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GENERAL SITUATION IN MEXICO SPECIAL EDITION

December 22, 2021

LABOR RELATIONS IN MEXICO: A Year in Review

2021 has been in Mexico the year with more changes to the Labor Law in decades. Even when the Mexican Labor law had its major, historical reform just last May 2019, changes continued this year. During 2021 three new labor reforms became effective. First, the remote work, telework labor reform, then the minimum wage reform, and the Outsourcing reform during the summer. Companies with operations in Mexico have been adapting at an unprecedented speed and implementing changes to their operative structures to be in full compliance. In addition to the local regulation, 2021 represented for Mexico the year of the first cases under the new rapid response mechanism that is part of the labor provisions of the USMCA. A new era of labor relations in North America was inaugurated this year.

INSTITUTIONAL RELATIONS 2021 Highlights

AMLO APPROVAL: President AMLO closes the year with the best popularity rating of 2021. According to the MITOSFKY poll, the President began 2021 with 60% approval, reaching his lowest level in May and July with 57%. By November, his popularity reached 67%, matching the highest level of his entire presidency in February 2019. 2021 ELECTIONS: In July, the most important election in the recent history of Mexico took place because of its volume: 19,915 positions were elected, and the balance of power in the Lower House set the agenda for the second half of AMLOs administration. Citizen participation was a central variable that affected who won and lost; more than 50% of participation was registered. Although Morena won 11 states, in Mexico City, Morena had a big setback as the opposition won 9 of the 16 mayors.

4 INSTITUTIONAL RELATIONS 2021 Highlights

CABINET CHANGES: Santiago Nieto Castillo departed from the Financial Intelligence Unit (UIF) and was replaced by former legislator Pablo Gómez Álvarez. In July, Rogelio Ramírez de la O assumed the position of Secretary of Finance, replacing Arturo Herrera. In August, Olga Sanchez Cordero left the Ministry of the Interior to preside the Senate. Victoria Rodriguez Ceja was confirmed as governor of Mexico’s Central Bank.

SOURCE: El Economista

USMCA: We celebrated one year of the USMCA implementation in July; the first meeting of the Free Trade Commission was held, chaired for the first time by women, as well as several meetings of the various committees within the treaty. This has been positive because it means that there is dialogue and communication between the parties’ governments. However, there have been trade irritants such as labor cases, and disagreements have been expressed regarding the U.S. interpretation of automotive rules of origin, as well as the Biden Administration’s initiative to grant tax credits to buyers of electric cars manufactured in the U.S. On the other hand, there are serious concerns on the part of the U.S. and Canada regarding Mexico’s electricity reform proposal, as it would violate the USMCA. The first year of the Agreement took place in the context of a global health and economic crisis that resulted in a disruption of supply chains. In the recovery process, external demand for Mexican exports has been one of the main drivers - unlike, for example, domestic private consumption, whose recovery has been more moderate.

INSTITUTIONAL RELATIONS 2021 Highlights

NORTH AMERICA LEADERS’ SUMMIT: On November 18, President Biden hosted Prime Minister Justin Trudeau of Canada and President Andrés Manuel López Obrador of Mexico for the first North American Leaders’ Summit (NALS) since 2016. The United States, Mexico, and Canada reaffirmed their strong ties and integration while also charting a new path for collaboration on ending the COVID-19 pandemic and advancing health security, competitiveness, and equitable growth, including climate change; and a regional vision for migration. Electric Reform: President AMLO submitted a constitutional reform bill to increase government control over the energy sector. The proposed reform would allocate to state-owned companies over half of the electricity market and would eliminate requirements for clean energy production. It would also reserve future lithium extraction for the state and do away with energy regulators, grouping their functions under the Energy Ministry and the CFE.

SOURCE: El Economista

RECOMMENDATIONS FOR 2022

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

LABOR

2022: AN UPCOMING YEAR OF IMPACTFUL LABOR CHANGES

Following three years of multiple changes to the labor law, new labor provision of the USMCA, and new international labor agreements ratified by Mexico, we can anticipate that next year will be the decisive, key year for full implementation, transition to the new labor model and for assuring compliance. Key aspects to keep track are: Legitimation of Collective Bargaining Agreements. Even when unions will have until May 1, 2023, to conduct the mandatory, one-time legitimation process, next year is expected and recommended to see an increasing number of legitimation taking place. Still, during 2021 the total number of CBA that have passed the legitimation process is minimum compared to the total number of CBA to be legitimized. New labor Law System. The third and final phase of the new labor law system will become effective during 2022. States with a strong manufacturing presence, especially in the north of Mexico, will finally transition to the new labor system. Starting May 2022, all new individual lawsuits in Mexico will be handled by the new labor courts and following the new system. New Labor Relations System. All collective relations in Mexico will observe the new regulations, both of Mexican labor law and the USMCA provisions. The new system requires an active participation of the workers in collective matters, especially the vote, via secret ballot, to support the terms that have been negotiated every two years when the CBA goes full negotiation.

ALVARO GARCIA HR, Vice President

INSTITUTIONAL RELATIONS

KEY ASPECTS FOR 2022

1. Keep an eye on the electric reform and the referendum on President Andres Manuel Lopez Obrador´s presidency planned for next year. It will be a game-changer for the rest of AMLO’s administration. 2. On June 5th, 2022, there will be governor elections of 6 states: Aguascalientes, Durango, Hidalgo, Oaxaca, Quintana Roo and Tamaulipas. Be aware of the results as Morena is a front runner for these elections. If you have business in these states, we recommend approaching the candidates as soon as they are officially running their campaigns. 3. As always, we recommend to be in full compliance with all government requirements. In particular, be aware and ready for SAT´s modifications to regulations as Complemento Carta Porte and CFDI 4.0. 4. USMCA: it will be likely that Mexico’s and Canada’s concerns regarding the Rule of Origin for Autos will continue. Labor and Environmental issues are likely to continue as they are part of Biden’s Administration priorities. Compliance with the Labor Law in Mexico is a must in order to avoid concerns from the US or Canada in labor issues. 5. Covid-19 and variants: continue to be careful and implement all health recommendations. New variants could be a bigger risk for next year in supply chains if lockdowns continue, particularly in Asia.

MONICA LUGO Institutional Relations Director

EHS

OMICRON DATA AND POTENTIAL SPREAD

The government is expecting a surge of COVID-19 cases in the coming days to weeks and has been collaborating with global public health and industry partners to learn about Omicron. We don’t yet know how easily it spreads, the severity of illness it causes, or how well available vaccines and medications work against it. Spread. The Omicron variant likely will spread more easily than the original SARS-CoV-2 virus and how easily Omicron spreads compared to Delta remains unknown. The government expects that anyone with Omicron infection can spread the virus to others, even if they are vaccinated or don’t have symptoms. Severe Illness. More data are needed to know if Omicron infections, especially reinfections and breakthrough infections in fully vaccinated people, cause more severe illness or death than infection with other variants. Vaccines. Current vaccines are expected to protect against severe illness, hospitalizations, and deaths due to infection with the Omicron variant. However, breakthrough infections in fully vaccinated people are likely to occur. With other variants, like Delta, vaccines have remained effective at preventing severe illness, hospitalizations, and death. The recent emergence of Omicron further emphasizes the importance of vaccination and boosters. Treatments. Scientists are working to determine how well existing treatments for COVID-19 work. Based on the changed genetic makeup of Omicron, some treatments are likely to remain effective while others may be less effective.

DAVID ANTUNEZ Environmental, Health, and Safety Director.

EHS

TOOLS TO FIGHT OMICRON Vaccines. Vaccines remain the best public health measure to protect people from COVID-19, slow transmission, and reduce the likelihood of new variants emerging. • COVID-19 vaccines are highly effective at preventing severe illness, hospitalizations, and death. • Scientists are currently investigating Omicron, including how protected fully vaccinated people will be against infection, hospitalization, and death. • The government recommends that everyone 5 years and older protect themselves from COVID-19 by getting fully vaccinated. • The government recommends that everyone ages 18 years and older should get a booster shot at least two months after their initial J&J/Janssen vaccine or six months after completing their primary COVID-19 vaccination series of Pfizer-BioNTech or Moderna. Masks. Masks offer protection against all variants. • The government continues to recommend wearing a mask in public indoor settings in areas of substantial or high community transmission, regardless of vaccination status. • The government provides advice about masks for people who want to learn more about what type of mask is right for them, depending on their circumstances. Testing. Tests can tell you if you are currently infected with COVID-19. • Two types of tests are used to test for current infection: nucleic acid amplification tests (NAATs) and antigen tests. NAAT and antigen tests can only tell you if you have a current infection. • Individuals can use the COVID-19 Viral Testing Tool to help determine what kind of test to seek. • Additional tests would be needed to determine if Omicron caused your infection. • Visit your state, local, or regional health department’s website to look for the latest local information on testing. • Self-tests can be used at home or anywhere, are easy to use, and produce rapid results. • If your self-test has a positive result, stay home or isolate for 10 days, wear a mask if you have contact with others, and call your healthcare provider. • Call your healthcare provider or public health department if you have any questions about your self-test result. Until we know more about the risk of Omicron, it is important to use all tools available to protect yourself and others.

HAPPY HOLIDAYS! I WANT TO WISH YOU ALL THE BEST FOR THIS HOLIDAY SEASON, HOPING THAT YOU AND EVERYONE AROUND YOU ARE DOING WELL AND STAYING HEALTHY. I ALSO WISH THAT AFTER ALMOST TWO YEARS, UNDER THESE CONDITIONS, YOU HAVE THE OPPORTUNITY TO ENJOY THE HOLIDAYS WITH YOUR FAMILY AND BE ABLE TO FEEL THE WARMTH AND JOY THAT BRINGS FACE-TO-FACE INTERACTION WITH THE ONES WE LOVE. This year has once again been full of challenges and uncertainties. But I am always amazed to see and learn how clients like you show us how innovation, determination, and execution give us the opportunity to overcome such an environment and turn it into a chance that helps us grow and sometimes even thrive. I am a firm believer that WORLD CLASS ORGANIZATIONAL CULTURES are contagious. Just being around clients like you put us in a perfect situation to learn about new ways to do business; to learn about the value of innovation and agility in this time of exponential change; to commit to compliance and ethics; to rally around common goals to find extraordinary solutions to complex problems, and most importantly to focus on the people of our teams and their well-being as the pillar for success. For this, I thank you and feel honored, more than ever, to be part of your team. I am committed to work hard for the success of your company. We have a clear path for 2022 on how to work internally to improve our value proposition for you. We are strengthening our team with the best talent, we are streamlining our processes to improve our efficiencies and quality, and we are committed to Digital Transformation as a key capability for our business. Additionally, we want to confirm our engagement to keep working for the improvement of the North American industrial and business ecosystem. By participating directly in different initiatives in Mexico, the US, and other parts of the world, we will continue to focus on making specific proposals in regards to Trade Facilitation, Trusted Trader Programs, 21st Century Borders, Talent Development and Talent Mobility, Regional Energy Cooperation and Regional Supply chain Integration and Resiliency. I wish you the best for 2022, which I am sure will have its share of challenges, but as you have taught us, by working together, we will be able to overcome them and turn them into opportunities for the benefit of our teams, our companies, and our communities all around the world! Sincerely,

Emilio Cadena CEO