Weekly Report 105

GENERAL SITUATION IN MEXICO

Weekly Review #105 I May 18, 2022

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MANUFACTURING INDUSTRY MEXICO WORLD-CLASS PLAYER

The production of advanced components and systems in electric vehicles will be possible in this complex. It will begin operations in 2023 with the potential to supply different automotive manufacturers.

Mexico remains a relevant site in automotive manufacturing. As you may recall, a few years ago, different brands announced the installation of production centers in the country.

In 2016 Audi started producing the Q5 in San Jose Chiapa, Puebla. Two years earlier, in 2014, BMW announced its plan to set up in San Luis Potosi to operate in 2019 with the manufacture of the 3 Series, while

SOURCE: El Economista

Mercedes-Benz took advantage of its alliance with Nissan to assemble the A-Class in 2019.

In addition, brands such as Kia, Stellantis, Volkswagen, Ford, Nissan, General Motors, Honda, Jac, Mazda, and Toyota place Mexico as the seventh-largest global vehicle producer with 3.1 million units in 2021.

GROUNDBREAKING Today the Joint Venture between LG and Magna places Mexico in the select group of countries with the potential to produce electric vehicles. With an investment of US$100 million for the first stage, the LG Magna E-Powertrain company announced the cons-

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MANUFACTURING INDUSTRY

truction of a plant in Ramos Arizpe, Coahuila. The plant will manufacture inverters, motors, and integrated chargers that General Motors will use to assemble electric vehicles.

This complex will generate 400 new jobs and will begin operations in 2023. Tom Rucker, president of Magna Powertrain, highlighted the company’s strength in the country: “Magna has a strong presence with more than 30 manufacturing facilities in Mexico. Being a pioneer in Ramos Arizpe, we are very close to one of our largest Powertrain facilities, and we have the support and knowledge of our colleagues behind us.

Our partnership with LG brings many benefits, including the ability to support automotive manufacturers worldwide with a scalable, global portfolio. Scalability provides individual components to total electrified systems and gives us a unique ability to capitalize on a market opportunity in every region. This facility is our first step, and a very important one, in showing our customers that we are ready to support and sustain electrification in North America.”

GM MOVES TO PRODUCTION On April 29, 2021, General Motors announced plans for its Ramos Arizpe complex; it unveiled a billion-dollar investment aimed at inaugurating its new Paint Plant and preparing this facility for an expansion in the Assembly and Global Powertrain Systems Plants.

The statement issued on that occasion by the corporation pointed out that “General Motors Ramos Arizpe has begun construction work on its new facilities within the Complex, where electric vehicles of GM brands will be produced starting in 2023”.

SOURCE: El Economista

During the groundbreaking ceremony for the LG Magna e-Powertrain plant, Jeff Morrison, Vice President of Global Procurement and Supply Chain at General Motors, mentioned that: “LG has been our electrification partner for over 15 years, starting with Volt and now Bolt, and now we’re going to our new electrification platform that will power all of our trucks and cars for years to come.

And Magna, which has been our largest supplier over the years for GM, has won Supplier of the Year many times with a very diverse and creative company. In my role at GM, I’m essentially responsible for helping to create the supplier base and supply chain that we need to power all of our vehicles. We are going through this big transformation as an industry. We are committed to an all-electric future part of that is building a million electric vehicles, but that is not possible if we don’t have the right supply chain, one that is resilient and sustainable. For me, that is a key part.”

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MANUFACTURING INDUSTRY COMPANIES THAT DO NOT PAY PROFITS WILL BE FINED UP TO 481,000 PESOS All workers who have worked for a period of 60 days or more in the company during the previous year are entitled to profit sharing.

According to the Federal Labor Law (LFT), a fine of between 24,55 thousand pesos and 481,100 pesos is what companies that do not comply with the distribution of profits among their workers could be fined.

These amounts are equivalent to between 250 and 5 thousand times the Unidad de Medida y Actualizacion (UMA), which is equivalent to 96.22 pesos this year.

Profit-sharing is a constitutional right that all workers have to participate in the profits obtained by an employer or company and must be delivered within sixty days after the annual tax is paid.

Thus, companies have until May 30 to make the profit-sharing among workers who have worked at least 60 days in the company the previous year, while in the case of individuals (persons with business activity), the deadline is June 29.

Likewise, workers have a term of one year from the day after the obligation is generated to claim their profits, or these will be added to the distribution of the following year, according to information obtained from the Tax Administration Service (SAT) website.

As specified in the Federal Labor Law, newly created companies during their first year and newly created companies that manufacture a new product during the first two years of operation are not obligated to participate in the profit sharing.

SOURCE: El Imparcial

Non-profit private assistance institutions, the Mexican Social Security Institute (IMSS), and decentralized public institutions with cultural, welfare, or charitable purposes, as well as companies that have generated an income of less than 300 thousand pesos, are not obligated to participate in the profit sharing.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference May 11 – 17, 2022

POLITICS • President’s visit to Nuevo Leon: The governor of Nuevo Leon, Dr. Samuel Alejandro Garcia Sepulveda, mentioned that this year there is a record in job creation and foreign direct investment. In terms of mobility, 110 electric trucks have been put out to tender, and there are plans to double the number of subway lines. He assured that the construction of the Suburban Train is underway. In principle, it will go from Santa Catarina to the airport with a view to its growth; he thanked the federal government for its support, which will contribute with 3 billion pesos for its construction. On the subject of self-sufficiency, he mentioned the “Zero Hunger” program, which will support 430,000 people in the state who have food poverty so that children in Nuevo Leon have good nutrition. In terms of water, the governor said that in accordance with the commitments acquired for the construction of the Libertad Dam and with the principle of supplying water to the metropolitan area of Nuevo Leon, the federation had approved the amount of 2,183 million pesos. In terms of security, General Luis Cresencio Sandoval mentioned that 630 clandestine hydrocarbon thefts had been located.

• Regulation of Foreign Vehicles: The Secretary of Public Safety and Citizen Protection, Rosa Icela Rodriguez, mentioned that the regularization pro-

gram for vehicles of foreign origin was restructured at the end of February of this year. The program consists of a one-time payment of 2,500 pesos that goes directly to f the Ministry of Finance and Public Credit, which then returns the resources to the entity where the vehicle ownership was reported.

To date, 44,482 vehicles have been regularized, and vehicle registration centers are already operating in 12 out of 12 states.

ENERGY • Plan for energy self-sufficiency: Refineries and petrochemicals were affected in the energy sector.

For this reason, a policy was adopted to produce what is consumed in energy. Since the beginning of the government, we have sought to recover the six refineries, which had been sold. Almost 50% of gasoline imports have ceased, and, with the purchase of the Deer Park refinery, Mexico is now self-sufficient in diesel. When the Dos Bocas refinery comes into operation, the country will be self-sufficient in gasoline.

• Investment in Tula: The President informed that $2.5 billion dollars will be invested in constructing the coker plant in Tula, which will allow the processing of fuel oil from Tula and Salamanca. He stated that the plant will be completed by the end of 2023.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

INFRASTRUCTURE • Agreement with airlines: The Secretary of the Government, Adan Augusto Lopez, announced that it was agreed that domestic cargo and charter flights will migrate their operations almost immediately to AIFA. He mentioned that in a period of three months, the same will be sought for international cargo. He stated that there is no type of decree but that the airlines offered to increase the number of operations to and from AIFA. • Aviation Safety: The President mentioned that all work is being done to recover the Category 1 aviation safety category of the international aviation safety assessment. He referred that the SICT is in charge of such work, with the support of the SRE, and that with this resolution, AIFA would be allowed to have flights to the United States.

HEALTH • Hiring Cuban doctors: The hiring of Cuban doctors occurs because there are no doctors in Mexico due to corruption and privatization of education. These doctors will earn the same as Mexican doctors earn, and the first thing to do is to call all the doctors in Mexico. However, there are no specialists to work in the most remote areas. He added that all medicines and clinical studies will be free for the entire population.

• COVID 19: The Undersecretary of Prevention and Health Promotion, Hugo Lopez Gatell, mentioned that there is a trend of reduction of COVID-19 cases in general for almost four consecutive months.

Regarding vaccination, 85% of people have at least one dose of vaccine, including children from 12 to 17 years old, while 66% of the population has had boosters applied.

• Vaccination of children: Regarding the COVID-19 vaccine for children from two to five years old, Lopez Gatell mentioned that children are at the lowest risk so that from five to eleven years old will be the next block, to whom the Pfizer vaccine and the Abdala vaccine, which is the Cuban vaccine, will be given.

• Hepatitis outbreak: Regarding a question about the new variant of hepatitis, Lopez-Gatell mentioned that there are several types of hepatitis and that the outbreak that has arisen is of hepatitis.

INTERNATIONAL • Summit of the Americas: The federal President commented that he hopes that all countries will be invited and considered that there has been a very responsible attitude on the part of the U.S. government because they have not come out to deny this possibility. Countries are free and sovereign and

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S are not governed by the mandates of hegemonies.

He emphasized that it is time for a change of policy in the Americas and that he does not rule out that President Biden should invite all the leaders of the continent. He pointed out that it is time for the entire continent to unite to fight the problems that affect the region, as they did in Europe with the European Union (E.U.). If the objective is not achieved, the President hopes that there will be no sanctions or reproaches. In either case, Mexico will be present through Foreign Minister Ebrard. Likewise, he pointed out that Mexico is coordinated with the U.S. to work on security, migration, and trade issues. Therefore, in no way will there be a rupture in the relationship with the said country if they disagree with Mexico on the subject of the Summit.

• Meeting with Larry Fink: The President stated that yesterday he met with Larry Fink, CEO of BlackRock, and pointed out that there are unbeatable conditions for foreign investment due to the comparative advantages that the country has. He also pointed out that Fink invited him to a meeting in New York in September to highlight possible investments for Mexico.

EDUCATION • Salary increase for education workers: In the presence of the Secretary of Education, the Secretary of Finance and Public Credit, the Undersecretary of Expenditures, and the Secretary of the Civil Service, it was announced that, in order to reduce injustices and inequities, it had been decided to review the ordinary annual salary and a wage increase of 3.5% and 1. In addition to this base of increases, there are elements to strengthen those who earn the least; therefore, there will be a staggering percentage increase of 3, 2, and 1 percent

for salaries below $20,000, $12,000, and $10,000.

For the application of this policy, the government will allocate an amount of 25,000 MDP. ENVIRONMENT • Plan for production and self-consumption: The President pointed out that Mexico has a 3.6% food inflation rate and the United States has a 1.3% inflation rate, which is why a campaign was launched to promote productive activity, together with producers and self-service stores, to ensure a fair price for basic food basket products. He also toured Nuevo Leon, Jalisco, Veracruz, Puebla, and CDMX to meet with agronomists, extensionists, and technicians to launch a campaign to increase production, especially for self-consumption; guarantee prices will be maintained for corn, beans, wheat, milk, among others. He also suggested that he will launch an emergency fertilizer production plan through the modernization of plants to achieve self-sufficiency.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S • Water supply in Nuevo Leon: President Andres Manuel Lopez Obrador assured that work is being carried out jointly with the state’s authorities and with the help of the business sector. He mentioned that the federation will always be alert and help look for structural solutions to increase water availability. There are 15 activities planned to address the water shortage, one of which is the construction of the Libertad Dam. He added that it is necessary to renew the water distribution lines program to prevent leaks from having more water, not only in Nuevo Leon but also in the whole country. He assured that if the industry and the citizens commit to taking care of the vital liquid, the current deficit will be solved by mid-August.

SECURITY • Debanhi case: The sub-secretary of Public Security, Ricardo Mejia Berdeja, mentioned that an inter-institutional group has been formed to follow up and exhaust the protocols to clarify all possible lines of investigation.

• Incident of military personnel in Michoacan: General Luis Cresencio Sandoval assured that after the application of intelligence work to detect illicit acts in the state, the armed forces located plantations, as well as warehouses with laboratory material used for the manufacture of drugs. During the operation’s progress, 5 of these identified warehouses were destroyed; in this sense, it could be said that the aggression against the military resulted from the execution of the operation in Michoacan.

• Security in CDMX: The Head of Government mentioned that, although the federal government makes a great effort in security matters, the states must do

their part and must coordinate in order to achieve better results. She mentioned that at the beginning of her administration, the CDMX was one of the five most dangerous states; today, it is number 16.

Among other achievements in the area of security, she pointed out that no mayor’s office in the CDMX is among the 35 most insecure municipalities in the country, the citizen’s perception of insecurity has been reduced from 92% to 67%, and 710 km of safe paths have been implemented in the city, with a gender focus. He explained that these advances had been achieved through the axes of attention to the causes, more and better police, intelligence and investigation, and coordination.

• Gender complaints: Regarding the 60 complaints about sexual abuse against Andres Roemer and what is being done for his extradition, the Head of Government commented that the prosecutor is doing a “first-class” job supporting the victims and is working with the SRE to collaborate in the case.

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NEWS BY STATE

BAJA CALIFORNIA The Health Secretary of Baja California reports 200 active cases in the past 14 days. The vaccination plan for young people from 12 to 13 years old and the adult population continues this week in different municipalities. The recommended prevention and self-care measures are constant hand washing, use of antibacterial gel, applying social distancing in places with crowds, and ventilation of the areas; the use of face masks in open and closed spaces remains optional. The private initiative will carry out a labor study in Mexicali to measure different factors and the difficulty of hiring personnel.

SONORA Official reports confirm three new cases in the last 24 hours. The vaccination plan for young people and the adult population continues this week. The use of face masks remains optional, and The Sonora Health Secretary recommends using face masks for the vulnerable population, unvaccinated people, and population with respiratory symptoms. There are around 30 companies interested in entering Sonora, and through the Ministry of Sound Economy, their arrival process is being facilitated. The governor of Sonora mentioned that the railway project in Nogales will increase trade, traffic, and growth.

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NEWS BY STATE

NUEVO LEON The state Secretary of Economy, Ivan Rivas Rodriguez, commented that in the first six months of the new administration, around 24 Foreign Direct Investment (FDI) projects had confirmed their investment in Nuevo Leon. These projects represent an investment of $2,200 million dollars and will generate around 18,000 jobs.

COAHUILA The Mexican Institute of Social Security (IMSS), the government of Coahuila, federal and state officials, representatives of the business sector, and workers in the mining sector announced that the Safe and Healthy Work Environments (ELSSA) program will be implemented in the companies of the branch, in order to promote preventive health actions and reduce workplace accidents.

TAMAULIPAS The cut in formal jobs in Tamaulipas was reflected in activities such as the maquiladora industries, oil, electricity, companies, and the home, in rates from the minimum to 9 percent during last April.

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NEWS BY STATE

SAN LUIS POTOSI According to figures from the Ministry of Labor and Social Welfare (STPS), as of February 2022, San Luis Potosi insured 456,461 workers before the Mexican Social Security Institute (IMSS), an increase of 0.4% compared to the immediately preceding month.

In total, there are 1.3 million people employed in the state, which represents 2.2% of the national total. Likewise, there are fifteen companies identified by the STPS as the largest employers in San Luis Potosi, with 46,791 workers. These firms are mainly from the construction and manufacturing industries. Based on the information released by the federal agency, we present the fifteen companies that generated the most employment in the state up to the fourth quarter of 2021. 1. Mabe Employees: Five thousand 955 2. General Motors Employees: Five thousand 682 3. Draexlmaier Components Automotive de Mexico Employees: 4,330 4. Robert Bosch Mexico Employees: 3,750 5. Cummins Industrial Group Employees: 3,593 6. BMW Group SLP Employees: 3,056 7. San Luis Metal Forming S.A. de C.V. Employees: 2,663 8. Asociacion de Apoyo y Union Local de Productores de Caña (Support Association and Local Union of Sugarcane Producers) E,ployees: 2,589 9. Interruptores de Mexico S.A. de C.V. Employees: 2,343 10. 3M Purification S. de R.L. de C.V. Employees: 2,333 11. Valeo Sistemas Electricos Employees: 2,199

JALISCO Francisco Xavier Orendain de Obeso, Strategic General Coordinator of Growth and Economic Development of the Government of Jalisco, mentioned that the state managed to recover the jobs lost during the most complicated period of the pandemic.

In 2021, almost double the number of jobs lost in 2020 was generated, and during the first four months of 2022, there was a generation above the average registered in the last ten years. He detailed that in 2022, approximately 10 thousand more jobs have been created than in previous decades. In 2021 Jalisco had second place in job generation. In terms of foreign direct investment, Jalisco has managed to attract, for the second consecutive year, over 2 billion dollars, thanks to the fact that it took advantage of the opportunities for economic reactivation in the world and despite the effects of the pandemic.

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NEWS BY STATE

AGUASCALIENTES These are the companies that generate the largest number of jobs in Aguascalientes.

With the respective number of jobs generated, these ten places are referred to through the information reflected in the report of the Labor Observatory of the STPS. Nissan Mexicana Number of workers: 10,605, 2.- Sensata Technologies Number of workers: 6,177. 3. BFS Ingenieria Aplicada S.A. de C.V. Number of workers: 6,068. 4.

- Cooperation Manufacturing Plant Aguascalientes (COMPAS) Number of employees: 4,547. 5.- Flex Number of employees: 4,275.

6.- Jatco Mexico S.A. de C.V. Number of employees: 4,130. 7.- Vianney Textil Hogar S.A. de C.V. Number of employees: 3,989. 8.

8.- Universidad Autonoma de Aguascalientes Number of employees: 3,307. 9.- Marelli Mexicana Number of employees: 3,223. 10.Industrias del Interior Number of employees: 2,423.

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NEWS BY STATE

STATE OF MEXICO The Governor of the State of Mexico, Alfredo Del Mazo Maza, and the Ambassador of the United States of America in Mexico, Ken Salazar, held a working meeting in which they discussed economic, security, and labor issues, in addition to reiterating the collaboration between the neighboring country to the north and the State of Mexico, in order to build safer, more resilient and prosperous communities. It is worth noting that the United States is the main source of Foreign Direct Investment in the State of Mexico, with more than 27 billion dollars raised since 2000 to date, with close to 2,800 companies established in the state.

CDMX Due to the fact that it seeks to generate with the Congress of Mexico City an agenda for economic reactivation, the Employers’ Confederation of the Mexican Republic (Coparmex) of Mexico City announced that it held the first plenary meeting with the Morena parliamentary group. This Sunday, the president of the Coparmex of Mexico City, Armando Zuñiga Salinas, informed that this meeting with local legislators was held because they seek to generate new instruments focused on attracting investments, increasing the promotion of the capital, and improving labor conditions. While acknowledging the reactivation work plan of the Government of Mexico City, the leader of Mexico City’s businessmen stressed that actions are needed from the local legislature because the pace of recovery has not been as expected. He stated the need to deepen a full, clear, and accurate strategy for economic reactivation.

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ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

CENTRAL MEXICO

NORTHEAST

BED BATH & BEYOND Opened the doors of its 12th store in Queretaro, in which 60 million pesos were invested. The opening represents the creation of 35 direct jobs and 40 indirect jobs.

ZF GROUP ZF Group inaugurated its electronic technology manufacturing plant in Nuevo Leon, consolidating its Latin American Engineering Hub in the state.

NORTHWEST

SOUTHEAST LEONI The state government announced the signing of a letter of intent with the German company Leoni to create 500 new jobs in the company’s plants in Yucatan, which could reach 1,000.

HOLCIM MEXICO Holcim Mexico inaugurated its new concrete plant “El Refugio” in the border city of Tijuana, Baja California.

LABOR

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ALVARO GARCIA HR, Vice President

DATA ANALYSIS USED FOR LABOR INSPECTIONS Technology has allowed companies to use multiple resources more efficiently, from time management to applied technology in their process. Technology allows us to analyze data and make better decisions in less time, focusing directly on what is important.

Labor authority in Mexico is using data from multiple government agencies, from social security to the tax authority, to identify companies or sectors that may not comply with the newest legislation.

The federal plan for labor inspections is expected to be conducted in companies that, using data analysis, are inconsistent or not complying, making the inspection effort’s more effective.

Employers must not only comply with the USMCA provisions or the labor law in order to avoid labor sanctions, now tax, social security, safety, and other indicators will be used to make the labor inspection program.

ADVISORY

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