Notitur November / December 2014

2014

November December

» Industry Mexico's Real Estate Boom » Connections 10 Projects we should build in the next ten years

Digital promotion

a new and effective sales channel for tourism

Publicaition of:

www.amdetur.org.mx

» AMDETUR Activities and Agenda.

» Legal Aspects Tourism, Key to National Development.

BOARD OF DIRECTORS CHAIRWOMAN

Ana Patricia De la Peña Sánchez Original Resorts VICE PRESIDENT Gerardo Rioseco Orihuela PROVAC Posadas EXECUTIVE Gonzalo Maqueda Cornejo President AMDETUR

SecretarY

Carmen Carballido Starwood TREASURER Jorge E. Téllez Landín Sol Mar

COUNCIL MEMBERS

Fernando Azcona Lizárraga / Villa Group Javier Robles / Grupo Vidanta Francisco Medina / Grupo Hotelero Santa Fe Gibrán Chapur / Palace Elite Marcos Agostini / Interval International Ricardo Montaudon Corry / RCI

Director

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Rosa de Jesús Lugo Dorantes

Notitur CHAIRWOMAN

Ana Patricia De la Peña Sánchez Original Resorts VICE PRESIDENT Gerardo Rioseco Orihuela Grupo Posadas EXECUTIVE Gonzalo Maqueda Cornejo PRESIDENT AMDETUR publisher Raymundo Hernández DESIGN KEMCS Diseño y Marketing www.kemcs.com TRANSLATION Elizabeth Collins Morrison elizcollins@mac.com PHOTOGRAPHY José Mata / www.pbase.com/ppmata Amdetur Cel. (04455) 1885 8581 ADVERTISING Raymundo Hernández C. raymundo.hernandez@amdetur.org.mx rayhernandezlcc@gmail.com

LOCAL ASSOCIATIONS

C.P. Javier Vales González, Asociación de Clubes Vacacionales de Quintana Roo, A.C. / Lic. Alejandro Lemus Mateos, Asociación de Desarrolladores y Promotores Turísticos de Tiempo Compartido, A.C. (Puerto Vallarta) / Sr. Paul Wesley Little, Asociación Sudcaliforniana de Desarrolladores de Tiempo Compartido, A.C. / Ing. José Luis Centeno, Asociación de Promotores de Clubes Vacacionales del Estado de Guerrero, A.C. / Lic. Fernando de Leeuw Santiago, Asociación de Clubes Vacacionales de Cozumel, A.C. / C.P. Fernando Alaniz Cárdenas, Asociación de Clubes Vacacionales de Sinaloa, A.C. / Lic. Cristhian Orozco Oseguera, Asociación de Desarrolladores y Operadores Turísticos de Ixtapa y Zihuatanejo, A.C. / Ing. Guillermo Dávila Espinosa, Asociación de Desarrolladores Turísticos de Manzanillo y la Costa Alegre, A.C. Notitur Digital is a bimonthly online publication, published by the Asociación Mexicana de Desarrolladores Turísticos, A.C. (Amdetur), WTC, Montecito # 38, Piso 32, Oficinas 11 – 14, Col. Nápoles, Mexico 03810, D.F. Phone and fax (55) 5488 2028 to 31. It is a sister publication to the printed magazine Notitur, whose registry numbers are: Certificate of Valid Title no. 3856, dated April 19, 1989; Certificate of Valid Content from the Comisión Calificadora de Publicaciones y Revistas Ilustradas no. 3172, dated April 19, 1989; Reserve Certificate Number 04-2005-030817343600-102 from the Instituto Nacional del Derecho de Autor, Ministry of Public Education. Amdetur is not responsible for the advertisements or “advertorials” published in Notitur Digital. Notitur treats personal information on its subscribers accoridng to the privacy standards of the Federal Law on the Protection of Data Held by Private Parties. For more information on our privacy policy, visit our webpage at: www.amdetur.org.mx.

If you would like to receive the digital version of Notitur, in English or Spanish, you can request it at: raymundo.hernandez@amdetur.org.mx Comparta esta Revista

Or dowload it directly: issuu.com/notitur/

ARTICLE Digital Promotion: a new and effective sales channel for tourism Tourism is clearly a key economic activity for economic growth in Mexico. In the last year alone, the number of international tourists visiting the country reached 23.7 million, bringing in a record amount of 13.8 billion dollars in foreign currency revenues, according to data from Banco de Mexico. However, these figures have remained largely unchanged since 1996, the year Mexico surpassed the 20-million mark in terms of international visitors, becoming the seventh most visited country in the world. Today, Mexico ranks 13th, six notches below where it stood in 1996, and this means we need to redouble our efforts to recover this lost ground.

AmdeturMx

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Amdetur amdetur activities

In August, the Mexican Tourist Resort Developers’ Association (AMDETUR) and the Federal Consumer Protection Agency (Profeco) held a meeting for the general purpose of creating a closer relationship between the authorities and AMDETUR members.

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LEGAL ASPECTS Tourism: key to national development

Tourism is an economic driver around the world and provides an element of sustainable development for any nation. This industry may become increasingly important in Mexico's economy in the future if we can manage to optimize and improve the yield on the resources of every region of our country.

ARTICLE MEXICO'S REAL ESTATE BOOM Mexico is in the midst of a unique historic moment in terms of liquidity, spurred largely by the successful financial market placement of various financial instruments such as Real Estate Investment Trusts (REITs) and capital development certificates (CKDs).

This, combined with the recent approval of sweeping structural reforms in Mexico, have encouraged an evolution in the real-estate industry toward new locations, models and players, and one of the most active segments in this regard has been the hospitality business.

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LEGAL ASPECTS Mexican Supreme Court rules that VAT tax may only be refunded to foreigners with tourist status

In September 2014, the Mexican Supreme Court found it constitutionally permissible not to refund value-added tax to foreigners who were in Mexico with “visitor” status--a conclusion it reached after ruling on a writ of constitutional protection (amparo) against article 21 of the Value Added Tax Law, in effect in 2007.

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connections 10 projects we should build in the next 10 years

One of the big advantages of working in the real estate industry is that we can choose the projects we’ll be working on in the future. These are some of Grupo 4S’s dream projects.

www.amdetur.org.mx

AMDETUR

PROFECO MEETING In August, the Mexican Tourist Resort Developers’ Association (AMDETUR) and the Federal Consumer Protection Agency (Profeco) held a meeting for the general purpose of creating a closer relationship between the authorities and AMDETUR members. Among the specific goals discussed were reactivating the Profeco-AMDETUR Committee and its respective work tables, sharing information about complaints statistics, and creating procedures for expediting conflict resolution and strengthening our image as a law-abiding, serious industry. The proposals were accepted by Profeco head Lorena Martínez, who in turn delegated follow-up actions to her staff.

During the meeting, Profeco authorities announced, with the support of information from AMDETUR, that they had begun actions to identify and sanction parties responsible for the misuse of brand names and identities such as AMDETUR, Profeco, Hacienda (the Mexican ministry of finance) and Banxico (the central bank), among others, and to file charges with the federal public prosecutor for organized crime.

NATIONAL TOURIST CERTIFICATION SYSTEM (SNCT) Also in the month of August, the Ministry of Tourism introduced the structure and functioning of a National Tourist Certification System, which will grant quality certificates to tourist service providers. The aim is to encourage improvements in the industry and make Mexico’s tourist industry more competitive.

The proposal by the Ministry of Tourism is to make tourists the center of attention for tourist service suppliers and for public policy on tourism, by improving their experience and providing the highest quality services and products.

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The SNCT is defined as “a set of procedures, mechanisms and instruments established by the Mexican government to define and apply rules, criteria and standards aimed at ensuring the highest quality in the provision of tourist services and products by granting certificates that attest to the level of maturity and quality of companies, independent tourist service providers (ITSP) and destinations, which prove that they have met the requirements and established plans to achieve sustainability, act in a socially responsible manner and undertake a process of continuous improvement.”

subsectors. We also stressed that one of the most important actions for the timeshare industry is compliance with Mexican national standard NOM-SCFI-029.

In coming months a pilot period will begin involving field testing and the gathering of elements to improve the SNCT process, the questionnaire and evaluation.

OPENING OF NEW ASSIST-CARD OFFICES

Its concrete proposals are the following: • To establish a culture of quality based on a process of continuous improvement.

• To draw its strength from the participation and recognition of the public, private and volunteer sectors.

• To be inclusive, ambitious, forthright, transparent, sustainable and distinctive as a matter of principle, and to adopt win-win criteria.

• To extend formal recognition or certificates for the quality of tourist services across the nation, focused on companies, ITSP and destinations.

• To professionalize the services of ITSP. • To encourage quality and social, economic and environmental sustainability, social responsibility and continuous improvement in the industry.

• To create a National Information system on companies, ITSP and destinations that have achieved recognition of their level of maturity and have undertaken a process of continuous improvement.

• To establish strategies and dissemination programs that stress the benefits and usefulness of the SNCT. To develop this project, the tourist industry was divided into 10 subsectors: • Lodging • Golf • Food and beverages • Travel agencies • Spas • Tourist marinas • Tourist transport and leasing • Tourism conferences, fairs and expos • Independent Tourist Service Providers (ITSP) • Destinations

▲ Assist Card 1: Fernando Padrón (BCO), Lilia Alvaro (Country Manager Mexico), Alexia Keglevich (CEO), María Riccardi (Regional Service Manager), Maximiliano Fausciana (Marketing Director).

AMDETUR participated in both the creation of the National Tourist Certification System and in the preparation of a handbook for the lodging subsector. We are working to ensure the SNCT certification is consistent with existing certifications and recognitions in this as well as other

ASSIST CARD, a company that focuses on travelers’ assistance with a global history and 20 years in Mexico, opened its new general offices in the nation’s capital.

The traditional ribbon-cutting ceremony for the offices at Mariano Escobedo 476, ground floor, in Torre Polanco,

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NOM-SEMARNAT PROJECT MEETING In September, the Ministry for the Protection of the Environment and Natural Resources (SEMARNAT) presented its draft of a regulation entitled “Specifications for environmental protection and mitigation of adverse effects on climate change from the planning, design and construction of tourist real-estate developments in coastal ecosystems.” This document will focus on mitigating the effects of climate change, its social and economic repercussions as well as its impact on the tourist industry.

On September 4, SEMARNAT held an initial informative meeting in order to present a draft of the regulation and invite various organizations to join in support of it.

was led by Alexia Keglevich, CEO of ASSIST CARD International, and Lilia Alvarado, CEO for the company in Mexico.

ADMETUR urged all affiliates who wished to analyze, share and participate in the analysis of this regulation to present their proposals. The strength of their response enabled us to begin working on the points to be addressed in a meeting held September 19, 2014.

The new offices of Assist Card are located in Torre Polanco, Mariano Escobedo 476, Colonia Anzures, and have two areas: the boutique, which includes reception, three customer service modules, a meeting room and coffee service for visitors; and administrative offices, where operations for all of Mexico are coordinated.

AMDETUR is already a member of the work group for the regulation, and representation and defense of our affiliates’ interests. We have been working steadily on this matter and have drawn SEMARNAT’s attention to the arguments and points brought forth in our meeting, and these will remain under review in coming months.

The opening in Mexico City is Assist Card’s fifth in 2014. In April it opened new offices in Montevideo, Uruguay; in May it opened a new stand for the general public at Terminal 3 of the Guarulhos Airport in Sao Paulo, Brazil, and it is already present in China, South Korea, India, Indonesia, Philippines, Japan, Sri Lanka and Vietnam, as well as 36 other countries around the world.

SECOND CORPARMEX FORUM ON MEDICAL TOURISM

▲ Diana Bernal, accompanied by Senator Omar Fayad and Aristóteles Núñez, head of SAT. Photo: Cuartoscuro.

3 YEARS OF PRODECON ACTIVITIES As part of the activities commemorating three years of activities by the Federal Taxpayer’s Protection Agency (PRODECON), the agency held a forum entitled “PRODECON, Tax Ombudsman: 3 years in the Defense of Basic Rights.” AMDETUR was present as a guest in this event. The opening ceremonies were led by PRODECON head Diana Bernal Ladrón de Guevara, the head of the Tax Administration Service (SAT), Aristóteles Núñez, and Senator Omar Fayad.

The forum created a space for authorities and taxpayers’ representatives to engage in a dialogue about the impact and importance of PRODECON’s work in the defense of taxpayers’ rights during its three years as Tax Ombudsman, by processing complaints and issuing recommendations to the tax authorities.

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Convinced that medical tourism has become an innovative segment with opportunities for considerable economic benefit in Mexico, the Mexican Employers’ Confederation (COPARMEX) held its Second Forum on Medical Tourism, which was met with considerable success.

On September 9 and 10 tourist industry representatives, among them AMDETUR, came together in this forum in which COPARMEX president Juan Pablo Castañón asserted that, through medical tourism, Mexico could attract some 1.7 billion U.S. dollars a year. Because the proximity of this market to the United States is tremendously important to the industry.

Also present at the forum were Roberto Zapata Llabrés, chairman of the COPARMEX Tourism Committee, Javier Potes, vice chairman of the Medical Tourism Committee, and Margarita Ortíz Muñoz, vice chairman of Business Center Outreach for the Tourism Committee.

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▲ Roberto Zapata Llabrés, chairman of the COPARMEX National Tourism Committee: Héctor Sandoval, Secretary of Tourism for the Government of Colima; National COPARMEX president Juan Pablo Castañón; Enrique de la Madrid, GEO of Bancomext - In Mexico City.

BREAKFAST WITH INDUSTRY LEADERS

to plan efficient mechanisms for financing, developing and promoting cities and magical villages.

Tourist industry leaders met for a breakfast on the theme of “Tourist Industry in Concrete 2014,” where they discussed opportunities and weaknesses for this industry within the economy, both in the international and domestic markets.

The issues addressed by specialists centered around the need to encourage better connectivity, not just in the air travel business but in creating quality standards for Mexican hotels.

Arnulfo Rodríguez Hernández, senior economist at BBVA Bancomer, said that the growth in Mexican tourism is far from the levels promised in the past, having been seriously affected by recent economic conditions.

Mindful of this situation, attendees agreed that there was a tremendous need to diversify Mexico’s tourist products and go beyond the traditional sun-and-sand destinations, and to create and update records on this economic activity

AMDETUR TIMESHARE SPECIALIZATION COURSE AMDETUR’s creation of a Specialization Course in Timesharing is now a reality. The objective of this course is to provide knowledge and analysis of the Timeshare business, its environment, structure and operation, to support companies, development agencies and service vendors in the process of generating value and sustained growth.

Through four twenty-hour modules, course participants can obtain the tools for identifying the factors that influence the development and growth of this industry, its regulatory framework, business models, and its administrative, commercial and service operation.

The support of an educational institution--in this case the Centro de Estudios Superiores de San Angel (CESSA)-is fundamental for addressing key areas of training and preparation in tourist-oriented human resources.

AMDETUR, for its part, has extensive experience in this industry and complies fully with the goal of promoting the development and comprehensive growth of tourist realestate ownership in Mexico, contributing to the economic and social growth of the entire country.

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AMDETUR

▲ Grand Opening of Resord Advantage New Offices

RESORT ADVANTAGE OPENS NEW OFFICES On September 12, Resorts Advantage Mexico opened new offices in Mexico City, located at Calle Amsterdam no 229, 4th floor, Col. Hipódromo Condesa.

The event was organized with a highly Mexican ambience and symbolism. During the opening ceremonies, Rafael Díaz-Cortes and his wife Patricia cut the official ribbon that signaled the start of celebrations by the company’s associates, who celebrated both their pride in their roots and the new facilities, both an important sign of Resorts Advantage’s organizational culture.

LIVE IT TO BELIEVE IT AMDETUR and the Mexican Tourist Promotion Council (CPTM) have joined forces to promote tourism to various destinations in Mexico through the ad campaign “Live It to Believe It.” AMDETUR handled the lobbying with its affiliates, encouraging them to use the visual material generated for this campaign in support of their sales activities. This effort presents a splendid opportunity to promote Mexican destinations and to underscore the joint efforts of AMDETUR and the CPTM.

It was in the year 1990, in Miami, where Mr. Díaz-Cortes decided to open his own service offices for vacation ownership developers, marking the birth of Resorts Advantage Ltd. Thanks to the success and development of his clients, he made the decision of venturing abroad and continuing his vision of growth by opening Resorts Advantage in Spain in 2005. In 2009, he and his team seized the promising opportunity of expanding their services to Mexico, and presenting their business proposal to a market of robust demand. This was how Resorts Advantage Mexico was created.

Attending the event were AMDETUR’s Executive President, Gonzalo Maqueda Cornejo, and members of the Resorts Advantage Management Team: Alejandra Gomez (VP for New Businesses), Ralph Díaz-Cortes (Director of Operations), Aurora Cabrera (General Manager Mexico), Saúl Pérez de León (Human Resource Manager Mexico), and Marisol Montes de Oca (Service Manager Mexico).

Remember you can see more about Amdetur's activities at our Facebook Fanpage: www.facebook.com/AmdeturMx

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These are some links to the campaign videos:

Oaxaca: https://www.youtube.com/watch?v=YxYuM4mXxWQ Guanajuato: https://www.youtube.com/watch?v=rjswOXhAf7k Chiapas: https://www.youtube.com/watch?v=t_snEmYU0fs México: https://www.youtube.com/watch?v=QKGzYpD6uuk Vallarta Nayarit: https://www.youtube.com/ watch?v=v102xMIZzEk Cancún, Riviera Maya: https://www.youtube.com/ watch?v=IJpUSgZPgc0 ◄

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LEGAL ASPECTS

Tourism:

key to national development

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n recent years, global tourism has outpaced of the growth of the overall economy. In 2013, international tourism rose 5% during the first eight months of the year1, while the economy grew 2.4%.2

Despite the benefits Mexico derives from this recovery, we are far from attaining the full potential of many of our local regions, especially compared to our national competitors.

The institutional scaffolding that Mexico built up in past decades as a tourist power needs to be re-engineered in order to guarantee not only the ability to capture the momentum of these boom cycles, but to improve its competitiveness against new emerging poles of development and changes in demand.

The issue is not a minor one for public policy makers. Tourist activity is vital for Mexico, because it is the country’s fourth largest source of foreign revenues. In its report for January-May 2014, Banco de Mexico announced that international tourism revenues totaled 7.22 billion dollars, 16.7% more than in the same period of last year, when they were 6.15 billion dollars.

At the end of 2013, the industry accounted for 8.4% of Gross Domestic Product and more than 6 million jobs. In the particular case of states like Guerrero, Quintana Roo, Baja California Sur and Nayarit, is the most important activity in their economies.

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México:World Tourism Competitiveness Ranking (WEF, 2013) Source: IMCO “Nueva política turística para recuperar la competitividad del sector y detonar el desarrollo regional” page. 16,with information from WEF, several years.

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55 51

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But despite positive trends in the industry, Mexico has lost competitiveness internationally and has not been able to develop its full potential, primarily because of a lack of tourism services that generate higher added value, a lack of public funding, a lack of coordination between levels of government, the need for strategic investment planning that goes beyond each six-year presidential administration, logistical transportation issues, a lack of cooperation with the business sector and, particularly, because tourism service suppliers have not adapted to the new telecommunications service needs of tourists who come to Mexico for business or pleasure.

According to the National Tourist Confederation, the loss of competitiveness in Mexican tourism should concern us. In 1994 we ranked seventh in terms of visitors and ninth in terms of foreign currency inflows, but by 2013 we had dropped to 13th and 32nd places3, respectively.

Furthermore, according to the Tourism Competitiveness Index published by the World Economic Forum in 2013, Mexico ranked 44th in a list of 139 countries, meaning that there are 43 countries that are more competitive than Mexico in tourism, and that our national policies need to be reformulated in order to attract more visitors from this constantly growing market.

International experience has proven that the tourist industry is a viable option for generating jobs and combating poverty, which is why Mexico needs to overhaul its tourism policy. The basic aim should be to improve the competitiveness of traditional destinations and support new tourist destinations with a regional specialization

1. United Nations Information Center, “WTO reports growth in world tourism” (DE, August 21, 2014: http://www.cinu.mx/noticias/mundial/omt-reportacrecimiento-del-tu/ ) 2. World Bank, “World Bank says Global Economy is Growing Stronger” (DE, August 21, 2014: http://www.bancomundial.org/es/news/pressrelease/2014/01/14/global-economy-turning-point-world-bank)

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depending on their tourism potential and type of wealth – cultural, natural, environmental, religious, health and sports, for example.

Along these lines, various projects have already been presented with the idea of promoting tourism at the national level. In my term as Senator, I have introduced nine bills on tourism, among which were the following: On August 7, 2013, I presented a bill to create the Tourism Promotion Bank in order to guarantee better instruments for access to financing, with a comprehensive focus that goes beyond the current National Tourism Promotion Fund, basically in order to facilitate access to funding for individuals and corporations and to provide technical assistance and training for promoting tourism activity.4 I am convinced that to trigger tourist potential in various states of Mexico, it is fundamental that this be made a constitutional mandate. To this end, a group of legislators including myself presented a bill that would elevate the tourist industry to constitutional level as a priority activity for the domestic economy. This would lay the bases for a new institutional framework for this industry, and would encourage development of public policies needed to

3. Notimex “México ranks 13th as a world tourist destination” (DE, August 21, 2014: http://www.mensajeronet.com/boletinescnt/sys/ contenidohtml.asp?IDArticulo=1337) 4. Armando Ríos Piter, “Draft of the Decree for a Law on the Tourism Bank,” (DE, August 21, 2014: http://www.senado.gob.mx/sgsp/gaceta/62/2/2013-09-12-1/assets/documentos/ Ini_PRD_Ley_org_Banca_Turismo.pdf)

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LEGAL ASPECTS

MĂŠxico ranked 44 of 139 on Tourism Competitiveness Index (WEF2013)

position Mexico as a world power. New institutions could be created in response to changes in world trends, but above all, it would represent a decision by the Mexican State to strengthen alternative sources of development for our communities.

The text of this reform proposes assigning tourist activity, and related areas, a priority place on the national agenda, which would allow for the creation of public policy regulations, laws and programs for the improvement of infrastructure, tax incentives, and financing to guarantee the competitiveness of our industry around the world, In other words, constitutional reform is indispensable for triggering jobs and regional development with a comprehensive vision.

Restoring Mexico’s place as a tourist power requires sharing a joint vision of the challenge, of renewing efforts and undertaking a profound reengineering that breaks with the traditional public policy schemes. Once we have taken these steps, the possibilities are infinite for Mexico's to take advantage of the wealth and potential it offers the world. ◄

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Mexican Supreme Court rules that VAT tax may only be refunded to foreigners with tourist status Eduardo Joel Ibarra Acosta. General Director for Liaison and Regulation Activities Mexican Taxpayers’ Protection Agency

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alue-added tax (VAT) is a consumption tax, and is paid for a variety of acts or activities--buying a car, renting a retail space, receiving professional eservices from a public accountant, or others.

This tax is very important for Mexico. According to the 2014 federal revenue budget, it should amount to a projected 609.39 billion pesos in revenues1, making I the second largest source of tax revenues after income tax.

Despite the VAT tax’s importance as a source of revenues for Mexico, there are cases in which the law provided for a return of VAT paid, either because it was paid in excess, improperly, or even as an incentive for the development of certain activities considered vital to the Mexican economy, such as foreign tourism, which generates a significant flow of money into the economy. Between January and April 2014, for example, Mexico received more than 4.44 billion dollars in foreign currency revenues from international tourists, which according to the Ministry of Tourism was 15% higher than in the same period of 20132.

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Accordingly, the return or “refund” of VAT tax paid by foreign tourists is a benefit that promotes and encourage consumptions and invigorates the domestic economy.

Article 31 of the VAT law in effect in 2007 includes the following provision:

This matter has prompted a certain amount of debate over extending this benefit not just to foreign tourists but to other foreigners who are not in Mexico as tourists. These questions have reached the level of Mexico’s highest court, which recently handed down its ruling.

“Article 31. Foreigners with the status of tourists pursuant to the General Population Law who return to their home countries by air or sea, may obtain a refund of the valueadded tax they have paid to acquire merchandise in this country, provided they meet the following requirements:…”

In September 2014, the Mexican Supreme Court found it constitutionally permissible not to refund value-added tax to foreigners who were in Mexico with “visitor” status--a conclusion it reached after ruling on a writ of constitutional protection (amparo) against article 21 of the Value Added Tax Law, in effect in 2007, which said that only foreigners with the status of tourists could obtain a refund of VAT paid on merchandise they had bought in Mexico, and that foreigners with the status of “visitors” did not enjoy the same benefit. The claimant argued that this created an unequal treatment in the eyes of the law, meaning it implied a basic unfairness.

We may infer from this article that only foreigners with the status of tourists, who leave Mexico by air or sea, are entitled to a refund of VAT tax paid. It does not, however, specifically define what is meant by “tourist,” so for this we must turn to the General Population Law, whose article 42 establishes the characteristics of the tourist and how they differ from those of a foreign “visitor.”

Our highest Court has explained that the principle of tax fairness, consigned in article 31, section IV of the Mexican Constitution, implies that all taxpayers who meet the requirements described in the tax laws should receive identical treatment; in other words, in order for an unequal treatment to be found unconstitutional, it would have to be proven that equal subjects were being treated unequally.

1. Article 1, Federal Revenue Law for 2014.

2. Source: http://www.sectur.gob.mx/2014/05/14/boletin-108-la-derrama-por-turistasinternacionales-crecio-15-en-el-primer-trimestre-supero-los-4-436-mdd-banxico/

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Characteristics and differences between “non-immigrant tourist” and “nonimmigrant visitor”

Non-immigrant tourists • 6 months maximum in Mexico • Non-remunerated, not-for-profit purposes • For recreational, health, artistic, cultural or sports purposes • Live on resources brought from abroad

On this basis, the Second Chamber of the Supreme Court explained that the non-immigrant tourist foreigners enter Mexico to remain in a place and environment different from that of their home country, receive services in the place at which they arrive, and purchase products during their stay with the purpose of taking them back to their home countries among their personal effects. Non-immigrant visitors, on the other hand, come to Mexico to engage in some activity that may or may not involve a profit, and to explore or engage in investment alternatives; so the purpose of their visit is different from that of tourists, focusing more on business, commercial or simply economic aspects.

Taking all these considerations into account, the Supreme Court concluded that foreigners who enter Mexico as tourists and foreigners who enter as visitors are not taxpayers in the same legal situation, and therefore, that article 31 of the Value Added Tax Law, in effect in 2007, respects the principle of tax fairness consigned in article 31, section IV of the Mexican Constitution.

Conclusions 1- VAT is a tax on consumption, and is the second largest source of tax revenues for Mexico after income tax.

Non-immigrant visitors • Up to a year (with 4 extensions of equal duration each) • May be for profit or not • For the purpose of investigating or engaging in investment activities • Live from resources brought from abroad, from the income they produce, or any other income from foreign sources

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2- The VAT Law allows for refunds in certain cases, such as for foreign tourists.

3-The VAT refund provided for in article 31 of the VAT Law in effect in 2007 covers only foreigners with the status of tourists. Persons with other migration status are not entitled to a VAT refund.

4-The Supreme Court in effect ruled against refunding (reimbursing) VAT tax paid by foreigners who do not have the status of tourists. ◄

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digital promotion a new and effective sales channel for tourism Ricardo Aguado Ornelas Coordinador de Posgrados Tecnol贸gico de Monterrey Campus Morelia

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ourism is clearly a key economic activity for economic growth in Mexico. In the last year alone, the number of international tourists visiting the country reached 23.7 million, bringing in a record amount of 13.8 billion dollars in foreign currency revenues, according to data from Banco de Mexico.

However, these figures have remained largely unchanged since 1996, the year Mexico surpassed the 20-million mark in terms of international visitors, becoming the seventh most visited country in the world. Today, Mexico ranks 13th, six notches below where it stood in 1996, and this means we need to redouble our efforts to recover this lost ground.

Since the 1970s, Mexico has been betting on the development and promotion of comprehensive beach megaprojects like Cancun and Ixtapa-Zihuatanejo.

Although these bets have paid off, today demand is becoming increasingly diverse, opening opportunities for new destinations that offer niche activities like ecotourism, cultural tourism, religious or even medical tourism, leaving our country at a slight disadvantage.

Mexico's tourist supply is vast, and has the potential to satisfy new kinds of demand, but more investment is needed in certain areas, one of them being promoting destinations. Development and promotion efforts should encompass the entire range of destinations that this country offers.

Today there are new media for promotion that are poised to replace the traditional marketing channels. An annual study by FutureBrand reveals that the Internet has become the largest tourist service supplier, replacing traditional travel agencies. And not only this, the Internet has proven to be the most

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effective communication channel for the tourism industry: promoting tourism online has the capacity to and advantage of serving and interacting with various market niches from a single platform.

But having an online presence is not enough. The dynamism offered by the World Wide Web cannot be ignored. It is imperative we establish the appropriate media to allow the public to interact with the organizations that manage destinations. E-mail continues to be, even today, the main media for interaction between a user and a promoter. E-mail offers a unique opportunity for personalized, intimate interaction with clients, which means better relations with them.

A study by the Center for Tourist Research and Studies at Tecnológico de Monterrey analyzed the response capacity offered by Mexico’s official tourist websites through email. In this project, a fictitious email account was created for Steven, a 27-year-old prospective tourist from Toronto Canada. “Steven” contacted each of Mexico's Tourism Ministries through their promotional webpage, requesting basic information such as the exchange rate or lodging options.

Dr. Jaime Murphy of the Australian School of Management and an expert on this topic, says it is important for a client to receive a response within no more than 24 hours. The quality of the response is important and should be personalized, sent from an official e-mail address with a digital signature. The above-mentioned study analyzed these variables, yielding rather discouraging results.

Study examined 32 official tourist websites Only 22 provide the option of email contact.

Less than 70%

Only 5 websites answered an email.

Less than 15%

The study examined a universe of 32 official tourist websites, and for starters, only 22 of them provide the option of e-mail contact, meaning less than 70% of the websites are designed to enable the public to interact with them. Of the 22 sites contacted, only five of them responded to the email, or only 23%, and barely 15% of Mexico's total tourist webpages. The vast majority of official tourist websites in Mexico fail to take advantage of the opportunity to establish direct contact with consumers. This contact is especially important in hospitality

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and tourism, whose intangible products are difficult to evaluate before they are consumed. Experts point to the importance of social media in building trust, creating dialogue and significantly influencing travelers’ decisionmaking processes.

Word-of-mouth recommendation, meaning communication established by a consumer with his or her social circle, is the best marketing tool for the tourism industry. An evaluation from a family member or friend has much more impact then what we receive from other media. Word-of-mouth recommendation is the primary factor behind up to 50% of all sales. So it is clear that marketing efforts for all destination management organizations should promote this type of dialogue.

Word-of-mouth recommendation, meaning communication established by a consumer with his or her social circle, is the best marketing tool for the tourism industry

Although e-mail remains the main media for contact between a consumer and a merchant, the brisk growth of what is called the Web 2.0, meaning a new age of Internet that allows for all kinds of interaction, has introduced innovative media for establishing contact and enriching the marketing process. Social networks today have the same influence as word-ofmouth recommendation, not only introducing new mechanisms that enable consumers to learn about destination or products, but permitting destination management organizations to position themselves in a much more dynamic way.

The social networks do not eliminate the traditional channels altogether, but promoters will have to invest more of their time and resources in incorporating these into their strategies and campaigns. Online marketing offers a more specific focus than traditional media and therefore a better return on investment.

In conclusion, tourism promoters would do well to integrate the various types of social network into their websites, and try to motivate tourist to participate in online travel communities and build digital communities with characteristics such as usefulness and user friendliness. It is important to have a presence on the Internet and in the social media, but it is even more important to pay attention to and keep track of these digital media. Otherwise, promotional efforts will fall short by failing to close the cycle of dialogue and interchange that the social media assume.â—„

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MEXICO'S REAL ESTATE BOOM M

exico is in the midst of a unique historic moment in terms of liquidity, spurred largely by the successful financial market placement of various financial instruments such as Real Estate Investment Trusts (REITs) and capital development certificates (CKDs). This, combined with the recent approval of sweeping structural reforms in Mexico, have encouraged an evolution in the realestate industry toward new locations, models and players, and one of the most active segments in this regard has been the hospitality business.

To support these structural reforms, the National Infrastructure Plan (NIP) has more than doubled its budgeted investments.

In fact, this is the first time that it includes a separate allocation for the tourist industry, with the firm intention of reviving destinations and expanding and improving Mexico's tourist supply.

All of these factors have attracted the attention of international investors, both companies with clear strategies for setting up shop in Mexico and institutional investors seeking to place some of their capital in markets with high growth potential and controlled risks.

Another of the factors that will help in the short and medium term to develop new destinations is the demand for domestic tourism. Despite sluggish growth in Mexico's gross domestic product (GDP) in 2013, just 1.2% over 2012, the pace

By: SaĂşl Villa, Partner in Charge of Mergers and Acquisitions and Cristina Torres, Senior Manager specialized in Real Estate for KPMG Mexico / asesoria@kpmg.com.mx Visit: www.delineandoestrategias.com amdetur.org.mx

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of growth is expected to pick up considerably in the future due to recent reforms and global economic recovery, particularly in the United States. This is expected to boost families’ per capita income (currently at 11,000 dollars a year), directly affecting the volume of spending on domestic tourism.

In the last two years, investment in transactions in this industry have doubled, some of it as a result of investment in REITs and CKDs, which have opened access to private investment in the real estate market and encouraged an injection of capital from pension fund managers (Afores).

An added benefit of REITs is that they create a secondary market for investment, in other words, a stable market for the purchase and sale of hotel properties. This gives real estate developers a new exit strategy for their investment, which increases the attraction of this type of capital.

"In the last two years, investment in transactions in this industry have doubled, some of it as a result of investment in REITs and CKDs..."

The potential growth that will be spurred by from rising demand and increased capital inflows opens new doors to investment strategies that are different from those of the last decade, although these remain very important. Some examples of possible investment opportunities today are the reconversion of family hotels and the development of hotels in mid-sized cities.

In Mexico's case, approximately two thirds of hotels are familyowned, single-brand units with homemade reservation systems and operations. The trend today, as in other regions of the world, is toward renowned international and national brands.

New hotel developments are increasingly associated with known brands that give travelers the security of enjoying a high standard of service quality, and certain predefined building characteristics, which in turn allow for the use of the brand's in-house sales channels and corporate clientele base.

Up until now, hotel investment was concentrated mainly in the most popular beach destinations, but with the boom in business and domestic tourism in Mexico in recent years, we are seeing increasing demand for hotel properties in major cities, as well as mid-sized cities and secondary destinations.

On the other hand, with these new possibilities for growth and capital inflows, there is a risk of unjustified price inflation in some locations.

Investors who are seeking superior yields consistent with their level of investment risk should include new investment concepts and strategies in their portfolio so as not to miss out on the opportunities that Mexico presents today.â—„

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proJects

we should build in the next ten years By: Carlos Mu単oz

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O

ne of the big advantages of working in the real estate industry is that we can choose the projects we’ll be working on in the future. These are some of Grupo 4S’s dream projects:

1. The new business-class hotel. The business category is one of the fastest-growing in the hotel industry, but it is still falling short of market preferences. At the heart of the dissatisfaction is the spatial and technological isolation of guests. Common areas have been minimized and still do not offer that optimum “third space” between home and office. Wi-Fi networks slow or even impede access to the internet, while hotels do nothing for the health of their guests. In the hotel of the future, the interior space of each room will be reduced further, in exchange for a new experience that brings together common areas, community-based services and absolute connectivity.

2. Communities planned with wellness in mind.

What are called "bedroom communities" have proven unsustainable, and a new compact mixed-use model has been proposed. If communities in the future are planned based on a holistic model of wellness, it would have significant impact on their architectural interpretation.

From spaces for practicing sports to a supply of organic produce and meditation rooms, everything will have to be reinvented. As generations age and pass through different life stages, the market for this type of enterprise will expand.

In a wellness-based community, all family members will be encouraged to live an active, healthy life.

3. Offices for a public that lives from its ideas.

Experts have documented the emergence of a new generation with a whole new way of working: highly collaborative, routine-averse, flexible in terms of their

schedules and structures, etc. For this new class of workers and their companies, we need office spaces that truly capture their essence. As already proposed in some projects, the line between home and work will blur and there will be an infinity of "third places." The office will be a place to live alongside others, where work once again becomes one's passion.

4. Urban micro-apartments with a sense of community. In high-rise residential developments today, 4S estimates that between 4% and 7% of salable area is occupied by constructed amenities (not counting exterior spaces), which is considered a low percentage, particularly taking into account the reduction in living areas in the last ten years. According to recent estimates for Mexico, the inside area of the average high-rise apartment selling for 100,000 dollars has dwindled by 38%. In the next 10 years, even more square footage inside these buildings will be lost, and the only way to make up for this will be to dramatically expand common areas and promote a sense of community within the projects. In the near future, we estimate that common areas could occupy as much as 25% of constructed area. An interesting question is whether homebuyers are willing to swap out parking areas for more and better amenities. It is in these additional square meters that the recipe to control prices is hidden.

5. Active retirement communities. In this age of connectivity and facilities, the concept of active retirement has changed. Retiree’s palate for experience has become more complex and demanding, and we try to constantly increase the number of comforts in our lives. To leave behind the solitary concept of retirement that prevails today, we need a project that understands the concept of active retirement. In the future, reverse mortgages – a

Ing. Roberto Calvet Martínez Vicepresidente de Infraestructura Turística Cámara Mexicana de la Industria de la Construcción ►

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financial product that remains largely absent from Latin America – will become increasingly popular, and we will see the emergence of a sustainable mechanism for offering services at accessible prices to the middle class.

6. Cultural-retail centers. Today Latin America is seeing the most aggressive growth in retail square footage in its history. Mexico and Colombia are the most notable examples, where growth in the number of shopping centers and retail sales floor area have been growing at an impressive rate. The main problem is that shopping centers seem to be a series of clones based on the same formula, making each shopping center a repetitive, soulless experience. The solution to this "cloning" is a blending of retail and cultural spaces, bringing together the performing and visual arts with traditional retail spaces, providing a forum for local actors and experimental artists, even incorporating urban art in the entire project architecture.

In the future, the boundaries between art, commerce and community will come together at the shopping center.

7. Self sustainable projects. On a daily basis we must contend with the costs and the need for appropriate maintenance of long-term projects. But if we conceptualize a project as something that generates resources instead of consuming them, our vision changes. In this vision, the enterprise would have a territorial reserve, as well as an equity component that would trigger the start of growth.

As the project grows, its speculative component would increase, but so would its equity, and it would generate constant resource flows. At the start, these would help the project defray maintenance expenses, but in the long term, they could even be paid out in the form of dividends. This formula could work for almost any type of development.

The project would also be complemented by energy generation through new technologies, and might give rise to an independent company, whose shareholders would be its residents.

speak of experiences. The luxury project of the future will be a multisite enterprise, connected by a central residential element, where there are also vacation properties at various sites of relevance to the market, co-ownership in luxury assets such as yachts and transportation, and services to ensure that they intersect and function seamlessly. The new luxury icon will be the embodiment of a lifelong dream, more than a project in a single physical location.

10. The fourth place. Starbucks CEO Howard Schultz coined the concept of the "third place." In his vision, our home is the first place, our office is the second, and the third is a space in our community where we frequently gather. In the vision of Grupo 4S, the fourth place is a project that brings together all three places and generates many third places.

It is a project where the values of trust, coexistence and community are felt in every square meter of construction. ◄

At Grupo 4S, we would love to hear about your future projects.

Contact Carlos Muñoz at carlos@grupo4s.com.

8. A place in symbiosis with nature. As time goes by, our view of nature becomes more sophisticated, but our urban impact is also growing, and we are doing very little to preserve our place on the planet for the long term.

In a project planned in symbiosis with nature, the impact of all these urban and construction elements is minimized.

This type of project, conceptualized to rehabilitate spaces near existing cities, would involve the creation of “green belts” based on projects that are unique in their respect for nature. This goes beyond certifications and involves a complete effort to achieve symbiosis with surrounding nature.

9. A new paradigm of residential luxury. Although the generation of luxury icons is an everyday matter in the real estate industry, we believe a new paradigm is needed. In our view, in the most sophisticated markets, it is not enough to speak of living and amenities; we should amdetur.org.mx

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