Mexico Market Update

New opportunities may exist in Mexico for Wisconsin companies in the energy sector, specifically with the state-owned oil company Petroleos Mexicanos (PEMEX), due in part to reforms proposed by President Calderón's administration. Mexico's ownership of this natural resource is guaranteed by the country's constitution, and opening any portion of the sector to foreign investment is extremely controversial. President Calderón has proposed allowing private investment in refining, storage and transportation, with the goal of improving the technology and increasing output. Mexico's crude oil exports have been declining since 2004, and without some reform this critical driver for the Mexican economy is likely to continue to decline.

While Mexico has succeeded in recent years in diversifying its economy away from relying entirely on oil exports and U.S. buyers for products manufactured in Mexico, the country will face challenges during these tough economic times. The slowdown in the U.S. market, still the buyer of an estimated 75 percent of Mexico's exports, will inevitably hurt the Mexican economy as well. However, government infrastructure projects in housing, ports, rail and highways are expected to continue, providing opportunities for U.S. inputs and equipment. GDP growth in Mexico is projected at 2.4 percent for 2008, and 3.4 percent in 2009.

Mexico continues to be the second largest export market for U.S. and Wisconsin products after Canada. During the first two quarters of this year, both Wisconsin and U.S. exports to Mexico grew by 11 percent over the same time period last year. Top Wisconsin product categories heading south include electrical and industrial machinery, vehicle parts, plastics, and paper and paperboard. Industrial machinery, a broad group of manufactured products included in the harmonized tariff system chapter 84, has seen an export increase of nearly 40 percent during the first half of this year.

According to the Country Commercial Guide for Mexico, updated annually by the U.S. Commercial Service in Mexico, best prospect sectors include automotive parts and supplies, electronic components, energy and environmental, airport and ground support equipment, telecommunication, security and safety, restaurant and hotel, transportation, and low-income housing inputs. Within the agricultural market, highlighted sectors include dairy products, red meat, poultry, and fresh fruit.

If you would like information regarding opportunities in your industry sector, please take advantage of the research resources available through Wisconsin's trade office in Mexico City. For more information, contact Susan Dragotta, our Latin American Specialist, susan.dragotta@wisconsin.gov, 262-691-5147.

-- Stanley Pfrang