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GENERAL SITUATION IN MEXICO

Weekly Review #100 I April 13, 2022

MANUFACTURING INDUSTRY THE AUTOMOTIVE INDUSTRY SEES RISK IN ELECTRICITY SUPPLY IF PRO-CFE REFORM PASSES

It emphasized that the automotive industry needs to guarantee in a long-term horizon, at least in the next 50 years, an energy supply that allows the operation of the industrial plant located in Mexico and the expansion of the facility to meet the potential that our country has. The automotive industry in Mexico urged the deputies to reject the electricity reform initiative of the Executive and to proceed to develop a proposal that corrects the deviations that exist in the electricity market, under the guarantee of a clean, competitive energy supply and that allows the transition of the sector towards electric units, to increase the arrival of new investments. “This electricity reform initiative that is being debated in the Chamber of Deputies and is expected to be voted on this week does not comply with the elements mentioned above, does not guarantee sufficient production or competitive prices, closes competition in the market, favors the Federal Electricity Commission, which has demonstrated its insufficiency and inefficiency in supplying energy at competitive prices,” said Guillermo Rosales, president of the Mexican Association of Automotive Distributors (AMDA). He pointed out that the automotive industry needs to guarantee in the long term, at least for the next 50 years, an energy supply that will allow not only the operation of the industrial plant located in Mexico but also the expansion of the factory to meet the potential that our country has.

MANUFACTURING INDUSTRY

Miguel Elizalde, president of the National Association of Bus, Truck, and Tractor-Truck Producers (ANPACT), stated, “what we require as an industry is an accurate, reliable, and competitive supply that meets the growth potential; sufficient, clean energy at competitive prices. We are in favor of having a regulatory framework that allows us to remain competitive and encourages us to continue with the leadership we have worldwide. The automotive sector, which contributes 3.5% to the GDP and almost 20% to the manufacturing GDP, demands electric energy and natural gas supplied at competitive prices, with respect to the international environment and mainly having the southeastern United States as a reference for competition. In the automotive industry, from auto parts, assembly of light and heavy cars, as well as distributors, “we have “expressed our request to the Congress of

SOURCE: El Economista

the Union to reject this initiative (of President AMLO) and proceed to an agreement of all political forces represented in Congress to develop a reform that corrects the deviations that may exist in the market, but that complies with the satisfaction of the elements, such as sufficiency in the supply at competitive prices, increasing the generation of energy from clean energies,” said Rosales. The AMDA leader emphasized that the entire automotive industry is immersed in the electric transmission, “we are living towards electric vehicles, and it will not be enough to have manufacturing capabilities. It is a condition imposed by the countries of Europe to which the United States and the Chinese government itself are also advancing that the production of their electric vehicles must be done in a chain that covers from the production of auto parts, the final assembly of the electric vehicle, with energy source supplied in a clean way”.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference April 5–12, 2022

ENERGY The President commented that this week he will be awaiting the discussion of the constitutional reform on electricity matters in the Chamber of Deputies; if a majority is not reached, the following day, he will send an initiative to reform the Mining Law to protect lithium, as it is a secondary reform, a qualified majority is not required. • Supreme Court of Justice Resolutions: Regarding the results of the SCJN, which declared the constitutionality of the Electricity Law, the federal President stated that it was a historical and patriotic decision for the benefit of the people and the nation. It was a good decision by the Court; it showed that there is an authentic rule of law, and they resisted private interests. With yesterday’s decision, half of the amparos are inadmissible, the most important ones, too. Yesterday it was defined, and it was clear that the LIE does not affect the USMCA. • He denied that there has been any pressure on the Ministers. He acknowledged that he does not agree with some Ministers who represent business interests and who are ultra-conservative. • He mentioned that the LIE does not consider elements of the proposed constitutional reform ana-

lyzed in San Lazaro, among them the lithium issue and the generation of energy from thermoelectric plants. • He added that the recovery of national assets, the nationalization of oil and the countryside were the result of the revolution. For this reason, a conservative party was created that influenced to economically support private groups through tax remissions and other measures that led to the merger promoted by President Salinas in 1988. He commented that neoliberalism is neoporfirism. • He described as an aberration that the Supreme Court has dismissed the prohibition for public officials to join the private sector upon the termination of their functions. • Regarding the opening of litigation and competitiveness referred to by the U.S. Ambassador to Mexico, Ken Salazar; Lopez Obrador said that we could disagree, respectfully, if there are legal actions, “we” would do the same because Mexico is an independent country. The President of Mexico contrasted that he cannot attend International Panels so that the U.S. government complies with its statements on immigration issues.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S INTERNATIONAL • Letter from U.S. Senators on the FGR: the President stated that they are misinformed and affirmed that there is autonomy and the rule of law in Mexico. • Meeting with Justin Trudeau and North American businesspeople: Lopez Obrador informed that he agreed with Trudeau to seek humanitarian aid in Ukraine. He commented that he will have a meeting with heads of state of the European Union to discuss the Ukraine issue in Canada. When speaking about Russia’s invasion of Ukraine, the President mentioned that he is against invasions and that Mexico has suffered Spanish and French meddling. On the other hand, he accused the U.N. did not do its job well. He added that the war should have been avoided, the policy failed, but it is still time for them to sit down. He informed that he will record a message to condemn the invasion of Ukraine and will call for humanitarian aid. • Elections in France: The President celebrated the elections in France and said that Jean-Luc Melenchon representing the left, was the most voted by young people. • U.N. vote: The President announced that Mexico will abstain from voting on the expulsion of Russia from the U.N. Security Council, as it would not be possible to resolve the conflict without dialogue. • Protests in Latin America: Given the protests in Peru against President Pedro Castillo and the call for the same to happen in Argentina, Chile, and Mexico, Lopez Obrador calls for an analysis on social networks of the users who make this call and who finances the campaigns to see if they are real people or bots. • Visas to Mexicans: On the request by a U.S. Congressperson to withdraw visas from “pro-Russian” Mexican legislators, the President commented that

he does not see it right, fair, or rational to suspend visas to those who met to express their views regarding the Russian invasion of Ukraine. • International cooperation: Marcelo Ebrard reported the results of his trip to India, noting the importance of that country in guaranteeing the supply of medicines and vaccines (not only against COVID). He added that the President requested that the country recovers its drug production capacity, for which it is necessary that there is a regulatory convergence by COFEPRIS to continue with the cooperation strategy with India. He informed that as part of his trip to the Middle East, he visited Saudi Arabia, Qatar, and the Arab Emirates to attract investments to Mexico in the process of economic recovery. He added that the CEO of Qatar Airways reported his desire to open flights to AIFA, and this week they will begin negotiations with the company. This was denied by Qatar Airways, which denied its desire to fly to AIFA.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

HEALTH • Supply of medicines: Dr. Jorge Alcocer, Secretary of Health, stated that more than 101 million medicines have been distributed and that there are supply orders for INSABI for 140 million medicines and 32 million pieces of healing material. The health sector has 1,381,638,033 pieces of medicine and healing material. He gave a report on traditional medicine, in which he emphasized healthy eating based on the so-called Corn Diet. Traditional medicine will be considered as an alternative health mechanism considered as an element of cultural wealth. • Vaccination Strategy: there are 5% of hospitalization in general beds and 3% of beds with respirators, which represents a reduction of 98% in the national hospital occupancy. He added that 193,280,535 doses of vaccines had been applied in the country. He invited the population to participate in the testing process of the Mexican vaccine Patria. SECURITY • Ayotzinapa case: The President expressed that now that there are more elements and information on the case, they will soon make known what is considered to have really happened and who are the responsible parties. • Armed Forces: The President thanked the Armed Forces for their work in various activities such as distributing vaccines, attention to natural disasters, public security, etc. He assured that the people were not repressed and that there were no massacres or torture. • Security for journalists: The President stated that 25% of the entire government advertising budget had been earmarked to guarantee social security for journalists who have no support whatsoever.

SOURCE: https://www.youtube.com/channel/UCxEgOKuI-n-WOJaNcisHvSg

POLITICAL AGENDA • Revocation of Mandate: President Andres Manuel Lopez Obrador stated that the mandate revocation exercise was successful, and people acted responsibly. He regretted INE’s attitude in putting obstacles to the vote, arguing lack of resources. In this regard, he recalled that MORENA returned 500 million pesos, and INE rejected them. • Electoral Reform: In response to a question on the vote of Mexicans abroad, the President mentioned that one option is electronic voting, not only for Mexicans abroad but for the whole country. • Support for journalists: 25% of the resources allocated to advertising will be used for medical care and pensions. • Freedom of expression: Lopez Obrador expressed his disagreement with the suspension of President Donald Trump’s Twitter account and expressed his satisfaction with the publication of the Volaris airline to deny the accusations of advertising the Revocation of Mandate. • Mayan Train: The construction is accompanied by an important reforestation program. Most of the trains were built on the old southeast track. Only 2% remains to free up the right-of-way.

NEWS BY STATE

BAJA CALIFORNIA The State of Baja California remains lowrisk or green light with 181 active cases in the past 14 days. This week continues the intensive vaccination plan with the first, second, complete scheme and booster application to the adult population in all municipalities. A meeting was held with the Mayor of Yuma to strengthen binational relations that promote the economic growth and development of the region and its people. SONORA The State of Sonora is considered as lowrisk or green light. Official reports confirm 15 new cases in the last 24 hours. This week, the vaccination plan continues with the first, second, and booster application to the adult population. The governor of Sonora mentioned that they will receive 120 thousand additional vaccines against COVID for the population.

NEWS BY STATE

NUEVO LEON To give an additional boost to the local economy, the Ministry of Economy (SE) of Nuevo Leon (NL) will launch a plan that will allow for greater growth in the next five years. The Post-COVID-19 Economic Plan “This is how Nuevo Leon rises” will be made up of six axes: a credit program, advice, and training for small and medium-sized companies, entrepreneurship, local value chain, the attraction of investment, and attention to women entrepreneurs.

COAHUILA The governor of Coahuila, Miguel Angel Riquelme Solis, announced that with the construction of the ‘Northern Economic Corridor,’ the State will increase its competitiveness and attract more investments and with them. The new corridor starts in Mazatlan, passes through Durango, and then through La Laguna, following Monclova. TAMAULIPAS Due to the Easter holidays, the Mexican Army will apply the antiCOVID vaccine 24 hours a day at the Military hospital to all those over 15 years of age. Sedena reported that from 8 in the morning of April 11 to 13, 2022, a “Massive Vaccination Campaign” is going to be carried out in the State of Tamaulipas.

NEWS BY STATE

QUERETARO During January, export manufacturing companies in the state reported annual growth of 6.8% in hours worked, according to indicators from the Industry, Manufacturing, Maquiladora, and Export Services Program (IMMEX). With this level of annual growth, Queretaro was the sixth state with the highest annual percentage variation in hours worked, only behind Nuevo Leon (11.7% annual growth), Mexico City (11.6%), Veracruz (10.7%), Durango (9.3%) and State of Mexico (6.9%). Therefore, the annual increase reported by the state in hours worked was above the national indicator, which was 2.9% in the first month of the year. There are 248 active establishments in Queretaro, according to the records of the IMMEX program of the National Institute of Statistics and Geography (Inegi). According to the real remunerations per employed person, in manufacturing establishments with the IMMEX program, during January, Queretaro ranked as the second state with the highest remuneration, reporting a payment of 21,340 pesos per worker in that month. Queretaro was below Veracruz, the state with the highest remuneration of 22,617 pesos, exceeding the national average of 17,800 pesos. At the end of January, the state contributed 3.5% of the employed personnel in the country in export manufacturing, placing it in tenth place nationally in terms

of contribution; likewise, it contributes 3.8% of the establishments, also placing it in tenth place. During January, manufacturing establishments with an IMMEX program reported income from the domestic market of 13,903.4 million pesos; income from the foreign market amounted to 13,677.3 million pesos. GUANAJUATO The head of the Ministry of Sustainable Economic Development of Guanajuato, Mauricio Usabiaga Diaz Barriga, stated that the state of Guanajuato seeks to continue promoting creativity in companies and the so-called orange economy of the future. He pointed out that currently, in Guanajuato, such innovation companies generate barely one percent of the GDP, so the state’s public policy is to grow in the future, this during the inauguration of the world forum called Global True North in Leon. “We are interested in Guanajuato in the economy of innovation and creativity; they are intangible, they are based on knowledge and creativity, they are not alone, the government of Guanajuato is interested in promoting all entrepreneurs in this branch. In the state, we have more than three thousand economic units in this economic sector of creativity; they generate more than 20 thousand jobs and contribute to one percent of the state’s gross domestic product. We have no doubt that this is only the beginning.

NEWS BY STATE

SAN LUIS POTOSI To analyze the progress of the implementation of the Labor Reform in the automotive sector, the main actors and representatives of this industry in Mexico met in San Luis Potosi with the Deputy Secretary of the U.S. Department of Labor, Julie Su. Deputy Assistant Secretary Thea Lee was present at the event; The U.S. Consul General in Monterrey, Roger Rigaud, and representatives of the Automotive Cluster of San Luis Potosi, the Automotive Cluster of the State of Mexico, the Automotive Cluster of Guanajuato, the Pan American Development Foundation Mexico (PADF), the Pan American Development Foundation (PADF), the Mexican Association of Automotive Clusters (AEC) and the Mexican Association of Automotive Manufacturers (AEC), the National Network of Automotive Industry Clusters (Redcam), the National Auto Parts Industry (INA), the National Council of the Maquiladora and Import Manufacturing Industry (Index) and the Employers’ Confederation of the Mexican Republic (Coparmex). Luis Alberto Gonzalez Olvera, General Director of the Automotive Cluster of San Luis Potosi, highlighted that the state is a reference on how the implementation of the labor reform is progressing through the Automotive Cluster, thanks to the coordination with the PADF and the INA to provide companies with timely information on the support they require for the processes of legitimizing collective bargaining agreements and also said that there is great progress on the issue and that companies

and their unions are gaining access to the knowledge to legitimize contracts in an orderly manner. AGUASCALIENTES In a challenging year marked by the ravages caused by COVID-19, the lack of inputs and microprocessors that have affected the global automotive industry, Nissan Mexicana closed its fiscal year 2021 with a sales leadership of more than 193 thousand units and a market share of 19.2% in the country. The Japanese company - which for 12 consecutive years, has been the top seller in Mexico. The good results of the Japanese manufacturer have been driven by the ambitious plan to renew 60% of its vehicle portfolio in the short term, starting in 2019 with Altima and Versa, then in 2020 with Sentra, NP300, Frontier, and in 2021 with March, Kicks, V-Drive and Frontier V6 PRO-4X. The excellence of Mexican manufacturing and Japanese engineering is highlighted due to the fact that six of the vehicles preferred by the Mexican public are proudly iconic models that are produced in the country, such as NP300, Frontier, and V-drive in CIVAC plant; Sentra in the Aguascalientes A2 factory; March, Versa, and Kicks in the Aguascalientes A1 complex. Facing new challenges, Nissan Mexicana continues to add milestones, with more than six million units sold historically. This result represents an increase of 1.5% compared to the fiscal year 2020 and more than 19% of the industry’s market share.

NEWS BY STATE

STATE OF MEXICO Even though Mexico City has eliminated the recommendation of the use of masks in open spaces, the Secretary of Health of the State of Mexico, Francisco Fernandez Clamont, affirmed that in the State of Mexico, the use of mask covers will continue, both in open and closed spaces. After participating in the Second Ordinary Meeting of the National Health Council for Wellbeing 2022, the state official confirmed that they will continue with the measurements. CDMX The Secretary of Health of Mexico City announced a new vaccination session against COVID-19 aimed at all those who have missed doses against the virus. It will take place on Tuesday, April 12, and Wednesday, April 13, 2022, from 7:30 am to 4:00 pm. The people who have not received the COVID-19 vaccines will receive them from AstraZeneca, Pfizer, and Sinovac. Mexico City’s health authorities have set up two locations, Sala de Armas and CENCIS Marina, where the three doses against COVID-19 will be administered.

NATIONWIDE: For two more weeks, until April 17, the 32 states will remain in the lowest risk phase of the pandemic. The new index will come into effect on April 4 and will be in effect until April 17; that is to say, it will cover part of the vacation period. With this, the 32 states will reach 4 weeks in green traffic light, something never seen during the pandemic in Mexico. Earlier this week, Hugo Lopez-Gatell, Undersecretary of Health, stated that Mexico has now accumulated nine consecutive weeks with a decrease in the pandemic.

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS. • Mexico moves up to 4th-largest global auto parts producer. Mexico was the fourth-largest auto parts manufacturer in the world in 2021, according to the Mexican National Auto Parts Industry Association (INA). Mexico produced $94.78 billion worth of auto parts in 2021, a 21% increase from $78 billion in 2020. The top global auto parts producers in 2021 were China, $470 billion; the U.S., $228 billion; Japan, $172 billion; Mexico, $94 billion; and Germany, $87 billion.

• Tajin R&D Center and Production Plant is inaugurated in Tala, Jalisco, with an investment of one billion pesos, which has generated 400 jobs in the region.

• Didi will invest $3 billion pesos in Mexico in 2022. The platform says that it has 10 million active users in our country, along with 350 thousand drivers and delivery staff. These funds are aimed at strengthening their reward programs and security innovations.

• U.S. Company Watlow Mexico inaugurated its fourth production plant in Queretaro, which had an investment of US$21 million and will generate more than 1,315 direct jobs.

SOURCE: El Economista

• Daimler relocates production of 300 components to Mexico. The effects on the global supply chain led Daimler to relocate 300 of its chassis components to Mexico at its plant in Garcia, Nuevo Leon, in order to replace imports.

TOWARDS THE “NEW NORMAL”

DISTRIBUTION OF DEATHS PER STATE DUE TO THE PANDEMIC

INFORMATION UPDATED ON APRIL 11, 2022 T 19:00 HRS LOCAL TIME.

NEW CASES REPORTED: 281

SOURCE: https://www.gob.mx/salud/

CONFIRMED CASES: 5,723,214

NEW DEATHS REPORTED: 78

CONFIRMED DEATHS: 323,727

INCREASE OF CONFIRMED CASES SINCE THE FIRST REPORT MAP WITH THE DISTRIBUTION OF THE INCIDENCE RATE OF ACCUMULATED CASES OF COVID-19 BY ENTITY OF RESIDENCE.

National rate 4.49

0 to 10.0 (28 states)

40.1 to 50 (0 states)

10.1 to 20 (3 states)

50.1 to 60 (0 states)

20.1 to 30 (1 states)

60.1 to 70 (0 states)

30.1 to 40 (0 states)

>70 (0 states)

Elaborated by Prodensa with information from the Health Ministry of Mexico

PANDEMIC’S SITUATION IN THE WORLD • As of April 11 , 2022, globally there have been reported 497,057,239 confirmed cases (7,258,177 new cases since last week´s report) of COVID-19 and 6,179,104 deaths (27,009 new deaths*). https://COVID19.who.int/

SOURCE: https://www.gob.mx/salud/

TOWARDS THE “NEW NORMAL” INCIDENTS OF CONTAGIONS IN THE POPULATION BY REGION AS OF APRIL 11

DEATH INCIDENTS IN POPULATION BY REGION AS OF APRIL 11

SOURCE: https://www.gob.mx/salud/

EHS

STAY UP TO DATE WITH YOUR COVID-19 VACCINES

GET VACCINATED AND STAY UP TO DATE A person is fully vaccinated two weeks after receiving all recommended doses in the primary series of their COVID-19 vaccination. A person is up to date with their COVID-19 vaccination if they have received all recommended doses in the primary series and one booster when eligible. Getting a second booster is not necessary to be considered up to date at this time. When Are You Up to Date? You are up to date with your COVID-19 vaccines when you have followed the current recommendations listed below. The recommendations will be different depending on your age, your health status, what vaccine you first received, and when you first got vaccinated.

DAVID ANTUNEZ Environmental, Health, and Safety Director.

LABOR

POTENTIAL CHANGES TO THE INSPECTION RULES Labor inspection is a key tool in all countries to ensure compliance with labor regulations in companies and, above all, to improve it. A good inspection program can promote a culture of prevention as long as it has at its core educational measures for employers to help them comply. Companies in Mexico are immersed in a challenging environment of great changes, so the inspection can become a great facilitator of compliance, as long as there is an adequate national policy. Today, the government intends to change several articles of the General Labor Inspection Regulations. The sense of several of the proposed changes is of concern, as it would limit the ability of companies to have sufficient time to correct the non-compliances identified by the authority.

ALVARO GARCIA HR, Vice President