Weekly Report 125

GENERAL SITUATION IN MEXICO

MANUFACTURING INDUSTRY

MANUFACTURING, THE ECONOMY’S DRIVING FORCE

The manufacturing sector is one of the most important pillars of the Mexican economy. The maquiladora and export manufacturing industry contributes 39.8% of the gross domestic product (GDP) and employs 18% of the total number of workers registered with the Mexi can Social Security Institute (IMSS), which is equiva lent to approximately three million people, according to figures from the National Council of the Maquilado ra and Export Manufacturing Industry (Index).

As of August, there were 6,457 establishments with a Manufacturing, Maquiladora and Export Services In dustry (IMMEX) Program in Mexico, which generated three million 226,983 jobs.

“This sector has managed to generate more than 10 million direct and indirect jobs in 2022, something that also reinforces the positioning that this industry has in this same area, reaching 4% growth this year

and, in parallel, 60% of Mexico’s total exports,” ex plained Luis Manuel Hernandez, president of Index Nacional.

According to figures from the National Institute of Statistics and Geography, Mexico exported more than 118 million dollars in the first quarter of 2022.

The northern states that contribute most to exports are Baja California, Chihuahua, Coahuila, Nuevo Leon, Sonora, and Tamaulipas.

Regarding the High-Level Economic Dialogue, a mee ting recently held by US and Mexican officials, the president of Index Nacional said that the purpose of this meeting is to generate an understanding between both governments to find out what can be done on issues such as logistics, value chains, and energy.

MANUFACTURING INDUSTRY

Regarding logistics, he said that one of the problems Mexico faces is the high cost in this sector, and one opportunity that exists is to prepare for investment in infrastructure.

Regarding value chains, he said that work is being done to continue supplying products and that it will be essential to strengthen customs in the country.

Regarding the energy factor, he considered that this has become a “bottleneck” in some northern states, where there is interest in having greater investment, but the energy issue has become a challenge.

He also highlighted that one of the important aspects focused on the investment required by both the Uni ted States and Mexico in semiconductors.

Luis Hernandez said that it is necessary for the coun tries that make up the USMCA to be seen as a region in order to achieve greater strength in the context of global investments.

He assured that Mexico has the vocation, in particu lar, he said that Mexicali, Baja California, has one of the most representative companies worldwide for the handling of chips.

The semiconductor issue requires three main elements: vocations, which we already have; energy, which is limited; and water.

“What we will see with the U.S. and Mexican govern ments is to find out what funds the United States has specifically and what companies in Mexico can access in order to strengthen the chains,” he concluded.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S Morning Press Conference

POLITICAL AGENDA

• Audience with Santiago Creel on security: Follow ing the request of the President of the Chamber of Deputies to have a 60-minute audience with the President to talk about the country’s security, Lo pez Obrador indicated that it should be with the Secretary of the Interior. He further stated that he already has a very clear proposal regarding the National Guard and the need for the SEDENA and SEMAR to legally assist in the continuation of pub lic security.

• Retirement after the presidency: The President assured that after finishing his presidency he will completely retire from politics. He will not partic ipate in any act in Mexico or abroad, he is not go ing to appear in any meeting, nor will he give any opinion on social networks. He is going to dedi cate himself to writing but his first publication will be three or four years after his administration. This will be a book on conservative thought in Mexico.

• Mondiacult 2022: The Mondiacult 2022 World Summit organized by UNESCO jointly with the Ministry of Culture began on September 28. Di ego Prieto, Director General of INAH, assured that Mexico will seek to make culture the vehicle for di alogue between nations for peace. The President

pointed out that the event was organized by Juan Jose Bremer, Mexico’s representative at UNESCO, and Alejandra Frausto, Secretary of Culture.

• Americo Villarreal case: The President said he was satisfied with the court’s resolution and to avoid a post-electoral conflict in the state. He endorsed Americo Villarreal as a clean and upright person and that is why he was able to withstand the “dirty war” that was orchestrated against him. He is con fident that he will have an exemplary administra tion.

• Ayotzinapa case: Before the definitive suspension of Jesus Murillo Karam, the President pointed out that it is a legal process and he has the right to defend himself, he added that the FGR is present ing all the evidence of Murillo Karam’s responsibil ity for the fabrication of the so-called “historical truth”. He pointed out that the Armed Forces are not responsible for what some members of the army or public servants do. On the resignation of the Special Prosecutor, Omar Gomez Trejo, and the role of Undersecretary Alejandro Encinas, the President reaffirmed the support and backing of Encinas, he explained that he knows the interests and implications of the report and the responsible parties mentioned, that is why a coordinated ac tion among multiple institutions was agreed.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

ECONOMY

• Agreement against inflation and high food prices: President Andres Manuel Lopez Obrador informed that an agreement has been reached between the private sector and the government to address the inflationary problem. Secretary Ramirez de la O said that they will seek to produce more food and reduce regulatory and logistical costs on the part of the government, and mentioned the points of the agreement:

• A single universal license will be issued by the government to the companies that have signed the agreement, which exempts them from all procedures and permits, including those of Se nasica and Cofepris, as well as the general im port tax, for the import and distribution of food

and supplies.

• The government will maintain its policy of con tainment of fuel and electricity prices and will freeze the tariffs on the concessional highways until February 28, 2023.

• The government will cancel for the period of this agreement, the export of white corn, beans, sardines, and aluminum and steel scrap used in food packaging.

• Reduce the price of the basic food basket by 8% to an average of 1,039 pesos until February 28, 2023.

• Regarding corn flour used for tortillas, the com panies assume their commitment not to raise their prices during this agreement.

• Companies that will participate: Tuny, Grupo Pin sa-Dolores, Grupo Gruma-Maseca, Minsa, Bachoco, San Juan, SuKarne, Grupo Gusi, Opormex, Sigma Alimentos, Walmart, Soriana, Chedraui, Calvario, Valle Verde.

• Payment of taxes by large taxpayers: The President mentioned that next week he will have a meeting with the Tax Administration Service (SAT) team. He specified that there are around 20 or 30 large tax payers that have not paid. These are national and foreign companies. He assured that in some cas es they have not been notified or audits have not been completed. The President pointed out that as of September 27, tax revenues reached 2,898,471, which, in real terms, is 0.3% below what was ob served in the same period of the previous year. He mentioned that the gasoline and diesel subsidy has reduced tax collection this year. However, this is being compensated by oil revenues. Therefore, ISR and VAT must continue to be collected in order to maintain stable revenues. However, he assured that all of this is in accordance with the fiscal year.

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

SECURITY

• Security in the states: The President took the op portunity to point out how important it is to have good officials and gave as an example the Secre tary of Security of Yucatan since it is a state where there have been good results. In this sense, the President spoke about the confrontation that took place yesterday in Jalisco, according to the prelim inary report, they wanted to kidnap a person, and his bodyguards confronted the group that wanted to kidnap him. He mentioned that the army had the opportunity to intervene, thanks to the fact that they are no longer prevented from doing so.

• “Zero Impunity” Report: Ricardo Mejia, Under secretary of Public Security, presented the report “Zero Impunity: No crime without punishment” and reported on the extradition of Nazario “C” to the US. He also reported on several relevant ar rests and the progress of investigations in Jalisco, State of Mexico, Quintana Roo, Guerrero, Coahuila, Sonora, Zacatecas, Morelos, Michoacan, Chihua hua, Sinaloa, Tabasco, and Guanajuato. Regard ing the acts of extortion of OXXO stores that took place between September 15 and 18 in Zihuatane jo, Guerrero, it was reported that 6 people have already been arrested and are being prosecuted for these acts. Regarding the case of the accident at the mine “El Pinabete” in Sabinas, Coahuila, the alleged operator of the mine was arrested, and the apprehensions of the owners are still pending. Regarding the case of Debanhi Escobar, in Nuevo Leon, the Attorney General’s Office has taken over the investigation and is in the process of reviewing the files of the folder.

CYBERSECURITY

• Telephone spying: Regarding the alleged espio nage carried out by the Ministry of National De fense, through the acquisition of the Pegasus soft ware, the President indicated that the information is not true. He invited to present the corresponding evidence regarding the alleged espionage, invit ing journalist Ricardo Raphael to show the corre sponding evidence of his complaint. In counter-reply, reporter Nayeli Roldan, from Animal Politico, pointed out the evidence that the media has in its hands. The President commented that his government carries out political intelligence actions, which is different from political espionage.

• Cyber-attack on the government: Regarding the cyber-attack on SEDENA, the President stated that he believes it is something that was handled from abroad. He also clarified that what was sto

KEY POINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S

len is in the public domain and that it is true what is said there. The President also mentioned that no action will be taken because his government acts with transparency and has nothing to hide.

INTERNATIONAL

• Elections in Brazil: When asked about the elec tions in Brazil, President Lopez Obrador congrat ulated the Brazilians for their democratic and ex emplary day and pointed out that the fateful time of coups d’etat is now behind us. The President recalled that in Brazil there is a two-round system, and yesterday, Lula da Silva won in the first round, and he congratulated on the results.

• Director of the Inter-American Development Bank: The President mentioned that he will propose Alicia Barcena as Director of the IDB, he highlighted her time at the UN and her leadership at ECLAC. He described her as a well-prepared woman with excel lent relations with all governments. He pointed out that if what is required is an upright, professional and conciliatory person, she would be the one.

INFRASTRUCTURE

• Government infrastructure projects: The President mentioned that the Commission that regulates Rafael Marin will pass to the Secretary of the Navy who will be in charge of managing the Train from Palenque to Coatzacoalcos, to Salina Cruz, and to the border with Guatemala. Regarding his trip to Oaxaca, he indicated that he will evaluate the re construction program for the damages caused by the floods in Huatulco and that he will meet with municipal presidents of the region. He also indi cated that he will supervise the works of a wind

break to improve the entrance of ships to the Port and the advances in the coking plant, the refinery, and the industrial parks. He also commented that he will evaluate the whole plan for the Isthmus and will supervise the plans to put a liquefaction plant in Coatzacoalcos and in the Port of Veracruz to take gas to Europe due to the energy crisis.

• Tulum Airport: The Federal Executive stated that the construction of the international airport of Tu lum, Quintana Roo, which will be of the highest order, has begun. He highlighted that the Ministry of National Defense (SEDENA) is taking charge of the construction with military engineers.

HEALTH

• Health Pulse: The Director General of the Mexican Social Security Institute (IMSS), Zoe Robledo, in dicated that good progress has been made with respect to the Cuban specialist doctor program, currently receiving the support of 352 doctors who work in 79 municipalities in 9 states, especially in highly marginalized areas.

• Covid-19: Undersecretary Hugo Lopez-Gatell com mented that there has been a reduction in the virus indexes for 3 months. Currently, there is the lowest level of transmission, with 2% occupancy in gener al beds and one percent occupancy in beds with ventilators. Regarding deaths, we have already had one month with reports below one digit. Regard ing vaccination, the official indicated that there is already 51% coverage in children from 5 to 11 years of age, with 83% coverage in the population eligi ble to receive the biologic in general.

NEWS BY STATE

BAJA CALIFORNIA

The real estate fund Meor laid the first stone of what will be its second HubsPark industrial park in Tijuana, Baja California, which contemplates an investment of 1.08 billion pesos in the first stage.

Paulo Carrillo, director of economic pro motion of the municipality, said that Ti juana continues to move forward with industrial development due to the enor mous demand for investment, mainly from China and the United States.

SONORA

Arturo Fernandez, president of Invest Sonora EDC, announced the signing of a collaboration agreement with entities in El Bajio and some in the north of the country that usually present a great in dustrial development such as Tijuana, Mexicali and Ciudad Juarez, with the purpose of integrating a communication network, which opens the possibility of investment management, since the in stallation of more companies from dif ferent sectors in Mexico is about to gain momentum.

NUEVO LEON

The state will promote clean energy in NL through the creation of the Agency for the Promotion and Use of Renew able Energies.

The Agency will be in charge of ensur ing that all companies of any kind comply with these new quality standards to improve the environment.

COAHUILA

The state of Chihuahua registered ex ports for $35,568 million dollars during the first half of the year, 24.3 percent more than the 28 thousand 618 million dollars registered in the same period last year.

TAMAULIPAS

Although everything depends on wheth er the epidemiological conditions force other sanitary measures to be taken, Tamaulipas will remain until October 15 with all municipalities in phase two of reopening non-essential economic ac tivities, as well as the mandatory use of face masks.

QUERETARO

The technical stoppages in some automo tive companies could affect the genera tion of jobs in the sector, but it is estimat ed that the production of auto parts could reach a 5 percent increase compared to the pre-pandemic year. This increase will occur at the end of the year, informed the president of the Queretaro automotive cluster, Renato Villaseñor Mendoza, who is confident that this will exceed the pre-pan demic levels. According to the Ministry of Sustainable Development (Sedesu), the manufacturing industry has grown by 21 percent compared to the previous year. This type of delays is related to the effects such as the one that occurred at General Motors and the technical stoppage it car ried out a few days ago, due to a shortage of drivers. He also said that the industry is overcoming the challenges in the supply chains and is confident that there will be several actions that will allow it to recover the market. According to the cluster, the shortage of auto parts is reducing the pro duction of automobiles and the number of sales. The day before, the head of the Ministry of Sustainable Development, Mar co Del Prete Tercero, ruled out any reports of delays or shortages that would prevent the auto parts industry from producing.

SAN LUIS POTOSI

The Government of the State of San Luis Potosi, as well as the head of the Secretar iat of Economic Development (SEDECO) in the state, Juan Carlos Valladares Eichel mann, foresee a great advance in terms of investment for the coming year 2023, a figure that they seek to break the record in this regard. Likewise, Valladares Eichel mann predicted that there will also be an important growth in terms of labor gener ation, as a result of the installation of com panies in the state at this time, which are currently expanding their plants, togeth er with the development of new industrial buildings. This industry, which is current ly undergoing a growth process, will start operations in 2023; however, its recruit ment areas have already started working to supply the demand for new vacancies, which will be reflected in next year’s fig ures. Meanwhile, he detailed that in 2022, it was possible to reach at least 1,300 mil lion dollars in concerted investment, and likewise, the effects of the pandemic that weakened the economy have been over come little by little, perceiving a greater industrial dynamism above 3%.

GUANAJUATO

With capital of 614 million dollars and the generation of more than 6,000 new direct jobs, 18 investment projects outside the Guanajuato industrial corridor have been completed during the current state admin istration. The Governor of the State, Diego Sinhue Rodriguez Vallejo, has expressed his intention to achieve balanced develop ment in all areas of the state, as well as to diversify the economic vocations of the municipalities with new industrial sectors. The head of the Secretariat of Sustainable Economic Development (SDES), Ramon Alfaro Gomez said that the state economic policy is designed so that growth reaches all corners of the state for the generation and preservation of jobs. These invest ments have been installed in the municipal ities: San Luis de la Paz, San Jose Iturbide, San Miguel de Allende, Abasolo, Salvatier ra, Valle de Santiago, Uriangato, Ocampo, Manuel Doblado and Doctor Mora. Dedi cated to the food, plastics, textile-clothing and automotive-auto parts sectors, the in stallation of these companies representsin addition to the generation of jobs - the arrival of new economic activities with new industrial processes, labor culture and a greater specialization of labor. With their installation outside the industrial corridor, employment opportunities are opened, and infrastructure development is deto nated, the labor supply is increased, and a better educational relevance is defined according to the needs of each region.

CDMX

On October 3, from the National Audi torium, Claudia Sheinbaum released her Fourth Government Report, where the main topics to be highlighted were public finance, sanitation, security, attention to the pandemic, investment in public infra structure, access to education, and con nectivity. Moreover, she announced that throughout this week she will present her fourth administration report in different municipalities. According to Sheinbaum Pardo, she will begin a tour of mayors’ offices to present the actions she has carried out in four years; the first of them to visit will be Iztacalco and Venustiano Carranza. In addition, it will be on Friday when the report will be presented in the state Congress.

STATE OF MEXICO

On Tuesday, October 4, Alfredo Del Mazo, Governor of the State of Mexico, attended La Mañanera to announce the progress of the connectivity works at the Felipe Angeles Airport (AIFA) by the federal government, Mexico City, and the State of Mexico to speed up trans portation and access. A map showed how these roads have been built to reach the airport terminal, this time the main communication node is the AIFA Distributor, followed by the Macrolibra miento Mexiquense (Insurgentes-Siervo de la Nacion), Siervo de la Nacion, To luca-Naucalpan highway, Tultepec-Pi ramides highway, Prolongacion Sier vo de la Nacion, Conexion Oriente and Macrolibramiento Mexiquense (east and west sections) and finally the extension of the Mexibus on Line 1 Ojo de Agua (Tecamac-AIFA).

ECONOMIC RECOVERY

ECONOMY AND INVESTMENTS IN MEXICO

NORTHEAST

- SIEMENS

With an investment of 955 million pesos, construc tion began on a new plant in Santa Catarina, Nuevo Leon. new plant in Santa Catarina, Nuevo Leon. It will generate 455 jobs.

- PANDUIT

Inaugurated its new plant in Apodaca, with this ex pansion 280 jobs will be created by the end of 2022.

- WABTEC

With an investment of more than 7 million dollars and the creation of 300 formal jobs, Wabtec Corporation began operations of the IC Plant in Arteaga, Coahui la.

NORTHWEST - MEOR

This will be Hubs Park’s second industrial park in Ti juana, Baja California. It contemplates an investment of 1,080 million pesos.

CENTRAL MEXICO

- BOCE INDUSTRIAL SYSTEMS

With an investment of 1.5 million dollars, the Turkish company will set up in Queretaro.

LABOR

FAQS ABOUT THE VACATION DAYS INCREASE IN MEXICO

The recent approval of a legislative bill, as of today just at a Sen ate committee level, has raised questions and concerns from em ployers. Are the proposed changes applicable this year? Will the potential new statutory days affect 2022 vacation premium calcu lations? Will vacations days from previous worked years should be added?

Even when the increase to statutory vacation days seems to have strong legislative support and it is expected to be approved, as of today changes are not yet applicable and if it be approved this year all predictions indicate that the new vacation table will be valid no earlier than Jan 1, 2023.

If the approval process goes as planned no retro payment will ap ply for vacation premiums already paid neither for 2022 vacations nor for previous years. Also, no retro right for previous vacations days will be mandated.

ALVARO GARCIA HR, Vice President