Competitive Landscape in North America A Site Selector s View November 1, 2016 Bob Cook Sr Vice President, Latin America
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
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
OUR CLIENTS CUSTOMIZED SOLUTIONS ACROSS ALL INDUSTRY SECTORS; OVER 100 PROJECTS PER YEAR SITE SELECTION GROUP PAGE 4
INDICATORS
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% 36.29 M 66.3% 324.12 M 82.8% Population Canada USA Mexico 128.63 M Disposable Income Canada USA Mexico
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
FOREIGN DIRECT INVESTMENT COMPARISON OF NORTH AMERICAN COUNTRIES 2011-2015 $400,000 FDI (USD, Millions) Annual Avg $350,000 $52.34 B $300,000 $29.18 B $250,000 $223.26 B $200,000 $150,000 $100,000 $50,000 39,669 43,111 71,753 58,507 48,643 $0 2011 2012 2013 2014 2015 Canada Mexico United States 2011-2015: North America received 20.2% of global FDI Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics); data retrieved October 2016 SITE SELECTION GROUP PAGE 8
FOREIGN DIRECT INVESTMENT GREENFIELD PROJECTS COMPARISON OF NORTH AMERICAN COUNTRIES 2011-2015 $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 $0 2011 2012 2013 2014 2015 $0 2011 2012 2013 2014 2015 Canada Mexico United States Canada Mexico United States North America (2011-2015) 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 (www.unctad.org/fdistatistics); data retrieved October 2016 $53.9M $67.1 M $38.6 M SITE SELECTION GROUP PAGE 9
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 1,600,000 + 4% 108.0% 106.0% 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0% 4.4% - 0.5% 2011 2012 2013 2014 2015 Canada Mexico United States 1,400,000 2006 2008 2010 2012 2014 2016 USD billions 2,200 2,100 2,000 1,900 1,800 1700 2006 2008 2010 2012 2014 1,600 2016 MXN millions 2,600,000 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 2006 2008 2010 2012 2014 2016 + 19% + 17% Source: Tradingeconomics.com; data retrieved October 2016 SITE SELECTION GROUP PAGE 10
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 $50,001 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mexico 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Bank, Tradingeconomics.com; data retrieved October 2016 12.0% 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 11 8.2% 7.4%
ECISION DRIVERS
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
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 2015-2016 0% 5% 10% 15% 20% 25% United States Mexico Canada SITE SELECTION GROUP PAGE 14
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 13 57 3 # Factors Ranking in Global Top 10% 34 4 48 26 Location Drivers -- Ranking in Top 10% 1.02: Intellectual Property Protection 12 76 15 1.09: Burden of Government Regulation 37 123 51 1.16: Reliability of Police Service 11 127 22 2.01: Overall Infrastructure Quality 23 65 13 2.07: Quality of Electric Supply 13 73 16 3.03: Annual Inflation Rate 1 64 1 5.03: Quality of Education System 14 117 18 5.04: Quality of Math and Science Education 18 126 44 5.07: Availability of Specialized Training Services 16 59 11 6.04: Effect of Taxation on Incentives to Invest 29 114 35 6.05: Total Tax Rate 15 115 95 6.07: Number Days to Start a Business 18 35 27 6.09: Prevalence of Non-tariff Barriers 72 70 52 6.12: Business Impact of Rules on FDI 52 41 53 7.01: Cooperation in Employer-Labor Relations 25 46 31 7.06: Pay & Productivity 15 84 8 7.08: Capacity to Retain Talent 14 69 2 7.09: Capacity to Attract Talent 10 68 6 8.05: Venture Capital Availability 20 65 5 9.01: Availability of Latest Technologies 11 58 2 9.03: FDI & Tech Transfer 27 20 34 10.01: Market Size (GDP) 15 11 1 11.05: Value Chain Breadth 38 36 7 11.07: Production Process Sophistication 18 42 7 12.02: Quality of Scientific Research Institutions 18 47 4 12.06: Availability of Scientists and Engineers 10 63 4 IMPROVE? CAN MEX USA Overall Index 13 57 3 # Factors (out of 114) Ranking in Global Top 10% 34 4 48 26 Location Drivers Ranking Just Outside Top 10% 1.02: Intellectual Property Protection 12 76 15 1.09: Burden of Government Regulation 37 123 51 1.16: Reliability of Police Service 11 127 22 2.01: Overall Infrastructure Quality 23 65 13 2.07: Quality of Electric Supply 13 73 16 3.03: Annual Inflation Rate 1 64 1 5.03: Quality of Education System 14 117 18 5.04: Quality of Math and Science Education 18 126 44 5.07: Availability of Specialized Training Services 16 59 11 6.04: Effect of Taxation on Incentives to Invest 29 114 35 6.05: Total Tax Rate 15 115 95 6.07: Number Days to Start a Business 18 35 27 6.09: Prevalence of Non-tariff Barriers 72 70 52 6.12: Business Impact of Rules on FDI 52 41 53 7.01: Cooperation in Employer-Labor Relations 25 46 31 7.06: Pay & Productivity 15 84 8 7.08: Capacity to Retain Talent 14 69 2 7.09: Capacity to Attract Talent 10 68 6 8.05: Venture Capital Availability 20 65 5 9.01: Availability of Latest Technologies 11 58 2 9.03: FDI & Tech Transfer 27 20 34 10.01: Market Size (GDP) 15 11 1 11.05: Value Chain Breadth 38 36 7 11.07: Production Process Sophistication 18 42 7 12.02: Quality of Scientific Research Institutions 18 47 4 12.06: Availability of Scientists and Engineers 10 63 4 Source: World Economic Forum, Global Competitiveness Index 2015-2016 SITE SELECTION GROUP PAGE 15
NORTH AMERICAN ATTRACTIVENESS INDEX SCORES BASED ON 25 QUALITY FACTORS AND 5 COST FACTORS FOR SLECTED INDUSTRIES 160 140 120 COMPARATIVE ANALYSIS FOR SELECTED SECTORS ATTRACTIVENESS INDEX FOR NORTH AMERICAN COUNTRIES 96.2 99.6 97.1 91.6 38.9 100 80 60 40 20 28.5 39.2 25.4 24.11 27.8 69.7 25.4 41.4 79.8 75.4 26.3 68.0 30.7 72.2 26.3 44.3 43.5 38.2 41.4 37.6 31.1 36.3 34.1 31.3 77.2 Cost Measures Quality Measures 0 Aerospace Automotive Components Automotive OEM Medical Devices Pharma Source: fdi Benchmark Canada Mexico United States
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).0583.1417.0554 38,195.95 7,786.77 40,176.17 21.1 51.7 43.9 Exchange Rate 1.32 CAD 19.22 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
FREE TRADE AGREEMENTS # COUNTRIES WITH AGREEMENTS CURRENTLY IN PLACE Population, millions Total Market Size 684.47 Outside Borders 648.17 Unique to Canada 0.04 15 20 44 Total Market Size 779.82 Outside Borders 455.80 Unique to USA 80.97 Total Market Size 1,265.94 Outside Borders 1,137.31 Unique to Mexico 646.57
THANK YOU! Bob Cook Senior Vice President Latin America El Paso, Texas (915) 549-4288 bcook@siteselectiongroup.com