Weekly Review I May 3, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I May 3, 2023

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NEARSHORING NEEDS SOCIALLY RESPONSIBLE COMPANIES

Mexico has signed at least 72 international treaties related to the conservation and care of the environment. In addition, since 2015, its participation in the 2030 Agenda for Sustainable Development stands out, which establishes, among various objectives, adopting best practices in industrial development to mitigate its effects.

With the advent of Nearshoring and the USMCA, industrial activities will increase significantly, particularly manufacturing and supply chain sourcing, so we must think about sustainability.

According to the National Inventory of Greenhouse Gas and Compound Emissions (INEGyCEI), manufacturing produces millions of tons of Greenhouse Gases (GHG) every year, due to the transformation processes of raw materials and the inputs it requires, such as water, gas, electricity, among others.

Given this, the need arises to guarantee and regulate business activities not only to comply with the 2030 Sustainable Development Goals, as the USMCA also stipulates in its Chapter 24 a series of guidelines and practices that service providers -and third parties involved in the production chain- must comply with in order to trade freely between regions.

ESG criteria and certifications

According to Enrique Lendo, sustainable finance coordinator for the United Nations Environment Program, there are at least two criteria for Mexican and foreign industries with which they can guarantee and adopt management and production processes alig-

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ned with the USMCA and the 2030 Sustainable Development Goals.

On the one hand, there are various certifications such as ISO14001, focused on the management of processes and tools to generate the least impact; the seals of cleanliness, quality, and care issued by the Federal Attorney’s Office for Environmental Protection (Profepa); the Green Globe, which recognizes tourism companies for their sustainable and responsible practices, or the Environmental, Social, and Governance (ESG) criteria.

ESG criteria are measures applicable to industries to manage their resources, prevent pollution caused by processes, for example in manufacturing, and reduce negative environmental impacts as much as possible.

“These criteria or certifications depend on the industrial activities, they choose them according to their objectives and what it may cost economically, especially for large companies, but there are options that are not so expensive for the value chain that can be adjusted to small suppliers,” says Lendo.

Another way in which industries can guarantee and adopt sustainable processes to apply as suppliers in nearshoring is through Mexico’s Sustainable Taxonomy.

This is a system coordinated by federal entities, financial entities and representatives of the private sector where criteria are established to evaluate whether an asset or economic activity has an impact on environmental objectives.

In other words, it is a scheme that regional suppliers can use to indicate the environmental effects of their activities and processes, which can be used to modify or adopt new practices.

“Each company will decide which criteria to choose, whether it is a certification or whether it should comply with the Sustainable Taxonomy, although in this case it is very likely that the Mexican government will not certify you or issue a document, but I recommend that businessmen point this out in their reports so that investors can see that their business model complies, especially with nearshoring and short chains in mind,” Lendo points out. The specialist points out that this is the ideal time to become certified, obtain seals or use sustainable criteria, because investors are coming more and more and they will need alliances with those who are aligned with the 2030 goal, but also because it is a requirement to trade freely in the region.

SOURCE: FORBES MEXICO

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

April 26 – May 2, 2023

POLITICAL AGENDA

• President’s Report: The Secretary of Government informed the President about the 16 minutes approved in the Chamber of Deputies and the closing of activities in that chamber. In addition, he spoke about the daily Security Report, the evaluation of the Security Strategy and the progress of the Welfare Program. Regarding the “fast-track” approval of the minutes, the Secretary reiterated that the legislative process was not violated, and that the waiver of formalities allows them to pass directly to the Plenary. He affirmed that the initiative on Science and Technology was voted in commissions and there was no irregularity in the legislative process. He hopes that the Senate can approve the minutes and assured that they still have time to do so.

• Presidential Tour: President Lopez Obrador stated that this weekend he will visit the Mayan Train. Next week he will supervise the refineries and works in Matamoros, Reynosa and Nuevo Laredo. In approximately one month he will visit Sonora. Likewise, he commented that from Thursday afternoon he will leave for Puebla to participate in the Cinco de Mayo ceremony.

• Meeting with Senators of the Republic: During

a meeting with legislators, satisfaction was expressed for the work done and the parliamentary practice of stopping the legislative clock to explain reforms was discussed. The Director General of Conacyt will attend next Wednesday’s morning conference to explain the reform. The approval of reforms for the benefit of the people was highlighted and the possibility of convening an extraordinary period was discussed. It was mentioned that Conacyt’s money is being used for research of national interest, instead of giving subsidies to transnational companies. The cancellation of the rural finance company and the free delivery of fertilizer throughout the country were also discussed. Regarding transparency, it was pointed out that no complaints were made during the period of the greatest looting in Mexico’s history and the high cost of PPPs in the construction of hospitals was given as an example. Finally, reference was made to Claudio X. Gonzalez and the cancellation of US government support to his cause was requested.

• Health of the president: The president referred to having finished his treatment and having “a mission” that keeps him on his feet; consolidating welfare programs, watching over the economy (same that he considered “going very well”, due to the strength of the peso, the drop in inflation

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

late corrupt behaviors. He proposed that the ASF perform the functions of the INAI and criticized the term of office of the commissioners: The President invited his party’s legislators to advance in policies that would make it difficult to reverse the modifications promoted by his administration in case the conservative bloc returns to power. In addition, he reaffirmed his intention to transfer control of the National Guard to the Secretary of Defense.

levels, the increase in salaries and the enrollment of workers to the IMSS) and consolidating the 4T transformation projects.

• Sale of the presidential airplane: The President stated that there are two national projects: the conservative bloc and the transformation. In this sense, he considered that the INAI “is useless”, and that the ASF should perform its functions. He criticized the term of office of the commissioners and the proposal of irremovability, and invited the opposition senators to stop the simulation. He also reaffirmed his intention to transfer control of the National Guard to the Secretary of Defense to advance his administration’s policies and make it difficult to undo them if in the future the “conservative bloc” returns to power.

• INAI: The President affirmed that there are two projects of nation: the conservative and the transformation, and criticized the role of INAI, pointing out that it serves no purpose other than to simu-

• Mining Reform: The Secretary of Government pointed out that a minute is still being analyzed in Commissions and asked that there be no haste in its approval in the Senate. He affirmed that the ruling benefits the Mexican people, since it gives priority to indigenous peoples for access to water consumption and removes the preferential nature of mining. In addition, he assured that this minute meets the expectations of investors and social groups in the states, as well as environmental and water defenders.

• Change from INSABI to IMSS Bienestar: The Secretary of Government indicated that the change from INSABI to IMSS Bienestar guarantees access to health care for the entire population. He commented that with this reform, the payment of fees is eliminated, ensuring free service. He also indicated that yesterday, the director of IMSS, Zoe Robledo, presented the advances in the supply system, being the best system for the supply of medicines and medical supplies in the country, thanks to the acquisition of distribution warehouses in Quintana Roo and Nayarit. He highlighted that the resources saved with this change will go to the purchase of medicines by the SSA.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

ECONOMY

• Economic growth: Mexico’s president notes that the country has had economic growth of 3.9% in the last quarter, with a better distribution of income and an appreciation of the peso compared to the dollar. In addition, there has been a decrease in inflation and no financial crisis is foreseen in the coming years, although it could occur as of 2025 due to external factors, such as the elections in the U.S. The government will continue with financial discipline and austerity, and will focus on food and energy self-sufficiency, as well as strengthening the domestic market, without indebting the country.

• Welfare Programs: Ariadna Montiel Reyes, Secretary of Welfare. - For the two-month period of May - June, a total dispersion of more than 13 mmdp is expected. There has been a strategy to change cards from the private bank to the welfare bank; she urged to make the card change according to the proposed stage. In May, the cards of Banorte, Santander, Banco Azteca, HSBC, Scotiabank and Afirme will be changed. He recalled that in January and February the Banamex change was made and the Bancomer changes were recently concluded.

• Remittances: Maria del Rocio Mejia, CEO of Financiera para el Bienestar. - She informed that there will be two options for sending remittances, the traditional stage and now it will be possible to make use of a digital tool through the FINABIEN app. He informed that the FINABIEN - United States card is already available through Mexican consulates (they will also have a bank account). This fulfills the government’s objective of creating alternatives for sending and receiving remittances.

SECURITY

• Security Report: The Zero Impunity program has led to the arrest of 17,000 people from April 18 to May 1, including the former delegate of the Benito Juarez mayoralty and local deputy, Christian Von Roehrich, for the CDMX Real Estate Cartel case. The Secretariat of the Navy has carried out 690 operations against drug trafficking and synthetic drugs, in addition to continuing with medical attention and vaccination against COVID-19. The National Guard continues to support security in the subway and 178 thousand elements of the National Guard and Armed Forces have been deployed. The Secretariat of Public Security and Citizen Protection reported on the regularization of vehicles with foreign provenance, with 1 million 415 thousand 532 vehicles already regularized in the 152 modules, and the program continues until June 30, 2023.

BILATERAL RELATION

• Security meeting with the United States: Today there will be a meeting with President Joe Biden’s

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

mentioned that in one month he will visit Sonora and that the Tulum airport will be inaugurated in December 2023.

• Tren Maya: The director of FONATUR, Javier May Rodriguez, informed that section 3 of the Tren Maya is 92% complete and is expected to be inaugurated in December 2023. The governor of Yucatan, Mauricio Vila Dosal, highlighted that the Tren Maya will generate economic development and allow greater mobility for companies in the region. Infrastructure projects are also underway, such as the expansion of the Port of Progreso and the construction of thermoelectric plants. In addition, there are more than 250 foreign investment projects in the region. President Lopez Obrador announced his support for local producers in the area of the Tren Maya.

envoy, Elizabeth Sherwood-Randall to discuss migration, arms and drug trafficking.

INFRASTRUCTURE

• Mexico City - Queretaro Train: The President will hold a meeting today with the two most important railroad companies to discuss the CDMX-Queretaro train. The objective is to ensure that both cargo and passengers are transported between the two cities.

• New state airline: The President spoke about improvements in connectivity and access in Sonora, new flights from AIFA and the approval of the new airline. He reported that the agreement for the acquisition of Mexicana de Aviacion is about to be finalized and talks are underway with Boing to secure the planes to be used. In addition, progress is being made on Category 1 and those responsible for air policy will be invited. He also

ENERGY

• Renewable Energies: The President stated that a decision is being made regarding the construction of solar and wind power plants in the Isthmus of Tehuantepec.

• Water in Rosarito: In addition, regarding the lack of water in Rosarito, the Secretary of Government mentioned that the President has instructed the head of CONAGUA, German Martinez to provide water service to the inhabitants of Rosarito, a strategy must be developed to build desalination plants. The recovery of the wells will be worked on to guarantee the human consumption of water in Baja California.

NEWS BY STATE

BAJA CALIFORNIA

The promotion of key industries such as biotechnology, electronics and aerospace, as well as the strengthening of the supply chain, are the main sectors with which Baja California is promoted as an investment destination. “Before it was a maquiladora state because only one thing was assembled with the other, but today things are produced here and that made us a transformation industry, now what we lack and that we are working on is the local supply,” secretary Kurt Honold said.

SONORA

Sonora has focused on attracting investment, looking for semiconductor companies, automotive manufacturers, production of cell phones, and other technological products, the location of the entity could serve as a complement to the economy of the neighboring country, especially when it comes to of more labor-intensive companies. Sonora can stand out a lot in areas of opportunity, such as semiconductors because very large companies in this sector are setting up in Arizona, which will require their support companies to set up near them.

SOURCE: MEXICO INDUSTRY, EL SOL DE HERMOSILLO

NUEVO LEON

Today, Nuevo Leon is one of the most attractive destinations for investments, which, hand in hand with nearshoring, will lead it to grow its economy by 6% this year.

In 2023, the expected rebound of the state’s Gross Domestic Product (GDP) will be the highest after the one registered in 2010, when it totaled 7.6 percent.

CHIHUAHUA

Chihuahua representatives were present at FAMEX 2023, the most important aerospace event in Mexico, with the objective of attracting foreign investment, generating more and better jobs, and continuing to position the state of Chihuahua as a leader in this industry.

During the event, Fernando Alba, Undersecretary of Mining, Industry, and Energy participated in the Foreign Investment Seminar, in the panel “Soft landing services: site selection”, where he discussed the strengths of Chihuahua as a national leader in the aerospace industry, and foreign investment destination for the global industry, in the company of representatives of the Ministry of Foreign Affairs, Ministry of Economy of the Federal Government and the National Bank of Foreign Trade (Bancomext).

SOURCE: HERALDO DE CHIHUAHUA, EL HORIZONTE

COAHUILA

The Mexican Association of Industrial Parks estimates a demand of 2 million square meters in the last 15 months.

In view of the expectations for nearshoring in Mexico, the Mexican Association of Industrial Parks registered in the last 15 months a potential demand of 2 million square meters of industrial space in the country and Saltillo is one of the cities where even unbuilt sites are being pre-rented.

TAMAULIPAS

Tamaulipas’ economic indicators continue to rise and, according to the Quarterly Indicator of State Economic Activity (ITAEE), annual growth was at least 1.0% during the fourth quarter of 2022, as part of the positive movement of 35.8% in primary economic activities and 1.6% in tertiary activities.

The ITAEE indicated that during October, November and December 2022, Tamaulipas led the growth charts at the national level in primary activities, where the sector of agriculture, breeding, animal husbandry, exploitation of animals, forest exploitation, fishing and hunting is included, with 35. 8 percent.

SOURCE: VANGUARDIA, MEXICO INDUSTRY

GUANAJUATO

Approximately ten new technology projects are expected to be installed in Guanajuato with an estimated investment of 861 million dollars as part of the transition that this market is managing towards Industry 4.0.

The entity has maintained the pace of net industrial demand at the close of 2023 reporting a 20% increase over the amount recorded at the end of the first quarter of 2022.

These figures are ratified by the results issued by the National Institute of Statistics and Geography when presenting the Monthly Indicator of Industrial Activity by Federal Entity, where it registered a 10.5% year-over-year growth, comparing the figures for December 2022 with those for December 2021.

Growth in Guanajuato’s manufacturing industry registered an annual increase of 10.6%, as well as in the generation, transmission and distribution of electricity, water supply and piped gas to the final consumer, where the annual increase was 9%.

These expansions are related to the manufacture of components for electric vehicles, where two of these investments will be installed in Irapuato, while the third will be for Leon.

QUERETARO

At the beginning of 2023, the manufacturing, commerce and nearshoring sectors have been the driving force for investments in the Bajio region, and the trend is positive with the arrival of new projects, resulting in a 2.9 percent growth in industrial land in the state of Queretaro.

This is according to the consultancy firm Newmark, which released the results of industrial activity in the states of Queretaro, Guanajuato and Jalisco, where there is a Class A inventory of 20.7 million square meters.

In the reports prepared by Diana Merino and Fernando Lara, analysts of Newmark’s Market Research division, it is highlighted that the growing national demand has imposed new challenges for the industrial sector.

In the case of Queretaro, during the first quarter of this year, there was a recovery trend in absorptions, reporting operations that resulted in a positive effect on the figures, an increase in the construction area of just over 295 thousand square meters and an availability rate that increased slightly, closing at 2.9 percent.

AGUASCALIENTES

Aguascalientes will host the third North America Automotive B2B Meeting on November 29 and 30, 2023. This great event of the automotive sector seeks to meet the new provisions of the Free Trade Agreement that require a much higher regional content of vehicles made in Mexico, so the industry and government institutions are in the task of strengthening the supply chain and the development of local suppliers to replace imports of foreign components with domestic components.

This third edition seeks to generate a business meeting between local and national sellers and buyers of the automotive industry that, through the Economic Cooperation Agency, encourages SMEs producers to join the automotive value chain.

According to the moderators of the press conference, there are currently 413 companies registered for this third edition of the event, which is a perfect fit for the economic development of the country and the region. In addition, it was mentioned that the new free trade agreement, which comes into effect this year, requires that 75 percent of auto parts must be manufactured in the United States, Mexico and Canada, which represents a golden opportunity for national economic development.

The meeting will be attended by delegations from Japan and South Korea, which will show the main technological advances in the sector.

JALISCO

According to Inegi’s Quarterly Indicator of State Economic Activity (ITAEE), corresponding to the fourth quarter of 2022, Jalisco’s economy registered a 5.05% growth compared to the previous quarter, in seasonally adjusted figures.

According to the latest data published by Inegi, such growth placed Jalisco in ninth place in the national ranking in terms of economic growth, which represented an advance of ten positions with respect to the fourth quarter of the previous year, when Jalisco ranked 19th in terms of growth rate.

By type of activity, primary activities registered the highest growth with 5.96% in the fourth quarter of 2022 compared to the same quarter of the previous year; secondary activities grew 5.36% and tertiary activities 4.27%.

CDMX

For the remainder of the administration of the head of the Government of Mexico City, Claudia Sheinbaum Pardo, 16 billion pesos will have been attracted for the Vallejo-i area, this amount of investment is in addition to the 14 billion that the area has already attracted since the project began, informed the head of the Secretariat of Economic Development, Fadlala Akabani Hneide. Derived from the Forum of the Circular Economy Law of Mexico City, he explained that this next amount of capital that is being sought is due to the industrial moment that the country is facing and that has to do with nearshoring. Regarding the sectors that are expected to be detonated with future investments, he explained that the aerospace, automotive, and pharmaceutical sectors stand out. He also said that due to the demand for industrial spaces in the area and the desire to make these three industries grow, a plan is being developed to improve Vallejo’s connectivity with the AIFA and the AICM.

STATE OF MEXICO

Delfina Gomez, candidate of the “Juntos Haremos Historia” (Together We Will Make History) joint candidacy for governor of the State of Mexico, explained that if she wins, she will take advantage of the commercial transportation capacities provided by the Felipe Angeles International Airport (AIFA) and the state’s highway network to turn the State of Mexico into the country’s logistic center. “The highway infrastructure will be used, as well as main and secondary roads and accesses to industrial parks to the main roads and highways that surround the State of Mexico to facilitate commercial traffic”. After maintaining a private agenda, in a press release from Delfina Gomez’s campaign team, they pointed out that it will be important to create and modernize industrial parks, as well as to disseminate development programs in mining, automotive and agriculture.

SOURCE: EL ECONOMISTA, MILENIO

INVESTMENT NEWS

NATIONAL

SCHNEIDER ELECTRIC

Schneider Electric, a global leader in the energy management and automation industry, plans to invest 68 million dollars in its production plants located in Tlaxcala, Nuevo Leon, and Mexico City to serve the North American market

NORTHWEST GRUPO MEXICO

Grupo Mexico is investing $427 million in the “Buenavista del Cobre” Zinc Plant in Cananea, Sonora, which is expected to create 1,300 to 1,700 direct jobs. The plant will produce over 120 thousand tons of zinc, making it the second most important zinc mine.

NORTHEAST YINLUN

Chinese company Yinlun invested $80 million to establish its manufacturing operations in Salinas Victoria, Nuevo Leon, specializing in the production of coolers, battery heaters, refrigeration, heating modules, and radiators. The investment is expected to create over 1,000 jobs.

TAYLOR-STANDARD REGISTER

The American company is a provider of digital printing and labeling services for global clients, which will generate 300 jobs in Apodaca, Nuevo Leon. The company has invested 22 million dollars in the expansion of its facilities.

CENTRAL MEXICO HELLA

German company Hella will invest 3.8 million dollars and create 72 new jobs to expand its automotive design and manufacturing operations.

SIG

SIG, a Swiss-based company that specializes in cardboard manufacturing, is investing 80 million dollars in Queretaro, Mexico. The company’s first plant will be in the Aerotech Industrial Park in the municipality of Colon, creating 200 new jobs.

WOLSTRAT

Real estate developer plans to invest over $105 million in at least three new mixed-use projects, including shopping centers, offices, and apartments, focused on the Bajio region as part of a national strategy.