Great reasons why to invest in Mexico!
CANADA’S FOREIGN DIRECT INVESTMENT IN MEXICO
During the last eleven years, Canadian foreign direct investment (FDI) has been a key factor for the integration of our productive sectors:
• From January 1999 to June 2010, Canada's cumulative FDI in Mexico reached $9.6 billion USD, becoming the fourth largest foreign investor in Mexico. In 2009, Canada was the fourth largest foreign investor after United States, Spain and the Netherlands.
Jim Cramer, the Bombastic, high-energy investment Guru and host of CNBC’s massively successful show “Mad Money”, gave Mexico real estate investment a big boost this week. Cramer told his audience:
“It’s not such a bad idea to diversify away from stocks, I think that out of favor real estate in Mexico, that’s easily accessible to Americans, represents a great buy”.
Quickest Recovery Rate Out of Recession
According to Moody’s Latin America, Mexico is racing out of the recession, recording a 4.3% growth rate (faster than the U.S.) thus far in 2010 and a 10% trough-to-peak increase which bests almost every other economy worldwide. Moody’s expects this growth to continue.
Strongest Currency Against the Dollar
Mexico got an even bigger boost from Bloomberg this month when they reported the peso has gained 7.5% against the dollar so far this year, beating out every other major currency. The peso is expected to grow another 11% by the end of 2010.
Lowest Business Tax in the World
A KPMG study recently found that Mexico boasts the lowest business tax rate in the world, out of 10 major countries and 95 cities. Property taxes, at 1% annually, are minuscule in Mexico. For example, on a 500k USD property, you would only pay $500 in annual property tax. Capital gains taxes in Mexico also have their advantages. In fact, capital gains tax on property appreciation can be exempted if you can simply show that you use the property 6 months out of the year.
Lowest Unemployment WorldWide
Fox Business News reported this year that Mexico’s unemployment performance is now stronger than any other economy on the globe except South Korea and the Netherlands. At 5.1%, down from 5.4% only a month ago, Mexico easily beat out the U.S. (9.9%), Canada (8.1%) and China (9.4%).
Fastest Growing Real Estate Market in the Americas
That could explain why development in Mexico real estate is far outpacing growth in other countries. One of the hottest spots in the Mexican economy is the coastal real estate market, expected to grow faster than any segment in the Americas and Internationally. For example, Playa del Carmen, located in the heart of Mexico’s Caribbean coast, was recently named the fastest growing area in the world by Guinness Book of World Records and the town of Tulum, just to the south, is poised to grow exponentially faster.
Already over 18,000 American companies are investing and operating in Mexico and 1 million Americans now live, work, invest and retire South of the Border, more than any other single place in the world. This number is expected to quadruple in the next decade as an aging America finds itself with over 100 million citizens above the age of of 50. They are looking for a cheaper place to retire that offers good healthcare at a lower cost and a warm tranquil lifestyle. With the recent BP oil disaster in the Gulf, Mexico may be the perfect place for these would-be retirees.
MEXICO: STRATEGIC INVESTMENT HUB
MEXICO HAS UNIQUE COMPARATIVE ADVANTAGES
Geographical and Infrastructural Advantages:
• Mexico is one of the largest countries in the world; it has a unique strategic position by having direct access to Europe, Asia, Latin America and North America.
• The Mexico-US border consists of more than 3,000 kilometres with 52 international access points, while the coastline along the Pacific and Atlantic Oceans has 11,000 kilometres.
• In 2009, more than US$40 billion dollars were invested in infrastructure. This investment, promoted by the federal government, exceeded 5 percent of GDP in the same year, reaching record levels (85 airports, 76 seaports, 26,700 kilometres of railroads and 366,000 kilometres of roads).
Trade Facilitation and Competitiveness:
• Mexico is reducing import tariffs from 13% to 5% from 2008 to 2013, and has also implemented programs for trade simplification through which products with zero tariffs will increase from 20% in 2008 to 63% in 2013. This reduction of duty rates will benefit products such as steel, shoes, fabrics, apparel, automotive and chemical.
• Mexico has competitive manufacturing costs. The country exports more manufacturing products than all countries in Latin America combined, representing approximately a third of the exports in the region.
• Mexico has a domestic market of more than 107 million people.
• Preferential access to the most important markets worldwide through one of the largest networks of commercial and free trade agreements (43 countries) makes a potential, accessible market with over one billion consumers, which represents two-thirds of the world imports and 75% of the world’s GDP.
• Mexico has become an important producer of goods with high added value worldwide, thanks to its skilled and competitive professionals.
• Mexico is the leading supplier of auto-parts and trucks in the United States: one out of every seven cars sold in the U.S. is made in Mexico.
• Mexico is the first destination for projects in the aerospace industry: there are more aerospace companies located in Mexico than elsewhere.
• For the aerospace industry, Queretaro is the most profitable city in North America; it has the highest return for investors. (Invest in Canada Report).
• Mexico is the world’s second largest exporter of colour T.V. sets worldwide (20 million units) and is one of the most important colour T.V. suppliers in the United States. Mexico is also the main producer of smart-phones (93.5 million of mobile phones were exported in 2008); and the third largest refrigerator exporter, along with other home-appliances.
• Mexico is the fourth favourite country for mining investments in the world and the second largest silver producer.
• Mexico is the largest exporter of organic coffee, avocado, papaya, watermelon, melon and mango (one of the top producers). It is the second largest exporter of fresh tomatoes and the leading exporter of vegetables in the Americas.
• Mexico is the largest medical instrument and device supplier to the United States.
• Mexico is one of the main destinations for the world’s software, Information Technology and Business Process Outsourcing (BPO) industries. It is a strategic ally to companies from all over the world. With a privileged location that allows direct access to the United States market, the world’s number 1 consumer of information technologies, and a highly qualified personnel and a solid public policy, the IT market is expected to grow from US$10 billion dollars in 2007 to around US$16.9 billion in 2012.
• Since every year more than 90,000 students graduate from engineering and technical programs, Mexico offers qualified professionals and skilled labour.
• Mexico has a young and highly qualified population, 49% of the population is 25 years old.
• According to a study carried out by the consulting firm AlixPartners, Mexico is the country with the lowest costs for the manufacturing of industrial components among the main emerging economies (Brazil, China and India) since it possesses an attractive exchange rate against the dollar, relatively low transportation costs and a large number of Free Trade Agreements.
Financial and Investment Advantages:
• Mexico is an attractive destination for Foreign Direct Investment (FDI). The economic policies of the last few decades have been a determining factor in guaranteeing the sound and stable macroeconomic environment that persists in Mexico. Thanks to the certainty, security and support of its institutions, Mexico has developed a solid economic stability and structural changes that have increased its competitiveness as an investment destination.
• The country’s public finances are well-balanced, as are its banking and financial systems.
• Mexico shows external accounts with very moderate deficits and one of the lowest inflation rates among Latin America’s main economies.
• Likewise, the country has signed Agreements on the Reciprocal Promotion and Protection of Investments with 28 countries and signed Agreements to avoid Double Taxation with more than 30.
• As a result of the global crisis, the Mexican market contracted 35% in 2009; however, it has strongly recovered (29% during the 2st quarter in 2010).
• AT Kearney has ranked Mexico as the 8th most attractive destination for FDI, improving 11 positions between 2007 and 2010.
Transparency and Law Enforcement:
• Mexico has made important efforts to increase its productivity and to be more competitive on the international scenario. Its system of government has made it easier to endorse laws and mechanisms that guarantee the transparency and security of investments, as well as of industrial and private property.
• On June 12th 2003, Mexico approved the Federal Law on Transparency and Access to Public Government Information which, as part of the process of reform that the State is going through, its purpose is to strengthen the democratization of the country, as well as to establish a relationship based on the government’s accountability to society.
• As for NAFTA, it provides the appropriate legal framework and certainty for trade in the North America region through legal instruments such as patents, copyrights, and trademarks, and also includes provisions covering trade rules and dispute settlement.
Source: Ministry of Economy and PROMEXICO.
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