GENERAL SITUATION IN MEXICO
Weekly Review I July 31, 2024
RELEVANT NEWS INDUSTRIES
AUTOMOTIVE
China has become a key investor in Mexico’s automotive industry, contributing US$2.2 billion in the first half of 2024, according to Directorio Automotriz. This investment supports over 20 projects and accounts for 18.3% of total sector investment, making China the second-largest investor after Germany (19.3%).
This marks a 52.7% increase in Chinese investments compared to the same period in 2023. Chinese firms are primarily seeking partnerships with Mexican businesses to transfer processes and technologies and are looking for skilled labor.
INVESTMENT BREAKDOWN:
• Tier 1 and Tier 2 auto parts manufacturers: 64.6%
• Suppliers of products/services: 9.1%
• Original Equipment Manufacturers (OEMs):8.1%
• Industrial parks and raw materials companies: 6.4%
• Development and engineering centers: 3.6%
Investments in electromobility platforms made up 36.4% of total investments, totaling US$4.69 billion across 40 projects, a decrease from 43% in 2023. The Volkswagen Group, including Audi Mexico, led these initiatives to adapt their Puebla plants for electric vehicle production.
The investments have created over 34,000 jobs though this is a 48.33% decrease from the previous year. Infrastructure developments included over 6.13 million square meters of construction or renovation, down 38.8%from the first half of 2023. The decline is attributed to a slowing electric vehicle market and uncertainties around the US elections, causing companies like Tesla to pause investments in Mexico.
INVESTMENT BY STATE:
The states attracting the most investment in H1 2024 were:
Coahuila: US$2.23 billion
Puebla: US$2.02 billion
Nuevo Leon: US$883.6 million
San Luis Potosi: US$587 million
Guanajuato: US$483.3 million
Durango also saw significant investment, with a 5.7% national share, including the establishment of its first OEM, SEV Motors Mexico, and the expansion of Siete Leguas Automotive.
SOURCE: MEXICO BUSINESS NEWS
RELEVANT NEWS
INDUSTRIES
AEROSPACE
At the Farnborough Aerospace Fair in England, Queretaro secured over US$157 million in investments, resulting in the creation of more than 1,650 new formal jobs. Governor Mauricio Kuri emphasized that these investments solidify Queretaro’s position as a leader in the aerospace sector, leveraging local talent and attracting new companies.
Key agreements include an investment of US$34.4 million from Airbus to manufacture helicopter components, generating 260 jobs. DIEHL Aviation invested US$47.9 million in aircraft supplies and compartments, creating 500 jobs. Safran, a high-tech aeronautics group, announced plans to assemble aircraft engines in Queretaro, with an investment of US$74.6 million and 650 new jobs. An expansion with ITP Aero will create 200 new jobs.
These developments reflect Queretaro’s commitment to innovation and job creation in the aerospace industry.
SOURCE: MEXICO INDUSTRY
NEWS BY STATE
BAJA CALIFORNIA
The construction of industrial buildings in Tijuana is a key opportunity for local companies, as noted by Gabriel Vizcaino, president of CMIC. Major firms like Frasa and Grupo La Mesa are investing around 4 billion pesos (about 200 million dollars) in new projects, which will enhance the local economy. Frasa plans to build two industrial parks, while Grupo La Mesa is developing a project with 14 buildings across Tijuana and Tecate. Vizcaino emphasized the need for local companies to diversify into private and industrial construction despite the scarcity of land. He highlighted that essential infrastructure and effective urban planning are crucial for continued industrial growth. Overall, these developments will strengthen Tijuana’s construction industry and boost the regional economy.
SOURCE: INDUSTRIAL NEWS BC
SONORA
Humberto Martinez Cantu, president of Index, stated that the export maquiladora industry is currently thriving. He believes the expansion of freight rail transport to and from Nogales, Arizona, will significantly boost economic growth. He also mentioned the importance of “nearshoring,” which has become crucial since the pandemic caused many supply plants to close. This trend, combined with the new federal government led by Dr. Sheinbaum promoting new plants in Mexico, is expected to drive further investment.
In 2023, exports reached $220 billion, and projections indicate that investments could increase by an additional $100 billion in the coming years. Overall, Martinez Cantu emphasized that rail transport will play a key role in the anticipated economic recovery.
SOURCE: EL IMPARCIAL
NEWS BY STATE
NUEVO LEON
The Nuevo Leon Secretary of Economy and the Producers Chain of the Industry in Mexico (Capim) are working to strengthen the steel and aluminum value chain due to rising local demand influenced by nearshoring and U.S. tariffs on over 500 products. Ivan Rivas Rodriguez, the state’s Secretary of Economy, noted that the potential business value of these purchasing needs exceeds $5.956 billion, presenting significant opportunities for local companies.
There are 1,013 recorded purchase requirements for various materials and services, and the upcoming Mexico’s Industry Supply Chain event is expected to draw around 13,400 attendees and facilitate 5,780 B2B meetings. Additionally, the China Iron and Steel Association reported that U.S. tariffs under Section 301 will increase to 25%, impacting steel and aluminum imports from China.
SOURCE: EL ECONOMISTA
COAHUILA
Coahuila is leading automotive investment in 2024, attracting over $2.2 billion, as highlighted in the ‘Automotive Investment Report 2Q 2024’ by Directorio Automotriz. In the first half of 2024, Mexico received a total of $7.8 billion in automotive investments, a 36.57% decrease from 2023’s record of over $12.26 billion, primarily due to a slowdown in electric vehicle investments and electoral uncertainties. Coahuila’s investments stemmed from 18 announced projects, generating 10,924 jobs and solidifying the state as a preferred location for electromobility with eight new projects in this sector. Notably, China invested $2.27 billion in Mexico’s automotive sector in the first half of 2024, a 52.7% increase from the previous year, coinciding with Coahuila’s growth. Major investments in Coahuila include ZC Rubber’s $590 million plant for tire production and Eaglerise Net Electric’s $197 million facility for electric vehicle components. Other significant projects involve Gimsa and INFAC Automotive, totaling additional investments in automotive parts. Looking ahead, the Governor of Coahuila, Manolo Jimenez Salinas, announced plans for over $845 million in investments from Asian companies specializing in various automotive manufacturing processes.
CLUSTER INDUSTRIAL
NEWS BY STATE
GUANAJUATO
The Asociacion de Empresas Proveedoras Industriales de Mexico (APIMEX) is launching a “World Class Manufacturing Program” on August 8 in Leon, Guanajuato, to strengthen leadership skills in the manufacturing sector. The program will provide industry representatives with training in areas like systemic thinking, strategic planning, cost analysis, Lean Six Sigma, and Artificial Intelligence (AI), along with personalized consulting to ensure effective implementation.
Micro, Small, and Medium Enterprises (Mipymes) in various manufacturing fields, such as chemicals, textiles, and automotive parts, are eligible to participate.
SOURCE: MEXICO INDUSTRY
QUERETARO
Aerospace companies are set to invest 2.946 billion pesos in projects that will create 1,650 jobs, as confirmed by Governor Mauricio Kuri Gonzalez. These investments were announced during the Farnborough International Airshow and involve the expansion of four companies.
Key projects include Airbus’s investment of nearly 647 million pesos to expand its operations in Mexico, creating 260 jobs, and Diehl Aviation’s 900 million pesos investment in Queretaro, which will employ 500 people to manufacture aircraft lavatories. Safran plans to invest 1.4 billion pesos to add 650 jobs by introducing a new engine assembly line and a maintenance facility, while ITP Aero aims to expand and add 200 jobs.
SOURCE: EL ECONOMISTA
NEWS BY STATE
SAN LUIS POTOSI
The government of San Luis Potosi signed the “Potosi Labor Agreement” with the International Labour Organization (ILO) to enhance labor cooperation and develop sustainable employment policies. Nestor Eduardo Garza Alvarez, head of the state’s labor department, stated the agreement aims to boost the economy by promoting environmentally sustainable jobs.
The initiative, “Promoting: promoting increasingly green jobs,” seeks to create a strategic alliance among the government, private sector, and unions to foster green employment, gender equity, and inclusion of minority groups and individuals with disabilities. Luis Alberto Gonzalez from the Automotive Cluster was appointed to the agreement’s monitoring committee, with the event attended by Pedro Americo Furtado de Oliveira, director of the ILO for Mexico and Cuba.
SOURCE: MEXICO INDUSTRY
NEWS BY STATE
CDMX
Jose de Jesus Rodriguez Cardenas, president of the National Chamber of Commerce, Services and Tourism of Mexico City (Canaco CDMX), highlighted that an increasing influx of Asian, mainly Chinese, products is displacing locally made goods and often fails to meet quality standards. The most affected sectors include household appliances, tools, clothing, footwear, and electronics. Many of these products evade taxes, exacerbating market distortions and damaging the local industry. He emphasized the need for fair competition and regulatory enforcement. Although not against Asian or Chinese products, he stressed that non-compliant imports threaten consumer safety and displace traditional businesses, with residential buildings turning into warehouses. Discussions with government officials aim to address these issues.
SOURCE: LA PRENSA
STATE OF MEXICO
During the first quarter of 2024, the economic activity of the State of Mexico experienced an annual growth of 2.4%, according to the Quarterly Indicator of State Economic Activity (ITAEE) from INEGI. This indicator details advances in primary, secondary, and tertiary activities of 2%, 5.2%, and 1.3%, respectively. This reflects that the economic activity recorded this year is the same as the first quarter of last year. However, there was a significant difference in activities: between January and March 2023, the growth in primary activities was -0.1%, secondary activities -8.3%, and tertiary activities 7.1%. INEGI specifies that during the first quarter of 2024, primary activities, consisting of agriculture, animal breeding and exploitation, forestry, fishing, and hunting, reported an estimated annual increase of 2%. This is mainly attributed to the performance of agriculture and animal breeding and exploitation. In this activity, the State of Mexico ranked tenth nationwide.
SOURCE: EL SOL DE TOLUCA
INVESTMENT NEWS
NORTH
SAFRAN
Safran the opening of a new plant in Chihuahua City, which will begin operations in 2025. The new plant will employ 225 people. It has required an investment of 6.5 million dollars.
FRESENIUS MEDICAL
CARE
The company invested 10 million dollars to expand operations dedicated to the development of medical technology in Reynosa, Tamaulipas. It is expected to create 600 jobs.
HARMAN
The automotive supplier inaugurated its new plant in Ciudad Juarez, Chihuahua, with an investment of 15.9 million dollars. This plant will employ 100 people.
NIDEC
The manufacturing company announced an investment of 23 million dollars for the expansion of its operations in Reynosa, Tamaulipas. This will generate 384 jobs.
CENTRAL MEXICO
DIEHL
The company announced the building of a plant in Queretaro. The project, focused on compartments for aircraft, represents an investment of 48.2 million dollars and the creation of 500 jobs in the first stage.
CDMX
ENGIE
Engie announced an investment of 64.1 million dollars for the expansion of natural gas infrastructure for the industrial parks of San Martin Texmelucan and Huejotzingo, Puebla.
CEWS
CEWS specializes in the manufacturing of harnesses. Its establishment will create 2,200 jobs in Campeche. The amount of the investment has not been made public.
SOURCES: CLUSTER INDUSTRIAL, MEXICO INDUSTRY
LEGISLATIVE CHANGES AND INITIATIVES
LABOR
• INITIATIVE WITH DRAFT DECREE ADDING VARIOUS PROVISIONS TO THE FEDERAL LABOR LAW, THE SOCIAL SECURITY LAW, AND THE LAW OF THE INSTITUTE OF SECURITY AND SOCIAL SERVICES FOR STATE WORKERS
Presented by: Dep. Mario Alberto Rodriguez Carrillo (Plur - MC)
Purpose:To establish as an obligation of employers to grant up to twelve working days of paid leave per year to the father, mother, or guardian worker whose child under twelve years of age suffers from an illness, injury, or medical condition that necessitates hospitalization, rest, or continuous accompaniment.
To add that insured father, mother, or guardian workers, whose children up to twelve years old have been diagnosed by the Institute with an illness, injury, or medical condition that necessitates hospitalization, rest, or continuous accompaniment, may enjoy a medical care leave for their children to be absent from work for up to twelve working days of paid leave per year.
Status: 2024-07-24 - Published in the Parliamentary Gazette
• INITIATIVE WITH DRAFT DECREE ADDING SECTION XXXIV TO ARTICLE 132 OF THE FEDERAL LABOR LAW; ADDING SECTION II BIS TO ARTICLE 43 OF THE FEDERAL LAW FOR STATE WORKERS; AMENDING SECTION X AND ADDING A NEW SECTION XI, RENUMBERING THE SUBSEQUENT SECTION, TO ARTICLE 10 OF THE NATIONAL LAW OF PENAL EXECUTION
Presented by: Sen. Geovanna del Carmen Bañuelos de la Torre (LNal - PT)
Purpose: To add as an obligation of employers the requirement to install menstrual hygiene dispensers in women’s bathrooms and to provide menstrual hygiene products and supplies.
Status: 2024-07-24 - Published in the Parliamentary Gazette
LEGISLATIVE CHANGES AND INITIATIVES
ENVIRONMENT
• Tamaulipas: Agreement Granting a Tax Incentive for the Implementation of the Tax on the Emission of Compounds and Greenhouse Gases into the Atmosphere during the 2024 Fiscal Year
Incentive: Individuals and legal entities required to file the declaration and make the payment of the Tax on the Emission of Gases into the Atmosphere for the 2024 fiscal year are authorized to enjoy a 50% reduction in the tax payment and 100% in the corresponding accessories.
Payment of the tax:
The tax payment will be divided semiannually: For the first payment, companies will generate monthly emission records from January to June 2024, making the corresponding payments no later than July 31, 2024.
For the second payment, with the emission records from July to November 2024 and the corresponding estimate for December 2024, the payment must be made no later than December 20, 2024.
Access to the tax incentive for individuals and legal entities:
They must be registered and active in the taxpayer registry of the Ministry of Finance of the
Government of the State of Tamaulipas.
Submit a positive compliance opinion on state and federal coordinated obligations.
Fulfill tax obligations regarding the Tax on the Emission of Gases into the Atmosphere.
Make the tax payment for the 2024 fiscal year within the established deadlines.
Submit the Emissions and Pollutant Transfer Register report to the Ministry of Urban Development and Environment, specifically the mandatory or voluntary section on atmospheric emissions and RETC substances.
Application of this Agreement:
The tax incentive provided in this Agreement will only be applied through the Ministry of Finance’s online portal.
The tax incentive will be applicable at the time of making the payment of the Tax on the Emission of Gases into the Atmosphere for the 2024 fiscal year.
Validity: This agreement will be valid until December 31, 2024.
• Hidalgo: REPORT AMENDING AND ADDING VARIOUS
PROVISIONS TO THE LAW OF EFFICIENT PRODUCTION PROCESSES OF THE STATE
Presented by: Commission of Legislation and Constitutional Points
Purpose: Companies, during the process of replacing or implementing technologies, must gradually incorporate the use of clean energies.
Status: 2024-07-29 - Approved, passed to the Executive Power of the State.
PRODENSA INSIGHTS
MANUFACTURING IN MEXICO:
OPERATIVE COMPLIANCE FOR IMMEX
5 Key Takeaways:
• Financial Compliance: Maquiladoras operating in Mexico must adhere to a complex tax system, including income tax, VAT, payroll tax, profit-sharing, and property taxes. Effective financial management, including accurate record-keeping and tax planning, is crucial for operational success.
• IMMEX Program Adherence: Compliance with the IMMEX program, including inventory management (Annex 24) and VAT certification, is essential for maintaining tax benefits and avoiding penalties.
• Human Resources Management: Maquiladoras must navigate labor regulations, including unionization, wage determination, employee benefits, and training requirements. Additionally, compliance with outsourcing regulations is essential.
• Trade Compliance: Effective management of imports and exports, including customs clearance, permits, and trade agreements like USMCA, is critical for smooth operations.
• Safety and Environmental Compliance: Adherence to Mexican safety and environmental regulations, including waste management, health and safety standards, and permit acquisition, is mandatory for responsible operations.
• Essentially, operating a maquila in Mexico demands a comprehensive understanding and adherence to a complex regulatory framework across finance, human resources, trade, and environmental domains. Prodensa has numerous, in-house IMMEX experts in all areas of required compliance in Mexico.
IS YOUR MULTITENANT SHELTER HOLDING YOU BACK?
Three Key Takeaways:
• Multitenant shelters often limit business growth and control: Shared facilities can hinder expansion and operational flexibility.
• Dedicated shelters offer greater autonomy and efficiency: By operating independently, businesses can optimize production, mitigate risks, and ensure compliance.
• Transparent costs and dedicated partnerships: Dedicated shelters provide clear pricing, eliminate profit-sharing, and offer tailored support for business success.
Ready to take control of your operations in Mexico?
A dedicated solution might be right for you. Contact us to have a free discussion with our expert Advisors. We can walk you through a number of ways to achieve operational independence in Mexico.
PRODENSA INSIGHTS
FREE E-BOOK: THE SOFTWARE DEVELOPMENT INDUSTRY IN MEXICO
5 Key Takeaways:
• Mexico’s Evolving Tech Landscape: While traditionally known for manufacturing, Mexico has significantly grown its software development sector, contributing substantially to the national economy.
• Diverse Software Expertise: Mexico offers a wide range of software development capabilities, including AI, cybersecurity, and fintech, serving both domestic and international markets.
• Talent Pool and Cost-Efficiency: The country boasts a growing pool of skilled software developers with strong English proficiency, making it a cost-effective outsourcing destination.
• Strategic Geographic Location: Mexico’s proximity to the U.S. and its membership in trade agreements like USMCA offer significant advantages for software development companies.
• Emerging Tech Hubs: Cities like Mexico City, Guadalajara, Monterrey, Tijuana, and Puebla have established themselves as key centers for software development and innovation.
• In essence, Mexico is rapidly transforming into a global software development hub, offering a combination of talent, cost-efficiency, and strategic location that makes it an attractive option for businesses seeking to outsource or expand their software development operations. Download the free ebook on the Insights section of our website.
THE IMPACT OF NEARSHORING ON NORTH AMERICAN MANUFACTURING: A SHIFT FROM ASIA
Key Points:
• Nearshoring is reconfiguring global supply chains, with significant movement of production from Asia to America.
• Factors such as geographic proximity, trade agreements, and relative stability have made North America an attractive destination for nearshoring.
• The future prospects for nearshoring in America are promising, with a significant increase in investment announcements and diversification of sectors and investor countries.
• The adoption of advanced technologies, such as artificial intelligence, will be crucial to maintaining the region’s competitiveness in the global manufacturing landscape.