Weekly Review I March 22, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I March 22, 2023

RELEVANT NEWS

THE AUTOMOTIVE INDUSTRY ADVANCES IN WAGE NEGOTIATIONS WITH INCREASES OF UP TO 9%

Negotiations for wage and contract revisions are advancing in the automotive industry, with increases reaching up to 9% and benefiting approximately 50,000 workers in the country, informed the Federal Center for Labor Conciliation and Registration.

According to the report of the Federal Labor Center, more than 24,000 workers in the automotive industry affiliated to the National Union of Workers of the Integrated Automotive, Similar and Related Industries of the Mexican Republic of the CTM, reached a wage increase of 9%, on average, after conciliatory talks for the annual review of their Collective Bargaining Agreement (CCT), which was agreed after intense negotiations, without any strike being called in this case.

Another negotiation was with Stellantis, one of the main automotive companies in the world, manufacturer of Chrysler, Dodge and Jeep cars, among others, which has five plants in Coahuila and three in Toluca, which agreed to a 9% increase for its 15,117 workers.

Daimler Vehiculos Comerciales Mexico -with 6,441 employees, located in Coahuila- will apply a salary increase of 8.82%.

Adient Mexico Automotriz, an advanced manufacturer of automotive components, with 1,984 workers, and Pinturas y Ensambles de Mexico, with 625 workers, both located in Coahuila, agreed to a 9.5% wage increase.

Meanwhile, Android de Mexico, with plants in Toluca and Coahuila, which has 140 workers, was granted an 8 percent wage increase.

In addition to the above, recently formed unions, such as the National Independent Union of Automotive Industry Workers (SINTTIA), negotiated a 10% direct salary increase and a salary equalization bonus for all workers who are not in a special level and have more than 20 years of service.

SOURCE: EL ECONOMISTA

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

March 15 – 21, 2023

POLITICAL AGENDA

• Oaxaca: The President of Mexico, Andres Manuel Lopez Obrador, recognized the Governor of Oaxaca, Salomon Jara, for his knowledge of the entity’s 570 municipalities and for his leadership in the region, which will allow him to establish dialogue and collaboration with local social and political actors. Lopez Obrador highlighted the progress of the Isthmus of Tehuantepec project, including the construction of a coking plant and the rehabilitation of a refinery, as well as the upcoming completion of the highway from Oaxaca to Puerto Escondido. The President also noted that Chiapas, Oaxaca, and Guerrero are the entities that have benefited the most from welfare programs and that it is important to maintain customs that promote harmonious community life. The Secretary of National Defense reported on the security situation in Oaxaca, highlighting that the state has improved in several crime rates. Governor Salomon Jara reiterated his commitment to the fourth transformation of the country and highlighted the advances in infrastructure and development in the state.

• Southeast area: The aim is for Tabasco, Chiapas, Campeche, and Quintana Roo to be able to live off

their natural resources; the conversion of economic activities to ecological and cultural tourism activities is contemplated. He emphasized that the southeast has 70% of the country’s water.

• Meeting with Latin American leaders: Mr. Lopez Obrador indicated that on April 5, he will hold a meeting with some Latin American counterparts, where they will address issues related to economic trade: import and export of food and other goods, in order to jointly face the inflationary phenomenon.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

ENVIRONMENT

• John Kerry Agenda: President Lopez Obrador mentioned that John Kerry, U.S. Special Climate Envoy will accompany him to Guelatao and will address the issue of renewable energies. He assessed that John Kerry is very close to President Biden and is a friend of Mexico. After Guelatao the energy cabinet will meet in Oaxaca to review joint projects.

• Oil self-sufficiency: Lopez Obrador explained that with the two coker plants in Salina Cruz and Hidalgo, the Deer Park plant, the Dos Bocas plant, and the plants that are being maintained, we will be self-sufficient in fuel production. This will prevent fuel price increases, which are fundamental to avoid food and merchandise shortages and inflation.

• Corn Producers: He pointed out that there are guaranteed prices that did not exist before, this helps so that producers are not abused. Currently, the price of corn has increased in the world and the guaranteed price has been maintained. This has resulted in some producers deciding not to sell to SEGALMEX and preferring to sell to individuals. He reported that there will soon be an increase in the guaranteed price. He reminded that the government provides free fertilizers that support producers in an important way. He explained that the country is already self-sufficient in white corn, but not yet in yellow corn. The president indicated that the use of yellow corn for domestic use is not recommended because it tends to be transgenic.

INFRASTRUCTURE

• Mayan Train: At the meeting, progress was reported on the construction of the Mayan Train and the modernization works at the Palenque airport to improve air connectivity in the area. In addition, the promotion of the employment of young local talent in these works was highlighted. Progress was also reported on the ecological rescue of Section 1 of the Mayan Train, including projects for new natural protected areas such as Wanha. In terms of security, it was reported that Chiapas is among the states with the lowest incidence of crime nationwide.

• Energy: In a press conference, Mexico’s president, Mr. Lopez Obrador, spoke about progress in the country’s oil industry. He criticized the lack of construction of new refineries in the last 40 years and the fact that contracts have been awarded to foreign companies to exploit oil instead of investing in domestic production. However, the fall in oil production was avoided by focusing on onshore or shallow water extraction instead of deep water. The Secretary of Energy, Eng. Rocio Nahle, informed that interventions have been carried out in

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

PEMEX’s 6 refineries in Mexico and that the goal is to achieve energy self-sufficiency by 2024. The Dos Bocas refinery is in the testing process and is expected to start operating in July 2023 with a processing capacity of 340 thousand barrels per day. The cost of the project is 12,600 billion dollars. Since the beginning of the administration, there has been an increase in the production of oil barrels, and it is expected to be above energy self-sufficiency in 2025. In addition, this administration has managed to reduce fuel prices.

ECONOMY

• Foreign Investment: President Lopez Obrador recalled his conversation with Elon Musk about the Tesla plant in Monterrey and his intention to build battery plants, only that the U.S. government has a policy that implies that if a company invests, the government gives a 50% subsidy of its investment as a stimulus for clean and automotive industries for electric cars, semiconductors, chips, etc. He

explained that Mexico could not give 50% as it is not in accordance with government policies, but he offered the quality of the labor force, including the Mixtec labor force for construction, and that it is not comparable with other young labor.

• National Banks: The president indicated that Mexico’s situation is special, however, there may be unforeseen and external factors such as the one currently being experienced abroad. He reminded that the national economy is solid and that in past years the banks in the country had historical profits. Thanks to elements such as the strengthening of the national currency, the increase in the minimum wage, among others, Mexico is not at risk of experiencing a crisis due to the country’s macroeconomic stability.

• Banking Convention: The President of Mexico, Andres Manuel Lopez Obrador, informed that during his participation in the Banking Convention, he highlighted that Mexico has reached a historic record of workers registered in the IMSS, with 21.7 million in the formal economy, and has also achieved a 90% increase in the minimum wage during his administration, reaching 16 thousand pesos per month. In addition, he pointed out that more than one trillion pesos have been allocated to public investment in infrastructure, 600 billion pesos for welfare programs for 25 million beneficiaries, and that remittances received in 2022 amounted to 58,560 million dollars, and in January and February of this year are expected to exceed 60 billion dollars. The Bank of Mexico has reserves of 200 billion dollars. He also mentioned that banks obtained profits of 240 billion pesos last year, the highest figure in history and that the peso is the currency that has strengthened the most worldwide.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

BILATERAL AGENDA

• Meeting with U.S. legislators: On March 19, a meeting was held with 12 U.S. legislators from both parties, in which topics such as migration, development cooperation, and security were discussed. It was agreed to work jointly, respecting the sovereignty of each country, and it was recommended that mechanisms be found to keep U.S. youths at home during adolescence in order to reduce drug use rates. The issue of fentanyl was not discussed because Mexico will not accept interventionist measures and it is not a substance produced in the country. The government is working to confiscate this substance and important progress has been made. In addition, the visit of a White House advisor and the upcoming visit to Washington of the security cabinet were mentioned.

• Fentanyl: He criticized that the United States intends to intervene in the country to control drug trafficking, which he considers hypocritical and disrespectful to Mexican sovereignty. He emphasized that work will continue to prevent fentanyl from reaching Mexico and the United States. In this sense, he welcomed the decree issued this week by President Biden to prohibit the sale of weapons and to have greater control over the issue, since 80% of the weapons used in Mexico by organized crime enter through the United States.

SECURITY

• Security: In a press conference, the President of Mexico spoke about the agreements reached with U.S. President Biden’s advisor for Homeland Security, in which they agreed to work together to prevent the entry of fentanyl through the border. The President criticized the initiative of some politicians to blame Mexico and threaten to intervene in the country, classifying it as offensive and hypocritical. Regarding the Mexican government’s security priorities, he mentioned combating the causes of crime, preventing drug use, and reducing homicides. Finally, the President welcomed the resolution issued by President Biden to improve the control of arms sales in the United States, since 80% of the high-caliber weapons used by the cartels in Mexico come from the United States.

• Drug trafficking: The Mexican President explained that his administration decided that the Secretariat of the Navy (SEMAR) will be in charge of administering the ports and the Secretariat of National Defense (SEDENA) will be in charge of customs to prevent smuggling and combat drug trafficking, specifically fentanyl from Asia. He also mentioned that Mexican consuls in the United States will inform Mexican-Americans about the Mexican government’s actions in the fight against drug trafficking and that he will ask Mexican doctors and scientists to analyze the possibility of substituting fentanyl with other analgesics. He also criticized the lack of action by the United States to combat fentanyl trafficking and stated that if its use is banned in Mexico, it should also be banned in the United States.

NEWS BY STATE

BAJA CALIFORNIA

On March 23, the twelfth edition of the “Mexicali Supply Expo” will take place, which seeks to strengthen the value chain and bring suppliers closer to the local industry, an event in which admission will be free and conferences will be offered. There will be at least 80 companies that are suppliers to the industry and, in addition, five conferences will be offered by specialists in human resources, leadership and labor standards, with a projection of attendance of 1,500 people.

SONORA

Governor Alfonso Durazo laid the first stone of the first two industrial warehouses of the Sky Bridge Sonora industrial park, in Ciudad Obregon. The land will have more than 62 hectares of extension and an initial investment of 247 million pesos, in its first stage, for the promotion of investment in the entity. The governor mentioned that the consolidation of this industrial park will increase the speed of the movement of goods between Mexico and the United States.

SOURCE: LA VOZ DE LA FRONTERA, MILENIO

NUEVO LEON

For this year, the support granted to small and medium-sized enterprises (SMEs) in Nuevo Leon, through soft loans, will be 13% higher than the last year.

COAHUILA

An automotive industry union agreed to a salary increase of 9% on average with five different companies, including Stellantis and Daimler. This will benefit 24,000 workers, according to the Federal Center for Conciliation and Labor Registration.

SOURCE: EL HORIZONTE, LA JORNADA

QUERETARO

The leader of Canacintra in Queretaro said that the automotive cluster will benefit from the arrival of Tesla. He explained that the placement of this factory of the magnitude that is expected with the installation of Tesla, causes increases in consumption and trade between different suppliers, directly and indirectly. In addition, he informed that in the state of Queretaro, there are already industries that supply Tesla, so the commercial exchange will continue to be a constant that will bring direct benefits to the state.

In previous days, Governor Mauricio Kuri stated that this could greatly benefit the automotive industry in Queretaro; he said that 50 percent of the automotive companies in the state are involved in activities related to the assembly and manufacture of electric vehicles, a positive factor in view of the upcoming installation of the U.S. firm.

GUANAJUATO

Since nearshoring is one of the modalities through which companies are coming to Mexico and Guanajuato, the Secretariat of Economic Development is looking for business opportunities with foreign companies, which are expected to arrive in the state in increasing numbers.

Luis Ernesto Rojas Avila, director of COFOCE said that the main benefits that could be reflected in Guanajuato range from technology transfer to innovation, scalability in the skills of employees, and the generation of wealth; this by transforming the supply chain.

CDMX

The dry began in Mexico in March and will last until mid-June, and in the center of the country the increase in temperatures can already be felt, which has put authorities on alert due to the risk of shortages of drinking water and increased pollution, which could lead to environmental contingencies. According to the general coordinator of the National Meteorological Service (SMN) of the National Water Commission (Conagua), Alejandra Margarita Mendez Giron, warmer maximum temperatures are expected for March in Mexico City, State of Mexico, north of Tlaxcala, north and south of Puebla, Hidalgo and Queretaro. Rafael Trejo Vazquez, assistant manager of Meteorological Forecasting, informed that, in the last few days, we have entered an anticyclonic system that covers most of the national territory, which inhibits the formation of cloudiness and when this occurs, more solar radiation arrives.

STATE

OF MEXICO:

PAN, PRI, PRD and Nueva Alianza registered Alejandra del Moral Vela’s candidacy for governor of the State of Mexico before the Electoral Institute of the State of Mexico (IEEM) for the coalition Va por el Estado de Mexico. The national leader of the PRI, Alejandro Moreno Cardenas presented the documentation to request the registration and asked for a favorable resolution. “The coalition ‘Va por el Estado de Mexico’ supports a hard-working, honest and brave woman who we know will work for everyone,” he said and predicted that she will be a “great governor”. In a message, Alejandra Del Moral Vela highlighted that for the first time it is an alliance candidacy that will in turn become the first coalition government in Mexico.

SOURCE: EL ECONOMISTA, EL SOL DE TOLUCA

INVESTMENT NEWS

CDMX VESTA

The Mexican electronics manufacturer is investing $135 million dollars to expand operations in Toluca, creating 3,000 jobs.

CENTRAL MEXICO

XINQUAN

Xinquan, a Chinese manufacturing company, is investing $30 million dollars to open a new facility in Aguascalientes. The expansion is expected to create 600 jobs in the manufacturing and auto parts sectors.

HAITIAN

Haitian, a Chinese manufacturing company specializing in machines, has announced plans to expand its operations in Jalisco. The company is investing $55 million dollars in the expansion of its current operations.

BAYER

The German electronics manufacturer is expanding operations to Orizaba, Veracruz with a $15 million dollars investment, generating 60 jobs.

NORTHEAST

BORGWARNER

BorgWarner, a US-based automotive parts supplier, has announced plans to expand its manufacturing operations in Saltillo, Coahuila. The company is investing $47 million dollars and expects to create 450 jobs.

WALMART

Walmart, a retail giant based in the USA, has announced plans to expand its operations in Nuevo Leon. The company is investing $90 million dollars and expects to create over 1000 jobs.

SUPER DOLLAR

Super Dollar, a supermarket chain based in the US, has announced plans to expand its operations in Nuevo Leon. The company will invest $15 million dollars and generate over 900 jobs.

NORTHWEST COFICAB

Tunisian, automotive manufacturer Coficab, announced a $20 million dollar expansion in Durango, creating 300 jobs.

SOURCE: CLUSTER INDUSTRIAL, VANGUARDIA INDUSTRIAL, EXPANSION, EL SOL DE DURANGO, EL FINANCIERO