Aviation manufacturing finds a home in Mexico

Aviation manufacturing finds a home in Mexico

Photo credit: Copenhagen Takeoff by Julien Menichini

The aerospace manufacturing industry in Mexico has been building momentum over the last decade. The national government has been focused on developing domestic industry to build the Mexican economy. This focus of priorities has encouraged the growth of the aerospace industry from $146 million of exports in 2004 through to $3.5 billion in 2010.

The Aerospace Summit taking place in Mexico September 2013 will showcase this growth and is aimed at building further growth. The summit will allow visitors to appreciate the competitive advantages which can be enjoyed by manufacturers operating in Mexico. It also looks set to detail the logistics and business dynamics of aerospace manufacture in Mexico, with tours of plants and facilities, exhibitions and seminars from experts within the industry.

This can only strengthen the position of Mexican estimates that the aerospace industry is forecast to achieve consistent growth of up to twenty percent per year through to 2016. This would boost the economy considerably and be responsible for the creation of approximately 37,000 jobs across 350 companies.

There are numerous benefits for companies looking to establish operations in Mexico, including significant cost savings. Recent research conducted documented savings of approximately thirty percent when compared to operational costs in other countries. Mexico manufacturers currently produce engine parts, turbines, landing gear, fuselages and other components. However, there is a great effort to coordinate the resources of state and federal government together with private industry to allow the further and strengthened development of the infrastructure including education to facilitate and support further industry growth.

Mexico has been keen to welcome businesses within a number of industries including the aerospace field to encourage establishing operations. Many companies have been attracted by the lower structure of wages in Mexico which allows manufacturers to pay a fraction of the assembly wage costs in the United States. Expert analysis estimate the job costs of Mexico manufacturing is approximately ten percent of U.S costs and almost thirty percent of European costs. This could be explained as different levels of skill but Mexico on state and national levels is aggressively pursuing aerospace investment and jobs to broaden their industrial base beyond current expectations of electronics and auto-motives. This approach appears to be extremely effective as two hundred and seventy aerospace companies now have factories within various regions of Mexico.

In fact, the World Bank now reports that ninety percent of Mexico’s exports are now industrial products and their economy is now classified as the thirteenth largest in nominal terms with a ranking of eleventh for purchasing power. This explains why the label of made in Mexico is becoming more familiar and commonplace.

The geography of Mexico, free trade attitude and adoption of new legal processes are also huge factors in this industry growth. These measures have removed a great deal of the bureaucracy and red tape for foreign owned companies looking to establish production operations. It has also allowed for efficient and speedy establishment of factories which far outstrip factory creation in the European or U.S market.

All these factors combine to confirm that aviation manufacturing has certainly found a home in Mexico, where it looks set to stay in years to come. Now, you may add that automotive industry has established a blooming industry that share IMMEX (export incentive program) with aerospace manufacturing. With IMMEX program, operations reduce and sometimes, eliminate duties and taxes. Mexico is building “the” automotive/aerospace cluster.

Foreign Investment Caps In Mexico

Foreign Investment Caps In Mexico

Photo credit: Euro-Money by Butz.2013

This document describes the caps and foreign investment regulation for diverse activities and industries under Mexican Law.  As always, this is for informative purposes and cannot be considered as substitute for a legal advice. Learn more.

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FOREIGN INVESTMENT CAPS IN MEXICO (60)

An Overview of the Mexican Legal Market for Foreign Firms

An Overview of the Mexican Legal Market for Foreign Firms

Photo credit: Law School by Tulane Public Relations

Investor attention is turning somewhat away from the BRIC (Brazil, Russia, India, China) in recent months because their economies haven’t been growing as swiftly as they had been in years past.  The four countries that are attracting the attention of international investors are Mexico, Indonesia, South Korea, and Turkey, or MIST for short.

Mexico in particular is attracting a lot of attention from investors; it’s currently the second largest economy in Latin America and is poised to become the world’s seventh largest economy in the coming decades.   In fact, Mexico’s economy is predicted to become larger than that of the United Kingdom.    Part of the country’s economic growth is due to the country’s conglomerates looking at international capital markets, and part of the growth is due to public/private partnerships in the infrastructure sector.    Liberalization of Mexico’s oil sector could also fuel tremendous growth; reforms are currently being discussed inside the country’s government.

The country has one of the world’s most open economies.  With a dozen free trade agreements that cover 44 nations, investors from all over the globe are scrambling to set up shop in the Spanish-speaking country.  With a highly skilled and motivated workforce, the country has become the darling of international investment community.

The legal sector in Mexico is also very open to foreign firms.  Interestingly, foreign law firms don’t need to register with any of the country’s local bar associations, and are allowed to use their home name to open offices.    However, only Mexican-licensed lawyers are permitted to appear in court and advise on local law.  It must be stated here that foreign law firms are allowed to employ Mexican lawyers to advise on Mexican law, international law, and home country law.

Mexican lawyers are not required to members of Mexico’s six bar associations.

While the legal market is open and bar association membership is not necessary, this does not mean that Mexico’s legal sector is unsophisticated or underserved.  In fact, Mexico’s lawyers are among the most highly trained and educated in the world with skills that span the entire legal sector spectrum.  The legal market is very competitive and very sophisticated, with a massive number of Mexican lawyers holding law degrees from Ivy League Schools and memberships in United States bar associations.  International firms should not think of themselves as “swooping in” to fill a void in the legal market.

The opportunities for foreign law firms appear to exist in partnerships with local firms or with small- to medium-sized firms.  Large legal firms in Mexico are few and far between, with “large” in Mexico being a firm with around 70 lawyers.  Brazil, on the other hand, has a good number of firms that employ over 200 lawyers.  Mexican lawyers are strongly independent, something they do not want to sacrifice by joining large firms.

But it’s quite possible for there to be many opportunities for legal firms who want to establish “spin-off” or boutique legal practices.  Because of the sense of independence that Mexican lawyers have, this is one area where the legal market has been growing and the trend does not appear to be slowing down.  One of the reasons given for this boutique legal firm growth is that lawyers want to avoid the long wait with larger firms to become partners.

Mexican Telecom Reform: The Rise of the STEM Lawyers

Mexican Telecom Reform: The Rise of the STEM Lawyers

Photo credit: Dell Tech Camp 2013 by Dell Inc.

The Reform started effects on June 12, 2013. As from this moment, several deadlines were triggered that will define the new telecom and antitrust landscapes:

  • Since June 12, 2013, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/Radio companies (the latter subject to country reciprocity to Mexicans in those sectors).
  • Since June 12, 2013, the only recourse against acts of New Telecom Regulator (IFETEL) and the New Antitrust Regulator (CFCE) will be Indirect “Amparo” (constitutional writ), repealing administrative recourses. This “Amparo” does not grant injunctions against regulators anymore.
  • By August 10, 2013, the Federal Judicial Council (administrative officers of Judicial Branch) will set the telecom and the antitrust courts with exclusive jurisdiction on those matters.
  • By September 1, 2013, the process for selecting IFETEL and CFCE Commissioners will be finished.
  • By December 31, 2015, migration to digital TV will be completed. Before that date, IFETEL would start a tender process for 1 or 2 national Digital TV networks.

Last Tuesday, the Calling for Aspirants to Commissioners of IFETEL and CFCE was issued with requirements for being eligible. If you read between the lines of the Reform and Calling, you may conclude that:

  • Regulators will be autonomous from Government and their decisions will have real impact on telecom and other markets, including power for functional and technical separation, ability to declare essential facilities and dominant players, and grant telecom licenses (IFETEL), among others.
  • Mexico is leaving administrative review tradition set by Telecom Law (1995) and Antitrust Law (1992) for the newly reformed “Amparo” proceeding.
  • The profile and eligibility requirements for Commissioners favors telecom and antitrust lawyers, but are inclusive with economists and engineers.
  • Secondary regulation will create a legal turmoil of interpretation and integration. Expect landmark cases and battles.
  • Legal analysis and litigation will be on the rise. This represents a great opportunity for the global legal market that has suffered from liberalization of the profession and the world crisis.

Now, the real question is: Would courts and lawyers be able to argument with STEM knowledge (science, technology, engineering and mathematics) and apply it to law? That is quite a challenge and yes, some will succeed.

President Xi Jinping sees Opportunities for Chinese Companies in Mexico

President Xi Jinping sees Opportunities for Chinese Companies in Mexico

Photo credit: Chinese Money by Steve Parker

Mexican President Enrique Peña Nieto visited China in April with an eye on a more balanced trade relationship, and Chinese President Xi Jinping visited Mexico earlier in June of this year with the same objective in mind; increasing commercial and cultural ties between the two nations.

As it stands at the moment, Mexico exports about $5.7 billion in goods including copper, minerals, oils, cotton, and car parts to China, but Mexico imports $57 billion worth of goods from China. These goods include plastics, toys, furniture, and electronics.

Before Xi’s arrival in Mexico City, Mexican Foreign Minister Jose Antonio Meade stated: “With China, the second-most important economy in the world, Mexico has a relationship that is far from the importance it should have. Mexico’s presence in China is well below its potential, as is China’s in Mexico.”

Peña Nieto is focused on making economic prosperity the “cornerstone” of his presidency, and he believes improved ties with China are of upmost importance. During his trip to China, he made an agreement to send China 30,000 barrels of oil a day, an amount he hopes will increase. President Xi also mentioned the possibility of a free trade agreement between the two nations.

It appears as though oil will present one of the largest opportunities for Chinese companies in Mexico: if legislation passes allowing foreign investment in the country’s oil sector, China could very well be the nation that could modernize the aging, outdated infrastructure and provide the know-how needed for deep water oil exploration. China would benefit greatly: China is an energy hungry nation and it needs to secure energy resources from as many sources as possible.

However, oil is not the only sector where opportunities exist for Chinese companies. During his visit to China, the Mexican president spoke of the expertise the Chinese have in the field of national infrastructure and how Mexico could benefit greatly from Chinese companies investing in and building much needed public transportation infrastructure. The telecommunications industry is also opening up to foreign investment; Chinese investment could be crucial in the Mexican drive to provide affordable, high quality telecommunications to all of its citizens.

Furthermore, during Xi’s visit, the Chinese were seeking to sign over a dozen agreements in trade, tourism, energy, science, and technology; these agreements weren’t signed, but interestingly, deals were made on commercial defence, access for Mexican tequila, and for Mexican pork to the Chinese market.

Rafael Valdez Mingramm, who promotes trade with Asia in general and China in particular, is an entrepreneur in Mexico and author of a book detailing the last four decades of Mexico-China relations and ties. He wrote: “China must be perceived, not as a threat, but as a great opportunity for Mexico and Latin America.”

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