Bosch to Invest Approximately $80 Million U.S. over the Next Four Years

QUERETARO, Qro, Mexico – Bosch announced today that it has signed a property lease agreement for a greenfield site and will establish a new facility in Querétaro, Querétaro, Bajio region, in central Mexico. The announcement was made with the support of the governor of Querétaro state, Francisco Dominguez Servien; Marco Antonio Del Prete Tercero, minister of Sustainable Development of the state; and Marcos Aguilar Vega, mayor of Querétaro City. This new facility represents the first time that Bosch’s Automotive Steering division will have operations in Mexico.

Bosch will begin construction of the facility soon, with completion scheduled for the end of this year. Bosch is investing approximately $80 million U.S. over the next four years to establish the 15,000-square-meter (160,000-square-foot) facility in Querétaro. Production lines will be installed beginning in January 2017, with start of production in December 2017.

Bosch plans to hire approximately 600 associates by the end of 2019, with further growth planned.

Startups Can Escape Their Cash Crunch by Going to Mexico

DURING A RECENT business trip to the Mexican state of Jalisco, I became intrigued by the number of foreign young professionals that I saw from the moment I deplaned at the airport in Guadalajara. I asked a local associate if this was normal or if an international convention was going on in town. He said that while large-scale events were a daily occurrence, most of these folks were Americans either working at one of Jalisco’s high-tech multinational companies or running their own startups.

This last statement caught my attention because it signaled an evolution in NAFTA that I had anticipated back when I helped negotiate the agreement more than 20 years ago in Congress. Mexico’s high-tech manufacturing industry coupled with tariff-free technology imports would foster a critical mass of gadget consumers who would demand software and content specifically tailored to them.

Prior to NAFTA, the high-tech industry in Mexico was limited to low-wage, labor-intensive assembly operations. But reforms initiated by the agreement opened a new era of investment in Mexico’s tech sector. Hardware companies are now able to bring their money through multinational banks to invest in equipment design and capital-intensive manufacturing lines. Software companies and app developers, meanwhile, enjoy full protection by courts under very stringent copyright and patent laws.

At the same time, however, I learned that Jalisco’s emerging software industry is still in its early stages and in great need of greater technical expertise. I immediately saw this as an opportunity for US startups to meet the needs of a new business-to-business market while at the same time increasing their cash flow by saving substantially in operating costs. For these startups, a move to Mexico could mean surviving that dreadful gap between initial investment and revenue generation known as the Valley of Death. Jalisco, my associate said proudly, wasn’t only welcoming these international entrepreneurs, but actively recruiting and incubating them, including small companies from Silicon Valley like Ooyala, Wizeline, and 3DMX.

To help draw more high-tech companies to Jalisco, Governor Jorge Aristoteles Sandoval created a cabinet-level Innovation Department upon taking office. He’s also leading a revitalization of Guadalajara’s historic downtown by building a 940-acre media-oriented business hub for TV, film, advertising, video games, animation, interactive multimedia and e-learning. Firms such as Kaxan, Inzomnia, Ocelot, and Metacube have already opened doors even though construction is still underway.

The existing tech industry base in Jalisco is already formidable, with firms such as IBM, HP, Oracle, and Latin America media titans Televisa and TV Azteca. Startups that land these corporations as customers can secure an immediate revenue stream, not only helping them overcome their startup curve but gaining them long-term stability for growth. Many of Jalisco’s domestic industries, such as agribusiness, manufacturing, and the service sector, are also increasingly incorporating technology into their operations.

Other advantages include tech-hungry venture capitalists, business advocacy organizations, hundreds of bilingual high-tech graduates joining the workforce each year, and sound telecommunications infrastructure. But most importantly, a half-day flight away from home and on US Central Time, Jalisco offers an enviable quality of life in a community that is home to nearly 40,000 American and Canadian expats.

Software giants such as Softek and Hildebrando are examples of companies that started in Mexico and now have large operations headquartered in the United States, employing thousands of American high-tech workers. They offer a roadmap that could be replicated by expat enterprises willing to capitalize in a thriving emerging market like Jalisco’s and return later to expand their businesses back home in the US.

High-tech in America was born from startups. Jalisco has acknowledged this power by using NAFTA rules to attract international small businesses and startup entrepreneurs. In other words, foreign investment is no longer just the business of big corporations. Jalisco has earned the moniker of “Mexico’s Silicon Valley” because it recognizes that knowledge is capital. Investing that capital in Mexico could be a startup’s gateway into the global market of technology and innovation.

For those of us who had the little guy in mind when we were negotiating NAFTA, this is a dream come true.



International Location Report: Mexico’s Economy is Setting Production Records

Mexico has long been one of the strongest trading partners with the U.S. and a preferred “nearshore” location for U.S. manufacturing operations. Manufacturing is at the core of the Mexican economy and represents a wide range of industries. Manufacturing investments are stimulating the economy, creating jobs, and making Mexico a top FDI location in Latin America.

“Mexico has significant momentum right now in the area of manufacturing,” says Larry Gigerich, managing director for Ginovus, a site location firm in Indianapolis, Indiana. “Many global companies view Mexico as a favorable manufacturing and distribution location due to its lower costs, good incentive programs, and proximity to one of the largest economies in the world — the United States.”

According to many experts, Mexico’s economic growth for 2015 is expected to be in the 2.5–2.9 percent range — very strong compared to the rest of Latin America, which is averaging about 0.5 percent. In June 2015, year-over-year business investment had increased by 8.6 percent. Mexico is expected to do even better in 2016 — a growth rate of about 3.2 to 3.5 percent.

Growth Across Industrial Sectors
Mexico is the seventh-largest vehicle manufacturer in the world and the sixth-biggest manufacturer of auto parts, with an estimated $81.5 billion in sales in 2014,” according to Doug Donahue, vice president of Business Development with Entrada Group, which helps manufacturers set up operations in Mexico. “Manufacturing also received the most FDI in 2014 — about $13 billion,” Donahue says.

Foreign investment in factories in Mexico is on the rise, even for industries that have been China-bound in the past. At the top of that list are global automakers that are investing heavily in new assembly plants. Companies that have made recent announcements include Nissan, General Motors, Ford, and Fiat Chrysler.

In March VW indicated it would spend $1 billion expanding a Mexican plant to build a small SUV for the U.S. and some foreign markets,” says John Boyd, principal with The Boyd Company, a location consulting firm based in Princeton, New Jersey. “In Hermosillo, Ford Motor Corp. is doubling production and hiring 1,000 workers to build its new Fusion model. Combined, automakers and parts suppliers have earmarked more than $20 billion of new investments,” Boyd says.

Rising labor cost in China and overly extended and risky supply chains to Asia are helping make Mexico the preferred nearshore location for many Boyd clients in other manufacturing sectors, such as medical devices, plastics, and food processing. Donahue agrees: “Even though automotive and aerospace are among the high-profile manufacturing industries of Mexico, we are seeing growth among our entire customer base, including electronics, consumer goods, and heavy transport, along with automotive and aerospace OEMs and Tier 1s,” he adds. “This growth is not only driven by the attractive Mexican manufacturing market as compared to the rest of the world, but also Mexico’s internal market growth.”

Mexico’s many free trade agreements are also factors helping it to attract new industrial investment.

A Productive Workforce
Mexico’s unemployment rate is about 4.3 percent — a reflection of reforms that were implemented by President Enrique Peña Nieto in 2012, including an improved minimum wage, women’s worker rights, and better labor union accountability. Some of his business-related reforms — for example, allowing foreign development of energy reserves and breaking up corporate monopolies — have also encouraged business investment.

“Regarding job performance, once Mexican employees have been brought on and trained, we have seen them to be highly dedicated and productive employees and, in many cases, more productive than their U.S. or Canadian counterparts,” says Donohue.

In the past, he notes, the major reason manufacturers set up operations in Mexico was to take advantage of lower labor costs. “Now, however, more training is required as suppliers are requiring higher competencies and skill sets. This is causing wage pressures and retention concerns, as more and more suppliers are coming into Mexico, and they all are competing for the same labor.”

Investing in the Future
To maintain its economic momentum, Mexico plans to invest more than $100 billion through 2018 to improve its transportation infrastructure. “Mexico realizes that, in order to attract international OEMs, Tier 1s, and their suppliers, it must establish a solid transportation infrastructure throughout the country,” Donohue says.

To keep up with the hiring needs of its manufacturers, the Mexican government is also investing heavily in further education and training of its workforce, creating more specialized programs with input from the commercial sector. Increasing funding, however, for such government education programs remains a challenge and may have to be gained through tax increases.

A bright spot is the emergence of Mexico City as a global financial center. Mexico City currently houses the headquarters of the country’s largest banks, insurers, and many international financial service companies for Latin America.

“Citigroup in Mexico City reportedly produces almost three times as much revenue than all 16 Citigroup branches in the rest of Latin America,” says Boyd. “Banco Santander Mexico’s $4.13 billion public stock offering in 2012 was Mexico’s largest ever in the financial sector, a strong sign of the revival of the nation’s financial services sector. After many years of economic missteps, these and other successes show Mexico is emerging as Latin America’s most promising relocation and investment market,” Boyd concludes.



Mexico Receives 2016 in a Still-Competitive Position

Mexico has been actively working to improve its competitiveness, and kicks off 2016 as an attractive country for investors worldwide.

Mexico saw moderate growth in 2015; the International Monetary Fund (IMF) attributes the slowdown to the fall in US industrial production, financial market volatility and reduction in oil production.Still, the country increased four positions in the most recent World Economic Forum (WEF) Competitiveness Ranking (from #61 to #57). The improved ranking is due to the efficiency of Mexico’s financial and goods markets, improvements in the business sophistication and fostering innovation categories, and recentlyimplemented reforms. Some of the biggest changes being in areas such as energy, telecommunications, economic competence, labor and education.
New international free trade agreements were also put in place to help revamp the national business environment – to date, Mexico holds agreements with more than 50 countries. Export diversification and foreign direct investment also saw significant improvement during 2015. The country’s involvement in thePacific Alliance – an initiative to boost the economy and enhance the region’s connections with the rest of the world – has also helped keep its position as the 13th biggest economy in the world and the 11th based on purchasing power.  It is expected that Mexico will be the 7th largest economy worldwide by 2050.
More alliances on the horizon
Mexico has been actively participating in the Trans Pacific Partnership (TPP) since 2012, a pact between 12 countries to increase Made-in-America exports, promote economic growth and secure jobs, among other things. If implemented and maintained successfully the TPP is expected to be the world’s largest trade partnership in 20 years, and will give Mexico access to principal economies, including those in the Asia-Pacific region.
Mexico and Hong Kong have announced plans to begin a Reciprocal Investment Promotion and Protection Agreement (RIPPA) in 2016. It provides national and foreign investors a legal framework that offers stronger protection for foreign investment in Mexico and Mexican investment abroad. Hong Kong is already a large trade partner of Mexico and a big destination for Mexican exports to the continent. The IMF estimates Mexico’s economy will grow from 2.3% in 2015 to 3.0% in 2017 if there is an increase in private consumption, investment and manufacturing exports. The country’s journey towards the digitalization of the accounting, payroll and taxation processes will also bring changes to the business customs this year.
Latin America Solar Is Booming, But Mexico Solar May Shine Brightest

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