Weekly Report 127

GENERAL SITUATION IN MEXICO

MANUFACTURING INDUSTRY

USMCA TO BE REVIEWED ON THE 200TH ANNIVERSARY OF US-MEXICO RELATIONS

Mexico and the United States will review the operation of the United States-Mexico-Canada Agreement (US MCA) at the next North American Leaders’ Summit, to be held in Mexico, tentatively in December 2022.

Just that month will mark the 200th anniversary of diplomatic relations between Mexico and the United States and the meeting will address, among other is sues, the energy trade dispute being pursued by the three countries under the USMCA, if they have not rea ched an agreement by then.

On July 20, 2022, the United States requested con sultations with Mexico under the Dispute Settlement chapter of the USMCA, arguing that several Mexican energy policies violate the agreement, favor Pemex and the Federal Electricity Commission and affect U.S. companies operating in Mexico and energy produced in the United States. Canada then filed its own request.

The three nations failed to resolve the dispute throu gh consultations within 75 days, so the complaining parties (the United States and Canada) requested an extension of the period before determining whether to request the establishment of a dispute settlement panel to examine the measures at issue and potentia lly authorize retaliatory actions.

The trilateral USMCA meeting takes on significance because even if the energetic dispute settlement pa nel were to be established earlier, this does not elimi nate the possibility that the countries could reach an agreement outside of that mechanism.

“In the next two months, perhaps, the North American Leaders Summit will be held in Mexico City,” said Moc tezuma Barragan.

Like Mexico, the United States wants to avoid the ener gy panel, said President Andres Manuel Lopez Obra dor on Friday.

Linked to the business sector, there is the High-Level Economic Dialogue (HLED) between Mexico and the United States and there is a Mexico-Canada dialogue. But there is no trilateral summit dialogue between the private sector and the government.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference October 12 – 18, 2022

POLITICAL AGENDA

• Resignation of Undersecretary Luz Maria de la Mora: The President said that the Undersecretary of Foreign Trade submitted her resignation, add ing that he is not aware of whether she was offered any other option within the government. Alejan dro Encinas Najera was appointed as the new Un dersecretary of Foreign Trade.

• Meeting with the President of the Board of Di rectors of the Chamber of Deputies: The Presi dent mentioned that Congressman Santiago Creel will be received by the Secretary of the Interior, the President assured that from that office he will gladly receive all those who request an audience. He mentioned that up to now he is taking great care of his agenda and that is why he turned this request to SEGOB.

• Migration policy: The President informed that he is working in a coordinated manner with the Gov ernors and the Federal Government agencies on migration matters, due to the fact that, on the eve of the elections in the United States, there is a temptation to use the migration issue for politi cal-electoral purposes; however, he stated that no changes are foreseen in the migration policy for the reception of migrants.

• Mexico City: The President mentioned that things are operating very well in the City. He announced that there are three issues that he will review with the Chief of Government: the inauguration of the Welfare Banks network; the works of the fourth section of Chapultepec with an investment of 10 billion pesos; and the completion of the Toluca - Mexico City train, which will be inaugurated by December 2023 at the latest. He added the issue of Terminal 2 of the Airport. He acknowledged the work of the Head of Government, taking the op portunity to also mention the good work done by the Secretary of the Interior and Foreign Affairs.

• Constitutional Reforms: The President commented that his government proposed three constitution al reforms: electric, National Guard, and elector al. He emphasized that his government no longer contemplates any other constitutional reform.

• He commented that in relation to the Electric Re form, the Supreme Court’s decision is enough since it defines as fraud the electric self-supply and al lows CFE’s plants to dispatch what they produce.

• Regarding the National Guard, he expressed his grat itude for the approval of the reform for the armed forces to continue until 2028 in public security tasks. He reiterated that he expects local congresses to do the same in favor of the country’s security.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

• Labor: Regarding the achievements in labor mat ters during his administration, the President high lighted that “wages have increased as never be fore and will continue to increase.” He referred that, during 36 years, the salary lost 70% of its purchasing power. He affirmed that he feels sat isfied that the salary, even with the current infla tion, has grown 63% in real terms and he would like that, at the end of his term, the growth will be 100%, as it happened in the north of the country. Other achievements he commented on were the distribution of profits to the worker; the pension issue; the elimination of subcontracting; and the participation of workers in collective bargaining agreements.

ECONOMY

• Regarding the Electoral Reform, he underlined its importance to avoid possible fraud and to abol ish anti-democratic practices, as well as to prevent young people from being subjected to govern ment impositions.

LABOR

• Afores: in order to protect workers, some chang es were made, with the support of the CCE, to increase contributions so that workers receive more. Likewise, he emphasized that a reduction in the AFORES management fee was established. He mentioned that a review will be made on the subject in order to have an updated valuation of the retirement savings funds and he will invite the heads of the Treasury and CONSAR.

• Economic situation: The President informed that yesterday the SHCP informed him that Larry Fink, from BlackRock, commented that Mexico was one of the countries that had better managed the cri sis caused by the pandemic because it did not go into debt. Regarding inflation, he pointed out that there is no problem with energy, but the food issue must be addressed. It is already being re solved and an agreement has been reached with Walmart, Chedraui, Soriana, and other distributors and producers to maintain the price of the basic food basket. When asked about the statements made by the President of ANTAD that maintaining the prices of the basic food basket is not an ob ligation for the chains, the President pointed out that nothing is mandatory.

• Reform to the Law of Credit Institutions: Regard ing the initiative in Congress, Ricardo Mejia, Un dersecretary of Public Security, explained that the

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

objective is to be able to use unclaimed resources for a public purpose. The President pointed out that he does not doubt that there are interests of the banks behind the controversy surrounding the initiative. He added that, in his opinion, these re sources could be used for issues of a social nature and not necessarily for security.

BILATERAL RELATION

• T-MEC Consultations: When asked about yester day’s comments by Ambassador Ken Salazar on the willingness of the U.S. Government not to go to the panel and to find another way for conciliation, the President informed that a good bilateral rela tionship is maintained. He informed that the Chan cellor was sought from the White House because President Biden wants to speak with the President today. He added that the relationship is based on equality and respect for sovereignty. The contro versy remains, but he is sure that they will realize that the relationship is not affected at all with the application of the sovereign policy on electricity, oil, and lithium management. He pointed out that in December there will be a summit in Mexico to which President Biden and Prime Minister Trudeau will come.

• Meeting with John Kerry: The President comment ed that the agenda is being reviewed and hopes that the visit of the U.S. official will coincide with his tour of BCS, Sonora, and Sinaloa, to meet with him in Hermosillo or Peñasco. The visit to the So lar Plant in Peñasco is contemplated, and the pre sentation of the Sonora Plan, which contemplates the following: replicating 4 or 5 times the plant to produce renewable energy, with transmission lines to BC and the border; the development of lithium,

to begin with, plans for exploration and produc tion of this mineral and the possibility of opening plants for the production of batteries; develop ment of the automotive industry for electric cars; a logistics plan to rehabilitate the Port of Guay mas; modernization of Customs in San Luis Rio Colorado and Nogales; and the new railroad route in Nogales.

• US-Mexico High-Level Dialogue on Security: The Secretary of Foreign Affairs, Marcelo Ebrard, said that during the High-Level Dialogue on Security 2022 between Mexico and the United States, both governments established indicators to monitor progress under the Bicentennial Understanding and communicate the results to citizens. The For eign Minister noted that progress has been made against impunity with the creation of the National

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

Search Commission and the Autonomous Prose cutor’s Office. The strengthening of police coop eration and the exchange of bilateral information have supported the drug interdiction activities of both countries. The Chancellor assured that as part of his speech, U.S. Secretary Anthony Blinken mentioned that the recent High-Level Dialogues reflect the shared needs between President Lopez Obrador and President Joe Biden through bilater al, regional, and global cooperation, highlighting that today both nations have one of the closest bilateral relations ever seen in the history of both countries.

INTERNATIONAL

• Recent OPEC+ negotiations: The President as sured that Mexico has always been given very spe cial treatment. He assured that the only country that did not reduce its production level was Mexi co, which avoided the questioning of the U.S. gov ernment, the same that it did to the governments of Russia and Arabia for the reduction, however, today Mexico continues to have a first-order rela tionship, thus being the first commercial partner with the United States.

SECURITY

• Pegasus spy software: The President pointed out that everything related to the acquisition of spy equipment and its use, including the recent alle gations, is the responsibility of the Attorney Gen eral’s Office, which is currently investigating and clarifying the issue. The President mentioned that this is an issue that must be thoroughly investigat ed because in past administrations there were for

eign companies that sold equipment and provided security services and had a very lucrative business in the country as they were common practices. The president mentioned that never again should the invasion of privacy of opponents and journalists be seen through this type of practice.

• Zero Impunity Report: Ricardo Mejia, Undersec retary of Public Security, gave the weekly report on security matters, highlighting that during the week there were 8,269 people arrested, as well as 7,976 presented to the Public Prosecutor’s Office. He also reported the liberation of Federal Highway 15 in the Yaqui Zone of Sonora, after 10 years of blockades.

• Customs situation: The President welcomed the support of the Army and the Navy in the admin istration of customs and in stopping the entry of drugs through the ports and informed that Horacio Duarte presented his resignation to be assigned to a special task in his home state, the State of Mexico, which will be announced during the day. Horacio Duarte, General Director of Customs, in formed that, in the period from January to Decem ber 2022, 820 billion pesos have been collected, an increase of 11% over 2021, which was the record year in collection. He stated that the annual cus toms collection is equivalent to 4 times what is al located to the universal pension for senior citizens and that there has been a 16% increase in customs collection during Lopez Obrador’s administration. Likewise, he indicated that, so far this administra tion, 97.9% more handguns have been seized than during the six-year term of Felipe Calderon and 59.8% more than under Enrique Peña Nieta; with respect to long arms, the percentages increase to 187.9% and 106% respectively.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

INFRASTRUCTURE

• Mayan Train: President Lopez Obrador pointed out that social programs are being provided through out the southeast, especially in those communities through which the train passes. Almost all ejidos have the Sembrando Vida program and all health, welfare, and education programs are also being ap plied and that is why there is no opposition to the construction of the train. Those who filed amparos were not the landowners, but representatives of vested interest groups or associations financed by foreign governments.

• AIFA: A Proceso reporter asked about plans to expand activities at AIFA, to which the President responded that they are analyzing opening oper ations to foreign airlines since there are capitals in states that do not have airports. Likewise, the President commented that the possibility of cre ating an airline linked to the Mayan Train, the AIFA, and the new Tulum airport, which is expected to be finished in December 2023, is being considered.

• Works on roads and highways: Te President em phasized that 12 billion pesos are allocated for the maintenance of free highways and 10 billion pesos for highway maintenance. Subsequently, Jorge Nuño Lara, Undersecretary of Infrastructure of the SICT, detailed 4 road improvement projects: the first is the Imuris-Nogales section, which will save 15 minutes, strengthening connectivity for interna tional trade with the USA, with a total cost of 177 million pesos, to be completed in October 2022. The second project is Federal Highway Mexico 187 Entronque Autopista Las Choapas-Ocozocoaut la, which will save 45 minutes, improving connec tivity between Dos Bocas and Tuxtla Gutierrez,

with a total cost of 1,681 million pesos. The third is Federal Highway 180, Jaltipan-Acayucan Section, which will save 20 min. and strengthen the con nection between Cosoleacaque, Jaltipan, Oluta, and Acayucan, for 250 million pesos. Finally, on highway 185 Coatzacoalcos-Salina Cruz, saving 30 minutes, facilitating the transportation of goods between the ports of Coatzacoalcos and Salina Cruz, for 671 million pesos.

AGRICULTURE

• Food imports: On the possibility of importing cheaper chicken, beef, or pork from Argentina or Uruguay to control inflation, President Lopez Ob rador commented that there is already pressure on the issue in the media. Although he is in favor of favoring national production, it is more relevant that there is no shortage and that cheap proteins can be purchased. Work is being done to autho rize the importation of products without the bu reaucracy of SAT, SENASICA, and customs.

NEWS BY STATE

BAJA CALIFORNIA

Last week the Governor of Baja Califor nia participated as a guest in the panel “IMMEX in Mexico” where she mentioned that a priority for the State is to strength en the value chains and supply networks for the national and foreign industry lo cated in the State, since that is the key to attracting new investments.

SONORA

President Andres Manuel Lopez Obrador pointed out that in the month of Octo ber there will be a visit from the Secre tary of the United States, John Kerry. The agenda is not defined, but it is expected to visit the Puerto Peñasco photovolta ic plant and talk about the Sonora Plan. He also mentioned that the Sonora Plan for Renewable Energies could include the participation of foreign investment for the manufacture of electric vehicles in Mexico.

IMPARCIAL,

PUENTE

NUEVO LEON

Amazon strengthens its operations with the opening of a new Delivery Station in Nuevo Leon

To announce the opening of Amazon’s third Delivery Station, the e-commerce company’s Chief Operating Officer, Diego Mendez de la Luz, was accompa nied by the governor of Nuevo Leon, Samuel Garcia Sepulveda, on a tour of its 21,000-square-meter Shipping Cen ter, located in the municipality of Apo daca.

COAHUILA

Sodecia announces expansion of its plant in Coahuila; new technologies will be implemented.

In order to increase its competitiveness in the region, SodeciaAutomotive an nounced the expansion of operations at its auto body components production plant in Ramos Arizpe, Coahuila.

Enrique Meza, general manager of So decia in Ramos Arizpe, informed that the capital injection will be US$36 mil lion and will generate 200 new jobs, tri pling the current workforce.

QUERETARO

As of 2023, industry will have to pay a green tax of 27 dollars per ton of CO2 emitted into the environment, something that al though it generates concern and unease among companies, it is an economic in strument through which they intend to re duce emissions, informed Marco Antonio del Prete Tercero, head of the Secretariat of Sustainable Development of the state of Queretaro (Sedesu). The aim is for compa nies to make an effort to reduce their en vironmental emissions and evaluate their processes and practices to move towards sustainability. Queretaro implemented an environmental agenda based on two pil lars: the circular economy and the decar bonization of the economy. In the latter, the state seeks to reduce CO2 emissions by 75% by 2050, from 12 million tons to between 3 and 4 million. According to the official, there are six areas of the economy that are susceptible to decarbonization: energy consumption, transportation, in dustry, the generation of greenhouse gas es from commerce, residences and institu tions, agriculture, and forests and land use.

The first three are the most significant. In this sense, in the middle of this year, Sede su signed a collaboration agreement with the Environmental Market (Mexico CO2), through which the development of the low carbon seal and emission compensation mechanisms was consolidated, which will come into effect next year and through which companies will be able to reduce the

FORTUNA

tax base of the environmental tax that ap plies. “These are seals issued by the Secre tariat in collaboration with the State Com mittee of Actions against Climate Change, which will evaluate the projects that are susceptible to offset carbon emissions,” he explained. The process for companies to adhere to this program will be defined before the end of the year.

JALISCO

The industrial sector contributes 28.6%) of the national GDP and of every 100 pesos contributed by said sector, manufacturing industry accounts for 58, construction 21, mining 16 and the remaining 5 pesos are contributed by the generation, transmis sion and distribution of electric energy, water, and gas supply through pipelines to the final consumer. In June, Inegi data show that the industrial sector of Chiapas, the 21st economy in terms of its contribu tion to the national GDP, grew 53.3%, Ta basco (#16) advanced 51.4%, Nayarit (#30) rebounded 11.7%, Baja California (#7) ex panded 11.5%, Chihuahua (#9) increased 4.8%, Sonora (#10) advanced 3.0% and Jalisco, the fourth largest economy in the country, grew 1.2%. With such increases, they also surpassed the levels of August 2019 and what was registered in the eighth month of 2018, which was the last year of Enrique Peña Nieto’s six-year term.

GUANAJUATO

“Today Guanajuato is taking a great leap in its development with this historic an nouncement of the laying of the first stone of the largest Data Center in Latin Amer ica”. So said the Governor, Diego Sinhue Rodriguez Vallejo, at the beginning of the construction of the company Layer 9 Mex ico; the first “Data Center” in the state of Guanajuato and will be the largest in Mex ico and Latin America, installed in the In dustrial Park Chuy Maria. Layer 9 is a U.S. company dedicated to hosting privately owned server data and network equip ment in a third-party data center, that is, instead of keeping servers in-house, in of fices or in a private data center, compa nies can co-locate their data by renting space in a center. This storage space, the Governor added, places Guanajuato as the epicenter on the data management map in Latin America and will run on renewable energy. The company will use a platform, based in the United States, to provide data solutions to partner companies, such as lo cal governments, utilities, developers, and contractors. The company will invest 800 million dollars in Guanajuato in two stag es, of which 400 million will be allocated to the first stage, which is expected to be ready by the end of 2023 and will generate up to 2,500 direct and indirect jobs. Lay er 9 Data Center has more than 50 years of experience in information management and today helps Guanajuato catch up with

important megatrends of the digital revo lution, such as cloud computing and artifi cial intelligence applied to “Big Data”.

AGUASCALIENTES

The president of the Aguascalientes In dustrial Group, Ricardo Ponce de Leon in dicated that foreign investment continues to flow permanently to the state of Aguas calientes and new capital will surely come, while the companies that already operate today will continue to require vacancies to meet their productive growth, as well as due to the turnover of personnel that hap pens naturally in companies. “For the fis cal year 2023, some companies affiliated to the GIA will have growth in their invest ments in the state, which will be disclosed in due time”, for the moment it is confiden tial information, commented the president Ricardo Ponce de Leon. Finally, the leader of the Industrial Group of Aguascalientes expressed that one of the good messag es sent to this union is the permanence of the Secretary of Economic Development, which brings certainty and now we will have to wait to know the policies that will be applied within this agency, in favor of economic growth and the companies es tablished in the state.

SAN LUIS POTOSI

The national leader of the Partido del Traba jo (PT), Alberto Anaya Gutierrez, affirmed that San Luis Potosi will lead the states of the country with the highest econom ic growth if the minimum monthly salary is set at eight thousand pesos, a propos al that will be promoted by the Govern ment of Change, headed by Ricardo Gal lardo Cardona, together with legislators of this political force. The national leader acknowledged the interest of the gover nor of Potosi in giving such an important boost to the internal market and to peo ple’s purchasing power. “As we know, the domestic market is key for an economy to become dynamic and grow, and also to generate productive chains through out the entity,” he said. He explained that such an initiative, agreed with the business sector, is very advanced and unique in the country, which, he reiterated, will allow the State to achieve in an accelerated manner the recovery and enrichment of the entity. “San Luis Potosi will be at the forefront of the whole country by exceeding the mini mum wage that is currently approved at a national level, a situation that we need for the benefit of the workers of the state,” he concluded.

CDMX

Mexico City is an example for other states in terms of public safety and investment in public works, said the Secretary of the Interior, Adan Augusto Lopez Hernandez. Derived from a meeting with different par liamentary groups of the Congress of the capital of the country, the federal official explained that the city is in a competitive level due to the reduction of the criminal incidence. Lopez Hernandez pointed out that crime is being attacked from three fundamental axes: investigation and intel ligence, the administration of justice and the administration of justice, which are being implemented by the administration of Claudia Sheinbaum Pardo.

STATE OF MEXICO

The historical inflation of 8.7 percent has caused very strong ravages in most agri cultural inputs such as fertilizer and fuel, which added to the collection of ‘dere cho de piso’ by organized crime have put the producers of the State of Mexi co in check, mainly in the southern zone of the State of Mexico, where products such as chicken, eggs, avocado or lemon have gone up 12 %. According to Eduar do Reyes Escamilla, member of the Agri cultural Commission of the Business Co ordinating Council of the State of Mexico (CCEM), the conflict is not only for pro ducers but also for the final consumer who pays and sees his salary reduced.

EL ECONOMISTA, MILENIO

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

NORTHEAST

- SODECIA AUTOMOTIVE

Will expand operations of auto body components production plant, the plant will open in Ramos Ariz pe the plant will open in Ramos Arizpe and generate 200 new jobs, tripling the number of 200 new jobs will be created, tripling the current workforce.

- APTIV

A company that specializes in the production of har nesses for electric cars. The brand will generate 942 new jobs in the region. The plant will be plant will be located in Linares, Nuevo Leon.

- ARCELORMITTAL

Investment of US$15 million for its Escobedo plant; it will seek to expand its will seek to expand equipment to increase produc tion.

CENTRAL MEXICO

- TIM HORTONS

The Canadian company announced an investment of 600 million pesos in the installation of 50 restaurants in the municipalities of Queretaro, El Marques, Corre gidora, and San Juan del Rio.

- VISHAY

Vishay will open company number 4 in Las Torres In dustrial Park in Ciudad Juarez.in Ciudad Juarez. 700 direct jobs will be generated.

CDMX

- GIVAUDAN

Expansion of production plant in Cuernavaca, Mexi co. Investment of 154 million pesos. Currently emplo ys 380 people; this expansion will help them to con tinue growing.

SOURCE: CLUSTER INDUSTRIAL, MEXICO INDUSTRY