OTTAWA - Mexican state police say they have made an arrest in the case of a Canadian businessman found dead in his burned out rental car last month.

The chief prosecutor in the state of Guerrero told Mexican national news agency Notimex that a friend of Daniel Dion's is now in custody in connection with the murder.

Dion, 51, of Carleton Place, Ont. travelled frequently to Mexico to oversee a handbag business that used prisoners as its main workforce.

The prosecutor's office says that 46-year-old Hector Juan Figueroa told police that he was a friend of Dion's and let the Canadian stay at his mother's apartment in Acapulco.

Notimex is reporting that Figueroa told police he arrived at his home to find Dion drinking alcohol in the early morning hours of Oct. 23.

Figueroa alleges that Dion began to hit him, and he fatally struck his friend in the head in self-defence.

He says he put the body in a car, drove it to the remote location where it was found several days later, and set it on fire.

Dion's nephew Shanny Bolduc told The Canadian Press that they had yet to hear of the arrest from Mexican officials.