Weekly Review I June 5, 2024

GENERAL SITUATION IN MEXICO

Weekly Review I June 5, 2024

RELEVANT NEWS

USMCA

The USMCA Free Trade Commission (FTC) convened to advocate for the full implementation of the agreement, aiming to uphold North America’s competitiveness. Representatives, including Mexico’s Minister of Economy Raquel Buenrostro and US Trade Representative Katherine Tai, discussed the agreement’s future, emphasizing the need for robust implementation efforts to sustain a growing North American economy. They committed to addressing concerns about non-market member countries’ policies impacting USMCA and workers, particularly in sectors like automotive. The US raised concerns about alleged labor violations in Mexico, while Canada expressed worries about Mexican energy and mining policies. The agreement will be reviewed in 2026, with

the fifth meeting of the USMCA Free Trade Commission to be hosted by Canada in 2025. The outcome of these discussions may be influenced by the results of US and Mexican elections, as well as issues such as China’s influence in the region and energy/environmental policies. Despite recent tensions, experts note improved US-Mexico relations under President Biden’s administration.

SOURCE: MEXICO BUSINESS

RELEVANT NEWS INDUSTRIES

EV

The Guanajuato Automotive Cluster (CLAUGTO), in collaboration with the state government and Deloitte, is currently developing the “Plan for Industrial Transformation and Electromobility for the State of Guanajuato.” This plan aims to provide comprehensive support and ensure the industry’s development. It will offer a joint vision as a triple helix cluster, outlining key functions and actions to navigate the changes that most automotive companies are facing today, emphasizing that it goes beyond just electromobility. Moreover, it will serve as a guide and voice for the industry towards public and private institutions, governmental and educational, to trigger and update suitable public policies, adapt job profiles, as well as new skills and competencies, like reskilling, among others. The plan will be publicly available for the automotive community. According to the association, several companies have begun internal adaptation processes driven by market trends and their customers. The CLAUGTO stressed in its statement that collective work and alignment among all members of the Guanajuato Automotive Cluster, both directly and indirectly, will consolidate the industry and provide certainty in facing future challenges.

SOURCE: MEXICO INDUSTRY

AUTOMOTIVE

The Mexican automotive industry has congratulated Claudia Sheinbaum on her presumed victory in the recent presidential elections. Both the Mexican Association of the Automotive Industry (AMIA) and the National Association of Bus, Truck, and Tractor Producers (ANPACT) expressed their willingness to collaborate with Sheinbaum’s transition team and incoming administration to create an environment conducive to investment and operations. AMIA emphasized the importance of policies supporting renewable and clean energies for sustaining industry growth in Mexico. ANPACT, representing leading producers of cargo and passenger vehicles, highlighted the need for advancing comprehensive and sustainable mobility nationwide, aligning with Sheinbaum’s public policies. They expressed readiness to support the government in developing safer, more efficient, and environmentally friendly mobility to maintain Mexico’s global leadership in vehicle production and exports.

SOURCE: MEXICO BUSINESS NEWS

NEWS BY STATE

SONORA

There are potential opportunities for copper mining in Sonora, Mexico, amidst the rise of nearshoring and electric vehicles. With companies relocating manufacturing operations closer to the United States and the increasing demand for electric vehicles, there’s a growing need for copper, a vital component in electrical infrastructure. Sonora, being a significant copper-producing state, stands to benefit from these trends. Investment in copper mining in the region could capitalize on these opportunities, boosting economic growth and job creation.

SOURCE: EL ECONOMISTA

BAJA CALIFORNIA

At the ratification event for the Business Coordinating Council of Ensenada (CCE) board for 2024-2025, Kurt Honold Morales, head of the Ministry of Economy and Innovation (SEI), emphasized Baja California’s robust economy driven by its industrial and manufacturing sectors, boasting 1,138 exporting companies and $4.598 billion in Foreign Direct Investment (FDI) over 30 months. Marco Antonio Estudillo Bernal was ratified as CCE president, with discussions focusing on strategic projects like a new commercial border crossing and an Ensenada-San Diego ferry to enhance the region’s strengths. Honold highlighted the availability of energy for productive activities and the state’s role in the “Cali Baja” mega-region, promoting key industries like electronics and automotive. He emphasized the importance of talent and innovation, noting the significant educational offerings with 113 universities and over 57,000 students enrolled in engineering and technical programs, positioning Baja California for nearshoring opportunities.

SOURCE: INDUSTRIAL NEWS BC

NEWS BY STATE

NUEVO LEON

Nuevo Leon is actively advancing electromobility by shifting its automotive industry towards manufacturing components for electric vehicles, as outlined. This strategic move aligns with global trends towards sustainability, positioning the state at the forefront of the evolving automotive landscape. Nuevo Leon’s industrial sector is undergoing adaptation to meet the increasing demand for electric vehicle components, including batteries, motors, and charging stations. Supported by government incentives and a conducive environment for research and development, the region is attracting investment in electromobility. Collaborations between local companies, international firms, and academic institutions are fostering innovation and the development of cutting-edge technologies for electric vehicles. This transition not only contributes to environmental sustainability but also presents significant economic opportunities for Nuevo Leon’s manufacturing sector, solidifying its position as a key player in the global electromobility market.

SOURCE: EL ECONOMISTA

NEWS BY STATE

COAHUILA

Stellantis is seeking suppliers for its body & interior, chassis, EE & modules, and powertrain divisions. The company’s Derramadero plant in Saltillo, Coahuila, will host a supplier fair aimed at driving supplier development and strengthening automotive supply chains. Stellantis, which currently owns several vehicle brands including Chrysler, Dodge, Jeep, Ram, Fiat, Alfa Romeo, and Peugeot, operates globally. Additionally, at the Stellantis plant in Toluca, State of Mexico, the new electric Jeep Wagoneer S for the U.S. and Canadian markets is being produced. This vehicle will be launched first in the U.S. and Canada in the second half of 2024 before being available in markets worldwide. The fair, scheduled for June 10th to 13th, 2024, will provide an opportunity for interested companies to pre-register via a QR code. Applicants will be asked if they have a valid IATF 16949 certification and if they are currently Tier 1 suppliers to any OEM. Stellantis has specified various components needed for its divisions, including body & interior, chassis, EE & modules, and powertrain.

SOURCE: MEXICO INDUSTRY

CHIHUAHUA

Chihuahua is nurturing talent to take advantage of its economic boom. With the state’s economy growing rapidly due to investments in various sectors like aerospace, automotive, and manufacturing, there’s a heightened demand for skilled workers. Chihuahua is focusing on developing its workforce by offering specialized training programs, partnering with universities and businesses, and providing incentives for students to pursue technical careers, and initiatives such as the “Chihuahua Emprende” program, which supports entrepreneurs, and efforts to promote STEM education. By investing in talent development, Chihuahua aims to sustain its economic growth and remain competitive on the global stage.

SOURCE: YAHOO FINANCE

NEWS BY STATE

SAN LUIS POTOSI

In the next three months, at least three companies that announced investments last year will begin operations, according to Salvador Gonzalez, head of the Ministry of Economic Development. This demonstrates the confidence that San Luis Potosi generates for investment. One of them operates in the air conditioning sector, another in the electromobility industry, and the third in specialized aluminum casting and component assembly, meeting the increasing demands of automotive companies. Gonzalez emphasized that the pace of attracting more foreign capital to San Luis Potosi has not slowed down, while also not neglecting the local and national industries established in the state. They anticipate reach-

ing similar levels of foreign investment as the previous year by the end of the third year of government. Gonzalez mentioned that the phenomenon of companies relocating within the national territory and the region where SLP is located has not stopped, and it may gain more momentum once the electoral process is fully completed and the elected authorities start functioning. He highlighted that the investment flow towards San Luis Potosi has not halted, with ongoing negotiations with several more companies, some in the process of installation or expansion, and others about to start operations.

SOURCE: PLANO INFORMATIVO

NEWS BY STATE

QUERETARO

The Secretary of Sustainable Development of the state of Queretaro, Marco Antonio del Prete, met with executives from the Ireland-Mexico Chamber of Commerce (IMC) and representatives from Enterprise Ireland to strengthen commercial ties between the two countries. Attendees included Tom Stack, president of the Ireland-Mexico Chamber of Commerce; Tony Wilkes, national secretary of the Chamber; and Ana Arroyo, representative of Enterprise Ireland. Del Prete expressed his pleasure in working together and discussed the objectives of the IMC, opportunities for bilateral collaboration, and exchanged information about Irish companies in Mexico. Over the past five years, trade between the

two countries has grown cumulatively by almost 60 percent, reaching 2.8 billion euros in 2023. The Mexican-Irish Chamber of Commerce originated from an initiative established in the early 1990s by a group of Irish and Mexican entrepreneurs who actively promoted trade relations between the two nations. Currently registered with the Ministry of Economy (SE) since 2018, the IMC’s board includes executives, founders, and leaders with broad representation of Mexico-LATAM companies. On the other hand, Enterprise Ireland is the state agency that works with Irish companies to help them start, innovate, and do business in global markets.

SOURCE: MEXICO INDUSTRY

NEWS BY STATE

CDMX

Mexico City has endured over 16 months of continuous drought affecting its entire territory, the longest recorded duration according to the National Water Commission. Starting 2023 as abnormally dry, the city has now reached severe drought status. The Cutzamala System, supplying 30% of the city’s drinking water, has seen significantly reduced reservoir levels, threatening its ability to meet demand. Sergio Rezendez, director of the firm Colliers Monterrey, highlighted the severe effects on basic services like hospitals and homes, where deteriorating water quality and rationing could lead to more diseases, impacting public health. The service sector faces increased costs due to the need for alternative water sources, potentially affecting business operations and investment decisions. Despite being a major business hub, the water crisis and its high costs may cause companies to reconsider their presence in the city.

SOURCE: EL ECONOMISTA

STATE OF MEXICO

The Government of the State of Mexico, through the Secretariat of Economic Development (Sedeco), emphasized the progress of the Stellantis Toluca Complex in developing the “STLA Large” platform, crucial for the state’s global electrification strategy. This initiative aims to generate direct and indirect jobs. The automotive industry accounts for over 60% of the state’s exports and 12.6% of its GDP. The Toluca Complex, producing iconic vehicles for over 50 years, is key to the state’s economic growth and global market strategy. The “STLA Large” platform showcases technological advancement, enabling the production of various vehicle types. Upcoming announcements will detail further projects in the state.

SOURCE: EL FINANCIERO

INVESTMENT NEWS

NORTH

INFAC

The South Korean company is investing 6 million dollars for a new industrial plant in Monclova, Coahuila, dedicated to the production of parts for electric vehicle in 2025. The project expects creating 250 jobs.

GIMSA

The Mexican company announced the construction of an industrial park in Coahuila with an investment of 82.6 million dollars for the establishment of a stamping company for the automotive industry, generating more than 5,000 direct and indirect jobs.

COFATECH

With an initial investment of 1.71 million dollars, Cofatech is groundbreaking a new plant in the Durango. It will create around 2,000 jobs. The plant is expected to start operations in 2025.

CENTRAL MEXICO

FENGMEI

The Chinese electrical systems manufacturer announced a 15.6 million dollars investment to set up in Aguascalientes. The company expects creating 1,000 jobs. It will begin operations by the end of 2025.

TEKLAS

The automotive part manufacturer announced an investment of 8 million dollars for the expansion of its plant in Aguascalientes, which will generate 300 jobs.

NATIONAL

SUITOUSHA

The steel pipes manufacturer has facilities located in Japan and China. Now, interested in investing in Mexico due to their clients such as Caterpillar, Komatsu and John Deere.

They have studied the country for 2 months. They are interested in the Center region (Leon/Silao/Aguascalientes/Queretaro/Lagos) and the North region (San Luis Potosi, Monterrey, Saltillo). They expect creating 100 jobs, starting operation in 2026.

SOURCES: CLUSTER INDUSTRIAL, MEXICO INDUSTRY

LEGISLATIVE CHANGES AND INITIATIVES

ENVIRONMENTAL

• CITIZEN INITIATIVE TO AMEND VARIOUS PROVISIONS OF THE STATE TREASURY LAW REGARDING ECOLOGICAL TAXES

Presented by: State Congress of San Luis Potosi

Purpose: The tax should be equitable and proportional, considering both companies already taking environmental actions and those that are not.

Eliminate indirect emissions.

Provide different treatment for less polluting fuels.

Reduce the current rate of 3 UMAs.

Raise the application threshold of the tax to 25,000 tons of emissions.

Consider fiscal incentives, such as emission compensation through remediation or conservation projects, as well as emission reduction certificates.

Take into account circular economy actions that companies are implementing to reduce the carbon footprint of their products.

Exclude companies already taxed at the federal level for the same concept from this tax.

Status: 2024-05-29 - Initiative referred to the State Treasury Commission for opinion.

HIGHLIGHTS OF THE ELECTIONS

• On June 2, 2024 the most important election of the recent history of Mexico took place, not only because of its size (the presidency, the federal congress, nine state governorships, local congresses, and mayorships, more than 20,000 positions were elected) but because it defined the continuation of President Andrés Manuel Lopez Obrador’s project.

• As of 12 am yesterday, the President of the Electoral Institute (INE) announced that Claudia Sheinbaum (Morena-PT-PVEM) has an irrevocable advantage in the election for the Presidency, with total voting between 58.3 and 60.7%, based on the fast-counting statistical exercise. Xóchitl Gálvez received between 26.6 and 28.6% of votes, while Jorge Álvarez Máynez finds himself in third place with between 9.9 and 10.8%. A female will become president for the first time in Mexico’s history.

• Although some instances of violence occurred, the election was carried out with no major issues. These include stealing a package of ballots in Nuevo León, trying to burn polling stations in Querétaro, and temporally closing a polling station in Puebla due to acts of violence. Additionally, the Electoral Institute of Mexico City informed it suffered a cyberattack.

• Citizen participation was a central variable that affected who won and who lost. It was estimated that participation ranged between 60 and 61.5%, which, if confirmed, would mean that participation decreased by 4 percentage points from the 2018 election.

HIGHLIGHTS OF

THE ELECTIONS

• All 128 seats in the Senate were on the ballot. As of 12 am last night, the three main opposition parties combined (PAN, PRI, PRD), which joined forces in many electoral districts, received between 28.5 and 32.9% of the total votes, based on the fast-counting. Morena, the President’s ruling party, and its allies, the Partido del Trabajo (PT) and the Partido Verde (PVEM) got between 55.8 and 60.3%.

• All 500 seats in the Chamber of Deputies were on the ballot. As of 12 am last night, the three main opposition parties combined (PAN, PRI, PRD) received between 30.8 and 33.7% of the total votes. Morena and its allies got between 43.5 and 58%.

• At state level, Morena is leading the race. The fast

counting by the INE gave the victory to Morena in Chiapas, Yucatán Puebla, Tabasco, Veracruz, Mexico City and Morelos. However, the PRI-PAN-PRD coalition won in Guanajuato, while Movimiento Ciudadano led the election in Jalisco.

• As the final results come up, political parties claimed victory on the elections.

• Outside of Mexico, long lines for polling stations were reported in cities like Madrid, New York, Paris, and Montreal, among others, and in some cities, there were not enough ballots for all voters. In total, the INE registered 180,676 votes from Mexicans abroad.