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GENERAL SITUATION IN MEXICO

Weekly Review #106 I May 25, 2022

MANUFACTURING INDUSTRY NEW ELECTRIC CAR PLANT ANNOUNCED IN MEXICO A major U.S. automaker will announce plans for a new electric vehicle plant in northern Mexico in early June, Secretary of Economy Tatiana Clouthier said on Friday, May 20. Clouthier, who declined to name the company’s name or the state where the plant would be built, told Bloomberg that the announcement would be made the first week of June after local elections. “We have companies that are already opening, and we’re going to have an announcement in early June,” Clouthier said in an interview during a trip to London to discuss a free-trade agreement with the United Kingdom. The northern states of Durango and Tamaulipas are scheduled to hold elections on June 5. Clouthier expressed confidence that Mexico and the UK will succeed in renegotiating a new trade agreement within two years and added that Mexico has the labor force and infrastructure to benefit from a world that is looking to shorten supply chains. Mexico will also look to increase the amount of trade to the United States through California, Clouthier said. In April, Texas Governor Greg Abbott caused chaos at his state’s border after implementing additional controls for shippers. Clouthier said last month that Mexico planned to reroute a new rail line to New Mexico instead of Texas, as originally planned.

SOURCE: El Financiero

Abbott’s inspections did not uncover any contraband or undocumented immigrants but created hours-long delays that left fresh produce rotting and wreaked havoc on supply chains. It was “a political move, we don’t want to get into that game, and we think mixing trade with politics is not a good thing,” Clouthier said of the delays at the Texas border. “We learn from our mistakes, and that’s why we are looking for another place to have another entrance,” she said.

MANUFACTURING INDUSTRY “PROGRESSIVE AND INNOVATIVE” IS HOW THE UNITED KINGDOM WANTS ITS FTA WITH MEXICO TO WORK The current trade agreement between the UK and Mexico is relatively superficial and is based on the EU-Mexico Global Agreement that was negotiated more than 20 years ago, so now both countries will seek an ambitious ‘new generation’ agreement that, in addition to strengthening trade, increases investment flows and promotes digital and cross-border trade. “We want the new Free Trade Agreement (FTA) to also deliver on progressive issues such as trade and gender equality and innovation,” UK Ambassador to Mexico Jon Benjamin said in an interview. The diplomat added that they will also seek to include provisions to facilitate trade for the 2,700 small and medium-sized companies from across the UK that exported to Mexico in 2020 and at least 800 that imported from Mexico and encourage more to join them. Benjamin recalled that UK businesses are unable to take full advantage of the bilateral relationship with Mexico, as “our current trade agreement is more than two deca-

SOURCE: El Financiero

des old, having been signed in the pre-iPhone era, and long before superfast broadband became commonplace. This agreement is now ‘showing its age’ and needs to be updated. The current agreement does not reflect the challenges and opportunities of a rapidly changing global economy,” he said. He detailed that the new agreement will seek to fix tariffs at 0 percent on 91 percent of imports from Mexico and 97 percent of exports to Mexico from the United Kingdom. Both the UK and Mexican negotiating teams have been instructed to hold the first official round of negotiations in Mexico City this July and a second round in the fall. “This will allow us to make significant progress towards our ambition to conclude negotiations for a new Free Trade Agreement within two years, which we agreed as part of the UK-Mexico Trade Continuity Agreement,” he stressed.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference May 17-24, 2022

INTERNATIONAL • Summit of the Americas: The President announced that on May 24th, there will be a call between U.S. Secretary of State Antony Blinken, Ambassador Salazar, and Foreign Affairs Secretary Marcelo Ebrard to discuss the Summit of the Americas. • Free Trade Agreement with the United Kingdom: Secretary Tatiana Clouthier announced that negotiations for the Free Trade Agreement between Mexico and the United Kingdom have begun, following the entry into force of the trade continuity agreement in 2021. She pointed out that in 2021 there were 5 MDD of commercial exchange with the United Kingdom, and there are more than 2 thousand British companies in the country. She concluded by mentioning that British companies will open 50 hotels in Mexico. HEALTH • Hiring of doctors: The President informed that there is a deficit of doctors and specialists. He announced that on Tuesday, all available positions for doctors will be announced, with fair salaries and immediate hiring, and reiterated his commitment to the agreement with Cuba on health measures.

• Hermosillo Specialty Hospital: The President informed that during his upcoming tour of the state of Sonora, a health agreement will be signed, and the exact date for the start of operations of the Hermosillo Specialty Hospital will be announced. INFRASTRUCTURE • Water services: It was commented that in Aguascalientes, the water supply service had been privatized, and in Queretaro, a reform has been approved to privatize the service, indicating that these processes result in damage to health due to contaminated water. • Irregularities in real estate developments: The conditions of several developments in the State of Jalisco were reported since the current conditions could lead to catastrophes. Therefore, it is necessary to regularize and avoid corruption in these constructions. The President commented that he is aware of these irregularities and indicated that he will begin to address this problem with follow-up visits this weekend. • Public investment in Sonora: Alfonso Durazo, Governor of Sonora, mentioned that the President’s tour in the state contemplates the review of the customs renovation program, the exit of the railroad tracks from Nogales, the modernization of

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S people linked to organized crime had been arrested; and intentional homicides have decreased by 14.3% compared to 2021 in Sonora. Mexico City now ranks 24th out of the 32 states, and there are currently 1.9 homicides per day in the state. He took the opportunity to mention that Rosa Icela Rodriguez, Secretary of Security and Citizen Protection, could also run for the presidency in 2024. POLITICAL AGENDA

the port of Guaymas, which will have 4 billion pesos, among other infrastructure works. Sonora will join the Sembrando Vida program. SECURITY • Security: The Secretary of Security and Citizen Protection, Rosa Icela Rodriguez, informed that there had been a reduction of 28.4% in federal crimes, and today we are at the lowest levels since four years ago. Intentional homicide has decreased by 17.1% (the lowest in five years), with an average of 82 incidents per day. In terms of security and the fight against corruption, he highlighted that 1,262

• Labor reform: The President mentioned that the increase for teachers has already been made, then come the soldiers, marines, police officers, and then doctors and nurses. Hiring must be completed in order for the public health system to function properly with free medical attention and medicines. He added that health personnel will be regularized since he entered government, 650,000 education workers have received their positions, and the same will be done with health workers. The fourth block will consist of office workers. • Inflation: When questioned about the expansion of the Gas Bienestar, the President assured that the situation is being taken care of, but first, it is important to control prices since an emergency situation has arisen, which is inflation. The price increase is being addressed because the best thing to do is increase production. Pemex will invest in fertilizer. • Profit-sharing to mine workers in Nacozari: The President commented that in Nacozari, an agreement was reached to provisionally deliver 300 thousand pesos of profit-sharing. The company accepted that the SAT analyzes the real value of the activities. The parties involved are Grupo Mexico and the mining union.

NEWS BY STATE

BAJA CALIFORNIA The Health Secretary of Baja California reports 292 active cases in the past 14 days. The vaccination plan for young people and the adult population continues this week. 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. This week the groundbreaking ceremony for the WestGate Industrial Park project was held.

SONORA Official reports confirm 22 new cases in the last 7 days. The vaccination plan for young people and the adult population continues this week. The use of face masks remains optional. Last week the President of Mexico made his 19th visit to the State to review progress on different issues with the governor.

NEWS BY STATE

NUEVO LEON The Secretary of Labor of Nuevo Leon inaugurated the State Week of Safety and Health at Work 2022 with the aim of training and raising awareness in the prevention of occupational risks. The State Week of Safety and Health at Work is held at Cintermex, where lectures will be given on technical aspects of safety, identification of hazardous materials, height risks, first aid, and ergonomics, among other topics. COAHUILA Governor Miguel Angel Riquelme Solis reported that the Pilot Program for the Removal of Masks in Closed Spaces will be launched soon and will be implemented in companies in the first instance, For this purpose, he mentioned that companies in La Laguna interested in participating in this program should approach the offices of the National Chamber of the Transformation Industry (CANACINTRA) in order to request the requirements set by the Ministry of Health. TAMAULIPAS In Tamaulipas, in the coming weeks, it will stop to be mandatory the use of face masks in closed spaces.

NEWS BY STATE

SAN LUIS POTOSI The road rescue programs in the capital city of San Luis Potosi, as well as the various infrastructure works in the interior of the state, are the hope for the economic reactivation of the construction industry in San Luis Potosi. The companies dedicated to the construction industry are facing a severe crisis even before the pandemic due to the lack of application of resources in public works and infrastructure. However, they remain optimistic since, with the plans that have been announced and that some of them have already started, the desired recovery of the construction companies could be consolidated, acknowledged in an interview with the local president of the Mexican Chamber of the Construction Industry (CMIC), Juan Manuel Perez Herrera. The new challenge for the builders is to consolidate the industry’s recovery. In this regard, he said that the business chamber has already entered into dialogue with the capital and state governments to request that they consider the assignment of works to local companies in order to generate a circular economy. The leader of the builders revealed that currently, 30 companies from Potosi and affiliated with the CMIC are executing various works throughout the state, as well as in the municipality, which recently started with the road rehabilitation programs; about five have been awarded.

JALISCO The Jalisco Ministry of Health informed that 589,904 people had contracted COVID-19, and 19,475 victims of the disease remain since the virus’s arrival in the state. Three private schools in Jalisco have registered outbreaks of COVID-19. The agency reported 116 more cases of COVID-19 this Thursday with no more deaths. On the other hand, Salud Jalisco pointed out that COVID-19 cases remain at a low level, and it is up to each educational authority to decide whether to use masks inside the schools. The vaccination day against COVID-19 for minors between 12 and 17 years of age is maintained by appointment at vacunacion.Jalisco.gob. mx.

NEWS BY STATE

GUANAJUATO The Governor of the State, Diego Sinhue Rodriguez Vallejo, presented the New Social Strategy, “Guanajuato, With You Yes.” This strategy aims to respond to the new economic and social reality caused by COVID 19 with innovative public policies to continue with the economic and social reactivation, “Our goal is to build the conditions so that everyone can develop and achieve their dreams. “The Strategy is based on six objectives to be carried out during the remainder of the current state administration. The second objective is that all Guanajuato residents receive quality medical attention. The third objective is to provide adequate spaces for family development by improving housing; the fourth objective will focus on strengthening the population’s income with various programs such as Vales Grandeza, Tarjeta Social, temporary employment, productive projects, training, and certifications for employment. The fifth item points out the improvement of social and basic infrastructure in the communities, with basic, community, and complementary infrastructure works, while the sixth item will promote an organized and participatory population to achieve a peaceful and healthy environment. “In short, we will accompany and help those who need it most. Today we live in a new reality, and for a new reality, we require a new social strategy,” said the State Executive.

QUERETARO In this government, we know that the most important thing is security, and to give business people what they need to take Queretaro to the next level, said the head of Queretaro’s Government, Mauricio Kuri Gonzalez, when he swore in the Board of Directors of the National Chamber of Commerce, Services and Tourism (CANACO ServyTur) Queretaro for the period 2022-2023. The state Governor acknowledged that his administration has several challenges; however, he said he was pleased that in organizations such as CANACO, there are companies that set an example and that, in addition, there are Queretaro men and women who work every day for a better state. “That is what we have to bet on: the formal company, the company that provides jobs, that provides well-paid jobs, that provides social security, that is the company we need, and really, that is the way we can reduce poverty,” he pointed out. The Governor reiterated that his administration is working on security, energy, water, regulatory improv

NEWS BY STATE

STATE OF MEXICO In the first quarter of the year, 13 entities maintained an unemployment rate above the same period of 2019, before the effects of the health contingency due to COVID-19, according to Inegi. State of Mexico accounts for the largest increase in the period, with a rise of 1.13 percentage points (going from 4.19 to 5.33%) in second place Mexico City with 1.12 points (from 4.73 to 5.85%), in third place Queretaro with a rise of 0.98 (from 2.64 to 3.62 percent).

CDMX On May 9, there were rumors of a 25% reduction in flights by Aeromexico, which Aeromexico executives denied. The airline’s Director of Communications and Public Relations informed that it will add flights from the new airport to Acapulco, Cancun, Guadalajara, Monterrey, and Oaxaca during the summer. Christian Pastrana, Director of Communications and Public Relations of the company, assured that the routes and frequencies they have in the capital terminal will be maintained in addition to the new ones announced at the Felipe Angeles International Airport (AIFA). In addition, ozone levels in the metropolitan area of Mexico City exceeded again this Friday the maximum levels established by the authorities. The fourth atmospheric contingency of the month and the fifth of the year has been activated by CAMe. The government’s central measure to dissipate the excess of pollutants is the reduction of traffic. Vehicles with yellow stickers will not be allowed to circulate from 5:00 a.m. to 10:00 p.m. this Saturday, among other restrictions in addition to the Hoy No Circula program.

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

CENTRAL MEXICO ZKW ZKW started the construction of the third phase of its plant located in Guanajuato, Puerto Interior. The company will expand its site by 15,700 square meters with an investment of US$102 million. It is expected to generate around 830 jobs. NORTHEAST SKF This construction, which will be located in the Kalos Industrial Park, will require an investment of $2,000 million pesos which will be used to reactivate the municipality’s economy.

METELMEX Will invest US$15 million to increase production by 100% at its Frontera plant, Coahuila. NORTHWEST MACK TECHNOLOGIES The company inaugurated an industrial plant in the Las Fuentes Industrial Park in Ciudad Juarez with an investment of $40 million USD. This industrial building currently has 1,000 employees, and it is estimated that by the end of the year, the company will have 2,000 employees in total.

LABOR

ALVARO GARCIA HR, Vice President

NEW REQUIREMENTS FOR THE DIGITAL PAYROLL RECEIPT Being prepared to comply with the new obligation to include the zip code of the workers’ fiscal address in the digital payroll receipt (CFDI) has become a time-consuming activity for the human resources department. Companies in Mexico do not have an official document or proof in their personnel files that today can confirm the tax domicile of the workers. Therefore employers must request proof of tax status from the workers in order to corroborate the data and be able to generate the digital impression of the receipts. No later than the last day of June 2022, companies must have this new requirement so that starting in July, official digital payroll receipts (CFDI) already include them. Although the tax authority has already granted an extension (originally, the deadline was the last day of April), even at this date, it is considered difficult for all companies to comply with this requirement.

WORKFORCE

A SOLUTION TO TALENT SHORTAGE The U.S. talent shortage has created disruptions to business and increased the cost to hire employees. There are too few unemployed workers to fill job openings. These are some recommendations and innovative solutions to the talent shortage situation. • Reorganize administrative services into Shared Service Centers, providing efficient resources to shared workforces. • Implement a range of technological solutions, like video meeting platforms, E-signature tools, and project management software. • Expand your talent market by hiring virtual talent in different parts of the country or even the world. • Hire up-and-coming professionals and provide job training, or hire interim professionals through staffing agencies when the need is urgent. • Go back to square one and, solidify your employer brand, re-evaluate your market value, including your mission, vision, and values. • Implement an employee referral program, placing your best brand ambassadors in the position of spreading the good word. • Strive to be an Employer of Choice in your niche market, including an evaluation of employee remuneration, leadership, innovation, and community integration.

ROBIN CONKLEN Business Development