Alliance32

United States - Mexico Chamber of Commerce Binational Business

Insight/

USMCA’s IP and Mining Previsions:

From Our Members/

Leaning into International Partnerships to Foster Prosperity

Priorities for Its Implementation

The Interview/

Alvaro Luque,

President and CEO of Avocados From Mexico

Opinion/

Year / Año 21 // No 32 // USA $4.00 // MEX $ 45.00

A Way Forward

Jay Timmons President and CEO of the National Association of Manufacturers

Cover/

Business/

24 years committed to Mexico

What Makes Utah One of the Fastest Growing Life Sciences Hubs in America?

KCSM

Executive Editorial Committee United StatesMexico Chamber of Commerce Albert C. Zapanta President & CEO, Binational Headquarters

Editorial Dear Members and Friends,

Francisco Lopez Espinoza CEO, Grupo Grafico Multicolor Joseph R. Chapa Vice-President, International Trade Development Centers

Publishing Coordinators Executive Director PROMEXE Rafael Lopez Rivera rafa.lopez@multicolorig.com Director of Communications Gabriela Kenny gabriela.kenny@usmcoc.org Publishing Manager Cecilia Lopez ceci.lopez@usmcoc.org

Editorial & Design Editorial Director Cecilia López ceci.lopez@usmcoc.org Editor Jill Martinez jmartinez@irvingonline.com Concept & Graphic Design AMIC Parlante cj@amicparlante.com

Printed by Ultra Group Mexicana For advertising inquiries, contact: Rafael Lopez rafa.lopez@multicolorig.com Executive Director PROMEXE Gabriela Kenny gabriela.kenny@usmcoc.org Director of Communications Cecilia Lopez ceci.lopez@usmcoc.org Publishing Manager

Cover Photo: Courtesy of KCSM ALLIANCE, revista cuatrimestral.- Publicacion de la Camara de Comercio Mexico Estados Unidos y Promotora Mexicana de Ediciones, S.A. DE C.V. (PROMEXE). Editor Responsable: Francisco Javier Lopez Espinoza. Número de Certificado de Reserva otorgado por el Instituto Nacional del Derecho de Autor: 042013-071518324800-102. Numero de Certificado de Licitud de Titulo y Contenido: 16157. Domicilio de la Publicacion: Jose Maria Chavez #3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Imprenta: Multicolor Gran Formato S.A. de C.V. Jose Maria Chavez #3408. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Distribuidor, PROMEXE Jose Maria Chavez # 3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Camara de Comercio Mexico Estados Unidos, 5510 Cherokee Ave. Ste. 120, Alexandria, VA 22313-2320. Mailing address: P.O. Box 14414, Washington, D.C. 20044.

Printed by Ultra Group Mexicana, S.A. de C.V. Av. Jose Maria Chavez No. 3408, Ciudad Industrial; Aguascalientes, Ags., Mex. Specifications: Total production, 3,000 units; covers: couche paper 135 grs; Varnish UV. Interiors: couche paper 135 grs.

Impression: offset full color.

The views expressed in this magazine are the responsibility of the authors and do not necessarily reflect official positions of the U.S.-Mexico Chamber of Commerce, its members or supporters. Our goal is to present a broad range of perspectives on shared bilateral issues.

It is with great pleasure that I write to you after many months of uncertainty caused by the COVID-19 pandemic. I am proud to share that, even with certain difficulties, the Chamber never interrupted operations and continued to deliver services to fulfill our mission of promoting good business relations between the U.S. and Mexico. We are thankful for the support we received from our members and their engagement in our virtual programs and initiatives which we have conducted with great success.

I am proud to share that some of our Chapters have increased their membership during this challenging time, and we welcome three binational members: Constellation Brands, Ingredion, and R.S. Hughes.

The relationship between the U.S. and Mexico is evolving to respond to the pandemic and many other challenges: supply shortages, natural disasters, increase of migration flows, and security threats to name a few; however, this is not a time to get discouraged, but rather focus on how we can contribute to resolving those issues. This edition of Alliance Magazine offers deep reflections on this front.

Distinguished leaders from the U.S. and Mexico public and private sectors share with us their journeys, their opinions, and proposals for the future. All our contributors are decision-makers who are working decisively to respond to those challenges and transformations.

One remarkable case is the recently announced Kansas City Southern Railroad purchase by Canadian Pacific Railway, Ltc. This historic deal creates the first rail network that connects Canada and Mexico, and we expect the merger to have a significant impact on the development of rail transportation services in North America.

In recent months, the Chamber has been focused on the implementation of the United States-Mexico-Canada Agreement (USMCA). There is consensus that the agreement provides a vehicle to tackle and reduce the impact of some of those challenges; however, the adjustment to the new provisions is a process that requires additional efforts. The Chamber’s contribution

to facilitating this process is the North American Working Group (NAWG), an initiative established to engage our members in discussions about implementation of this agreement and explore, in-depth, the opportunities that it offers for various industries. Our NAWG initiative is also intended to identify the difficulties ahead and establish a constructive dialogue with U.S. and Mexico government authorities to address those obstacles.

At this time, we are preparing to host our Annual Board of Directors Meeting, Conference, and Good Neighbor Awards Gala 2021. It will be a pleasure to see you again in person, and we hope you will join us in 2022 for our key events: the Annual Meeting in May, Binational Meeting in Mexico City, and the North American Sustainable Economic Development Summit in the Fall.

I also would like to express my gratitude to each of the contributors to this edition for accepting our request to submit articles and joining our efforts to build a constructive dialogue, and to all our members for the very positive responses to our call to be part of the many discussions that have taken place during this year. ¡Gracias!

Un abrazo,

Al Zapanta President and CEO

1

Contents 06

10

12

14

22

21

26

28

31

34

38

40

From Our Members/ Leaning Into International Partnerships to Foster Prosperity

Analysis/ Challenges of Subcontracting in Mexico

Analysis/ Automotive Industry Outlook: USMCA as a response to complex scenarios

16 Cover/

2

KCSM 24 Committed to Mexico

Analysis/ Manufacturing in Mexico: GoMaquila or Bust.

Right …?

Insight/ USMCA’s IP and mining previsions: priorities for its implementation

The Interview/ An Interview with Alvaro Luque, President and CEO of Avocados From Mexico

Opinion/ Free Trade 2.0

Insight/ USMCA: The roadmap for a more prosperous North American region

Business/ Bringing Manufacturing Back to North America

Opinion/ The Way Forward

Insight/ The USMCA: Key to Success

Business/ What Makes Utah One of the Fastest Growing Life Sciences Hubs in America?

GENERATE BOTTOM LINE IMPACT. ACHIEVE MAJOR OPERATIONAL SUCCESS.

3

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shoreviewadvisors.com 214.307.2655

Enterprise Value Realization Strategy Development & Deployment Operations Improvement & Results Acceleration Operational Due Diligence

Chapter Offices /

www.usmcoc.org

Albert Zapanta

Joseph R. Chapa

Alejandro Ramos

Gabriela Kenny

P.O. Box 14414, Washington, D.C. 20004 zapantaz@usmcoc.org (469) 567-0921

jrchapa@usmcoc.org (469) 567-0922 F: (703) 642-1088

alejandro@usmcocne.org (212) 471-4703 F: (212) 471-4701

207 Mandalay Canal Irving, TX 75039 gabriela.kenny@usmcoc.org (469) 567-0923

President & CEO Binational Office

Vice President Western Region, Executive Director, Trade Development and Assistant Center

California Regional Chapter Los Angeles, CA

4

THE AMBASSADOR OF GOOD BUSINESS

MARK LEVINSON President MARLEN MARROQUIN Executive Director

marlen.marroquin@usmcoc.org 333 South Hope Street #43, Los Angeles, CA 90071 (310) 922-0206

Inter-American Chapter Miami, FL

JORGE CARSTENSEN President interamerican@usmcoc.org CLEMENTINA GAY Executive Director clementina.gay@usmcocne.org 2601 S. Bayshore Dr. Suite 1110 Miami, FL 33133 (626) 890-9049

Inter-Mountain Chapter, Salt Lake City, Utah KEITH ATKINSON President intermountain@usmcoc.org DENNIS TENNEY Executive Director dtenney@usmcoc.org

111 South Main Street, Suite 2200, Salt Lake City, UTAH 84111 (801) 916-3575

International Trade Development and Assistance Center JOSEPH R. CHAPA Executive Director

jrchapa@usmcoc.org 207 Mandalay Canal Irving, TX 75039 (469) 567-0922

Washington, D.C. Office Mid-Atlantic Chapter CLARK H. CROOK CASTAN President

chcrookcas@hotmail.com P.O. Box 14414, Washington, D.C. 20004 (301) 233-4485 (703) 752-4751

Great Lakes Chapter Detroit, MI Contact via email: greatlakes@usmcoc.org

Vice President Eastern Region Executive Director of Northeast Chapter

Director of Communications North American Headquarters

Mid-America Chapter Chicago, IL

Aguascalientes Chapter Aguascalientes, Ags.

Pacifico Chapter Guadalajara, Jal.

Themrbgrp@aol.com Blue Cross Blue Shield Building 300 E. Randolph Dr. 47th floor Chicago, Il 60601 (312) 729-1355

aguascalientes@usmcoc.org.mx (449) 286 6682

pacifico@usmcoc.org Av. Circunvalación Agustín Yañez 2895 Piso A, Guadalajara, Jalisco (33) 3376 8444

Northeast Chapter New York, NY

JORGE VEGA Trade Representative

RALPH BIEDERMANN Executive Director

ROSA ERTZE President ALEJANDRO RAMOS Executive Director

alejandro@usmcocne.org 1540 Broadway, Suite 1400 New York, NY 10036-4086 (212) 471-4703 (212) 471-4701

Pacific Northwest Chapter Seattle, WA LUIS MORRIS President

lmorris@usmcoc.org 800 5th Ave #101-260, Seattle, WA 98104-3102.

(253) 678-7696 (206) 259-5003

Southwest Chapter Dallas, TX VINCENT CHAPA President JOSIE OROSCO Executive Director

josie.orosco18@gmail.com 901 Main Street, 60th. Floor Dallas, TX 75202 (214) 651-4300 / (817) 881-0264

Houston-The Woodlands-Gulf Coast Chapter, Houston, TX JULIE CHARROS-BETANCOR President PETE GARCIA Executive Director petegarcia@usmcocgc.org 4582 Kingwood Dr Suite E-334 Kingwood, TX 77345 (713) 854-1577

RAFAEL LOPEZ President and Executive Director

Golfo Chapter Veracruz, Ver.

jorge@usmcoc.org.mx (229) 937-0598

Guanajuato Chapter Leon, Gto. RICARDO ARELLANO President SERGIO PONCE LOPEZ Executive Director

sergio.ponce@usmcoc.org Privada Magnolias No. 113 Col. Bosques del Campestre Leon, Guanajuato, 37125 (477) 779-5670

Michoacan Chapter Morelia, Mich.

NICK ORTIZ President / Executive Director

usmcocmco@gmail.com Melo 166-B Morelia, Mich.

C.P. 58000 (443) 353-7743

Noreste Chapter Monterrey, N.L.

JOSEPH CHAPA VP Western Region and International Development Centers jrchapa@usmcoc.org (469) 893-1796

JOSE MARIA SALGUERO President and Executive Director

Puebla Chapter Puebla, Pue.

VIDAUR MORA President and Executive Director puebla@usmcocpue.org 31 Poniente No. 4128 Piso 2B Col. Reforma Sur Puebla, Pue. 72160 (222) 249-8828 (222) 249-2361

Queretaro Chapter Queretaro, Qro. SERGIO NAVA President MONICA LOPEZ Executive Director

queretaro@usmcoc.org monica.lopez@usmcoc.org Av. Zaragoza Pte. 330-301 Col. Ninos Heroes Queretaro, Qro. 76010 (442) 226-4771

Valle de Mexico Chapter Mexico City JOSE GARCIA TORRES President CLAUDIA VIDAL Executive Director

c_vidal@usmcoc.org Av. Insurgentes Sur 1605 Torre Mural, Piso 25, Mod. 3 Col. San Jose Insurgentes Benito Juarez, 03900. Mexico, D.F. (55) 5662-6103 (55) 5683-2700

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5

From Our Members ______

Leaning into International Partnerships to Foster Prosperity How the Economic Relationship Between the U.S. and Mexico Can Benefit Companies, Employees and Customers Alike By

Jean Claude Tissot

6

If there’s anything the last year has shown us, it’s the importance of working together and the incredible results we can achieve when multiple countries combine efforts to achieve their goals.

As we navigate 2022, we must remember these lessons, particularly in the organizations operating with one foot in Mexico and the other in the U.S. The relationship between these two countries fosters crucial economic, cultural and political exchange. It also provides an important economic advantage for the states along the border.

As the relationship between Mexico and the U.S.

About Jean Claude Tissot

prospers, the companies and individuals of all industries in the region also reap benefits. From petrochemicals and mining to tourism and electronics, U.S.-Mexican partnerships have fostered thousands of jobs and opportunities.

In Texas alone, roughly 500,000 jobs are connected and supported by trade with Mexico. More than 65 Mexican companies have invested in Texan ventures, resulting in a growing number of new jobs and opportunities for Texans. In return, more than 14,000 companies from Texas are exporting goods or services to Mexico.

An example of the mutually beneficial relationship between Mexico and the

U.S. is Coca-Cola Southwest Beverages (CCSWB), based in Dallas, Texas. Established in 2017, it is one of the largest Coca-Cola bottlers in the U.S. and a company of Monterrey-based Arca Continental. CCSWB serves as a prime example of the integral economic exchange between the U.S. and Mexico. CCSWB serves more than 31 million consumers in our territory, which includes Texas and parts of Oklahoma, New Mexico and Arkansas.

As we approach our fifth anniversary, we employ 8,000 team members and have invested hundreds of millions of dollars in U.S. infrastructure which includes seven production plants and 37 distribution

facilities. Concurrently, we fostered a greater exchange of goods and services between our Mexican and U.S. stakeholders.

Companies like CCSWB benefit each day from the economic opportunities taking place between the two countries.

Economically, the exchange of investments, jobs and goods/services between the U.S. and Mexico has proven to be an enormous advantage to companies and their employees in the region. To protect the assets both countries have invested in one another, they must continue to work together. As long as the connection remains strong, both countries will continue to prosper.

/

Jean Claude Tissot is the President of Coca-Cola Southwest Beverages (CCSWB), a company of Arca Continental and one of the largest Coca-Cola bottlers and distributors in the United States.

Tissot’s tenure within the Coca-Cola system spans more than two decades, inside the company as well as leading one of its largest bottlers. After joining CCSWB, Tissot led the integration efforts of the company in the United States, transforming the marketing and business operations to drive efficiency, accelerate technological advances and build collaboration.

Outside of his work at CCSWB, Tissot serves several industry associations including: American Beverage Association, Coca-Cola Bottlers Association, Coca-Cola North America Hispanic Advisory Council and the United States-Mexico Chamber of Commerce. He belongs to the alumni associations for CESA University and ICESI University and has taught business classes at UNITEC University in Honduras. Tissot holds Master of Science degrees in Marketing and Finance from the College of Advanced Studies (CESA) in Bogotá, Colombia, and a Bachelor of Science degree in Business Administration from ICESI University in Cali, Colombia.

Winning: How to Successfully Invest in the United States

Do you want to do business in the United States? Do you want to become a permanent resident? Do you wish to invest your capital and keep it safe?

7 Alejandro Dabdoub began investing in the United States more than 20 years ago. Today, in his book “Winning: The Art of Becoming an American Investor,” he reveals the process that he followed in order to succeed, as well as all the things he would have liked to have known beforehand to avoid wasting time, money and opportunities.

He explains why you should invest in the United States and in which areas and industries; the importance of maintaining good immigration status; the legal issues to be considered; how banks work; and even such complicated topics as probate and death taxes.

The book is easy to understand using common language and answering frequently asked questions. Dabdoub provides guidelines to achieve investment goals in the U.S. The book is like having your own experienced advisor share his best advice and tactics—without the hourly charges.

Dabdoub begins his book by identifying the advantages of investing capital in the U.S.; however, he also clearly warns that the opportunities and challenges are different in each of the 50 states, and each require a specific strategy.

Likewise, he provides information about any potential regulatory and bureaucratic obstacles and how to get over those hurdles unscathed, in the shortest amount of time possible, and with good practices without overspending on lawyers and advisors.

Dabdoub details examples of situations that he, himself, went through in the process of becoming a successful investor. The book includes instruction and exercises, including case studies that can be adapted to your own projects.

Some of those are: safe visas to invest in the United States; the types of companies in which you can invest your money safely; the essential members in a work team; the investment criteria; and the different analyses to use to determine if a project or company is viable.

Dabdoub also discusses the existing conditions due to the worldwide COVID-19 pandemic and where the real estate industry is headed.

Finally, the author includes a questionnaire that helps you to do your own analysis to determine if you are ready to take the next step in your investment growth and if you have the necessary resources to do so.

Alejandro Dabdoub Smutny is a Mexican businessman, investor and writer, with more than 20 years experience in the finance world. He is a partner in a real estate group in Mexico that develops highend condominiums as well as mixed-use retail construction. In addition to owning successful restaurants and wine retailers throughout Mexico, Dabdoub began his U.S. investments in Houston, building shopping strips and investing in apartment buildings. He later became a partner in Allied Orion Group, a Houston-based multifamily real estate investment, construction and property management firm. He has also assisted in creating funds for international investors so they can invest in real estate in the United States.

Grow Your Business in the U.S., Canada and Mexico Through Our Goldberg Hedgefunds 8

Goldberg Hedgefunds has supported small businesses in the United States and Mexico since 1998. Binational funding activities for small businesses are our core, by helping business owners focus on growth across borders. We are now adding Canada to further improve your business success.

Many of our clients have taken advantage of our Hyberg Funding Program.

The Hyberg program considers all the company’s business bank deposits.

These deposits include checks, debit cards, credit cards, cash, direct deposits, wires, ACH, and other deposits that are reflected on your business bank statements.

Through our automation systems, Goldberg Hedgefunds provides Merchant Processing, Future Receivables financing, and HYBERG Financial Data Analytics, all with a very close personal touch.

Small businesses and start-ups do not typically have a lengthy credit history to fall back on. Consequently, the Hyberg program is one of our most popular funding solutions because the program utilizes the previous 12 months’ business income records to qualify and not the owners credit rating.

Our merchant services guarantee we will beat your current providers commission rates. Free basic equipment (POS), free signage and installation and overnight credit card funding.

About Goldberg Hedgefunds

Contact Goldberg Hedgefunds at 775-Biz Funds or (775) 249-3863 or via email at submit@goldberghedgefunds.com The website is www.goldberghedgefunds.com

/

We know that international financing is not one-size-fits-all. Custom-fit endeavors like these require creative funding solutions.

Some of our international funding projects have included financing a liquor import/export company with branches in the U.S. and Mexico, financing commercial real estate in Mexico City, funding equipment for a regional pizza franchise in Canada, financing an oil driller in Mexico, funding a finance company in Mexico City, and a partner buyout for a call center in Toronto, Canada.

Daniel Goldberg, the chief executive officer, brings over 20 years’ experience in the finance and banking industry. He holds a B.S. in International Economics from Texas Tech University (1991); and several degrees from Texas A&M University Commerce: an M.S. in Economics (2011), an M.B.A. (2012), M.S. in Marketing (2013), M.S. in Project Management (2015), and an M.S. in Business Analytics (2017).

9

Victor L. Cardenas, Jr.

Hartline Barger, LLP Founded in 1994, the Hartline Barger LLP law firm serves clients throughout Texas and across the country, with offices in Dallas, Houston, Corpus Christi, Waco, Santa Fe and Albuquerque.

Nationally recognized for our work in product liability litigation and a broad spectrum of practice areas from personal

injury defense, commercial litigation and toxic torts to warranty and deceptive trade practice litigation, we have built a firm with lawyers who, simply stated, like to try cases.

Victor L. Cardenas Jr. is a partner in the Houston office that represents international and domestic energy, industrial, commercial, and transportation sector clients in complex environmental litigation and commercial business disputes.

He is fluent in Spanish and has represented Hispanic-owned business and interests for over a decade.

Contact:

Victor L. Cardenas, Jr. at (713) 951-4116 or vcardenas@hartlinebarger.com for your next consultation.

Analysis

Update

Subcontracting

Tax

______

______

Challenges of Subcontracting in Mexico By

Marcela Calderon Partner in charge of Employment, Social Security and Payroll Taxes Services KPMG in México

10

Photo by Alex Kotliarskyi on Unsplash

To make economic development compatible with labor in supply chains, it is necessary to strengthen compliance with labor standards.

In this regard, the Mexican government has taken various actions, among which is the new regulation on labor subcontracting.

On April 24, 2021, new labor, social security, and tax provisions came into force that regulate labor subcontracting in the following terms.

A. The subcontracting of personnel, i.e. the assignment of personnel to provide services under the direction, supervision and training of the beneficiary of the services, is prohibited1.

B. The subcontracting of specialized services is permitted, provided that they are not part of the corporate mission or the main economic activity of the beneficiary, and that they are registered with the Ministry of Labor2.

C. Specialized services are defined by the regulation as gathering elements or distinctive factors of the activity performed by the contractor, which are based, among others, on training, certifications, permits or licenses that regulate the activity, equipment, technology, assets, machinery, level of risk, average salary range and experience, which provide added value to the beneficiary, provided that own workers are made available to the beneficiary3.

Analysis ______

Subcontracting

D. The labor authorities have issued a criterion

on the concept of “providing employees“ whereby one or more employees carry out the specialized services in an establishment owned or under the management or responsibility of the contractor.

In the case of tax matters, the Taxpayer Attorney Agency has included as another requirement the temporary nature of the service, i.e. it cannot be permanent.

In addition, companies are obliged to request various labor, tax and social security information.

F. Various reporting obligations are established before the social security authorities to identify the specialized services that are regulated by the labor provisions, as well as the employees involved, since, in case of any non-compliance in the payment of social security contributions, the contractor is jointly and severally liable.

E. The tax consequences of contracting prohibited personnel services are the nondeductibility of the expense for income tax and value added tax crediting purposes, and in some scenarios even being considered tax fraud with criminal consequences.

The integration of labor and tax matters to classify services and to grant immediate tax consequences to ensure compliance, as well as inspection and control acts by labor and tax authorities, imply a strict control over the compliance of service providers’ obligations in the supply chain.

In this context, the transfer of control over compliance with labor and tax obligations of service providers implies assessing the following measures

1. Internal control processes that allow for the permanent verification of compliance with labor, social security, and tax obligations of specialized services providers.

2. Investment in specialized technology that facilitates compliance verification activities.

3. Assign specialized personnel to verify

compliance with commercial, labor, tax and social security obligations, among others.

4. Enhance personal data protection policies

with respect to the information of specialized services employees.

The continuity of the operation is definitely closely linked to the due compliance with labor, tax, data protection, social security, and other obligations of the specialized service providers, thus minimizing any operational, legal and/or commercial risk.

Consequently, immediate actions should focus on assessing the labor risks of service providers in order to determine their permanence, as well as on implementing procedures for service providers to submit information demonstrating compliance with labor, tax and social security obligations.

1 Article 12 Federal Labor Law 2 Article 13 Federal Labor Law 3 Article Second Rules to register specialized services providers

11

Analysis ______

Automotive Industry

Automotive Industry Outlook: USMCA as a Response to Complex Scenarios By

Jose Zozaya

12

The automotive industry was one of the business sectors that was most impacted by the implementation of emergency measures enacted to face the global COVID-19 pandemic due to the suspension of activities for more than two months until the manufacture of transportation equipment was deemed an essential activity.

We also had to adjust to altered work schedules and the implementation of strict sanitary protocols to safeguard the health and safety of each and every individual whose jobs support the automotive value chain.

Shortly afterward, another significant challenge arose. As production activities resumed and production rates accelerated to meet the growing demand in Mexico’s main export destination, the United States, the Mexican automotive industry faced shortages of certain components necessary for the production of light vehicles and trucks. Those components included semiconductors, components that are necessary not only for vehicle control systems such as speedometers, proximity sensors, reversing cameras or seat belts. Additionally, those components are also essential in the manufacture of video game consoles, cell phones and computers for which demand increased unexpectedly due to the pandemic.

As an industry, we expected this shortage to be over by the third quarter of 2021 and that the reactivation in the production and export of light vehicles would increase by around 12 percent compared to 2020. However, due to the July 2021 reports, it is possible that at the end of the current year, figures similar to those of 2020 will be recorded

Analysis ______

Automotive Industry

13

largely due to the increase in cases of COVID-19 globally, which has made it difficult to resupply chips to the automotive industry, which in turn has forced different assembly companies to implement technical stoppages due to the inability to comply with their production schedules.

Even though the situation is not the most favorable, the truth is that every moment of crisis becomes an opportunity to strengthen our work.

In this sense, today, more than ever, it is essential that we take advantage of the U.S.-Mexico-Canada Agreement (USMCA) as a structure to work with Canada and the United States, our strategic trading partners. Let us not forget that the new rules of origin promote greater regional integration that forces us to implement new strategies with a more regional vision.

Commercial instruments such as the USMCA create an opportunity for us as a region to strengthen our markets and reduce our dependence on essential components from other regions. For example, there are new projects that have been announced in

the United States to face the shortage of semiconductors, initiatives in which the challenge will be to complement the value chains with a regional vision that allows avoiding future disruptions such as the one we have faced for the past six months.

As an industry, we are fully committed to sustainability in order to hand over a healthy environment to future generations. One priority is that of electromobility, a challenge of the present, in which most of the companies have publicly stated their commitment to join the Sustainable Development Goals of the 2030 Agenda by announcing their plans to cease manufacturing gas-powered vehicles between 2030 and 2040.

U.S. President Joe Biden has also signed an executive order that establishes that by 2030, 50 percent of the vehicles sold in the United States will be electric or zero emissions; for this reason, it will be essential for Mexico and Canada to advance and promote the political will for the preservation of the environment.

We are on course to build a region that can be strengthened in the face of complex scenarios; however, I have no doubt that the automotive industry will take the necessary steps to bring about a brighter future.

About

/

Jose Zozaya is executive president of the Mexican Association of the Automotive Industry and chairman of the USMCOC Binational Board.

Analysis ______

Manufacturing

Manufacturing in Mexico: Go-Maquila or Bust. Right …?

14

MEXICO´S TRADEFACILITATION PROGRAMS: ONE SIZE FITS ALL? It is easy to agree with the idea that Mexico is a near-shore prime manufacturing location, that its products have preferential tariff access to the world´s largest markets, and that its trade-facilitation programs enable a clear, worry-free path to import raw materials for processing in the country.

Yet, if you share the previous paragraph´s conclusion with your

company´s compliance officer ([Mexico´s] trade-facilitation programs enable a clear, worry-free path to import raw materials for processing in the country), you are likely to receive a frown and a disapproving shake of the head.

This, as companies already doing business in or planning to reshore in Mexico ordinarily do not do their homework and, at the warrior scream of “Maquila,” typically go for this program, actually the most complex, burdensome and risk-filled of those available. (Note: All of the original Maquila programs have, by now, automatically been transformed into IMMEX programs).

Due to the breadth of this article, we do not have the luxury of describing in detail the pros and cons of each available trade-facilitation program in Mexico. Suffice it to say that,

Photo by Lenny Kuhne on Unsplash

in addition to IMMEX, there are a number of trade-facilitation programs with varying degrees of complexity, namely PROSEC, Eighth Rule Permit, Drawback, Clearance Registry, and Certified Companies Registry1.

Even though your company should think long and hard as to what program is an actual fit to its operations, the following four items should always be on the top of your list when doing such an evaluation: 1.) import duties; 2.) value added tax; 3.) antidumping duties; and 4.) mandatory technical standards.

We will briefly deal with the nuances of their application while importing goods for processing in Mexico2.

Analysis ______

Manufacturing

1) Import Duties

3) Antidumping Duties4

Temporary importation of goods into Mexico, including raw materials, is subject to payment of import duties, to the extent that the resulting products are to be exported to a relevant Free Trade Agreement country (most importantly due to market-attractiveness, those in the USMCA, the European Union, and the European Free Trade Association3).

Temporary imports into Mexico are subject to antidumping duties, exclusively when the corresponding final determination of the relevant investigation expressly determines it; thus, thorough research should be performed in the historical records of the Mexican Diario Oficial.

We should note that there is a means to end up receiving a refund for the lesser of the raw materials’ import duties or those of the resulting products.

2) Value Added Tax (VAT) Goods that are temporarily imported for manufacturing purposes are subject to the payment of value added tax; however, companies can benefit from the Mexican government´s fiscal credits in the exact same amount of such tax when they qualify for a VAT certification. Alternatively, this levy may also be avoided by posting a bond or letter of credit.

4) Mandatory Technical Standards5

Therefore, even though there are a number of trade-facilitation programs in Mexico that have been working as expected for a large number of years and virtually all manufacturing foreign investment in the country makes use of them on a regular basis, each program should be carefully analyzed before allocating time and resources into it.

Treatment of the four items we have briefly described should always play a major role in such an evaluation.

Until late 2020, the importation of certain materials to be utilized in production processes, or that would not be sold to the public in the same shape or form as imported, were permitted to enter under “exemption letters” that allowed them to be imported without proof of NOMs compliance.

Lastly, as the nature of this subject matter is inevitably technical and entails significant responsibility, the next time you run into your company´s compliance officers, you could very well give them a reassuring pat on the back.

As of today, importers must comply with relevant NOMs, either prior to importation through duly certified compliance evaluations or after the importation process through an existing contractual obligation with an authorized verifier, to finalize such process within 40 days.

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Authors Alejandro N. Gomez-Strozzi (agomez@foley.com), Marcos CarrascoMenchaca (mcarrasco@foley.com) and Charles E. Meachan (cmeachan@foley. com) are partners at the law firm Foley & Lardner LLP.

Photo by carlos aranda on Unsplash

1 They respectively stand for Manufacturing, Maquila and Export Services Industries Program (IMMEX Program); Sectorial Promotion Program (PROSEC); Eighth Rule Permit; Refund of Import Duties to Exporters (Drawback); Inspection at Origin (Clearance Registry); and Integral Companies Certification Scheme (Certified Companies Registry).

2In addition to those briefly described in this article, there are other requirements that should be observed as per the specifics of each case.

3The European Free Trade Association´s members are Switzerland, Norway, Liechtenstein and Iceland.

4Antidumping duties are imposed on a country-by-country basis, exclusively after a thorough investigation concludes that certain unfairly traded imports caused damage to the relevant domestic industry.

5 Known in Mexico as NOMs, for Normas Oficiales Mexicanas.

NOMs are compulsory to a large number of goods, products and services in Mexico, when they may affect or pose a risk to the physical integrity and health of consumers, lives of laborers in their workplaces, food safety, the environment, and other legitimate policy objectives.

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______ KCSM

KCSM:

24 years committed to Mexico 16

By

Oscar del Cueto President

Kansas City Southern de México (KCSM) has been operating in the country since 1997. Today we transport almost 30% of the load moved by train nationwide.

For 24 years, KCSM has contributed on making Mexico an efficient and competitive market. The freight transport operations carried out daily have strengthened national and international trade, in addition, they impulse economic growth in regions by job creation and maintaining constant investments.

“This year we celebrate our 24th anniversary, we have achieved the consolidation of freight transportation by rail and contributed on making Mexico a relevant market in cross-border trade”, says Oscar Del Cueto, president of KCSM. KCSM has invested more than 4 billion USD, mainly in infrastructure. We understand the importance of the freight transportation in Mexico, which is the support of many industries that have pushed the economy in the country. This is one of the main reasons we will continue investing to make our services more efficient.

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What we move KCSM’s rail network is made up of 4,251 kilometers of track and crosses 15 states of the country; it connects with the ports of Lázaro Cárdenas, Altamira, Tampico, and Veracruz, which allows a better commercial exchange with other continents.

We operate three intermodal terminals that provide service to all types of companies.

The goods that are transported by the KCSM railways represent various sectors, the main ones being agriculture and minerals, automotive, chemicals and hydrocarbons, energy, industrial and consumer products.

Units mobilized by sector during 2020

Energy 3%

Automotive 12% Industrial and consumer products 14%

19% Chemicals and hydrocarbons 10% Agriculture and minerals 42% Intermodal

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Rolling Pipeline The transportation of hydrocarbons represents a significant percentage of the total units moved

by KCSM each year.

Today KCSM transports about 67% of the total hydrocarbon imports made by rail in the country. In 2019, we invested in the operation of three storage terminals in San Luis Potosí, Guanajuato, and Nuevo León, which has allowed us to provide a more efficient and faster service.

Capacity, efficiency, and security are key elements that have made the company the best option for the transportation of hydrocarbons. One unit train carries between 90 and 96 tank cars, which transport around 65 thousand barrels of hydrocarbons.

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KCSM uses the Precision Schedule Railroading (PSR)

Security in our rail network for a cross-border service

For more than one year, KCSM has been working with the Precision Scheduled Railroading (PSR) system. This innovation in freight transport was made to generate fluency and speed in the rail network, thus increasing the safety and efficiency of large volume freight transportation over long distances, mainly con the border with the United States.

Certainly, one of the pillars of freight transport by rail is safety. At KCSM we have highly trained employees, as well as innovative systems and cutting-edge technology that allow coordinated logistics.

According to the latest reports we have, accident by incidents or theft have decreased considerably.

In this way, we focus on operating a precise programming and execution of train schedules to avoid delays and waiting, this allows us to offer a reliable and consistent service, always guaranteeing discipline and safety for our clients.

The freight transport operations are safe, therefore they have strengthened national and international trade, as well as impulse economic growth in regions by job creation and maintaining constant investments.

Working for a better cross-border service

Control and Monitoring Center (C4)

One of the challenges we have as an industry is to speed up the cross-border service. In this sense, at KCSM we have investment projects underway to facilitate border transit.

We are building a rail bridge in Nuevo Laredo. A new section of single track, next to the current KCS bridge on the Laredo side. This work will improve the movement of cross-border rail traffic.

We also have international crews on both sides of the border that help speed up the immigration process at the border with the United States.

KCSM has a C4 in Monterrey that allows monitoring of trains, 24 hours a day, 7 days a week.

The safety in the KCSM rail system has been strengthened though: 1) Constant diligence.

2) Security Filter Audit Combined technology with human capital.

3) Safety filtering combined with the design of the rail service.

4) Counterintelligence Program.

5) Constant safety analysis for prevention, detection and deterrence, legal team to support complaints.

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Cooperation and coordination plans have been established with the authorities of the three levels of government in México to create preventive measures and immediate attention in case of risks to the population, employees, or load.

Sustainable transportation For Kansas City Southern de México, responsible business practices are a fundamental part of our values and culture.

We are committed to the environmental care and very aware of the need to continue promoting actions that generate a lower carbon footprint, and consequently a reduction in polluting emissions in each ride we make.

That is why we work to minimize environmental impact and improve efficiency throughout the supply chain.

The company has the most modern fleet of locomotives that work with a hybrid system, this means that they work with a combination of internal combustion engines that work with ultra-low sulfur diesel and with electric motors together (diesel electric locomotives).

These types of machines are friendly to the environment and only emit 0.08% of gases, thanks to the type of combustion.

Within the KCSM fleet there are also other types of locomotives called Tier 4, which do not emit gases.

Influence of the railroad in the T-MEC Throughout the years, freight rail has proven to be a safe and efficient transport, especially over long distances and with high volumes of cargo. In Mexico, it has contributed to the economic development of regions in different states of the country.

KCSM consider the railroad as the backbone for the country’s foreign trade since it has become the pillar of many sectors for the transfer of products and goods from one continent to another. In 2020, 125 million tons were transported, which was a positive figure because despite being an atypical year due to the arrival of the pandemic, good results were achieved.

The strategic position that KCSM has is highly relevant for the T-MEC since it has the shortest route from the Pacific to the East Coast of the United States, which allows Mexico to strengthen its commercial relations with this country.

The T-MEC, an opportunity for Mexico At KCSM we have a highly integrated freight rail network for the North American region, which crosses the industrial heart of Mexico and connects efficiently with Asian markets through the different logistics centers of the country.

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______ KCSM Mexico is a logistics platform to serve the United States and Canada, these three countries make up a very relevant commercial block for the markets of different regions and continents.

The railway is the complement of international transit and the T-MEC facilitates the movement of goods between the three partner countries.

The intermodal mobility allows it to be a complementary transport to maritime.

The North American Railroad: KCS-CP combination We are in a very interesting process together with Canadian Pacific Railway to achieve the creation of a railway that can serve the three countries that make up the T-MEC commercial bloc.

KCSM invests in border projects in Monterrey and Nuevo Laredo to increase cargo volume capacity and support the growth of different industries. The objective of these investments is to speed up the route of the trains in tune with the T-MEC.

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Completely committed to Mexico KCSM is constantly working in the benefit of Mexico, we set ourselves the objective of supporting Mexican society. The railroad has been a key part of Mexico’s economic recovery through the import and export of goods, as since the pandemic began, it was classified as an essential activity, so the movement of trains on the tracks has not stopped.

KCSM has made charitable donations in states with impact on the communities we serve and where our employees live and work. In Mexico, we donated $350,000 pesos worth of medical equipment to state governments to support local hospitals.

“We expect that soon we will be able to count with the largest rail network in the region in which the three countries that make up the T-MEC will be connected, which will increase competition and will offer new options and services for carriers.

For Mexico, it is a great opportunity to think about an integration to serve the entire North American region. We aim for the creation of the North American Railway”, says Pat Ottesmeyer, president and CEO of KCS. Elsewhere, for 11 years KCSM has promoted the work of hundreds of Mexican creators through the sponsorship that year after year we provide to the Morelia International Film Festival (FICM). For us it is a pride to contribute to such an important event for cinema that inspires an artistic dialogue at an international level with a great social impact.

Additionally, we recently announced our collaboration with Monarch Joint Venture, an organization that works to conserve the migration of the Monarch butterfly, since our rail network accompanies the migratory route of the Monarch butterflies in Mexico.

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Opinion

______ Policy

Free Trade 2.0 By

Congressman Pete Sessions (TX-17)

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Trade is a powerful tool in developing strategic and mutually-beneficial relationships with other nations. Proposed by President Donald Trump, the United States–Mexico–Canada Agreement (USMCA) replaced the previous North American Free Trade Agreement (NAFTA) that was passed in 1993. The USMCA boosts trade while aligning labor expectations and environmental guidelines among our three nations. These long-overdue changes helped bring a level playing field to all countries involved. Over one year ago, the United States of America, Mexico, and Canada ratified the USMCA. The USMCA serves as a notice to friends and foes alike that we are prepared to work together for the long haul. The agreement allows for a more flourishing relationship that provides the necessary balance between all three countries.

The USMCA has helped develop renewed closeness between the United States, Canada, and Mexico. It offers significant value to the United States as Mexico and Canada are its largest trading partners.

Of note, these countries are critical trading partners for Texas. Specifically, in Central Texas, the trade agreement has opened new markets for farmers and ranchers to sell chicken, eggs and dairy products. It also includes data protection for agricultural chemicals spanning 10 years.

In Congress, bipartisan agreement is hard to come by. The House of Representatives, Senate, and the White House are currently controlled by the Democratic Party. Though the USMCA originally passed Congress with widespread bipartisan support, no action relating to the trade agreement has been presented by Democratic leadership this year. The United States Trade Representative and counterparts must continue to move the ball forward.

Since President Joe Biden’s administration took office, our relationship with our North and South American counterparts has felt unstable due to poor policy initiatives. Between the excess amount of illegal border crossings and the cancelation of the Keystone XL pipeline project, we must find ways to mend our trading relationship and interests with Canada and Mexico. Additionally, the widespread COVID-19 pandemic impacted many economies worldwide. We need balanced opportunities to enhance the economy of the United States while maintaining a focus on health and individuals’ overall well-being. I am working closely with colleagues across the aisle to find solutions.

At the crux of the United States’ success is the free enterprise system. I believe that pressing into the free market will help the economy to rebound after the pandemic and enhance American competitiveness. Time has proven that the free enterprise system generates more wealth and lifts more people out of poverty than any other economic system in history. It is inevitable for the United States’ continued success in the 21st century.

Opinion ______ Policy

The Way

Forward: A Proposal to Resolve Border Issues in Manufacturing By

Jay Timmons, President and CEO of the National Association of Manufacturers

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As our report states, America is a nation of immigrants, but America has also become a nation with a broken immigration system.

Manufacturers believe our leaders not only have an obligation to fix this system but also a historic opportunity to do so at a moment when Americans’ attention is focused on the issue like almost none other.

Because manufacturers are in the business of building solutions, the National Association of Manufacturers is putting forth a reasonable and practical proposal designed to address the problems created by our current system and to fix those issues once and for all. It is with the goal of unifying a fractured country that we offer this proposal.

For National Security, Compassion And Workforce Economic Realities Our nation’s rich heritage and global economic influence have been made possible by generations of immigrants who have had the courage to leave their homelands, families and fortunes, to call America their new home. Over the centuries, they have made the American experiment possible, helping to turn the United States into an exceptional nation and an unrivaled global leader.

America is indeed a nation of immigrants, but America has also become a nation with a broken immigration system. Manufacturers believe our leaders not only have an obligation to fix this system but also an historic opportunity to do so at a

moment when Americans’ attention is focused on the issue like almost none other.

Decades of neglect and lack of enforcement of existing laws and regulations have eroded the confidence of our citizens in the sanctity of our borders—while also leaving those who know no home other than the United States worried about their futures, living in uncertainty and fear. Now, the conflict between those who rightly want our laws followed and those who recognize the contributions of immigrants and continued immigration to the United States has become a flashpoint.

Opinion

______ Policy

A vast majority of Americans, however, believe it is time to push past the existing arguments, completely overhaul our immigration system and fix the problems that exist today by listening to the concerns of all sides. The right approach is holistic and enduring—one that bolsters our national security, upholds our rule of law, demonstrates compassion and establishes a modern, wellfunctioning system for welcoming new people to the United States.

This is the type of reform that manufacturers have long advocated.

But while it is one thing to call for reform, it is another to offer a plan. Because manufacturers are in the business of building solutions, the National Association of Manufacturers is putting forth a reasonable and practical proposal designed to address the problems created by our current system and to fix those issues once and for all. It is with the goal of unifying a fractured country that we offer this proposal.

The seven points included in our proposal are the following:

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1. Strengthen border security with walls and other measures; 2. Prioritize America’s workforce needs through reforms to legal immigration; 3. Reform non-immigrant visas and temporary worker programs to reflect employer needs; 4. Provide a permanent solution for populations facing uncertainty;

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For more information on our proposal, you can visit our website https://www.nam.org.

5. Reform asylum and refugee programs for a more orderly and humane system; 6. Fix the problem of the unauthorized population with a firm reset; and 7. Strengthen the rule of law so it is respected and followed by all.

We are calling on Congress and the administration to seize this opportunity and end the division that has been created over this issue.

Not every element of this plan will appeal to all people. A comprehensive solution requires compromise, and A Way Forward is designed with that in mind. But if our leaders follow this course, the result will be a safer America and a stronger, smarter economy.

We will have given those who deserve it, a chance to be a productive and contributing part of our country.

And we will have upheld the values that make this nation of immigrants exceptional: free enterprise, competitiveness, individual liberty, and equal opportunity.

Opinion

______ Policy

Inmigration and Innovation Policymakers, industry and universities in the United States are prioritizing investments that support America«s continued technological leadership in the face of global competition. We also must ensure our nation has talent and skills to propel this innovations, and pathways for the best and brightest are critical.

H-1B visa fees paid by employers have funded nearly 90,000 college scholarships for U.S. students in science and engineering and enabled more than 1 million K-12 students and 50,000 teachers to receive support and training to enter science fields.

Job openings in manufacturing are highly technical, workers require specialized skills training and credentials to quality for these jobs, and manufacturers need to attract a diverse set of workers with technical backgrounds in science, technology, engineering and math disciplines.

More than 70% of STEM graduates with advanced degrees are foreign born.

Lawful Permanent Residents The inmigration and Nacionality Act established a ÒpermeableÓ cap of 675,999 new lawful permanent residents per year. Due to the entry of new LPRs from categories not subject to statutory caps, in 2019 the United States admitted just more than 1 million new LPRs. Two-thirds of this total (68.8%) were familiy-based inmigrants. Employment-based inmigrants totaled a mere 13.5%.

Family-Based (69%) Employment-Based (14%) Refugees and Asyless (10%) Diversity (4%) Other (3%)

Advanced technologies enabled manufacturers«ability to respond to the COVID-19 pandemic, with digital tools supporting their ability to pivot operations to produce much-needed equipment and supplies. Manufacturers are expected to accelerate investments in digital transformation as a result of the pandemic. But these planned investments may not happen if manufacturers in the United States are unabled to hire the talent needed to implement them.

As of September 2020, the U.S. unemployment rate for individuals in computer occupations was 3.5%, and the unemployment rates available for jobs in computer science and math are similar.

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Insight

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USMCA

USMCA’s IP and Mining Previsions: Priorities for Its Implementation By

Tatiana Clouthier, Secretary of Economy of Mexico

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One year after its implementation, the United States–Mexico–Canada Agreement (USMCA) has proven to be a successful trade and cooperation mechanism, setting the groundwork for North America to cope with the economic impacts of the COVID-19 pandemic and quickly advance toward recovery.

USMCA brought certainty for trade and investment across the region by establishing a modern set of rules, as well as new disciplines that deepened North American integration and allows our countries to fully harness the opportunities of the digital economy. In this regard, ensuring its correct implementation— particularly in strategic areas such as intellectual property rights (IPR)—is key to maintain an open and dynamic business environment, ultimately leading to the creation of well-paying jobs and increasing our citizens’ quality of life.

Since NAFTA’s (North American Free Trade Agreement) entry into force 27 years ago, Mexico’s intellectual property system successfully evolved to meet the challenges of globalization and productive integration. Today, in a coordinated effort led by the Ministry of Economy, the government of Mexico is working towards a more robust and transparent intellectual property framework that complies with our commitments under USMCA.

The USMCA’s IPR Chapter seeks to promote innovation and its dissemination benefits both producers and users by striking a balance between rights and obligations. It goes beyond the provisions negotiated in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and those of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. The Chapter’s ambitious disciplines cover a broad range of IPR categories such as trademarks, industrial designs, industrial secrets, geographical indications, patents, copyrights and related rights, making it one of the most extensive and comprehensive chapters of the USMCA. As a result of USMCA’s enactment, Mexico’s IPR regimen underwent important changes. They included reforms to the Federal Copyright Law aimed at ensuring effective protection of copyright and related rights in the digital environment through provisions on technological protection measures and rights management

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Photo by/ Secretaría de Economía / Víctor Alcántara.

information, as well as strengthening the protection of encrypted programcarrying satellite and cable signals.

The Federal Criminal Code was also reformed to provide stronger sanctions to dissuade IPR violations more effectively. In addition, new acts such as the unauthorized recording of protected cinematographic works were classified as crimes.

On the other hand, the Federal Law for the Protection of Industrial Property (WIPO) was issued, repealing the previous Industrial Property Law. The new law incorporates best international practices, such as provisions for an effective term of protection for trademarks, the possibility of compensation for unreasonable delays attributable to the authority when granting patents, enforcement practices, and sanctions for the misappropriation of industrial secrets, among others.

Furthermore, competent authorities are working together to implement, in a timely manner, certain USMCA commitments that will require a transition period.

The USMCA began a new era of enforceable, high-standard protections for creators of industrial property and productive integration throughout North America by providing incentives for innovation and technological advancement.

At the Ministry of Economy, we are committed to continue strengthening our intellectual property system to seize the benefits of the digital revolution.

One of the most relevant sectors to incorporate innovation is mining which utilizes the most advanced technology, generating opportunities for the development of diverse industries in our country. It has also contributed in a significant manner to the development of important projects.

It is fundamental that the government maintains a balance with the environment as well as a commitment with the community.

Innovation which is essential to strengthening policies is one of

the three pillars of the Ministry of Economy, from the present to the future, considering environmental and social security aspects. New technologies are necessary to achieve strategic objectives sustainably.

Foreign investment, national investment and innovation are important elements of the development of projects and are also necessary to stimulate mining.

The mining projects are long-term, therefore ensuring legal certainty is a key element required through national and international legislation, such as the USMCA. Goal 9 of Agenda 2030 states: Build resilient infrastructure, promote sustainable industrialization and foster innovation. One of the objectives of this goal is to increase scientific research and improve the technological capacity of the industrial sectors of all countries, particularly developing countries, by fostering innovation and increasing research and development work, which will benefit society.

Insight

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USMCA

USMCA:

The Roadmap for a More Prosperous North American Region.

By

Ambassador Esteban Moctezuma, Ambassador Extraordinary and Plenipotentiary of Mexico to the United States of America

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The pandemic generated by COVID-19 represented one of the biggest global challenges we’ve had to face in our lifetimes. The worst economic crisis since the Great Depression emerged during the most virulent health emergency in the last 100 years, which compounded its effect on our countries.

To put it in perspective, the USMCA represents 28 percent of the world’s GDP ($24.4 trillion in 2019); more than 15 percent of the world’s trade originates in North America. One year after the agreement entered into force, we can already attest to its success through notable examples:

Spanish philosopher María Zambrano said that a catastrophe is only catastrophic if nothing redeeming comes of it. For the U.S.-Mexico bilateral relationship, the crisis revealed the strength of our ties like never before.

1. The U.S.-Mexico bilateral trade increased 19 percent between January 2021 and April 2021, compared with the same period in 2020.

The U.S., Canada and Mexico constitute one of the world’s largest free trade regions encompassing more than 490 million people, with more than $1.3 trillion worth of trade. In the most difficult of times, the resilience of supply chains in North America kept essential industries running. For example, it helped get medical devices and food to people who needed them most, while other regions shut down completely. In the face of this critical juncture, we need to transform these successes into knowledge in the service of a stronger and more prosperous North American region.

No one can predict the future with absolute certainty, we can’t know what challenges we’re going to face down the road but we can prepare for the unexpected and make our collective institutions as resilient and as prepared as possible. This is the guiding principle behind the United States–Mexico– Canada Agreement (USMCA) that will give us the ability to navigate a fast-changing world and work, side by side, to usher in a new era for the U.S.Mexico bilateral relationship.

2. USMCA has proven to be a solid framework to improve labor conditions and guarantee democratic unions; and 3. It established a dispute settlement system that is both fair and strong.

Commercial disputes used to be solved only through political means. Today, we have an objective and balanced forum to find the right solutions. The question we need to answer now, as historical partners, is how do we move forward together?

Mexico is the main U.S. trading partner and the implementation of the USMCA represents new opportunities to strengthen North American regional value chains. Mexico is one of the top three trading partners for 39 U.S. states; in other words, more than three fourths of all U.S. states’ economies depend on trade with Mexico.

How do we maximize these new opportunities? The primordial action has been to align our essential sectors and emergency procedures for any unforeseen event. Industrial transformations that will affect trade and commerce are taking place before our eyes. The automotive industry, for example, is shifting to electric vehicles that will transform its entire

supply chain. These rapid changes require us to adapt along with them.

We have a once-in-a-lifetime opportunity to create new regional value chains by attracting investment in strategic sectors from other regions, particularly Asia. We learned the hard way that North America cannot rely on faraway regions for strategic components such as medical devices, batteries or semiconductors.

Mexico can help by consolidating itself as the supplier of those goods for North America. We have both the infrastructure and the industrial base to do it.

We believe this idea is compatible with creating a business environment conducive to inclusive and sustainable development. There is a path to strengthen existing supply chains with a vision for a green future with clean energies.

Economic progress depends on strong political ties, and political progress depends on strong economic ties.

The negotiation of the USMCA and the reactivation of the High-Level Economic Dialogue (HLED) are part of a renewed bilateral dialogue signaling that we are no longer the distant neighbors of the past. Today, President Lopez Obrador and President Joe Biden recognize that we’re safer when we work together.

Let’s use the power of our trade to deliver on our common goal of reducing poverty and inequalities across the three North American countries. We want to work together for a brighter future and use the USMCA as the motor for the competitiveness and continued prosperity of North America in the twenty-first century.

THE WHITE HOUSE FELLOWSHIP Developing America’s Next Generation of Leaders The White House Fellowship, founded in 1964 by President Lyndon B. Johnson, is the nation’s premier non-partisan leadership and service opportunity. More than 800 White House Fellows have served 11 Presidential Administrations over 56 years. Fellows spend a year working at the highest levels of government. They gain new skills, knowledge of how Washington works, and lifelong associations with other alumni.

Applications for the Fellowship open November 1, 2021 and close in early January 2022. The Fellowship year runs September through August. Below are some examples of White House Fellows with a business background who continue to contribute their leadership skills to their communities.

Henry Cisneros Univision

Jim Padilla

Ford Motor Company

Margarita Colmenares Chevron

NBCUniversal News Group

Cesar Conde

Tom Johnson

Susan Stautberg

Mike Ullman

Al Zapanta

Atlantic Street Capital

Starbucks

CNN

Tyson Foods

Learn more at whff.org

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Insight ______

USMCA

The USMCA Keys to Success By

Senator Claudia Ruiz Massieu

September 2021 marks 14 months since the United States-MexicoCanada Agreement (USMCA), the high-standard instrument that laid the foundations for North American economic integration in the twenty-first century, was enacted. Are we talking about a successful year for the USMCA? The answer should be a convincing yes, since the trade agreement has been implemented under quite particular and unprecedented circumstances due to COVID-19, but it worked well nevertheless!

The implementation effort coincided with the pandemic, which resulted in the worst economic crisis since the Great Depression, causing high unemployment rates, travel restrictions and closed land borders within North America, just to mention a few challenges. Nevertheless, regional integration (inaugurated with

NAFTA and boosted by the USMCA) has been an essential tool to relieve the economic impact of the health crisis in our countries, accelerating the recovery of the three national economies. For example, in the first half of 2021, trade between Mexico and the U.S. reached new all-time highs: bilateral exchanges amounted to $320 billion, a 31.6 percent increase compared to the same period in 2020, and near four percent more than in 2019, before COVID-19.

In light of these times, perhaps the main challenge for the USMCA implementation in the short term, is to ensure that the agreement works as well under normal circumstances as it has been working in the middle of a global crisis… But which factors were the keys to success during USMCA’s first year? In my opinion, there have been three: cooperation, coordination, and collaboration. (continue on page 32)

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Insight

______

USMCA

Cooperation between Mexico and the United States to accelerate vaccinations in border cities so travel restrictions could end as soon as possible has been essential.

Coordination between the U.S., Mexico, and Canada during the first COVID-19 lockdown, such as setting common standards to determine essential activities on both sides of the borders to guarantee operation of regional supply chains for strategic industries. Also, there was collaboration between the public and private sectors of the three countries to address potential issues within the trade agreement such as the transitional regimen for the new rules of origin in the automotive industry.

These examples demonstrate the benefits of working together and facing shared challenges with shared responsibility.

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However, the USMCA implementation has not been without disputes and, in coming years, unilateral decisions are sure to be a huge challenge for USMCA member-countries. In the

“Nevertheless, regional integration has been an essential tool to relieve the economic impact of the health crisis in our countries, accelerating the recovery of the three national economies”

United States, for instance, the 2020 electoral process opened the door for renewed pressure to establish trade barriers for Mexican agricultural products, barriers which would benefit states like Georgia and Florida.

The Trump administration backed the Republican legislators in those states and decided to investigate the importation of various products, of which Mexico is one of the main suppliers.

In Mexico, on the other hand, the congressional majority has passed presidential bills to limit the access of foreign investors in the hydrocarbon and electricity markets in order to favor energy state-owned companies.

The Mexican Supreme Court will review whether these regulations are constitutional, but regardless of its resolution, the reforms have already been the subject of controversy within the USMCA which fully protects U.S. and Canadian investments in Mexico.

These decisions only raise problems and slow down solutions.

The lesson is clear: there is no room for unilateralism. Beyond its immediate effects, unilateralism undermines mutual trust between partners. On the contrary, only dialogue, consensus building and cooperation to identify and address common issues can draw a safe roadmap for a durable and strengthened integration between our countries.

Successful USMCA implementation entails the transformation and update of a complex framework of laws, regulations, public policies, practices, and even cultural mindsets. It therefore demands permanent coordination between all sectors of the North American economy: public, private, and social sectors, as well as society at large. If we really want to make the USMCA a lever for inclusive growth and competitive development in the region, we need to avoid the temptation to gain any advantage outside the common rules. The success of the USMCA, regardless of circumstances, depends exclusively on us.

Senator Claudia Ruiz Massieu chairs the Special Committee for the USMCA Implementation in the Mexican Senate.

Jeff Jorge Principal & Firm Leader International Services USMCOC Binational Board of Directors Member

¡Por el compromiso continuo con la comunidad Empresarial Mexico-Estadounidense!

Como miembro binacional de la USMCOC, hemos visto cómo el poder de las buenas relaciones y las grandes conversaciones pueden llevarte hacia un gran futuro. Al igual que la USMCOC, Baker Tilly aprovecha todas las oportunidades que el mañana representa.

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Angel Ramirez Mexico Market Leader USMCOC Great Lakes Advisory Board Member

Honramos el legado de USMCOC y esperamos enfrentar el futuro juntos.

Here’s to an ongoing commitment to the Mexican-American business community!

As a longstanding binational member of the USMCOC, we have seen how the power of great relationships and great conversations can lead to great futures. Like the USMCOC, Baker Tilly embraces the opportunities that tomorrow presents.

Mayra Pena Senior Manager International Tax Services USMCOC Mid-America Advisory Board Member

We honor USMCOC’s legacy and look forward to facing the future together.

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The Interview ______ Alvaro Luque

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An Interview with Alvaro Luque, President and CEO of Avocados From Mexico

8 in 10 avocados in the United States come from Mexico. Avocados From Mexico (AFM) has not only been successful at creating a brand for Mexican avocados in the U.S. and driving avocado consumption across the country, but it is also an economic engine with benefits to the U.S., Mexico, and the American consumer. We talked to Alvaro Luque, President and CEO of AFM to learn more about this success story.

The Interview

______ Alvaro Luque

What do you think is driving the boom in avocado imports? Why are Mexican avocados so beloved?

Globally, the United States is the third biggest country, the number two in consumption of avocados per capita, and 100 percent in love with the fruit. On the other hand, Mexico is the number one avocado producer and exporter in the world and the only country that can grow the fruit year-round and can meet the growing demand for avocados in the U.S. Today, eight out of 10 avocados consumed in the U.S. come from Mexico—a number that has continued to increase as Americans’ avocado appetite has blossomed.

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The numbers speak for themselves … but what’s behind this boom?

While healthy eating is a priority for so many, I think many Americans are drawn to the health benefits that avocados can offer. They’re not only delicious, but they’re also a superfruit that contains good fats and nearly 20 vitamins and minerals. They can also be incorporated into so many meals.

From guacamole to burgers, avocados have a creamy flavor, smooth texture, and vivid green hue that have helped the fruit solidify its place as a staple in Americans’ diets.

At Avocados From Mexico our strategy is not focused on market domination, but rather growing the market as a whole. Since the organization was established in 2013, we’ve leveraged a CPG (consumer packaged goods) mentality to launch innovative marketing campaigns that have gotten Americans thinking, talking about, and consuming avocados differently … and more frequently.

With this innovative approach to marketing, we have not only created a brand in a package-less category, but we have doubled the volume of Mexican avocado imports in the U.S. from 1.2 to 2.4 billion pounds in just seven years. This strategic framework has helped drive demand. It’s been a catalyst for the avocado category.

What should people expect to learn when they visit the Avocado Institute?

In short, I’d say everything someone might want to know about the behind-the-scenes workings of the Mexican avocado industry. The Avocado Institute was created by our parent organizations - Association of Avocado Exporting Producers and Packers of Mexico (APEAM) and Mexican Hass Avocado Importers Association (MHAIA). It is an educational, one-stop digital resource that provides a deep dive into things like: how and where avocados are grown, what their journey looks like from Mexican farms to U.S. tables, food safety precautions and industry regulations, sustainability efforts, and the impressive economic benefits that the Mexican avocado industry has offered both sides of the border.

Additionally, the Avocado Institute provides information about how avocados are tested for optimal flavor and consistency before being exported, the reforestation efforts that the industry is undertaking and how the industry is helping save the Monarch butterflies. The site really covers a lot of ground.

Why is the relationship between Mexico and the U.S. so important for the avocado industry?

The Mexican avocado industry is a great example of successful crossborder collaboration. Mexican avocados are a true win-win and have proven to be a significant economic engine for both the United States and Mexico.

Let’s talk numbers; an economic contribution analysis from Texas A&M University found that in the 2019-2020 season, $2.82 billion of U.S. imports of Mexican Hass avocados contributed $6.5 billion in U.S. economic output; $4 billion in value added U.S. GDP; $2.2 billion in U.S. labor income; and more than 33,000 U.S. jobs for American workers.

On the flip side, Mexico also continues to benefit from the thriving avocado industry and growing American consumption. In Michoacán, the boom in avocado exports has resulted in lower emigration, improved roads and infrastructure, a decrease in poverty and marginalization, more than 78,000 permanent jobs, and better conditions for social development.

The Interview ______ Alvaro Luque

How is your team continuing to drive innovation for the industry?

My teams’ smart thinking and innovative work have proven to be a driving force behind Mexican avocado’s market penetration and impressive growth. We’ve fundamentally changed the way produce marketing is done across the industry by ideating, planning, and executing the most unexpected marketing activations.

To date, our campaigns have defied established paradigms and delivered impressive results.

While delivering many industry firsts, like being the first fresh produce brand to ever advertise in the Big Game, we have been able to create a highly visible brand in a package-less category and have doubled the imports of Mexican avocados in the U.S. over the past seven years.

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We are well on our way to becoming the most innovative produce company in the world and we don’t have any plans to slow down. Looking ahead, we will continue to unveil first-of-itskind work that will help to build our brand in the U.S and increase consumption of avocados through retail and foodservice.

For more information on the Avocado Institute, please visit www.avocadoinstitute.org Avocados From Mexico’s website is www.avocadosfrommexico.com.

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Business ______

Manufacturing

Bringing Manufacturing Back to North America

By

Plastiexports

38

Global and U.S. supply chains have experienced unprecedented disruptions as companies continue to be negatively impacted by multiple major catastrophes such as the COVID-19 pandemic and countless issues in Asia, specifically China. As the novel coronavirus outbreak rapidly expanded over the past year to almost every part of the world, it brought to light the excessive reliance and overexposure that many U.S. companies’ supply chains have on China.

While industry experts have warned about these issues for two decades, we’re now living the reality

Investment in White Room to comply with U.S. Food & Drug Administration Regulations

of this situation. This new reality makes it increasingly important that Mexican and American companies team up to have complete, integrated supply chains between our two countries.

Having American companies collaborate with Mexican factories has multiple benefits.

This is best showcased through a recent example of Plastiexports and Shoreview Management Advisors teaming up to provide a complete supply chain solution to Olde Thompson, a spice and spice-related housewares company.

New Market and Growth Opportunities for Mexican Manufacturers In 2019, Shoreview Management Advisors began searching throughout Mexico for a factory that would be able to manufacture precision injection-molded assemblies at costs competitive with China. Over 40 factories were involved in the initial screening, among them was Plastiexports. This project necessitated developing capabilities that did not exist in Mexico at that time. It required challenging the traditional business model that most companies had operated within for many years.

This venture represented both an opportunity to open the door to a new market and a challenge to submit in record time a proposal that complied with food industry standards.

Business ______

Manufacturing Plastiexports automation investment pays off in quality assurance.

Future Investments Bring Outsized Returns Quickly adapting to customer needs is embedded in Plastiexports’ DNA. As such, Plastiexports decided to make substantial investments to accommodate the manufacturing and assembly of plastic components for the food industry. Designing and installing automated assembly cells, as well as procuring new electric injection molding machines in a clean room environment, were some of the steps that Plastiexports took to exceed the customer’s needs and expectations. This attention to detail in turn ensured the program became a success.

As a company focused on reacting quickly to changes, Plastiexports offers tailor-made solutions for customers who are looking to relocate their supply chains within North

About Shoreview Management Advisors

America and Mexico.

This agility and degree of personalization will enable U.S. companies to have a secure, robust supply chain close to home.

Working closely with Shoreview Management Advisors as a team, allowed Plastiexports to develop and execute the localization of a substantial amount of business from Asia to North America, helping Olde Thompson reduce costs and lead times. A further improvement to the supply chain is underway for these assemblies and involves the localization of ceramic parts in Mexico that had historically been produced in China.

“The current market situation opens multiple opportunities for manufacturing companies in Mexico and the United States, but the winners will be those companies that are willing to make investments in these uncertain times and those who are able to

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build an ecosystem of several industries to serve customers,” according to Plastiexports CEO Baldwin Britton.

As a result of the responsiveness of the Plastiexports team and their overall competitiveness,

Shoreview Management Advisors is working with Plastiexports on several larger projects that need additional machines and factory workers.

/

Shoreview Management Advisors is a trusted strategic advisor to the consumer and industrial products industries. The group generates bottom line impact and results for business leaders and executives, allowing them to achieve major operational success in a variety of areas from increased capacity to reduced manufacturing costs to outstanding customer service. In many cases, the team enables significant revenue growth by turning operations and supply chain into distinct competitive advantages.

Shoreview is also the founding member of the Mexico Strategic Sourcing Alliance, a group focused solely on providing end-to-end sourcing solutions to companies that are moving their outsourcing from China to Mexico. The Mexico Strategic Sourcing Alliance has helped a number of U.S. companies achieve much lower supply chain costs in the form of product savings, tariff avoidance, and lower logistics costs to U.S. distribution centers.

What Makes Utah One of the Fastest Growing Life Sciences Hubs in America?

What comes to mind when you think of Utah? Skiing on the “greatest snow on earth”? Breathtaking vistas of national parks like Arches, Zions or Capitol Reef? Quality of life that is among the most desired in the country?

But what about one of the fastest growing life sciences industries in America? It’s true—Utah consistently ranks among the nation’s top innovation hubs.

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Utah’s Life Sciences at a Glance Well-known companies such as ARUP Laboratories; BioFire Diagnostics, LLC; Cytiva Life Sciences; Edwards Lifesciences; Fresenius Medical Care; Merit Medical Systems, Inc.; Myriad Genetics; Nelson Labs; Stryker; Sumitomo Dainippon Pharma; Teva Pharmaceuticals, Thermo-Fisher Scientific; Varex Imaging; and more have a significant footprint in Utah, with many having international operations, including in Mexico.

In addition, newer companies such as Clene Nanomedicine, Co-Diagnostics, EVOQ Nano, Intermountain Precision Genomics, Owlet, Recursion, RenalytixAI, Sera Prognostics and Xenter offer unique and cutting-edge technologies, contributing significantly to life sciences growth in the state and this does not include the scores of earlystage companies, some of which are housed in several incubators that call Utah home.

A 2020 Biotechnology Innovation Organization report prepared by the national research firm, TEConomy Partners, showed that Utah was one of only four states with a high concentration of jobs in the medical device, pharmaceutical, laboratory and R&D areas. The other three states were California, New Jersey and Massachusetts which have been traditional leaders in life sciences.

With significant life sciences employment growth in Utah over the last decade, it follows that such a large part of the employment base in our state is concentrated in life sciences.

According to this same TEConomy report, Utah ranked number six in the country in per capita funds raised by life sciences companies. Over the last year, Utah life sciences companies have raised over $1 billion in capital to fund the novel products being developed here, running well ahead of the 2020 funding mark. “We’re seeing an energy and collective drive among companies large and small to make Utah’s life sciences industry a national and global powerhouse,” said Randy Rasmussen, co-founder of BioFire and chair of BioUtah Board of Directors.

By

Kelvyn Cullimore, President and CEO of BioUtah

An Economic Force Utah’s life sciences community claims over 1,000 companies, employing 130,000 Utahns, directly and indirectly, and generating $13 billion in GDP. Those statistics come from a 2018 study by the University of Utah’s Kem C. Gardner Policy Institute that compared employment growth across the top 20 life sciences markets in the United States. From 2012 to 2017, Utah ranked as the fastest growing life sciences sector among the top 20 markets based on average job growth. That trend has continued with Utah remaining in the top five growth markets. (continue on page 42)

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More and more people are reading labels in search for natural, reliable, and easy-tounderstand ingredients.

Adapting innovation is the strategy that lngredion has developed worldwide, together with its All Life strategy.

The ingredients that lngredion provides are a vital part of daily life in thousands of applications and are found in products that people around the world use through raw materials oriented towards the bakery, toothpaste, industries.

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Business ______

Biotechnology

What accounts for such stellar growth?

Quality of life and access to outdoor recreation consistently rank high for attracting talent and companies alike. But, more importantly, Utah is consistently recognized as one of the best states for doing business, especially for startups. Utah’s accolades are impressive:

Brigham Young University is also a premier tech transfer school that produces a well-educated workforce and unique marketable innovations that spur economic growth in Utah. In addition to these two schools, nine other institutions of higher learning contribute to our educated talent pool, including Utah State University, Weber State University and Dixie State University. Utah boasts one of the most educated citizenries of any state in the country.

Spreading the Word

42

#1 Best State Economy and #3 Best Overall – U.S. News & World Report – March 2021 #3 Top State for Business – CNBC – July 2021 #1 Best Economy – WalletHub – June 2021 #1 Best Economic Outlook for the 14th straight year – Rich States Poor States – May 2021 #1 Best Economy – 24/7 Wall St. Journal – August 2020 #2 Best Place to Start a Business – Inc. – August 2019 #1 Best State for Entrepreneurs in 2020 – Forbes – November 2019

Despite all this activity, the growth of the industry and its mission to innovate to change patients’ lives is not well known, but that’s about to change. BioUtah, the industry’s trade association in the state, has launched a bold new initiative to brand the industry as “BioHive,” a term created to convey, in a singular word, the totality of our life sciences ecosystem.

When the first pioneers came to Utah, it was an arid and uninviting environment for putting down roots. It required a significant amount of ingenuity and commitment to make this desert blossom. The beehive was adopted, in 1847, as an official emblem of the state, representing those settlers’ hard work and perseverance, hence Utah is known as the Beehive State.

Major Research Universities Another significant reason for the growth in Utah is the strong performance of our institutions of higher learning. The University of Utah (U of U) is consistently recognized as one of the top tech-transfer universities in the country. Year after year, the U of U produces not only a well-educated workforce, but groundbreaking healthcare technologies, thanks in large part to their outstanding medical school and associated research programs.

“What better way to reflect the imagination and purposefulness of our life sciences industry than to tie our brand to those very same qualities that established the state—BioHive,” said Kelvyn Cullimore, president and CEO of BioUtah.

“By branding our industry as the BioHive, we believe it will raise the profile of Utah’s medical innovation on the local, national and global stage and recognize the signifi-cant contributions of our life sciences companies to improving the lives of people not just in Utah, but in the U.S. and around the world.”

Welcome to the BioHive!

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Mexican Avocado Industry Fact Sheet An economic contribution analysis from Texas A&M University (2020) shows that Mexican Hass DYRFDGR LPSRUWV KDYH VLJQLȴFDQWO\ EHQHȴWHG 8 6 QDWLRQDO DQG VWDWH HFRQRPLHV

In 2019-2020, U.S. imports of Mexican Hass avocados totaling $2.82 billion contributed the following to the U.S. economy:

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$4

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$2.2

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$1.1

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33,051 in U.S. jobs for American workers

Jobs in Mexico 78,000 direct and permanent jobs and 310,000 indirect and seasonal jobs The Mexican avocado industry is responsible for establishing a vibrant local economic engine in Michoacán that has encouraged regional economic growth and created jobs in Mexico. The Mexican avocado industry creates approximately 78,000 direct and permanent jobs and 310,000 indirect and seasonal jobs, providing a productive living in a region that was once one of the largest sources of migrant workers in the U.S.

The supply of avocados from Mexico in the U.S. has jumped to 2.4 billion pounds since 1997 As production has grown, avocado farming continues to be a viable and sustainable business venture in Mexico.

There are approximately 68 packers and 30,000 avocado growers in Michoacan, and they are mostly small family farms 7KH YDVW PDMRULW\ RI JURZHUV DQG SDFNHUV DUH FXOWLYDWLQJ LQ IHZHU WKDQ ȴYH DFUHV PHDQLQJ VPDOO IDPLO\ IDUPV DQG QRW ODUJH FRUSRUDWLRQV DUH EHQHȴWLQJ IURP WKH 0H[LFDQ DYRFDGR LQGXVWU\

We invite you to scan the QR code to visit avocadoinstitute.org for news, facts and education on the avocado industry in Mexico.