Weekly Review I April 12, 2023

GENERAL SITUATION IN MEXICO

RELEVANT NEWS

TESLA WILL BUILD A BATTERY MEGA FACTORY IN SHANGHAI

U.S. electric vehicle manufacturer Tesla announced the construction of a new mega factory in Shanghai, which will be dedicated to the manufacture of the brand’s energy storage product, named Megapack.

Construction is scheduled to begin in the third quarter of this year, with production scheduled to start in the second quarter of 2024, the company announced at a project signing ceremony in Shanghai.

The new factory will initially produce 10,000 Megapack units each year, equivalent to about 40 GWh of energy storage. The products produced there will be sold worldwide.

The plant will be located in the Pilot Free Trade Zone of China’s Lingang Special Area (Shanghai).

Construction of the factory is expected to give rise to another industrial cluster worth more than 100 billion yuan ($14.6 billion), said Lu Yu, an official with the Lingang Special Area Administration.

Zhuang Mudi, deputy secretary-general of the Shanghai Municipal Government, argued that the project will help boost the development of the nascent energy storage industry and the metropolis’ green and low-carbon transformation.

As Tesla’s first gigafactory outside the United States, the plant delivered 710,000 vehicles in 2022, a yearon-year increase of 48 percent.

It has become the brand’s main vehicle export hub, with electric cars selling well in Asia-Pacific, Europe, and other regions.

Since 2019, Tesla has been increasing investment in Lingang, expanding production capacity at the Shanghai factory, and building more facilities, including a supercharger manufacturing factory.

In January 2019, Tesla broke ground on its Shanghai gigafactory, becoming the first to benefit from a new policy that allows foreign automakers to set up wholly-owned subsidiaries in China.

Thanks to the excellent business environment in Shanghai and Lingang Special Area, Tesla’s gigafactory has an industrial chain localization rate of more than 95 percent, said Tao Lin, vice president of the company.

2

SOURCE: FORBES MEXICO

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

April 5-11, 2023

POLITICAL AGENDA

• Commercialization of cannabis: Mr. Lopez Obrador pointed out that the director of the Federal Commission for the Protection against Health Risks (COFEPRIS) conducted an investigation, which determined that COFEPRIS granted 63 permits to commercialize cannabis products, most of them to companies linked to the Fox family, indicating that the investigation is still in process.

• People with disabilities: Regarding the Program to support this social group, the President indicated that 14 states have already joined, and 6 more states will soon sign it, in order to support people between 30 and 64 years of age who were not receiving the benefit. The agreement is for the state governments to voluntarily cover 50 percent of the benefit and the federation to support the rest, thus attending all the disabled people in those states that participate in the program.

ENERGY

• Purchase of 13 power plants from Iberdrola: The Federal Executive informed that the agreement for the purchase of 12 combined cycle plants and one wind energy plant with Iberdrola is aimed at guaranteeing that electricity prices do not rise and

3

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

strengthening the Federal Electricity Commission (CFE); with this purchase, the Commission went from a 39% to a 55% share in the national electricity sector. Thus, he will seek to leave conditions for the next government to maintain the same price policy in the following years. He emphasized that within the purchase plan, it was considered, as an option, to go to the Supreme Court of Justice of the Nation (SCJN) to denounce Iberdrola’s preponderance in the electric sector, but given the national political context, a different strategy was chosen, to buy the plants and avoid legal proceedings.

• Iberdrola: President Andres Manuel Lopez Obrador explained that it is estimated that due to the actions being implemented by his administration, he calculates that by next year they will have 65% of all electric power generation. He mentioned that Jose Ignacio Sanchez Galan, president of Iberdrola and his team understood that the electricity industry should not be left in the hands of the market alone, which guarantees that the price of electricity for consumers will not increase.

INTERNATIONAL

• Judicial Process against Donald Trump: The President indicated that he is against the legal process against former President Donald Trump, as it is a political-electoral issue rather than a legal one. He emphasized that there are smear campaigns and they would seek that D. Trump does not participate in the 2024 electoral process.

ECONOMY

• Trade: Regarding the exchange of products through the “Ferrobuque”, President Lopez Obrador commented that it is a private company that allows this trade between both countries, which will have the facilities to connect with the works of the Isthmus. He indicated that he will contact the Secretary of the Navy to discuss the issue and provide more information. In this sense, he indicated that an agreement was reached with Grupo Mexico for part of the railroad concession to return to the State and continue with the Isthmus Project.

• Remittances: The head of the Federal Consumer Attorney’s Office (PROFECO), Ricardo Sheffield stated that, according to information from the Bank of Mexico, in February 2023 a total of $4,348.4 million dollars were received in remittances, a figure that has increased with respect to the last few years. The official stated that the best option is Unlink, which delivered $6,275.50 for 300 U.S. dollars; while the worst option is Sigue, which gave $5,870.87 for the same amount of dollars.

4

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

HEALTH

• Transgenics: Dr. Lopez-Gatell pointed out that in the case of transgenics in food, the argumentation put forward by global multimillionaire companies that benefit from the sale of these products, is the false idea that it is the only way to contrast food shortages to combat world hunger, pointing out that the intention of agro-industrial exporting companies, is to generate a great amount of wealth because their production model is aimed at the commercialization of economically profitable products.

• Social Prevention of Addictions: Dr. Jorge Alcocer Varela, head of the Health Secretariat informed that today, the “Social Prevention of Addictions” section is inaugurated. The Undersecretary of Prevention and Health Promotion, Hugo Lopez-Gatell Ramirez, pointed out that addictions are a social problem that requires treatment and emphasized the importance of addressing the issue from a preventive approach. Regarding fentanyl, he stated that in the United States there is an enormous abuse of this drug, adding that fentanyl is not produced in Mexico, it is produced from precursors that are not manufactured in the country. He commented that, as a preventive way, the government is integrating these approaches before it becomes a public health problem, starting with a school campaign to talk about the associated risks of addictions.

• IMSS-BIENESTAR: The Director General of the Mexican Social Security Institute, Zoe Robledo Aburto, reported on the progress of the Program, regarding the rehabilitation of operating rooms, the increase in productivity in terms of surgeries in contrast to the increase in investment allocated

to the Program. He also reiterated the administration’s efforts to improve the supply of medicines in all the country’s hospitals. Regarding the administrative decentralization to the entities of the Republic, he explained that in Morelia Michoacan there is already a building where they have been moving, and that they have already started operations. He added that a few days ago a series of measures were agreed upon to facilitate the transfer of personnel, both massified with trustworthy personnel.

SECURITY

• Fentanyl: Regarding the response from the government of China, where they commented that they are not responsible for the illegal trafficking of the substance, Mr. Lopez Obrador indicated that they still do not have a formal response to his letter, for which they will seek to establish communication with the Embassy of that country in Mexico to issue a position. In this regard, President Lopez Obrador informed that this week the members of Mexico’s security cabinet will be in the United States, with the issue of fentanyl and arms trafficking on the agenda.

5

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

INFRASTRUCTURE

• Migration: Commenting on what was expressed by the President of El Salvador, regarding the death of people in a migration station in Ciudad Juarez, Chihuahua, Mr. Lopez Obrador regretted what happened and reiterated that the fact will not go unpunished, for which investigations are already underway, and that he is in communication with the various governments from where the migrants originated to inform them of the issue. Regarding the substitution of the National Migration Institute, after Father Alejandro Solalinde’s statement, the President of the Republic declared that it is necessary to wait for the authorities to carry out and conclude the corresponding investigations. He thanked Father Solalinde for his support in finding a solution. Regarding a change in immigration policy, the President commented that the issue in general is being analyzed within his government, reiterating that his administration will not seek to violate human rights.

• Infrastructure: The General Director of FONATUR, Javier May, pointed out that 200 kilometers of track have already been completed, generating 62 thousand jobs. ICA commented on the completion of 195 kilometers (km) of railroad ballast laid, 195 km of rail assembled, 800 thousand sleepers manufactured and 450 thousand sleepers (270 km) laid. In environmental matters, the head of the Ministry of the Environment and Natural Resources, Maria Luisa Albores, showed the progress made in the region’s national protected areas, in addition to the areas voluntarily set aside for conservation. Regarding roads, the Secretary of Infrastructure, Communications and Transportation, Jorge Nuño, commented that work is being carried out on four projects (Nichupte Vehicular Bridge, Luis Donaldo Colosio Boulevard, Airport Distributor and Chac Mool Avenue), with an investment of 8,806.5 million pesos, benefiting 1.3 million inhabitants and 20 million tourists. In addition, a connection between the Mayan Train and the Cancun International Airport is being built.

• Isthmus: Regarding works, the President commented that the railroad from Salina Cruz to Coatzacoalcos is expected to be completed before the end of 2023, both passenger and freight trains. Meanwhile, work is being done on the other sections, especially on the rehabilitation of the railroad from Ixtepec to the border with Guatemala. Regarding ports, he commented that work has been completed in Coatzacoalcos, and in other regions, such as Salina Cruz, and highlighted that there are 10 plots of land available for the construction of industrial parks, actions that will contribute to the generation of jobs. Finally, he indicated that the head of the Secretary of the Navy will soon give a report on the subject.

6

NEWS BY STATE

BAJA CALIFORNIA

Due to the dynamism of its economic activities, Baja California achieved 3rd place in job creation in the country, with a balance of 30,788 formal jobs during the first quarter of 2023, according to the report of insured workers registered with the Mexican Institute of Social Security (IMSS) in the entity, also contributing with 7.3% of the jobs generated nationwide, which were 423 thousand 384, informed the Secretary of Economy and Innovation, Kurt Honold Morales.

SONORA

The state of Sonora is the entity with the highest industrial growth on the northern border, according to INEGI, the entity had a historical growth of 6.51 percent, mentioned the Governor of the State. CFE reported that three photovoltaic plants like the one in Puerto Peñasco will be built, which will put Sonora at the forefront in the generation of green energy.

7

SOURCE: EL MEXICANO, GOVERNMENT OF SONORA

NUEVO LEON

The Chamber of the Transformation Industry of Nuevo Leon (CAINTRA) launched the Technical Education Commission to strengthen the skills and knowledge of technical and professional personnel, due to the shortage of trained personnel.

COAHUILA

According to data from the National Auto Parts Industry (INA), last year Coahuila led production with 15.3% of the national total, which generated a spill of 107 billion dollars, which for this year could exceed 112 billion.

8 NEWS BY STATE

SOURCE: EL ECONOMISTA, VANGUARDIA

The Ministry of Economic Development (Sedeco) confirmed the execution of this project, in an area of 30 hectares donated by the City Council.

It will be promoted by the state government as part of the strategy to stimulate the arrival of new investments in the four zones of the state. The industrial complex will be able to receive between 15 and 20 companies, with a sufficient supply of electricity and treated water.

AGUASCALIENTES

The Institute of Education of Aguascalientes (IEA), will work hand in hand with the business sector to redesign the university careers that will be offered to young people in the state, informed Lorena Martinez Rodriguez.

During the signing of the agreement between business chambers and technological and private universities for internship projects, the head of the IEA said that it is essential that the professional careers offered in the state are linked to a need and future investment projects.

9 NEWS BY STATE

SAN LUIS POTOSI Construction begins on the industrial park in Ciudad Valles, SLP.

SOURCE: INMOBILIARE, HERALDO MX

CDMX

Mexico City will continue to experience warm weather and rain for the beginning of the week, and authorities have recommended protection against high temperatures, UV rays, and precipitation if you go outside.

The National Water Commission’s Meteorological Service (Conagua) explained that there will be two low-pressure channels throughout the country during the week, resulting in natural causes for the expected rainfall throughout the week.

This probability of rain comes as the Army and the Ministry of Agriculture carry out cloud-seeding to stimulate precipitation and mitigate the effects of drought in the Cutzamala System, which supplies water for domestic and mainly agricultural use in the Valley of Mexico and has been at its lowest levels for months.

Authorities did not say how they expect this week’s possibility of rain to improve the level of the main Cutzamala dams; however, the Army’s plan is to bombard the moist clouds with chemicals during this month. This intervention makes rainfall more likely.

STATE OF MEXICO:

The Electoral Institute of the State of Mexico has established a special commission responsible for organizing two debates for the state’s gubernatorial elections, featuring Delfina Gomez from Morena and Alejandra del Moral from the Va por Mexico coalition. The commission has set the dates for the debates on April 20 and May 18, to be held at the IEEM headquarters. The debates will be broadcasted by the public television channel Sistema Publico de Radio y Television Mexiquense and the official IEEM Youtube channel. Each debate will last an hour and include four randomly selected topics. The candidates are not required to participate, and both will have the same time for their interventions. The debates will have an audience, and the candidates will have an equal number of seats for their guests. Alejandra del Moral has expressed interest in participating in up to five debates, while Delfina Gomez has not yet confirmed whether she will participate or not.

10 NEWS BY STATE

SOURCE: EL ECONOMISTA, MILENIO

INVESTMENT NEWS

CENTRAL MEXICO

TECK AND AGNICO

Canadian mining companies, Teck and Agnico, have announced a joint investment of $580 million for an expansion project in San Nicolas, Zacatecas. The companies specialize in mining and are committed to expanding their operations in the region by dividing the project 50/50

MG MOTOR

Chinese automotive manufacturer, MG Motor, has announced an $18 million investment for expansion into the state of San Luis Potosi. The company specializes in automobile manufacturing and is expected to generate new job opportunities in the area.

WTECH

NATIONAL ARRA

The U.S.-based automotive and electric startup, ARRA, has announced the inauguration of its company with a start-up investment of $20 million by bringing its first electric vehicles into the Mexican market.

Mexican automotive manufacturer, WTECH, has announced an expansion project worth $201 million in Guadalajara, Jalisco in Mexico. The expansion will create over 4,000 new jobs in the area and will focus on auto parts manufacturing.

CDMX EMERSON

NORTHEAST NORCAST

Mexican steel and metal company, Norcast, has announced a $25 million expansion project in Torreon, Coahuila in Northeast Mexico. The investment is expected to create 390 new jobs in the region. Norcast specializes in steel and metal manufacturing.

U.S.-based electronics manufacturer, Emerson, has announced the inauguration of a $24 million expansion project in Metepec, Mexico State. The expansion is focused on electronics manufacturing. Emerson is committed to investing in the region and strengthening its presence in the Mexican market.

11

SOURCES: CLUSTER INDUSTRIAL, EL ECONOMISTA, PR NEWSWIRE, GLOBAL INDUSTRIES, EL

CEO

CONSULTING

HOW TO APPROACH TALENT COMPETITION?

Yes! It is great news that North America and the world are turning their heads towards nearshoring to Mexico. But with the arrival of popular giga-brands and more than 100 new upcoming investment projects confirmed last year, how is this imminent shift in the labor market going to affect the industry?

In order to start transforming your company into an Employer of Choice, these are the 6 pillars we recommend take into consideration: