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Mexico in Brief, our monthly newsletter, is available in this section. Our Mexico in Brief summarizes the most relevant business news in Mexico, and also lists the main Mexican economic indicators. Our file is organized by issue number and issue date. Please consult it at your convenience and send us any comments through the link appearing below, or emailing us at .(JavaScript must be enabled to view this email address).
Monterrey-based telecommunications company Marcatel recently announced that it acquired American-based Vivaro for an undisclosed transaction price. The acquisition will allow for the company to strengthen its position and increase its cash flow. Vivaro reported approximately U.S.$220 million in sales last year, and holds approximately 270 employees.
Mexican-based Sigma Alimentos, a subsidiary of Grupo Alfa, recently announced its acquisition of Bar-S Foods, a leading American company in packaged processed meats, for an undisclosed amount. Bar-S Foods has an ample sales coverage in the United States averaging approximately U.S.$535 million in 2009. Sigma Alimentos continues to expand and strengthen its foothold in the United States market.
The Federal and State Governments of Michoacan and Zacatecas are working with Mexican-based PCZ Construcciones and Chinese-based CNR and China Railway International in railway development projects that will require an investment of approximately U.S.$500 million. The Federal and State Governments are targeting to update and improve transportation services in those regions. In other news, the Department of Transportation recently announced that it has committed approximately U.S.$3.2 billion in interstate and highway projects. It also announced that due to their recent budget increase it has increased the number of projects, many of them are currently under review.
Brazilian-based Embratel, a subsidiary of Mexican communications giant Telefonos de Mexico or TELMEX, recently announced its launching of a public offering for the preferred stock of the Brazilian television company NET, at approximately U.S.$13 per share. The acquisition will represent an investment of approximately U.S.$2.6 billion. Embratel currently holds 35.8 % of common stock and 5.4 % of preferred stock of NET.
Mexican-based Grupo Pochteca successfully concluded a bond offering of approximately U.S.$350 million, from which it will refinance short-term debt maturing during the next four years. The company is expected to receive additional funds from a capital increase of approximately U.S.$15 million. The funds will allow the company to boost its distribution of Shell lubricants and strengthen its operations in Brazil.
Mexican-based Compañia de Energia Mexicana, a subsdiary of Grupo Ferrominero, recently announced that its Atexcaco hydroelectric project registers a 70% advance. The company’s investment in the plant is of approximately U.S.$75 million and they are targeting to start operations in 2011. The plant will supply Compañia Minera Autlan with electric energy, planning to reduce its consumptions costs.
General Motors de Mexico, a subsidiary of General Motors Company, recently announced that it will invest approximately U.S.$499 million in its Ramos Arizpe plant located in the Mexican State of Coahuila. Approximately U.S.$215 million will be used to expand their existing plant, and the remainder will be invested in the acquisition of machinery and equipment for engine manufacturing. The company has plans to initiate manufacturing of an undisclosed automobile in the plant during 2011.
Mexican banks have juggled through the global crisis and drastically lowered non-performing loans to instances even below standards applicable in other countries, such as the United States of America. The Mexican banking sector has announced that it aims to grow its client base similarly to other outstanding banking markets in South America; this year the loans’ sector is expected to grow by at least an additional ten percent. In a related matter, the Chairman of the Mexican Banking & Securities Commission recently announced that the Mexican financial system is due to experience new rules, updating them to the standards of international banking, including rules regarding derivatives and bank liquidity.
Shipping logistics company DHL recently announced that it plans to invest approximately U.S.$250 million over the next five years in Mexico. The planned investment targets three different business lines in the country, and will be primarily focused in infrastructure expansion, new storing centers, and technology. The new installations will create approximately 600 new job positions.
Corporación Durango, or Codusa, which recently changed its name to BioPappel, recently announced that it will invest approximately U.S.$250 million over the next five years in the construction of five new paper manufacturing plants. The new manufacturing plants will operate under more efficient technology which will help reduce its environmental emissions by 16%, as the company continues its pursuit perfecting sustainability. BioPappel manufactures approximately 2 million tons of paper and 8.2 million carton packages per year.
Mitsui Power America, a subsidiary of Japanese-based Mitsui & Co, LTD, recently announced that it is currently seeking for new energy projects in Mexico to which it intends to inject an investment of approximately U.S.$2.5 billion. In addition, the company is currently participating in the bidding of a plant in the Mexican State of Chihuahua and plans to participate in two additional biddings in the Mexican States of Morelos and Jalisco.
The Mexican Stock Exchange recently unveiled a milestone as a mid-sized company under the recently incorporated corporate form of Sociedad Anónima Promotora de Inversión Bursátil completed its initial public offering, raising approximately U.S.$71 million. The success story boosts confidence among investors, as more companies are expected to follow suit. In other news, Mexican-based Grupo Famsa placed a bond offering of approximately U.S.$200 million, from which it is expected to refinance short-term debt and strengthen its position in its business sector. Mexican government-controlled Petróleos Mexicanos or PEMEX recently also launched a bond offering for approximately U.S.$2 billion, payable in 10 years.
U.S.-based Callaway Golf Company recently announced that it will invest approximately U.S.$14 million in the Mexican State of Nuevo Leon in a manufacturing plant for the production of golf clubs, of which 85% of them will be exported back to the United States of America. Additionally, the Secretary of Economic Development of the State also announced that two Callaway suppliers may also formalize investments in the State in the near future.
Mexican-based retailer Grupo Gigante recently announced that it plans to invest approximately U.S.$140 million to complete or expand its ongoing real-estate developments and the construction of three new stores of its The Home Store brand, and 100 Super Precio retail shops. The Mexican group plans to diversify its real-estate investment in the Dos Patios Corporativo development, the construction of malls in Lomas Verdes and San Esteban; and the construction of two small residence complexes, all of them in the Mexican States of Mexico and Guerrero.
Several global automobile manufacturers have announced their plans to assemble certain of their products in Mexican soil, as global demand increases. General Motors will manufacture the Spark in the Ramos Arizpe plant; Nissan will manufacture the Micra in its Aguascalientes plant, Volkswagen will manufacture the new Polo in its Puebla plant, while Ford will assemble the Fiesta in its Cuautitlan plant. Nissan also announced that it will invest an additional of approximately U.S.$600 million for the manufacturing of two additional global models. The automobile industries plans involving Mexico will double its automobile production to approximately 3 million vehicles within the next three years.
Kansas City Southern Mexico, a subsidiary of U.S.-based Kansas City Southern, recently announced the reactivation of its railroad terminal project in the Mexican State of Michoacan, where it plans to invest approximately U.S.$80 million. The railroad terminal will complement the services that are currently offered in the port of Isla de la Palma.
Cessna Aircraft Company recently announced that it will invest approximately U.S.$67 million in the establishment of its fourth plant in the Mexican State of Chihuahua. The plant will provide labor in the structure metal assembly for Cessna aircraft, generating approximately 150 new job positions.
The Mexican State of Nuevo Leon experienced a 136% increase in foreign investment during the first semester of 2010. The growth is mainly attributed to the arrival of new manufacturing companies and the expansion of previously installed companies. Moreover, the State is currently awaiting the arrival of ten new companies from different manufacturing sectors and other companies are planning expansions, involving an overall additional investment exceeding approximately U.S.$340 million.
Spanish-based Grupo Grand Coral recently announced its investment of approximately U.S.$5 billion in the next ten years in the Mexican States of Quintana Roo and Baja California Sur, focusing in luxury and smart living. The upcoming residence area in Playa del Carmen will include apartment complexes, hotels, beach clubs, and a golf course designed by Nick Price. The group has initiated work in the construction of a residence complex in Los Cabos.
Mexican low-cost airline Interjet recently launched an initial offer of approximately U.S.$360 million for its domestic competitor Volaris. Volaris has not commented on the terms of the offer, although Interjet has stated their confidence in the terms of its offer, through which it seeks to add value to their brand and fleet.
All-terrain vehicle manufacturer Polaris Industries recently announced its plans to transfer production of its plant in Wisconsin to the Northern Region of Mexico. Although not yet determined, the company is said to be evaluating the cities of Monterrey or Saltillo as possible plant sites. The company expects to start operations in Mexico by mid 2011. Polaris Industries manufactures all-terrain vehicles, snowmobiles, motorcycles and neighborhood vehicles.
Software giant Microsoft Corporation recently announced that it will invest approximately U.S.$1.9 billion in Mexico within the next three years. The company’s announcement states that approximately U.S.$485 million of such amount will be invested in software and entertainment programs targeted for small and medium companies, while the remaining amount will be invested in the modernization of education and to support approximately 3,000 new IT companies. During the past three years the company has contributed in the education sector and supported small and medium companies.
The Mexican Federal Electric Commission, or CFE, recently announced that it will invest approximately U.S.$60 million in energy infrastructure in the Mexican State of Nuevo Leon within the next two years, of which an initial U.S.$38 million will be invested in 2010. The investment will be destined for the construction of new distributing networks, sectioning equipment and the installation of new failure detection systems. In other news, Indian-based Havells Sylvania recently announced an investment of approximately U.S.$100 million for the construction of its new facility which will manufacture efficient electric products. The new plant will be constructed in the central Mexico and will generate approximately 500 new job positions.
Nissan Mexicana, a subsidiary of Japanese-based Nissan Motor Company, recently announced that it will invest approximately U.S.$600 million in its manufacturing plant located in the Mexican State of Aguascalientes, where it plans to manufacture the new Nissan March. The company additionally informed that the prototypes will be finished by July 2010 and hopes to start production before the year’s end.
Monterrey-based Deacero recently announced that it will invest approximately U.S.$700 million in the construction of a new steel manufacturing plant in the Mexican State of Coahuila, generating approximately 1,000 new jobs. Considering the production of the new plant, which is expected to be operational by September 2011, the group will increase its production capacity by 50%.
Mexico’s 4.3% GDP growth in the first quarter of 2010 leads the country’s expected re-emerging after the global economic crisis, as compared to 2009 figures. Several financial and consulting firms estimate that Mexico may continue experiencing similar a growth ratio throughout 2010.
The Secretary of Communications and Transportation recently announced that it has reactivated its bid process for the construction and operation the expected airport in the Mayan Riviera, in the vicinity of Tulum. The airport will require an investment of approximately U.S.$256 million. The bid requirements were initially announced to be published on April 15, 2010, but were delayed and are expected to be published shortly.
Steel manufacturing giant Ternium recently announced that it has reactivated its manufacturing project in the Mexican State of Nuevo Leon, in which the company is expecting to invest approximately U.S.$4.2 billion during the next five years. The company will start construction of the steel manufacturing plant in 2010, investing approximately U.S.$1 billion in its first stage. The plant will focus on manufacturing for the automotive industry.
The private equity fund Advent International recently announced that it will invest approximately U.S.$1.65 billion in Latin America, focusing approximately U.S.$660 million in Mexican companies. Advent International further announced that it will invest approximately between U.S.$50 and U.S.$750 million per transaction. The fund has previously invested in Mexico, specifically in companies such as: Duty Free, La Mansión, Gayosso and Milano.
The Secretary of Economy is currently working to improve and update the Program for the Development of the Maquiladora Manufacturing and Services’ Export Industry (IMMEX), and is also considering the creation of an alternate program, aimed to provide additional options to smaller operating companies having import & export activities, alongside with some expected significant tax benefits.
Mexican retailer Grupo Comercial Chedraui recently announced that it raised approximately U.S.$370 million through its initial global public offer in the Mexican Stock Exchange. The company further announced that the proceeds obtained will be used to open new Chedraui supermarket stores in central Mexico and to expand their business to the northern region of the country. Grupo Comercial Chedraui was until recently a privately-held business, founded in 1920 and currently operating 142 retail stores throughout southern and central Mexico.
Mexican-based conglomerate Grupo Alfa recently announced its intention of finding a partner to its 20% interest in the natural gas venture in which it participates with Pioneer Natural Resources Company. The natural gas venture, located in the vicinity of San Antonio, Texas, will require approximately U.S.$5 billion over the next five years. As previously reported in our February Mexico in Brief, the venture has two sites with a high natural gas production capacity through which Alfa seeks to fulfill its affiliates’ natural gas requirements and sell the surplus within the United States of America.
The Monterrey-based Christus Muguerza Hospital Group recently announced that it is reactivating its expansion project, for which it plans to invest approximately U.S.$250 million over the next five years in the construction of six hospitals within Mexico. The project also includes reactivating the construction of the Hospital in the Mexican State of Chiapas, for which it will invest approximately U.S.$25 million. In other related topics, the Mexican-based ABC Hospital Group recently set the cornerstone for its Neuroscience and Orthopedics Medical Center, which will involve an investment of approximately U.S.$28 million during 2010. The medical center will have a capacity for approximately 21,000 patients and it is expected to be operational in mid 2011. Monterrey-based Grupo Proeza also recently announced that it will invest approximately U.S.$8 million to venture in the health business by opening its first clinical hospital, expecting to launch seven additional facilities by the end of 2011.
Mexican-based Grupo Lala recently announced that it considering to acquire Spanish Puleva Food S.L. involving an expected investment of approximately U.S.$822 million. The Mexican diary giant will be dealing amongst fierce competitors such as Lactalis, Leche Pascual, Arla, and Parmalat in its attempt to obtain control of the Spanish company. This would represent Grupo Lala’s second major international acquisition in less than year; it acquired National Diary in the United States of America in mid 2009.
Metalsa, a subsidiary of Monterrey-based Grupo Proeza, recently announced an investment of approximately U.S.$147 million in the acquisition of nine operating plants in the United States of America from Dana Holding Corporation. The investment has positioned Metalsa as the second largest chassis manufacturer in North America, with operations in Mexico and in Argentina, Australia, Brazil, Canada, India, Japan, the United Kingdom and the United States of America, among others.
Unilever de México, a subsidiary of U.S-based Unilever Group, recently announced that it will invest approximately U.S.$125 million in the construction of a new aerosol plant in the Mexican State of Morelos, generating approximately 470 new jobs. The new plant, which will be Unilever’s third aerosol plant worldwide, is expected to be operational by May 2011.
The Mexican peso continues its recovery versus the U.S. Dollar, reaching its best level in March since November 2008. Analysts’ believe that the peso’s recovery responds to a strong growth in the Mexican industrial sector.
KPMG recently released its alternative competitiveness study for 2010, which is prepared every two years. This edition evaluated 95 cities from ten different countries, weighing variables such as taxes, infrastructure, public works, real estate, regulatory matters, work and quality of life. The 2010 study revealed that Mexico is the best country to do business, followed by Canada, The Netherlands, Australia, the United Kingdom, France, Italy, the United States of America, Germany and Japan. Additionally the study revealed that the city of Monterrey is the best place to do business worldwide. The study revealed that Mexico offers a business advantage over the other countries involving the lowest business costs.
KPMG recently released its alternative competitiveness study for 2010, which is prepared every two years. This edition evaluated 95 cities from ten different countries, weighing variables such as taxes, infrastructure, public works, real estate, regulatory matters, work and quality of life. The 2010 study revealed that Mexico is the best country to do business, followed by Canada, The Netherlands, Australia, the United Kingdom, France, Italy, the United States of America, Germany and Japan. Additionally the study revealed that the city of Monterrey is the best place to do business worldwide. The study revealed that Mexico offers a business advantage over the other countries involving the lowest business costs.
The investment fund Rasaland Investors plc recently announced its investment of approximately U.S.$1 billion in the Mexican State of Jalisco in a project called Chalacatepec. The upcoming exclusive tourist destination, set to begin construction on July 2011, will harbor a maximum of three hotels, apartment complexes and residences. In other news, the Huatulco area will undergo a three year renovation plan with an investment of approximately U.S.$147 million. The investment is mainly targeted to several construction projects, including a marina, shopping plaza, apartment complexes, residences, and an expansion of its local airport.
Wal-Mart de Mexico, a subsidiary of U.S.-based Wal-Mart Stores Inc., recently announced that it will invest approximately U.S.$962 million in 2010, generating approximately 7,000 new job positions. The investment is mainly targeted to the opening of 300 new stores from their diverse business units such as: Bodega Aurrerá, Mi Bodega Aurrerá, Bodega Aurrerá Express, Walmart, Superama, Sam’s Club, Suburbia Stores and Vips’ Restaurants. The company’s aggressive plan will be close to the equivalent of opening one store per day.
Mexican government-controlled Petróleos Mexicanos, or PEMEX, recently announced the discovery of two new oil reserves with a capability of producing 150,000 barrels daily. Ayatsi, the biggest of the recently discovered oil reserves, is estimated to contain 590 million barrels of crude oil and is located in the Mexican State of Campeche. Tsimin, which is located in the Mexican State of Tabasco, is estimated to contain 305 million barrels of crude oil and 13.8 million cubic feet of natural gas. Pemex will issue an official announcement regarding the sites on March 18, 2010; production on both sites is expected to initiate in 2012.
Praxair Mexico, a subsidiary of U.S.-based Praxair Technology Inc., recently announced that it will invest approximately U.S.$150 million in Mexico during 2010, generating 150 new direct job positions. The investment will fund diverse projects, among them the construction of several manufacturing plants in the Mexican States of Nuevo Leon, Hidalgo and Tamaulipas. The company is currently analyzing new investment opportunities in the country for the next five years.
Gamesa Quaker, a subsidiary of U.S.-based Pepsi Co., recently announced that it will invest approximately U.S.$30 million in a development center for their baked products in the Investigation and Technological Innovation Park in the State of Nuevo Leon; Mexican conglomerate Xignux also recently announced that it will invest approximately U.S.$23 million in the development of three centers to be located in the same Park. In other news, German-based Continental AG, in conjunction with its Mexican tire distributor Jasman Automotriz, recently inaugurated its first tire renovating plant in the Mexican State of Nuevo Leon, the companies plan to open 13 additional plants within the next two years.
Mexican-based Grupo Alfa, along with its partner Pioneer Natural Resources Company, recently announced their finding of two sites with a high production of natural gas in the vicinity of San Antonio, Texas. Alfa additionally announced that it plans to: (i) invest approximately U.S.$307 million in 2010 to drill 20 additional sites, and (ii) increase its investments in natural gas by approximately U.S.$200 million annually. The group’s primary goal is to fulfill its companies’ natural gas requirements; any surplus would be sold in the United States.
Aernnova Aerospace recently announced that it will invest approximately U.S.$134 million in the construction of a plant to be located in the Mexican state of Queretaro and which will manufacture certain aeronautic components, generating approximately 1,624 employment positions. Queretaro will also house an automobile shock absorber manufacturing facility by ArvinMeritor Inc., who announced the construction of the new plant as part of its global restructuring plan. Procter & Gamble, who is already established in the Queretaro area, has announced that it will invest approximately U.S.$150 million in the upgrading of its Mariscala plant.
Mexican leading construction company ICA aims to participate in Panama’s U.S.$5.25 billion project to expand the Panama Canal and is seeking to do so in conjunction with an international consortium. ICA has also recently expressed interest in continue its international construction business, participating in projects located in Colombia, the Dominican Republic, Guatemala, Spain, Portugal and the North of Africa.
As expected, the bidding process for the control of Mexican airline Aeromexico started last September. The pricing started with an offer made by Mexican entrepreneur Alberto Saba, involving a U.S.$100 million bid; a group leaded by shareholders of Banamex and Grupo Modelo followed, and involved approximately U.S.$151 million, and was quickly met by a close offer made by a group of Mexican businessmen leaded by Jose Barraza. The original bid from the Saba family expired and a new one has been placed, also in the U.S.$151 million level. The bidding process is still open and has lately raised interest among the Mexican business community.
The Mexican Ministry of Tourism recently informed that Mexico received a cash flow of approximately U.S.$7.9 billion from tourism related business during the first seven months of 2007, 8.2% higher than the figures for the same period of 2006. On the other hand, the gross fixed investment registered a growth of 5% during the first sixth months of this year, in contrast with the same period of 2006. Direct foreign investment during 2007 is expected to reach a record, estimated to increase in approximately U.S.$1.4 billion.
The Ministry of Economic Development of the State of Nuevo Leon recently opened a business representation office in Beijing, with the main purpose of seeking business opportunities for exports from the State. The office, however, also serves as a link for Chinese and general Asian investment in Mexico and particularly in Nuevo Leon. Recent announcements have been made regarding considerable investments in the State by companies such as Nippon Kayaku, Sanyo and Takata, together with a number of suppliers of LG.
The long-debated tax reform proposed by Mexican President Calderon has been approved. The main goal of this reform is to provide the government with funding to more effectively fight poverty. The most significant change involved is the creation of a new flat corporate tax known as IETU, as a result of which companies’ tax results will need to be calculated under the new IETU formula and under the previous income tax formula, of which the higher resulting figure will be paid. The tax reform is scheduled to become effective on January 1, 2008, and the Mexican Treasury expects that the new taxes will amount for approximately 3.7% of 2008’s Mexican GDP.
© Copyright 2010 J.A. Treviño Abogados S.A. de C.V.