattanooga plant, which opens next year in Tennessee. VW’s new generation of engines will go into production in 2013 at an as-yet-undetermined site and will set the benchmark in terms of consumption and emissions. An engine plant in Mexico close to Puebla is considered the most logical choice for a location in North America. Mexico Will Be Nissan's Export Hub for Americas

Japan's Nissan will invest $600 million to upgrade its plants located in Aguascalientes and Cuernavaca and start making three new low-cost cars there, positioning Mexico as its supply hub for the Americas markets. The No.3 Japanese carmaker, which is in alliance with France's Renault, plans to start assembly of its Micra compact by early next year, and then add a sedan and a multipurpose vehicle to the lineup by 2013. Nissan expects to produce 300,000 units of the three models per year in Mexico and expects 80 percent of them to be exported to the United States, Chile and other neighboring nations that have free trade agreements with Mexico. Valeo Enters North American Automatic Transmissions Market

Valeo's highly efficient torque converters, which are now produced in a new 21,000- square meter plant built in San Luis Potosi, Mexico, have allowed the French auto part company to win significant new business in North America. Its innovative technology has been chosen to equip the new 6-speed generations of automatic transmissions on Ford's best-selling trucks and is also represented on several General Motors passenger car models. Valeo aims to further its presence in this market and expects to be among the world leaders for torque converters by 2013. Hawker Beechcraft Expands in Chihuahua

Hawker Beechcraft, an aerospace manufacturing company headquartered in Wichita, Kansas, is currently working on the development of its second plant in Chihuahua City, with a $108.2 million investment, to employ 600 people. The new plant will be built on a 188 square foot surface, and when operations start large assemblies and subassemblies for aircraft structures will be made there. Hawker Beechcraft currently has around 220 employees there and investment from October 2007 to date amounts to $2.2 million.

Extending U.S. Medicare to Mexico Author: Marla C. Haims and Andrew W. Dick, the RAND Corporation. July, 2010 This paper explores the idea of extending U.S. Medicare benefits to Mexico – that is, allowing Medicare-eligible beneficiaries to use Medicare to cover health services received in Mexico. It provides an overview of both the Medicare program and the Mexican health care system in their current state; discusses the potential number of Medicare-eligible beneficiaries residing in Mexico today and over the next several decades; and offers a series of potential policy options and their feasibility, along with logical next steps. http://www.rand.org/pubs/occasional_papers/2010/RAND_OP314.pdf

Infrastructure Projects in Mexico

Mazatlan-Durango Highway Sponsor: Ministry of Transportation (SCT) Location: States of Sinaloa and Durango Project Value: $900 million

This is one of the biggest highway projects currently under construction included in the National Infrastructure Program 2007-2012. Because of the geographically tough nature of the Western Sierra Madre Mountains, the highway will require 63 tunnels and 32 bridges, including the 1,280-foot-high Baluarte Bridge, which will be the world’s second-highest road bridge. When the three-year project is completed in 2012, it will create a 145-mile stretch of modern road between the Pacific Coast port of Mazatlan and the inland city of Durango, cutting the drive time from eight hours to 2½ hours.

Business opportunities: construction, engineering. Veracruz International Airport Expansion Sponsor: Aeropuertos del Sureste de Mexico (ASUR) Location: Veracruz, Veracruz Project Value: $65 million

ASUR will expand and modernize the international airport of Veracruz. With an investment of approximately $65 million to be exercised over the next four years, it will be able to mobilize two million passengers. This project will increase the size of the airport by 135%. There will be four new passageways for boarding operations, as well as a new building for the rescue team and another one for private jets. Likewise, new platform positions will be built for parking both regular and private airplanes. The modernization work also includes the rehabilitation of the storm drainage of the runway and the visual aid system for air navigation. Business opportunities: construction materials, engineering, general equipment, precision instrumentation, air navigation equipment.

Success Stories Selected Readings

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Volume 15, Issue 8 Page 5 [email protected]

Idaho

In 2009, Idaho's exports to Mexico reached $187 million, up $147 million from their level in 1993 and an increase of 1.8% in comparison with the previous year.

Among all U.S. states, Idaho was ranked 42nd as an exporter of goods to Mexico in 2009.

In 16 years of NAFTA, Idaho's exports to Mexico have increased by 363%, while those to the rest of the world rose 214%. This means that the export growth rate to Mexico is 1.7 times higher than its export growth rate for the rest of the world.

Since NAFTA was implemented, Idaho's sales to Mexico have grown at an annual average rate of 10.1%.

Mexico is an important trading partner to Idaho. It was ranked as the 6th largest export market for goods from Idaho in 2009, up from 8th in 1993, illustrating the impact of NAFTA for Idaho's growing businesses. Mexico accounted for 4.8% of Idaho's exports worldwide in 2009.

Exports to Mexico 1993-2009 (Millions of US Dollars)

Source: US Census with adjustments made by the World Institute for Strategic Economic Research (Wiser), and SE-NAFTA. 1993-1999 by SIC AND 2000-2009 by NAICS.

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Volume 15, Issue 8 Page 6 [email protected]


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