Weekly Report 65 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review # 65 I July 28, 2021

MANUFACTURING INDUSTRY BOTTLENECK IN ADMINISTRATIVE PROCEDURES DOES NOT STOP MAQUILADORA INVESTMENT. According to the business organization representing the sector, companies registered in the Maquiladora and Manufacturing Export Industry (IMMEX) program have increased their investments in 2021, despite deficiencies in procedures for the arrival of new production plants. Mexico captured 4.8 billion dollars in fixed assets from IMMEX companies in the first quarter of 2021, when the annual average before the COVID-19 pandemic was around 8 billion dollars, according to data from the National Council of the Maquiladora and Manufacturing Export Industry (Index). But Mexico could capture even more of these investment flows if it streamlines the procedures for opening new production plants under the IMMEX program, said Luis Manuel Hernandez, president of Index. “Up to 35 companies that want to obtain their IMMEX permit are in the process of authorization, which we see that the faster it is, the more quickly the voice is heard that Mexico is open to attracting more investment,” said Hernandez at a press conference. The projects would generate some 25,000 jobs.

As a point of comparison, 80 new IMMEX establishments started operations from April 2020 to April 2021, of which 39 corresponded to the months of 2021 alone. The program constitutes a foreign trade and tax regime by means of which companies registered under the IMMEX figure may introduce into the country, exempt from import taxes, the raw materials, parts, components, as well as machinery and equipment they require for their assembly and/or transformation processes of finished products and/or parts and components. Likewise, once the transformation and/or assembly of such goods is completed, they leave the country as dutyfree exports. “Many companies are arriving under the shelter or shelter schemes,” said Hernandez. The main sectors of the Mexican economy are manufacturing, petroleum and petrochemicals, tourism, agriculture, transportation and communications, construction, mining, and electric power.

MANUFACTURING INDUSTRY

IMSS EXTENDS OUTSOURCING REFORM TRANSITION DEADLINES UNTIL FURTHER NOTICE The Technical Council of the Mexican Social Security Institute (IMSS) decided to extend the time for companies that had an outsourcing scheme to comply with the procedures of the transition regime of the outsourcing reform and left the term open until the Congress of the Union defines the new deadline. The Morena and PAN benches in the Senate of the Republic presented two initiatives to modify the transition regime of the outsourcing reform that went into effect on April 24 to give companies more time to comply with the procedures involved in the change of systems. This weekend was the first deadline contemplated in the reform for companies regarding the transfer of outsourced personnel to the central payrolls of the companies, as well as the changes in the employer registers by class. The Institute informed through a press release that in an ordinary session held this Friday, “the H. Technical Council of the IMSS authorized, as an administrative facility, to extend the 90 calendar day period” contemplated in the transition regime regarding the procedures before the agency. The extension of the IMSS is to the fifth, sixth, and seventh transitory articles of the outsourcing reform decree that modified seven legal ordinances. These have to do with the following obligations for the companies:

• Perform the employer substitution when migrating workers from companies that operated under personnel subcontracting schemes to their payrolls, recognizing the rights and seniority of the transferred persons. • Deregister the employer registrations they had for subcontracting schemes and request new ones. • Begin to deliver quarterly reports with information on service contracts and specialized works performed under the new modality. In addition, the IMSS decided to extend the deadlines indefinitely until the Congress of the Union defines the corresponding extension in the legislation.

GOOD NEWS MEXICO RECOVERS 95% OF JOBS LOST IN 2020, ONE STEP CLOSER TO THE PRE-PANDEMIC STAGE Analysts expect that the 678,000 jobs that are missing to recover from the 12.9 million lost due to the pandemic will be restored in the coming months. With the 176,603 jobs generated in June, 95% of the total number of jobs lost due to the pandemic were recovered. The Mexican Institute of Statistics and Geography (INEGI) informed that the number of Mexicans with occupation reached 55 million 77 thousand 521 last month, 678 thousand 127 fewer jobs than those registered in March 2020, when they reached 55 million 755 thousand 648. Therefore, from the 12 million 996 thousand 59 jobs lost in April 2020, the period of most significant economic restriction and mobility to contain the pandemic, the recovery was 12 million 317 thousand 932 in the sixth month of 2021. The unemployed population available and looking for a job was 2,309,107 in June, 3.97% of the Economically Active Population, the lowest rate in 15 months.

95% OF LOST JOBS RECOVERED The unemployment rate stood at 3.97% of the labor force, the lowest level in the last 15 months. Last June, 176,603 jobs were created, representing a recovery of 95% of the jobs lost due to the pandemic. The employment recovery in the country has been fast in general terms, as 95% of the jobs lost in April 2020 have been recovered so far, with just over 670,000 positions remaining.

SOURCE: Excelsior

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference July 21-27, 2021

COVID -19 President Lopez Obrador pointed out a new wave of infections with less intensity than the first and second registered in 2020. He pointed out that it is less harmful because of fewer hospitalizations and infections, mainly young people. This is because the adult population is already vaccinated. EMPLOYMENT GENERATION / OUTSOURCING Regarding the implementation of the reform in terms of subcontracting (outsourcing), the President said that the private sector requested an extension of one month to comply with the guidelines. He announced that it will be the Congress of the Union who decides if this is possible. DECENTRALIZATION OF THE FEDERAL MINISTRIES The President confessed that it is a pending commitment. However, he said that actions are being carried out, including the Ministry of Energy located in Villahermosa, Tabasco. He announced that the Ministry of Health will be moved to the state of Guerrero at the end of this year.

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

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference July 21-27, 2021

RETURN TO CLASSES The President spoke in favor of returning to face-toface classes from the next school year, underlining that it is essential that children return to schools with good control to avoid contagion of COVID-19. INTEGRATION OF LATIN AMERICA AND THE CARIBBEAN Regarding the proposal of replacing the Organization of American States with a new international body that integrates all the countries of Latin America and the Caribbean, the President stressed that a new relationship must be sought between all the countries of America. Also, persuade the authorities of the United States to integrate the sovereignty of each country and visualize that the policy designed for 200 years is not positive. Mexico decided to support Cuba in this health crisis since it is not enough only to express oneself at the UN, blocking against the blockade. REOPENING OF THE BORDER As an express question about the expiration of the deadline for reopening the border between the United States and Mexico, Lopez Obrador reported that the states of Chihuahua, Baja California, Tamaulipas are still being vaccinated. It is expected that the entire population living on the border will be vaccinated by August.

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

REFORMS TO PRESENT The President announced some of the reforms promoted by his government. Among them, prohibition of tax forgiveness for large corporations, revocation of mandate, support for social policy raised to constitutional rank, fight against corruption. He informed that the reforms he will present are: constitutional reform to strengthen the CFE so that it can produce 50% of the electric power and the private initiative up to 46% so that there is competition. The second reform is to pass the National Guard to SEDENA, and the third is an electoral reform so that the exercise in the service of private interests is avoided.

MEASURES TAKEN BY STATES IN MEXICO

BAJA CALIFORNIA The State of Baja California is considered in the low-risk tier or green light, except for the municipality of Mexicali, which is still considered in the medium risk or yellow light. Official reports confirmed that there are currently 498 active cases with hospital occupancy at 30.65%, with 232 hospital beds available and 215 respirators available for COVID-19 patients. The vaccination plan continues applying Pfizer and Astra Zeneca second doses in most of the municipalities. The population with a complete vaccination scheme slowly increased to 72.90% in the past week. However, Baja California’s Health Secretary reported that they will apply second doses of Astra Zeneca vaccines to 60,000 adults this week.

SONORA Sonora has the vast majority of its municipalities in medium risk tier or yellow light, five municipalities in the high-risk tier or orange light, one municipality in the maximum-risk tier or red light, and only one municipality out of 72 low-risk tier or green light. Official reports confirmed that are currently 1,929 active COVID-19 cases and 266 hospitalized patients, of which only 65 patients are in critical condition. 196 new confirmed cases were reported in the past 24 hours. The vaccine plan continues this week in different municipalities with the application of the second dose of Astra Zeneca to adults between 50 and 59 years old and applying the first and second dose of Astra Zeneca, Pfizer, J&J, and CanSino to adults between 18 and 49 years old.

MEASURES TAKEN BY STATES IN MEXICO

COAHUILA The Ministry of Education in Coahuila clarified that it does not have a plan to return to the classrooms for next August 23, but that the agency is prepared to “react” to the indications according to the behavior of the pandemic by the COVID-19 and the instructions of the Ministry of Health of Coahuila. TAMAULIPAS Tamaulipas will remain in orange at the Epidemiological Traffic Light for two more weeks due to the number of COVID-19 infections. According to the state authority, as of this Friday, July 23, the total number of cases is in the state, 64,267 positives. NUEVO LEON Although there was an increase in hospital occupancy in week 28, in the average of positive cases and the daily average of deaths from COVID-19, the state of Nuevo Leon decided to maintain the same restrictions as the previous week. For the next seven days, the capacity continues at 50 percent, the schedule from 5 am to midnight for most businesses, pregnant women as the only vulnerable group who are not allowed to enter specific types of establishments, and plan to resume classes on August 30.

MEASURES TAKEN BY STATES IN MEXICO

QUERETARO The director of Health Services, Martina Perez Rendon, reported that 164 variants of the Covid-19 virus had been identified in the state, among which are three cases of the Delta variant. She pointed out that at least 31 cases of variants are considered of concern due to the increase in cases they generate. She specified that in these cases, at least three are from Delta, 27 from Alpha, and one from Gama, while the rest are of another type considered of interest. She explained that there are still few cases that have been confirmed from Delta, so it cannot be said that it is the cause of the increase in positives in the last two weeks in the state. “We cannot make an affirmation neither in one sense nor in another because the number of samples that we have positive to the Delta variant. It is a small number”, she indicated. Although, she added that each person positive for these variants could infect another six or seven people, according to what they have studied internationally.

AGUASCALIENTES Aguascalientes is already the third state in the country with the highest fatality due to COVID-19. It surpasses its mark, establishing itself with an average of 13.9%, only below Baja California and Hidalgo. Even though the health sector did not report new deaths in the last 24 hours, the entity managed to climb one more notch in the records of fatalities. According to the technical report of the Institute of Health Services of the State of Aguascalientes (ISSEA), the death toll from the pandemic is 3,320, while the number of accumulated cases increased by 39, reaching a total of 23,000 863 infections. Currently, there are no suspected cases. However, a total of 179 active cases and 29 hospitalized cases are counted. The updated figures on the behavior of the pandemic also detail that 772 thousand 079 doses have been applied against COVID-19. This figure will increase this day as the vaccination days continue in the municipality of Jesus Maria. Finally, in terms of the number of recovered patients, it remains stable with a total of 20,285.

MEASURES TAKEN BY STATES IN MEXICO

GUANAJUATO In Guanajuato, there are 137 thousand 357 confirmed cases of Covid-19, 880 are under investigation, while 187 thousand 335 cases are already discarded. As for the cases by community transmission, there are already 137 thousand 201 identified. There are 11,332 deaths in the entity. The National Association of Parents (ANPF), through its representative in the State of Guanajuato, Teresa Castellanos, assured that before thinking about returning to school activity for next August. It is necessary to move to green in the epidemiological traffic light and avoid risks for minors. As the restart of school activities approaches, both the parents’ associations and authorities have expressed their point of view to start the 2021-2022 school year on time. He explained that further progress must be made in everything that has to do with how the hundreds of thousands of students would return to work and the schools’ conditions. For the representative of ANPF, it is necessary that in addition to the State Executive Power that has pronounced for the resumption of classes, the health authorities verify that there are no longer risks. He specified that taking children to classes in the current circumstances and under the previous schemes can generate more problems than benefits, so he asked that it be well consulted with the parents if there is a decision in this regard.

JALISCO The Government of Jalisco suspended the celebrations of the national holidays, the traditional October Holidays, and the employers’ associations in the municipalities and religious congregations due to the increase in positive cases of Covid-19. Governor Enrique Alfaro said that the celebration of Independence will be held without the assistance of the people. “We also want to send a message with this decision regarding the Independence celebration and regarding the October Festivities to understand that what is not essential can be suspended, that what we cannot stop is: neither the return to classes nor the reactivation of the of Economy.” This will be the second consecutive year in which the national celebrations will not be held with the assistance of people in the Plaza de Armas, in front of the Government Palace. Similarly, municipal public squares throughout the state will be closed to avoid concentrations of people during the so-called national days.

MEASURES TAKEN BY STATES IN MEXICO

STATE OF MEXICO Authorities informed that in Mexico City, only 35.63% of hospitals beds remained available, according to the IRAG Network Information System. The increase in COVID-19 patients led the government to suspend the terms and deadlines of the public administration as of Monday, July 26. Last week, the federal government presented new measurement parameters for the Coronavirus Epidemic Risk Stoplight, which are intended to recover social and economic activities. Mexico City changed to orange color, but the economic and social activities reminded unchanged. CDMX Francisco Javier Hernandez, Minister of Health from the State of Mexico, informed that hospitalizations and cases had increased in the state in the last week. As in Mexico City, the State of Mexico changed to orange as the increases of contagions and deaths were registered.

VACCINATION PROGRESS

As of July 24, 60,558,289 doses of vaccine have been applied in all of Mexico since December 24. 23,955,609 have the complete scheme (57%), and 42,180,955 have at least one dose. The states with the greatest progress in immunization are Baja California, Mexico City, Baja California Sur, Chihuahua, with percentages ranging from 79 to 70 percent. The cumulative total of vaccines received packaged and packaged in the country amounts to 79 million 422 thousand 585 doses from six different pharmaceutical companies: Pfizer-BioNTech, AstraZeneca, Sinovac, Cansino, Centro Nacional de Epidemiologia y Microbiologia Gamaleya, and Johnson & Johnson.

TOWARDS THE “NEW NORMAL”

DISTRIBUTION OF DEATHS PER STATE DUE TO THE PANDEMIC

INFORMATION UPDATED ON JULY 26, 2021 AT 19:00 HRS LOCAL TIME.

NEW CASES REPORTED: 5,920

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

CONFIRMED CASES: 2,754,438

NEW DEATHS REPORTED: 171

CONFIRMED DEATHS: 238,595

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 78.90

0 to 10.0 (0 states)

40.1 to 50 (4 states)

10.1 to 20 (3 states)

50.1 to 60 (3 states)

20.1 to 30 (5 states)

60.1 to 70 (4 states)

30.1 to 40 (2 states)

>70 (11 states)

Elaborated by Prodensa with information from the Health Ministry of Mexico

PANDEMIC’S SITUATION IN THE WORLD • As of July 26, 2021, globally there have been reported confirmed 194,080,019 cases (422,294 new cases) of COVID-19 and 4,162,304 deaths (7,644 new deaths*). Lethal rate: 2.1%. • In the last 14 days, the number of new cases accounts for 4% (7,329,163) of the total of accumulated cases.

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

TOWARDS THE “NEW NORMAL” INCIDENTS OF CONTAGIONS IN THE POPULATION BY REGION AS OF JULY 26

DEATH INCIDENTS IN POPULATION BY REGION AS OF JULY 26

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

EHS

RECOMMENDATIONS VARIANTS OF THE VIRUS THAT CAUSES COVID-19

Information about the characteristics of these variants is rapidly emerging. Scientists are working on learning more about how easily they spread, whether they could cause more severe illness and whether currently authorized vaccines will protect people against them. What We know Viruses constantly change through mutation, and new variants of a virus are expected to occur. Sometimes new variants emerge and disappear. Other times, new variants persist. Multiple variants of the virus that causes COVID-19 have been documented in Mexico and globally during this pandemic. Viruses constantly change and become more diverse. Scientists monitor these changes, including changes to the spikes on the surface of the virus. By carefully studying viruses, scientists can learn how changes to the virus might affect how it spreads and how sick people will get from it. If you think about a virus like a tree growing and branching out, each branch on the tree is slightly different than the others. By comparing the branches, scientists can label them according to the differences. These small differences, or variants, have been studied and identified since the beginning of the pandemic. Some variations allow the virus to spread more easily or make it resistant to treatments or vaccines. Those variants must be monitored more carefully. Contact us to help you with the preventive measures and protocols in your company.

DAVID ANTUNEZ Environmental, Health, and Safety Director.

SUPPLY CHAIN

SUPPLY CHAIN LEGAL COMPLIANCE With the current labor reform, companies are required to validate their current supply chain to confirm the legal compliance of their suppliers. The steps we recommend you to take are: • Identify necessary documentation to validate the current compliance status of your suppliers, e.g., articles of incorporation, positive compliance opinion (SAT, IMSS), registration with REPSE (where applicable specialized services). • Mapping your current supply chain to identify suppliers of specialized services, consumables, and raw materials. The above is to define the priority order of review. • Supplier compliance analysis: In order to have visibility of the current status of suppliers, areas of opportunity can be detected by the compliance pillar, such as labor, legal, and tax. For this step, we recommend using technological platforms that allow you to follow up with the corresponding documents for each supplier. • Creation of a Business Continuity Plan: With the exercise results, actions can be taken such as developing suppliers for optimal legal compliance or changing the supplier base. Whatever the decision is, risk mitigation is essential. We can support you with validation and counseling for your current supply chain.

BENJAMIN BOCANEGRA Consulting Manager

MAKE TIME FOR SMALL TALKS WITH YOUR TEAM

YOELLE ROJAS

LABOR

Public Affairs & Communications Director

It’s almost a year and a half since the pandemic started; we have returned to our working centers, some of our teams keep working remotely, but we need to recognize that all these changes are complex for our teams. For most companies, this has meant adapting quickly to new ways of working and communicating. Encourage the small talks between your team; whether your team is affected directly or not by the pandemics or is openly willing to discuss how they feel, it has never been more important to encourage regular and open communication between the team members. Use your communication channels to enable these conversations. Start by making space in the working day for short daily meetings to ensure the whole team is engaged in conversation at least once a day. Be creative and propose some topics to start talks to change the mindset of the team positively. If you are lack ideas to detonate conversations, contact us to guide you through how to improve your team’s communication.

PUBLIC AFFAIRS

THE THIRD WAVE The third wave of SARS-COV-2 virus infections is a growing threat to public health and business due to the speed of spread, attributed to new variants, and the population’s laxity in prevention measures. It is urgent that we all reinforce our actions to avoid contagion. The U.S. authorities have already updated the protocols regarding the use of masks: Just a few weeks ago, they began to allow those already vaccinated not to wear them in certain public places. Today, in view of the new phase of the pandemic, the CDC (Center for Disease Control and Prevention) is backtracking and recommending their use again, even for those already vaccinated and minors. In Mexico, the health authority has also updated guidelines and published them in the official gazette. It is time to update protocols and reinforce measures.

ALVARO GARCIA HR, Vice President