Weekly Report 104 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review #104 I May 11, 2022

MANUFACTURING INDUSTRY AIRLINE INDUSTRY RECOVERY WOULD BE IN 2023: IATA

The head of the world’s largest airline industry body said Monday that passenger traffic is recovering faster than expected. On average, the industry could return to pre-pandemic levels by 2023, a year earlier than expected. The relaxation of COVID-19-related restrictions worldwide had freed up pent-up demand from the past two years when governments closed their borders, increasing flights. International Air Transport Association (IATA) Director General Willie Walsh told Reuters that the near-term outlook remains positive, even as the aviation sector faces new hurdles such as high oil prices, inflation, and labor shortages. “We see very strong bookings. Certainly, all the airline CEOs I speak to see good travel demand in the short term, but they continue to see demand throughout the year,” he told a conference in Riyadh. Many regions are expected to perform better this year. However, Walsh cautioned that he did not expect a quick recovery in Asia-Pacific, citing restrictions in China due to its zero COVID policy. But he said that overall, given the current accelerated rebound in passenger traffic, the industry could reach pre-pandemic passenger numbers next year, helped by a strong northern summer in 2023.

SOURCE: El Economista

“I don’t think we should be distracted from the fact that we are seeing a strong recovery, and I think that recovery will gather momentum as we move through the remainder of the year to 2023.” Wizz Air Chief Executive Jozsef Varadi separately told Reuters he was fairly confident the European low-cost carrier would have good booking figures in the northern summer. However, he said he was concerned about supply chain disruptions such as airport staff shortages. “I think we will have a lot of customers, but we will have a lot of supply chain problems.”

MANUFACTURING INDUSTRY AUTOMOBILE PRODUCTION IN MEXICO FALLS BY 6.58% IN APRIL The production of automobiles in Mexico fell by 6.58% annually in April, a month still affected by the shortage of inputs, informed the National Institute of Statistics and Geography (Inegi) this Monday. The number of automobiles manufactured in Mexico was 251,547 units in April, some 18,000 units less than in the same month a year ago, when 269,265 units were produced. Thus, light vehicle production rose 0.94% year-over-year to 1.1 million units in the first four months of the year. In the same line, Mexican vehicle exports grew by 2.86% year-on-year in the same month. Some 241,286 light vehicles were sold abroad in April, some 7,000 more than in the same month of 2021, when 234,584 units were exported, Inegi added in its report. However, in the first four months of the year, vehicle exports fell 0.64% year on year to 922,278 vehicles.

SOURCE: FORBES MEXICO

Meanwhile, domestic sales fell by 0.98% compared to the same month a year ago in the fourth month of the year, to 83,459 units. In the first four months of 2022, the domestic market’s drop in light vehicle sales is 2.40%, to 336,841 units. According to the Mexican Automotive Industry Association (AMIA), the automotive industry represents 3.8% of the national gross domestic product (GDP) and 20.5% of the manufacturing GDP, more than any other sector. The sector was completely paralyzed during the sanitary emergency decreed by the Mexican Government in April and May 2020, a year in which the GDP contracted by 8.2%. After a substantial 16.51% drop in vehicle manufacturing in December 2021, automobile production in Mexican plants had a 2% annual decline in the past year due to the shortage of semiconductor chips.

MANUFACTURING INDUSTRY

NISSAN TO INVEST $700 MILLION DOLLARS TO IMPROVE FACILITIES AT THE AGUASCALIENTES PLANT The automaker Nissan announced it will invest $700 million dollars to improve the manufacturing capacity of its plant in Aguascalientes. Jeremie Papin, senior vice president of Nissan Motor Co., Ltd., and president of Nissan America, said in a meeting with media and suppliers that the investment will be used to improve manufacturing facilities at the Aguascalientes plant and improvements in automation and training of its employees by investing in technology. “Nissan will invest more than $700 million in its local operations in equipment and bringing advanced technology,” he said. “By announcing an investment of 700 million dollars has no doubt that they have the clear vision that Nissan has to remain number 1”, commented state governor Martin Orozco.

SOURCE: EL FINANCIERO

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference May 4 – 10, 2022

INFRASTRUCTURE • Hermanos Serdan Airport: The President confirmed that the federal government will provide support for the construction of this airport in Puebla. • Incident at the AICM: Regarding the “approach incident” between two airplanes at the Mexico City International Airport (AICM), the President stated that today there will be a meeting at the Ministry of the Interior to put the airspace in order. He commented that there is no intention to affect the airlines and that everything is being done based on agreement. He pointed out an error and that the corresponding investigation was being carried out. He commented that there is resistance to the AIFA encouraged by conservatism since the new airport has nothing to do with the incident. He emphasized that there is going to be understanding and that the airlines have already approached to have more flights at AIFA. He pointed out that Aeromexico is getting more flights. As of August, the airline will increase operations at AIFA, a situation that will be replicated for Volaris and Viva Aerobus, but all through dialogue. • Airspace Redesign: He affirmed that there is no problem with the airspace redesign and described it as an invention of his adversaries and the conservative press, especially the Reforma newspaper.

He disqualified the news that, by decree, flights would be transferred to AIFA and affirmed that he was unaware of this information. He affirmed that these criticisms are born from the resentment of his adversaries and builders for stopping the Texcoco Airport and avoiding the construction of works with corruption. He informed that Aeromexico and other airlines agreed to transfer flights to AIFA. ENVIRONMENT • Production for self-consumption: The President informed that he will make a tour to meet with agronomists and extensionists from all over the country this week. He pointed out that it is necessary to promote a production campaign, especially for self-consumption, so that world inflation does not affect so much. He said that he will meet with agronomists from Monterrey this Friday and in the afternoon with technical specialists in Guadalajara. On Saturday, he will be in Veracruz and in the afternoon in Puebla. Finally, he will have meetings with producers near Mexico City on Sunday. He said that he will meet with 12,000 technical agronomists to promote this planting campaign for self-consumption.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

INTERNATIONAL • Summit of the Americas: The President affirmed that if it is decided to exclude Latin American countries from the next Summit of the Americas, he will decide to send a representative in their place and not attend personally. The President reiterated his position in favor of the integration of Latin America, qualifying as inhumane cases such as the blockade of Cuba, which are used as electoral issues by conservative politicians. He assured that the relationship with the government of the United States is very good but considered that there are still signs of interventionism towards Latin American countries. • Call with Joe Biden: He mentioned that since Trump was in office, an investment of 4 billion dollars was promised to keep people in their villages, but so far, almost nothing has been invested. He highlighted that programs such as Sembran-

do Vidas and Jovenes Construyendo el Futuro are being implemented in El Salvador and Honduras. He mentioned that Marcelo Ebrard met yesterday with the U.S. Secretary of State, Antony Blinken and that today he will speak with him so that he can comment on the results. He stressed that it is important to increase work visas in the country for Mexicans. • Russia-Ukraine Conflict: The President emphasized that Mexico condemns all invasions but at the same time seeks to promote dialogue and seek peace, and in this conflict, this was lacking. He assured that Mexico will not impose sanctions on any country and remain neutral in the conflict. • Central America Tour: Last night, he concluded his Central America and the Caribbean tour. The President declared that he insisted on the integration of North America to attend to the migratory flow and highlighted the contradiction that exists in the labor force, since this is lacking in the countries of the North, but the labor force from Central America is not accepted. Likewise, he stated that xenophobia should not be used as a political campaign to obtain votes, exemplifying this through the statements made by the governor of Texas and reiterating that Mexico will not allow Mexicans living in the U.S. to be offended in an honorable manner. • The tour’s objective is to express solidarity with Central America and the Caribbean. He reiterated that the country’s foreign policy is as such. He informed that the application of the Sembrando Vida and Jovenes Construyendo el Futuro programs is being promoted in these countries and mentioned that we must work towards strengthening the region in the world, taking the European Union as an example.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S oIn Guatemala, around 30 thousand Guatemalan agricultural workers who work in Chiapas, specifically on coffee and banana farms, were enrolled in Social Security. — El Salvador said that the Sembrando Vida and Jovenes construyendo el Futuro programs are fully consolidated. He reported that 10,000 producers and 10,000 young people are being supported. — Belize reached an agreement to remove tariffs because they could not sell their agricultural products in Mexico due to taxes. He pointed out that this situation was maintained due to a mistaken policy; however, it was decided to remove taxes for foodstuffs such as fish, agricultural products, and livestock. — Cuba, a cooperation agreement was signed that includes sanitary aspects. ECONOMY • Package Against Inflation and Famine (PACIC): Rogelio Ramirez de la O, Secretary of Finance and Public Credit, presented the PACIC. He mentioned that inflation is being suffered worldwide due to COVID and increased demand. This situation worsened in 2022 due to the Russia-Ukraine conflict that raised grain and fertilizer prices. The plan consists of establishing maximum prices for some products in the basic food basket to prevent inflation from affecting people with scarce resources and increase the supply of food in the country. He pointed out that the plan is divided into four stages: production, distribution, foreign trade, and other measures. In each stage, different measures will be taken. Among them are the stabilization of gasoline and diesel prices, the expansion of the “Fertilizantes del Bienestar” program, the elimination of the compensatory quota for

ammonium sulfate, freezing of railroad rates and compensation for interconnection (food and basic products), temporary elimination of tariffs and fixing the price of certain products in the basic food basket. oInvolvement of the Private Sector: The private sector has shown its support to the President in implementing the PACIC. Walmart Mexico and Grupo Bimbo presidents indicated that they are voluntarily joining this initiative. They recognize that the high inflationary indexes that are being faced directly impact the people, particularly those who have the least and require an effort to combat them. For this reason, they join the current Administration’s call for the government to work together to face the challenge. On the other hand, Francisco Cervantes, President of the CCE, said that many chambers are willing to cooperate in the agreement to mitigate inflation, and many

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S brands such as Kimberly-Clark, Lala, and many others are joining. The President pointed out that this agreement has no political interest and is the government’s responsibility. However, he emphasized that the Secretary of the Treasury was very clear about the agreement’s limitations; it will not solve the problem, but it will help. • Economic Environment: The President mentioned that the minimum wage had increased 70% in real terms and contractual salaries. He also stated that there is an increase in reserves of around 15% and that it is very likely that remittances will reach 60 billion dollars. He indicated that the currency is stable and there is no devaluation of the same and thanked the business people who contribute to the Public Treasury since there is an increase of more than 4%, even with inflation, being a nominal increase of 12% of this period in relation to last year. Finally, he assured that the increase in inflation is closely related to the Russia-Ukraine War. Still, Mexico can do its part so that it is not affected so much, maintaining accessible prices. • Salaries: When asked about the President’s pending modification of the UMAS to the minimum wage, he responded that all the counter-reforms are being reversed. He commented that in the case of the UMAS, there is already a resolution by the Supreme Court. He informed that the first measure that has been taken to compensate is the doubling of the universal pension so that all those over 65 years of age are guaranteed a pension and to help compensate those whose pensions are measured with UMAS since the UMAS are less than the minimum wage. He advanced that there is a plan to move the benefits and that if the salary is increased, the additional amount is not taxed. • Remittances: The Attorney General announced

that each person sends an average of 350 dollars each month. He highlighted that in the receipt of remittances during March, an increase of 12.59% was reported in relation to last year; 15.72% in relation to 2020; 56.39% in relation to 2019; and 74.98% in relation to 2018. • Inflation: Regarding inflation growth, the President pointed out that there is more control over the energy sector. If there were no fiscal support for gasoline, inflation would increase much more. He commented that the United States has 8.5% inflation and, in general, all countries are facing this problem. POLITICAL • Gertz Madero Case: A reporter delivered a file on an investigation of Mexico’s General Attorney. The President mentioned that he will evaluate the report. He stated that confrontations between law-

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S yers are very delicate and reiterated his appreciation to Julio Scherer. Finally, he assured that the federal government will act responsibly and impartially in the case. • Bribes to PEMEX Officials: When questioned, the President stated that the company Vitol was sanctioned in the United States for giving bribes to PEMEX officials in previous six-year periods. He stated that the company offered to give money to the government as compensation. However, he instructed that the money should not be accepted if it was not informed who had received the bribes. He announced that he will request PEMEX to provide more information on the matter.

HEALTH • Vaccination against COVID-19 for children: When asked about the agreement to acquire the Cuban vaccines for children, the President informed that they are vaccines for children 2 years old and older in the first stage. He pointed out that more information will be given tomorrow and that, if necessary, it will be done with other vaccines such as Pfizer or other pharmaceutical companies. He added that it is possible that the children will already be vaccinated in August. • COVID 19: Hugo Lopez Gatell, Undersecretary of Prevention and Health Promotion, reported that the average number of new cases of COVID-19 in the week of May 1-7 was 370 cases, while the occupancy of ventilator beds was 1%. A total of 206,122,919 doses of vaccine have been applied, with 91% coverage in people aged 18 and over. • Pulso Salud: Zoe Robledo, Director General of IMSS, announced the results of the implementation of the IMSS-Bienestar program in public hospitals in the states of Nayarit and Tlaxcala in terms of the expansion of hospital infrastructure, the basification of health workers and the expansion of pharmacies and the filling of prescriptions.

NEWS BY STATE

BAJA CALIFORNIA The Health Secretary of Baja California reports 172 active cases in the past 14 days and 122 new cases in the past 24 hours. This week started, the vaccination plan for young people from 12 to 13 years old in the school facilities, and the vaccination plan for the adult population continues throughout the state. 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.

SONORA Official reports confirm 3 new cases in the last 24 hours. The vaccination against COVID-19 for young people from 12 to 14 started this week. The Governor of Sonora mentioned that face masks will be optional. The Sonora Health Secretary recommends using face masks for the vulnerable population, unvaccinated people, and population with respiratory symptoms. Also, filters or sanitizing mats are not necessary for closed public spaces. Last week began the construction work on the Solar Plant located in Puerto Peñasco. The first phase includes 279,000 solar panels.

NEWS BY STATE

NUEVO LEON The Nuevo Leon Ministry of Economy announced that, in 2021, the state broke the export record for a total value of 45 thousand 476 million dollars, exceeding the levels that were even before the pandemic. Ivan Rivas, State Secretary of Economy, explained that the sectors that led the increase in exports are directly related to the metal-mechanic industry.

COAHUILA In order to give greater clarity to the electoral processes in the entity, the government of Coahuila is working, in coordination with local deputies, on the elaboration of new electoral legislation. This was announced by the government secretary, Fernando de las Fuentes, who stated that the main objective is to guarantee that all groups in society are included. TAMAULIPAS Tamaulipas is one of the six states in Mexico with Governor elections; the election will be held on June 5. Unlike other states, in Tamaulipas, the three candidates are men, and according to the Electoral Institute of Tamaulipas, two are in an alliance and one alone: • Arturo Diez Gutierrez Navarro, Movimiento Ciudadano (MC). • Cesar Verastegui Ostos, who represents the “Va por Tamaulipas” coalition made up of PAN, PRI and PRD. • Americo Villareal Anaya, for the alliance of Morena, PVEM and PT.

NEWS BY STATE

SAN LUIS POTOSI San Luis Potosi has 19 consecutive days without deaths due to coronavirus. On the last day, 21 new laboratory-confirmed cases were registered, for a cumulative total of 182,004 cases and 7,551 deaths, according to the technical report of the State Committee for Health Safety. The report indicates that 523,880 suspected cases of COVID-19 have been registered so far, of which 182,004 have been confirmed; 338,112 have been ruled out, and 3,765 cases are still under investigation. Likewise, 162,867 cases have been discharged. In the case of hospitalizations, there are 5 people, of which one is stable, and four are serious; and of these, one is positive for COVID-19, one is negative, and three are still under investigation. Hospital occupancy is 1 percent in regular beds for patients with respiratory diseases, and ventilator beds for patients with coronavirus are free.

JALISCO According to the president of the Coordinating Council of Women Entrepreneurs, Sofia Perez Gasque, according to data from the organization, in Jalisco, seven out of every 10 enterprises are led by women, thus leading this business sector. However, she pointed out, only 6% of the consolidated companies, that is to say, the large companies in the state, are headed by women, in addition to the fact that in the private sector, there is still an 18.8% salary gap. At a national level, said the president during the first UNIDAS Congress, 18% of women, that is to say, more than 11 million productive women, are not paid in Mexico. For this reason, this Congress, in conjunction with the signing of a collaboration agreement with the national Coparmex to promote the actions of women at the business level, will also serve to generate reforms and public policies in favor of this sector, in addition to achieving collaboration between all the state business centers of the Coparmex.

NEWS BY STATE

QUERETARO Queretaro will have economic growth of 4%, which is almost double the country’s, due to the attraction of investments and the boost to economic reactivation, assured the Governor, Mauricio Kuri Gonzalez. He explained that the economic slowdown caused by the COVID-19 pandemic will also boost the state’s economic growth. “We continue to receive a large amount of investment, the last time I talked to Marco del Prete, we were talking about a 4% growth for Queretaro,” he asserted. However, he affirmed that they already have projects in their portfolio representing 90 billion pesos, among which is a motorcycle assembly plant. “And we are trying to get automotive companies to arrive. There are a large number of them. And there is a company that is already putting the motorcycles, it would already be a motorcycle assembly plant, and well, we continue working in that sense”, he said. He pointed out that they also have a logistics sector company in the pipeline, representing an investment of 800 million pesos. “We must recognize that we are coming from a very strong deceleration, which also helps us have a rebound in the economy.”

GUANAJUATO The state Governor presented his fourth government report, in which he assured that Guanajuato is in a stage of recovery, with new challenges in economic and productive matters. “Today, we are in full reactivation; we have recovered and overcome the jobs we lost in the most complicated part of the crisis,” he said. “More companies continue to arrive and with them more sources of employment because national and foreign investors continue to trust in our state.” He added that the government’s actions were focused on public policies to boost sectors such as construction, manufacturing production, agribusiness, exports, and attraction of investments in mindfacture. As a result of these axes, he said that the entity had an economic growth above 2020, that is 7.2 percent concerning the first three quarters of that year, and an investment of 2 thousand 617 million pesos was made in 87 projects in 2021.

NEWS BY STATE

AGUASCALIENTES Nissan, one of the companies with the greatest presence and importance in the economy of Aguascalientes, has announced a major investment in this state. Specifically, the Japanese company announced that it will use $700 million dollars to increase its operating capacity. In the event prepared for this announcement, the main executives commented that this money will be used to improve its production capacity globally. “This important investment in Aguascalientes manufacturing is focused on improving facilities, retooling and making important developments in automation, as well as preparing and training employees. At the same time, it will help Nissan become even more competitive by improving the speed of its operations and implementing the latest technologies.” Reads the statement released by the company. Although the company itself did not specify it, it has been advanced that the investment aims to prepare the plants to manufacture hybrid and electric vehicles.

It should be noted that not long ago, the introduction of E-power technology in our country was announced. This consists of the adaptation of two engines to generate energy, one electric and the other internal combustion. It has been anticipated that Aguascalientes will be one of the main regional producers of electric vehicles and parts. There will be 23 models powered by electricity that will be manufactured in this state over the next few years. There is still no certainty when these vehicles will begin production in this state. However, Nissan has already started its adaptation to make Aguascalientes the manufacturing center for all of Mexico and North America.

NEWS BY STATE

STATE OF MEXICO Since the capital of the country must already have a General Territorial Planning Program, the State of Mexico is supporting the city in the elaboration of the Metropolitan Chapter, informed Nina Carolina Izabal Martinez, General Director of Urban Planning of the Secretariat of Urban Development and Works of the State of Mexico. This Monday, the state official announced a meeting in Toluca with the head of the Institute of Democratic Planning and Prospective of Mexico City, Pablo Tomas Benlliure Bilbao. She explained that in the meeting, they discussed the common challenges that both entities have and the areas of opportunity in order to fulfill a common objective, to strengthen the right to the city.

CDMX The head of the Government of Mexico City, Claudia Sheinbaum, informed that a new expert opinion will be hired to determine the causes of the collapse of the elevated section of Line 12 of the capital’s Metro, which occurred on May 3, 2021, and caused the death of 26 people and more than a hundred injured. He called on recognized engineers to make this assessment and present the whole truth. At the same time, there is the resolution of the Attorney General’s Office, which has already clearly established the causes of the collapse. Sheinbaum reiterated that her government will not allow the company DNV to politicize the issue of the collapse of Line 12 with the delivery of the third and last report of its expertise.

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

CENTRAL MEXICO

NORTHEAST

PIRELLI New investment of 15 MDD for two years; in which an advanced technology and digitalization center will be built next to its plant in Silao, Guanajuato. Generating 450 new direct and indirect jobs.

MARTINREA Announced an investment of 45 million dollars for its expansion in Ramos Arizpe, Coahuila. This investment will generate 350 direct jobs. CDMX

NISSAN Will invest 700 MDD for its operations in Aguascalientes, Mexico. DEACERO GROUP Inaugurated its MacroHub located in the municipality of Villagran, Guanajuato, with an investment of 16 million dollars and the generation of 500 direct and indirect jobs.

SOURCE: El Economista

NISSIN FOODS MEXICO Will expand its plant in State of Mexico, investing 15 MDD to expand its only plant in the municipality of Lerma. CEMENTOS FORTALEZA A cement company founded by Carlos Slim Helu, will invest 210 MDD in a second cement production line in the municipality of Santiago de Anaya in Hidalgo.

LABOR

LET’S CELEBRATE MOTHER’S DAY BY SUPPORTING SHARED RESPONSIBILITIES Statistics In Mexico show that out of every 100 people excluded from the labor market, the vast majority, 87 percent, are women. Of these, almost half are relegated from a job opportunity simply because they do not have someone to take care of their children. The paradigm that only women are the ones who care continues to prevail in our society. Younger generations are breaking the old model. During the pandemic, and as a result of countless work meetings through digital platforms, we began to see images of men in charge of their children, especially babies. Those images were unthinkable just a few years ago. The window that the technological platforms opened to the intimacy of homes allowed many people to break the taboo and begin to feel comfortable showing themselves with that double responsibility. Yet, not all companies have understood or adapted to it. Companies in Mexico should be prepared for upcoming legislation changes that will include extended paternity leave, and new regulations regarding a national care law, specially to support women to break barriers at the workplace. Organizations that implement shared and equal family responsibilities benefits for all their workers will have a better narrative and will be best prepared to attract and retain talent.

ALVARO GARCIA HR, Vice President