Mexico Final Small - Citibank · Six hours b ehind GMT in Mexico City President Felipe Calderon...

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COUNTRYPROFILE

EXICOM

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COUNTRY OVERVIEW

BASIC DATACapital City:

Land Area:

Population:

Main Towns:

Climate:

Language:

Measures:

Currency:

Time:

Government:

Mexico City

1,964,375 sq km

112.5m in 2010

Guadalajara (1.5M) Monterrey (3.2M) Tijuana (1.6M) Puebla (1.5M)

Tropical in the south, temperate in the highlands, dry in the north.

Spanish is the official language. Over 60 indigenous languages are also spoken, mainly Náhuatl (1.2m speakers), Maya (714,000), Mixtec (387,000) and Zapotec (403,000)

Metric System

Peso (P s ). Average exchange rates in 2010: Ps12.64:US$1; Ps16.75:€1

Six hours b ehind GMT in Mexico City

President Felipe CalderonAgrarian Reform Abelardo Escobar PrietoAgriculture Francisco Javier MayorgaCommunications & Transport Dionisio Pérez-Jácome Friscione Economy Bruno FerrariEnergy Jordi Herrera FloresEnvironment & Natural Resources Juan Rafael Elvira QuesadaFinance & Public Credit José Antonio Meade KuribreñaForeign Relations Patricia Espinosa CantellanoHealth Salomón Chertorivski WoldenbergInterior Alejandro Poiré RomeroLabor & Social Welfare Javier Lozano AlarcónNational Defense Guillermo Galván GalvánPublic Education Alonso Lujambio IrázabalPublic Security Genaro García LunaSocial Development Heriberto Félix GuerraTourism Gloria Guevara ManzoCentral Bank Governor Agustín Carstens

Source: The Economist Intelligence Unit as of February 2012

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Citi Transaction Services Latin America & Mexico

A. POLITICAL STRUCTURE

Official Name United Mexican States

Political Divisions31 states and the Federal District (Mexico City); states are divided into municipalities

Form of Government Presidential, with a constitutionally strong Congress

The Executive The president is elected for a non-renewable six-year term and appoints the cabinet.

National LegislatureBicameral Congress: 128-member Senate, elected for a six-year term, with 64 seats elected on a rst-pastthe- post basis, 32 using the rst minority principle and 32 by proportional representation; 500-member Chamber of Deputies (the lower house), elected for a threeyear term, with 300 seats elected on a rst-past-the-post basis and 200 by proportional representation.

Regional Governments State governors are elected for six-year terms; each state has a local legislature and has the right to levy state-wide taxes; municipal presidents are elected for three-year terms.

Legal System There are 68 district courts and a series of appellate courts with a Supreme Court; federal legal system, with states enjoying signicant autonomy.

National ElectionsJuly 2006 (presidential and congressional); next elections July 2012 (presidential and congressional upper and lower house).

National GovernmentThe president, Felipe Calderón of the centre-right Partido Acción Nacional (PAN), heads a minority government.

Main Political OrganizationsGovernment: Partido Acción Nacional (PAN)Opposition: Partido Revolucionario Institucional (PRI); Partido de la Revolución Democrática (PRD); Partido Verde Ecologista de México (PVEM); Convergencia; Partido del Trabajo (PT); Partido Nueva Alianza (Panal).

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B. POLITICAL OUTLOOK 2012 – 2016

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Despite some early campaigning blunders, the Economist Intelligence Unit’s baseline sce-nario is that Enrique Peña Nieto, the candidate of the Partido Revolucionario Institucional (PRI), will win the presidential election, defeating the yet to be selected candidate of the current ruling party, the centre-right Partido Acción Nacional (PAN), and Andrés Manuel López Obrador of the centre-left Partido de la Revolución Democrática (PRD). There is little hope of any significant progress on important political and economic reforms (including labor, security, tax, energy and education bills) before the July 2012 election and prospects thereafter are also uncertain, given the improbability of the next president commanding a working majority in Congress. In principle, the PAN would tend to be in favor of addressing the reform issues given its efforts in this area when it was in office, but it is likely to be less supportive of similar PRI initiatives with no election on the horizon. Therefore, in the absence of a political reform that would make it easier for the party of the incoming presi-dent to command a congressional majority, continuing legislative delays on structural reforms are expected. Although complete gridlock is unlikely, as public pressure mounts for some action to tackle rising crime and the slowing economy, any bills that pass are likely to be heavily watered down, which will reduce their effectiveness. Aside from governability issues, a worsening security situation with escalating drug-related violence will remain a key concern for the next administration. according to official figures released in January, a total of 47,515 murders were recorded from when the current administration took office in December 2006 until September 2011. Increasingly brutal tactics by drugs cartels have con-vinced a growing number of people that the security strategy of the current president, Felipe Calderón (which is centered on engaging the armed forces to confront the cartels), is in urgent need of revision. However, a convincing alternative has not yet been put forward by the opposition. Even if the next government chooses to concentrate its scarce resources on tackling the most powerful drug-trafficking organizations, such as the Sinaloa Cartel and Los Zetas, broader reforms to the police force and judiciary (not to mention pov-erty reduction and job creation schemes) would be required for substantial progress to be achieved. In the absence of more radical. and unlikely measures to tackle the crime epidemic (such as a partial legalization of drugs or stricter gun control in the US), this is expected to remain a critical issue in the medium term.

The bilateral relationship with the US, Mexico’s dominant trade and investment partner and host to around 13m people of Mexican origin, will remain the overriding foreign policy focus. We expect closer co-operation on security and drugs policy in the medium term, as demon-strated by the recent announcement that the US is seeking a small physical presence in Mexico in order to train and advise local security forces. However, the prospect of a signifi-cant step-up in US aid to support security improvements appears slim because of US fiscal constraints, as well as Mexico’s long-running aversion to a more integrated role for the US in its territory.


C. ECONOMIC PERFORMANCE

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In spite of support from the US president, Barack Obama, for a reform of US immigration policy to help to assimilate undocumented Mexican workers into the formal workforce, the resurgence of the Republican Party at the mid-term US elections in November 2010 and the upcoming general elections this year mean that a comprehensive reform bill is unlikely to advance before then. Although Mexico can boast one of the largest networks of trade agree-ments in the world (comprising over 40 countries on three continents), efforts to diversify trade and investment relations away from the US have had limited success so far, with that country still accounting for 80% of Mexico’s total exports in 2010.down from 90% in 2000. Efforts in this direction are likely to be intensified in the forecast period, notably by discuss-ing closer trade links with Brazil (which currently accounts for around 1% of export sales), as well as with the Trans-Pacific Partnership (TPP) pact; the latter with the aim of boosting trade and investment ties with Asia, including Japan.

In December 2011 the survey of the manufacturing sector by the Instituto Nacional de Estadística y Geografía (INEGI, the national statistical institute) indicated that business confidence increased by 1.7 points over the previous month on a seasonally-adjusted basis. This reflected gains in orders and production, while employment and inventories declined. The unadjusted indicator reached 50.9 points, an increase of 0.2 points over the last 12 months. Similarly, orders and production were higher than a year earlier, while employ-ment, supplier deliveries and inventories remained lower. These trends are compatible with a scenario of ongoing recovery but raised uncertainty as companies continue to increase production and maintain a stable level of new orders, while at the same time remaining reluctant to increase employment while they let inventories run down. If eco-nomic activity in the US continues to improve, domestic manufacturing production is likely to also stay on a path of growth. However, the seasonally-adjusted index of consumer con-fidence edged down 0.69% from November to December 2011. This points to concerns from households over the recovery losing steam and a possible intensification of the head-winds from the global economy in 2012. The unadjusted series stood at 90.8 points, which was 0.4% lower than a year ago. Although on average the index has been relatively stable during the past few months, there seems to be a slight downward trend in all components except purchases of durable goods.

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In December 2011 the headline consumer price index increased by 0.8% month on month and 3.8% compared to the same month in 2010. This was the highest year-on-year rate seen since the begin-ning of the year, and was higher than the 3.5% rate seen in November. The monthly increase in December reflected a 1.9% rise in non-core prices, marking the sixth consecutive increase and the highest jump for the month of December since 2000. The main driver was non processed foodstuffs, which rose by 4.3% during the month, reflecting a 2.7% increase in prices of meat products. This item added 0.4 percentage points to headline inflation during December. Meanwhile, core prices increased 0.5%, the highest jump since January 2010. Processed foodstuffs rose 0.7% and added 0.2 percentage points, while other services increased 0.7% and contributed 0.1 percentage points to headline inflation. Overall, the spike in inflation can be partly explained by a combination of higher energy prices, exchange rate depreciation and negative weather conditions. But assuming that these pressures recede, the 12-month change in headline inflation will edge down during the first quarter of 2012, and remain stable thereafter. Given the possibility of external shocks, it is too early to discount the possibility of inflation bouncing back in the second half of the year. And with uncer-tainty clouding the global macroeconomic outlook, the internal debate within the Banco de México (Banxico, the central bank) on whether to cut rates is likely to continue and intensify during the first few months of 2012.

During the first two weeks of January, the exchange rate regained ground and appreciated by 4.5%, from a low of Ps14.2:US$1 in late November to Ps13.6:US$1. This strengthening partly reflects Banxico’s decision to reintroduce dollar auctions of US$400m per day at the end of November, although so far not even one has been awarded. In addition, recent better than expected data releases in the US (which prompted the Economist Intelligence Unit to revise its 2012 forecast for GDP growth in that country upward from 1.3% to 1.8%) could have also helped reassure the markets that economic activity will continue improving. However, a bigger than expected deterioration in global economic conditions could have a significant effect on the exchange rate, leading to a pronounced depreciation of the peso. For Banxico, the most important objective is to allow an orderly correction of the exchange rate and avoid sharp adjustments that could jeopardize inflation expectations. In addition, high volatility could also adversely affect consumer and business expecta-tions, and therefore the overall pace of the recovery. This helps to explain the decision to reintro-duce dollar auctions of a limited amount. At the same time, the weakening of the currency in an envi-ronment of global economic slowdown is not an entirely negative event, as it can help to alleviate some pressures stemming from lower foreign demand and improve relative competitiveness against some of the Asian economies. Over the medium term, Banxico will probably favor adjustment taking place through the currency rather than interest rates, which are likely to increase and eventually become attractive for foreign investors once again.

E. ECONOMIC FORECAST

Economic Growth

Stronger than expected GDP growth in the third quarter prompted us to revise up our full-year estimate for 2011 last month, from 3.4% to 3.9%, but the outlook for 2012 remains highly uncertain, with signicant downside risks to our (unchanged) forecast of 3.1%. Despite some trade diversication, close synchronicity with the US business cycle leaves the economy vulnerable to any deterioration in economic conditions in the US market. Recent US indicators have been more positive, but an ongoing problem is that the collapse in property prices has eroded the wealth of the household sector, which is already saddled with high levels of debt. This will have an impact on US domestic demand, which will feed through into Mexico’s exports (which account for around one-third of total GDP). As a result, growth of export volumes will weaken in 2012, but on the benign assumption that the global picture picks up in 2013, should accelerate to an average of 6.6% per year in 2013-16. Real imports will follow a similar pattern, also remaining weak in the early part of the forecast period, before picking up thereafter. Mexico would not be aected directly by an escalation of economic diculties in the euro zone, but with European banks (several of which are active in Mexico) needing to meet stricter capital requirements, they could slow credit growth, thereby dampening domestic demand. At the same time, the banking sector appears solid and well capitalized (see Economic policy) and both bank deposits and commercial bank loans continue to expand at a satisfactory pace, according to the most recent data.

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Inflation

Disciplined scal management over the economic cycle, weak demand-side pressures and currency appreciation until August have so far kept ination contained, but, as the recent weakening of the currency feeds through to consumer prices, inationary pressures are expected to rise in early 2012.

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Low inflation will support some gains in real wages, but weak job creation will prevent private consumption growth from rising significantly above 4% in the forecast period. Real lending rates will remain low and credit growth is expected to remain firm, but limited banking pen-etration suggests that credit will fail to stimulate consumption significantly, despite recent efforts to improve credit provision. Fixed investment growth will pick up only from 2013, on the assumption that some industrial restructuring in the US prompts companies to set up in Mexico. However, shallow capital markets will restrict financing options and high (and rising) levels of violence will deter investment in some parts of the country. Government consump-tion growth will also be weak, reflecting revenue constraints faced by the central government and conservative borrowing policies.

On the supply side, export-oriented manufacturing will suffer on the back of the gloomy global outlook, with domestically oriented services expected to perform marginally better. In the medium term, restructuring of the US automotive industry is likely to benefit Mexico, as some production may shift to more cost-effective Mexican locations. Evidence of some Chinese firms setting up factories in Mexico for export to the US, as well as some firms choos-ing Mexico over China, owing to lower transport costs and rising Chinese wages, will also provide some support in the medium term. Sectors including utilities and construction, which depend to a significant extent on domestic demand, will stay weak in 2012, but should post stronger growth from 2013. On the negative side, growth in tourism will be deterred by high crime levels, while poor infrastructure will cap growth in agriculture. Expansion of financial services, which underpinned GDP growth in the pre-crisis years, will also remain below poten-tial, owing to ongoing cautious lending practices on the part of banks.

Exchange Rates

COUNTRY OVERVIEW

External Sector

From an average of 0.6% of GDP in 2009-10, the current-account decit is expected to widen in the forecast period, reaching 3.3% of GDP by 2016. This will be mostly owing to a widening of the merchandise trade decit to US$45.9bn in 2016 (equivalent to 3% of GDP). The services decit will remain relatively stable as a share of GDP over the forecast period, as sluggish growth in tourism (on the back of security concerns and economic slowdown in Mexico’s key markets) is oset by still-high freight costs, whereas the income decit will ease as a share of GDP, owing to higher returns on international reserves and lower interest payments on foreign debt (these factors will oset rising prot repatriations from foreign companies operating in Mexico). The current transfers surplus.which is dominated by workers’ remittances from Mexicans overseas.has been falling since 2008 as a share of GDP, but will pick up moderately in 2012-16 (although at 2.4% of GDP in 2016, it will remain signicantly lower than the 2.7% of GDP peak in 2006). Our forecasts rest on the assumption that the current-account decit will remain manageable and largely nanced by FDI inows, although portfolio ows will also be strong in the short term, supported by interest rate dierentials with developed economies.

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Mexico’s large external financing requirement and exposure to the US economy make the peso particularly vulnerable to shifts in market sentiment, as shown by a sharp currency depreciation in mid-September when the peso weakened from Ps12.8:US$1 to Ps13.9:US$1 in the space of a week. The peso has remained vulnerable since then, reaching Ps14.2:US$1 in late November before recovering to around Ps13.6:US$1 in mid-January, partly in view of better US data and consequent rosier prospects for Mexico’s outlook. Further weakening in 2012 is possible given the gloomy global picture, which may deter investors from riskier asset classes such as emerging market currencies, but we do not expect the same extent of weakening as in 2008-09 (when the peso reached nearly Ps15:US$1 in February 2009). Banxico’s decision to launch daily auctions of US$400m of reserves when the peso weak-ens by more than 2% will help to control currency volatility. Banxico’s total foreign reserves stood at US$144 at the beginning of January, up from US$121bn at year-end 2010, and remain relatively stable given that the bank continues to accumulate them from trans-actions with Petróleos Mexicanos (Pemex, the state oil firm) and through purchases of foreign exchange with market participants. Moreover, the peso does not appear currently overvalued in real terms, and we expect stronger foreign direct investment (FDI) and port-folio inflows in the forecast period.

However, this will be muted by only modest increases in real wages and ample spare capacity, which will prevent domestic demand from exerting signicant pressure on ina-tion. We retain our baseline assumption that ination should remain broadly within the 2-4% target range in 2012, but with a heightened risk of overshooting of the ocial target, given monetary easing. Ination will be signicantly lower than the average rate of 5.2% in 2008-09, but much higher than OECD ination (which will record an annual average rate of 2.2% in the forecast period).


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CASH MANAGEMENT SERVICES

A. GENERAL BUSINESS TERMS AND CONDITIONS

Account Services

Under Mexican law. Customers who wish to open Demand Deposit Accounts (or checking accounts) may do so in USD and in Mexican Peso. USD accounts may be interest bearing, accounts denominated in Mexican Peso may receive interest pegged at a rate under Cetes (Certicados de la Tesoreria). Mexican banks provide concentration accounts through which deposits can be made at any of the branches. There are no baking laws or regulations restricting automatic funds concentration, funding of accounts balances or intra-day overdrafts.

Payments

Almost 80% of payment transactions in Mexico are made via check or cash. In 1995, Banxico introduced several reforms to the Payment System, with the main objective of converting most of the payments to a more ecient system. First step was the creation of a wider Electronic Payment System (Sistema de Pagos Electronicos de Uso Ampliado – SPEUA) that worked until July 2005 when a new system called SPEI (Sistema de Pagos Electronicos Interbancarios) arrived. SPEI has dramatically changed the way Financial Institutions and Corporations move funds. This system is comparable to the U.S. Federal Wire. The postal system is generally unreliable and therefore the seller usually sends a messenger to the buyer’s payment center on a specied payment date. Banamex is the only bank in Mexico capable of making payments to almost any Mexican Bank in the country.

Collections

The collection methods used by companies in Mexico include:• Collection of checks at the client’s oce via specialized messenger service (ECD) – Depósito Electrónico Banamex• Direct deposit to the account using a single reference for identication and amount and due date validating (optional) with cash and checks – Cuenta Concentradora or Servicio Electrónico de Pagos• Credit to the account via funds transfer – Cuenta Concentradora• Direct Debit, interbank debits to local banks - Domiciliación• Commercial cards, Distribution Cards, and Purchase Cards to collect from customers facilitating a credit line with corporate risk.

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• On Line Invoicing, it is an electronic collection service where you can submit, collect, reconcile and visualize the detail of the company’s invoices – Factura Electrónica

Large Volume Cash CenterCash centers exist in cities like Mexico City so that large sums of cash can be collected. The cash is usually picked up by an armored car service (hired by the client) that keeps the amount overnight and deposits it the next day to a concentration bank. This type of service is mainly used by utility companies, public organizations and corporations that collect large amounts of cash (for example, consumer goods companies that collect cash directly from their point of sale) – Servicios de Efectivo Tradicional and Electrónico.

B. BANAMEX’S ACCOUNTS SERVICES SOLUTIONS

Resident and Non-resident SmartAccount - Local Currency

Smart Account Local Currency• In this type of checking account no interest rate is paid• Requires an initial deposit of: $10,000 (MXN)• Minimum average balance of: $10,000 (MXN)

Smart Account Premium• Requires an initial deposit of: $20,000 (MXN)• Interest rate of CETES (Treasury Certicates) is paid according to the monthly average balance• Offers an interest rate of 15%, 60%, 65%, 70%, 80%, 90% or 100% CETES

Smart Accounts Local Currency with Interest• Requires an initial deposit of: $20,000 (MXN)• Minimum average balance of: $20,000 (MXN)• Interest rate is paid according to the monthly average balance of the checking account negotiated between the executive and client.Resident and non-resident SmartAccount - U.S. Dollar

SmartAccount – USD• Requires an initial deposit of: $500(USD)• No interest rate is paid in this type of checking account• Minimum average balance of: $500 (USD)



SmartAccount – USD with interest• Requires an initial deposit of: $1,000(USD)• Minimum average balance of: $1,000 (USD)• Oers an interest rate of 75%, 90% or 100% of LIBOR

* Tax rate is charged on the amount deposited not in the interest rate, if the tax rate is higher than the interest rate there is no interest paid.

Documentation & RegulationTo open an account with Banamex, companies must submit:• Copy of the company’s incorporation agreement, and powers of attorney.• Oficial ID on the company’s representatives (signatories and accounts ocers)• Copy of the company’s RFC (taxpayer ID)• Copy of the company’s proof of address in Mexico

Basic Transactions, Services & Fees

Basic transactions, services & fees (some fees apply if the event occurs) are charged to the checking account.

Basic Transactions:• Opening fee• Account opening• Annual management fee• Check issued• Free checks per month

Concepts only apply if the event occurs:• Monthly minimum average balance• Account management when balance is lower than the monthly minimum• Returned check due to insucient funds• Returned deposited check

C. PAYMENT SOLUTIONS IN MEXICO

Cross Border Payments

CitiDirect Online BankingWorldLink SM


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Local Payments

PayLink SMLocal electronic banking, BancaNet Empresarial is used for local tax payments and service payments, such as: mobile phone, telephone lines, electricity, etc.Both services include electronic funds transfers (third parties and payroll), manager checks and local referenced payment orders.

Custom Taxes

Impuestos Aduanales is the service that enables your company to pay directly custom taxes, derived from your international commerce transactions, without the participation of a third party.

D. BANAMEX’S COLLECTIONS SOLUTIONS IN MEXICO

Cross Border Collections

Funds TransfersInternational funds transfers can be received in USD or MXN. The foreign exchange (FX) applied will be imposed by FX desk, and the value date is same day if received before 1:30 p.m. Domestic funds transfers are accepted in local currency and USD accounts located in Mexico are treated as Payments Orders.

Local CollectionsCollections can be processed at the branch level with or without a reference. This can be a numeric or alphanumeric reference (Cuenta Concentradora). Automated collections can be done with the Banamex Direct Debit product (Domiciliación - similar to ACH debit in the U.S.).

E. DELIVERY SYSTEMS

Cross Border Delivery SystemsCitiDirect Online Banking SMInternational Delivery SystemSWIFT• Local Address: BNMXMXMM• Messages time limits: 9:00 a.m. – 1:30 p.m. is the operative schedule, but the system can receive information at all hours.



• Message types accepted: All messages. However, MT (operative messages) must be received through an authenticator (thus must have a prior agreement with Banamex).• CitiDirect Online Banking SM Local Delivery Systems• CitiDirect Online Banking• Scheduled CitiDirect On Line times in Mexico 9:00 a.m. to 6:00 p.m. BancaNet Empre sarial• Available 24/7 for book to book transactions. Scheduled times for other services.

LIQUIDITYCurrently, the Mexican peso is a fully convertible, free-oating currency and there are no exchange controls. Local and foreign currency accounts are available to resident and non-resident entities. All nonresident entities are required to register any foreign currency accounts held in Mexico with the banking authorities.

There are generally no “lifting fees” (Taxes that companies may be required to pay when moving funds out of a country) on transfers between resident and non-resident accounts. There are Mexican Peso and USD Accounts available in Mexico, both for resident and non-resident entities.

Banks are allowed to pay interest on any account, but in practice rarely pay interest on current (demand deposit) accounts, and if they do, the interest payment is generally much lower than that which could be earned in an investment instrument.

A. OVERDRAFTS

Overdrafts (Líneas de sobregiro) are available to both resident and non-resident entities, but are a rather expensive nancing mechanism with interest charged at more than twice the rate on TIIE (Tasa de Interés Interbancaria de Equilibrio), Mexican benchmark interbank money market rate. It also depends on each banking relationship and the particular client’s credit prole and its bank’s appetite for providing the credit line.

B. BANK LOANS OF CREDIT/LOANS

Credit lines are available to both resident and non-resident entities, for working capital and long term purposes. Typically, short term loans are known as “Credito Revolvente”. An operational disadvantage of short-term debt is the continuing need to renegotiate or “roll over” the debt. A lender (bank) may decide not to roll over the loan or renew the credit line at maturity due to changing nancial variables in the company or changes in general economic conditions.


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C. BANKERS ACCEPTANCES (BA)

In Mexico, this type of instrument is rarely used for short-term funding. Its rates are based on the CETE or the Mexican benchmark interbank money market rate, known as “TIIE”.

D. COMMERCIAL PAPER (CP)

Most MXN denominated commercial paper is issued by large companies and non-banking financial institutions with strong credit quality and ratings. The rates are based on TIIE or CETE’s and discounted by brokers. Paper has to be issued as part of a revolving one-year credit program, and the typical tenor may range from 7 to 91 days.

This type of instrument provides a quick source of low-cost short-term nancing for large companies which are active in the market.

E. SUPPLIER CREDIT

Depending on the relationship between companies and their suppliers, dierent tenors of credit, ranging from 30 to 90 days after delivery, may be extended. There are some highly specialized relationships in which a “supplier-managed” replenishment program is established. In this program, the supplier maintains and tracks the inventory of materials it provides to a customer, and as the inventory is used, the supplier bills the customer for the items and replenishes the supply.

F. TRADE BILLS – DISCOUNTED

Banks will often discount trade bills for up to 90 days with recourse, but this form of nancing is most commonly used by small exporters. The most popular tenor is 45 days.

G. INTER-COMPANY BORROWING

It is common that parent companies nance their subsidiaries by extending supplier credit. Additionally, foreign-owned subsidiaries in Mexico may also access USD funding through inter-company loans. The usage of a cash concentration product (ZBA) facilitates this role, as funding is sent via the parent, and funds are controlled and disbursed via a “core account” (master account). This account may establish limits on the funds it provides, to the related “payables accounts”.



H. FACTORING

Factoring is another alternative for obtaining liquidity and involves the sale of receivables to a company that specializes in nancing and managing receivables.

TRADE SERVICES

A. TRADE FLOW

2010 EST

ExportsU.S. $291.3 billionImportsU.S. $297.8 billion

B. TRADE PRODUCTS AND SERVICES

Trade Services

• Letters of Credit• Documentary Collections• Standby Letters of Credit• Electronic Banking (Transaction Initiation)

Trade Finance

• Pre & Post Export Financing• Import Financing• Draft Discount• Medium term nancing• Exim or ECA’S• Value added tailor made transaction


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C. FOREIGN EXCHANGE REGULATIONS

FX Controls: NoCentral bank provides the FX: NoTrade Transactions reported: NoTrade Obligations reported: NoMandatory repatriation of export proceeds: NoCash-deposit for import: NoImport License: Yes, only for restricted / luxury articlesImport Restrictions: Depending on sectorO-shore accounts: YesRestrictions on hard currency transfers: NoRestrictions on income in investments: Yes, for restricted investments (oil, nuclear, etc.)Operates under ALADI: Yes

LOCAL REGULATIONS

A. IDENTIFICATION FILE FOR NATIONAL LEGAL ENTITIES

I. Provided that the client is a legal entity of Mexican nationality, the corresponding identication le must meet the following requirements:a) It must contain settled the following:- Firm name;- Line of business, activity or purpose;- Nationality;- Code of the Federal Taxpayer Registry;- Serial number of the Advanced Electronic Signature, when available;- Permanent address (including street name, avenue or road duly specied, external number

and, where appropriate, interior, colony or county, city or town, state and zip code);- Permanent address phone number;- Email, if any;- Date of incorporation, and Name(s) and surname, without abbreviations, of the manager

or managers, director or legal guardian who, with his/her signature, can bind the legal person for purposes of opening an account, creating a contract, or performing the operation in question.b) In addition, each entity shall obtain and include in the client identication le a copy of at least the following documents relating to the legal entity:(i) Testimony or certied copy of public documents providing their legal existence entered in the appropriate public record, according to the nature of the legal entity, or any instrument which include details of its constitution and its entry in that public record, or a document



that, according to the regime applicable to the legal entity concerned, proves its existence.In the event that the legal entity is newly formed, and such, it is not yet registered in the appropriate public record in accordance with its nature, the legal entity shall obtain a letter signed by a person legally empowered to prove his/her identity in terms of public instrument verifying its legal existence referred to in subsection b) paragraph (iv) of this section, stating the obligation to carry out the respective entry and provide, at the time, the data for the entity itself;

(ii) Tax Identication Card issued by the Secretary or evidence of the Advanced Electronic Signature, when the corresponding legal entity has it;

(iii) Proof of residence referred to in subsection a) of this section II, in terms of what is stated in subsection b) paragraph (iii) of section I [1];

(iv) Testimony or certied copy of documents containing the powers of the legal representative/s, issued by a public notary, when not contained in public documents attesting the legal existence of the legal entity in question, and the personal identication [2] of each of those representatives, pursuant to subsection b), paragraph (i) of section I [3];

II. Provided that the client is a person of foreign nationality, the entity in question must observe the following:a) In the event of the individual to declare to the entity that he/she does not have the immigration status of immigrant or immigrated in terms of the General Law of Population, the respective identication le shall contain settled the same data as specied in subsection a) of section I, and besides this, the entity shall obtain and include in that le a copy of the following documents: passport and ocial document issued by the National Institute of Migration, when it has the latter, stating its legal entry or stay in the country, as well as the document conrming the address of the client at his/her place of residence, in terms of subsection b) paragraph (iii) of section I of this provision. In addition, the entity concerned shall obtain from the individual referred to in this subsection, a declaration under subsection b), paragraph (iv) of section I of this provision.

B. IDENTIFICATION FILE FOR FOREIGN ENTITIES

a) In the case of foreign legal entities, the respective identication le shall contain settled the following:- Firm name;- Line of business, activity or purpose;- Nationality;- Code of the Federal Taxpayer Registry and/or serial number of the Advanced Electronic Signature, when available;

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- Permanent address (including street name, avenue or road duly specied, external number and, where appropriate, interior, colony or county, city or town, state and zip code);- Permanent address phone number;- Email, if any;

Date of incorporationb) In addition, each entity shall obtain and include in the client identication le a copy of at least the following documents relating to the legal entity:

(i) Document that proves conclusively its legal existence, as well as information that helps to determine its ownership structure and in the event that this legal entity is classied as high risk client in terms of the 25th of these provisions. Also, it should be collected and included documentation identifying the respective shareholders or members;

(ii) Proof of residence referred to in subsection b), in terms of what is stated in subsection b), paragraph (iii) of section I of this provision;

(iii) Testimony or certied copy of documents containing the powers of the legal representatives, issued by a public notary, when not contained in public documents attesting the legal existence of the legal entity in question, and the personal identication of each of those representatives, pursuant to subsection b), paragraph (i) of section I or subsection a) of this section III, as applicable. For those legal representatives who are outside the national territory and which do not have passports, personal identication must be, in any case, an original document issued by ocial authority in the country of origin containing the photograph, signature, and address of that representative. For purposes of the stated above, valid personal identication documents include, driver’s license and credentials issued by federal authorities of the country concerned. The verication of the authenticity of these documents is responsibility of the entities; Regarding the document referred to in paragraph (i), the entity in question shall require that this is duly legalized or, in the case that the country where the document was issued is part of “The Hague Convention”, the Requirement of Legalization for Foreign Public Documents is abolished, according to The Hague, Netherlands, October 5, 1961. It will be only required that the document bears an apostille attached to the referred convention. In the event that the client does not submit duly legalized or apostilled relevant documentation referred to in paragraph (i), it will be the entity’s responsibility to ensure the authenticity of that document.



C. IDENTIFICATION FILE FOR FOREIGN GOVERNMENTS

a) In the case of foreign governments, the respective identication le shall contain settled the following:- Name;- Activity or purpose;- Nationality;- Permanent address (including street name, avenue or road duly specied, external number and, where appropriate, interior, colony or county, city or town, state and zip code);- Permanent address phone number;- Email, if any;- Date of incorporation.

b) In addition, each entity shall obtain and include in the respective identication le of the foreign legal entity, a single copy of at least the following documents related to that legal entity:



(iii) Testimony or certied copy of documents containing the powers of the legal representatives, issued by a public notary, when not contained in public documents attesting the legal existence of the legal entity in question, and the personal identication of each of those representatives, pursuant to subsection b), paragraph (i) of section I or subsection a) of this section III, as applicable. For those legal representatives who are outside the national territory and which do not have passports, personal identication must be, in any case, an original document issued by ocial authority in the country of origin containing the photograph, signature, and address of that representative. For purposes of the stated above, valid personal identication documents include, driver’s license and credentials issued by federal authorities of the country concerned. The verication of the authenticity of these documents is responsibility of the entities; Regarding the document referred to in paragraph (i), the entity in question shall require that this is duly legalized or, in the case that the country where the document was issued is part of “The Hague Convention”, the Requirement of Legalization for Foreign Public Documents is abolished, according to The Hague, Netherlands, October 5, 1961. It will be only required that the document bears an apostille attached to the referred convention. In the event that the client does not submit duly legalized or apostilled relevant documentation referred to in paragraph (i), it will be the entity’s responsibility to ensure the authenticity of that document.

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D. IDENTIFICATION FILE FOR INTERNATIONAL ORGANIZATIONS

a) In the case of International Organizations, the respective identication le shall contain settled the following:- Agreement of incorporation/ document evidencing that are participating members- Date- Object- Name;- Activity or purpose;- Nationality;- Permanent address (including street name, avenue or road duly specied, external number and, where appropriate, interior, colony or county, city or town, state and zip code);- Permanent address phone number;- Email, if any;- Date of incorporation.

b) In addition, each entity shall obtain and include in the respective identication le of the foreign legal entity, a single copy of at least the following documents related to that legal entity:



(iii) Testimony or certied copy of documents containing the powers of the legal representatives, issued by a public notary, when not contained in public documents attesting the legal existence of the legal entity in question, and the personal identication of each of those representatives, pursuant to subsection b), paragraph (i) of section I or subsection a) of this section III, as applicable. For those legal representatives who are outside the national territory and which do not have passports, personal identication must be, in any case, an original document issued by ocial authority in the country of origin containing the photograph, signature, and address of that representative. For purposes of the stated above, valid personal identication documents include, driver’s license and credentials issued by federal authorities of the



country concerned. The verication of the authenticity of these documents is responsibility of the entities; Regarding the document referred to in paragraph (i), the entity in question shall require that this is duly legalized or, in the case that the country where the document was issued is part of “The Hague Convention”, the Requirement of Legalization for Foreign Public Documents is abolished, according to The Hague, Netherlands, October 5, 1961. It will be only required that the document bears an apostille attached to the referred convention. In the event that the client does not submit duly legalized or apostilled relevant documentation referred to in paragraph (i), it will be the entity’s responsibility to ensure the authenticity of that document.

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MARKET GUIDE FOR TREASURY

Allowed —No materialrestrictions

Operating Accounts1 Non-Residents ResidentsOnshore local currencyOnshore foreign currencyOffshore local currency Offshore foreign currency

Overdrafts Non-Residents ResidentsOnshore local currencyOnshore foreign currency

Interest-Bearing Accounts Non-Residents ResidentsOnshore local currency operating accountsOnshore foreign currency operating accounts

Time Deposits Non-Residents ResidentsOnshore local currencyOnshore foreign currency

Domestic Notional Pooling2,3 Non-Residents ResidentsOnshore local currencyOnshore foreign currency

Inter-company Lending5 Non-Resident to Resident Resident toNon-residentOnshore local currencyOnshore foreign currency

Non-Residents ResidentsOnshore local currencyOnshore foreign currency

FX Convertibility/Transferability• Local currency is freely convertible domestic and offshore.

Tax and Transfer Pricing Considerations• Corporate t ax variable according to business, should be checked on case-by-case

basis.

Other Payment and Clearing Considerations for Treasury• No major restrictions on netting.• No major restrictions on Non-Residents making payment on behalf of Residents.

For more information, please visit www.transactionservices.citi.com.

Allowed —Straightforwardregulations,approval orlicense

Allowed —Challengingregulatoryapproval orlicense

Allowed —Subject to acomplex setof rules

StrictlyProhibited


Notes:1 Oshore a ccounts for Residents cannot be actively promoted by local banks, but can be ofered through anyCitibank office abroad.2 Notional p ooling is not allowed in Mexico.3 Physical p ooling is allowed for either Resident or Non-Resident.4 Companies m ust sign intercompany credit agreements and charge market rate interests among them.

MARKET GUIDE FOR TREASURY

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CONTACT INFORMATION

Sales Heads

Industry Sector Heads

Carolina JuanTreasury and Trade Solutions Client Sales ManagementLatin America & Mexico HeadCiti Transaction ServicesEmail: [email protected]: + 57 (316) 743 - 9347Of. Phone: +57 (1) 639 - 4026

Industrials SectorInes Vargas BarreraEmail: [email protected]: +52 (181) 8366 - 5190Of. Phone: +52 (81) 1226 - 8525

Branding, Consumer and Healthcare SectorOscar MazzaEmail: [email protected]: +1 (305) 588 - 9396Of. Phone: +1 (305) 347 - 1336

Technology, Media and Telecom SectorGabriel KirestianEmail: [email protected]: +54 (911) 3301 - 4826Of. Phone: +54 (11) 4329 - 1516

Energy, Power and Chemicals SectorPeter LangshawEmail: [email protected]: +55 (11) 6183 - 6958Of. Phone: +55 (11) 6183 - 6958

Public SectorJorg PaascheEmail: [email protected]: +52 (1) 55 5453 - 0103Of. Phone: +52 (55) 2226 - 6020Based: Mexico DF, Mexico

Non Bank FI Sector (NFBI)Ricardo DessyEmail: [email protected]: +54 (911) 6641 - 9752Of. Phone: +54 (11) 4329 - 1471Based: Buenos Aires, Argentina

BrazilAdoniro CestariEmail: [email protected]: +55 (11) 7130 - 9447Of. Phone: +55 (11) 4009 - 7838Based: Sao Paulo, Brazil

Central AmericaEvelin MadridEmail: [email protected]: + 506 8701 - 4529Of. Phone: +506 2588 - 7541Based: San Jose, Costa Rica

MexicoMiguel YtuarteEmail: [email protected]: +52 (1) 55 4088 - 2284Of. Phone: +5255 (1226) 8895Based: Mexico DF, Mexico

Andean RegionCarolina JuanEmail: [email protected]: + 57 (316) 743 - 9347Of. Phone: +57 (1) 639 - 4026Based: Bogota, Colombia

ArgentinaAdrian ScosceiraEmail: [email protected]: +54 (911) 5674 - 6966Of. Phone: +54 (11) 4329 - 1194Based: Buenos Aires, Argentina


Citi Transaction Serviceswww.transactionservices.citi.com

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