Weekly Review I May 31, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I May 31, 2023

RELEVANT NEWS

INVESTMENT ANNOUNCEMENTS IN MEXICO TOTAL $48 BILLION DOLLARS DURING THE YEAR; THESE ARE THE 5 LARGEST ONES

The Ministry of Economy (SE) estimated that so far this year 117 investment announcements have been made by the private sector, reflecting Mexico’s competitive advantages.

According to the agency headed by Raquel Buenrostro, the announcements of companies represent a total amount greater than $48 billion dollars, of which most will be invested this year ($30 billion dollars) and the rest over the next three years.

“This demonstrates Mexico’s competitive advantages: stability in its public finances and the strength of its currency; social and political stability; a robust air, rail, maritime, and land infrastructure that connects us with the entire world; a young and specialized labor force; important tax incentives; and the development of micro, small and medium-sized companies with a level playing field,” said the Secretariat of Economy in its Twitter account.

It specified that none of these announcements are part of the official data published regarding Foreign Direct Investment (FDI).

SOURCE: FORBES MEXICO

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

May 24-30,2023

ECONOMY AND INFRASTRUCTURE

• Citibanamex: President Lopez Obrador revealed that negotiations between Citi and Grupo Mexico are suspended due to additional guarantee requests. He mentioned the possibility of a public-private partnership if the bank isn’t purchased, with the government contributing up to $3 billion and the rest sold to interested Mexicans. The President will discuss this with the Secretary of Finance. He also addressed challenges in transforming BANSEFI into Banco del Bienestar and emphasized the importance of paying taxes on stock market transactions. The involvement of Francisco Gil Diaz in Banamex’s sale, with tax evasion through simulation, was mentioned. The progress with Grupo Mexico showed a $7 billion operation, with 80% allocated to Grupo Mexico.

• Train Concessions: President Lopez Obrador mentioned progress in negotiations and the aim to rescue a concession segment for the complete Tren Maya circuit. He emphasized that fear-mongering tactics are being used and clarified that the agreement sought is not monetary but pertains to passage permits and concession reviews. Grupo

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

the production of 150,000 to 180,000 barrels of high-quality oil per day by 2025 and 2029.

Mexico’s concessions and their payment of fees were discussed. The President highlighted that this is not expropriation but concession recovery. He mentioned past privatizations, corruption, and the focus of the fourth transformation on fighting corruption and influence peddling. The progress of the Tren Maya project was reported, including job creation and visits to construction sites.

• Economic outlook: The president highlighted that despite 6% inflation, fuel and electricity prices have remained stable, and there has been a decrease in food prices. The conflict between Russia and Ukraine continues to impact inflation. The Mexican peso remains strong against the US dollar despite the economic situation. GDP increased by 1% in Q1 2023, averaging 3.7% annual growth.

• Investment: Carlos Slim acquired shares in Talos Mexico, which has significant investments in the Gulf of Mexico’s Zama field. In the public-private partnership with PEMEX, the state-owned oil company will hold over 50% of shares, ensuring

• Water: The president mentioned that efforts are being made to address the water scarcity issue in San Luis Potosi (SLP) by repairing an aqueduct managed by a Spanish company. In Nuevo Leon, collaborations with companies have led to the installation of water treatment plants and regulations to improve water usage. The president emphasized the need for awareness campaigns and budget allocation for leak repairs. CONAGUA’s director will provide updates on water projects in an upcoming conference. The president expressed interest in promoting rainwater harvesting programs and highlighted ongoing water infrastructure projects in Campeche, Durango, Coahuila, and Jalisco. He assured that water availability is guaranteed this year due to rainfall, dismissing concerns about potential water release from Chihuahua’s dams.

ENERGY

• Electric generation: Lopez Obrador mentioned the increase in CFE’s share of electricity generation from 38% to 55% following the purchase of Iberdrola’s plants. He also discussed the decline in oil production prior to his administration and emphasized efforts to achieve self-sufficiency in gasoline production, which requires a minimum of 1,833,000 barrels. Actions have been taken to work towards this goal.

BILATERAL RELATION

• Migration: Lopez Obrador emphasized the need to address the root causes of migration and provide

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

employment and development opportunities to prevent people from feeling the need to migrate. He mentioned the care and support provided to migrants in transit, including shelters and medical attention. He highlighted how the migration issue is used in the electoral context in the United States and expressed satisfaction with the possibility of migrants being able to process their paperwork and have greater opportunities for legal work in the US. He mentioned a recent meeting with the US Ambassador to Mexico, where they discussed the possibility of Congress authorizing resources for development similar to the “Alliance for Progress” proposed by Kennedy.

• Fentalnyl: Regarding the resolution by the US Congress declaring fentanyl as a chemical weapon, Lopez Obrador stated that Mexico will continue to collaborate to combat the trafficking and use of this harmful substance, which has caused the deaths of many people, especially young individuals. He mentioned ongoing communication with representatives from both the Democratic and Republican parties to inform them about the actions taken by the Mexican government, including requests made to the Chinese government to prevent the entry of fentanyl and other chemical precursors into Mexico. He also mentioned that similar actions will be taken with South Korea. He highlighted the efforts of the Mexican armed forces in taking control of ports and seizing substances coming from Asia.

• Migrant Station Tragedy: Regarding the tragedy at the migrant station, Lopez Obrador stated that there are now individuals detained and being processed for their involvement in the incident. He expressed his disagreement with the classification of information for five years but mentioned his inten-

tion to make the information public. He informed that the National Attorney General’s Office will release the video related to the incident today, two months after it occurred.

POLITICAL AGENDA

• SCJN: The president responded to a reporter’s question about a congressman’s proposal to “obradize” the judiciary by stating that in a democracy, different opinions are normal. He believes that the judiciary has been “rotten” for a long time, being subjected to economic and political power. However, he emphasized that currently there is no political subjugation. The president mentioned the past symbiotic relationship between economic and political power, contrasting it with the present clear separation between the two, which disturbs many adversaries. He recalled unsuccessful legal actions taken during the administration of Governor Yunes in Veracruz. The president emphasized the need to democratize and ensure the autonomy of the judiciary in order to continue promoting transformation, proposing that the people elect the judges.

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

Regarding the impeachment request filed against him, the president expressed no concern, stating that he has already faced the Supreme Court, opposition parties, and officials.

• President’s Agenda: The president will be visiting the Istmo region to supervise the progress of the Palenque-Coatzacoalcos train project, as well as the modernization of the ports of Salina Cruz and Coatzacoalcos, and the creation of industrial parks. There will be no public events during the visit. Additionally, the president has plans to visit Tampico, Altamira, the Huasteca Potosina and Hidalguense regions, and Sonora. He mentioned that the upcoming trip will focus on evaluating and supervising industrial parks in the Istmo corridor. The government is about to initiate the bidding

process for 10 industrial parks, each averaging 300 hectares. The president also mentioned negotiations with Grupo Mexico regarding the concession of 120 kilometers of railway tracks for the project. Tomorrow, on May 31st, the president will hold a meeting with Elizabeth Shrewood-Randall, the advisor on National Security from the United States’ White House.

• Elections: The president expressed concern about a campaign of misinformation targeting the government during the State of Mexico election. He criticized the media’s bias towards the conservative bloc and against the government’s social programs.He emphasized efforts to achieve energy self-sufficiency and highlighted the decline in oil production before his administration.

• The president distanced himself from Ricardo Mejia and disapproved of his name being used in a campaign. He stated that he has no favored candidates and believes in the people’s decision through elections. He reiterated his support for Governor Marina del Pilar and Mayor Montserrat Caballero, mentioning the threats they have faced. He criticized the privatization of public services and emphasized the separation of economic and political power.The president mentioned that the energy reform, which privatized the oil industry, was approved by legislators from the PRI and PAN parties who received economic benefits.

• He acknowledged a notification from the INE and will comply with the resolution. However, he denounced the increase in election-related lies in the media and anticipated more misinformation as the election day approaches.

NEWS BY STATE

BAJA CALIFORNIA

The Tijuana border area is positioned as a key and privileged center for nearshoring, adding 500,000 square meters of total rentable area, as indicated by the Tijuana Economic and Industrial Development Association (Deitac). The planned investment will be allocated to the construction and adaptation of industrial spaces and would generate between 15 and 20 thousand direct and indirect jobs. Most of the companies attracted by nearshoring with an interest in settling in Tijuana are from the United States, Asia, and from European countries such as Finland and Germany.

SONORA

With the presence of more than 40 national and international companies, the Government of Sonora held the First Job Fair for the Maquiladora Industry to make better job opportunities available to citizens. “We are very happy because in the first quarter of this year we have already created more than 12,000 formal jobs in the State,” said Francisco Vazquez Valencia, Secretary of Labor.

NUEVO LEON

Nuevo Leon ranked second in the Foreign Direct Investment (FDI) registry of the Federal Ministry of Economy, with 2.332 billion dollars, which represents 13% of total investment in the country, behind Mexico City with 7.039 billion dollars, or 38% of total FDI, in the first quarter of the year.

If we compare the 2.332 billion dollars against the first three months of the previous year, it represents a growth in state FDI of 53.49 percent.

CHIHUAHUA

Local authorities from Chihuahua participated in the North American Semiconductor Conference (NASC), which represents a valuable opportunity for industry leaders to share ideas and collaborate on solutions to the challenges facing the semiconductor industry.

The NASC 2023 event was held in Washington, DC, and was attended by representatives from government, industry and academia from Canada, the United States and Mexico.

SOURCE: EL ECONOMISTA, EL SIGLO DE TORREON

TAMAULIPAS

While participating in the Matamoros Industrial Supplier Expo in its 2023 edition, Ninfa Cantu Deandar, Secretary of Economic Development in Tamaulipas, highlighted that the state has attracted more than 393 million dollars, between expansions and the arrival of new companies, since the last quarter of 2022 to date, which is also equivalent to the creation of 7,218 jobs.

In this sense, the maquiladora industry is a fundamental pillar, and it is the one who leads the development lists, with around 1,360 companies installed in the various productive regions of the state.

The Industrial Supplier Expo in Matamoros is one of the most important events for the industrial sector in Tamaulipas and South Texas, bringing together the best local, national and international industrial suppliers, as well as conferences and business roundtables.

COAHUILA

Governor Miguel Riquelme Solis emphasized that the most valuable asset of the state is its qualified labor force, which is recognized worldwide, which is why he assured that there is competitiveness for those who decide to invest.

This was announced after announcing the arrival of the 33rd company so far this year to be installed in the state.

He added that not only automotive companies are coming, but also electric and energy generation companies that will strengthen and diversify the area.

SAN LUIS POTOSI

Based on March data from the National Survey of Construction Companies (ENEC), construction companies in San Luis Potosi showed an annual growth of 87.9% in production value, making San Luis Potosi the third best performing state in the country, with a balance of 663.7 million pesos.

Likewise, the value of production that the state of San Luis Potosi contributed to the national total was 3% in March alone, with 25 thousand 602.7 million pesos.

QUERETARO

The automotive sector companies, organizations and institutions that participated in Phase 1 of the Circular Economy System presented the results of their work in 2022, which resulted in 135 projects, an investment of 349 million pesos (million pesos), and savings of 343 million pesos.

A total of 114 companies participated in this phase and 210 people were trained. This work generated a reduction of 117,000 tons per year of materials and waste avoided, equivalent to what 292,000 people would generate in a year.

JALISCO

Given the limited availability of industrial parks that can meet the growing demand from companies seeking to relocate to the state, Jalisco’s Secretariat of Economic Development (Sedeco) is working in partnership with the private sector to jointly develop this infrastructure in the shortest possible time.

The head of Sedeco, Roberto Arechederra, told El Economista that through the Jalisco Tech Hub Act public policy -created to take greater advantage of the nearshoring-, the State will have a 140-hectare plot of land on which developers will build a “first generation” industrial park to increase the supply of industrial warehouses.

SOURCE: MEXICO INDUSTRY, EL ECONOMISTA

CDMX

Mexico City’s Head of Government, Claudia Sheinbaum Pardo, has signed the Global Commitment for the New Plastics Economy, aiming to eliminate single-use plastics and promote the reuse of necessary products. The goal is to achieve a zero waste system by reintegrating all generated waste into the economy, as plastics’ production and landfill disposal have negative environmental impacts. The government is committed to encouraging manufacturers, retailers, hotels, and food services to eliminate unnecessary plastic packaging and increase the use of recycled materials by 2025. They also aim to enhance the volume and quality of recycled plastics and support ambitious policies with tangible progress reports. The United Nations praised Mexico City’s commitment, emphasizing the need for collective action to combat plastic pollution. The city has made significant progress in waste management, reducing landfill waste by 25% and eliminating 621,000 tons of greenhouse gas emissions. Strengthened legislation, including a circular economy law, has led to positive changes, such as self-service stores reducing their reliance on single-use plastics. Mexico City is recognized as a leader in environmental efforts, with initiatives like the Transfer Station, Selection Plant, and Hydrothermal Decarbonization Plant contributing to waste reduction, along with campaigns like Reciclaton and the Barter Market.

STATE OF MEXICO

The upcoming election to choose the next governor of the State of Mexico will involve more than 7,000 electoral observers, including 140 from other countries who will monitor the electoral process in the country’s most populous state. Additionally, there will be 246,702 representatives from the seven participating political parties. A total of 821 national and international media outlets will cover the election, which is considered of great importance due to its large number of voters. The number of media outlets may increase as accreditation is still open with the Electoral Institute of the State of Mexico (IEEM). On the day of the election, 2,400 police officers from the 125 municipalities of the state, along with 12,500 members of the State Security Secretariat (SSEM), the National Guard (GN), the Federal Attorney General’s Office (FGR), and the State of Mexico Attorney General’s Office (FGJEM) will be present to ensure security. Notaries public will also be on hand to document any incidents that occur during the electoral process.

INVESTMENT NEWS

NORTHWEST MEOR

Mexican company Meor just placed the first stone on what will be their 5th industrial park, making a significant investment in Ciudad Juares, Chihuahua, the amount invested in the project is about $60 million and it expects to generate significant jobs once constructed.

NORTHEAST

TUBOS SAMUEL

Tubos Samuel, a Mexican steel manufacturer, is expanding its operations in Saltillo, Coahuila. With a $4 million investment, the company will create 100 new jobs and strengthen its presence in the industry.

XUSHENG

Xusheng, a Chinese automotive manufacturer, is expanding its operations in Saltillo, Coahuila. With a $350 million investment, the company will create 1,200 new jobs and contribute to the automotive manufacturing sector.

FESTO

Festo, a German company specializing in automation, is expanding its operations in Salinas Victoria, Nuevo Leon. With a $100 million investment, the company will create 1,500 new jobs and contribute to the advancement of automation technology in the region.

BORGWARNER

BorgWarner, a United States-based automotive manufacturing company, is expanding its operations in Ramos Arizpe, Coahuila, in the northeast region. With an investment of $54.3 million, the expansion project will create 280 new jobs and further strengthen the automotive industry in the area.

CENTRAL MEXICO DYNATECT

Dynatect, a US-based automotive manufacturer, has inaugurated its expansion center in Leon, Guanajuato. With a $4 million investment, this facility will create 112 new jobs and strengthen Dynatect’s manufacturing capabilities in the region.

METSO OUTOTEC

Metso Outotec, a global leader in industrial processes, has announced the expansion of its center in Irapuato, Guanajuato. With an investment of $39.9 million, this project will create 70 new jobs and enhance MetsoOutotec’s capabilities in industrial processes in the region.

SAMUEL, SON & CO.

Samuel, Son & Co, a Canadian company, is expanding its operations in Queretaro, Queretaro. With an investment of $35 million, the company aims to strengthen

its manufacturing capabilities in the automotive industry. This expansion project will create 100 new jobs and contribute to the economic growth of the region.

MANTOVA

Mantova, a Brazilian company, has announced its expansion in Queretaro, Queretaro. With a $4 million investment, the company is focused on manufacturing operations. This expansion project will create 60 new jobs and contribute to the growth of the manufacturing sector in the region.

CDMX VALEO

Valeo, a prominent automotive manufacturer from France, has announced an expansion project in Lerma, State of Mexico, within the Greater Mexico City area. With an investment of $29 million, this expansion aims to strengthen Valeo’s manufacturing capabilities and will create 220 new jobs.

THIS COULD BE THE ACHILLES’ HEEL OF NEARSHORING

The arrival of new investments and the interest that the country awakens as the ideal place to implement a Nearshoring process, also anticipates a series of challenges ranging from technological infrastructure to talent management within industrial plants.

For Emilio Cadena, CEO of Grupo Prodensa, a Monterrey-based consultancy that has advised more than a thousand projects in the sector, these will be the most important challenges in the context of an accelerated relocation of industries.

“Incoming companies and those already established in Mexico are in the race for efficiency and productivity,” says Cadena.

For starters, he explains, the nature of Industry 4.0 has allowed the consumer to become an essential part of production processes.

“The buyer wants tailor-made products and wants them immediately. How can factories have that responsiveness?” he asks.

The answer, he advances, lies in predictive and analytics technologies that start from Big Data. Thus, if Nearshoring marks the road to El Dorado, data and information will be the gasoline to reach the destination.

CADENA CEO

“The manufactures that can predict, from a large collection of consumer data, what they need to be producing, are those that are going to be ahead of the race. That’s why the focus of many organizations is not just on data collection, but how it can be used: you need information to make decisions and stay ahead of the curve,” he warns.

This explains why the Mexican industry was investing US$215 million in Big Data in 2014, according to IDC, and 10 years later that investment is around US$2 billion. Companies and manufactures that have not yet involved data and information to their production processes will lose the preference of their customers, whether in a B2B or B2C market. “It’s a survival strategy,” says Cadena.

INVESTMENT IS ON THE RISE, AND TALENT IS ON THE DECLINE

The talent deficit in the face of the emergence of new jobs and industry needs has the potential to become the Achilles heel of Nearshoring in Mexico. Up to 9 out of 10 companies in the sector have suffered from a lack of human resources for plant operations, while the turnover rate remains between 50 and 70 percent, according to information reported by the newspaper Reforma.

“Organizations must work on fostering very positive environments that make people want to stay and work there longer. Emotional compensation, which goes beyond the economic issue, is important, that is, adding ingredients to the employee’s salary,” said Cadena.

Although factories cannot promote options such as flexible working hours or home office, as other sectors do, there are benefits that are attractive in manufacturing, such as transportation, canteen service, various benefits, and improved treatment within the company. According to EY Mexico, among the positions that are beginning to generate a greater need for specialized talent are project managers, IT specialists, business analysts, and customer service specialists, among others.

“Asian companies, for example, have more problems with talent: they have a hard time motivating and retaining Mexican collaborators because we do not have the same priorities, values, or culture as in their countries of origin,” explains Cadena.

Although foreign organizations that invest in the country tend to be strong in their technology, infrastructure, and processes, many have hit a wall when it comes to managing talent.

In the race for efficiency and productivity, everything plays a role, from information to human resources, and it is in these Achilles heels, says Cadena, where the difference between world-class companies and others can be seen.

SOURCE: FORBES MEXICO