Weekly Review I July 5, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I July 5, 2023

RELEVANT NEWS

USMCA PROVIDES PROSPERITY AND CERTAINTY TO INVESTMENT ATTRACTED BY NEARSHORING: CCE

The Business Coordinating Council (CCE) assured that the Agreement between Mexico, the United States, and Canada (USMCA) is a key tool to promote prosperity and competitiveness in North America and generates certainty for investments attracted by nearshoring.

“In a complex geopolitical context and given the historic opportunity offered by the phenomenon of relocation or nearshoring, the Mexican private sector highlights the relevance of the USMCA as a valuable legal framework to generate certainty in investment and trade,” said the organization led by Francisco Cervantes Diaz.

The Treaty between Mexico, the United States, and Canada has mechanisms for compliance with trade, investment, labor, and environmental obligations, as

well as 19 committees and working groups that are responsible for following up on the commitments made, it added.

It “calls on the three USMCA governments to prioritize compliance with USMCA obligations in order to be in a position to take full advantage of the benefits of relocation,” said the organization.

The CCE said that since the entry into force of the agreement it has promoted various initiatives to promote and protect the USMCA, such as the establishment of a permanent representative office in the United States.

Through the office, it added, we promote the deepening of regional integration and contribute to the proper implementation of the trade agreement.

RELEVANT NEWS

We encouraged and promoted the participation of the private sector of the three countries in the 10th North American Leaders Summit in early 2023, which for the first time included a business component, he said.

The CCE added that it also coordinates different business mechanisms such as the US-Mexico CEO Dialogue, led jointly with the U.S. Chamber of Commerce, to propose public policy recommendations to both governments.

The Mexican Business Council, for its part, said that CMN is leading an important strategy with the Business Council of Canada to deepen the bilateral trade relationship. Mexico is Canada’s third largest merchandise trade partner (after the United States and China) and in 2022, Canada’s direct investment in Mexico was 3.78 billion dollars.

The Mexican economy has positioned itself as an important and attractive market for Canadian exports and investors and the USMCA has boosted trade and investment between the countries of the region in an unprecedented way, according to the CCE.

The United States and Canada, he mentioned, account for a significant share of foreign direct investment in Mexico, with 42.5 percent and 4.8 percent, respectively.

“Every minute goods are exchanged between member countries for around 3 million dollars and among the main products that our country exports under the USMCA are: computers and data processing machines, automobiles and vehicles for transporting goods, vehicle parts and accessories, as well as televisions and screens, among others.”

SOURCE: FORBES MEXICO

KEYPOINTS OF PRESIDENT ANDRES MANUEL

LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

June 28 – July 4, 2023

POLITICAL AGENDA

• Opposition parties: The president claimed that opposition parties, particularly the PRI, no longer exist as many members as possible and leaders have resigned. He accused them of being absorbed by an informal power called the “Supreme Conservative Power,” managed by Claudio X. Gonzalez, which he believes is working against his legally constituted government. According to the president, the opposition’s candidate is handpicked by Claudio X. Gonzalez and represents the interests of the oligarchy rather than being a true party member. He criticized the media for spreading misinformation and expressed that the opposition’s objections to his morning press conferences are hypocritical. The president also referenced a viral cartoon that satirizes the background of opposition members and their support for Xochitl Galvez.

• Migratory Reform: The president stated that he is opposed to the immigration reform promoted by Ron DeSantis, the governor of Florida. Furthermore, he called for not giving “a single vote to DeSantis” or to those who hold disdain towards migrants.

• SEGLAMEX Fraud: The Mexican President emphasized that his government does not align with neoliberal principles and clarified the purpose of SE-

GALMEX, which aims to restore price guarantees, ensure fair payments to farmers, and strengthen rural stores. However, the appointed official overseeing the system, Ignacio Ovalle, made a mistake by involving individuals with questionable backgrounds who engaged in corrupt practices and overpriced purchases, resulting in financial losses. Regarding the investigations, the Secretary of the Public Function clarified that the reported amount of 15 billion pesos as alleged irregularities is imprecise. Auditing activities revealed observations of around 9.5 billion pesos, with ongoing analysis and evidence gathering to address the issues raised. Some funds related to bond houses have been recovered, but other cases and complaints are still under investigation. To tackle corruption in SEGALMEX, a working group was established comprising various government entities, holding meetings to strengthen the cases, identify patterns, and provide information. A total of 87 individuals, including former public servants and individuals associated with implicated companies, have been denounced for their involvement, with reported amounts reaching 4.9 billion pesos. Overall, investigations are ongoing, and the government is working to address the issues, recover funds, and strengthen accountability in SEGALMEX.

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

and no longer resembles its original form. According to him, the PRI has become an appendix of the conservative bloc, led by Claudio X. Gonzalez, which he finds lamentable. He claims that the parties within the bloc depend on Gonzalez’s management. He clarifies that the bloc is an informal political grouping created above the parties, and their underlying goal is to return to power, continue their corrupt practices, and perpetuate classism and racism.

INTERNATIONAL

• National Strategic Litigation Council: A reporter highlighted the National Strategic Litigation Council’s legal battle against the government and suggested that they are preparing an attack to discredit the President, drawing parallels with similar situations in other countries. The President expressed confidence in his experience and the support of the people. The reporter also mentioned connections between the Council and the Judiciary, including financial support from Minister Arturo Zaldivar. The President criticized the Council’s efforts to halt projects such as the Felipe Angeles Airport and the Maya Train, alleging that they receive funding from the United States. He hinted that the Council has influenced the selection of the opposition candidate, indicating that the candidate’s identity will be publicly revealed soon.

• PRI senators: The president commented on Alejandro Moreno’s accusations, stating that it is very unfortunate to see the PRI end up in such a manner. He believes that the PRI has been distorted

• Cooperation for Central America: Regarding a reporter’s inquiry about support for Central American countries aimed at addressing the root causes of forced migration, President Andres Manuel Lopez Obrador stated the importance of urging the United States to allocate greater resources, in addition to promoting cooperation among different nations to contribute to the development and well-being of the people. The most significant effort lies in prevention, and cooperation plays a vital role in this task. She highlighted that, at the president’s request, a strategy was implemented from the beginning of the administration to promote development and create a higher level of well-being that discourages forced migration. Programs such as Sembrando Vida and Jovenes Construyendo el Futuro are part of these efforts. These programs provide training and skill development that benefits both workers and employers. Additionally, in many cases, these programs provide access to financial tools like bank cards and savings accounts, which have been evaluated by various international organizations, including the UN.

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

• Social Programs: The most well-received program among the citizens is the support program for senior citizens. In second place is the scholarship program for students, which has shown a decrease in school dropout rates, particularly at the secondary education level, and is complemented by the Youth Building the Future program. In the field of agriculture, the most popular program is the government’s fertilizer distribution program, which is environmentally friendly and results in higher maize yields. Regarding IMSS-Bienestar, progress is being made as 20 states have agreed to federalize the public healthcare system to ensure the right to quality healthcare, with an adequate supply of medications, doctors, and specialists.

SECURITY

• Michoacan: President Lopez Obrador commented on the unfortunate murder of Hipolito Mora, a former leader of self-defense groups in Michoacan. He attributed the incident to the lingering violence that was permitted under past Mexican governments, particularly during Felipe Calderon’s presidency, which he referred to as a narco-state. He noted that in the aftermath of that period, the Enrique Peña Nieto administration resorted to using self-defense groups to confront the violence, pitting people against each other.

• Homicides: During a comparison of homicide rates in Mexico over the past six presidential terms, it was highlighted that the final two years of Felipe Calderon’s administration were the deadliest for Mexico. This period was marked by the implementation of the “kill them on the spot” strategy, led by Genaro Garcia Luna. However, journalist Jorge Ramos has pointed out that the current presiden-

cy has witnessed the highest number of fatalities. This can be attributed to the fact that President Lopez Obrador took office when the homicide rate was at record levels, which has since been gradually decreasing.

ENVIRONMENT

• Genetically modified corn: A reporter raised concerns about the production of counterfeit tortillas using corn husks and the status of corn tariffs and genetically modified corn in Mexico. The President stated that COFEPRIS is responsible for addressing the issue, and they will evaluate the reported violations. He emphasized that Mexico produces high-quality, non-genetically modified white corn and recently increased tariffs on imported corn, excluding white corn, to support domestic production. The President expressed the need for a joint investigation into genetically modified corn for the benefit of consumers in Mexico and the United States. He reiterated that the use of genetically modified white corn for corn flour is not accepted, and steps will be taken to address the importation of genetically modified white corn from South Africa.

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

• Glyphosate: Regarding the elimination of glyphosate, President Lopez Obrador stated that progress is being made, and it depends greatly on the research being conducted by CONACyT to find substitutes. He emphasized that it is not completely ruled out. In the case of small-scale farmers, they do not use this agrochemical due to its high cost. This issue is more relevant to large-scale producers with plantations, and a research protocol for a new fertilizer has already been established.

• AICM: President Lopez Obrador stated that the Mexican Navy (SEMAR) is already in charge of the airport, specifically in terms of control and surveillance. The aim is to prevent a return to the excessive control by drug trafficking groups, ensuring no corruption or alliances with organized crime. SEMAR will formally take over the management of several airports, while the Army (SEDENA) will be responsible for others. The existing concessions and contracts with private operators will not be modified or canceled. Regarding the future of Mexicana de Aviacion, the President mentioned that they are waiting for pending legal issues to be resolved, urging lawyers and workers not to be deceived. He criticized Gaston Azcarraga from Grupo Posadas for allegedly causing the airline’s bankruptcy and leaving thousands of employees jobless, likening it to the environmental damage caused by mining in San Luis Potosi.

INFRASTRUCTURE

• Mayan Train: The Tren Maya project in Mexico is progressing well. The first section of the train route has completed 150 km of track, with the Escarcega station and Palenque boulevard nearing 80% completion. A total of 9 out of 12 bridges have

been finished, and the project has created 13,000 jobs. The first train has departed from the manufacturing plant and will begin testing in August. Alstom, the company responsible for building the trains, will deliver additional trains in August, December, and throughout 2024. The project has already brought benefits to the region, including employment opportunities and support for agriculture. The Tuxtla Gutierrez Airport is also being modernized. In Tabasco, a newly protected natural area is being established along the Tren Maya route. The governor of Tabasco highlighted the positive impact of the project on the environment and the state’s hospitality.

• Urban Development: In response to a direct question about the issue of land invasions in areas like Puerto Escondido and the Caribbean, the president stated that by the end of his term, he will leave urban development plans in place for tourist sites in the country to prevent land seizures and uncontrolled growth. He emphasized the importance of preventing invasions and mentioned that all Fonatur lands in the Huatulco area have been declared Protected Natural Areas. The president criticized the privatization of beaches during the neoliberal period and expressed the goal of allow-

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

HEALTH

ing all citizens to “enjoy” Mexico’s natural beauty. Lastly, he highlighted that the government would continue the process of regularization, stopping both small-scale invaders who extort money from people to occupy national lands and large-scale invaders who have seized thousands of hectares in tourist areas.

• CFE: the president stated that it is necessary to rescue the Federal Electricity Commission (CFE) because it was targeted for destruction during the neoliberal period. He argued that the privatization reforms were driven by self-interest rather than the public interest, which would have led to the disappearance of the CFE and the control of the energy sector falling into the hands of foreign companies. In the current administration, efforts have been made to rescue the CFE and prevent real increases in electricity prices. The president emphasized that the CFE and the government have not incurred additional debt. He also mentioned the potential for multiple solar plants in Sonora and expressed the intention to leave recommendations for the Sonora Plan to future administrations committed to the ongoing Transformation.

• Health: Zoe Robledo, the director of IMSS (Mexican Institute of Social Security), discussed investments in electromechanical equipment across 210 hospitals in 14 states as part of the IMSS-Wellness Plan. These investments include 3,227 air conditioners, oxygen gas outlets, 1,257 refrigerators, 670 fire extinguishers, among others. He provided specific details on the investments made in each state. On the other hand, Hugo Lopez-Gatell, the Deputy Secretary of Health Prevention and Promotion, emphasized the formative nature of socialization, which involves becoming part of a collective and acquiring life skills. He highlighted the key socialization factors such as schools, families, and the media, noting that they can influence discrimination and unfavorable environments. Lopez-Gatell also mentioned that alcohol is one of the most consumed addictive substances. He identified factors that hinder socialization, such as exposure to violence in schools and families, which can lead to drug use. Drugs, according to Lopez-Gatell, provide an unhealthy form of socialization and act as an escape from difficulties in communication, empathy, and everyday interactions. He stressed the importance of ethical conduct in mass media, including advertising, as they can either positively or negatively influence socialization. Finally, he acknowledged that social programs contribute to various aspects of well-being, including social well-being, by providing social impact areas for addiction prevention.

NEWS BY STATE

BAJA CALIFORNIA

Exports from the Mexicali Maquiladora Industry increased 29.5% annually between January and April 2023 compared to the same months in 2022, according to figures released by the National Institute of Statistics and Geography (INEGI). Tijuana reports 79 thousand 877.7 million pesos (18.1% annual drop); Mexicali with 20 thousand 839.1 million; Tecate with 3 thousand 653.7 million pesos (up 18.2% annually); and Ensenada with 3 thousand 573.8 million (4.9% annual drop). Mexicali currently reports 149 active maquiladora plants which employ a total of 81,566 people.

SOURCE: INDUSTRIAL NEWS BC

SONORA

Sonora is one of the main states in the aerospace industry nationwide; due to its location, the human capital, as well as the labor value, have turned the entity into an attraction for the investment of warehouse maquiladoras. According to the Ministry of Economy of the Federal Government, Sonora contributes 18.6 percent of production, having 70 units that produce aerospace manufacturing, generating 21,000 good-income jobs.

Margarita Velez de la Rocha, Secretary of Economy of Sonora, said that the governor, Alfonso Durazo Montaño, will announce a series of important investments for the entity in the aerospace sector.

SOURCE: EXPRESO

SOURCE: UNIRADIO INFORMA, ENTORNO INFORMATIVO

NUEVO LEON

While U.S. companies have long dominated investments in Nuevo Leon, now Chinese companies are showing their strong presence, as seen in the Hofusan Industrial Park, where the rapid installation of factories from that country is part of the relocation of their products to bring them closer to the world’s largest market in the United States.

The Governor of Nuevo Leon, Samuel Garcia Sepulveda inaugurated on June 26, section 2 of State Highway 001 in the municipality of Salinas Victoria, with an investment of 178 million pesos, and is also expediting the construction of a vehicular overpass on the Highway to Colombia and a Civil Force Detachment, for greater security in the transportation of goods.

SOURCE: EL ECONOMISTA

CHIHUAHUA

The president of the Mexican Chamber of the Construction Industry (CMIC) in Chihuahua, Julio Cesar Mercado Rodriguez announced that there is an increase in the sector of 9.4% compared to last year, this is projected to continue next year with large investments for the state.

This year is very good for the construction sector, with a review of national statistics which indicate that the first quarter has an increase of 9.4% over last year, for Chihuahua, there will be a good investment in work for next year.

SOURCE: ENTRE LINEAS

TAMAULIPAS

The state of Tamaulipas hosted the visit and work meeting of the ambassadors of the European Union in Mexico and, during the meeting, the various competencies that the state has for attracting new investments from businesses and industries distributed from the central, southern and northern regions were highlighted.

The manufacturing and automotive industries were highlighted among the areas of greatest interest for investment, as well as the development of clean energies, the wind energy potential, and the various connections offered to the logistics sector, which range from highways in direct connection to the United States, airports and maritime terminals that receive and transport global merchandise.

SOURCE: MEXICO INDUSTRY

COAHUILA

The Secretary of Economy of the State of Coahuila, Claudio Mario Bres Garza, announced that in the month of July, two large industrial parks will be put into operation in the Laguna region of the state, which will strengthen the economy of the area.

He said that one of the industrial parks will be located in Mieleras, one belonging to Grupo Amistad; with an extension of 280 hectares, and the second one corresponds to an investment of the Hassan Mansur family.

SOURCE: EL SIGLO DE TORREON

SOURCE: MEXICO INDUSTRY, EL DIARIO DE COAHUILA

SAN LUIS POTOSI

San Luis Potosi is in the sights of at least 15 Tesla suppliers, which are interested in establishing their manufacturing plants in the state.

In an interview, the state’s Secretary of Economic Development, Juan Carlos Valladares Eichelmann, explained that talks are being held with an important portfolio of companies that have seen the state’s potential in the automotive industry, and that, after Tesla’s confirmation, they are betting on San Luis Potosi to expand their supply.

GUANAJUATO

Guanajuato is Mexico’s fifth largest exporter. In the first quarter of this year, it contributed seven thousand 938 million dollars, a collaboration of 6.2%.

For the entity, exports in the first quarter of this year showed a growth of 9%, an increase of 659 million dollars, compared to the same period last year.

In the first quarter of last year, seven thousand 279 million dollars were reported.

SOURCE: AM

SOURCE: EL UNIVERSAL SOURCE:

QUERETARO

Recently, the Secretary of Sustainable Development of Queretaro announced that close to 67 private investment projects are planning to set up in the state. This will represent the entry of 93 billion pesos and the generation of 42 thousand new jobs.

For its part, the National Chamber of the Housing Development and Promotion Industry (Canadevi) projects an increase of between 8% and 10% for Real Estate in Queretaro in 2022.

SOURCE: INMOBILIARE

JALISCO

Jalisco is an entity that despite not having a geographic position close to the United States has a connection to the Port of Manzanillo, as well as to the center and north of the country being attractive for companies dedicated to logistics.

By the second half of 2023, 160,000 square meters of the 260,000 square meters under construction in Jalisco will be ready and “they will probably all be rented before construction is completed,” says Bruno Martinez, president of the Association of Industrial Parks of the State of Jalisco (APIEJ).

The development of industrial properties has not stopped and, as of the first quarter of 2023, Jalisco’s inventory totaled 5.9 million square meters, a sustained growth in construction to meet the demands of companies interested in starting operations.

SOURCE: THE LOGISTICS WORLD

SOURCE: EL ECONOMISTA, LIDER EMPRESARIAL, GOVERNMENT OF JALISCO

CDMX

The Head of Government, Marti Batres Guadarrama, assured that a greater coordination work is being carried out with the private sector of Mexico City, this in the midst of the climate of insecurity that has been reported, where the recent robbery at Plaza Antara stands out. In a press conference, he explained that a worktable has already been set up to address the issues that concern the businessmen of the capital of the country, among them those of achieving greater security, especially in shopping malls and commercial spaces. He stated that as an authority, he has already presented an invitation to the capital’s shopping malls to have their video surveillance cameras connected to the CDMX’s Command, Control, Computing, Communications and Citizen Contact Center (C5).

SOURCE: EL ECONOMISTA

STATE OF MEXICO

The Federal Electoral Tribunal has ruled that President Lopez Obrador violated election laws during his campaign in the States of Mexico and Coahuila. The tribunal found him guilty of bias, misuse of resources, and failure to comply with precautionary measures. This adds to the ongoing conflict between the government and electoral institutions. The timing of actions plays a crucial role in determining the outcome of complaints. Despite the rulings, campaigning continues throughout the country, putting pressure on the National Electoral Institute. The resolution of the presidential candidacy nomination will take place in September.

SOURCE: EL PAIS

SOURCE: EL ECONOMISTA, MILENIO

INVESTMENT NEWS

NATIONAL NAVIEN

Korean water heater manufacturer Navien is expanding to Mexico for nearshoring opportunities. Mexico will be the company’s main distribution center for countries like Colombia, Brazil, and Chile. Navien specializes in high-efficiency water heaters and heating technology in the high-end market and is present in 30 countries, including Korea, China, Russia, the US, and Canada.

NORTHEAST NEAPCO

US-based supplier of drive shafts and axles for trucks, will double the size of its plant in Saltillo, Coahuila, creating 600 jobs. This expansion is part of the 44th project announced in Coahuila this year, involving a $59 million investment and generating 150 direct jobs.

JULIAN ELECTRIC

Japanese supplier of automotive harnesses, is planning its third expansion in the Derramadero area, adding 14,000 square meters and increasing the total number of jobs to 1,200. With a cumulative investment of $35 million in Saltillo, Coahuila, the company will invest $10 million for this new expansion and 150 direct jobs.

SA AUTOMOTIVE

American supplier specializing in plastic injection for electromobility platforms, will establish its third plant in Mexico. With an investment of $16 million, the new facility will be in the Santa Maria Industrial Park in Ramos Arizpe, Coahuila. This expansion is part of Coahuila’s 43 investment projects announced in 2023, contributing to the creation of 500 direct jobs and economic growth in the region.

INVESTMENT NEWS

CENTRAL MEXICO BOSCH

German company is expanding its operations in Queretaro, Mexico with a new plant, investing $19.8 million and creating 900 jobs. The facility will manufacture hydraulic pumps and components for mobile machinery and factory automation, catering to the growing North American markets and enhancing customer service.

LEVER

Queretaro-based developer announced the expansion of its operations with the construction of Europark III. This project, with an investment of $27 million, will create approximately 600 direct jobs and consist of industrial warehouses designed for small and medium-sized businesses.

SOURCES: CLUSTER INDUSTRIAL, NEWS REPORT MX, REVISTA ESPEJO, EL FINANCIERO

NORTHWEST

AMPHENOL HIGH POWER SOLUTIONS

Nearshoring becomes a reality in Sonora as Amphenol High Power Solutions, a Chinese company, establishes a plant with a $10 million investment. The plant will manufacture connectors for electric and hybrid vehicle charging stations.

GRUPO TETAWAKI

American company Tetakawi will invest $15 million and create 600 jobs in Mazatlan, including 200 engineers and 400 operatives. Their arrival presents opportunities for the aerospace, automotive, medical, and electronics sectors in the region.

SOURCES: CLUSTER INDUSTRIAL, MILENIO, INMOBILIARE, A21

SUPPLY CHAIN COLLABORATION IN NORTH AMERICA

Collaborative supply chains facilitate a smoother coordination, reduced bottlenecks, and improved visibility. This leads to optimized inventory management, reduced costs, and increased customer satisfaction.

Collaborative manufacturing networks are also better equipped to respond to market dynamics, regulatory changes, and emerging technologies.

By leveraging the collective intelligence of various stakeholders, companies can swiftly adapt to new trends and opportunities.

This will continue to unlock the potential of North America and its diverse and collaborative talent pool, leading to creative problem-solving and increased adaptability.

KURT SCHMIDT Consulting Director