Mexico and Fonatur: celebrating 30 years of success in tourism investment

Latin Trade, May, 2004

As the destination of choice for nearly 20 million tourists every year, Mexico offers some of the world's best opportunities for private investment.

New properties currently being developed by Mexico's National Trust Fund for Tourism Development (FONATUR) are providing investors with top quality enterprises in one of the world's most stable, open and deregulated emerging economies.

In 2003, private investment in the Mexican tourism sector grew by 12.2% compared to 2002 figures, increasing from US$1.5 billion to US$1.7 billion. Of the total domestic and foreign private investment channeled into the sector, 21% originated from abroad.

Also in 2003, Mexico benefited from an increase in tourist spend of nearly 7% over 2002 figures, as tourism contributed US$9.5 billion to the country's economy.

The government, which has long recognized tourism as a national priority, now permits 100% foreign ownership in most economic activities--including those within the commercial and services sectors. Entrepreneurs from any nation may now freely repatriate their profits, royalties, dividends and interest payments.

The government, through the Mexican Tourism Board, invested in publicity US$72 million in 2003 to promote Mexico worldwide as a destination. Beginning this year, the government also placed a zero tax charge for foreign conventions and meetings held in Mexico.

This strong official support augments Mexico's already enviable position as one of the world's top 10 favorite places to vacation.

Situated next to the United States of America, Mexico is easily accessible by air to American markets and offers a security-conscious environment for all tourists. Other competitive advantages include a wide range of attractions--from the sun and sand, to historic colonial towns, museums and ecological destinations that enhance the nation's great biodiversity.

Tourists to Mexico benefit as well from diverse services that relate specifically to their needs. These have resulted from the country's accrued investment over time of more than US$44 billion.

Domestic tourism is also contributing to the growth of the industry within Mexico. Domestic tourism became more than six times the consumption of foreign tourism in 2002, which reached 12.9% of total tourism figures during that year.

As Mexico's premier developer of quality tourism destinations for the past 30 years, FONATUR and its partners have benefited from the strong revenue stream that tourism represents to the country.

"Our experience in creating and developing integrally-planned resorts in Cancun, Los Cabos, Loreto, Ixtapa and Huatulco has made us one of the largest developers of tourism properties globally," said Oscar Camacho, Director of Sales and Marketing for FONATUR. "Combine our development track record with our 66,700 acres of spectacular assets and it is easy to see how FONATUR's offerings are compelling."

FONATUR recently took its real estate sales effort global, contracting with more than 44 prestigious real estate groups to offer FONATUR's properties in Mexico to buyers worldwide.

FONATUR and its five integrally planned resorts: Cancun, Los Cabos, Ixtapa, Loreto and Huatulco, have helped multiply tourism in Mexico by a factor of six. Together they contain 258 hotels and more than 38,526 rooms.

FONATUR's destinations now represent 40% of Mexico's hotels, receive 46% of foreign tourists that visit Mexico and generate 54% of Mexico's foreign exchange earnings from tourism.

The occupancy rate of the hotels installed in FONATUR's Integrally Planned Resorts in 2003 reached 64.36%--nearly 8 percentage points higher than that of Mexico's other beach resorts.

New FONATUR projects now underway include:

Loreto Bay, a resort located in the Nopolo polygon to be built over 15 years offering 5,095 villas and 934 condominium units. The property has an 18 hole PGA golf course and luxury hotels, it will feature a spa, a sport fishing center and marina, plus restaurants, shopping, entertainment and cultural areas.

With revenues of close to US$80 million for the sale of lots at Loreto Bay and potential investment of about US$1.2 billion, the resort represents the largest residential development in FONATUR's 30-year history.

FONATUR, which provides highly respected studies that vouch for the profitability of each of its projects, has estimated the internal rate of return for investors in the Loreto Bay project at 22.3%.

The Loreto Bay resort is greatly anticipated by Loreto residents as it represents the opportunity for a better lifestyle: The project is expected to increase the number of visitors to the area from 60,000 to 200,000, resulting in economic benefits such as job creation.

Also being developed by FONATUR is the Nayarit Integrally Planned Resort. This 2,136 acre development, to be built out in three phases, is expected to diversify Mexico's tourism market by attracting high-spending upscale vacationers.

Nayarit will ultimately offer 14,500 hotel rooms, three golf courses, beach clubs, a marine theme park of regional scale, a marina with 150 slips, an airdrome and shopping and recreation centers.