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GENERAL SITUATION IN MEXICO

Weekly Review # 66 I August 4, 2021

MANUFACTURING INDUSTRY STPS PUBLISHES EXTENSION OF OUTSOURCING REFORM BY SEPTEMBER 1 It is now official, companies with outsourcing schemes will have one month more, until September 1, to comply with the rules of the outsourcing reform that went into effect last April 24. The Ministry of Labor and Social Welfare (STPS) published this Saturday in the Official Gazette of the Federation. In an afternoon edition, the reforms to the transition period, endorsed by the Congress of the Union on Friday night. The head of the STPS, Luisa Maria Alcalde Lujan, highlighted that this extension of deadlines will allow companies to conclude the regularization process by which 2.3 million workers have already benefited. The outsourcing reform considered different deadlines for companies to adapt to the new rules. The first one, regarding the transfer of outsourced personnel to the companies’ central payrolls, expired on the third week of July. The tax component of the changes, corresponding to the new provisions for the crediting and deduction of income tax and VAT on outsourcing expenses and the classification of the outsourcing of personnel as tax fraud, was scheduled to come into effect on August 1. The changes approved by the legislators contemplate the extension of all the staggered deadlines originally contemplated in the reform to September 1.

MANUFACTURING INDUSTRY

AUTOMAKERS AND AUTO PARTS COMPANIES MUST PREPARE FOR U.S. INTERPRETATION OF RULES OF ORIGIN Since the United States will not give in and will pressure Mexico to comply with the rules of origin in the automotive sector, assembly and auto parts companies should prepare for any eventuality, with options ranging from paying the 2.5% tariff to incorporating the U.S. or Canadian raw materials and components. The United States, through the U.S. Trade Representative Office (USTR), will not give in on the interpretation of the rules of origin, because the automotive industry represents “a pillar in Joe Biden’s infrastructure plan, in addition to strengthening his economic plan to boost U.S. industry under the slogan ‘Build Back Better,’ which promises to create jobs and strengthen the supply chain strategy,” said Jose Ignacio Martinez Cortes, coordinator of the Laboratory of Analysis in Trade, Economics and Business (LACEN) of the UNAM. The specialist said that the interpretation in which the United States does not agree with Mexico and Canada

is found in article 5.16 of the USMCA and number 8 of Decision 1 of the Free Trade Commission of the same Treaty, whose Uniform Regulations take effect as of the entry into force of said Treaty, on July 1, 2020. Martinez Cortes said that the United States is defending its interests against China at Mexico’s expense in the automotive controversy of the Trade Agreement between Mexico, the United States, and Canada (USMCA); however, the region’s economy could face a loss of competitiveness, either by giving in on regional content or the imposition of tariffs. Joe Biden’s government plans to spend 174 billion dollars on promoting the conversion to electric cars. Such stimulus would boost infrastructure for the recharging of this type of vehicle, as well as incentives for carmakers to leave internal combustion engines behind, explained Martinez Cortes.

GOOD NEWS THE USMCA REGION EXCELS IN TRADE

According to the World Trade Organization (WTO), among the total exports made by regions at the international level, those made in the USMCA region are the second-highest in value. The region that currently forms the USMCA, formerly NAFTA, exported 2.24 billion dollars in 2020, down 12 percent from 2019, making it the second-largest shipping group in the world, according to the “Statistical Review of World Trade 2021.” The European Union leads the list, with $5.45 billion in exports in 2020, which also registered an annual drop of 6 percent. The internal demand in the North American region is one of the elements that drive exports among the countries that comprise it, as is the case of the close relationship between Mexico and the United States. “The current integration between Mexico and the United States, from agriculture, through the automotive sector, to the aeronautical sector, is clearly showing a very dynamic recovery where Mexico is positioned as the main supplier (to the U.S.), causing Mexico to maintain and consolidate its position as the main exporter in the United States,” said Jorge Armijo, specialist of the Gilberto Bosques Center for International Studies in the Senate. The monetary and fiscal plans implemented by the United States helped to reduce the drop in exports due to the pandemic. “We are seeing that the dynamism in the recovery of Mexican foreign trade is due to the recovery of the U.S. economy,” said Armijo. However, he said that in the USMCA block, trade levels between partners have not been enough to show such a solid recovery, in the face of the pandemic, as other

SOURCE: REFORMA

countries, for example, the European Union, which in some cases were less affected compared to the United States. The European Union’s success is largely attributable to the fact that the E.U. has coordinated trade policies among its partners and is not so dependent on other economies; in other words, its trade is more diversified, he said. Also, in 2020 China displaced the United States as the European Union’s main trading partner, he pointed out. Regarding the Association of Southeast Asian Nations (ASEAN), which includes countries such as Vietnam, the Philippines, Singapore, and Malaysia, ranked third with shipments of 1.38 billion dollars, with a decrease of only 3 percent, compared to 2019.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference July 28- August 3, 2021

USMCA Ambassador Esteban Moctezuma is working to report on Mexico’s actions to comply with the Treaty. President Lopez Obrador commented that some legislators might not like the change in energy policy in which Mexico will stop buying gasoline abroad to process all raw materials within the country. PUBLIC CONSULTATION President Andres Manuel Lopez Obrador congratulated those who participated in the public consultation to prosecute former presidents, called on those who did not do so not to miss the opportunity to do so in these participatory democracy exercises. He stressed that, in March 2022, another consultation will be held to ask the population about the permanence of the President of the Republic; that is, the revocation of the mandate. FISCAL AGREEMENT Regarding the consultation of the fiscal pact in Jalisco, the head of the Federal Executive said that the Fiscal Coordination Law establishes a formula for the distribution of resources to the states. He specified that for a State to receive more resources, it would have to carry out a reform.

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

PROBLEMS IN CITIES The President announced that there will be a program to address the main problems in cities such as drains, clogged drains, parks in poor condition, public transport, potholes, public lighting, etc. PRESENTIAL CLASSES The President assured that it is not mandatory, but it is necessary to return to replace what was lost, causing damage to society. Mexico is not in the first place of the severity of the pandemic.

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 in the medium risk or yellow light. Official reports confirmed that are currently 657 active cases with hospital occupancy at 43.05%. Baja California’s Health Secretary asked the population to continue following the COVID-19 protocol due to increased active cases. The vaccine plan continues this week, applying the first dose of Pfizer vaccine to all adults waiting to start their vaccination scheme. They also continued applying the second dose of the Pfizer vaccine. The percentage of the population with a complete vaccination scheme increased to 75.18% in the past week.

SONORA The state of Sonora has the vast majority of its municipalities in medium risk tier or yellow light, 5 municipalities in the high-risk tier or orange light, two municipalities in the maximum-risk tier or red light, and only one municipality out of 72 in the low-risk tier or green light. Official reports confirmed that are currently 2,103 active Covid-19 cases and 336 hospitalized patients, of which only 79 patients are in critical conditions. 152 new confirmed cases were reported in the past 24 hours. The Sonora’s Health Secretary reminds us of the sanitary measures to combat the COVID-19, like avoiding closed places or spaces, not attending crowded places, and limiting close face-to-face contact.

MEASURES TAKEN BY STATES IN MEXICO

COAHUILA Coahuila returned to yellow traffic light due to COVID rebound after four months in green. State authorities recognized that infections doubled in a week, mainly in young people. However, this situation will not contemplate the application of new restrictive measures. TAMAULIPAS Three hospitals in Tamaulipas are at 100 percent occupancy of beds with ICU ventilators, confirmed the Information System of the IRAG Network of the Federal Ministry of Health. Eight hospitals currently provide their greatest service due to the increase in positive cases for COVID-19. NUEVO LEON The Nuevo Leon Health Secretariat reported a record of daily COVID-19 infections on July 30, reporting 1,308 positive cases for a single day, thus reaching 201,497 infected in total. On the other hand, he also mentioned that once more people are vaccinated, they will propose to the Health Safety Council that it should be a requirement to present the vaccination card to have access to establishments.

MEASURES TAKEN BY STATES IN MEXICO

QUERETARO According to the anti-COVID spokesman of Queretaro, people over 40 that refused to be vaccinated are those in serious hospitalizations. In the numerical analysis of COVID-19 every Monday, the Organizational Spokesperson of Queretaro announced that the population’s response to the continuous alert calls influenced a very slight slowdown of the disease until Friday, July 30. The Organizational Spokesperson, Rafael Lopez Gonzalez, considered that, although each slowdown is good news, the one experienced during the previous week was not enough to prevent doubling the goal from 600 to 1,200 assets, nor to avoid the constant increase in hospitalization, as well as in the number of deaths, especially in people between 20 and 49 years old, since in two weeks the average number of deaths went from 1 to 7.8.

AGUASCALIENTES Starting this Monday, August 2, 2021, the vaccination session is being carried out for people over 18 years of age who work in the industrial sector of Aguascalientes. There are three points where the biological is applied, which are exclusively attended by employees previously notified by their companies. In all the state municipalities, the Roadrunner Brigades have already been installed to immunize the population between 18 and 29 years old, except for the capital municipality. There is still no exact date for the campaign to begin for this age group in Aguascalientes. However, it is expected to be in the next few days.

MEASURES TAKEN BY STATES IN MEXICO

GUANAJUATO Daniel Diaz Martinez, Secretary of Health of Guanajuato, confirmed through his Twitter account that there will be 242,200 vaccines that will arrive in Guanajuato on Monday afternoon. On the other hand, the delegate of Comprehensive Programs for Well-being, Mauricio Hernandez Nuñez, confirmed that the doses will be applied starting at noon on Tuesday in each of the municipalities to which the doses will arrive. Through a statement sent by the Federal Government, it was stipulated that each municipality will receive the following number of vaccines: Abasolo will receive 8,800, Apaseo el Alto 7,800, Apaseo el Grande 11,000, Comonfort 9,300, San Miguel de Allende 21 thousand, Guanajuato 22 thousand 500, Irapuato 63 thousand 500, Acambaro 12 thousand, Jerecuraro 5 thousand 500, Tarandacuao thousand 200, Juventino Rosas 9 thousand 350, Villagran 7 thousand, Valle de Santiago 9 thousand, Manuel Doblado 7 thousand 500, Purisima del Rincon 4 thousand 200, Salvatierra 8 thousand 750, Yuriria 11 thousand, Uriangato 8 thousand and Moroleon 6 thousand 500, all of these with priority for people from 30 to 39 years of age, while to complete second doses from 40 to 49 years of Celaya will be sent 2,950.

JALISCO Although the federal platform reports 17 hospitals at one hundred percent of their care capacity in general beds for COVID-19, the Governor of Jalisco assured that only in Puerto Vallarta was a saturation level that forced an increase in the spaces enabled for care for people affected by the virus. The head of the state Executive Branch denied saturation in other hospitals in the entity and said that they will continue with the strategy of flexible reconversion of hospital beds. Last Sunday, the State Government announced that it would enable the Training Center, in the Idipe Delegacion de Ixtapa neighborhood, with 12 more beds with oxygen concentrators and expand the capacity of the Puerto Vallarta Regional Hospital. He added that he hopes that preventive measures and vaccination will help lower infections and hospitalizations. He insisted that they do everything possible to return to classes in person.

MEASURES TAKEN BY STATES IN MEXICO

STATE OF MEXICO The State of Mexico reached 292,617 confirmed cases of COVID-19, as well as 38,297 deaths, on Sunday. The State of Mexico is the entity with the most deaths from COVID-19 in children and adolescents. As of Sunday, July 25, there were 93 deaths among people from 0 to 17 years of age who tested positive for the virus, according to the latest report of the National System for the Integral Protection of Children and Adolescents.

CDMX The Secretary of Health of Mexico City, Oliva Lopez Arellano, revealed this Sunday that the Delta variant is already dominant in 85% of the total cases of COVID-19 in the capital. She mentioned that although there have been more variants in Mexico City, such as Alpha, Beta, Gamma, it is the Delta variant, first identified in India, which is currently the hegemonic one. Regarding the cases of minors with COVID-19, she informed that there are currently 12 hospitalized with the Delta variant, but fortunately, none are serious. Meanwhile, Eduardo Clark Garcia Dobarganes, General Director of Digital Government of the Digital Agency for Public Innovation, informed that there are 5 thousand active cases among the population from 0 to 17 years old and that it is complicated to project when the peak of the so-called third wave of the pandemic could occur due to the characteristics of the Delta variant.

VACCINATION PROGRESS

As of August 2, 67.5 million vaccine doses have been applied in all of Mexico since December 24, of which 25,808,916 have the complete scheme, 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.

TOWARDS THE “NEW NORMAL”

DISTRIBUTION OF DEATHS PER STATE DUE TO THE PANDEMIC

INFORMATION UPDATED ON AUGUST 2, 2021 AT 19:00 HRS LOCAL TIME.

NEW CASES REPORTED: 6,506

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

CONFIRMED CASES: 2,861,498

NEW DEATHS REPORTED: 245

CONFIRMED DEATHS: 241,278

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.

2,861,498 2,800,000

2,600,000

2,400,000

2,200,000

2,000,000

1,800,000

National rate 93.24

0 to 10.0 (0 states)

40.1 to 50 (3 states)

10.1 to 20 (2 states)

50.1 to 60 (2 states)

20.1 to 30 (2 states)

60.1 to 70 (4 states)

30.1 to 40 (3 states)

>70 (16 states)

1,600,000

1,400,000

JANuary

FEBRUARY

MARCH

APRIL

MAY

JUNE

JULY

Elaborated by Prodensa with information from the Health Ministry of Mexico

PANDEMIC’S SITUATION IN THE WORLD • As of August 2, 2021, globally there have been reported confirmed o 198,234,951 cases (446,834 new cases) of COVID-19 and 4,227,359 deaths (7,781 new deaths*). Lethal rate: 2.1%. • In the last 14 days, the number of new cases accounts for 4% (7,915,722) of the total of accumulated cases.reports/20200323sitrep-63-covid-19.pdf?sfvrsn=d97cb6dd_2

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

AUG

TOWARDS THE “NEW NORMAL” INCIDENTS OF CONTAGIONS IN THE POPULATION BY REGION AS OF AUGUST 2

DEATH INCIDENTS IN POPULATION BY REGION AS OF AUGUST 2

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

EHS

RECOMMENDATIONS VARIANTS OF THE VIRUS THAT CAUSES COVID-19

The government is monitoring multiple variants; currently, there are four notable variants: • B.1.1.7 (Alpha): It was initially detected in the United Kingdom in December 2020. • B.1.351 (Beta): This variant was initially detected in South Africa in December 2020. • P.1 (Gamma): This variant was initially identified in travelers from Brazil, who were tested during routine screening at an airport in Japan in early January 2021. • B.1.617.2 (Delta): This variant was initially identified in India in December 2020. These variants seem to spread more easily and quickly than other variants, which may lead to more cases of COVID-19. An increase in cases will put more strain on healthcare resources, leading to more hospitalizations and potentially more deaths. So far, studies suggest that the currently authorized vaccines work on the circulating variants. Scientists will continue to study these and other variants. What we are doing to learn more Scientists are studying these variants to learn more about them and to detect new variants quickly. They want to understand whether the current and new variants: • Spread more easily from person-to-person • Cause milder or more severe disease in people • Are detected by currently available viral tests • Respond to medicines currently being used to treat COVID-19 • Change the effectiveness of COVID-19 vaccines

DAVID ANTUNEZ Environmental, Health, and Safety Director.

STRENGTHEN YOUR VIRTUAL NETWORK!

YOELLE ROJAS Public Affairs & Communications Director

Successful networking may unlock opportunities to find new clients, suppliers and develop a community within social platforms. Networking also helps personal growth, finding mentorship, professional development, friendship, and career growth. Since COVID-19, people are working from home, social and business interactions had changed. We were used to attending industry events and performing some networking; many events were canceled or shifted to an online format during the past year. With this shift, we faced a new experience, the virtual connection. How can we enhance our virtual interaction during online events? • If there is time to introductions, introduce yourself briefly, providing your name, position, and what you do. • Configure the communication tools with your name, company, and picture. • If the event host allows you to turn on your camera: turn it on! Put yourself out there! Use the chat feature during online events, participate and give your thoughts, but keep it short and straightforward. • Message privately people you want to know better. Use social platforms to approach people. • Nurture your relations with spontaneous and small digital talks. You can send an article, a post, or a podcast that you think can be useful for the other person. Growing your virtual network is essential; it takes time, conversations, and willingness. We can help you develop your network and find the right platforms to connect.

PUBLIC AFFAIRS

LABOR

RETURN TO FACE-TO-FACE WORK A growing number of companies have begun calling workers who have been working remotely for months to return to face-to-face work, and while the third wave of the pandemic has put the brakes on those calls, we are facing an environment in which more bosses are asking employees to return to work in the office. The call to return has, in turn, made it evident that there is a high number of workers who simply do not want to return, or at least not entirely to faceto-face mode, but are looking to maintain flexible, hybrid, or remote work schemes that allow them to continue to work remotely.

ALVARO GARCIA HR, Vice President

In this phase of the pandemic, Human Resources departments must listen to the voice of all employees to take note of their concerns and suggestions to create gradual and staggered return programs, but above all, inclusive home office policies that reconcile the needs of the company with the preference of the workers.

BASIC PROTECTIVE MEASURES AGAINST COVID-19

1 2 3 4 5 Wash your hands frequently with soap and water for 20 seconds.

When coughing or sneezing, cover your nose and mouth with a disposable tissue or use the inside corner of your arm.

Avoid shaking hands and kissing.

Keep your workspace clean and don't share personal items and utensils.

If you show symptoms of a cold or flu, go to a doctor. Do not self-medicate and inform your supervisor and Human Resources department.