Daniel Dion, 51, is shown in this undated family photo. He was in Mexico to promote his line of purses. (Canadian Press)Authorities in Mexico say they have arrested a man in connection with the death of a Canadian businessman whose body was found in the trunk of his rental car in Mexico.

Mexican authorities arrested Hector Figueroa, 46, on Saturday after police say he confessed to killing Daniel Dion.

Fernando Monreal Leyva, the director of the state police department, said Figueroa said in his confession that he got into an altercation with Dion at Figueroa's house and that he punched Dion and that Dion died from his injuries. He then told police he drove Dion's body to a remote location and set the car on fire.

The body of Dion, 51, was found in the burned-out trunk of his rental car on Oct. 30 in Chilpancingo, 115 kilometres outside of Acapulco. DNA tests have successfully identified the remains as Dion's, authorities said.

Charges have not been laid, said Leyva, but the suspect remains in custody as the investigation continues.

An image of Hector Figueroa taken from his Facebook profile. Figueroa counted Daniel Dion as one of his six friends on the social networking website. (Facebook)

Leyva said the suspect was a systems technician and had spent time in prison on a 15-year homicide sentence, and that it was while in prison that he came to know Dion.

Reports in Mexico said Dion operated a purse-manufacturing company that was to employ rehabilitated Mexican prisoners.

Dion, who was from Sherbrooke, Que., but lived near Ottawa in the town of Carleton Place, had planned a month-long stay in the Mexican resort city for a business trip to sell "eco" purses. He was due to return home in October.

His family reported him missing on Oct. 23.

A member of Dion's family told CBC that they were relieved to hear news of the arrest Tuesday morning, but would not comment further.

With files from the CBC's Omar Dabaghi-Pacheco