Weekly Review I June 28, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I June 28, 2023

RELEVANT NEWS

MEXICAN CAPITAL GOODS IMPORTS HIT RECORD HIGH DRIVEN BY NEARSHORING

Mexico broke a record in its imports of capital goods, by capturing 5,001.7 million dollars in May, a year-onyear increase of 24.1%, Inegi reported on Tuesday.

With this, the country accumulated 28 consecutive months of growth in this indicator, 27 of which with double-digit rates, contrasting with the immediately preceding period of 24 continuous months of declines, and of these 19 with double-digit rates.

It also meant that Mexico surpassed, for the first time, the level of 5 billion dollars in a single month.

Capital goods are durable, man-made items that companies use to produce goods and services. Tools, machinery, buildings, vehicles, computers, and construction equipment are types of capital goods. An increase in capital goods orders and shipments is a sign that businesses expect more demand and that the economy will grow.

In the first five months of the current year, Mexico imported US$22.611 billion worth of capital goods, a value 22.2% higher than the same period in 2022.

At first glance, the Mexican economy has benefited from relocation, attracting alternative productive capital to Asia, and as these investments grow, Mexico’s productive base, largely tied to international trade, increases.

Already as a whole, Mexican imports of goods totaled 52,934.5 million dollars last May, an increase of 1.4%, while exports totaled 52,860.4 million, advancing 5.8%, at annual rates.

RELEVANT NEWS

Consequently, Mexico recorded a deficit of 74.1 million dollars, reflecting a balanced trade balance.

On the export side, oil (-28.2%) and extractive (-29.8%) sales declined, while automotive sales rose (26.2%). On the opposite side, the fall in oil imports (-40.1 percent) stands out.

In May 2023, exports of manufactured products reached 47.45 billion dollars, which represented an increase of 9.5 percent at annual rate.

The most significant increases were observed in exports of professional and scientific equipment (26.8%), automotive products (26.3%), food, beverages and tobacco (10.8%), electrical and electronic equipment and appliances (9.5%) and textile products and clothing and leather industry (9.5%).

In turn, the annual increase in exports of automotive products was derived from increases of 31% in sales channeled to the United States and 7.6% in those directed to other markets.

In the month in question, the value of oil exports was 2.729 billion dollars. This amount was made up of 2.270 billion dollars in crude oil sales and 459 million dollars in exports of other oil products.

The average price of the Mexican crude oil export mix stood at 65.04 dollars per barrel in May, 4.28 dollars lower than in the previous month and 39.26 dollars lower than in May 2022.

In that month, the volume of crude oil exported stood at 1.126 million barrels per day, higher than the 1.027 million barrels per day in April and 0.984 million barrels per day in May 2022.

At the same time, the value of agricultural and fishery exports was 2.131 billion dollars, an amount that implied an annual growth of 4.9 percent.

The most significant increases were recorded in exports of cattle (78.4%), tomatoes (35.8%), fruits and edible fruits (34.4%), peppers (21.9%) and fresh vegetables (14.6%).

SOURCE: EL ECONOMISTA

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

JUNE 21-27, 2023

POLITICAL AGENDA

• Consultation to the Supreme Court of Justice: President Lopez Obrador informed that today, through the SEGOB, he will submit a letter to the SCJN for an answer as to why they are violating the CPEUM (Art. 127) which establishes that no one should earn more than the President of the Republic.

• Supreme Court of Justice: The President rejected the idea of issuing a decree to fight corruption in the judicial branch and affirmed his respect for the division of powers. He criticized the SCJN ruling as a defense of the interests of a corrupt minority and suggested that he will send a new proposal for constitutional reform. He also mentioned the lack of moral authority of the ministers due to the benefits they receive. He emphasized that his government is winning against the reactionaries, despite the media backing they receive. Finally, he rejected the idea of an independent candidate, considering him disconnected from citizens’ interests.

• SEGOB: When asked about his perception of and dealings with the current Secretary of the Interior, Luisa Maria Alcalde, the President expressed his pleasure for including, more and more, women in public spaces and positions. He said that the cur-

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

“Jovenes Construyendo el Futuro” Program which benefits around 2.6 million young people and currently has 250,000 young people in training.

rent Secretary has been with him for a long time and that she is a very capable woman.

• Commemoration in the Zocalo: The President informed that the commemoration of the triumph of the Fourth Transformation will take place next July 1st in the Zocalo. He invited all Morena governors and extended the invitation to the citizens.

• New Head of Customs: President Andres Manuel Lopez Obrador appointed Major General Andre Foullon Van Lissum as head of Mexico’s National Customs Agency, replacing Rafael Marin Mollinedo, who will be ambassador to the World Trade Organization.

LABOR

• Head of the Secretary of Labor: President Lopez Obrador announced that the Undersecretary of Employment and Labor Productivity will be Quiahuitl Chavez Dominguez, replacing Marath Bolaños Lopez. This sub-secretary is in charge of the

• Mines: A reporter criticized the business class for its lack of sensitivity and voracious ambition, mentioning the cases of strikes in Cananea, Sombrerete and Taxco, owned by German Larrea and Grupo Mexico. He denounced the poor working conditions and illegal activities in these mines. He also accused other businessmen such as Ricardo Salinas Pliego and Olegario Vazquez Raña of similar practices. The President emphasized the importance of protecting workers’ rights and seeking agreements. In addition, issues related to electoral reform and the direct election of members of the Judiciary were addressed. Privatizations in previous administrations were also mentioned.

• Labor conditions: A dispute was resolved with German Larrea regarding the concession of the Isthmus railroad. The President emphasized the importance of protecting the public and the rights of businessmen but prioritizing the public interest. He emphasized the need to guarantee good salaries and profit sharing, as in the case of mining. He mentioned that justice has been sought for workers in sectors such as mining, electricity, and railroads, achieving the enrollment of many of them in Social Security. He accepted the intervention of the United States in a mining case and promoted union democracy and the approval of collective bargaining agreements by the workers.

ECONOMY

• Development in Chiapas: The governor of Chiapas highlighted the collaboration between the popu-

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

lation and the state and federal governments to promote development. The benefits of the mega-projects in terms of employment, investment and tourism were mentioned. The president was thanked for the social support programs and the implementation of internet in the state. The creation of a low-cost regional airline is also being considered. Regarding security, it was reported that crime is decreasing in Chiapas. The President addressed questions regarding the conflict in the Zapatista communities and the fishing industry. The existence of an armed conflict was denied, and opposition groups were mentioned as sources of disinformation. Finally, the president assured that he will not intervene in the upcoming elections in Chiapas and stressed the importance of finding good candidates for the general welfare.

INTERNATIONAL

• Latin American Tour: At the moment he has only defined to visit Chile on September 11, and he does not know if he will visit another country since he has to be back in Mexico on September 13 for the Day of the Children Heroes.

INFRASTRUCTURE

• Inter-Oceanic Corridor: Regarding a reporter’s complaint that the salary increases were not contemplated in the framework contracts of the Ministry of Finance and Public Credit and that this has prevented this increase from being granted to the workers that make up the National Bipartisan Association of Cleaning Companies, the President requested that the issue be reviewed and addressed.

• Southeastern Gas Pipeline: The reporter asked about the progress of the gas pipeline project of Transportadora Gas Natural de la Huasteca, a subsidiary of TC Energy, and the benefits it will bring to Veracruz. The president answered that an agreement has already been signed between Transcanada and the Federal Electricity Commission to transport gas by sea from Tuxpan to Coatzacoalcos in a first stage, and then from Coatzacoalcos to Dos Bocas, and from there to the gas pipeline that connects Dos Bocas with Tabasco and Yucatan. An investment of 5 billion dollars was mentioned for this project. In addition, it was reported that the gas pipeline from Dos Bocas to Reforma, in Chiapas, has already been completed.

• Logging and water concessions: The President indicated that he recently signed a decree to declare 16,000 hectares of Fonatur’s property in tourist zones as a natural protected area. Regarding water reserves, the President pointed out that permits are no longer given out “left and right” due to influence and corruption as was done in the past.

Today the aquifers are taken care of and no new permits are granted for water extraction where these reserves are depleted; an example of this is the Mexicali brewery, Constellation Brands, which had a permit granted by the last administration,

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

which was cancelled through public consultation. Today this brewery is being built where there is water, in the State of Veracruz. Likewise, no permit for energy exploitation has been granted for the use of fracking. There are projects such as the construction of pipelines in Sonora, Sinaloa, Nuevo Leon, Jalisco, Tabasco, and Campeche so that people have access to drinking water.

• Energy Sector: The President of Mexico was questioned about the designation of natural gas as clean energy. The President acknowledged that there is a difference between what is desirable (eliminating fossil fuels) and what is possible, and that the transition to clean energy will take time and technological development. Mexico is making progress in clean energy, including the modernization of abandoned hydroelectric plants with an investment of US$1.2 billion. Previously, the country had 38% of energy production, but this has now increased to 55%. The agreement with Iberdrola to buy 13 of its plants was highlighted, with the goal of leaving the Federal Electricity Commission (CFE) with 60% of energy generation by the end of the government. The President considers it important for the CFE to be the majority company to avoid shortages and price abuses. It was mentioned that the OXXO chain received subsidies and did not pay the real cost of its energy consumption, which has generated criticism from the Reforma newspaper, whose owner is pointed out as one of the newspaper’s patrons.

• Electric energy: In relation to the energy reform, the President singled out the legislators who approved this reform. He mentioned the owner of the OXXO chain who decided to become a partner with Iberdrola, but he said that they should intervene to support the CFE even if this means going

against the Supreme Court of Justice, where several appeals have been filed due to different factors, including the self-supply. Before, there was a 38% capacity, today the CFE has 55% and will be left with 60 or 65% so that the price of electricity does not increase. Likewise, he assured that there is no need to fear for the lack of electricity due to the high temperatures, since there are reserves.

HEALTH

• Fentalino: The President made reference to the US Attorney’s conference on fentanyl and chemical precursors, in which he spoke of more than 100,000 deaths in 2022 due to fentanyl in the United States, mostly young people between 18 and 29 years old, which he described as regrettable and for which he will help the US Government so that this drug does not arrive, since it is very harmful and addictive. He mentioned that fortunately Mexico does not have this problem, even though there are certain places that, for some reasons such as their proximity to the border, have a high level of consumption of this drug. He mentioned Guanajuato as a red focus in this issue, particularly in the industrial corridor where the maquila industry is located and there are low salaries for workers, as well as the abandonment of families, lack of support, among other factors.

NEWS BY STATE

BAJA CALIFORNIA

With the aim of attracting investment from French companies to Baja California, the Undersecretary of Investment Management of the Ministry of Economy and Innovation, participated in the first Mexico-France Business Forum organized by the Bank for International Settlements and the Ministry of Foreign Affairs. Baja California has more than 52 years of experience in the aviation industry with more than 94 companies established in the region that represent 21% of the national total. Of which 60% have specialized certifications and concentrate a labor force of 35 thousand operators, technicians and engineers who are dedicated to design, manufacturing, assembly and maintenance processes.

SONORA

Governor Alfonso Durazo said that the entity has qualified labor and its geographical conditions make it very attractive to investors. At the Paris Airshow event, where the Secretary of Economy, Margarita Velez de la Rocha, attended as a representative of the state, highlighted the importance of placing Sonora within the competition with the rest of the country’s entities that have an aerospace cluster. The Government of Sonora participated in different meetings in which great results were obtained, allowing collaboration and mutual promotion agreements to be made with large companies in the aerospace sector.

NUEVO LEON

The number of employed workers with high school and higher education increased by 9.2% in the last year. On the contrary, the number of employed workers -formal and informal- with a lower educational level, decreased, according to an analysis of the Employers Confederation of the Mexican Republic, with data from the National Survey of Occupation and Employment (ENOE) of Inegi.

Cecilia Carrillo Lopez, director of Coparmex Nuevo Leon, said that it is a reality that companies located in the state have increased the educational requirements of their personnel due to the high value-added sectors to which they belong.

CHIHUAHUA

The construction industry generated total income of 2.645 billion pesos, while the value of production amounted to 3.258 billion pesos in the state of Chihuahua for the fourth month of 2023.

Chihuahua became the sixth state at the national level with the highest production value, and had the fifth highest income from the supply of goods and services for the month of April of this year.

SOURCE: EL ECONOMISTA, HERALDO DE CHIHUAHUA

TAMAULIPAS

The state of Tamaulipas is a pole of growth and of great interest for new investments in nearshoring, said Luis Manuel Hernandez, national president of the maquiladora and manufacturing export industry index, highlighting the creation of more than 4,400 jobs each year in the last five years.

Among the advantages and aspects of attraction for new investors, he pointed out the solid logistic network and direct connection to Texas, United States, for which he is working with representatives of the industry, government, and business chambers of that region.

COAHUILA

The Global Indicator of Economic Activity (IGAE) registered a growth of 0.8% in the fourth month of the year with respect to the immediately preceding period, thus recovering from the 0.2% decline reported in March and above the 0.6% estimated by Inegi.

As a result, the economy returns to the positive territory it has maintained throughout the year, with the exception of March, placing it 1.4% above the level reached in January 2020 prior to the health crisis.

SOURCE: MEXICO INDUSTRY, EL DIARIO DE COAHUILA

AGUASCALIENTES

Aguascalientes is present at the international Paris Air Show, which takes place in the capital of France and is the largest aerospace industry exhibition in the world.

Aguascalientes’ stand is located in the Mexico pavilion, joining the more than 2,400 exhibitors from around the world showcasing their products and services to the nearly 140,000 aviation industry professionals who come to explore potential business partnerships at this event.

GUANAJUATO

The state of Guanajuato has once again become the epicenter of Industry 4.0, through the technological boost in the main industrial sectors of the country, such as automotive, aerospace, food, technology, among others. In this tenor, Governor Diego Sinhue Rodriguez Vallejo announced that this state is consolidated as a reliable region for investments.

In the framework of the presentation of the fifth edition of the Industrial Transformation Mexico fair, organized by Italian Geman Exhibition Company, Secretary Ramon Alfaro assured that, due to the fact that investment is dynamic, the current state administration is confident that the projects will continue.

SOURCE: GLOBAL ENERGY

JALISCO

The Government of Jalisco, through the Ministry of Economic Development (Sedeco) in conjunction with the Association of Industrial Parks of the State of Jalisco (APIEJ), Industriales Jalisco, the Chamber of Construction (CMIC) Jalisco and the National Chamber of the Electronics Industry of Telecommunications and Information Technology (CANIETI), presented today the State Crusade for the development of industrial parks, a strategy that seeks to accelerate the creation of industrial warehouses in the state.

Secretary Roberto Arechederra explained that the industrial parks crusade is a very robust initiative that combines the efforts of the private sector and the government, with the latter acting as the connection between all of them. In addition to facilitating and accompanying developers in the permitting process and the search for financing, land and energy options.

QUERETARO

The state will attract six investments representing 2.2 billion pesos in capital and the incorporation of 1,950 jobs; the projects -mainly in the aerospace sectorwere confirmed during the tour made by a delegation of state public servants in France, within the framework of the Paris Air Show.

Albany, Airbus, Delastek, General Electric (GE) Aerospace, ITP Aero, and Safran are the companies that announced and ratified investment plans in the state, mainly to increase the capacity of the units they have in the state.

SOURCE: EL ECONOMISTA, LIDER EMPRESARIAL, GOVERNMENT OF JALISCO

CDMX

Mario Delgado, Morena’s national leader pointed out that the mayor of Iztapalapa, Clara Brugada, will be invited to the internal organization process so that, after the coordinator of the Fourth Transformation is appointed on September 6, the times to do the same with Mexico City will be determined. The leader highlighted the mayor’s leadership in the city and the extraordinary work she has done. In addition, he pointed out that she expressed her desire to tour different points of Mexico City with the purpose of preventing the right wing from taking power again in the capital. Regarding other aspirants within Morena to govern Mexico City, Delgado Carrillo pointed out that the leadership has no formal knowledge of them, but affirmed that the party has outstanding cadres in the city, both men and women, who could give continuity to the work done by Claudia Sheinbaum.

STATE OF MEXICO

The parliamentary group of the Partido del Trabajo (PT) proposed to the Congress of the State of Mexico to reform the Law of Education of the entity to allow parents to follow up through digital platforms, attend virtual school meetings, orientation meetings or similar to those convened by educational institutions. The bill was referred to the Education Commission for its analysis in the following days, in order to obtain the opinion before the beginning of the next school year and to implement this mechanism to support those who cannot attend because they are ill at home or because their work does not allow it.

SOURCE: EL ECONOMISTA, MILENIO

INVESTMENT NEWS

NORTHEAST

EXA INDUSTRIAL

Exa Industrial, a Mexican company, will invest $56 million to expand its plant in Matamoros, Coahuila. This expansion will create 270 new jobs to produce high-quality trailers for both domestic and international markets.

TERNIUM

Argentinean company Ternium will invest $3.2 billion in Nuevo Leon,

Mexico, for a steel mill project. This expansion aims to cater to the growing automotive sector and will create 1,800 direct jobs and 5,000 indirect jobs. With this investment, Nuevo Leon’s total investments reach $21 billion during the current state administration.

ASIAWAY

The Chinese automotive supplier, Asiaway Automotive Components, inaugurated the first phase of its new 23,000 m2 plant in San Luis Potosi, Mexico. The company invested $414 million in this phase, creating 300 new jobs. Over the next few years, the plant is expected to generate up to 2,000 new jobs. They inaugurated its new plant and announced an upcoming investment.

WOODSIDE

Australian company Woodside will invest $7.2 billion in the Trion Field off

the coast of Tamaulipas, Mexico. This investment in deepwater oil extraction in the Gulf of Mexico establishes the state as a significant player in the hydrocarbon industry. The project will create jobs and boost the development of the Matamoros port.

INVESTMENT NEWS

FLEX AMERICAS

Flex Americas will invest $100 million in the Industrial Port of Altamira, Tamaulipas. The investment includes the construction of a new building, coating lines, and a production line for Biaxially Oriented Polypropylene (BOPP) and 300 direct jobs in the region. This investment highlights Flex Americas’ commitment to the manufacturing and electronics sector in Tamaulipas.

CENTRAL MEXICO SAFRAN

French company Safran will invest $80 million in expanding its operations in Queretaro, Mexico. This investment will create 800 high- skilled jobs and establish the company’s seventh plant, focusing on aircraft engine testing for the aeronautical industry.

HAITIAN

Haitian, a Chinese company specializing in plastic injection machines, has invested $25 million in a new plant in Acatlan, Jalisco. This investment has created 100 direct jobs and aims to develop local supply chains and attract more Chinese investments to the region.

4G INGENIERIA

4G Ingenieria, a Mexican company specializing in the metal-mechanical sector, has invested $0.7 million in the inauguration of its Plant II in Leon, Guanajuato. The new facility includes an Engineering and Design Center and a prototype manufacturing area. They will be creating 50 jobs in the region.

SOURCES: CLUSTER INDUSTRIAL, MILENIO, INMOBILIARE, A21