Weekly Report 99 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review #99 I April 6, 2022

MANUFACTURING INDUSTRY GENERAL MOTORS AND HONDA JOIN FORCES TO MANUFACTURE ELECTRIC VEHICLES General Motors (GM) and Honda announced plans to expand the commercial relationship between the two companies to jointly develop a series of electric vehicles (EV), whose global production will begin in 2027. In this regard, they announced that GM will focus on promoting new technologies such as lithium metal, silicon, and solid-state batteries and implementing production methods that update battery cell manufacturing processes. For its part, Honda highlighted its solid-state battery technology, considered by the company to be the “core element” of future electric vehicles, which is being tested in Japan and is being prepared for mass production. This is a key step in delivering on our commitment to achieve carbon neutrality in our global products and operations by 2040 and eliminate exhaust emissions from light-duty vehicles in the United States by 2035,” said Mary Barra, GM Chair and CEO. For his part, Doug Parks, executive vice president for GM Global Product Development, Procurement, and Supply Chain, assured that the new electric vehicle will be affordable and powered by leveraging the 2 million units of EV production capacity that the company will use to install by 2025. “Honda is committed to achieving our goal of global carbon neutrality by 2050, which requires reducing the cost of electric vehicles to make EV ownership possible for the greatest number of customers,” said Toshihiro Mibe, president and CEO of Honda.

SOURCE: Forbes Mexico

Since 2013, the two companies began working together on the development of a next-generation fuel cell system and hydrogen storage technologies; in 2018, the Japanese company developed GM’s EV battery modules; in 2020, the two announced plans to develop two EVs to be launched in 2024 jointly.

CLIENTS GOOD NEWS Congratulations to our client Clear Edge, in Guadalupe, Nuevo Leon, for reaching 1000 days without accidents. Thanks to the entire team for making this possible. We are very proud to be your partners.

SOURCE: Forbes Mexico

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference April 5, 2022

COVID-19 The Undersecretary of Prevention and Health Promotion, Hugo Lopez-Gatell, commented that up to the 11th week of the year, only 0.1% of the COVID-19 cases registered had had a risk of death. Currently, only 5% of the pandemic beds are occupied. Mortality, which is the most serious indication of the epidemic, has been reduced by 98%. He added that there is continuing progress in vaccination; almost 192 million doses have been applied and that we have reached 90% population coverage without taking into account boosters. He stated that Mexico is one of the 10 countries with the highest number of vaccine doses globally, which has resulted in fewer deaths and millions of lives saved in the country. ENERGY REFORM After being questioned about the visit of Luis Arce, President of Bolivia, and the management of lithium by the nation, President Lopez Obrador said there is communication between the Ministry of Economy and the Bolivian government. He stated that he seeks no foreign company or government to take away lithium, which is required to supply fossil energies. He added that it will be important to follow up on the discussion during these days and that it will possibly be voted in about 15 days because the ordinary period ends in April.

He explained that they felt attended and satisfied in the meeting with John Kerry and the business people to whom the initiative was explained. He explained that it is false that the initiative promotes dirty energies and that the government does not care about producing solar, wind, or hydroelectric energy. He added that a great effort is being made and that no more coal-fired power plants will be created. When asked what he thought about the counterproposal presented by PRI deputies, the President urged the opposition deputies “to rebel” and be authentic popular representatives since it would be a shame if they sided with foreign companies. He added that with the reform, the popular economy is at stake, and if it is not approved, private and especially foreign companies will continue to prosper. ECONOMY The President pointed out that they are progressing well, there has been no increase in debt, no additional debt has been contracted, and the currency is stable. The President also pointed out that inflation in Mexico is lower than in the United States. There are 21 million workers registered in the IMSS, the minimum wage has increased by 70%, and tax collection has improved.

TREN MAYA The President emphasized that there is no legal problem with the Tren Maya. He mentioned that the train was originally planned to go underneath. However, they decided to make a new route parallel to the highway so that they don’t obstruct the area for a year. He explained that the idea of the train was to communicate the entire region, which is full of ancient Mayan cities, and to solve the saturation problem at the Tulum airport. It is an integral project for the rehabilitation of cities, and 200,000 hectares of trees will be planted. Military engineers who built the AIFA have already moved to the Mayan Train and the Tulum Airport because they have to work to conclude these projects by December 2023. President Lopez Obrador stated that he is already thinking about concluding his term of office in 2024 and leaving all the works completed. HEALTHCARE Jorge Alcocer reported that 728 million medicines had been delivered, representing 50% of the total distributed. He also mentioned that from March 21 to 25, 2,490 mixtures were prepared for cancer patients. FREEDOM OF SPEECH The President commented that there is no longer impunity. He mentioned that progress is being made in the fight against corruption and said that he regrets the murders of journalists very much. He commented that there are open files in all the cases, and in most of them, there are already suspects. The President stated that there is freedom of speech, and he is the most attacked and criticized President ever. He stated the media criticizes not only him but also the transformation process that represents millions of Mexicans. He affirmed that there should be a profound change in the media’s role, and the main objective should be to inform the people with objectivity and professionalism.

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

MANDATE RECALL President Lopez Obrador pointed out that it is very regrettable that the INE does not promote the consultation. He pointed out that not even 1% of Mexicans knew about it. He called on the people to participate as it is his duty as President. After being asked about TEPJF’s decision to declare the governors’ propaganda regarding mandate recall inapplicable, he said he would send a constitutional reform initiative to guarantee democracy in Mexico so that there will no longer be judges with “biased” attitudes in electoral matters. He said that he will propose that the people directly elect the electoral counselors and magistrates. WATER SCARCITY IN NUEVO LEON The President mentioned that there is a joint plan that has been implemented in the state. He commented that more than 2 billion pesos have been invested in supplying water to Monterrey and that this will continue to be done. Alongside Governor Samuel Garcia, they will prioritize the supply for the people.

NEWS BY STATE

BAJA CALIFORNIA The State of Baja California remains lowrisk or green light with 237 active cases in the past 14 days and 9 new cases in the past 24 hours. This week begins the intensive vaccination plan with the first, second, complete scheme and booster application to the adult population in all municipalities. The Mexicali Supply Expo 2022 will take place on Thursday, Abril 7th, with 150 exhibition spaces from 7 strategic industries sectors such as renewable energies, plastic products, electronics, medical devices, metal mechanics, automotive, and aerospace.

SONORA The State of Sonora is considered a lowrisk or green light. Official reports confirm 108 new cases in the last 24 hours. This week, the vaccination plan continues with the first, second, and booster application to the adult population. The 2022 National Women’s Fair was held, where more than 25 national and international companies offered 1,000 jobs in order to promote job opportunities.

NEWS BY STATE

NUEVO LEON The government of Nuevo Leon announced an economic plan to support SMEs with financing, a segment that was severely affected by the COVID pandemic and which is now intended to be strengthened in the face of an adverse international environment. The government will support a credit fund of two thousand 800 million pesos and an import substitution program in specific productive sectors. COAHUILA The State Government of Coahuila will apply around 20 thousand first doses of the anti-COVID vaccine to minors in the northern region of Coahuila. The application of the doses mentioned above has already been scheduled for next week. TAMAULIPAS In Tamaulipas, the latest report from the Ministry of Health on COVID-19 cases indicates that 98 infections and two deaths were confirmed, with the northern border registering a rebound in positive cases with laboratory tests.

NEWS BY STATE

SAN LUIS POTOSI The cycling market increased exponentially due to the coronavirus pandemic that caused the confinement and forced the adoption of new forms of mobility and leisure activities. The demand increased between 60 to 70 percent from 2020 (when the pandemic started) to date, particularly regarding this bicycle manufacturer brand that mainly supplies the domestic market. However, during this same period, the bicycle manufacturing industry has also been affected by the increase in raw materials, which has raised the final cost of bicycles by up to 35 percent, since steel and freight alone have shot up by more than 100 percent in some periods.

QUERETARO The technology company Microsoft plans to inaugurate a regional data center in the state of Queretaro in late 2022 or early 2023, from where it will provide all of the company’s services to businesses around the world. “It is a stateof-the-art data region center at a global level, that is, it is not a center of, by and for Mexico, it is a global center established in Mexico to offer domestic and foreign customers,” Roberto de la Mora, chief technology officer (CTO) of Microsoft Mexico, explained this. The project is already under construction in Queretaro. This state attracts international industry, where it will start with three “availability zones,” each with its own data center of between 2.4 and 3 megawatts with redundant links and power to offer Microsoft’s complete portfolio. The company has already begun to hire personnel, so it foresees hundreds of direct jobs for the area and those created by the construction of the work and the indirect jobs that will be generated. The technology giant chose Queretaro because it has “ideal conditions” in terms of geographic location, internet connectivity, and electricity.

NEWS BY STATE

GUANAJUATO According to data from the National Institute of Statistics and Geography (INEGI), despite the pandemic, the automotive industry in the state of Guanajuato reported 10 percent growth at the end of 2021 and 18 percent growth in the auto parts sector. The attraction of investments in this sector detonated even new economic poles outside the industrial corridor, reaching municipalities such as San Luis de la Paz, San Miguel de Allende, and San Felipe. At the national level, only the states of Guanajuato and Nuevo Leon have managed to surpass the levels registered for their manufacturing industry before the pandemic during 2022. Much of this recovery is attributed precisely to the automotive sector, of which Guanajuato seeks to become the national epicenter. It is estimated that Guanajuato’s manufacturing activity fell by 14.1 percent after the pandemic. At the last cut issued by INEGI, it already showed an increase of 17.9 percent, so it not only achieved its recovery but also surpassed by 3.4 percent the levels it already had.

JALISCO Despite the health and economic crisis, the Council of Industrial Chambers of Jalisco (CCIJ) expects to generate 10,000 new jobs this year. This was announced by the new President of the organization, Cesar Castro Rodriguez. “We have been holding job fairs since January. We are working with Zapopan, and I will talk to Pablo Lemus (Mayor of Guadalajara) to set up employment kiosks in Guadalajara as well,” he said. Agreements will be sought with the University of Guadalajara (UdeG) to attract graduates of bachelor’s degrees and technicians focused on the industries that require personnel. The sector to be strengthened with these recruitments is mainly the electronics sector, corresponding to the corridor of industrial parks in El Salto.

NEWS BY STATE

STATE OF MEXICO From Monday, April 4 to April 6, 2022, vaccination modules against COVID-19 for stragglers will be installed in nine municipalities of the State of Mexico. All persons over 18 years of age who have never received the vaccine, who are missing the second dose ,who completed their primary schedule more than four months ago or who received the CanSino single dose, and have not yet received the booster vaccine, regardless of their municipality of residence, will be able to get vaccinated. CDMX The obligatory mask restriction in public open places has been lifted in CDMX. Health Minister for Mexico City Olivia Lopez Arellano, announced the lift of the restriction, one that has been adopted by several other countries due to complete vaccination schemes and decrease in cases. Other sanitary measures are still recommended such as the use of facemasks in public closed spaces, social distancing and hand sanitizing.

NATIONWIDE: Mexico expects WHO to support production of anti-COVID vaccines. Angel Villalobos, Mexico’s representative to the WHO, hopes that member countries will agree to free up intellectual property processes (IP) to increase vaccine production. The Mexican vaccine is yet to be released, yet the United States, the European Union (EU), India and South Africa reached consensus in mid-March on key elements of the longsought IP exemption for vaccines, including whether it would be for three or five years, according to a proposed document in WHO.

ECONOMIC RECOVERY MEXICO’S ECONOMY CONTINUES TO RECOVER In January, the Coincident Indicator recorded its second consecutive month above its long-term trend. The Mexican economy continues in its recovery process after the impact of the COVID-19 pandemic in 2020, according to the latest data from the Cyclical Indicators System, prepared by the National Institute of Statistics and Geography (Inegi).

Meanwhile, the Urban Unemployment Rate was the only component that showed a monthly decrease in its level, with 0.05 points. LEADING INDICATOR In the case of the Leading Indicator, which seeks to indicate the turning points of the Coincident, it was also above its long-term trend, with 100.9 points last February.

In January, the Coincident Indicator, which reflects the general state of the economy, stood at 100.2 points, thus registering its second consecutive month above its long-term trend.

However, it showed a decline of 0.10 points with respect to January, thus registering its seventh month of decline.

Likewise, it presented a monthly growth of 0.16 points. It strung 20 months of increases, which had gradually brought the indicator to a level not seen since November 2019, before the world faced the new coronavirus.

The decrease in this indicator was explained by the decline of 0.28 points in the Standard & Poor’s Index. This was the only component that showed a negative trend during the month.

Within the indicator, it was observed that the increase was explained before the monthly increase presented by five of its six components; being the Industrial Activity Indicator the one with the highest expansion, with 0.35 points.

Meanwhile, at the other extreme, the Interbank Interest Rate was the component with the largest increase in its level with respect to January, with 0.31 points more.

SOURCE: El Economista

ECONOMIC RECOVERY ECONOMY & INVESTMENT IN MEXICO

COMPANIES NATION WIDE • Arca Continental • Insider NORTHEAST • Veolia • Samkwang • Mattel CENTRAL • Wartlow • Automotive Company • Microsoft • SSA Mexico

KEY INSIGHTS • With an investment of 420 million pesos and the generation of more than 1,300 jobs, Wartlow will open its fourth plant in Queretaro. • A Swiss automotive company is preparing to open a plant in Queretaro, where it is currently analyzing two possible locations, explained Valentin Pfyffer, representative of the Swiss-Mexican Chamber of Commerce and Industry (SwissCham) in the Bajio region. • Microsoft plans to inaugurate a regional data center in Queretaro at the end of 2022 or the beginning of 2023. • SSA Mexico will invest 30 million dollars for new

SOURCE: El Economista

•

• • • •

equipment at the Manzanillo facility during the remainder of the year. With an investment of 170 million pesos, Veolia started up a new Environmental Center located in San Luis Potosi. Samkwang will invest approximately 15 million dollars in a new plant in Reynosa. Mattel will double its investment in the Nuevo Leon plant, which will now manufacture Mega Bloks. Arca Continental plans investments for US$600 million; half will go to Mexico. Turkish Insider has become a unicorn and plans to invest US$50 million dollars in Mexico.

TOWARDS THE “NEW NORMAL”

DISTRIBUTION OF DEATHS PER STATE DUE TO THE PANDEMIC

INFORMATION UPDATED ON APRIL 4, 2022 AT 19:00 HRS LOCAL TIME.

NEW CASES REPORTED: 706

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

CONFIRMED CASES: 5,666,921

NEW DEATHS REPORTED: 12

CONFIRMED DEATHS: 323,235

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 6.26

0 to 10.0 (28 states)

40.1 to 50 (0 states)

10.1 to 20 (1 states)

50.1 to 60 (0 states)

20.1 to 30 (2 states)

60.1 to 70 (0 states)

30.1 to 40 (1 states)

>70 (0 states)

Elaborated by Prodensa with information from the Health Ministry of Mexico

PANDEMIC’S SITUATION IN THE WORLD • As of April 4, 2022, globally there have been reported 489,799,062 confirmed cases (9,628,490 new cases since last week´s report) of COVID-19 and 6,152,095 deaths (27,699 new deaths*). https://COVID19.who.int/

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

TOWARDS THE “NEW NORMAL” INCIDENTS OF CONTAGIONS IN THE POPULATION BY REGION AS OF APRIL 4

DEATH INCIDENTS IN POPULATION BY REGION AS OF APRIL 4

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

LABOR

USDOL This week Julie Su, Deputy Secretary of the US Department of Labor (USDOL), is in Mexico to meet with authorities, employers, and workers to reaffirm commitments and increase collaboration on USMCA labor obligations. The USDOL has a clear agenda to ensure that all workers in North America benefit from our trade agreement. Employers in Mexico must observe all USMCA labor provisions in order to be in full compliance. Employers must remain neutral when it comes to the right of union association. Workers must engage freely, without the employer’s participation, with the union of their choice. The USDOL delegation, headed by Deputy Secretary Su, has already visited the new Labor Court for Collective Matters this week in Mexico City. She has also met with women activists working to combat gender discrimination in employment, empowering women workers, and demanding equity and inclusion at work. The 2019 labor law reform has yet different areas pending for full implementation. Companies must ensure that all changes are implemented timely and with evidence for future audits and inspections.

ALVARO GARCIA HR, Vice President