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GENERAL SITUATION IN MEXICO

Weekly Review #93 I February 23, 2022

MANUFACTURING INDUSTRY U.S. TEXTILE MANUFACTURERS SEEK MEXICAN SUPPLIERS

Entrepreneurs of the fiber, textile, and clothing chain in the United States sought Mexico to become “the option” to replace imports from Asia and to supply within the framework of the Mexico, United States, Canada Agreement (USMCA) with merchandise that is lacking in North America, including medical supplies, increase the denim value chain, as well as cotton and synthetic products. Manuel Espinosa, president of the National Chamber of the Textile Industry (Canaintex), told El Economista that after the trade war between the United States and China, as well as the shortage problems in some imported inputs from the East of the world, Mexico’s northern neighbor, has seen our country as the best partner to recover the manufacturing boom, aligned to the sustainability of products. However, the leader of the business people regretted that in Mexico, there are limitations in the use of inputs, such as cotton, which has a world quality. Still, production is tied to the issue of glyphosate (pesticide), which the government of Andres Manuel Lopez bans. He said that his U.S. textile counterpart, the NCTO (National Council of Textile Organizations), and Canaintex are working to define strategies to increase the production of inputs such as cotton and synthetics. “(The Americans) want to produce, they see Mexico as ‘the option,’ the cotton problem, here in Mexico we produce world quality, but with the issue that transgenic seed is prohibited, and glyphosate, we do not produce what we should produce. This is what I was talking about with the cotton growers. We (tex-

SOURCE: El Economista

tile growers) are dying to consume Mexican cotton because it is the way to become competitive, and we are importing 30% of what is consumed in Mexico”, Espinosa reproached. The problem in the country is the uncertainty that proliferates in several aspects, from electricity, the lack of inputs due to brakes in production, and above all, the issue of the rough and legal smuggling of inputs of the fiber, textile, and clothing chain. Therefore, the leader of Canaintex demanded the granting of seed permits for the planting of cotton with new technologies and to meet the demand required by the U.S. market. According to Canaintex, the agglutinated companies generate more than 12% of the manufacturing Gross Domestic Product (GDP) in its entire value chain, reaching 90,000 million pesos. Another of the sector’s major pending issues is illegality, since “we estimate that out of every three products sold in the market, two are illegal. If the government takes this on board, we have said that a formal job is generated for every garment produced, which translates into income for them,” accused Manuel Espinosa. The industry has the conditions to grow, but it is in the hands of the authorities to take action and create the conditions. Because of the 70,000 jobs lost during the pandemic, more than half have recovered, and he said we are below 2019.

MANUFACTURING INDUSTRY MEXICO WILL LEAD THE AUTOMOTIVE ELECTRIFICATION IN LATIN AMERICA: NISSAN Among Nissan’s plans for 2030 is for Mexico to lead the electrification of the automotive sector in Latin America.

In 2021, Nissan reported a worldwide net income of $53 billion dollars, an operating profit of $1.6 billion dollars, and a net income of $1.7 billion dollars.

For Nissan Motor Company, the electrification of the automotive sector in Mexico and around the world will not be a goal, but a consequence of the transition to the use of technologies that are more environmentally friendly, so the domestic market will lead the efforts to bring this technology to all of Latin America.

“In Latin America, Mexico will be the first country to have e-Power technology, and what this means is that it is not about Europe, Japan, China, or North America. It’s about Mexico,” emphasized Ashwani Gupta, Nissan’s Director of Global Operations, during the Future and Beyond event.

This interest is no coincidence because, according to Nissan, the Mexican market has a great potential that is reflected in the fact that the country ranks fourth with the fourth-largest number of cars sold worldwide, with about 6 million sold historically.

“Mexico is seen by Nissan globally within the top 5, which translates into them being significantly important to us for their earnings and their profitable market share, which is why Mexico is so important to us.”

SOURCE: Forbes Mexico

MANUFACTURING INDUSTRY

In 2021 alone, a year in which the effects of the COVID-19 health emergency were still being felt, Nissan managed to place around 203,918 units in the country, representing about 5% more than 2020. “Mexico is going to be able to become number one in electrification in Latin America, and it is also going to be the one that can have new features like pro-pilot, and then Mexico is also going to lead that connectivity to digitalization,” Gupta maintained. It will be in May of this year when the automaker will unveil its first hybrid bet for Mexico. The Nissan executive mentioned that although 40% of vehicle production is used for the domestic market, it is essential for the Japanese company that Mexicans can access cutting-edge technologies, as they are immersed in the experience gathered by the local consumer. “When we make products for domestic customers, it means that we are also incorporating all customers’ behavior in our products and technologies, and that is also part of the strengthening that Nissan has in Mexico,” said the executive. For the world to drive cars that have a better relationship with the environment, the Japanese company designed the Ambition 2030 plan, which aims to electrify its most important markets globally, including Mexico, which occupies a prominent place in the strategy.

SOURCE: Forbes Mexico

One of the first steps to achieve this plan is an investment of 18 billion dollars over the next five years to manufacture cars. Nissan’s idea is that globally the company will be able to offer 23 new electric car models to reach 50% electrification by the fiscal year 2030. Nissan Motor Company will base its electrification strategy in Mexico and the world based on three pillars: to convince customers that purchasing an electric vehicle is the best decision because its driving is more optimal and, therefore, its performance. Another is that the price will be more competitive than market options due to the investment in renewable technologies, such as batteries, and finally, the creation of an ecosystem that helps drivers maximize their experience behind the wheel. “We are going to make the customer’s decision easier, more natural when choosing an electric car,” said Gupta.

GOOD NEWS COVID DEATHS IN MEXICO HAVE DECREASED FOR TWO CONSECUTIVE WEEKS: LOPEZ-GATELL

The Government affirms that it fulfilled its forecast and that COVID-19 deaths in Mexico have fallen for two consecutive weeks, highlighted this Tuesday by the Undersecretary of Health, Hugo Lopez-Gatell. “The comparison is very noticeable between the peak of the second curve and the current moment; there is a 76 percent difference. Fortunately, we have already had two consecutive weeks of mortality reduction,” explained the official. As had been predicted, shortly after identifying the South African variant in November last year, the omicron spread rapidly but resulted in low-intensity cases. This scenario is reflected in both the number of hospitalizations and deaths, which are 82 and 76 percent lower than at the peak during the second wave of the pandemic, said Lopez-Gatell. “Hospitalization had a very different pattern, instead of the last curve being the largest, it is the smallest, first curve, second the most intense, third and in the

SOURCE: El Financiero

fourth, we have a reduction of 82 percent concerning the peak of the epidemic. The same in deaths”. DOES MEXICO BEAT COVID? The figures presented this Tuesday by the undersecretary show a hopeful outlook for the country because, according to his report, conditions are getting closer and closer to a situation of stability. Not only are the 32 states already showing a “drastic reduction in the epidemic and deaths,” but the National Vaccination Strategy continues to make progress and has achieved “86 percent coverage in the total population, 90 percent in adults and 52 percent in children and young people”, informed Lopez-Gatell. As for the available vaccines, all the reserves have been distributed, and there are enough to cover the pending booster doses for the population aged 15 years and older, as well as for minors aged 12 to 14 years with comorbidity, for whom pre-registration has already been opened.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference Feb 16-22, 2022

MEETING WITH AMBASSADOR KEN SALAZAR

ECONOMY

He highlighted the good relationship that exists with

The President declared that there had been no depre-

the United States and pointed out that the Ambassa-

ciation of the currency during his administration, which

dor was present in Tijuana and Nogales, Sonora, to talk

has not happened in decades. He reported that more

about the customs operation. He added that in No-

than 70,000 jobs were created in February 2022. He

gales, it is likely that there will be a rail bypass to make

highlighted that tourism and the economy are growing.

a customs office, so there is a collaboration between the two governments to allow commercial exchange in

JOURNALISTS

this border area.

President Lopez Obrador indicated that it is a media campaign without an underlying cause because the

PRESIDENT FOR CUSTOMS SURVEILLANCE

Government has a political position and is facing a

President Lopez Obrador reported that his tour of the

conservative and corrupt bloc that has dominated the

north of the country responds to the need to monitor

country for 36 years. The “grey house” issue is not per-

the operation of Customs, which is why he is accom-

sonal or journalistic. It is a dispute over the nation. He

panied by elements of SEDENA to combat drug traf-

pointed out that it is a power struggle, with two dif-

ficking smuggling and guarantee security. The decision

ferent conceptions: power is at the service of others,

was made so Customs could be managed by the Sec-

and the other is to accumulate money without moral

retary of the Navy and the Secretary of National De-

scruples, acting in a classist and discriminatory manner,

fense to prevent acts of corruption and that there could

without respect for the people.

be honest management in them; the modernization of customs has managed to improve collection.

SOURCE: https://www.youtube.com/channel/UCxEgOKuI-n-WOJaNcisHvSg

MEASURES TAKEN BY STATES IN MEXICO

BAJA CALIFORNIA Baja California’s risk light changed the past week due to the drop of COVID-19 cases. Baja California is considered a low-risk or green light with 832 active cases in the past 14 days. This means 100% capacity in essential activities. The Health Secretary asks the population to continue with the sanitary protocols and preventive measures such as the use of face masks, healthy distance, ventilation of spaces, and hand washing. The vaccination plan continues daily in different municipalities. The IMSS (Mexican Social Security Institute) informs that as of February 22, the COVID-19 Permit will be disabled due to the decrease of COVID-19 cases. Therefore, the companies’ workers must go to their family medical unit for a medical assessment and the corresponding disability.

SONORA The State of Sonora is considered medium-risk or yellow light with only 4 municipalities in low-risk or green light. Official reports confirm 58 new cases in the last 24 hours. The vaccination plan continues this week in different municipalities with the booster application for people over 30 years old and the complete vaccination schedule for the adult population. A new generation graduates with 61 environmental managers from the Diploma and Updating Workshop on Environmental Regulations. Environmental protection is a shared responsibility between companies, institutions, citizens, and all those who are part of the environment.

MEASURES TAKEN BY STATES IN MEXICO

COAHUILA The Laguna Region Subcommittee stated that based on the electronic survey carried out, in which companies and commercial establishments from the five regions predominantly from industry and services participate, there had been a decrease in the percentage of workers positive for COVID-19 compared to the last week; going from 7 to 2 percent of infections among workers. TAMAULIPAS The attraction of foreign direct investment in Tamaulipas reached more than one thousand $336.2 million dollars in 2021, double what was obtained a year ago when the COVID-19 pandemic caused effects. However, it remained 18 percent below the maximum accumulated by the entity obtained in 2019, reported this week by the Ministry of Economy. NUEVO LEON Governor Samuel Garcia Sepulveda indicated that due to the decrease in COVID-19 cases and hospitalizations, the permitted capacity will rise from 60% to 75%. It could reach 100% in a week if the downward trend in cases continues.

MEASURES TAKEN BY STATES IN MEXICO

AGUASCALIENTES After an intense period of high propagation, the latest data indicate that the coronavirus pandemic is easing, with a drop in COVID-19 cases in Aguascalientes, according to the latest report issued by the Ministry of Health. According to the agency, during the previous week analyzed (February 6 to 12), 1,146 infections were recorded, which represents a 32% decrease compared to the 1,701 cases recorded in the previous period (January 30 to February 5). Similarly, hospitalizations in the different ISSEA hospitals showed a decrease, falling from 55 to 43 patients admitted.

QUERETARO The state Secretary of Health, Martina Perez Rendon, stated that it is possible that if the downward trend in COVID-19 cases is maintained for the Easter holiday period, it is possible that this year some of the activities that could not been carried out since the beginning of the sanitary contingency can be carried out. Regarding the proximity of the Easter holiday period and the possibility of a fifth wave due to the mobility that this implies, he said that “this will depend on the population and that a new variant does not appear, we cannot rule it out.” The official said that they remain alert since the virus is still circulating, since “out of every 100, about 65 cases are confirmed, this forces us as a society to continue to join in applying protective measures, especially the use of masks”. In addition to the precautions already known, Perez Rendon said that a second factor in continuing to face the virus is attending the vaccination days to apply booster doses.

MEASURES TAKEN BY STATES IN MEXICO

GUANAJUATO Guanajuato’s Minister of Health, Daniel Diaz Martinez, announced a shift to an “endemic” approach to the coronavirus pandemic, prioritizing prevention and rapid reaction to outbreaks and forecasts a return to a more normal existence more than two years after the emergence of COVID-19. This new strategy includes maintaining cautious surveillance in tune with the warning signs of the next wave or variant of the SarsCov2 virus in addition to actions such as: boosting the application of vaccines, maintaining personal protective equipment in health professionals and citizens in addition to the constant monitoring of cases, hospitalizations and deaths “The pandemic will not have a definite end, that is, there is no point to reach, but it will be a gradual decline since the disease will not go away” said the state official. It is also necessary to have available the reconversion of hospital beds, maintain the rapid and PCR type tests for people with symptoms, and promote from the local level the federal policy for the vaccination of minors.

JALISCO After weeks complicated by a large number of sick people, infections by COVID-19 are decreasing in Jalisco. According to the latest figures from the Jalisco Ministry of Health, 1,511 infections and 10 deaths were recorded this Sunday. With these figures, the state reached 557,644 infections and 18,679 deaths so far in the pandemic.

MEASURES TAKEN BY STATES IN MEXICO

SAN LUIS POTOSI With data until September 22, San Luis Potosi registered 739 new cases of COVID-19, including 375 women and 364 men, of which 275 were fully vaccinated, and a four-month-old baby contracted the respiratory disease. As announced by the State Committee for Health Safety, there were also 11 new deaths of three women and eight men between 30 and 91 years of age, nine of whom were adults over 60 years of age. According to the report, of the 11 deaths, only one person had no risk factors, while the other 10 suffered from high blood pressure, diabetes, smoking, among other diseases, and eight of them had no history of vaccination. IMSS suspends COVID-19 permits due to a decrease in infections. As of this February 22, 86 patients remain under medical attention for COVID-19, of which 30 are stable, 42 are in serious condition, and 14 are intubated and have been reported as delicate and at risk of losing their lives. Health authorities pointed out that almost two years after the beginning of the SARS-CoV-2 pandemic in San Luis Potosi, 169,821 infections and 7,375 deaths have accumulated.

MEASURES TAKEN BY STATES IN MEXICO

STATE OF MEXICO At the end of the third quarter of 2021, the country’s tourist states recorded the highest growth rates in their economic activity after the devastation suffered by the COVID-19 pandemic. Although the states most dependent on tourism showed signs of recovery last year, they have not yet reached pre-pandemic levels. According to seasonally adjusted data from the National Institute of Statistics and Geography (Inegi), the highest annual increases in the Quarterly Indicator of State Economic Activity (ITAEE) during the January-September 2021 period were observed in Nayarit (15.9%), Quintana Roo (12.2%), Baja California (11.3%), Guerrero (11.2%) and Baja California Sur (11.0 percent). It was followed by Queretaro (9.4%), Nuevo Leon (9.2%), Yucatan (9.2%), Tabasco (9.2%), Oaxaca (8.9%), Coahuila (8.4%), Chihuahua (8.0%), Chiapas (8.0%), State of Mexico (7.7%), Guanajuato (7.1%), Jalisco (7.0%) and Aguascalientes (7.0%). The states with variations between less than 7% and more than 4% were Durango, San Luis Potosi, Zacatecas, Hidalgo, Sonora, Tlaxcala, Colima, Puebla, Tamaulipas, Veracruz and Sinaloa.

CDMX The Organization for Economic Cooperation and Development (OECD) lowered its growth forecast for the Mexican economy from 3.3% to 2.3% for 2022. In its “OECD Economic Survey of Mexico,” the international organization also estimated that the gross domestic product will grow by only 5.3 % in 2021 after a previous estimate of 5.9 %. On the other hand, the OECD anticipated a 2 % growth in private consumption in Mexico for this year, in addition to a 6.5 % increase in exports and 6 % in imports. In addition, the organization estimated that the unemployment rate will stand at 4%, which in comparison would not make much difference with the 4.1 % of 2021.

ECONOMIC RECOVERY STRATEGY IS BEING DEVELOPED TO TAKE ADVANTAGEOF COMPANY RELOCATIONS: RAMIREZ DE LA O Mexico is already working to take advantage of the relocation of global companies to the country in order to diversify global supply chains, informed Rogelio Ramirez de la O., Secretary of Finance. “We have been in close negotiations with our North American trading partners to take advantage of this relocation of companies to make global supply chains more resilient to possible external shocks,” he said. In an online conference where he was a speaker with the General Secretary of the Organization for Economic Co-operation and Development (OECD), Matias Cormann, he was confident that Mexico is on its way to becoming a more prosperous economy thanks to the strong integration it has with North America and the solid macroeconomic framework and stability that characterizes the country. Following the launch of the OECD report for Mexico, he explained that for the government, it is essential to ensure that economic growth permeates the country’s most vulnerable groups. In this way, the social disparities that have existed in Mexico for years can be reduced, he stressed. The Secretary of Finance explained that the priority axes for greater economic development are investments in infrastructure projects, the deployment of a social protection network that allows regions to be integrated to the same level of development, and maintaining solid and healthy public finances.

SOURCE: El Economista

The official thanked the OECD, the Ministry of Finance, and other government agencies that participated in developing analyses, work, and documents to favor Mexico’s integration into global supply chains. THE TAX COLLECTION EFFORT Secretary Ramirez de la O also pointed out that Mexico has increased tax collection by combating tax evasion and avoidance without increasing tax rates. In the same sense, he explained that for this fiscal year, the government launched additional actions to consolidate public revenues, such as launching a new tax regime that will facilitate compliance with obligations and the implementation of complementary measures to prevent the smuggling of goods. He is referring to the Simplified Trust Regime.

TOWARDS THE “NEW NORMAL”

DISTRIBUTION OF DEATHS PER STATE DUE TO THE PANDEMIC

INFORMATION UPDATED ON FEBRUARY 21, 2022 AT 19:00 HRS LOCAL TIME.

NEW CASES REPORTED: 4,832

SOURCE: https://www.gob.mx/salud/

CONFIRMED CASES: 5,418,257

NEW DEATHS REPORTED: 98

CONFIRMED DEATHS: 315,786

INCREASE OF CONFIRMED CASES SINCE THE FIRST REPORT MAP WITH THE DISTRIBUTION OF THE INCIDENCE RATE OF ACCUMULATED CASES OF COVID-19 BY ENTITY OF RESIDENCE.

National rate 49.49

0 to 10.0 (27 states)

40.1 to 50 (0 states)

10.1 to 20 (5 states)

50.1 to 60 (0 states)

20.1 to 30 (0 states)

60.1 to 70 (0 states)

30.1 to 40 (0 states)

>70 (0 states)

Elaborated by Prodensa with information from the Health Ministry of Mexico

PANDEMIC’S SITUATION IN THE WORLD • As of February 21, 2022, globally there have been reported 422,188,754 confirmed cases (1,597,571 new cases) of COVID-19 and 5,876,766 deaths (9,197 new deaths*). Lethal rate: 1.4%. In the last 14 days, 28,979,964 cases were reported globally.

SOURCE: https://www.gob.mx/salud/

TOWARDS THE “NEW NORMAL” INCIDENTS OF CONTAGIONS IN THE POPULATION BY REGION AS OF FEB 21

DEATH INCIDENTS IN POPULATION BY REGION AS OF FEB 21

SOURCE: https://www.gob.mx/salud/

EHS

DAVID ANTUNEZ

SPRING SEASON Spring is coming again, and travel will increase again. We still cannot claim victory over Omicron, so the following recommendations must be followed: DOMESTIC TRAVEL DURING COVID-19 What You Need to Know • Delay travel until you are up to date with your COVID-19 vaccines. • Check your destination’s COVID-19 situation before traveling. State, local, and territorial governments may have travel restrictions in place. • Wearing a mask over your nose and mouth is required in indoor areas of public transportation (including airplanes) and indoors in transportation hubs (including airports). • Do not travel if you are sick, tested positive for COVID-19 and haven’t ended isolation, had close contact with a person with COVID-19 and haven’t ended quarantine, or are waiting for results of a COVID-19 test. • If you are not up to date with your COVID-19 vaccines and must travel, get tested both before and after your trip.

Environmental, Health, and Safety Director.

LABOR

ALVARO GARCIA HR, Vice President

DECENT WORK Ten years ago, the right to dignified or decent work was added to the Mexican legislation. Decent work, among other things, provides social security access and a living, decent wage. USMCA provisions, set in chapter 23, require companies in Mexico operating under the North America commercial agreement to ensure that all labor relations and work arrangements comply with decent work standards. The international labor organization (ILO) has developed an agenda for the work community looking at job creation, rights at work, social protection, and social dialogue, with gender equality as a cross-cutting objective. Decent Work and the four pillars of the Decent Work Agenda – employment creation, social protection, rights at work, and social dialogue – are integral elements of the 2030 Agenda for Sustainable Development. For business continuity purposes, but also to create productive labor relations, contact us to learn how your organization can comply with all decent work standards.