Weekly Review I July 26, 2023

GENERAL SITUATION IN MEXICO

Weekly Review I July 26, 2023

RELEVANT NEWS

NEARSHORING, AN $80 BILLION DOLLAR OPPORTUNITY FOR MEXICO IF IT OFFERS CONDITIONS TO COMPANIES: FITCH

Guillermo Marcelo Vilchis Gurza, senior director of Fitch Ratings, projected that Mexico can capture 80 billion dollars in investments from companies that are taking their operations out of China to bring them to the Mexican economy, a phenomenon known as nearshoring.

“As of today, we have already captured 40 billion dollars (in foreign direct investment through nearshoring), so in the future we expect -if the required infrastructure conditions are in place- to continue with this growth, this figure could double,” said the rating agency’s representative.

The arrival of companies attracted by nearshoring is a process that will take time to consolidate, that is, it will take 1, 2 or 3 years, said the economist during the Fitch on Mexico forum.

“At the moment that progress is made in the infrastructure issue, opportunities for the creation of new companies in the country that take advantage of nearshoring will open up, because obviously the amounts of investment will increase,” he said.

He added that Mexico will capture half of the nearshoring investment in Latin America and that investors have put among their requirements a better business climate, a greater generation of electric energy, more security, and a better-qualified labor force.

He said that in some states there is already a labor shortage problem due to companies locating in the north and monopolizing the labor force.

RELEVANT NEWS

“As soon as we as Mexicans are able to provide and grant all those facilities to investors, the number (of foreign direct investment) will grow,” said the senior director of Fitch Ratings.

“It is a matter of getting to work and that in all the states (there is investment, not only) in the north, in all the states we can create those infrastructures and those opportunities”, he highlighted.

Companies from China are looking to set up in Mexico to take advantage of its proximity to the United States, the largest market in the world in commercial terms.

“They are very important amounts of foreign direct investment that we have to take advantage of because of all the conditions that have occurred in inter-

national markets,” he said. He stated that the trade war between China and the United States has led to “these opportunities in Mexico, and the more we take advantage of (nearshoring), the greater the number of companies that come and invest”.

The investment of automotive companies, such as Tesla, is an excellent example of the broad generation of jobs, and “it is a very strong investment and so there can be many sectors”.

He maintained that Mexico is the most attractive country in Latin America for investment due to its location: “The only thing that would prevent us from not doing so would be not offering all the conditions required for the establishment of these companies”.

SOURCE: FORBES MEXICO

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

July 19-25, 2023

POLITICAL AGENDA

• Interoceanic Corridor: The president revealed that proposals have been received for five industrial parks in the Interoceanic Corridor. He anticipates that by September, a passenger and cargo train service will commence between Salina Cruz and Coatzacoalcos. Additionally, the terminals at the ports of Coatzacoalcos and Salina Cruz are expected to be operational between November and December, while the industrial parks are projected to begin operating around December to January. The Interoceanic Corridor aims to boost trade and economic development in the region.

• Presidential Agenda: The president mentioned that he will meet with Elizabeth Sherwood-Randall, the advisor to the U.S. President for National Security, this afternoon to discuss topics such as migration, arms trafficking, drug trafficking, and cooperation for development. He emphasized the positive relationship with the U.S. government, stating that Ms. Elizabeth has visited Mexico about four times this year. Today, there will be a bilateral meeting with the United States, followed by a trilateral meeting with the addition of Canada tomorrow. Additionally, the president

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

mentioned his upcoming visits to various states in Mexico, including Nayarit, Sinaloa, La Laguna, Nuevo Leon, and Jalisco, to review water-related projects.

• President´s approval: President Lopez Obrador announced that according to the platform Streams Charts, he has risen three positions and now holds the third place among the most listened-to Spanish-speaking streamers. Additionally, he revealed that various telephone surveys show he has a 72% approval rating among citizens.

• CDMX: President Lopez Obrador shared his experiences as the former Chief of Government in Mexico City, where he encountered speculative financial practices that led to construction in inappropriate areas, including bald land and forests. To address the issue, a decision was made to restrict construction in 12 delegations and facilitate it in four others. However, this decision triggered corruption in the central region of the city, particularly in Miguel Hidalgo and Benito Juarez. The President expressed difficulty in fully rectifying the damage caused by corruption and highlighted similar issues in Veracruz’s historic center, where large constructions are allowed due to corruption involving both local authorities and the judicial system.

INTERNATIONAL

• Water treaty: President Lopez Obrador responded to questions about the water treaty with the United States, stating that Mexico has a 60% delay in fulfilling its water obligations this year due

to some people withholding water in Chihuahua. He emphasized that the treaty is fair and beneficial for northern Mexican farmers, and it must be honored as agreed upon to avoid modifications. The President acknowledged that there is water hoarding in Chihuahua controlled by a small group with political affiliations, but he assured that there are no impending conflicts or claims from the U.S. government.

• Trilateral Meeting: President Lopez Obrador mentioned that tomorrow, they will hold a trilateral meeting with the delegations of the United States, Canada, and Mexico. The meeting will address migration, drug trafficking, and arms smuggling. He expressed gratitude to President Biden for denouncing the actions of the Governor of Texas, who installed buoys on the Rio Grande, violating Mexico’s sovereignty and bilateral treaties. The President assured that the Governor will not have support from Mexican-Americans or humanitarian individuals who understand the root causes of migration. Tomorrow, detailed reports will be provided by Alicia Barcena, the Secretary of Defense, and Admiral Ojeda. Additionally, President Lopez Obrador will discuss the CELAC summit in the upcoming days.

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

the change to his administration’s efforts in tackling corruption and stopping drug trafficking. The President announced that the National Institute of Statistics and Geography (INEGI) reported a decline in inflation in Mexico, which now stands at 4.79%. He highlighted the significance of remittances, which contribute $60 billion annually to the country’s economy, and emphasized that the Mexican peso remains stable without devaluation.

• Economic growth: President Lopez Obrador celebrated the reported 4% economic growth by INEGI, highlighting that it signifies there is no stagnation in the country’s economy.

ENVIRONMENT

• Migration: President Lopez Obrador discussed migration issues and US-Mexico relations, expressing concern over the treatment of migrants in Texas and criticizing anti-migrant policies. He highlighted the importance of dialogue and social programs to address migration at its root, stressing the need to avoid trade wars between neighboring countries. The President also praised the good relationship with President Biden and reported upcoming meetings with US officials to discuss security matters. Additionally, he celebrated Mexico’s recent economic growth.

ECONOMY

• Credit rating: In response to questions about credit rating agencies downgrading PEMEX’s credit rating, President Lopez Obrador attributed

• PEMEX: President Lopez Obrador addressed the losses of 700,000 barrels of oil due to accidents in oil wells during a conference. He emphasized the need for reparations and investigations into worker negligence and lack of professionalism. The President called for holding companies accountable and possibly sanctioning them for their involvement in exploration and drilling processes. Despite challenges in canceling contracts due to equipment shortages from past privatization, PEMEX is working to reduce costs and increase liquid hydrocarbon production. The government aims to achieve fuel self-sufficiency through investments in refining and continued cost-saving efforts. President Lopez Obrador also stressed the importance of fighting corruption within PEMEX and reviving the petrochemical industry.

• Beer plant: President Lopez Obrador confirmed that the beer plant project in Mexicali has been officially closed following a public consultation.

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

He emphasized the inconsistency of establishing a plant in Mexicali due to its water scarcity, especially if the product is intended for export. He mentioned that the company Constellation Brands has already started the construction of a new brewery in Veracruz, where water is abundant, and innovative technology is being utilized. The strategic location of the Veracruz plant near the port will facilitate successful exports.

• Quintana Roo: President Lopez Obrador further emphasized his commitment to preventing further encroachment on the Sian Ka’an Biosphere and protecting the environment. He spoke against corrupt practices in land development and highlighted ongoing efforts to regulate and plan urban development in the region. The President’s visit to Tulum aims to address these issues and ensure responsible and sustainable development in the area. Additionally, he reiterated that there are no forced evictions occurring in the country, seeking to address concerns about land tenure and rights.

INFRASTRUCTURE

• Passenger train: President Lopez Obrador discussed the ambitious plan for passenger train projects, including the Tren Maya, Interoceanic, Toluca-City of Mexico, two in Jalisco, and Felipe Angeles. The Secretary of Infrastructure, Communications, and Transport, Jorge Nuño, provided details on the suburban railway from Buenavista to the Felipe Angeles Airport, with an investment of over 25 billion pesos. The route is expected to take 39 minutes, with 10 trains carrying 719 passengers each. Another official, Manuel Gerardo Gomez Parra, presented the strategy for the new

train branch from Lecheria to the AIFA, currently 43% completed, with plans to finish the civil work by February 2024 and begin testing in April to June. Additionally, the President highlighted the collaborative efforts between the federal government and the governments of Mexico City and the State of Mexico to construct the Trolleybus connecting Chalco and Iztapalapa, benefiting millions in the eastern part of the city. The projects aim to improve mobility, connectivity, and economic development in the region.

HEALTH

• Hepatitis C: Subsecretary Lopez-Gatell, emphasized the importance of combating Hepatitis C on the occasion of World Hepatitis Day. Intravenous drug use and contaminated needles contribute significantly to the spread of the virus, caus-

KEYPOINTS OF PRESIDENT

ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE

ing severe liver conditions. In Mexico, Hepatitis C transmission is also linked to drug use, especially crystal methamphetamine, and unsafe sexual practices. To eliminate the virus, the government is implementing comprehensive measures, including healthcare personnel training, free diagnostic tests, and access to effective treatment. Since 2020, the country has expanded testing and treatment availability, reaching millions of people, with thousands currently undergoing treatment. The goal is to protect public health, reduce infection rates, and improve the well-being of the population.

• Fake drinks: In a press conference, a reporter mentioned Coca-Cola’s lawsuit against fake beverage laboratories, which COFEPRIS has not responded to yet. Hugo Lopez-Gatell, the subsecretary of health, stated that COFEPRIS investigates when there are complaints about violations of regulations and has received anonymous reports about counterfeit bottled beverages. They are currently conducting investigations to identify those involved and the product’s composition. Lopez-Gatell praised COFEPRIS’s efforts to eliminate corrupt private interests and regularly issue statements when potential health risks are found. He clarified that while sugary beverage consumption is a public health concern, the issue of pirated beverages, while taken seriously, does not pose a significant public health risk.

NEWS BY STATE

BAJA CALIFORNIA

Investors and specialists from different parts of the world analyzed the opportunities offered by Baja California to install and expand productive chains through the information presented by the state governor, Marina del Pilar Ávila Olmeda, during a meeting at the Mexico-United States Chamber of Commerce in New York City. She highlighted the importance of nearshoring or relocation of production chains to areas with geographical proximity, “Baja California offers advantages due to our geographical position, our border ports, our seaports, our communication routes, and mobility,” mentioned Marina del Pilar.

SOURCE: INDUSTRIAL NEWS BC

NUEVO LEON

The Secretary of Regional and Agricultural Development of Nuevo Leon, Marco Gonzalez Valdez, proposed to authorities of the U.S. Department of State to create a cross-border logistics corridor between Nuevo Leon and Texas, which would be the most important, fastest and safest in North America, with 24hour mobility.

Nuevo Leon’s Secretary of Regional Development and Agriculture participated in the Plenary Meeting of the United States-Mexico Binational Group on International Bridges and Crossings, which was held in Washington, DC.

SOURCE: EL ECONOMISTA

CHIHUAHUA

Border industry authorities, with the support of the Ministry of Innovation and Economic Development (SIDE), are inviting industry suppliers and business organizations to participate in the third edition of Expo Wiretech 2023, to be held on October 4 and 5 at the Chihuahua City Exhibition Center.

The event is organized by Mexico Assembly Wiretech, in collaboration with the National Chamber of the Transformation Industry (CANACINTRA), and is dedicated to the harness industry. The objective is to promote the growth and development of the industry, providing exhibiting companies with a platform to showcase their products and services to a wide national and international audience. In addition, there will be worldclass exhibitors and attendees from China, Germany, Italy, France, and the United States.

SOURCE: GOVERNMENT OF CHIHUAHUA

TAMAULIPAS

With the purpose of promoting the development of new suppliers, consolidating existing ones, and providing services to Manufacturing, Maquiladora and Export Services (IMMEX) companies in the south and center of Tamaulipas, the Reynosa index association announced the expansion of its services to these regions.

The project was recently presented to state authorities at a work meeting, where it was indicated that the association will initially have a liaison office in Ciudad Victoria and El Mante, an office that will also serve the metropolitan area of Tampico, Madero, and Altamira.

COAHUILA

With the purpose of strengthening ties between the State Government and the companies located in Coahuila, the Secretary of Economy, Claudio Bres Garza, and the Undersecretary, Ana Lidia Martinez, visited the facilities of the BIC plant, located in the Santa Maria Industrial Park, where they met with the SVP Global Manufacturing, Mario Berra and the director of these facilities, Lucio Lopez.

He emphasized that in addition to continuing with the process of recruiting personnel for their packaging work, they will start hiring at all levels for their manufacturing and assembly project of the new fluorescent highlighters, mechanical pencils, and markers, which will be carried out in this city.

SOURCE: MEXICO INDUSTRY

SOURCE: EL DIARIO DE COAHUILA

AGUASCALIENTES

Aguascalientes hosted Stage 4 of the Project to Strengthen the Automotive Cluster in Mexico, which brings together businessmen and government officials from the states of Aguascalientes, Guanajuato, Queretaro and San Luis Potosi. This is due to the important participation of the automotive industry in the economy.

The rector of the Universidad Tecnologica de Aguascalientes (UTA), Armando Lopez Campa, mentioned that the main objective of the project is to strengthen Mexican automotive companies so that they can compete and have better opportunities in the value chain, to promote local employment and the consolidation of the regional economy.

SAN LUIS POTOSI

A 12.1 percent growth in industrial activity placed San Luis Potosi in fourth place among the states with the greatest dynamism in the country, surpassing the national average and the rest of the entities of the Central Bajio-West Region, according to the most recent figures of the Monthly Indicator of Industrial Activity by Federal Entity (IMAIEF) of INEGI as of March, informed the Technical Secretary of the State Population Council, Mayra Edith Velazquez Loera.

SOURCE: HERALDO DE MEXICO

SOURCE: PUNTO DE VISTA MAGAZINE

GUANAJUATO

The State of Guanajuato shows its greatness with the promotion of the Aerospace Industry cluster, by consolidating itself as the epicenter of Industry 4.0 with an enabling ecosystem through Mentefactura.

The Governor of the State, Diego Sinhue Rodriguez Vallejo, gave the conference “From Manufacturing to Mentefacturing, a Vision of the State of Guanajuato”, within the framework of the Mexico Aerospace Fair (FAMEX) 2023.

In this way, the Bajio Aerospace Cluster has positioned itself among the main clusters in the sector and competes with states such as Queretaro, Chihuahua, Monterrey, and Sonora, mainly manufacturing states.

In addition, Guanajuato has a consolidated supply chain in the automotive sector that can easily be diversified to the aerospace sector and currently has 2 success stories such as Grupo Plasma Automation (Leon) and Boreal (Apaseo).

SOURCE: GOVERNMENT OF GUANAJUATO

CDMX regulations for platforms like Airbnb are being developed, with the project expected to be published within the next six months, as announced by the Chief of Government, Marti Batres Guadarrama. The main goals of this regulation are to establish fair competition with other lodging services, such as hotels, and to prevent gentrification in the city. The concern is that unregulated vacation rentals could lead to an uneven playing field for professional lodging businesses and may impact local neighborhoods. In response to heavy rains, an operational team of 555 public servants from various government agencies has been deployed to provide interinstitutional support to the residents of Pueblo de Parres El Guarda in Tlalpan. The efforts in the affected area focus on cleaning canals, using geocostales for water diversion and soil retention, and stabilizing the perimeter to prevent further damage and provide assistance to those affected.

STATE OF MEXICO

In just three months, the Institute of Transparency and Access to Public Information of the State of Mexico (Infoem) has taken significant actions against parties who failed to comply with transparency obligations. They issued 298 warnings, 94 admonitions, and four fines. The main goal is to ensure fair competition between different lodging services, like hotels, and avoid gentrification in the capital city. The Infoem received over 35,700 information requests this year, and any omissions resulted in 4,138 appeals. Municipalities were the most requested subjects, with 22,048 petitions. The Infoem’s measures seek to promote compliance and accountability among public servants and obligated parties.

SOURCE: EL ECONOMISTA

SOURCE: MILENIO

INVESTMENT NEWS

NATIONAL INFINIX

Chinese smartphone manufacturer, Infinix Mobility, aims to make Mexico a key market in the next three years. They are currently negotiating retail agreements with Altan Redes, AT&T, and Telcel. With the rising consumer power in Mexico, Infinix sees great potential to establish a strong presence and become a mature market in the region.

NORTHEAST TOPBAND

Chinese company, inaugurated its plant in Nuevo Leon, with a $35 million investment. The plant will manufacture electronic controllers, creating 300 new jobs. China now ranks as the second-largest investor in Nuevo Leon, just behind the United States,. The manufacturing of electrical appliances accounts for 17.3% of Nuevo Leon’s exports.

VALERO

World’s largest refining company, will invest $120 million in a new terminal at the Altamira Industrial Port, Tamaulipas, Mexico. The terminal’s daily storage capacity will be 1.1 million barrels, and it is set to begin operations in the first quarter of 2024. Valero also plans to add 11 new service stations to its existing two in Tamaulipas.

NORTHWEST MEOR

Mexican real estate company has completed an industrial warehouse in Juarez, Chihuahua. The first phase, offering 13,000 square meters of space, is ready for occupancy, and the next phase will begin soon. The $35 million investment project is a spec building, de-

signed for manufacturing and logistics clients, with a focus on sustainability.

CENTRAL MEXICO BESTUNE

Chinese luxury car brand will begin sales in Mexico in October. They will partner with Shanghai Auto Assembly Group’s Mexican subsidiary for vehicle import and assembly in Hidalgo state. The investment of $358 million will establish a plant and expect to generate around 480 direct jobs.

P&G

P&G is investing over $55 million in a new distribution center in Irapuato, Guanajuato. The center will be creating around 400 direct jobs. It will enhance service and connectivity for customers in the Bajio, North, and Northeast regions of Mexico.

SOURCES: CLUSTER INDUSTRIAL, SAN DIEGO UNION TRIBUNE, MEXICO INDUSTRY, EL FINANCIERO

INVESTMENT NEWS

CFMOTO, the leading Chinese powersports company, marked a significant milestone by announcing the grand opening of its first manufacturing plant in Mexico. The company invested a substantial $46 million dollars in a state-of-the-art facility located in Apodaca, Nuevo Leon, reaffirming its commitment to expansion and growth in the international market.

The newly inaugurated 75,000-square-meter plant will be instrumental in manufacturing up to 100,000 all-terrain vehicles per year. This will not only solidify CFMOTO’s position as a premium global powersports brand but also enhance its capabilities to cater to the growing demand for high-quality all-terrain vehicles, motorcycles, engines, and accessories worldwide. CFMOTO’s strong presence in Asia, Europe, and North America, shows their commitment to delivering exceptional products and experiences to its customers.

With this ambitious venture, CFMOTO is set to create more than 500 job opportunities in the region. The company’s commitment to generating local employment is aligned with its vision to contribute positively to the local community and the Mexican economy.

Since this administration began in October 2021, there has been an impressive influx of investment projects in Nuevo Leon. 148 investment projects have been confirmed, representing $21.559 billion dollars and causing the creation of 92,058 new jobs.

Furthermore, during the announcement, the state Secretary of Economy, Ivan Rivas, shared insightful statistics. “Out of the 148 investment projects confirmed during this period, 27% belong to the automotive sector, showcasing its dynamic nature and importance

in driving economic growth,” he said. Additionally, 28 of these projects originate from Chinese companies, signifying a strengthening of business ties between Mexico and China.

Minjie Lai, the General Manager of CFMOTO, emphasized the significance of the new Mexico’s plant for the company’s global strategy. “Mexico’s plant represents a cornerstone of our vision to become a premium global powersports brand. The production of this factory will help CFMOTO significantly reduce its costs, giving it a greater edge in market competition and providing better service to our global customers. We will continue to work with local partners to explore the global market and promote a higher level of development,” said Lai.

At the end of the inauguration ceremony, CFMOTO executives, Marco Kuljacha, President of Prodensa, as well as local, state, and federal authorities, drove the first unit assembled at the plant, a gasoline-powered all-terrain vehicle, model U 1000 XL.

CF MOTO INAUGURATES ITS FIRST PLANT IN MEXICO