Weekly Report 124

GENERAL SITUATION IN MEXICO

MANUFACTURING INDUSTRY

AUTOMOTIVE EXPORTS IN MEXICO BROKE RECORD IN AUGUST

Mexico’s automotive exports totaled 15,245.6 million dollars in August, a 42.5% inter-annual growth and a record for any month of the year, Inegi reported on Tuesday.

With a 30.1% share of Mexico’s total international sa les, automotive exports have progressively improved after the effects of the COVID-19 pandemic and, more recently, the global shortage of semiconductor chips.

The year-on-year growth of automotive sector sales in August was the highest in the last 15 months since in June 2021, they grew 859%, because it was com pared to the same month of the previous year when many plants closed their operations due to the maxi mum worsening of the pandemic.

Another noteworthy aspect of automotive exports in August was that their growth at an annual rate was the most dynamic among the main concepts into which Mexican foreign sales are divided.

Driven by the automotive industry, Mexico’s total mer chandise exports rose 25.2% year-on-year in August to 50.67 billion dollars. Cumulatively, in the first eight months of the year, they advanced 18.9% to 377,945.8 million dollars.

Mexico’s foreign trade is one of the engines of the Gross Domestic Product (GDP), growing at higher ra tes than the average of the rest of the sectors of the national economy.

On the other hand, Mexican imports of all products amounted to 56,168.2 million dollars in August, an amount that increased 27% at an inter-annual rate and represented an all-time high for any month of the year. From January to August, foreign purchases totaled 402,347.6 million dollars, an increase of 24.1% annually.

Thus, Mexico registered a trade deficit of 5,498.2 mi llion dollars in August and 24,401.7% cumulatively.

In August 2022, exports of manufactured products amounted to 45,212 million dollars, which represen ted an increase of 27.1% at an annual rate.

MANUFACTURING INDUSTRY

The most significant growth was observed in ex ports of automotive products (42.5%), steel products (38.7%), machinery and special equipment for va rious industries (32.4%), food, beverages, and tobac co (21.8%), and electrical and electronic equipment and appliances (8.4%).

In turn, the annual increase in automotive products exports was the result of increases of 43.7% in sales channeled to the United States and 36.7% in those to other markets.

At the same time, the value of oil exports was 3.215 billion dollars. This amount was made up of 2.518 bi llion dollars of crude oil sales and 697 million dollars of exports of other oil products.

In the same month, the average price of the Mexican crude oil export mix stood at 87.26 dollars per barrel, 10.56 dollars lower than in the previous month, al though 19.48 dollars higher than in August 2021.

As for the volume of crude oil exported, this stood at 0.931 million barrels per day in the reference month, lower than the 1.079 million barrels per day in July and 1.098 million barrels per day in August 2021.

The value of agricultural and fishery exports, in the eighth month of the current year, was 1.555 billion dollars, an annual advance of 17.9 percent.

The most important expansions were recorded in avocado exports (44.8%), mango (26.5%), fresh ve getables (10.8%), and tomato (8.7%).

In contrast, the most significant annual declines were in exports of onions and garlic (11.5%) and citrus fruits (8.1%).

Extractive exports amounted to 688 million dollars, with an annual reduction of 24.2 percent.

In August 2022 and with seasonally adjusted figures, total merchandise exports reported a monthly de crease of 0.86 percent, the net result of a 14.82 per cent drop in oil exports and a 0.25 percent increase in non-oil exports.

Also, with seasonally adjusted series, total imports showed a monthly reduction of 2.10 %, derived from a 0.14 % decline in non-oil imports and a 13.30 % decline in oil imports.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference September 21-27, 2022

ECONOMY

• Inflation: He explained that there will be no price controls but that the price of the 24 products of the basic food basket will be clearly defined. products of the basic food basket and that if possible, will be extended to more products. He also mentioned that the owners and directors of Soriana, Chedraui, and Walmart were present, as well as the main tor tilla producers. Walmart, as well as the main pro ducer of tortillas, chicken, eggs, meat, and tuna, among others. others. He said that on October 3, representatives of the companies will be present at the morning conference and will announce the plan to stop inflation.

• Minimum wage: Given the inflationary situation, the President expressed his support for a consid erable increase in the minimum wage, which will be discussed at the appropriate time and with the consensus of the labor, business, and government sectors.

SECURITY

• National Guard: The President mentioned that he agreed to a vote in the Senate on the National Guard Minute to determine who are the represen tatives of the interest groups in case it is not ap

proved. When questioned about the modification of the ruling in the Senate by MORENA and PRI to generate greater consensus, Lopez Obrador pointed out that the best thing to do is to consult the citizens, which would not be a matter for the ruling parties. He stated the three questions that would be asked:

Do you agree with the action of the National Guard and its performance so far?

Do you consider that the Armed Forces, the Army, and the Navy should remain doing public security work until 2028 or should they return to their barracks in March 2024?

What is your opinion, should the National Guard become part of the Ministry of National Defense or depend on the Ministry of the Interior or Pub lic Security?

He expressed his interest that it should be dis seminated throughout the country, that it should be the people who give their opinion and that all doubts should be clarified. He stated that the con sultation should not be carried out through the INE and that a legal mechanism should be sought through the Undersecretary of the Interior, even if it is not binding. Expressed that the consultation should be promoted throughout this year and at the beginning of next year.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

• Earthquakes: Regarding the earthquake of Sep tember 22 at dawn, the President said that no ma jor structural damage has been reported and re gretted the loss of life of two people in Mexico City.

• Security: Ricardo Mejia, Undersecretary of Public Security of the Government of Mexico, presented the “Zero Impunity” report for the week of Sep tember 15-21. He reported a total of 7,055 arrests during the week. The President showed a com parative graph of past presidents concerning the percentage of intentional homicides, showing a decrease in the variation between 2019 and 2022. He also stressed that violence should not be con fronted with more violence, defending the policy of “Hugs, not bullets.”

• Ayotzinapa: The resignation of prosecutor Omar

Gomez Trejo as head of the Special Investigation and Litigation Unit for the Ayotzinapa case was confirmed, after the Federal Public Prosecutor’s Office withdrew 21 of the 83 arrest warrants re quested by the Attorney General’s Office (FGR). He mentioned that what was made known by the judge who is hearing the Ayotzinapa case, who has released 120 implicated persons, are failures in the integration of the files presented by the Public Prosecutor’s Office, pointing out that this is certainly not justice and questioned the figure of due process. He called for a review of the institution’s autonomy and its supremacy over other powers. He mentioned that the law yers of the big law firms are the ones who want things to remain as they are in order to protect foreign companies. The President mentioned that it is a day of na tional mourning, as it commemorates eight years since the disappearance of the Ayotzin apa Case. He stated that the pact of silence and impunity is being broken and progress has been made in the corresponding investigations, although some do not want the commitment to justice to be fulfilled. However, he reiterated that nothing and no one is going to stop the process of the Mexican government in its search for the truth. Likewise, he mentioned that there are many parties interested in the investigation not advancing or delegitimizing it, such as ad versaries, the traditional press, NGOs, and in ternational human rights organizations such as the United Nations (UN) or the Organization of American States (OAS). (UN) or the Organiza tion of American States (OAS), which he con sidered should be reformed because they are ornamental.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

POLITICAL AGENDA

• Texas Governor: When asked about the Texas gov ernor’s statements against the Mexican govern ment, the President argued that the U.S. official is acting for electoral purposes.

• COFECE: The President questioned the function ality of autonomous bodies such as the Federal Economic Competition Commission (COFECE), pointing out that it protects Iberdrola and other foreign companies and they have judges to defend them because they carried out reforms to create a whole scaffolding so that the State would be sub ordinated to private interests.

• Peace proposal: Lopez Obrador mentioned that yesterday Foreign Minister Marcelo Ebrard met with the Minister of Foreign Affairs of Ukraine and that he expressed that they saw the peace pro posal well and that the gentleman who had writ ten a Twitter against it saying that the proposal was on favor of Russia, did not have authorization from the Ukrainian government. There has been no evidence to corroborate.

• Visit to Oaxaca: Over the weekend, the President will be in Oaxaca and will visit Puerto Escondido and Huatulco to assess the hurricane damage. In Huatulco, he will hold a meeting with all the munici pal presidents of all the affected areas. He will also visit Salina Cruz, the road from Ixtepec to Oaxaca and from Oaxaca to Puerto Escondido, the Sali na Cruz Refinery, and the coking plant being built there. He will also visit the port and artisan labor roads.

• Daylight savings: Regarding its elimination, it is expected that next Thursday, it will be approved

in the Chamber of Deputies, and in the next few days, the Senate will do the same, declared Adan Augusto Lopez.

• Tamaulipas: He was pleased with the electoral re sult in the state and highlighted that it was the state with the highest citizen participation. He empha sized that Americo Villarreal, governor-elect, is a person with values who is facing a mafia that seeks to impede his government; he said that there is a persecution against the governor-elect in which the media, political parties, and even international agencies such as the DEA are participating.

NEWS BY STATE

BAJA CALIFORNIA

The Governor of Baja California held meetings with executives from various French companies, to present the logis tical advantages that the State of Baja California offers for the generation of projects at an international level. The entity is at the forefront of the world as a suitable destination for the indus try and French businesspeople from the automotive, aerospace, aeronauti cal biotechnological sectors expressed their interest in our State as a space to develop their projects in the near future, the Governor mentioned.

The President of Mexico mentioned that the country’s current priority in terms of renewable energy is the Puerto Peñas co solar project in the state of Sonora, along with the development of lithium for storage. There is a renewable ener gy plan that can be produced in Mexi co. There is electricity, there is lithium, batteries can be made, and there is al ready an automotive industry in Sonora, he added.

SONORA

NEWS BY STATE

NUEVO LEON

During the last week of September, the Ministry of Labor of Nuevo Leon will car ry out different actions of the new model called Hiring Days “Trabajo Si” (“Yes to work”), with the purpose of continuing to strengthen the various labor sectors of the state

COAHUILA

After carrying out pilot tests in at least 50 companies in Coahuila, the State Government showed that there was no variation in the increase in cases of COVID-19 due to the withdrawal of the use of the mask, so the obligation to use it to reduce contagion was eliminated, repealing the law that called for its use.

NEWS BY STATE

QUERETARO

To strengthen local supply chains, industri al and tertiary sector companies generated potential business for more than 3.3 billion pesos at the 18th edition of the Expo En cuentro Industrial y Comercial 2022. This year, 73 buying companies participated, 603 local companies offered their products and services, and 2,167 business appoint ments were made, resulting in an income of 2.5 billion pesos if these approaches are successful, explained the Secretary of Sustainable development (Sedesu), Marco Antonio del Prete Tercero. In addition to this potential revenue, an additional 800 million pesos could be generated through the Government Procurement Meeting, which was held for the first time in the state within the framework of the indus trial and commercial exposition. A total of 54 purchasing companies participated in government procurement, including state government agencies, municipal govern ments, and the Judicial and Legislative Branches; 632 suppliers participated, and 723 business appointments were made. During the three days of the event, from September 7 to 9, 4,000 visitors attended the exhibition and business meetings.

SAN LUIS POTOSI

In the search for growth in the supply of flights from San Luis Potosi’s Ponciano Arriaga airport, the new San Luis PotosiMonterrey air route was consolidated to day thanks to an expansion of AeroMexi co flights. The airline announced the start of operations of four routes from Monter rey’s General Mariano Escobedo Interna tional Airport, including the reactivation of flights to the Bajio and Queretaro starting on December 15 of this year, and connec tions to Guadalajara and San Luis Potosi starting on January 16, 2023. According to the airline, the San Luis - Monterrey route will have five flights; schedules and costs have not been disclosed at this time.

NEWS BY STATE

JALISCO

Because the United States is the country of origin with the highest percentage of Foreign Direct Investment (FDI) coming into the state, a delegation from the Min istry of Economic Development (Sedeco) of Jalisco went this weekend to Los Ange les, California, to identify investment op portunities. As part of the California-Mexi co Business Leadership Forum, the Jalisco delegation focused on developing the in tegration of supply chains and innovation, as well as strengthening the economic and trade relationship between California and Mexico, said the head of Sedeco, Rober to Arechederra. During the visit to Califor nia, the members of the delegation held a networking session with 150 companies to link Jalisco companies in the high-tech, creative industry, and renewable energy sectors with entrepreneurs in Los Angeles. Arechederra Pacheco said that the Jalisco officials also met with leaders of the immi grant community so that the Jalisco office in Los Angeles can provide them with the services they need to make their compa nies more competitive.

GUANAJUATO

During the inauguration of the ninth edition of the Automotive Supply Forum, the Gov ernor of Guanajuato, Diego Sinhue Rodri guez Vallejo, said that the state will be the epicenter of the electric car industry in the future, an objective that will be achieved with the help of the Automotive Cluster (Claugto), the event’s organizer. The Au tomotive Supply Forum will be held to day and tomorrow, September 22nd in the city of Leon, with the objective of holding business meetings and strengthening the automotive supply chains between buyers and suppliers of the industry. He added that in a few years we will move complete ly from manufacturing to mindfacturing. This is the strategy that is being promoted in the entity with the allies of Industry 4.0, to create opportunities that aim to raise the quality of life of the people of Guana juato. We are living in a historic moment, a change of era, with the automotive indus try that is transforming; electro-mobility is one of the most important and exciting challenges we are facing, and Guanajuato is the state that is best prepared to gen erate the perfect ecosystem for the trans formation to the electric car industry,” he said.

NEWS BY STATE

CDMX

The Employers’ Confederation of the Mexican Republic (Coparmex) Mexico City will establish a coordination strategy with the federal Ministry of Labor and Social Security (STPS) to achieve the full implementation of the Labor Reform and the legitimization of collective bargain ing agreements.

In a meeting with members of the Busi ness Center of the country’s capital, the head of the STPS, Luisa Maria Alcalde Lujan, recalled that on October 3, the last phase of the implementation of the 2019 Labor Reform will begin in Mexico City, and 10 other states.

STATE OF MEXICO

The State of Mexico would be the first state to join the new industrial policy. The local administration manages ac tions such as the installation of working groups to identify the industries with the greatest growth opportunities and to in clude new strategies in the local consti tution. “This transversal national policy must necessarily land in the states, espe cially in the most industrialized ones. The State of Mexico is the maximum referent, by tradition, for many years it has always had a lot of industrial booms. What we want is for it to become a great leader once again in industrial attraction be cause it has all the characteristics to do so,” she said. Laura Hernandez explained that to achieve this goal they are man aging three actions: the launching of the new industrial policy presented by Con camin and the Ministry of Economy, the installation of worktables to identify the industries that have the greatest growth opportunities, and the inclusion of the new strategies in the Economic Chapter of the new local Constitution. Regarding the activities in which they are interested in promoting as the local Business Co ordinating Council, he mentioned that there is a special focus on achieving the reconversion of the automotive sector to become the largest producers of hy brid electric vehicles and detonate the agro-industry so that primary activities are no longer seen as an informal sector.

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

NORTHEAST

HL KLEMOVE

The new Korean Tier 1 plant will generate 500 new jobs, with an investment of 65 M. USD, and will start operations in July 2023 to manufacture electric car parts such as front camera, radar, and DCU chassis for Hyundai and Kia, as well as OMD.

KIA

Kia Mexico is preparing for a new phase and, together with its component suppliers, will invest US$408 mi llion by 2024 in Monterrey, Nuevo Leon. Of the 408 million dollar investment, 67 million dollars have alre ady been allocated for infrastructure improvements and adaptations.

The governor informed that with this investment, five new industrial buildings will be built in which 800 jobs will be generated.

CENTRAL MEXICO

UTZ

The Swiss plastics company UTZ invested US$16.8 million in its second plant in San Miguel de Allende, Guanajuato, to produce sustainable plastic packa ging.

NORTHWEST CANDID

In its first five years of operation, he said, more than 750 direct jobs will be generated with projected sa les of more than 1,000 million USD.

NORDSON MEDICAL

Nordson Medical began operations in Tecate, Baja California, where it recently inaugurated a plant with an investment of more than US$20 million.

CDMX

LA MODERNA

The company will invest EUR 41.64 M. in a new pas ta plant in Toluca, State of Mexico. EUR 41.64 M. in a new pasta plant in Toluca, State of Mexico.

LABOR

FINAL IMPLEMENTATION OF THE NEW LABOR JUSTICE SYSTEM

The final phase of the new labor justice system implementation has arrived. Next Monday, Oct 3rd all remaining Mexican states pending to implement the new system will inaugurate the new labor courts and will begin to judge labor cases under the new labor system. The labor law reform will be finally implemented.

Five years ago the Mexican constitution set the rules for a major transformation of the labor law system. The previous administra tive model will cease and a new judicial system begins.

It is important to take into consideration that all labor disputes ini tiated before the inauguration of the new institution will continue to be judged under the previous system, therefore the old labor bureaus will close the door for new cases but will continue in oper ation until they finalize all pending cases.

ALVARO GARCIA HR, Vice President