Weekly Report 108

GENERAL SITUATION IN MEXICO

Weekly Review #108 I June 8, 2022

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MANUFACTURING INDUSTRY AUTOMOTIVE INDUSTRY PRODUCTION STEPPED ON THE ACCELERATOR IN MAY; IT GREW 15.2% Mexico’s automotive industry stepped on the accelerator last May by increasing its production 15.2% compared to the same month of 2021, with the manufacture of 275,436 vehicles; however, it is far from the pre-pandemic figures (22.4% below) of 2019, informed the Mexican Association of the Automotive Industry (AMIA).

According to industry data reported to Inegi, vehicle exports grew slightly 1.1% in May of this year by sending 244,643 units abroad, a figure very similar to that of 2021, when 242,020 units were exported.

“The automotive industry has not been able to recover, despite the positive figures reported for May, but it still faces the problem of semiconductor supply, as well as the impact of the fall in the U.S. automotive market, after it dropped 30% during the fifth month of this year,” commented Fausto Cuevas, director of AMIA. Although the U.S. market fell sharply, Mexican auto exports grew 3.4% in May, being the only country with growth in shipments.

Mexico shipped 187,626 light vehicles to the U.S. during May versus 181,420 units in 2021, which translates, for every 100 units sold in the U.S. market, 17 are Mexican. “It is not that we are in a line of constant growth; however, it was a good month of May, and we have a conservative optimism towards the months to come,” considered the executive, who estimated that the automotive industry will see recovery in the assembly of cars until 2024 when there will be greater availability of semiconductors.

SOURCE: El Economista

The utilized capacity of the automotive sector amounted to 80.8% in May. During the period from January to May of this year, the industry produced 1 million 376,028 light vehicles, 3.5% more than in 2021. In the case of exports, 1 million 166,921 units were reported, a 0.3% drop with respect to the same period of 2021.

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MANUFACTURING INDUSTRY TATIANA CLOUTHIER IS MAKING A WORKING VISIT TO CALIFORNIA The head of the Ministry of Economy will participate in several forums, including the Forum of Ministers of Trade and Foreign Affairs and the IV Summit of CEOs of the Americas, as part of the activities of the Summit of the Americas.

The Secretary of Economy, Tatiana Clouthier, will make a working visit to Los Angeles, California, from June 7 to 9, to participate in several forums within the framework of the IX Summit of the Americas.

Clouthier will attend the Forum of Ministers of Trade and Foreign Affairs organized by the Inter-American Development Bank (IDB).

At this forum, different topics will be discussed, such as strengthening regional supply chains, sustainable trade, and climate change, as well as trade and the digital economy.

SOURCE: El Economista

She will also participate in the IV CEO Summit of the Americas, organized by the U.S. Chamber of Commerce.

“The secretary will meet with her counterparts from Belize and Ecuador to strengthen our trade and investment ties. And she will dialogue with representatives of various U.S. companies to learn about their investment projects in Mexico,” said the Ministry of Economy in a press release.

The Undersecretary of Foreign Trade, Luz Maria de la Mora, and the head of the USMCA Implementation Office in the United States, Cesar Remis, will accompany Clouthier during this visit.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference May 31 - June 7, 2022

INTERNATIONAL • Summit of the Americas: He informed that he will not attend the Summit; Marcelo Ebrard, Secretary of Foreign Affairs, will attend on behalf of the Mexican government. The reason why he will not participate is that not all countries were invited.

He reaffirmed that the policy of exclusion that has been imposed for centuries must be changed. He stressed that he has a good relationship with President Biden but considers that the decision not to invite some countries responds to pressures from the Republican and Democratic parties related to some leaderships of the Cuban community in Florida • USMCA: The President of the Republic pointed out that having reaffirmed this commitment has helped a lot in trade with the United States and Canada. He affirmed that Mexico has an advantage in relation to other countries for foreign investment • Investment in Mexico: After a meeting with business people from Sempra Energy, a liquefaction plant is being built in Ensenada, Baja California, and he does not rule out creating two liquefaction plants to export gas to Europe and Asia. He indicated that he will invite business people to visit the Isthmus once the Dos Bocas Refinery is finished,

and he trusts that the workers will find work with other projects. He also stated that he does not rule out the possibility of building a coker plant in Salina Cruz, Oaxaca. Likewise, the President of Mexico highlighted the opportunity for foreign investment in fertilizer plants in the country.

ECONOMY • Peso - U.S. dollar exchange rate: The President commented that the Mexican peso has appreciated during his administration. He highlighted that, during his administration, the peso has appreciated by 3.5% percent.

• Socioeconomic report: Carlos Torres Rosas, Coordinator of Development Programs and Technical Secretary of the Office of the President, presented the socioeconomic results after three years of government.

- In the international context, the peso has remained strong and stable; he stated that it is one of the few currencies that has appreciated with respect to the dollar in these 42 months of government.

- Regarding remittances, he informed that yesterday the Bank of Mexico (BANXICO) released the data corresponding to April, which was $4,718 million dollars, representing an increase

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S ELECTIONS

of 17% compared to the same month of the previous year.

- During the first quarter of the year, Gross Domestic Product (GDP) growth of 1% was reported. Likewise, last week, the Ministry of Economy released the Foreign Direct Investment (FDI) data for the first quarter of the year, reporting a record figure of more than 19 billion dollars.

- He explained that the minimum wage has never increased as much as it has during this administration. For more than 20 years, the minimum wage has not increased in real terms. Likewise, purchasing power has increased by 67%.

- The Mexican Stock Exchange (BMV) has reported an increase of 24%. Likewise, the Bank of Mexico’s reserves have reported a 15% increase in these same 42 months, reaching almost 200 billion dollars.

• State Elections: He indicated that the INE released the results of the elections in each state, which were: - Hidalgo (MORENA): Julio Ramon Menchaca 62%.

- Oaxaca (MORENA): Salomon Jara Cruz – 60% - Quintana Roo (MORENA): Maria Elena Lezama - 56%.

- Tamaulipas (MORENA): Americo Villarreal 50%.

- Aguascalientes (PRI, PAN, PRD Alliance): Maria Teresa Jimenez - 54%.

- Durango (PRI, PAN, PRD alliance): Esteban Villegas Villarreal - 54%.

- He emphasized that Morena will be governing 12.6 million inhabitants. He indicated that the electoral reform will be promoted, which includes the possibility for Mexican migrants to vote from wherever they are.

• Presidential candidate 2024: He pointed out that those who are waiting for a signal from him to define MORENA’s candidate will not get it and that the party’s bylaws state that it must be chosen by a poll.

CORRUPTION • Corruption in COFEPRIS: The head of the Federal Commission for the Protection against Sanitary Risks, Dr. Alejandro Ernesto Svarch Perez, pointed out that within COFEPRIS, interests, and corruption prevailed. He detailed three levels of corruption: i) discretional management of company applications, where applications were delayed giving rise to management firms that profited from the

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S applications; ii) surveillance based on extortion, which consisted of a network of officials and state authorities that extorted those verified; and iii) acts of corruption, there were interest groups that managed the interests of trade and the external pharmaceutical sector within the Institution.

• Fight against corruption in COFEPRIS: Alejandro Svarch Perez, head of the Federal Commission for the Protection against Sanitary Risks (Cofepris), stated that, by instruction of President Andres Manuel Lopez Obrador, the Secretariat of the Navy (Semar) intervened to fight against corruption within the agency, and the result was the dismissal of 32 officials.

SECURITY • Security results: There was a 30.8% reduction in federal crimes. The crimes showing a reduction are: intentional homicide with -10.2%, kidnapping with -44.8%, and general robbery with -24.3% in May 2022 with respect to the same month of the previous year.

ENERGY • New Mining Law: The President pointed out that the initial guidelines of the state-owned company that will manage lithium will soon be presented, recalling that the exploitation of lithium will depend on the Ministry of Energy and will not be exploited by international or national private companies.

• Combined cycle plants in Yucatan: President Andres Manuel Lopez Obrador stated that the two thermoelectric plants, one in Merida and the other in Valladolid, have already been put out to tender.

With these plants and the gas pipeline, the prob-

lem of the Yucatan Peninsula will be solved since the permanent supply of electricity will be guaranteed.

- Regarding the international arbitration of the Zama oil field in the Gulf of Mexico, the President said that 16 meetings were held with U.S. companies and the U.S. Ambassador to deal with electric energy, gas, and oil issues. The meetings addressed investment issues for liquefaction plants and Talos Energy’s request for the exploitation of the field; it is estimated that up to 160 thousand barrels of oil can be extracted daily in shallow waters. It was decided that PEMEX will invest in order to operate and manage the field. He added that the Energy Transition Plan will be announced to show that Mexico is one of the countries that produces and will produce more clean energy. He informed that one of the companies he met with committed to invest approximately 3 billion dollars in three projects.

HURRICANE AGATHA • Hurricane Agatha in Oaxaca: Likewise, he pointed out that, so far, 9 deaths and 6 missing persons have been identified. Governor Murat indicated that, according to the National Water Commission (CONAGUA), there is an 80% probability of a possible cyclone in the next 5 days and that the Federal Electricity Commission (CFE) indicated that there are still 25,000 people affected in the electric power supply, but it is expected that today, at midnight, the service will be reestablished.

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NEWS BY STATE

BAJA CALIFORNIA The Health Secretary of Baja California reports 435 active cases in the past 7 days. The recommended prevention measure is to complete the scheme vaccination and apply the booster vaccine.

Last week there was a meeting at Index with the Manager of Services and Consulting of World Traffic Customs Services on the “new rules on foreign trade of the Ministry of Economy.”

SONORA Official reports confirm 131 new cases in the last 7 days. The vaccination plan for the young population started this week in different municipalities. The use of face masks remains optional. As part of the modernization of Guaymas port, a 300-meter cold store will be built for customs inspection. Sonora will become the capital of aquaculture by hosting the United Nations Food and Agriculture Organization (FAO) forum next year.

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NEWS BY STATE

NUEVO LEON In the announcement of the microcredit program for small and medium-sized businesses that will start in the next few days, the Secretary of Economy in Nuevo Leon, Ivan Rivas, reported that the $2.4 billion pesos in credits from the Impulso Nuevo Leon Program have already been fully used, which benefited 1,100 SMEs. COAHUILA In the coming weeks, it will be possible for 100 percent of the automotive industry to stop using face masks.

TAMAULIPAS Lacking the full guarantee of the World Health Organization (WHO), the Tamaulipas Congress rejected the application of the “Abdala” vaccine in children.

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NEWS BY STATE

SAN LUIS POTOSI Juan Carlos Valladares, Minister of Economic Development (SEDECO) in San Luis Potosi, is on a tour in Spain to promote the state and strengthen commercial relations with business people from that country. In this sense, the state official held a work meeting yesterday with the Spanish Chamber of Commerce to create new business opportunities and consolidate a collaboration network with the members of this organization.

At the meeting, Juan Carlos Valladares was received by Inmaculada Riera I Reñe, general director of this Chamber of Commerce and Jaime Montalvo Dominguez de la Torre, director of International Affairs, as well as Micaela Picazo, coordinator of Bilateral Relations. Throughout the official’s work tour, the main objective is to position San Luis Potosi as an attractive pole in Mexico for the arrival of new companies and industrial sectors by intensifying the economic promotion of the state.

AGUASCALIENTES The National Electoral Institute (INE) released the results of its quick count of the election for Governor of Aguascalientes, which gives the victory to the candidate of the PAN-PRI-PRD alliance, Maria Teresa Jimenez Esquivel, who obtained 53.76 of the vote, while the candidate of Morena, Nora Ruvalcaba, obtained 33.52% with 100% of the votes counted.

JALISCO Governor Enrique Alfaro Ramirez assured that a successful plan has been developed to consolidate an industry that previously was not in his area. For this, there is a sincere and open dialogue with the private initiative.

This generates a synergy that consolidates the fundamentals and achieves projects that strengthen the dynamics of Jalisco and the western region. “The reactivation process and the numbers will always belong to the businessmen, while the government generates the conditions and good agreements,” said the governor, Enrique Alfaro. For his part, the head of the Coordinating Council of Industrialists of Jalisco, Cesar Castro Rodriguez, mentioned that the industrialists have a clear agenda that will address the challenges of gender equality, health, and education. Finally, Enrique Alfaro assured that the next step will be a transition toward the innovation industry. With this, Jalisco will be able to reinvent itself and rebuild an ideal of prosperity for the state.

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NEWS BY STATE

GUANAJUATO The Ministry of Labor and Social Welfare (STPS) notes in its most recent report that Guanajuato will have 2.7 million employed persons as of the last quarter of 2021, which represents 4.8% of the national total, placing it in seventh place in the country. For February 2022, 1,36,473 jobs were registered with the Mexican Social Security Institute (IMSS). Compared to the immediately preceding month, this figure was higher by 8,761 (0.9%). The economic activities that concentrate the largest number of employed persons in Guanajuato are: Manufacturing Industry (24.8%), Commerce (19.6%), and Agriculture, Livestock, Forestry, Hunting, and Fishing (9.8%), which group 54.3% of total employment. The five automotive companies in Guanajuato with the most employees are: General Motors, 7,216 employees; American Axle & Manufacturing, 5,334 employees; Mazda, 5,034 employees; Honda, 4,512; and Kromberg & Schubert, 4,122 employees.

QUERETARO LG Innotek announced that it will expand its operations in San Juan del Rio, Queretaro, offering a new source of jobs. The mayor of the municipality informed that the project will boost the automotive and manufacturing industry in the state. LG Innotek announced that it will expand its operations in San Juan del Rio, Queretaro, offering a new source of jobs. Mauricio Sanchez, director of LG, said that the investment will be US$80 million for this year. The project will boost the automotive and manufacturing industry in the region. LG Innotek Mexico, a plant dedicated to the manufacture of anti-lock braking systems for engines, power steering, among other automotive components, was installed in the entity in 2014 with an investment of 800 million pesos, with which they produced 7.6 million components per year for the U.S. and Mexican markets. Soon, the company will communicate more information and seek to strengthen its workforce to offer better jobs and salaries for the entity.

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NEWS BY STATE

STATE OF MEXICO The governor of the State of Mexico, Alfredo Del Mazo Maza, held a meeting with leaders of the Business Coordinating Council (CCE), in which they discussed issues related to investment and economic promotion of the state.

The governor noted that thanks to the competitive advantages of the state and the interest of the business sector in the State of Mexico, during the current state administration, more than 10,352 million dollars in foreign investment have been made, and more than 137,000 new jobs have been generated. Del Mazo Maza considered that business people are allies of the State of Mexico, for which he reiterated his administration’s willingness to facilitate the opening of businesses, improve regulation and boost the competitiveness of the labor force. During the meeting, he stated that the best way to fight inequality is through the generation of jobs, an issue in which the CCE has been key.

CDMX Mexico City once again received the One Planet City Challenge (OPCC) 2021- 2022 award from WWF, the World Wide Fund for Nature. WWF is a non-governmental organization founded in 1961 that is in charge of environmental conservation.

Its official name in the United States and Canada is World Wildlife Fund. Mexico City officially received this recognition on June 6 through the official website of the Ministry of the Environment and the Government of Mexico City. The CDMX competed for this title with other 280 cities from 50 countries, achieving this contest’s main objective: to reduce emissions of the Environmental and Climate Change Program 2019-2024.

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ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

NORTHEAST - FUJIKURA Announces expansion in Coahuila; 4,257 jobs and 21.8 MDD.

- PRETTL In the coming months, Prettl will open a plant in the municipality of El Marques, where it plans to create an additional 1,500 jobs.

CENTRAL MEXICO - LG LG Innotek announced that it will expand its operations in San Juan del Rio, Queretaro, offering a new source of jobs. The mayor of the municipality informed that the project will boost the automotive and manufacturing industry in the state.

- BROSE Will invest more than 400 million pesos to expand its operations in Queretaro.

LABOR

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CFDI 4.0 EXTENSION Today the Tax Administration Service (SAT) announced that the entry for the new electronic invoice 4.0 will be extended until January 1, 2023, in order to make it easier for taxpayers to comply with their tax obligations.

Individuals and companies that are currently using the new invoicing version 4.0 are asked to continue using it in order to socialize its use. On the other hand, those who are not using it yet, are invited to continue with the transition process during the rest of the year.

It is important for the taxpayer to know and keep updated at all times on their tax information contained in the Tax Status Certificate, which is like their birth certificate, since it contains identification data, location, and tax obligations, such as: • Federal Taxpayers Registry (RFC).

• Name or Company Name.

• Postal code of the tax domicile.

• Tax regime.

In case the taxpayer knows this information, they can provide it to their employer or invoice issuer without the need to present their Tax Status Certificate.

It should be noted that the issuance of the payroll invoice is independent of the labor obligation that employers have to pay wages and salaries to their workers, so not submitting the invoice is not a reason for dismissal or withholding of payment.

The delivery of certificates is free of charge and should not be conditioned by any public servant of the SAT for alleged debts or physical verification of the taxpayer’s address.

ALVARO GARCIA HR, Vice President

WORKFORCE

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TOP TALENT SOURCED FROM MEXICO FOR GLOBAL OPERATIONS Global operations depend on Mexico to provide key talent and business continuity. Mexico is a natural destination to provide manufacturing and administrative talent. Organizations find: • Top bilingual talent trained in international systems and software • Local time zones that facilitate real-time business communication • Endorsement from global corporations expanding operations and shared services • Cultural similarities stemming from travel and technology Mexico captured over $30 billion in FDI over the year 2021, of which 44% represented new investment.

Data shown: Employment in the Mexican IMMEX / Maquiladora Program, which represents the formalized manufacturing-for-export market in Mexico. Data obtained from INEGI on 6 June 2022.

ROBIN CONKLEN Business Development

www.prodensa.com contact@prodensa.com