Competitive Landscape in North America. A Site Selector s View. Bob Cook Sr Vice President, Latin America. November 1, 2016

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1 Competitive Landscape in North America A Site Selector s View November 1, 2016 Bob Cook Sr Vice President, Latin America

2 PARALLEL NEGOTIATIONS OUR VALUE PROPOSITION FULLY INTEGRATED APPROACH TO FINDING THE OPTIMAL LOCATION IN NORTH AMERICA 1 LOCATION OPTIMIZATION LOCATION ANALYTICS Comprehensive analysis of workforce, logistics, business environment, infrastructure OPERATING COST EFFICIENCY Evaluation of all operating costs to determine the total financial impact 2 NEGOTIATION ASSISTANCE ECONOMIC INCENTIVES Negotiation of statutory and discretionary incentives with state, county & municipalities Tax abatements Sales & Use Tax Credits Cash Grants Infrastructure Grants Training Subsidies Utilities discounts REAL ESTATE Negotiation of real estate terms without any conflicts of interest 3 ON-GOING SUPPORT INCENTIVE COMPLIANCE Manage on-going compliance activities for incentives over their useful life Payroll reporting Capital investment reporting Claw back monitoring Site inspections EDC relationship management Local management coordination INCENTRAK TECHNOLOGY Utilize the latest technology to monitor the incentives compliance process Tax Abatements and Credits Recruiting & Training Assistance Land/Space Cost Write-Downs Request for Proposals Letter of Intent Expansion Options INCENTIVE NEGOTIATIONS REAL ESTATE NEGOTIATIONS Utility Incentive Rates Cash Grants Relocation Assistance Construction Investigations Financial Analysis Lease Negotiations SITE SELECTION GROUP PAGE 2

3 LOCATION INTELLIGENCE RELIABLE, CONSISTENT DATA FOR GLOBAL LOCATIONS AT THE CITY LEVEL 10,000+ VARIABLES ON 1,300+ METRO AREAS IN 70 COUNTRIES SITE SELECTION GROUP PAGE 3

4 OUR CLIENTS CUSTOMIZED SOLUTIONS ACROSS ALL INDUSTRY SECTORS; OVER 100 PROJECTS PER YEAR SITE SELECTION GROUP PAGE 4

5 INDICATORS

6 OVERVIEW OF NORTH AMERICA MARKET COUNTRY SHARE OF NORTH AMERICAN POPULATION (489.04) M AND DISPOSABLE INCOME 7.4% 6.9% 10.3% 26.3% M 66.3% M 82.8% Population Canada USA Mexico M Disposable Income Canada USA Mexico

7 NORTH AMERICAN POPULATION WHERE THE CONTINENT S POPULATION IS CONCENTRATED 68% of Canada s Population 66% of Disposable Income 77% of Manufacturing Output 51% of Canada s Population 43% of North American Population 58% of US Population 56% of Disposable Income 51% of North American Disposable Income

8 FOREIGN DIRECT INVESTMENT COMPARISON OF NORTH AMERICAN COUNTRIES $400,000 FDI (USD, Millions) Annual Avg $350,000 $52.34 B $300,000 $29.18 B $250,000 $ B $200,000 $150,000 $100,000 $50,000 39,669 43,111 71,753 58,507 48,643 $ Canada Mexico United States : North America received 20.2% of global FDI Source: UNCTAD, FDI/MNE database ( data retrieved October 2016 SITE SELECTION GROUP PAGE 8

9 FOREIGN DIRECT INVESTMENT GREENFIELD PROJECTS COMPARISON OF NORTH AMERICAN COUNTRIES $90,000 $80,000 FDI (USD, Millions) $100 $90 FDI per Project (USD, Millions) $70,000 $80 $60,000 $70 $50,000 $40,000 $30,000 $20,000 $10,000 $30,198 $12,007 $19,025 $19,234 $13,339 $60 $50 $40 $30 $20 $10 World Avg N.A. Avg $ $ Canada Mexico United States Canada Mexico United States North America ( ) Average 2,099 annual greenfield projects (CAN 348; MEX 390; USA 1,752) 11.4% of greenfield FDI 13.5% of greenfield projects Source: UNCTAD, FDI/MNE database ( data retrieved October 2016 $53.9M $67.1 M $38.6 M SITE SELECTION GROUP PAGE 9

10 MANUFACTURING EMPLOYMENT & OUTPUT COMPARISON OF CANADA, UNITED SATES AND MEXICO Relative Change in Mfg Jobs GDP from Manufacturing 112.0% 110.0% 11.0% CAD millions 2,200,000 2,000,000 1,800,000 1,600, % 108.0% 106.0% 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0% 4.4% - 0.5% Canada Mexico United States 1,400, USD billions 2,200 2,100 2,000 1,900 1, , MXN millions 2,600,000 2,400,000 2,200,000 2,000,000 1,800,000 1,600, % + 17% Source: Tradingeconomics.com; data retrieved October 2016 SITE SELECTION GROUP PAGE 10

11 GROSS DOMESTIC PRODUCT PER CAPITA COMPARISON OF NORTH AMERICAN COUNTRIES GDP per Capita (USD) $52,000 $51,000 $48,033 $50,000 $49,000 $48,000 $47,000 $46,000 $9,600 $9,400 $9,200 $9,000 $8,800 $8,600 $8,400 $8,200 $8,000 $46,542 Canada USA $50, Mexico Source: World Bank, Tradingeconomics.com; data retrieved October % 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Relative Change (Base Year: 2009) 11.2% Canada Mexico United States SITE SELECTION GROUP PAGE % 7.4%

12 ECISION DRIVERS

13 VARIABLE WEIGHTINGS FOR DESKTOP EVALUATION SAMPLE PROJECT WEIGHTINGS, NOT REPRSENTATIVE OF ALL PROJECTS CATEGORY CATEGORY WEIGHTING LABOR AVAILABILITY 30.00% LABOR COST 20.00% DESCRIPTION - Age and Income Demographics, Educational Attainment, Skills and other factors Recommended Wages and Benefits; Household Income Unemployment Insurance, Workers Compensation Costs and other factors OPERATING COSTS 20.00% Utility Rates, Tax Rates and other factors OPERATING CONDITIONS 20.00% Union Presence, Infrastructure, Climate Variables, Laws/Regulations, Economic Incentives and other factors REAL ESTATE COSTS & CONDITIONS TRANSPORTATION & LOGISTICS 5.00% Quality and Cost of Real Estate Options 5.00% Distance to DC, Customers, Suppliers, and other factors SITE SELECTION GROUP PAGE 13

14 MOST PROBLEMATIC FACTORS FOR DOING BUSINESS PERCENTAGE OF RESPONDENTS INDICATING FACTOR AS PROBLEMATIC SURVEY OF 14,000 BUSINESS LEADERS Insufficient Capacity to Innovate Access to Financing Inefficient Government Bureaucacy Tax Rates Complexity of Tax Regulations Restrictive Labor Regulations Inadequately Educated Labor Force Poor Work Ethic In Labor Force Corruption Crime and Theft 0.0% 2.7% 9.7% 8.5% 6.7% 5.7% 5.5% 16.0% 15.1% 17.1% Source: World Economic Forum, Global Competitiveness Index % 5% 10% 15% 20% 25% United States Mexico Canada SITE SELECTION GROUP PAGE 14

15 KEY LOCATION DRIVERS RANKING OUT OF 140 NATIONS ON 114 DIFFERENT BUSINESS FACTORS; (EXECUTIVE OPINION SURVEY of 14,000 BUSINESS LEADERS) SELL AS COMPETITIVE ADVANTAGES CAN MEX USA Overall Index # Factors Ranking in Global Top 10% Location Drivers -- Ranking in Top 10% 1.02: Intellectual Property Protection : Burden of Government Regulation : Reliability of Police Service : Overall Infrastructure Quality : Quality of Electric Supply : Annual Inflation Rate : Quality of Education System : Quality of Math and Science Education : Availability of Specialized Training Services : Effect of Taxation on Incentives to Invest : Total Tax Rate : Number Days to Start a Business : Prevalence of Non-tariff Barriers : Business Impact of Rules on FDI : Cooperation in Employer-Labor Relations : Pay & Productivity : Capacity to Retain Talent : Capacity to Attract Talent : Venture Capital Availability : Availability of Latest Technologies : FDI & Tech Transfer : Market Size (GDP) : Value Chain Breadth : Production Process Sophistication : Quality of Scientific Research Institutions : Availability of Scientists and Engineers IMPROVE? CAN MEX USA Overall Index # Factors (out of 114) Ranking in Global Top 10% Location Drivers Ranking Just Outside Top 10% 1.02: Intellectual Property Protection : Burden of Government Regulation : Reliability of Police Service : Overall Infrastructure Quality : Quality of Electric Supply : Annual Inflation Rate : Quality of Education System : Quality of Math and Science Education : Availability of Specialized Training Services : Effect of Taxation on Incentives to Invest : Total Tax Rate : Number Days to Start a Business : Prevalence of Non-tariff Barriers : Business Impact of Rules on FDI : Cooperation in Employer-Labor Relations : Pay & Productivity : Capacity to Retain Talent : Capacity to Attract Talent : Venture Capital Availability : Availability of Latest Technologies : FDI & Tech Transfer : Market Size (GDP) : Value Chain Breadth : Production Process Sophistication : Quality of Scientific Research Institutions : Availability of Scientists and Engineers Source: World Economic Forum, Global Competitiveness Index SITE SELECTION GROUP PAGE 15

16 NORTH AMERICAN ATTRACTIVENESS INDEX SCORES BASED ON 25 QUALITY FACTORS AND 5 COST FACTORS FOR SLECTED INDUSTRIES COMPARATIVE ANALYSIS FOR SELECTED SECTORS ATTRACTIVENESS INDEX FOR NORTH AMERICAN COUNTRIES Cost Measures Quality Measures 0 Aerospace Automotive Components Automotive OEM Medical Devices Pharma Source: fdi Benchmark Canada Mexico United States

17 OPERATING COSTS COMPARISON OF NORTH AMERICAN COUNTRIES All Industries Average Costs Canada Mexico United States Electricity (Per kwh in USD) Production Salary (in USD) Total Tax Rate (% Profit) , , , Exchange Rate 1.32 CAD MXN 1.00 USD Canada s competitive advantages Experienced Industry-Specific Staff Tightness of Labor Market / Competition for Labor Regulatory Environment Taxation Safety Natural Gas Rates Source: fdi Benchmark Virtually on par with the United States Electric Rates Quality of Local Infrastructure Quality of ICT Infrastructure Healthcare Access to Overseas Markets(?) SITE SELECTION GROUP PAGE 17

18 FREE TRADE AGREEMENTS # COUNTRIES WITH AGREEMENTS CURRENTLY IN PLACE Population, millions Total Market Size Outside Borders Unique to Canada Total Market Size Outside Borders Unique to USA Total Market Size 1, Outside Borders 1, Unique to Mexico

19 THANK YOU! Bob Cook Senior Vice President Latin America El Paso, Texas (915)