LGA Consulting - Market Entry & Sales & Channel Options in Mexico

8/9/2019 LGA Consulting - Market Entry & Sales & Channel Options in Mexico

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2009 Market Entry &2009 Market Entry &

Sales & ChannelSales & ChannelOptions in MexicoOptions in Mexico

Vince LencioniWisconsin Trade Office - Mexico

LGA Consulting, General Manager

November 2009


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Four Part PresentationFour Part Presentation

I. Mexican Market and ImportI. Mexican Market and ImportDynamic OverviewDynamic Overview

II. 10 Keys to Doing Business inII. 10 Keys to Doing Business inMexicoMexico

III. Channel Options & RelatedIII. Channel Options & RelatedTechnical Trade IssuesTechnical Trade Issues

IF TIME..IF TIME.. IV. Retail, GovIV. Retail, Govt & B2B Salest & B2B Sales

DynamicDynamic Pre and Post CrisisPre and Post Crisis


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I. Mexican Market andI. Mexican Market andImport DynamicImport Dynamic

OverviewOverview


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Mexican Regions and CitiesMexican Regions and Cities

I.I. RegionsRegions Industrial/Business Style DynamicIndustrial/Business Style Dynamic1. North (Monterrey & US border) 29% GDP

2. Central (Mexico City, Guadalajara, Bajio) - 52% GDP

3. South (Tourism, oil, least urbanized areas) 19% GDP

II.II. Major CitiesMajor Cities1. Mexico City: 20 milion+; 31% (40%) GDP; NY/CHI/LA

2. Monterrey: 3.8 million+, 7.5% GDP; Barcelona/Houston

3. Guadalajara: 5 million+; 6.3% GDP; #1 Agri;San Diego

III.III. Other Regional CitiesOther Regional Cities ((1 to 3 million inhabitants1 to 3 million inhabitants))1. North: Tijuana, Juarez, Tampico, other border cities.

2. Center/Bajio: Queretaro, Leon, SLP, Aguascalientes

3. South: Puebla, Villahermosa, Veracruz, Acapulco


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Mexico Indicators & DemographicsMexico Indicators & Demographics

I.I. GDPGDP: $1.5 Trillion; Imports: Over $300 Billion: $1.5 Trillion; Imports: Over $300 BillionI.I. US sells it 50% of Imports, buys 80% of its exportsUS sells it 50% of Imports, buys 80% of its exports

II.II. PopulationPopulation Somewhere between 107 & 125 millionSomewhere between 107 & 125 millionI.I. Urban (72%) vs. Rural (28%)Urban (72%) vs. Rural (28%)

1.1. Working Age Population: 53% large cities, 14% mediumWorking Age Population: 53% large cities, 14% medium

cities (10,000 to 100,000); 33% small cities/rural.cities (10,000 to 100,000); 33% small cities/rural.1. Employment: Large 10%, Medium 12%, Small/Micro: 66%

I.I. Age: 40% (0Age: 40% (0--19), 24% (2019), 24% (20--34), 36% (35+)34), 36% (35+)

I.I. Income: Upper (5%), Middle (40%), Lower (55%)Income: Upper (5%), Middle (40%), Lower (55%)

I.I. Upper and half of middle can buy imports: 25%Upper and half of middle can buy imports: 25%

III. Interests & OpinionsI.I. InterestsInterests Sports, Politics, Classism. Materialism, ReligionSports, Politics, Classism. Materialism, Religion

II.II. OpinionsOpinions USUS--Mexico relations, US foreign policy, ObamaMexico relations, US foreign policy, Obamavs. Bush, NAFTA, Crime, Immigration,vs. Bush, NAFTA, Crime, Immigration,


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USUS ExportsExports toto WorldWorld,, LatamLatam, &, & MexicoMexico

US Export Share 2009US Export Share 2009 Canada 19% ; Mexico 12%Canada 19% ; Mexico 12% Mexico > China (6%) +Japan (5%)Mexico > China (6%) +Japan (5%) Closest LatAm country by share Brazil 2%Closest LatAm country by share Brazil 2%

US Export Rates 2009US Export Rates 2009:: MexicoMexico --19%.; China19%.; China --12%12% BrazilBrazil --23%; Chile23%; Chile --31%31%

ArgentinaArgentina --31%; Colombia31%; Colombia --25%25%

US Exports to Latin America as % ofUS Exports to Latin America as % ofExports to Mexico:Exports to Mexico:

Top 10 LatAm > Mexico ($94 Billion)Top 10 LatAm > Mexico ($94 Billion) 66% of Exports to Mexico66% of Exports to Mexico Mexico = 53% of exports to EUMexico = 53% of exports to EU

Wisconsin Exports to Latin America as %Wisconsin Exports to Latin America as %of Exports to Mexicoof Exports to Mexico

-- Top 5 Latam = 2/3 of Mexico marketTop 5 Latam = 2/3 of Mexico market

1.Peru1.Peru $144 Million$144 Million UpUp 173%173%

2. Chile2. Chile $279 Million$279 Million UpUp 26%26%

3. Brazil3. Brazil $259 Million$259 Million DownDown 13%13%

4. Mexico4. Mexico $1.1 Billion$1.1 Billion DownDown 11%11%* Source: WI Gov & WTA - All figures shown compared to Jan - Jun


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II. 10 Keys to DoingII. 10 Keys to DoingBusiness in MexicoBusiness in Mexico


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10 Keys to Doing Business10 Keys to Doing Business

1.1. Exporting to Mexico is full timeExporting to Mexico is full time Not casual, not when US market downNot casual, not when US market down

2.2. Try to Bring in Regional ExperticeTry to Bring in Regional Expertice

Employees, Consultants,IntermediariesEmployees, Consultants,Intermediaries

3.3. Establish viable Channel StrategyEstablish viable Channel Strategy Industrial vs Consumer vs GovernmentIndustrial vs Consumer vs Government

4.4. Work with, do not trust IntermediariesWork with, do not trust Intermediaries Offer aggressive compensation and supportOffer aggressive compensation and support Sales Development & Reporting or move onSales Development & Reporting or move on

5.5. Extending credit is essentialExtending credit is essential More important than price, use guaranteesMore important than price, use guarantees


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10 Keys to Doing Business (cont.)10 Keys to Doing Business (cont.)

6.6. Learn Competition DynamicLearn Competition Dynamic Domestic vs InternationalDomestic vs International

7.7. Learn Market Realities for ProductLearn Market Realities for Product

Price, Quality, Market Penetration CostPrice, Quality, Market Penetration Cost 8.8. Patience: Medium Term ReturnsPatience: Medium Term Returns

Rewarding but often challengingRewarding but often challenging

9.9. Devil in Details Business EnvironmentDevil in Details Business Environment

MurphyMurphys Law + Developing Economys Law + Developing Economy

10.10. Visit the market:Visit the market: cheap & easycheap & easy Crime = precautions not prohibitionsCrime = precautions not prohibitions


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Mexico Crime Image & Business TravelMexico Crime Image & Business Travel

US IMAGE: Crime, Violence, Drugs, Kidnappings, MurdersUS IMAGE: Crime, Violence, Drugs, Kidnappings, MurdersI. Reality Calderon taking on like never before

1.1. Taking on drug cartels = inevitable transitional violenceTaking on drug cartels = inevitable transitional violence

II. 7000 Deaths in 2008: 93% Police & Drug Cartel1.1. Other 7% = Almost all Mexican to MexicanOther 7% = Almost all Mexican to Mexican

2.2. Foreigners are very rarely victims and never targetsForeigners are very rarely victims and never targets

3.3. Business Travel in MexicoBusiness Travel in Mexico -- travel with confidencetravel with confidence

III. But there are problems .1.1. Border SituationBorder Situation Juarez and TijuanaJuarez and Tijuana

2.2. Local PoliceLocal Police -- Ineffective and unprofessionalIneffective and unprofessionala.a. 5% of stolen cars found, tolerate/support crime5% of stolen cars found, tolerate/support crime

3.3. Kidnappings, Phantom callsKidnappings, Phantom calls Foreigners not targetsForeigners not targets

4.4. Kidnap express, crime, taxi concernsKidnap express, crime, taxi concerns Affects us allAffects us all

5.5. DRUG INTERDICTION EFFORTS IS NOT ONE OF THEMDRUG INTERDICTION EFFORTS IS NOT ONE OF THEM


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Business Financing SourcesBusiness Financing Sources

Percent ofPercent ofTotalTotal

FinancingFinancing

20072007

ALLALL

20082008

ALLALL

20082008

SMALLSMALL

20082008

MEDMED

20082008

LARGELARGE

20082008

AAAAAA

VendorVendor 61.861.8 56.356.3 65.565.5(70.1)(70.1) 54.754.7(60.4)(60.4) 50.350.3(53.8)(53.8) 36.036.0(46.4)(46.4)

MexicoMexicoBankBank

17.3317.33 20.020.0 16.616.6(12.8)(12.8)

20.520.5(18.8)(18.8)

22.322.3(20.4)(20.4)

26.926.9(26.8)(26.8)

ForeignForeignBankBank

2.382.38 3.23.2 1.41.4(1.0)(1.0)

3.43.4(2.3)(2.3)

4.14.1(4.5)(4.5)

9.79.7(5.0)(5.0)

SubsidSubsidGroupGroup

12.612.6 13.313.3 11.711.7(11.9)(11.9)

15.615.6(14.9)(14.9)

11.911.9(10.3)(10.3)

10.710.7(10.3)(10.3)

Source: Banco de Mexico; Numbers in ( ) = last years figures


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Credit & Collections Challenges &Credit & Collections Challenges &

Realities in MexicoRealities in MexicoI.I. Finance/CreditFinance/Credit1.1. Upfront or 50/50Upfront or 50/50 maybe initially, but.maybe initially, but.

a.a. LC use limitedLC use limited not Asia or Europenot Asia or Europe

b.b. Credit can sometimes be more important than price toCredit can sometimes be more important than price to

both the representative and your clientboth the representative and your client lesson fromlesson fromAsians and EuropeansAsians and Europeans

2.2. Bank lending to business downBank lending to business down

a.a. 2008: 75% of companies did not want bank financing2008: 75% of companies did not want bank financing

b.b. 60% relied on vendor credit before crisis, now?60% relied on vendor credit before crisis, now?

3.3. Selling with Open AccountSelling with Open Account Sooner or Later.Sooner or Later.a.a. Offer credit and build in 90Offer credit and build in 90--120 days of financing costs120 days of financing costs

b.b. Be upfront about financing costs: let the client decideBe upfront about financing costs: let the client decide

c.c.Always try to include a promissory note as a guaranteeAlways try to include a promissory note as a guarantee

d.d. ExIm Credit Insurance is more than prudentExIm Credit Insurance is more than prudent


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Payments: Mexico vs. LatamPayments: Mexico vs. Latam

CountryCountry Prompt PayPrompt Pay 30 days +30 days + 60 days +60 days +

1. Brazil1. Brazil 63%63% 27%27% 15%15%

2.Colombia2.Colombia 67%67% 32%32% 16%16%

3. Peru3. Peru 61%61% 32%32% 16%16%

4.4. VenezuelaVenezuela 62%62% 32%32% 18%18%

5. Chile5. Chile 58%58% 37%37% 17%17%

6. Mexico6. Mexico 57%57% 36%36% 19%19%

7.7.ArgentinaArgentina 52%52% 37%37% 17%17%

Source: Latin America Business Monitor (2008)


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Trade Finance & CreditTrade Finance & Credit Due DiligenceDue Diligence

I.I. Offering financing/credit terms to clientsOffering financing/credit terms to clientsi.i. Before extending credit, review Mexican credit reports,Before extending credit, review Mexican credit reports,consider export insurance, check foreign references, doconsider export insurance, check foreign references, doother local due diligence reviews (LGA can help)other local due diligence reviews (LGA can help)

i.i. Payment problems before crisis (#6 Latam), worse now.Payment problems before crisis (#6 Latam), worse now.

ii.ii. Before crisis: Terms given (62) vs. terms offered (48).Before crisis: Terms given (62) vs. terms offered (48).

II.II. Credit Strategies to avoid nonCredit Strategies to avoid non--payment and litigationpayment and litigation1.1. Promissory NotesPromissory Notes -- Fast, easy, no collateral, no fees, noFast, easy, no collateral, no fees, no

interest ratesinterest rates

a.a. Secured financing still underdeveloped / underusedSecured financing still underdeveloped / underused

2.2. Need to verify that company is good for guaranteeNeed to verify that company is good for guarantee

3.3. Make owner sign guarantee as individual as well.Make owner sign guarantee as individual as well.

III.III. BankruptcyBankruptcy Improved laws and debt securityImproved laws and debt securityi.i. Only as good as position in debt line, still long delaysOnly as good as position in debt line, still long delays

ii.ii. Legal actions against nonLegal actions against non--bankrupt companies viablebankrupt companies viable


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III. Channel Options & RelatedTechnical Trade Issues


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First Experience with Mexico: IndirectFirst Experience with Mexico: Indirect

I.I. Exporting by DiversionExporting by Diversion Manufacturer unawareManufacturer unaware

1.1. Product sold to US company, sent to Mexican operationProduct sold to US company, sent to Mexican operation

2.2. Sales to US distributors/reps that end up in MexicoSales to US distributors/reps that end up in Mexico

a.a. Examples: Martinelli and Oshkosh BExamples: Martinelli and Oshkosh BGoshGosh

II.II. Mexican companies request sales and you delivery to USMexican companies request sales and you delivery to US

border and they import itborder and they import it1.1. Mexican clients trying to go around US distributorsMexican clients trying to go around US distributors

2.2. Or Mexican clients stumble on company websiteOr Mexican clients stumble on company website

III.III. Maquiladora: buying decisions by US home office, product sentMaquiladora: buying decisions by US home office, product sentto US or border locationto US or border location

1.1. Maybe regional rep/distributor calls on Mexican maquila plant butMaybe regional rep/distributor calls on Mexican maquila plant butproduct shipped to US locationproduct shipped to US location

IV.IV. TERMS: Cash in advance or extending credit to US entityTERMS: Cash in advance or extending credit to US entity


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Decision to take the next step:Decision to take the next step:

How to sell more proactively in MexicoHow to sell more proactively in Mexico

I.I. As direct requests or indirect sales increase, or withAs direct requests or indirect sales increase, or withaddition of new international sales peopleaddition of new international sales people

II.II. DecisionDecision dictated by costs vs. investmentdictated by costs vs. investment mentality, sectormentality, sectordynamic, Intdynamic, Intl experience (CEO & sales), possibly US DOC,l experience (CEO & sales), possibly US DOC,

State, or Association export development effortsState, or Association export development efforts1.1. Using US trading companyUsing US trading company most expensive option butmost expensive option but

can test market and give accesscan test market and give access

a.a. Short term/transitory: Less & less likely for MexicoShort term/transitory: Less & less likely for Mexico

2.2. Direct Sales with own US sales staffDirect Sales with own US sales staff Right staff, rightRight staff, right

sales volume potential, and finite, large sales targetssales volume potential, and finite, large sales targets3.3. Finding MexicoFinding Mexico--based distributor or rep/agentbased distributor or rep/agent

a.a. Even with resources, local presence often neededEven with resources, local presence often needed


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Channel Market StrategiesChannel Market Strategies IntermediariesIntermediaries

I.I. US intermediariesUS intermediaries Usually very sector and client specificUsually very sector and client specific

1.1. Rep and distributor options varied and plentifulRep and distributor options varied and plentiful

II.II. Mexico intermediariesMexico intermediaries smaller market so much broadersmaller market so much broader

1.1. Distributors culture with fewer viable reps who are hard to findDistributors culture with fewer viable reps who are hard to find

a.a. Distributor margins higher than US, more than expectDistributor margins higher than US, more than expect

2.2. No MANA in Mexico, rep agencies few, lowNo MANA in Mexico, rep agencies few, low--tech approachtech approach

III.III. National & Multisector Coverage ChallengesNational & Multisector Coverage Challenges

1.1. Exclusivity vs. NonExclusivity vs. Non--ExclusivityExclusivity National, Regional, SectorNational, Regional, Sector

2.2. Some Industries require local coverage and stocking and are hardSome Industries require local coverage and stocking and are hardto cover with one intermediary (hardware, MRO).to cover with one intermediary (hardware, MRO).

3.3. Multisector coverage challengesMultisector coverage challenges sector vs. functional focussector vs. functional focus

a.a. Often with overlapping regional coverage issuesOften with overlapping regional coverage issues

b.b. Need for multiple intermediaries = channel conflictsNeed for multiple intermediaries = channel conflicts


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Mexican Distributor OptionMexican Distributor Option

I.I. Most typical & traditional market entry strategyMost typical & traditional market entry strategy1.1. When practical, the first method consideredWhen practical, the first method considered

II.II. RoleRole: Imports product, usually stocks product, buys/resells: Imports product, usually stocks product, buys/resellsproduct, controls price/margins, accepts buyer credit riskproduct, controls price/margins, accepts buyer credit risk

III.III. AdvantagesAdvantages: Holds stock, does marketing and in: Holds stock, does marketing and in--market work,market work,provides afterprovides after--sale service, only one credit issue.sale service, only one credit issue.

IV.IV. DisadvantagesDisadvantages: No control of price or margins, branding and: No control of price or margins, branding andsales staff control issue, may carry multiple and evensales staff control issue, may carry multiple and evencompetition product, usually woncompetition product, usually wont broaden focus for you.t broaden focus for you.

V.V. Distributor whenDistributor when: below $5: below $5--10,000, commodities, replacement10,000, commodities, replacementparts, stocking, if master distributor appropriate, if broadparts, stocking, if master distributor appropriate, if broadcoverage needed/wantedcoverage needed/wanted

VI.VI. DecisionDecision: Big fish in small pond vs Small fish in big pond: Big fish in small pond vs Small fish in big pond


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Mexican RMexican Rep/Agent Optionep/Agent Option

I.I. Not as typical, growing with push towards selling directNot as typical, growing with push towards selling direct

II.II. Nature of RepsNature of Reps -- Hard to find, very small, accidental notHard to find, very small, accidental notprofessional reps, suspicious, little formal organizationprofessional reps, suspicious, little formal organization

III.III. RoleRole: Does not buy/resell nor import product, finds & forwards: Does not buy/resell nor import product, finds & forwardsclients. receives commission when client pays, helps with AR.clients. receives commission when client pays, helps with AR.

IV.IV. AdvantagesAdvantages You control pricing, have better marketing/You control pricing, have better marketing/branding control, will help with service, helps with AR with paybranding control, will help with service, helps with AR with paycontingency;contingency; Better meet commitment & presence expectationsBetter meet commitment & presence expectations..

V.V. DisadvantagesDisadvantages You are responsible for invoicing, importingYou are responsible for invoicing, importingAR/credit risk with clients, no stock in country = delays,AR/credit risk with clients, no stock in country = delays,

VI.VI. Rep WhenRep When: Above $5: Above $5--10,000, capital goods, non10,000, capital goods, non--stocking,stocking,master distributor inappropriate, want more than distributormaster distributor inappropriate, want more than distributor support,support,and/or service/technical knowledge important.and/or service/technical knowledge important.

VII.VII. DecisionDecision: Agency vs. One man vs. De facto employee: Agency vs. One man vs. De facto employee1.1.Possible need for dependent rep/ de facto employeePossible need for dependent rep/ de facto employee

a.a.Need for Evangelism and Industrial Rep ChallengesNeed for Evangelism and Industrial Rep Challengesb.b.Nevada company exampleNevada company example


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Reasons forIncorporation in MexicoReasons forIncorporation in Mexico

I.I. Selling through intermediaries not viableSelling through intermediaries not viable

1.1. Service requirements require OEM local presenceService requirements require OEM local presence

2.2. Simple client demands (automotive)Simple client demands (automotive)

3.3. Want rep but need to stock productWant rep but need to stock product

4.4. Import Registrations and NOM control issuesImport Registrations and NOM control issues5.5. Government procurement viability needsGovernment procurement viability needs

6.6. Local Invoicing requirements (e.g. catalog sales)Local Invoicing requirements (e.g. catalog sales)

7.7. High demand but price sensitivity wonHigh demand but price sensitivity wont allow fort allow forintermediary margins and commissionintermediary margins and commission

8.8. Channel market complexity requires local presence,Channel market complexity requires local presence,warehousing, and distribution.warehousing, and distribution.

9.9. Market Potential and importance to overall export salesMarket Potential and importance to overall export saleswarrants investment in proprietary staff and distribution.warrants investment in proprietary staff and distribution.


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NOMS & Other Technical Trade IssuesNOMS & Other Technical Trade Issues

I.I. Obligatory Product Certifications/RegistrationsObligatory Product Certifications/Registrations1.1. Performance and Safety Standards to protectPerformance and Safety Standards to protect

consumers not normally applicable to industryconsumers not normally applicable to industry

2.2. Importer held, some can be held by US companiesImporter held, some can be held by US companies

a.a. Discrepancies between government agenciesDiscrepancies between government agencies

II.II. Label Retail/Consumer RequirementsLabel Retail/Consumer Requirements1.1. General and Food products: NOM 50 and 51General and Food products: NOM 50 and 51

2.2. Specific Product labeling standards:electronics,clothingSpecific Product labeling standards:electronics,clothing

3.3. Products not sold in retail environment can be exemptProducts not sold in retail environment can be exemptIII.III. Importers must insure that products meet theseImporters must insure that products meet these

standards before they can import, unlike ULstandards before they can import, unlike UL


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Mexico Customs IssuesMexico Customs Issues

I.I. Tariffs at 0% (Tariffs at 0% (except with retaliation, 90 at 20%*except with retaliation, 90 at 20%*))1.1. Europe close to 0% as wellEurope close to 0% as well no US advantageno US advantage

2.2. Rest of world without trade agreements: closer to 20%*Rest of world without trade agreements: closer to 20%*

II.II. IVA vs. Sales Taxes: import & sales processingIVA vs. Sales Taxes: import & sales processingIII.III. Intercompany pricing & customs valuation issuesIntercompany pricing & customs valuation issues

IV.IV. NonNon--tariff issues if not barrierstariff issues if not barriers1.1. Mexican NAFTA retaliation measuresMexican NAFTA retaliation measures

2.2. Chinese Quotas and Safeguard MechanismsChinese Quotas and Safeguard Mechanisms

3.3. RegulatoryRegulatory

a.a. NOMsNOMs Border vs Domestic EnforcementBorder vs Domestic Enforcement

b.b. Health PermitsHealth Permits Cofepris problems/delaysCofepris problems/delays


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IV. Retail, GovIV. Retail, Govt & B2Bt & B2BSales DynamicSales Dynamic

Before and After CrisisBefore and After Crisis


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Mexican Imports by Composition

(January 2009)

13%

71%

16%

Consumer oods

Intermed Goods

Capital Goods


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-50.00%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

2006 Sep-08 Jan-09

I port o positionIncrease (%)

Consumer oods

Intermed oods

Capital oods


Growth/Decline (2008)


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Growth/Decline (2009)

* Source: INEGI 2009 Data from Jan Sep


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Retail/Consumer Sales in MexicoRetail/Consumer Sales in Mexico

I.I. Before October 2009Before October 2009

1.1. Good purchasing power, strong demand for foreignGood purchasing power, strong demand for foreignproducts, special taste for American goodsproducts, special taste for American goods

2.2. Price important but novelty key as wellPrice important but novelty key as well

3.3. Consumer credit at historic levels, fueling demandConsumer credit at historic levels, fueling demand4.4. Open often to initial purchases at the borderOpen often to initial purchases at the border

5.5. Domestic warehousing and pricing key to replentishmentDomestic warehousing and pricing key to replentishment

II.II. After October 2009After October 2009

1.1. Dollar denominated purchasing avoidedDollar denominated purchasing avoided import substitutionimport substitution

2.2. Domestic warehousing and pricing key for initial entryDomestic warehousing and pricing key for initial entry3.3. If price is not right, novelty and cost savings essentialIf price is not right, novelty and cost savings essential

4.4. Strong Mexican consumption tendencyStrong Mexican consumption tendency

5.5. Consumer credit available but higher ratesConsumer credit available but higher rates


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Government Sales: Strongest ProspectsGovernment Sales: Strongest Prospects

I.I. OpportunitiesOpportunities Dams, wastewater & clean water, medical,Dams, wastewater & clean water, medical,construction, civil engineering/road projectsconstruction, civil engineering/road projects1.1. WaterWater -- 70% of products/technology are imported70% of products/technology are imported2.2. Medical and ConstructionMedical and Construction Large percentage as wellLarge percentage as well

II.II. DirectDirect Only federal, will be challenging to winOnly federal, will be challenging to win1.1. Unrealistic without local presence or local intermediaryUnrealistic without local presence or local intermediary

III.III. IndirectIndirect Find integrators and provide products they cannot makeFind integrators and provide products they cannot makeor get in Mexicoor get in Mexico1.1. Some Import Substitution & Price Sensitivity ConcernsSome Import Substitution & Price Sensitivity Concerns2.2. Try to get products speced into bid with integrators helpTry to get products speced into bid with integrators help

IV.IV. GovGovt Revenue Up: 1/3 of federal spending and large part of federalt Revenue Up: 1/3 of federal spending and large part of federalsubsidies to states/cities = oilsubsidies to states/cities = oil

1.1. $120 US a barrel at peak, $70 now with hedging$120 US a barrel at peak, $70 now with hedging2.2. Savings & debt profile: Peso debt is 6x more than dollar debt.Savings & debt profile: Peso debt is 6x more than dollar debt.3.3. 20062006--2012 NIP infrastructure program underway2012 NIP infrastructure program underway

a.a. Money reserved for projects before crisisMoney reserved for projects before crisisb.b. Mexican govt: project spending will not be altered in 2009Mexican govt: project spending will not be altered in 2009c.c. Mexican govt efforts to eliminate red tape to excelerate projectsMexican govt efforts to eliminate red tape to excelerate projects


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B2B Sales Dynamic in MexicoB2B Sales Dynamic in Mexico

I.I. With crisis, sales will be difficult, especially automotive,With crisis, sales will be difficult, especially automotive,maquiladora, capital goods.maquiladora, capital goods.

II.II. Three best approaches/focuses in 2009Three best approaches/focuses in 2009::

1.1. Inputs and aftermarket parts without local competitionInputs and aftermarket parts without local competitiona.a. Not made in Mexico or inferior/unacceptable qualityNot made in Mexico or inferior/unacceptable quality

b.b. Cubanization of Equipment: Repair and wait.Cubanization of Equipment: Repair and wait.

2.2. Less expensive products that can handle devaluationsLess expensive products that can handle devaluations

3.3. Worst Case Scenario: Use time to establish, improve, orWorst Case Scenario: Use time to establish, improve, orchange channels to prepare for 2010 recoverychange channels to prepare for 2010 recovery

III.III. Catalog sales/distribution is growing & viableCatalog sales/distribution is growing & viable1.1. Grainger, C&H Distributors, Fastenal, Wesco, TraversGrainger, C&H Distributors, Fastenal, Wesco, Travers


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Wisconsin Trade OfficeWisconsin Trade Office -- MexicoMexico

Toll Free US NumberToll Free US Number: 1: 1--888888--750750--09880988

Tel.Tel. 011-52-555-378-3890 or 40

EE--mail:mail: vlencionivlencioni@@lgaconsulting.comlgaconsulting.com

Website:Website: www.lgaconsulting.comwww.lgaconsulting.com

Documents

LGA Consulting - Market Entry & Sales & Channel Options in Mexico