GENERAL SITUATION IN MEXICO
Weekly Review I August 14 2024
RELEVANT NEWS INDUSTRIES
AUTOMOTIVE:
The automotive industry in Mexico is projected to attract approximately MX$36.2 billion (about US$1.9 billion) in investments over the next two to three years, largely due to the nearshoring trend, according to MONEX. This investment represents 28% of the sector’s total anticipated investments and comes as manufacturers respond to pandemic disruptions and improved semiconductor supplies.
In 2023, 82.7% of Mexico’s exports went to the U.S., up from 80.6% in 2021, with the automotive sector experiencing a 31.5% increase in exports. The nearshoring trend has spurred new investment announcements, particularly in early 2024, with the manufacturing sector making up 53% of these projects.
Major automotive companies like General Motors, Volkswagen, Nissan, and BMW are expanding operations in Mexico, and new investments are emerging in electric vehicles from companies such as BYD and Tesla. A Cushman & Wakefield study highlighted that foreign direct investment in Nuevo Leon has led to 69 automotive sector projects, with 35 focused on electromobility, reinforcing Mexico’s status as a key player in the global automotive supply chain.
SOURCE: MEXICO BUSINESS NEWS
RELEVANT NEWS INDUSTRIES
EV:
Mexico needs to invest about US$1.73 billion annually for the next six years, totaling US$10.41 billion by 2030, to improve its EV charging infrastructure, according to Roland Berger. With only 1,400 charging stations for 58,000 EVs, the current ratio is 41 vehicles per charger, far above the global average of 2.6.
The number of charging stations is projected to increase to 9,000 by 2024 and 112,000 by 2030, as EV sales are expected to rise from 44,000 units in 2023 to 206,000 by 2030. The Mexican Association of the Automotive Industry (AMIA) reported a 53% growth in hybrid and electric vehicle sales in June 2023.
Companies like Tesla and Evergo are expanding charging networks, and the Mexican Electromobility Association (EMA) noted a 23% increase in charging positions in early 2023. Odracir Barquera from AMIA highlighted the need for a comprehensive approach to transition to new technology vehicles.
SOURCE: MEXICO BUSINESS NEWS
AEROSPACE
The aerospace industry offers significant opportunities for the Rio Grande Valley region, spanning Texas and northern Tamaulipas. Ralph Garcia from McAllen EDC highlighted the region’s potential for developing manufacturing chains and strengthening the workforce.
Universities provide essential training and skills development, while the area has ample industrial space and logistical benefits. Local companies are already servicing major aerospace firms like SpaceX, boosting job creation and investment.
Challenges include retaining local talent, which requires collaboration between universities and businesses to keep skilled workers in the region. Despite these challenges, there is optimism about the aerospace sector’s growth through regional cooperation.
SOURCE: MEXICO INDUSTRY
NEWS BY STATE
BAJA CALIFORNIA
In the first seven months of this year, Baja California announced over $1.72 billion in new investments, expected to create 3,234 jobs, ranking it tenth nationally for investment, ahead of states like San Luis Potosi and Chiapas. This private investment could reach a total of $48.04 billion over the next two to three years, generating more than 47,480 direct jobs, primarily in the manufacturing sector, which accounts for 53% of the investments. Key sectors include beverages, automotive, and electronics, with 43% of the expected jobs linked to the automotive industry. Notable companies entering the region include Sempra Energy and Daikin.
SOURCE: MEXICO INDUSTRY
NEWS BY STATE
NUEVO LEON
Walmart and the Nuevo Leon Ministry of Economy have signed a collaboration agreement to help small and medium-sized enterprises (SMEs) in the “Made in Nuevo Leon” program become suppliers for the retail chain. Participating SMEs will receive training on Walmart’s requirements and opportunities, enabling them to sell their products, particularly in food and beverages, in Walmart stores. Secretary of Economy Ivan Rivas highlighted the program’s potential to develop local suppliers and grow businesses through exposure to best practices. Currently, 85% of Walmart Mexico’s suppliers are SMEs, and the initiative aims to create new employment opportunities and support the state’s economic development. The “Hecho en Nuevo Leon” platform also assists new businesses with training and resources to enhance product presentation, sales skills, and market visibility, having already supported 1,384 SMEs through over 130 courses and 6,262 participants.
SOURCE: MEXICO NOW
NEWS BY STATE
CHIHUAHUA
To foster the creation of 143 new businesses in Chihuahua, the Ministry of Innovation and Economic Development signed an agreement with seven incubators from various academic institutions, including Universidad Autonoma de Chihuahua and Universidad La Salle. Led by Undersecretary Jesus Garcia Lopez, the initiative aims to support entrepreneurs in realizing their business ideas and formalizing their companies. The collaboration will facilitate the startup process by providing guidance on the necessary steps for business creation and development. Garcia emphasized that this program is designed to strengthen the local economy by enhancing the entrepreneurial ecosystem and creating favorable conditions for new businesses to emerge.
SOURCE: MEXICO NOW
COAHUILA
BBVA Mexico has granted a $67.4 million loan to 360 Industrial Parks to enhance the functionality of an industrial portfolio located in the Ramos Arizpe corridor, Coahuila. This financing targets 19 industrial buildings occupied by national and international companies in sectors such as aerospace, automotive, logistics, chemicals, appliances, and clean energy. Alejandro Cardenas Bortoni, BBVA Mexico’s Director of Business and Government Banking, emphasized that Coahuila’s strategic location near the U.S. makes it a key investment hub in Mexico. The portfolio spans 1.3 million square feet and includes infrastructure for AAA companies from Canada, China, Ireland, Italy, the U.S., and Sweden. The five-year loan aims to refinance existing debts and support the construction of additional industrial buildings. 360 Industrial Parks is a partnership between Proyectos y Edificaciones Civiles (PECSA) and Consorcio Constructor Saltillo (COCONSA), which has successfully reduced vacancy rates in the industrial park sector. A BBVA report predicts that Coahuila will see a GDP growth of 4.2% by the end of 2024, driven by manufacturing in transportation and machinery. Through this agreement, BBVA Mexico aims to support strategic partners and strengthen the region’s appeal for investment and development.
SOURCE: CLUSTER INDUSTRIAL
NEWS BY STATE
GUANAJUATO
The 2024 Automotive Supply Forum, organized by the Guanajuato Automotive Cluster (CLAUGTO), aims to generate over $200 million in business opportunities and increase to more than 2,400 business meetings during its eleventh edition, set for August 21-22 at the Poliforum in Leon, Guanajuato. The event will feature 13,500 square meters of space with 492 booths and is expected to attract over 12,000 attendees, including more than 800 buyers from OEMs and Tier 1 and Tier 2 companies. Ramon Alfaro Gomez, head of the Guanajuato Sustainable Economic Development Secretariat, noted that the automotive sector employs around 100,000 people across 25 municipalities, with expectations to produce approximately 800,000 vehicles this year, potentially nearing 900,000. The forum will include a congress area, business meeting space with over 2,700 confirmed appointments, and networking opportunities. Notable confirmed OEMs include Stellantis, General Motors, and Mazda, while buyers are looking for suppliers in areas such as plastic injection molding, aluminum forging, and machining.
SOURCE: MEXICO INDUSTRY
NEWS BY STATE
QUERETARO
The automotive industry in Queretaro, which produces $8.5 billion annually, is focusing on new rubber technologies essential for the transition to electromobility. Daniel Hernandez Camacho, director of the Queretaro Automotive Cluster, noted that the sector anticipates double-digit growth this year, employing over 85,000 workers across 120 tier 1 companies. The region produces over 200 components and systems for North American vehicles, with rubber playing a critical role in areas like vibration and noise absorption, particularly as electric vehicles evolve. As these vehicles generate less noise and vibration, the industry is adapting by finding new rubber applications to address wear on metal components. The third Rubber Technology Symposium aims to equip local companies with the latest innovations in rubber technologies, fostering collaboration between industry professionals and manufacturers. Genaro Montes Diaz, from the Sustainable Development Secretariat, highlighted the rubber industry’s significance in both automotive and aerospace sectors in Queretaro.
SOURCE: EL ECONOMISTA
NEWS BY STATE
CDMX
BBVA Mexico and Ministry of Economic Development of Mexico City organized the “CDMX Nearshoring Connection” event, where 150 companies discussed the current conditions for business relocation in Mexico, especially in Mexico City. Fadlala Akabani Hneide, Minister of Economic Development, emphasized that Mexico City is well-positioned to attract companies seeking to relocate due to its favorable business environment and proactive policies. Nearshoring, driven by the need to reduce supply chain risks, is seen as a key strategy, with around 400 companies, primarily from Europe, the U.S., and China, showing interest in Mexico. SEDECO highlighted Mexico’s strong trade relationship with the U.S., with bilateral trade surpassing USD 800 billion. Mexico’s large domestic market and skilled workforce make it an attractive destination for Foreign Direct Investment (FDI), with Mexico City alone attracting over USD 57 billion from 2019 to early 2024, representing 30% of the national total.
SOURCE: BBVA
STATE OF MEXICO
The Government of the State of Mexico expects USD 2.5 billion in investments during August, creating over 11,600 jobs. These investments will mainly impact the automotive, pharmaceutical, commercial, logistics, and real estate sectors, with companies like Sanofi, Bayer, Stellantis, Chedraui, Prologis, and Danhos involved. The companies will soon announce new projects and operations within the state. The Ministry of Economic Development of the state emphasized that the administration of Delfina Gomez Alvarez has focused on fostering a favorable investment environment and that job creation, support for existing companies, and attracting new investments remain key priorities.
SOURCE: MEXIQUENSE
INVESTMENT NEWS
NORTH
ZC RUBBER
With an investment of 590 million dollars and the creation of 1,500 jobs, RUBBER conducted the groundbreaking ceremony in Saltillo, Coahuila.
The announcement was made on April 30, 2024.
ARTISTIC MILLINERS
The Pakistani textiles company announced an investment of 36.7 million dollars to start up operations in Mexico, located in Parras, Coahuila. The potential creation jobs will be 700.
CENTRAL MEXICO
SINOBOOM
With an investment of 150 million dollars, SINOBOOM started the construction of a new manufacturing plant in Silao, Guanajuato, where 700 new jobs will be added to its staff.
SOURCES : MEXICO NOW, MEXICO INDUSTRY, CLUSTER INDUSTRIAL
LEGISLATIVE CHANGES AND INITIATIVES
LABOR
• Initiative with a Draft Decree to Add Article 476BIS, 476-TER, and Amend Article 487 of the Federal Labor Law
Presented by: Deputy Maria Macarena Chavez Flores (Michoacan – PRD)
Purpose: In relation to occupational diseases, work-related stress will be interpreted based on two continuous and positive medical evaluations provided by the patient’s doctor. These evaluations will determine whether the condition can be classified as an occupational disease, taking into account various doctrines from renowned medical associations or institutions. Additionally, the initiative proposes adding the right for workers who suffer a workplace-related risk to receive psychological and psychiatric assistance. Status: 2024-08-07 - Published in the Parliamentary Gazette.
LEGISLATIVE CHANGES AND INITIATIVES
ARTIFICIAL INTELLIGENCE
• Nuevo Leon: Initiative to Amend Article 16 of the State Education Law
Presented by: Local Deputy Denisse Daniela Puente Montemayor (Nuevo Leon - MC)
Purpose: The State’s educational services must promote continuous digital education and provide training on the knowledge and use of Artificial Intelligence applications.
Status: 2024-08-06 - Initiative referred to the Committee for review.
ENVIRONMENT
• Nuevo Leon: Initiative to Amend Article 5 of the Law on Administrative Justice for the State and Municipalities of Nuevo Leon
Presented by: Local Deputy Irais Virginia Reyes de la Torre (Nuevo Leon - MC)
Purpose: To ensure that the Magistrates of the Ordinary Chambers receive training in environmental justice so that in resolutions related to permits, licenses, construction sites, and any administrative matters, the protection of the environment is prioritized.
Status: 2024-08-06 - Initiative referred to the Committee for review.
PRODENSA INSIGHTS
SHELTER SERVICES V. GOING SOLO: CHOOSING THE RIGHT PATH
Entering the Mexican manufacturing sector is an exciting yet challenging endeavor. With its growing economy, strategic location, and competitive labor costs, Mexico offers immense opportunities for global manufacturers. However, understanding the best approach to entering this market is crucial. Should you opt for shelter services or establish a wholly-owned subsidiary?
SHELTER SERVICES:
• PROS-reduced risk and liability, quicker start up, compliance partners, and economies of scale
• CONS-limited control, limited flexibility in the operational model, potential unexpected costs and taxes
WHOLLY-OWNED SUBSIDIARY:
• PROS-full control, full flexibility in the operational model, long-term investment
• CONS-initial planning and investment, regulatory environment burden, full team structure needed
THE SHELTER SERIES UNVEILING THE TRUE COST: MULTITENANT V. DEDICATED SHELTER IN MEXICO
Many companies are drawn to the initial cost-attractiveness of multitenant shelters in Mexico. However, we have seen a growing concern about the true financial picture of this operational model. Let’s dive deeper into the financial aspects of multitenant shelters and the dedicated shelter model, helping you make an informed decision about your nearshoring strategy.
• Limited Control over Labor Costs: multitenant shelter operations may be restricted in some of the labor costs (benefits package, worker risk premium) or also may be limited in bargaining power for insurance policies.
• Profit and Income Tax Uncertainties: multitenant shelter operations may be limited in the flexibility of the Safe Harbor calculation for their income tax while dedicated shelter (with Shelter IMMEX) may have an impact from some non-deductible expenses on their labor costs.
• Limited Flexibility in Supplier & Support Services: multitenant shelter operations may have difficulty differentiating or clearly allocating certain costs due to the shared nature of some expenses.
• VAT Certification & Other IMMEX Incentives: multitenant shelter operations have an increased risk of being adversely affected by the operations of other companies, including the crucial risk of losing VAT Certification
• Continued Growth & Independence: multitenant shelter operations have very limited flexibility to grow and become independent, as a new operation would need to be incorporated and transferred.
PRODENSA INSIGHTS
CAPITALIZING ON FREE TRADE: PASSPORT FOR DOING BUSINESS IN MEXICO
Mexico has become a global trade hub through its extensive network of Free Trade Agreements (FTAs), which provide preferential access to key international markets. With 14 FTAs covering 50 countries, Mexico has significantly boosted economic growth, attracted foreign investment, and diversified its exports.
The United States-Mexico-Canada Agreement (USMCA) is central to Mexico’s trade strategy, replacing NAFTA and facilitating trade across North America. The USMCA reduces tariffs, streamlines customs, and enhances rules on digital trade, labor, and environmental standards.
Beyond North America, Mexico has agreements with regions such as the European Union, Latin America, and Pacific Rim nations, further expanding its global trade reach. Key agreements include the Latin American Integration Association (ALADI), the Mexico-European Union Free Trade Agreement, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Mexico’s FTAs offer benefits like reduced costs, expanded markets, and increased competitiveness. For businesses, these agreements, particularly the USMCA, provide opportunities in supply chain optimization, market access, and investment. Success in Mexico’s market requires thorough research, local partnerships, regulatory compliance, and leveraging technology.
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