WEEKLY REPORT 17.5.24

May 11 –17, 2024

HOT TOPICS:

U.S. Imposes New Tariffs on China

On May 14th , U.S. President Joe Biden decided to impose new tariffs on Chinese goods. The decision to impose tariffs on USD 18 billion of imports from China was taken to protect American workers and businesses from “China’s unfair trade practices” The tariffs cover a wide range of sectors, including steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products For some products, the Biden administration went as far as to increase tariffs from 25% to a 100%, as is the case in electric vehicles Experts have called this full-blown protectionism Nevertheless, according to Paul Krugman, the immediate impact of the tariffs will be minimal since the U S imports few of these affected items from China However, he argues that Biden's actions hold significant symbolic value, signaling that the U S is unwilling to tolerate another surge of imports from China that could undermine key aspects of the administration's agenda

Source: The White House and The New York Times

FDI GROWTH

The Ministry of Economy reports that during the first quarter of 2024, Foreign Direct Investment (FDI) in Mexico reached USD 20 313 billion, a 9% increase compared to the same period in 2023, marking a new historical high Nevertheless, only 3% of these make up for new investments, as the rest is reinvestment of profits Around 52% of investment flows come from the U S , while the following countries are Germany, Canada and Japan, respectively. Also, 77% of investment concentrated in 5 entities: Mexico City (59%), Nuevo León (7%), Baja California (5%), Veracruz (3%), and Chihuahua (3%) Additionally, 44% of the investment focused on manufacturing

Source: Secretaría de Economía

TRADE IN THE TRANSISTHMIAN CORRIDOR

Altagracia Gómez Sierra, economic advisor to Claudia Sheinbaum, announced that a presidential decree is about to be issued to designate the Trans-Isthmian Corridor as a specialized fiscal area This will generate a real incentive for importing companies, specially form Asia, to incorporate Mexico deeper into their trade routes. The area will be confined, with the National Guard to protect it

Source: Forbes

BATRES’S PROPOSAL TO CANCEL TRUSTS WAS DENIED

Minister Lenia Batres found herself alone in her attempt to strip protection from judicial trust funds, as the other four members of the Supreme Court's Second Chamber voted against her proposal Batres' initiative arose from complaints by Congress and the Legal Counsel of AMLO, where she worked before being handpicked by the president as a member of the Supreme Court. In October 2023, Congress approved the dissolution of 13 out of the 14 trusts managed by the federal judicial branch This move mirrored a previous action by the president, who had dissolved 109 trusts three years earlier AMLO criticized the Supreme Court’s decision as unconstitutional

Source: El País and Milenio

BYD WILL DETERMINE MEXICO INVESTMENT SITE BY YEAR-END

Chinese electric car manufacturer BYD plans to build a plant in Mexico, capable of producing up to 150,000 cars annually The plant will be located in central Mexico, but they have not chosen the specific site. They will announce that information by the end of 2024 The plant is expected to take two to three years to become operational The U S Trade Representative Katherine Tai mentioned in a recent conference that they have not ruled out additional tariffs if BYD decides to produce in Mexico

Source: Reuters and EFE

HOT TOPICS:

The Electoral Race in Mexico City

The candidates for the mayorship of Mexico City engaged in their last debate before the elections on June 2nd The issues discussed were security and justice, and urban development The leading candidates, Santiago Taboada (PRI-PAN-PRD) and Clara Brugada (Morena-PT-PVEM), constantly exchanged attacks during the debate Although Clara is winning in most polls, Taboada is not so far behind According to Expansión, Brugada has 51% of vote intention, while Taboada has 40% However, other surveys, such as the one by Massive Caller, put Taboada in first place with 43 4% of vote intention, while Clara has 39 2% Their race has centered on five key boroughs: Iztapalapa, Gustavo A Madero, Coyoacán, Cuauhtémoc, and Iztacalco Both candidates have focused their campaign efforts in these areas, which are among the top six in terms of voter numbers in the capital, except for Iztacalco Iztapalapa, which was governed by Clara, has the highest number of registered voters, followed by Gustavo A Madero, Coyoacán, and Cuauhtémoc These boroughs collectively account for 50 2% of the city's electorate, which explains why the both head-runners are focusing there

Source: Expansión, El Universal, Milenio, and Massive Caller

DEBATE IN TABASCO

The second debate between the governor candidates for Tabasco took place and focused on three issues: education, economy, and infrastructure There are four candidates: Javier May (Morena-PT-PVEM), Lorena Beaurregard (PRI-PAN), Juan Manuel Fócil (PRD), and María Inés de la Fuente (Movimiento Ciudadano) Regarding economy, Javier May proposed leveraging the energy and railway potential of the state and boosting the agricultural and industrial zone of the state, among others Lorena Beaurregard proposed to promote an economic recovery program, establish partnerships with the private sector, including in the construction of passenger trains, and make the government a facilitator of investments The PRD candidate proposed to support established entrepreneurs and startups through training, technology, and loans, while the MC candidate said she would attract investments through incentives in various areas such as ecotourism, maquiladora industry, renewable energies, finance, among others, and provide financial support and loans to local businesses According to Polls Mx, the Morena candidate is leading the race with 63% of vote intention, while the PRIPAN candidate is in second place with 17%

Source: Prodensa Intelligence and Polls Mx

LOCAL ELECTORAL INSTITUTIONS FACE BUDGETARY CHALLENGES

The National Electoral Institute (INE) stated that the local electoral bodies of San Luis Potosí, Morelos, Zacatecas, and Yucatán are facing significant budgetary risks leading up to the June 2 election The INE emphasized the importance of providing resources to these electoral bodies to cover expenses related to documentation, election day operations, vote counting, and other activities Other electoral institutions are facing "medium risk" regarding financing These are Nayarit, where the electoral body is owed MXN 17,000 million since January; Guerrero, where ongoing dialogue with local authorities aims to secure additional resources to cover ongoing process expenses and employee benefits; and Oaxaca, where the electoral institution requested MXN 118,000 million pesos in May due to budget discrepancies The Linkage Commission pledged to monitor these situations and will present the project to the General Council of the INE for consideration in the next session

Source: Expansión

ENERGY PROPOSALS FROM PRESIDENTIAL CANDIDATES

As last week’s blackouts showed, the energy sector has profound structural problems that must be urgently attended by the next administration This is why is relevant to know what the presidential candidates are proposing regarding the issue The frontrunner, Claudia Sheinbaum (Morena-PT-PVEM), bases her proposal on the idea of sovereignty and selfsufficiency In order to do that, she will strengthen PEMEX and CFE Also, she plans to expand electricity coverage in rural areas, and reduce energy intensity However, her energy advisor has mentioned she will look to cooperate with the private sector Xóchitl Gálvez (PRI-PAN-PRD) wants to increase the private sector’s participation in the market She has proposed to professionalize PEMEX and CFE, accelerate the energy transition, and strengthen the electricity transmission system Finally, Jorge Álvarez Máynez, has a view more centered on renewable energy He has mentioned he wants to reduce subsidies to fossil fuels, incorporate clean energies into PEMEX and CFE, and close refineries

Source: IMCO

LAST PRESIDENTIAL DEBATE

On Sunday, May 19th , the last presidential debate will take place The topics that will be discussed are social policy; insecurity and organized crime; migration and foreign policy; democracy; and pluralism and division of powers It’s important to evaluate the current situation in each of the of the topics to better understand the candidates’ proposals On security, the states found in worst condition are Colima, with a 100 homicides per 100,00 people, Zacatecas, Guanajuato, Morelos, and Sonora Regarding foreign policy, the next administration’s decisions will determine how we leverage nearshoring Foreign Direct investment in Mexico surged by 22% by the close of 2023 compared to the previous year, with 66% originating from four countries, notably the United States and Canada This increase reflects growing confidence in investing in Mexico, evidenced by over 370 investment announcements recorded by the end of 2023 However, an ongoing challenge to investment sustainability is the country's energy generation and the frequent droughts experienced Presidential candidates must share their ideas regarding these challenges Migration is also an important issue, as it has created many frictions with the U S The disappearance of trusts to support shelters, the use of the National Guard to detain migrants, as well as the reduction of the budget for the National Institute of Migration, have deteriorated the situation Lastly, democracy and the division of powers are under threat in the current administration Hearing out what each candidate thinks will help identify if this current trend will be maintained in the next administration

Source: Animal Político and México Cómo Vamos

Legislative and Regulatory issues: HOT TOPICS:

TRANSPORTATION:

AGREEMENT REGULATING THE PERMANENT MODALITY OF INTERNATIONAL CARGO TRANSPORTATION SERVICE FOR TRANSPORTERS FROM THE UNITED STATES OF AMERICA AND CANADA, IN NATIONAL TERRITORY

Presented by: Ministry of Infrastructure, Communications, and Transport to the National Commission for Regulatory Improvement (CONAMER)

Purpose:

• Establish on a permanent basis the modality for operating the International Cargo Transportation Service, allowing the Ministry to issue a permit for those carriers from the U S and Canada trade among North American countries

• Outline the procedure for processing that all carriers from the U S and Canada must follow, achieved through the proposed regulation by establishing and informing the requirements for the application, handling, and granting of the permit

• Inform carriers from the U S and Canada of the process they must follow, which will be in person and must be initiated through an online Pre-registration

Status: 05-15-2024 - Moderate Regulatory Impact Analysis (AIR)

NUEVO LEÓN:

NUEVO LEÓN: CITIZEN INITIATIVE ADDING ARTICLE 136 BIS TO THE ENVIRONMENTAL LAW OF THE STATE OF NUEVO LEÓN

Presented by: State Congress of Nuevo León

Purpose: In order to reduce atmospheric pollution, the State Government will allocate 3% of the annual budget to subsidies for antipollution technology for public and private companies Preference will be given in resource allocation to those companies identified as the main emitters of pollutants in the state according to the Emissions and Pollutant Transfer Registry, provided that at least half of the days in the previous year exceeded the pollution limits established by Mexican official regulations

Status: 2024-05-10 - Initiative referred to Committee on Environment and Sustainable Development

CITIZEN INITIATIVE THAT AMENDS VARIOUS ARTICLES OF THE LAW ON SUSTAINABLE MOBILITY, ACCESSIBILITY, AND ROAD SAFETY FOR THE STATE OF NUEVO LEÓN

Presented by: State Congress of Nuevo León

Purpose: For companies with a minimum of 100 employees, it will be mandatory for them to provide employee transportation

Status: 2024-05-06 - Initiative referred to Committee on Mobility for consideration

ARTIFICIAL INTELLIGENCE:

In the Senate, the "Proposal for a National Agenda on Artificial Intelligence for Mexico (2024-2030)" was presented at an event promoted by the National Alliance for Artificial Intelligence (ANIA) and Senator Alejandra Lagunes Soto (PVEM-LN), who chaired it She made the following remarks:

• The proposal, developed over 13 months, aims to position Mexico internationally in the realm of Artificial Intelligence (AI), leveraging the transformative potential while maximizing benefits and mitigating risks

• It emphasizes the need for a regulatory framework tailored to the digital sphere, complementing existing laws Addressing lag in commercial development and infrastructure, especially in AI and cybersecurity, is crucial

• The proposal advocates for collaboration among government, academia, and industry to build national data infrastructure and integrate digital tools into education

• Governmental data policies, flexible regulatory schemes, and ethical governance frameworks for AI must be emphasized to drive national progress