Weekly Report 103 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review #103 I May 4, 2022

MANUFACTURING INDUSTRY NEARSHORING OFFERS OPPORTUNITIES FOR MEXICO DUE TO ITS LOGISTICS: MINISTRY OF ECONOMY Nearshoring offers opportunities to Mexico due to its logistics, with better costs to reach the North American market compared to Asia, highlighted Tatiana Clouthier, Secretary of Economy. To exemplify this, the official indicated that a typical truck transport service to Memphis, Tennessee, from Mexico costs 2,111 dollars and takes four days, while from China, the cost rises to 6,453 dollars, and the period is extended to 31 days. “The proximity that we did nothing for it, simply that we have the great gift that nature gave us to live next to the United States allows us to take advantage of the costs versus other countries,” said Clouthier while participating in a conference organized by Americas Society/Council of the Americas (AS/COA) on Thursday. This advantage is enhanced by the high transportation costs resulting from the increase in oil prices, which have surpassed $100 per barrel. Nearshoring to locations closer to the end consumer is of particular interest to Mexico due to several factors, including the U.S.-China trade war, rising raw material costs, supply chain risks evidenced by the Covid-19 pandemic, and Russia’s invasion of Ukraine. “Mexico is ideally positioned to continue being a key partner in North America,” commented Luz Maria de la Mora, Undersecretary of Foreign Trade of the Ministry of Economy, at the same forum, after highlighting the United States as the world’s largest importer and

SOURCE: El Economista

MANUFACTURING INDUSTRY the certainty that trade agreements provide for dealing with differences. Disputes between countries are always latent, but De la Mora emphasized the mechanisms for settling them, as is now happening in a case on the rules of origin of the automotive industry in the Agreement between Mexico, the United States, and Canada (USMCA), with a panel that is about to be set up. In addition to its geographic location, Mexico has the advantage of being a country with solid material and institutional bases for international trade. In 2020 it was the eleventh largest exporter in the world, and since 2020 it has a new free trade agreement with the United States, unlike other regions such as the European Union or China, which continue to face tariffs on U.S. imports. The Ministry of Finance has reported that Mexico’s interest in relocating production chains to countries closer to the final consumer markets has been shown in surveys and announcements of possible investments. For example, at a global level, a World Bank survey conducted in March 2021 with multinationals found that, among the 56 companies that plan to increase investments in the future, 45% will increase their investments to diversify their geographic locations, and 32% will increase their investments to bring production closer to their final consumers. Clouthier mentioned Mexico’s Spanish language as another advantage, stating that more and more Americans speak Spanish, especially on the border, where it is common for her to converse in that language with governors from the southern United States.

SOURCE: El Economista

Without specifying the name, the official made this comment in relation to the logistical advantages: “There is an important project that I am sure will begin to be carried out very soon, that connects from Sinaloa, and I was saying to Texas, but I believe that we are no longer going to use Texas; we are going to look for a connection to New Mexico because we cannot leave our eggs in one basket and be hostages of those who want to use trade as a political tool.” There were recent disruptions in U.S.-Mexico trade due to Texas Governor Greg Abbott’s order to inspect all cargo trucks that share the border with his state (Tamaulipas, Nuevo Leon, Chihuahua, and Coahuila). Advantages of Mexico related to nearshoring: • Cheaper transportation and logistics cost to reach the U.S. market. • Production sharing with the United States and Canada in several industries, including automotive, aeronautics, electrical electronics, and food. • Network of trade agreements, including the Treaty between Mexico, the United States, and Canada (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TIPAT). • Skilled, inexpensive labor under a recent structural labor reform. • Language, with a bilingual Spanish-English population in both the United States and Mexico. • Time zone, which allows for greater synergy while industrial plants or services are in operation in North America. • A large export and import base in Mexico relative to the size of the economy. • Mexico is far from military conflicts.

MANUFACTURING INDUSTRY

STELLANTIS BUYS THE MERCEDES AND BMW CAR-SHARING COMPANY Automotive group Stellantis announced Tuesday an agreement to buy Share Now, a car-sharing joint venture of German giants BMW and Mercedes. “We want to establish ourselves in big cities, and Share Now is a key step to accelerate our model,” Brigitte Courtehoux, CEO of Free2Move, the Stellantis (Fiat, Chrysler, Peugeot, Citroën) subsidiary that will absorb its competitor, told a press conference. Share Now will be acquired by Free2move, Stellantis’ car-sharing subsidiary, the group said in a statement. The deal will enable it to serve “14 major European cities” and increase its fleet fivefold, the statement said, building on the recent acquisition of Opel Rent in Germany and Austria. Free2move would also “add more than 3.4 million customers to its two million users,” the group said.

SOURCE: El Economista

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference April 27– May 3, 2022

ENVIRONMENTAL Mayan Train: • The head of FONATUR and general coordinator of the Mayan Train Project, Javier May Rodriguez, indicated that the right of way for the 7 sections of the project exists. He specified that there will be 700 kilometers with electric trains, and Ultra Low Sulfur Diesel (ULSD) will be used. He said that 93% of the citizens have shown their support for the realization of the Train and that consultations have been held with the indigenous peoples, where they have had the necessary support. • The Head of the Ministry of Environment and Natural Resources, Maria Luisa Albores, indicated that the “Sembrando Vida” program had been invigorated in the five states where the Mayan Train will pass. She said that the 25 natural protected areas will have more capacity to care for natural resources, and three natural protected areas will be created, totaling more than 10,000 hectares. Prevention and mitigation actions are being carried out in favor of water, air, soil, flora, and fauna. • Sargassum: Jose Rafael Ojeda Duran, Secretary of the Navy, informed of the actions that have been taken to address the spread of sargassum, highlighting the coordination between the different government agencies and companies to address this issue. He expressed that the current alert sit-

uation for estimating the number of sargassum is located in category 8, which corresponds to the denomination of “excessive.” • Clean Energy: In response to a reporter about the concerns of Senator Xochitl Galvez and Congressman Gabriel Quadri regarding clean energy, the President commented that he will not increase the price of electricity. He pointed out that climate change is used as an excuse, but those who promote its fight are the ones who pollute the most, whether they are governments or corporations. He commented that his government does not have opposing discourses and also pointed out that Mexico is one of the countries in the world that produces the cleanest energy. POLITICAL AGENDA Electoral reform: • President Andres Manuel Lopez Obrador presented the political electoral reform in matters of democracy that arrived on April 28 to the Congress of the Union. It will seek to modify 18 constitutional articles and will contain 7 transitory articles. It proposes: • To replace the National Electoral Institute (INE) with the National Institute of Elections and Consultations.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

Federalization of elections. • Reduction of senators, deputies, and local legislators. Municipal changes. • Reduction of the budget of political parties to limit it to elections. • To guarantee access to vote by electronic means (electronic votes). • Reduction of radio and television time in electoral matters. • Modification in the definitions of governmental propaganda.

• The President is pleased that there is interest in debating this issue, which needs to be reformed so that there may be true democracy and autonomy in the organization. It seeks significant savings, facilitates the vote for Mexicans abroad, and guarantees free and fair processes. • Support for the countryside: The President stressed the importance of self-sufficiency in food and emphasized that support for the countryside would be provided directly, without intermediaries. In addition, the free fertilizer program will be expanded. • Basification of oil employees: The President called on the oil union leaders to seek dialogue, reiterating that there have been changes, and it appears that the basification will no longer go through the unions, which has upset the leaders. He commented that PEMEX will be able to carry out these processes without the influence of the unions. He stated that so far in his administration, 500,000 teachers had been basified, and work is being done in the health sector. • Injunction of Philipps Morris: In reference to the injunction granted to Philip Morris by the Supreme Court of Justice of the Nation to be able to sell vaping devices, the Secretary of the Interior informed that this injunction has no effect because yesterday, the Chamber of Deputies approved a Minute coming from the Senate in which the prohibition of the importation of electronic cigarettes is firm, which also prohibits their commercialization. • Unveiling of Adan Augusto: Members of the press questioned the President about a possible unveiling of the Secretary of the Interior, Adan Augusto, for the presidency in 2024, to which the President pointed out that this was the responsibility of previous governments, expressing that whoever

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S wants to participate in the political contest should do so. Economy • Grupo Bimbo: The President commented that Daniel Servitje, director of Grupo Bimbo, informed him on Sunday that it was carrying out an operation to sell one of its candy and popsicle companies. He pointed out that the sale was to a U.S. company in that industry, which is good because it means that Bimbo is getting stronger and that there is confidence in the country. • Inflation: The President informed that on Wednesday of next week, they will announce the plan to combat inflation. He pointed out that it is not a matter of price control but guaranteeing prices for basic products such as rice, beans, and milk. He commented that an agreement is being reached with producers and distributors. INTERNATIONAL AFFAIRS • Joe Biden Call: Lopez Obrador commented that the call addressed issues such as migration, where there is an agreement to address the causes, and development programs, although there is a lack of resources to do so. Work visas will be given to Mexicans who wish to work in the U.S. Likewise, the topic of investment in Central America for development was discussed. He emphasized that they will fully support President Joe Biden›s immigration initiative. Another topic was the Summit of the Americas, where the Federal Executive stated that all countries should be invited and that exclusion should be avoided. Beatriz Gutierrez Müller will attend the May 5th commemoration. • Central America and Cuba: When asked if Central American countries have expressed interest in extending the routes of the Mayan Train, the Presi-

dent stated that the entire region will benefit from the Train, mainly Guatemala, there will also be a station near Belize, and the Chetumal airport is already being completed, which will also benefit that country. ENERGY • Dialogues with self-supply companies: The President commented that they will start dialogues with companies that have to do with self-supply of electric energy. He informed that according to the LIE declared constitutional by the SCJN, “it is already considered a legal fraud.” He mentioned that there is a self-supply allowed for companies that have plants and use electric energy for their consumption “if it is a steel mill if it is a mining

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S company.” However, companies such as Iberdrola began to sell as if they were the CFE and without having a permit. He stated that Iberdrola “is the one that sells, for example, to the OXXOs. A dialogue will begin at the Ministry of the Interior, whose head, Adan Augusto Lopez, will lead the negotiation and will be accompanied by the Secretary of Energy, Norma Rocio Nahle, and the director of the CFE, Manuel Bartlett Diaz. He pointed out that today they will start to call them together. • Lithium Company: Marcelo Ebrard informed AMLO that a meeting of countries with lithium production potential is being called. There is communication with Argentina, Chile, and Bolivia, and they are thinking of working together, where experiences will be gathered, and the company’s characteristics can be defined. Likewise, it will be defined how the company will be: if it will be completely independent or related to SE, SHCP, CFE, SENER, and other agencies. INFRASTRUCTURE: • Metro Line 12: In a follow-up to the accident a year ago, the President emphasized that expenses have already been covered and there was reparation of material damage. The Attorney General’s Office continues to advance in the investigation. The commitment was that the fractured track would be rehabilitated as soon as possible, which will be done without charge by the company responsible, owned by Carlos Slim (CARSO and ICA). • Tulum Airport: The President mentioned that military engineers are already elaborating an executive project, pointing out that the land already has the collaboration of the ejidatarios of Carrillo Puerto due to the great territorial extension that was acquired. He emphasized that this airport should

also be concluded by December of next year. • Outsourcing: A reporter recalled a complaint in CAPUFE where toll booth workers were unjustifiably dismissed and the outsourcing administrator hired relatives and friends. The President pointed out that the issue is being attended to. He has already spoken with the Director of CAPUFE and already has the authorization from the SHCP to make the hires. HEALTH • Health Pulse: The President reported on the consolidation of the health system to guarantee access to the entire population that does not have social security. He pointed out that in 4 or 5 months, the IMSS-BIENESTAR system will be 100% operational in 15 states, and in the rest, the goal is for the first quarter of next year. Regarding the COVID vaccination, he pointed out that in April, the process continued. This strategy will continue with the vaccination of children. They will continue to meet twice a week to review the issue. • He emphasized that all the vaccines were used and were not wasted thanks to the coordination of all the institutions. For his part, Mtro. Zoe Robledo, Director of IMSS, pointed out that there is a health plan for wellness, and now it will be reported on Tuesdays in the Pulse of Health. The mission of the said plan is to make the full right of access to health a reality; the process began in September 2021 with an x-ray of the state health systems. So far, there are 14 states with completed surveys. He highlighted that the main needs detected are: Equipment for attention to first and second-level diseases; Hospital infrastructure, mainly for the habilitation of operating rooms, expansion of beds, medical offices, medical residences, and laboratories.

NEWS BY STATE

BAJA CALIFORNIA The State of Baja California remains lowrisk or green light with 145 active cases in the past 14 days and 0 new cases in the past 24 hours. Vaccination remains open in hospitals, health centers, and clinics of all institutions. The vaccination plan continues in all municipalities with AstraZeneca and Pfizer applications. The recommended prevention and selfcare measures are constant hand washing, use of antibacterial gel, applying social distancing in places with crowds, and ventilation of the areas. The use of face masks in open and closed spaces remains optional. This week the job fair led by the Mexicali Economic Promotion and Development Coordination and the National Employment Service was held, where more than 3,000 vacancies were offered.

SONORA As of May 1, the epidemic risk traffic light will no longer be issued by the Ministry of Health and the State of Sonora. Official reports confirm 0 new cases in the last 24 hours. The pre-registration for universal vaccination against COVID-19 begins for 12 years of age and older without comorbidities. The Governor of Sonora met with the mayor of Puerto Peñasco and San Luis Rio Colorado to review the projects of infrastructure, health, scholarships, and military installations that are being carried out.

NEWS BY STATE

NUEVO LEON The change from an internal combustion engine-based powertrain to an electric motor-based one greatly impacts the participants in the vehicle supply chain. The Automotive Cluster shared that they are defining the structure of a new Driven Center, focusing on solutions that integrate an electric drivetrain. COAHUILA In Coahuila, the new educational offer adapted to the demands of the technology industry at a global level was analyzed; in addition, the results and benefits of Coahuila’s dual education model were shared to bring students closer to the productive market during their training process.

TAMAULIPAS Carlos Alberto Garcia Gonzalez, president of the Mexican Association of Ministers of Economic Development (AMSDE), assures that the rejection of the PRI, PAN, PRD, and Movimiento Ciudadano deputies to Andres Manuel Lopez Obrador’s electricity reform opens the way for the arrival of more than 2 billion dollars of investment in wind farms in Tamaulipas. “Some 14 (wind) projects will go forward and generate an additional 1,700 megawatts of energy, which shortly will make Tamaulipas the number one nationwide in energy generation through wind,” says the Minister of Economic Development of Tamaulipas.

NEWS BY STATE

SAN LUIS POTOSI San Luis Potosi is returning to economic and social normality after a complicated sanitary period due to the Covid-19 pandemic, said State Governor Ricardo Gallardo Cardona, announcing that so far, more than 20 thousand new jobs have been recovered in the state, of which 14 thousand were lost during the contingency. The above, according to the National Survey of Occupation and Employment of the National Institute of Statistics and Geography (Inegi), published at the end of April of this year, which confirms that more than 20 thousand citizens are within the economically active population, with respect to March 2021. “Fourteen thousand jobs were lost in the whole pandemic, today we have 20 thousand new jobs, it means that we have six thousand more up, the 14 thousand are recovered, and another 6 thousand more are gained; we are happy with the fast recovery”, expressed the Chief Executive JALISCO In the framework of Labor Day, which was celebrated on Sunday, May 1, the Institute of Statistical and Geographic Information of Jalisco presented a general overview of the statistics on the subject. In Jalisco, as of the fourth quarter of 2021, there were three million 924 thousand 612 people employed; of which, 2.8 million, which are 72.14 percent, were subordinate and

paid employees, 738 thousand 140, 18.81 percent were classified as self-employed, 247 thousand 064 were employers representing 6.30 percent and 108 thousand 309, that is, 2.76 percent are classified as unpaid workers. A significant proportion of the employed population works in the services sector, 42.24 percent, employing 1,657,651; in second place is the commerce sector, which employs 857,950 people and represents 21.86 percent of the total, and in third place is the manufacturing industry, which employs 721,939 people, 18.40 percent of the total. The agricultural sector employs 9.47 percent of Jalisco’s employed population, and 7.27 percent are employed in the construction sector. In terms of occupation or trade, which refers to the task or activity carried out by the employed population of Jalisco, 25.31 percent of the total are industrial workers, artisans, and helpers; 18.90 percent are merchants; 14.88 percent are personal service workers; 12.97 percent are professionals, technicians and art workers. In terms of educational level, 7.24 percent of the employed population in the state has an incomplete primary education, 16.48 percent complete primary education, 32.02 percent complete secondary education, and 44.25 percent have high school and higher education.

NEWS BY STATE

QUERETARO Queretaro’s Governor, Mauricio Kuri Gonzalez, announced that together with the Technical Health Committee, several actions will be determined given the emergence of a new strain of covid in China; for the time being, the non-mandatory use of masks in closed places will be defined. The state governor even stressed that care must be taken with this new strain, which has already caused new confinement of the population in Shanghai. For this reason, he said that, if necessary, a technical and scientific decision will be taken, and not a political one, to protect the health of the people living in the state. For this reason, the Technical Health Committee is expected to meet so that it can analyze what measures will be followed concerning this particular case. In addition, today, the Technical Health Committee will analyze the possible deconversion of the Covid Hospital to open it for the attention of other diseases since the number of cases has been reduced. He revealed that this will be a technical decision and that the meeting could also define the non-compulsory use of masks in closed spaces and less restrictive measures. GUANAJUATO The State Committee for Health Safety (CESSA) decided to suspend the state traffic light for economic reactivation and continue with the epidemiological monitoring of the behavior of the SARS CovV2 virus. The decision will be published in the State Official

Gazette and leaves without effect this May 2. The general measures for the entrance to commercial establishments and governmental or private offices, cultural spaces, as well as other facilities contained in the previous agreements with CESSA regarding the placement of sanitary filters for temperature taking, application of antibacterial gel, and use of sanitizing mats at the entrances of the premises. The following measures are maintained: preferential use of masks in enclosed spaces, antibacterial gel dispensers with 70% alcohol at the entrance and in common areas, and permanent natural ventilation. These determinations may be modified according to the determinations of the federal health authority. The State Health Secretariat informed that epidemiological surveillance should be strengthened, especially in respiratory cases, in all health sector units as a fundamental part of the follow-up of the virus’s behavior. The above decisions are taken due to the fact that the Guanajuato Ministry of Health has registered the lowest hospitalization levels since the beginning of the pandemic, with a 1 percent bed occupancy rate out of the 1,321 beds available. There has been a significant decrease in four recorded waves, with the lowest point in two years, of patients requiring hospitalization and a marked decrease in deaths. As of epidemiological week 15 of this year, most municipalities have zero active cases, but the sampling of patients who meet the operational definition of respiratory symptoms continues.

NEWS BY STATE

STATE OF MEXICO According to an SPD news source, Delfina Gomez is shaping up to be MORENA’s candidate for the government of the State of Mexico. This explains Gomez quit her position as head of the Ministry for Education two weeks ago. Moreover, in Industry News, Nissin Foods Mexico confirmed plans to expand its plant in the State of Mexico, which will generate an investment of 15 million dollars and 580 direct jobs. Alfredo Del Mazo Maza, Governor of the State of Mexico, stated that the food company is in the process of expanding towards the center and north of the country and, to achieve its business objectives, it will expand its presence in this state.

CDMX Due to bad air conditions, the Megalopolis Environmental Commission (CAME) informed that a double no-fly day will be applied in Mexico City and the State of Mexico this Tuesday. On the other hand, Claudia Sheinbaum announced that they will begin to grant the universal pension for people with disabilities in the capital. It is expected that the capital will be the first to grant this pension starting in May and that by the end of the six-year term, in 2024, at least 28 states will have already been incorporated. Lastly, this week, almost a year after the collapse of Metro Line 12, members of the National Action Party (PAN) of Mexico City placed an anti-monument in Reforma in memory of the accident victims.

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO MICHELIN Phase 2 expansion starts in Leon, Guanajuato; 400 MDD invested KIVA REAL ESTATE GROUP Inaugurated Alamos Lifestyle Center with an investment of 600 million pesos, the company’s sixth development in Queretaro.

SOURCE: El Economista

WALMART Presented its investment plan for the next two years in the State of Mexico, planning to allocate 1,900 million pesos to open 30 new stores in 21 municipalities.

NOVARES A global supplier of plastic components for automobiles opened a new plant with an investment of 1.75 MDD in Santa Ana, Sonora. Generating 400 new jobs.

LABOR

ALVARO GARCIA HR, Vice President

FEDERAL VERSUS LOCAL PROTOCOLS As the indicators used for monitoring the pandemic show a clear and sustained downward trend, governments in all latitudes are lifting the restrictions established almost two years ago in order to prevent the further spread of the virus that causes the disease that has brought the world to a standstill. Our country is no exception; both the federal and state governments have decreed the end of several sanitary measures and protocols. The public messages of the recent release of the use of masks have put the companies in limbo because, despite the local announcement, the federal protocols have not been updated. Hence, today, although the local measures already exempt the use of face masks, the federal ones still do not, and it is the latter that an inspection by the STPS will observe their compliance.