Weekly Report 117

GENERAL SITUATION IN MEXICO

Weekly Review #117 I August 10, 2022

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MANUFACTURING INDUSTRY CCE EMPHASIZES THAT MEXICO IS THE MANUFACTURING HUB AND SECOND LARGEST TRADING PARTNER OF THE U.S. Mexico’s Business Council (CCE) and the National Council of the Maquiladora and Manufacturing Export Industry (Index) stated that Mexico is the manufacturing hub of the region and the second largest trading partner of the United States, as well as strengthening North America’s supply chains, reducing its dependence on other regions of the world.

“Today, building strong regional supply chains in North America is essential to ensure that key sources of essential inputs and materials are available at all times,” said Francisco Cervantes, president of the CCE, and Luis Manuel Hernandez, president of Index.

The businessmen announced the incorporation of Index into the CCE’s office in the United States to strengthen our country’s competitiveness in the region.

The ribbon-cutting ceremony was led by Mexico’s Ambassador to the United States, Esteban Moctezuma, and was attended by the Counselor of the USMCA Implementation Office in Washington, Alberto Sandoval, on behalf of the Secretary of Economy, Tatiana Clouthier.

The CCE established its office in Washington, DC, in 2019 to represent the interests of the Mexican business community and develop a working agenda in coordination with the U.S. private sector.

The office, the business representatives agreed, will allow for faster progress on the agenda of strengthening regional competitiveness and representing Mexico’s manufacturing export sector.

SOURCE: Forbes Mexico

The new Index headquarters in Washington will focus on strengthening North American value chains, promoting investment in border infrastructure, and accelerating trade facilitation initiatives to promote safe and efficient trade, they said.

This alliance between the CCE and Index to detonate the potential of Mexico’s private sector in Washington, represents a great opportunity to capitalize on the strength of our country and our region to face the current international disruptions, attract large investments and generate jobs, they added.

“It also shows that the Mexican private sector is committed to boosting and energizing the trade relationship with our northern neighbor, taking advantage of existing international platforms and instruments, such as the Treaty between Mexico, the United States, and Canada (USMCA),” they said.

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MANUFACTURING INDUSTRY ‘NEARSHORING’ DRIVES UP RENTAL PRICES OF INDUSTRIAL WAREHOUSES ON THE BORDER: SHCP Gabriel Yorio Gonzalez, Undersecretary of Finance and Public Credit (SHCP) informed that the price of industrial warehouses on the border between Mexico and the United States has increased due to the high demand for the spaces by Asian investors, who are relocating their companies, known as nearshoring, their operations to Tijuana and Ciudad Juarez.

“The whole trend of relocation of companies is already happening in the northern zone. There are already very specific cases in Tijuana and Ciudad Juarez, as well as probably many of you, are seeing the demand for industrial warehouse rental spaces and prices are going up,” the official commented.

The northern zone of Mexico is dynamic and has a vocation focused on manufacturing and industry, said the economist during the press conference on the strengthening of the semiconductor supply chains between Mexico and the United States.

He added that in the border zone they already have a tax incentive scheme, which applies to municipalities and has contributed to nearshoring.

“In the industrial enclaves that Mexico already has and have grown naturally and were specific efforts at some point in the history and economic development of Mexico,” said Gabriel Yorio Gonzalez.

Currently, nearshoring is a trend, which is already being reflected in the northern part of the country, which is the natural candidate for some of the industries, recalled the Undersecretary of Finance.

“The same is happening with the relocation of companies in the central and Bajio corridor with an e-com-

SOURCE: Forbes Mexico

merce and logistics vocation,” he pointed out.

There is already a training of foreign direct investment flows, which takes advantage of the relocation of companies, he said.

Mexico has important challenges ahead and I would like to put that we are working in the southeast zone, which must be connected with the dynamics of investment, foreign trade, and trade facilitation, he added.

“We are working from the Ministry of Finance to provide a package of incentives, which will not be the same as the one operating on the northern border,” Yorio Gonzalez mentioned.

“It is an incentive package, which we are designing and it remains to be calibrated and we are looking to provide companies that want to be located in some of the 10 industrial parks of the Transisthmian Corridor with incentives that cause a higher rate of return,” he detailed.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference August 03-09,2022 POLITICAL AGENDA

INTERNATIONAL

• Enrique Peña Nieto case: When asked by a reporter about the investigations that the Attorney General’s Office (FGR) is carrying out for three different crimes against former President Enrique Peña Nieto, the President stated that from the beginning he had assured that he would only file charges if the people asked him to do so. However, his opinion was to look forward and seek not to repeat acts of corruption.

• CDMX Governorship: when asked by a reporter if Marti Batres is the runner-up for the CDMX Governorship, the President stated that he does not know. He pointed out that Ariadna Montiel, Rosa Icela Rodriguez, and other possible candidates have the same opportunity to be voted for since his party is democratic.

• International Day of Indigenous and Afro-American Peoples: The Director General of the National Institute of Indigenous Peoples (INPI), Adelfo Regino Montes, reported on the Welfare Programs for indigenous peoples and communities. He emphasized that the Government has steadily increased the budget for indigenous and Afro-Mexican peoples. He pointed out that in 2022 the increase was 66.9 % concerning the last year of the previous sixyear term. The total amount disbursed to date is $339,350.7 million pesos in the different programs.

• Mexico’s position on the China-Taiwan-US conflict: The Mexican government reaffirmed its position that there should be no more wars, that there should be no more confrontation or trade war. The world needs all nations to have a truce of at least 5 years to be able to face the crisis that came with the pandemic and the war between Russia and Ukraine that has affected all nations.

• Truce in armed conflicts: A reporter asked the President if he will present his five-year truce plan before the UN so that there will be no war or trade wars, as well as how a war between China and the United States would affect Mexico. To which the President answered that a war between these countries would affect Mexico. For this reason, a truce of at least five years must be chosen so that the populations are not affected by the wars.

• Meeting with Bolivia: Regarding the meeting between Foreign Minister Marcelo Ebrard and the President of Bolivia, Evo Morales, and how the proposal for the industrialization of lithium will be developed, the President answered that, as Bolivia is more advanced in the exploitation of lithium, then they can help Mexico with this. In this sense, he pointed out that the company that will be in charge of lithium will depend on the energy secretary and will be national. He also stated that lithium will be

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S put at the service of the automotive industry installed in Mexico to strengthen it.

HEALTH • Tianguis del Bienestar: The Secretary of Security, Rosa Icela Rodriguez, informed that the instruction to distribute these confiscated goods free of charge is being complied with since a year ago when the Tianguis del Bienestar began. Currently, in the state of Guerrero 14 municipalities have been attended, in Veracruz 7 municipalities, in Oaxaca 54, and in Chiapas 12. Likewise, it was informed that 17 municipalities in Oaxaca that were affected by hurricane Agatha have yet to be attended.

SEDENA, SHCP, SAT, the Customs Agency, the National Guard, and the FGR, among other authorities, are participating.

• Health plan for wellness: The Director General of the Mexican Social Security Institute (IMSS), Zoe Robledo Aburto, reported on the progress of the Health for Wellbeing Plan. He pointed out that 115 Cuban doctors with 15 specialties in high demand will be integrated into the States of Colima and Nayarit. He pointed out that the IMSS defined the location and points of attention of the Cuban doctors according to the needs of the population. He emphasized that the signing of the agreement guarantees that the doctors have the best training and experience.

• CONACYT programs and projects: The General Director of the National Council of Science and Technology (CONACYT), Maria Elena Alvarez-Buylla Roces, said that CONACYT has restructured and implemented an administrative efficiency strategy to achieve much more with less. She also pointed out that a scholarship program in the areas of health has been promoted. He said that a more

modest investment has been articulated in ten strategic agendas for research and advocacy in priority projects, in many cases in conjunction with the Mexican Government. She added that new scientific capacities have been articulated and generated in laboratories, public centers, industrial plants, and companies to have vaccines not only against COVID but also for other diseases.

• She informed that an alliance was established with the President of the Republic regarding the Patria vaccine. He emphasized that it has successfully passed the preclinical phases in animals demonstrating safety and efficacy, which comes from Avimex, a company with a scientific and technological base, which presented the most significant advances. She detailed that throughout this month, registrations for the trial will be open to citizens of legal age living in Mexico City, Oaxaca, and Michoacan, which are the sites where they will open for vaccination of Patria’s clinical trial.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S taken to rescue the 10 miners trapped in the coal shaft after its collapse. It was commented that, through various agencies and the private sector, there are 25 submersible pumps and 6 drills. The task force has 557 deployed elements and 70 land vehicles.

SECURITY

INFRASTRUCTURE • Infrastructure development in Oaxaca: The President stated that Oaxaca will benefit from the Isthmus project and the modernization of the port of Salina Cruz, to which some 10 billion pesos have been invested. He also mentioned that development works are being carried out throughout the Isthmus, among them the improvement of the road from Ixtepec to Guatemala and the construction of the new highway from Mitla to the Isthmus, which will be opened in December of next year.

The highway from Oaxaca to Puerto Escondido will also be inaugurated at the end of this year.

• Mine collapse in Sabinas, Coahuila: The Secretary of National Defense, Luis Cresencio Sandoval, and Laura Velazquez, National Coordinator of Civil Protection, reported on the actions that have been

• National Guard: The President informed that, by agreement of the Presidency, the security related to the National Guard will depend entirely on the Ministry of Defense (SEDENA). He emphasized that the operational issue is in charge of the Secretary of Defense; however, this week he will issue an agreement for the National Guard to depend entirely on SEDENA. He stated that he will send an initiative Law for constitutional reform. He pointed out that, if he obtains the majority of votes in the Chambers, he will be able to modify laws. He expressed that, if the Constitutional reform is not approved, then the Law reform will be approved.

He reiterated that the Agreement he seeks to issue does not violate the Constitution.

AGRICULTURE • Imports of corn and wheat: Regarding Mexico’s dependence on foreign imports of wheat and yellow corn, because 73% of the yellow corn consumed in Mexico is imported, the President answered that it is part of the anti-inflationary plan to have reserves of white corn for export. However, in the case of yellow corn and wheat, the importation of yellow corn was not limited by the sale of yellow corn by the United States to agribusiness companies.

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KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S ECONOMY • Mexico as an attractive destination for investment: Citigroup CEO Jane Fraser met with the President yesterday. She said that Mexico is one of the most attractive countries for investment in the world, being the first place in Latin America. Battery plants in the north of the country and the electric vehicle automotive industry were highlighted as some of the areas of opportunity for Mexico’s development with the attraction of foreign investment.

• Economic projections: When asked about a study by the center for economic studies of the private sector, which states that it will be a lost six years in economic growth. The President indicated that the experts are not taking into account the effects of the international context, without considering the effects of the pandemic or the war in Russia and Ukraine. He also said that with his government there is a better distribution of wealth and although growth is low, it reaches everyone. He also said that Mexico’s inflation is lower than that of the United States and Europe and that its currency is strong.

• Fuel subsidies: He pointed out that the subsidies for not increasing the price of gasoline and diesel help to keep inflation down. That is, without these subsidies, inflation would be 11% and this would affect everyone’s economy. He also added that people like Calderon and Ricardo Anaya think that the business is to sell crude oil and not to give value to the raw material.

• Payment of taxes: The head of the Executive informed that taxpayers are being urged to pay their taxes and remarked that there are no tax privileges. He commented that remission of taxes is prohibited, a situation that applies to everyone and

which explains the increase in tax collection without increasing taxes.

• Remittances: An average remittance of US$350 per month was reported. It was reported that, in the last 4 years, there is a continuous upward trend compared to previous administrations. Overall, there is an increase of 64% compared to 2018 and 15.59% compared to last year.

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NEWS BY STATE

BAJA CALIFORNIA The Health Secretary of Baja California reports 2,173 active cases in the past 14 days and 395 new active cases in the past 24 hours. The vaccination plan continues this week for the children and adult population. The Industrial Development Commission offered a press conference to report on the results that were generated for Baja California in the participation in the Farnborough International Airshow. As a result, 120 business appointments were attended, 15 direct investment projects, and 35 subcontracting projects were identified.

SONORA Official reports confirm 841 new cases in the past 7 days. The vaccination plan continues this week for children from 5 to 11 years old. The Governor reported that Sonora achieved an extraordinary advance of 3.7 percent during April 2022 compared to the previous year, according to the INEGI Monthly Indicator of Industrial Activity. He also mentioned that his commitment is to increase manufacturing to accelerate the economic growth of the state.

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NEWS BY STATE

NUEVO LEON LEGO expands its plant in Nuevo Leon with more than $500 million dollars; it becomes its largest manufacturing plant in the world.

Nuevo Leon leads 15 states with the highest demand for industrial space, since the conflict between China and the United States began, the substitution of Chinese imported goods for products made in Mexico began, as well as the search for companies from that country to relocate to the country to remain competitive.

COAHUILA General Motors will increase job creation in Coahuila.

General Motors invested 1,000 million dollars for this mega-project, which will also allow to detonate the generation of jobs in the region, since it is expected that in the next five months 1,500 jobs will be formally produced.

TAMAULIPAS Kimball Electronics will inaugurate the second operating plant in Tamaulipas.

Kimball Electronics currently has an area of 227,000 square feet, of which 147,000 are dedicated to manufacturing. With the expansion, 240,000 square feet were added to the presence in this city.

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NEWS BY STATE

SAN LUIS POTOSI Kenneth Lee Salazar, Ambassador of the United States of America in Mexico, visited the state, where he met with the leaders of the Automotive Cluster of San Luis Potosi, the National Chamber of the Transformation Industry (Canacintra) and the Pan American Development Foundation (PADF) to discuss the progress of the Labor Reform and Chapter 23 of the USMCA as well as the challenges and opportunities faced by the business sector in the state.

The automotive sector highlighted the importance of the state of Potosi at the national level, which has more than 240 companies dedicated to the production of auto parts, in addition to the two major automakers BMW and GM. During the dialogue, the strategies for dissemination, training, and support to employers, together with PADF and the state government, to accelerate the integration of the industry to the new provisions of the Labor Reform were highlighted.

JALISCO To take advantage of the competitive advantages of the logistics corridor between Nuevo Laredo and Jalisco, both states signed an Interinstitutional Partnership Agreement with which they will strengthen commercial, business and tourism exchange, as part of the actions to consolidate the state of Jalisco as the Logistics HUB of America.

The signing of the Partnership Agreement with the municipality of Nuevo Laredo is strategic for Jalisco due to the fact that currently, more than 60% of the exported merchandise passes through this border crossing.

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NEWS BY STATE

GUANAJUATO Guanajuato is one of the three states with the highest COVID-19 viral activity as of August 6.

The agency’s technical report showed that Guanajuato is in third position among the states with the highest viral activity, just below Mexico City and the State of Mexico.

Guanajuato has 8,972 active cases, compared to 23,859 in Mexico City and 10,032 in the State of Mexico.

QUERETARO Tetra Pak announces the expansion of its packaging plant in Queretaro; it will invest 437 million pesos.

The expansion includes a new production line for the cutting area and two lines in the lamination area.

With the expansion, the multinational company’s production capacity will increase to 12.8 billion packages per year.

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NEWS BY STATE

STATE OF MEXICO As a new form of cyber extortion, through spam messages, criminals impersonate the International Criminal Police Organization (Interpol) and warn their victims that they have detected the use of child pornography, for which they would be referred to the authorities.

39 cases have been detected in State of Mexico, informed the Secretary of Security of the State of Mexico (SSEM.) According to Asuncion Alvarez Alvarado, head of the Cybernetic Police of the State of Mexico, in the last few days there has been an increase in the number of spam type messages in emails at national level, which have to do with possible extortion attempts.

CDMX The Mexico City Attorney General’s Office has detected at least ten phantom companies as part of its investigation into the so-called Real Estate Cartel, which involves former officials of the Benito Juarez mayor’s office, revealed the head of government, Claudia Sheinbaum. She questioned that the former head of the Benito Juarez delegation and now PAN federal deputy, Jorge Romero Herrera, had stated in an interview that he was unaware that Luis Vizcaino Carmona, former legal and government director in the PAN administrations, obtained apartments in exchange for construction permits or land use violations.

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ECONOMIC RECOVERY ECONOMY AND INVESTMENTS IN MEXICO

NORTHEAST

CDMX

- LEGO With an investment of US$507 million, LEGO expanded its plant located in Nuevo Leon, Mexico, to become the company’s largest factory in the world.

- VOLKSWAGEN The German automaker Volkswagen (VW) seeks to position its Puebla plant as one of the most modern of the entire European automotive consortium. Ir will make an investment of close to US$ 1 billion to expand its industrial plant to carry out technological manufacturing and focus on its electrification plans.

- KIMBALL ELECTRONICS Kimball Electronics will inaugurate its second operating plant in Tamaulipas. In this second plant, 400 jobs have already been generated, although the goal is to create 1,500 in the long term; in addition, the investment of 46 million dollars is highlighted.

NEARSHORING

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MEXICO: POSITIONED TO SERVE THE AMERICAS

ROBIN CONKLEN Manager, Prodensa USA

Mexico is a strategic ally for nearshoring operations - in manufacturing as well as mindfacturing. Past decades of population growth resulted in a generous labor supply. The workforce is often cost-effective and strategically skilled for foreign direct investment since the onset of NAFTA. Sharing over 2,000 miles of border allows managing directors to have more oversight and be more hands-on with products or knowledge transfer. Mexico is also a gateway to many free trade agreements and access to global markets.

Contact us for detailed information of our Mindfacturing solutions.

www.prodensa.com contact@prodensa.com