 Good afternoon, everyone. My name is Paige Jarvy, Global Marketing Assistance with PMMI. On behalf of PMMI, I want to thank you for joining the webinar today. Today's webinar is one in a series of webinars, seminars, and events that we've planned this year to help PMMI members grow their export sales. In just a few moments, we will hear from Louise Dominic, Managing Director at MILA. Louise will be covering the updated findings to PMMI's 2015 Market Research Report on Mexico's packaging machinery market. To find out other events we have on the pipeline, including events and services at upcoming ExpoPAC Mexico show, I encourage you to take a moment to visit PMMI.org forward slash global. I first want to get started going over some events and services that we will be offering at ExpoPAC Mexico. Free for our members, we invite you to join us on Wednesday, May the 18th, from 10.30 to 12.30 in the afternoon for a brunch and presentation on packaging operation in Mexico as well as a panel of end users sharing their point of view on general situation and drivers for investment in packaging operations. It's a great opportunity to network and engage with end users, so I encourage you to look into setting some time on Wednesday to join us for that. We do also offer a generated list of qualified sales agents who will be attending ExpoPAC Mexico. The ExpoPAC Mexico Agent Directory gives you the information you need to connect with, excuse me, connect with processing and packaging machinery agents, distributors, and reps in your target market. As you can also see, we do have complimentary services at our PMMI Pavilion booth number 2000. We do have a daily happy hour for our members as well as on-site interpreters, private meeting rooms, internet, business lounge, those things are listed there. If you are interested in registering for the events or reserving a meeting room, I will be sending out an email after this webinar with the links to do so. I am going to introduce Luis. Again, he is the managing director with Market Intelligent Latin American Consultant Group based out of Mexico City. Luis is going to touch on the growing opportunities in Mexico. Luis has extensive experience in analyzing the packaging machinery and capital goods sectors in Mexico, conducting many research reports for PMMI members over the past 16 years. Luis will be sharing his updated findings from the Market Research Report on Mexico Packaging Machinery Market available to download on PMMI.org. Quickly, some housekeeping items before I turn the presentation over to Mr. Dominic. I want to bring to your attention that you have entered the webinar on muted mode, and if you would like to ask a question at any time during the presentation, please enter it at the chat box located on the lower left corner of your screen. This webinar is also being recorded and will be uploaded to our website to be reviewed once we conclude. Without further ado, I present this presentation over to you, Luis. Thank you very much, Page. Welcome everyone. Thank you for attending this webinar. As Page mentioned, we recently updated the Market Research Report that we did one year ago. There were several factors that required that we updated the Market Research Report. Usually, we do this Market Research Report every other year for PMMI, but due to the large imports that were recorded in 2015 to changes in the shares by origin and also to the uncertainty in the global market, PMMI felt it was required to do an update one year after we did that Market Research Report. So that's what we did over the last several weeks. First, some of the data that drove to make this update. First, in 2015, a historical high record in packaging machinery imports was achieved. Mexico imported $678.1 million of packaging machinery. The U.S. recovered the leading supplier position after 12 years, ranking second or even third place. Imports from Germany and Italy saw declines in value and share in 2015. And Spain and the rest of the world distanced from the leading suppliers. They slowly continued gaining market share. So with the Mexican economy with mixed indicators, it was worth to analyze where the industry is going. As you know, the overall GDP in Mexico has been showing moderate growth rates. The inflation is at its lowest historical levels. And those are positive indicators, but there are also other indicators like the valuation of the Mexican peso that has evaluated 33% in the last 24 months. That required to put attention and to see what impact this is having on the market. So usually I put this slide way ahead in the presentation, but this time I think it's worth to put it right at the beginning. So you see the evolution of the packaging machinery import market. The U.S. in 2013 had a relatively small share with shipping, almost half what Italy was shipping into Mexico. But today that story just in two years has reverted. Nowadays in 2015 the U.S. was the largest supplier into Mexico. And Germany and Italy both lost some market share. So it was worth to analyze why. So the MMI commissioned an update of the 2015 market research report. We conducted 32 interviews with end users who have purchasing plans. We also conducted interviews with packaging machinery distributors, associations with ProMexico, and we did a deep analysis of trade statistics. And we compared the importers that are bringing packaging machinery into Mexico with the previous market research reports that we had. The key goals of this research was to identify what led to a 15% packaging machinery import increase, identify the reasons behind the U.S. return to the leading supplier position, identify market trends and customer preferences to see if they are really shifting, and to see what the MMI members can expect from the Mexican market under the uncertain economic conditions that we have. So basically I put this slide because the challenges to identify we are in which stage of the roller coaster we are. We're going up if it's going to remain stable or if the fall is coming in the coming years. So first let's look at the macro environment. As many of you are familiar in Mexico we have 123 million people that estimate for 2016 we are neighbors to the U.S. Which is very important because we are a big supplier to the U.S. especially of processed foods, beverages, beer, and many other package products. We are an open economy. We have 46 free trade agreements with 46 countries. Recently we joined the Trans-Pacific Partnership. We have free trade with 1 billion customers or 60% of the global GDP. Most packaging machinery imported into Mexico comes from free trade countries. Those, they don't pay import duties. And that's positive in most ways, but for American manufacturers it eliminated the NAFTA advantage. Imports from Italy, Germany, and other countries do not pay duties similarly to packaging machinery brought from the United States. In recent years Mexico passed some key structural reforms on energy, telecommunications, taxes, the financial, education, and political systems. Those reforms are designed to have a faster growing and more competitive country to have better costs in power and telecommunications and also to make Mexico more competitive, attract wider foreign investments and creating additional jobs. Mexico is right now in a cycle with very favorable demographics. The working age population will outpace the number of dependents in the coming years. Right now 37% of the population is younger than 20 years old that represents approximately 45 million people and 56% of the population is younger than 30 years old. That's 69 million people. And also in many countries there's migration from rural to urban areas. The estimates for 2015 are that 80% of the population lives in urban areas. So here we see the main economic indicators. Our GDP has been growing moderately over the last quarter. We've seen growth that is between near 2.5% compared to the previous year. If you see there's a slight acceleration of the Mexican economy compared to 2014 and 2013. And the forecast for 2016 is that that slight acceleration will continue. We are expecting that Mexico will grow between 2.5% and 3% during 2016. There are different forecasts from the secretariat of Treasury. The estimate growth will be between 2.6% and 3.6%. The Mexican central bank is more conservative and indicates from 2 to 2.5%. And the IMF 2.6%. In previous years the IMF has been the most on target. The Mexican inflation has been decreasing. You see we used to have... We have been having single digit inflation for many years now but the inflation that we had in March of 2016 is among the lowest that we have seen this indicator is measured. There's kind of a contradiction having very low inflation and a currency that has depreciated 33% in two years. And we see the impact of that. Also Mexico continues attracting foreign direct investment. A large portion of this comes from food and beverage companies. There you see some names of big investors in recent years. In 2013 the peak that we had was due to the acquisition of Grupo Modelo by AB Invest. But in 2015 the foreign direct investment attraction was very, very high. And we are expecting this trend to continue in the following years. Then the customer confidence that in previous studies that we made we compared packaging machinery imports of Mexico versus customer confidence index. And there was a very, very high correlation. So this was among all the indicators, the one that had the greatest correlation when customer confidence was trending out, packaging machinery imports were up and when it was trending down, imports were coming down. It seems that 2015 would be the exception because imports grew 15%. But the customer confidence index maintained a flat level practically. There was slight growth at the beginning of the year but then a decline on the last months of the year. So it remained practically flat. There is a store change. This is, I would say, the best indicator for demand. For domestic demand has been shown very positive results. If you see practically all throughout 2015 comparing same store sales, sales were 5% higher and if it's true that inflation is 2%, then this would be a very, very important growth. Now we'll see the inflation indicator has been impacted by telecommunications and energy and that has helped to keep inflation down. But the reality is that our inflation is higher. You see prices of goods and services going up some 5% per year. The exchange rate, as mentioned, we've had a depreciation of the Mexican currency versus the US dollar of 33% in 24 months. And the peso has always depreciated against the euro but the depreciation against the euro has been more moderate. And these have made, if you compare a euro denominated machinery versus a US dollar denominated machinery, then now European machinery is becoming more competitive. Back in January 2004, a 100,000 dollar euro machinery compared to a 100,000 dollar machine, the euro denominated machine would be 36% more expensive in peso terms. In January 2016 that difference went down to 9%. And in recent months the gap has increased a little bit but it's still very far from what we had back in January of 2014. Then the political environment, which is important to also analyze. We have President Peña with the lowest approval index since he took office. Among citizens only 30% approve what the president is doing. Among business leaders only 22% approve the president. And this is according to a poll made by Reforma newspaper. And asking the respondents to qualify the president's job from 0 to 10. Back in April 2010 and 2013 there was a lot of approval. The president was qualified between 6.5 and 7. And today among business leaders it doesn't reach as 4. And among citizens it's around 4.2% out of 10. So definitely in the political arena something's going wrong. And there's this content among the population on how the Mexican government is acting. But let's take a break here and see what's going on. It kind of doesn't make sense. We have a growing economy, low inflation, increasing foreign direct investment, strong internal demand, young population. Also the formal jobs figure has increased significantly in recent years. The consumer confidence is stable. And on the negative indicators we only have the pace of evaluation. And that's creating presidential disapproval. So it kind of doesn't make sense. It seems we have a lot more drivers than inhibitors in the economy. So let's continue analyzing the data. Our inflation of 2.13% the lowest since the indicator is tracked. It has in the mix the effect of telecom. The telecom reform made telephony costs go down 4.2%. Cellular telephony 6.8. Long distance charges for national costs disappeared. And international long distance went down 40.7%. So that had an impact in inflation. As well as energy prices with the energy reform, we have seen energy prices come down 3.7%. Indos for electric power going down 6.4% in 2015. Natural gas prices going down 10.9%. And 30 new private companies entered the oil and gas sector. There were no new taxes, no tax increases for 2016. So why do we disapprove the presidential job? We still need more data, right? So we analyzed the trade balance. Last year we had an import decrease of 1%. And our exports decreased 4%. So we had a negative trade balance equivalent to 14.5 billion. Which is the biggest negative trade balance we have in several years. Our auto industry which is one of the engines of the Mexican economy. We produced 3.5 million vehicles in 2015. That was up 5.5%. And our vehicle exports increased 4.4%. So there's something going wrong that we had a negative trade balance if we exported more vehicles. That's one of our largest exports, right? Also, another indicator that we saw is a KPMG report called Top Management Perspectives. Where they interview 812 business leaders. 48% mentioned they have seen their company profitability improving the last year. 37% maintained similar levels. And only 15% had lower profitability. So that's also a good indicator. So where's the problem? The problem is mostly in the oil industry. You all have heard about oil prices coming down. But in addition to oil prices we have several other problems in that industry. Traditionally oil income has been a large contributor to Mexico's public finances. It has covered a large portion of the public budget. It used to be close to 50%. In 2014 it represented one third of the public budget. The oil price decline is only part of the problem. To that we have to add that PEMEX has seen production declines for a decade now. So our oil production path from 3.5 million barrels per day in 2015 to 2.2 million barrels per day in 2015, sorry, from 2005 to 2015. We lack of refining capacity. So we export oil and import gasoline and finish products, which does make a lot of sense. And we have not developed our natural gas industry and pipelines. So that has translated into increasing gas imports from the United States. Two years ago we were a big oil exporter and nowadays we are net importer of petroleum products. The petroleum products trade deficit during the first quarter of 2016 equals $9 billion, which has a great impact on Mexico's public finances. Here is a chart of the petroleum products trade balance. So it was a very good source of income for the Mexican government, the petroleum industry. Today is a big cost. So this translates into in 2015 we had a public deficit of $35.14 billion, which is equivalent to 3.5% of our GDP, and that's huge. That's a lot more than what the economy grew in 2015. The Mexican external debt has increased to $160 billion, 30% in the last three years, and internal debt has also increased in 45% in the same period, reaching $265 billion. When the president or the secretariat of Treasury are asked about this increasing debt, they say that it's manageable and they say that compared to other developed countries, it's small, but I mean Mexico is a developing country, so our debt is getting to levels that are beginning to be worrying. Our reserves that we have been accumulating reserves over the last 15 years are declining $22 billion in 2015. Pemex, the Mexican petroleum company, posted losses of $28.8 billion, and the Mexican government had to inject $4.2 billion into Pemex, so it could partially meet its obligations with suppliers. They say that another $8 billion are required so it can pay its suppliers. Nowadays, instead of being the government cash cow, the petroleum industry has become an additional cost, and that for Mexico is not a very good sign. So if we have this to the analysis that we made, we see that now there are more inhibitors than drivers. And by previous experiences, we know that having strong fiscal deficit, increasing public debt, having lower reserves, not making its official budget cuts in government spending, having a negative trade balance turns out to increasing country risk, and that's the recipe for an economic crisis. We have very strong crises with governments back in the 80s and 90s, and seems that now we forgot about them and we're following the same recipe that we have back then. Fortunately, we still have reserves, so that crisis would not take place in the short term, but the signs are beginning to be alarming. So after this deep economic analysis, why did the packaging machinery industry grow so much in 2015? We estimate the industry considering that the local suppliers supply around 17 or 20% of the market. It was valued in 810 million, which would be a historical high, 8% higher than the value in 2014. Imports were 15% higher. And with these numbers, we see a compound annual growth rate of 7.2% per year, which is very, very positive. Approximately, as mentioned, approximately 80% is supplied by imported machinery. We don't pay tariffs in practically any machinery that is imported. Very few non-free trade agreement countries pay anywhere from 5% to 15%. But if you see this as a proportion of the imports, it's almost nothing. It's less than 5%. The USA, Italy, and Germany in that order remain the largest suppliers. It's a 71% share between the three. If you see who imported packaging machinery, top 30 importers imported 49% of the total import value. So 30 companies imported almost half of the total packaging machinery imports. A single importer, Compañía Servicera de Coahuila imported 18% of the total value in 2015. But in large part, I would say the main reason of that 15% growth in imports in 2015, and also what a large contributor to the US regaining the living position. You see Compañía Servicera de Coahuila in 2014 imported 34.7 million, and in 2015 120 million. So let's first analyze that single company. Compañía Servicera de Coahuila is a subsidiary of Grupo Modelo. Grupo Modelo, probably some of you know it, but everyone knows them by this because they are the producers of Corona that I'm sure all of you are familiar with it. So some years ago, Unhauser-Busch purchased a share of Grupo Modelo. And later, Inbeth purchased Unhauser-Busch and created AV-Inbeth. AV-Inbeth later acquired Grupo Modelo. And the Department of Justice, when that acquisition was announced, filed an anti-monopoly lawsuit against AV-Inbeth because they would have a dominant position in the US beer market if they would be selling all the Unhauser-Busch beers plus the Modelo beers, Corona, Victoria, etc. So AV-Inbeth was forced to sell the business for the US. So they are now the owners of Grupo Modelo and they will sell Corona beer to all the world, but they sold the US business to constellation brands. And with that sale, they sold Compañía Servicera de Coahuila, which is a large brewery located in the north of Mexico. Constellation brands take over that brewery, but that brewery cannot supply the whole US market demand. So now Grupo Modelo has two different owners, Compañía Servicera de Coahuila, owns the Corona and all Modelo brands for the US market. And AV-Inbeth will sell Corona and Modelo beers to the rest of the world except the US market. Constellation brands take over this brewery and they don't have enough capacity to supply the US market. So they asked for a permit to the Department of Justice to buy beer from Grupo Modelo and that permit is granted until 2017. So they have to move fast and make a huge investment to increase the capacity of the plant from 10 million hectiliters to 25 million hectiliters by mid-2017. And they will continue those expansions in the coming years to reach 27.5 million hectiliters by 2018. Also they are increasing capacity of large bottle production plants. They are investing 2.5 billion in Coahuila, but that's not enough to meet the US demand. You really like Corona beer. So the company announced in early 2016 the construction of a 10 million hectiliters state of the art in the plant in Mexicali that will be later scaled up to 20 million hectiliters. The first five million hectiliters are scheduled to be in operation in early 2019. The company did not announce the value of this investment, but considering similar values than in the expansion of Cerreceria de Coahuila, this could be a five billion dollar project, the plant in Mexicali. The company Cerreceria de Coahuila in 2015 imported packaging machinery, mostly from the United States of America, 91.5 million. 10.9 from Germany, 10 from Italy, 5 from France. And this was a large contributor to the US market share game. Most of the machinery is imported from a subsidiary of Constellation Brands located in Luxembourg called CIH International. So these are some pictures of the plant expansion. They are building new lines similar to this. This is a new line that took the picture just when it was entering into operation. So that's a huge investment and it explains largely the import increase and the US leading position. So I believe that to thoroughly analyze the market trends, we need to remove company Cerreceria de Coahuila from the analysis. If we exclude company Cerreceria de Coahuila, packaging machinery imports grew 1% in 2015 to reach 557 million versus 552 million in 2014. Without company Cerreceria de Coahuila, the US would have captured the first place anyways. With 27% share, followed by Italy with 22% share and Germany fell to the third position. In 2014, Germany was the leading supplier. They fell to spots to third with 18%. Here I made a mistake on this sentence. The beverage sector was the largest investor in packaging machinery in 2015. Followed by the food sector and distant from those, there were the personal care and pharmaceutical industries. So there are important demand drivers for packaging machinery in Mexico. The industrial production index is improving. Companies are moving forward with investment plans for increasing capacity in the new plants and investing in new product presentations. The low inflation translates also into low interest rates, which are positive for capital investments. Mexico continues to attract investment from European companies in the food and beverage industry that target not only the domestic market but also the NAFTA markets. We have highly competitive manufacturing costs and with the peso of evaluation, with lower power costs, lower gas costs and lower telecommunication costs, even more competitive. And as mentioned, the favorite demographics of the country and the growing middle class are very important drivers for local demand growth. So what are the inhibitors? The inhibitors are, number one, the peso depreciation. The imported machinery is way more expensive in peso terms. But it seems that companies are not really affected by that because their finished products are also more competitive in the international arena. So even though they would have to spend more on their capital investments, those companies that are exporting to the U.S. market, they are also seeing considerable increases in revenues in peso terms for their exports. The euro-losing value to the U.S. dollar makes European machinery more competitive. But even with that, American machinery returned to the leading position and even without considering the investments in the beer plant. So what are the reasons behind that? Among the ones we were able to identify with the interviews. The most important thing is that American machinery is more better suited for large production scales. A large part of the investments in recent years have been coming from large multinational companies. They find American machinery is better suited for their high volumes. Also, something that helped Italy to become a leader in the industry some years ago was that the Italians were very aggressive with financing. And they were finding government-supported credits that they could extend to their clients at very, very low interest rates. But they were denominated in euros. Many companies took those credits, then the euro appreciated a lot more than the U.S. dollar. And these companies learned that those credits with low interest rates at the end were expensive. So many companies now stay away of credits denominated in euros. And also the Italian government is not supporting that much its manufacturers with the low interest rates that they were able to offer some years ago. So I believe those are the leading factors that made the U.S. retake the number one position. Also, European manufacturers, they are aggressively pursuing sales in Latin America because of the slow behavior of the European economy. But now things are beginning to move more dynamically in Europe. So they are not as aggressive as they were some years ago. And Mexican food and beverage companies continue increasing investments in the U.S. which is a demand inhibitor for packaging machinery in Mexico. Because these companies are devoting larger budgets to their operations outside of Mexico than to growing their Mexican operations where they are already leaders. And a good example of this would be Vimbo, for example. So what can we expect from the market? We believe that in 2016 growth will continue. We will continue to see huge investments from constellation brands. But also we will continue to see investments from multinationals and from the local companies that traditionally purchase packaging machinery. And we expect that growth will be more moderate in 2017. We require that all prices improve, that the oil sector if not begins contributing again to Mexico's public finances at least stops being a cost for the government. And I don't believe that will happen in the coming years because the new fields being awarded to private companies, they will take several years to be developed. And we won't see production increases on the best case until 2018, which is an election year for Mexico. And as you know, during the years previous to an election, companies become more cautious with investments in the country. So these are the market shares if we compare the total import market and if we exclude compañía Cervecera de Coahuila, which is that the U.S., considering that large investment, will have 35% market share. And without that investment, still leave the market with 27%. So what did we find looking at the machinery importers? The top 200 packaging machinery importers, their imports accounted for 81% of the total 2015 import value. So if you're selling to those 200 companies, you are within that 81%. The majority of these companies are large multinationals or the large Mexican players. We see that among these 200 importers, 31% of the import value was imported by beverage companies. Good companies accounted for 25% of the value, personal care and pharma 8% each. And 28% of the imports were brought either by packaging machinery companies. Some manufacturers have presence in Mexico and they import the machinery under their own brand, and then they sell it locally to the customer or by agents or representatives, etc. And there we also included other companies. We saw some companies that are not related to the key industries. They are in the lubricant sector, they are in the toy sector, and they got considerable volumes of packaging machinery. So we grouped them in there. Breaking down the packaging machinery importers by what they imported in 2015, one company bought $121 million, three companies imported between 20 and 30, six companies imported between 19 and 10 million. There were 12 that imported between 10 and 5 million, 20 from 5 to 3, 79 from 3 to 1 million. And from there down, we see that the lower the value, the greater the number of companies, the number of importers. So what can we expect from the market in the near future? We decided to compile the interviews. 28 plan to continue with their investment plans. They see the price of evaluation as something that affects the value of their imports, but they need to go ahead with their capital investments. They believe that local demand justifies the investments, and there are no changes within those 28. Three companies mentioned that they are waiting, they're putting on hold their plans until the exchange rate improves. They believe that right now we're in a peak, and that the peso will recover some value, the common months. So if that happens, they will place their packaging machinery orders. And among these 32, only one cancel its planned investments. And this company is not exporting anything. They decided to postpone the investment because of the increase in costs due to the peso evaluation. So in general terms, there's a lot of optimism in the industry, fueled by strong domestic demand, fueled by increasing exports due to exchange rate and to having Mexican-made products being more competitive. I like this quote that one of the companies gave me. They said, despite of our government, we continue growing. So this company really disapproves what the government is doing, really disapproves that there's not enough budget costs that the fiscal deficit is huge, that they are using our reserves to cover the deficit. And also, we've had a lot of corruption scandals that have not been solved, and the officials involved in these scandals are free. So that has also contributed to the people's discontent. But I like that quote, and I believe that's a reflection of what's happening in the industry. Despite of the government policies, companies continue growing and demand continues growing. And we see that large multinationalists continue investing in Mexico. Some recent investment announcements, they announced that they will build a desling and bottling facility in Jalisco, also a distribution center. They will invest $400 million there. Constellation brands, they will continue with their $2 billion investment in Chihuahua, and at least $3.5 billion in Mexicali. Arca Continental announced $405 million for plant expansions and acquisitions. In bases universales, $120 million for a camp production facility in Yucatán. Grupo Modelo, $300 million for a small beer plant in Yucatán. Val Corporation, a camp production facility in Nuevo León. Heineken continues, they announced $2 billion for a new plant in Chihuahua. Tequeda, which is a Japanese pharmaceutical company announced an expansion of $80 million in their Mexican operations. And these are the new announcements that go on top of these previous announcements that continue with investments from Coca-Cola, PepsiCo, Nestlé, Mondelez, Heineken, Keke, Marz, Kellogg's. We believe that there are still positive perspectives for the market. These little arrows were supposed to appear in the presentation, but we don't have this feature in the system. But I believe the market is right now in this stage. There is growth expected for 2016. Maybe a little more moderate growth in 2017. But the big question is what will happen in 2018. That is the year where we have elections in Mexico. And if the government policies are not changed, we are heading towards a deep economic crisis, such as the ones we have in the 80s and 90s, just the years before elections. So we hope not. We hope there are changes in the government, but so far if you see the speeches of the Mexican government, everything is perfect and everything is going well. So where the international food and beverage companies are so interested in Mexico, we already mentioned several of the factors, large population, young population, migration from rural to rural communities. But there are other factors, like an increasing number of working women, the positive macro GDP and inflation figures. The export opportunities to supply the U.S. market and manufacturing in Mexico to supply the U.S. market offers very strong costs, competitive advantages. And even American companies have realized that Mars is increasing production in Mexico. Hershey's moved all their chocolate production to Mexico. And they are supplying the U.S. market from the plant that they established in Monterrey. So many European companies are seeing Mexico as an American company. They are seeing Mexico as a place to manufacture and send their products to the U.S. The free trade agreements allow important raw materials, finished products without duties. The low manufacturing costs. In Mexico, the food manufacturing and the operations profits are significantly higher than those of other comparable economies. So manufacturing food products in Mexico is a profitable business. We have a well-developed retail sector with multiple store formats. I've had many American companies come and see the retail stores in Mexico. And many are getting pressed. They see that we have some stores that look more like Whole Foods and there are Chedraruy or Azoriana, right? So we have a wide variety of retail store formats from very large supermarkets or macro centers to small supermarkets targeting premium or very high-income segments. And that's also driving companies to develop new product presentations. And also the last is the Mexican dietary health that every time we're consuming more processed foods and every time we're purchasing more canned products and products that are packed. We see opportunities and challenges. The opportunities, strong investment plans from multinationalists continue. The Mexican companies increase in investing in the U.S. and Europe. That's making an increase on the number of Mexican global players. South American companies are also expanding into Mexico. We see companies like Kuala making heavy investments in Mexico. Companies look for energy efficiency and sustainable practices. And among the challenges, the price of evaluation, the U.S. machinery becoming less price competitive versus European. And we've seen Asian machinery, they had a peak in 2013, but they are losing share due to some bad experiences among industry players. And as you know in the packaging machinery industry, the news runs fast. Finally, some recommendations for strategies for success. Doing business in Mexico requires a lot of traveling into Mexico, meeting with customers, being in front of the customer. So local presence is highly appreciated and I would say it's becoming a must. Those companies who have local presence are way more successful than those that only export from their countries of origin. Many companies do not purchase from companies who lack of local service. So establishing some form of presence in Mexico, either direct through an investment or through a distributor or an agent or rep is something that is becoming a must. Post-sale services needed, lacking of post-sale local service means losing the sale. Face-to-face negotiations have always better results. In Mexico, we like doing business with people that we already met. So having face-to-face meetings is highly recommended. The personal relations are very valuable. They can make the difference between closing a sale or having the client go to somebody else. Giving price references and information in trade shows is essential. Comparing Mexican culture to American culture in the U.S. when somebody approaches your booth, that person usually makes questions related to the operation of the equipment, to the speed, to the equipment itself. In Mexico, the first question they asked is, what's the price? The price depends on the configuration of the equipment and it depends on the speed and the model that you put and a lot of things. But to give that as an answer to a Mexican is kind of a rule. You should be able to give at least a price reference. So let's say you can ask a couple of questions like, what volume would you be looking? And give a range. This machine would cost you anywhere from 40,000 to 75,000. Price references are appreciated. Not giving a price is seen as something rude. Mexicans have preference for local trade shows. The most industry participants, they participate in expo pack either in Mexico City or Guadalajara. They are trying to pack expo in La Vega, or Chicago. And the largest companies, they also try to to inter-pack. But expo pack is the leading trade show for the industry. And most Mexican companies, they look for suppliers, they select new suppliers right there at the show. The market has demanding consumers. Not only for finished products, but also for packaging machinery. So try to be flexible in meeting your customer's demands. Flexibility is key. I mentioned there's no more or less advantage. We import practically all packaging machinery without duties. We confirmed, we saw this last year during our interviews, we confirmed this. Service flexibility and reliability are more important factors than price. So Mexico is still a price-driven market, especially if you are selling to a small or medium-sized operation. But within multinational, so large Mexican companies, flexibility and reliability and local service are key. Price is secondary. Credit options and payment schedules can be a strong decision-making point. I mentioned credit is what made, largely made Italian. The leaders in the industry for many years offering credit in local currency is appreciated. And right now that official inflation is very low, interest rates are low, offering credit in local currency are very good options. The last, save some margin for negotiation. Sometimes companies are willing to place the order if you give them an extra 2%. So try to save some margin so you can make the final negotiation with your clients. Offer equipment service packages and have local spare parts. That's also becoming a must. Companies do not want to wait for a part to come from Germany or Italy or even the United States. Sometimes that has to happen, but for the most common parts, it's recommended to have local inventory. And I mentioned investing, developing relationships. I mentioned the number of local companies willing to purchase from supplies without the formal presence in Mexico is disappearing. And last, I would say investing marketing. Companies like to see videos of the machines in operation. They like to see promotional materials, brochures, things like that. I know we're not in the brochures area anymore and now everything has to be digital. But in Mexico, brochures are something that I still use especially in a trade show. If you can hand out a brochure to a plant manager, he will bring it to his office. He will keep it on his desk for a couple of weeks until he will get rid of it or he will store it with the thousands of brochures that he has. If that last is the case, when he looks for a supplier, he will grab his brochures and that will be his first place to look for a supplier because those are companies that he has already met. So this is a recommendation that I believe many packaging machinery manufacturers are using to invest in marketing. You go to the web pages, they're very technical, very detailed. They have technical sheets. They have very informative materials from engineers to engineers. But in many cases the plant owners are not engineers and they want to see a video, they want to see something that a non-engineer can understand. So that's all for today's presentation. I didn't want to include all the information on the research in this presentation, so I have materials for the presentation that I'm giving in Expo back here in Mexico. So I'm open to your questions. Thank you very much for listening to me. Thank you, Luis, for your insightful presentation. It's very reassuring to hear that 2016 looks like a good year for PMMI members in Mexico. As Luis said, we will open up the floor to audience questions. Again, the chat box located in the lower left corner of your screen, you can type them in and we will read them and Luis can answer them as we go. While we wait for the questions to come in, I would like to remind members attending Expo Pack Mexico that Luis will be presenting for us on packaging operations in Mexico. It's a brunch on Wednesday, the 18th, like I said earlier, and you will also hear firsthand from a panel of end users on the Mexican market and also don't forget to stop by our pavilion where we have other services to take advantage of. Happy Hour, Private Meeting Room, Internet, and a lot more. And if you have any other questions on that, please feel free to email me at page at PMMI.org. There are two questions here, Paige. Yes, yes, yes. Sure. In other places in Latin America, Google campaigns are being more used as a way of marketing. Do you see that trend in Mexico as well? Yes, in Mexico, Google AdWords and Google campaigns are also gaining momentum. So it's similar to other Latin American countries. Now, my recommendation is before spending money in a Google AdWords campaign or a web-based campaign, make sure you have an adequate web page. I see many web pages lacking of videos or lacking of practical information. I see a lot of technical information, but many are lacking of practical information. So definitely Google campaigns will continue to grow in Mexico as they have in other more developed countries and in many Latin American countries. But my recommendation would be before going into a Google AdWords campaign to make sure you have a very good web page to show. Wonderful. We do have a question from... We'll continue to evaluate where we gain the old exchange rate. I don't think we will return to the old exchange rate. I think it will continue to evaluate, but the valuation will be more moderate than in the previous 24 months. If you see what... I'm an accountant, I know that I'm an economist, but if you see what the experts are saying on the exchange rate, some of the valuation was needed, the peso was too appreciated, and some of that valuation was needed. Now the oil industry, as mentioned, it has a huge impact on the Mexican public finances. And if we don't see all prices going back to $50, then you can expect further devaluation. If prices go back to a range between, I would say $45 and $60, then I think we'll be okay and there will not be further devaluation. Okay, Scott did write a question. He said he has had minimal success to get responses to emails to an agent to represent his company. Do you have any suggestions, Louise? He did use our PMMI agent directory, and he states, he added, accordingly, to the machines my company builds and the market they are used in. Well, here, as I mentioned during the presentation, in Mexico we like doing business with people that we have met, that we have met face-to-face. So sending an email to a company in a very few cases, you will get a response. Only if they really want your machines and they are not representing anything similar, and they see that there's very high demand for the type of machine that you're offering. If that's not the case, you need to build a relationship with one of these agents. So my recommendation would be to come to ExpoPAC and schedule meetings with these agents, meet with them face-to-face, learn about them, have them learn about your company, show them that your machinery can be a source of profit for them, and take it from there. I believe that in Mexico business begins when you meet face-to-face with a person. It doesn't begin when you exchange emails. And that's part of our culture. When I explain these to new exporters, what I tell them is, if you exchange emails, you won't have any responses, or you will have probably one response. And that response will leave you nowhere. If you meet face-to-face with the same companies, you will have three companies interested. And if you have lunch with one of them, you have a distributor. So that's how I explain it. We like personal relationships. We like sitting down, learning about you, learning about your family, learning about what things you like doing, and then we talk business. So my recommendation would be that to meet face-to-face with these agents or distributors in ExpoPAC. Wonderful. Thank you, Luis. Do you have a couple more questions here? Pablo said, you mentioned European machinery is becoming more attractive because there's now a 10% difference against US machinery. What about versus Canada equipment? What should be 20% to 30% lower? Yeah, the Mexican peso has not depreciated the same to the US dollar than to the Canadian dollar. Actually, the Canadian dollar has also lost value against the US dollar. So Canadian machinery is way more competitive now. I believe that Mexico offers a very good opportunity for Canadian manufacturers because they have a very strong competitive advantage due to exchange rate. And also, there is a geographic proximity. I mean, it's not the same to send a machine from Canada than to send it from Germany. From Canada it can be dropped all the way into Mexico. Canadians do have a very good competitive advantage in these moments. Wonderful. Scott, to answer your question, you asked, how do you find these agents at the show? You like face-to-face also, but need help to find and connect first. I will be sending out a follow-up email. There we do have agents that have confirmed that they will be at ExpoPAC Mexico. You will be able to see their contact information and reach out to them prior to. And maybe you'll have some luck getting face-to-face meetings with them while you're down there. So look out for an email that will have all of the information. Quickly, as we finish up, I do want to have everyone take a look at PMMI, where PMMI and our members will be. We are traveling to Brazil and Thailand mid-June. So keep an eye out for new market research reports, webinar presentations for those two prime markets as well. And I just want to thank you again, Louise. And on behalf of PMMI, thank you everyone for participating. As a final note, you will receive again a follow-up email with links to the events and services at ExpoPAC, as well as some of the upcoming shows that we will be at as well. And we do ask that if you would please fill out an evaluation on today's webinar, it will help us improve any further, excuse me, any future webinars that we do do. And we will have this webinar posted on our website so that you can go back and view it at your leisure. So I just want to thank everybody. Have a great rest of the day. And we look forward to seeing you guys at ExpoPAC.