Weekly Review I October 11, 2023 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review I October 11, 2023

RELEVANT NEWS PRIVATE SECTOR CALLS FOR AN EXTENSION OF DISTRIBUTED ELECTRICITY GENERATION LIMIT DUE TO NEARSHORING In view of the arrival of companies due to nearshoring and the increase in the demand for electricity, the private sector is requesting that the limit for distributed generation (small-scale generation installed near the place of consumption) be increased from 0.5 to 5 Megawatts (MW), in order to meet its sustainability goals for cleaner energy. Juan Acra, president of the Mexican Energy Council (Comener), pointed out that Mexico is in a moment of decision in energy matters due to the relocation of companies or nearshoring. “We cannot wait until there is an energy shortage. Dialogue tables are needed to find a solution, independent of the political processes that transcend over each six-year term,” he said after participating in a meeting organized by the Chamber of Commerce of Mexico City. He said that distributed generation is undoubtedly the most viable ally to achieve the energy transition in the industrial sector. According to the most recent report on interconnection requests for power plants with a capacity of less than 0.5 MW from the Energy Regulatory Commission (CRE), in the first half of 2023, maximum levels of 2,954.65 MW were registered in 367,207 contracts. The figure implies an investment of 3,952.22 million dollars.

Acra emphasized that clean energy is needed by small and medium-sized companies, large consumers, investment attraction centers, and large industrial parks involved in nearshoring, areas where the demand for energy is growing more and more. SOURCE: FORBES MEXICO

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE October 04 – 11, 2023

POLITICAL AGENDA • New positions: The President announced that the new Undersecretary of Health, replacing Hugo Lopez Gatell, will be Dr. Ruy Lopez Ridaura, the former Director General of the National Center for Preventive Programs and Disease Control. He also mentioned that he would provide information on who will lead the Consumer Protection Agency (Profeco) later. Additionally, it was noted that next week, the new head of the Ministry of Energy will be announced, following the departure of Rocio Nahle. • Infonavit: Carlos Martinez, the director of Infonavit, reported on the progress of the Institute’s programs. He highlighted several significant changes, including the cancellation of mass lawsuits, portfolio sales, and large-scale property auctions that led to evictions. Additionally, the Institute implemented various social collection policies and discontinued the Green Mortgage Program. During this administration, 2.2 million credits have been granted to help families establish a home, resulting in an economic impact of 1.1 trillion pesos. • Protection to Indigenous People: The President addressed concerns about the lack of a robust legal framework for Indigenous people’s protection, stating that significant progress has been made. He discussed specific actions taken for the Yaqui

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

community’s conservation and well-being. He emphasized that states with the highest indigenous populations, such as Oaxaca, Chiapas, and Guerrero, receive substantial social support. The President acknowledged the historical neglect of indigenous communities during the neoliberal era and highlighted efforts to reduce poverty and inequality, despite pandemic challenges. • Migration: The President mentioned that a meeting of presidents and foreign ministers from neighboring countries dealing with the migration phenomenon will take place in Palenque, Chiapas, on October 22. Invitations have been extended to the presidencies of several countries, including Ecuador, Colombia, El Salvador, Honduras, Belice, Guatemala, Venezuela, Haiti, Cuba, Colombia, Costa Rica, and Panama. • Concessionaire: The President reaffirmed his commitment to decentralizing the federal government and outlined ongoing initiatives. He is working on a proposal for railway concessionaires, aiming to improve and utilize 20,000 kilometers of railway tracks for passenger trains. The plan maintains existing concessions and proposes dialogue with concessionaires to operate passenger trains. If they decline, alternative public or private operators may be considered. This initiative may extend beyond the current administration. BILATERAL AGENDA • US-Mexico Relation: President Lopez Obrador discussed a visit by a U.S. delegation led by Secretary of State Antony Blinken. They worked on various issues, including migration, narcotics, North American development, and investments. Mexico stressed

the need to address root causes rather than building a border wall. They highlighted efforts in combating fentanyl trafficking and emphasized that Mexico doesn’t produce fentanyl’s raw materials. The president will meet Joe Biden on November 14-15 in San Francisco, despite previous concerns over Peru’s political changes and the Pacific Alliance presidency. • Issues in the border: The Mexican President expressed concern about a hostile stance from the Texas government, as they have set up checkpoints hindering the smooth flow of goods between the two countries. These actions are seen as obstructing the free movement in customs. Mexico is preparing a diplomatic note to protest these measures, which are negatively impacting the economic and trade activities of both nations. The exact economic losses incurred from these checkpoints are yet to be determined.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE • New development hubs are planned for the Oaxaca and Nayarit coasts. • The President also mentioned several upcoming project inaugurations, including the Santa Maria Dam, the Palenque-Cancun section of the Tren Maya, the Oaxaca-Puerto Escondido highway, road networks from Vallarta to Nayarit, and the Tren del Istmo passenger train. He highlighted a shift towards supporting Mexican businesses over foreign companies and cited examples of previous administrations favoring specific companies. • Mexicana Airline: The issue with Mexicana airline workers has been resolved through the purchase of the brand. Plans are now underway to establish 20 routes from AIFA (Mexico City’s new airport). Ticket sales commenced in September this year, with a focus on ensuring necessary facilities and infrastructure are in place for operation. HEALTH

INFRASTRUCTURE • Infrastructure projects: The President outlined several infrastructure projects and their completion dates: • In November, the Oaxaca-Puerto Escondido highway will be inaugurated, reducing travel time to 2-2.5 hours. • The Mitla-Tehuantepec project is set to be finished by March 2024. • Road connections from Puerto Vallarta to Tepic and Compostela will be completed before the President’s term ends. • The Tepic airport will be ready by January 2024.

• Health report: President Lopez Obrador announced an agreement with 23 states to improve the public healthcare system through IMSS Bienestar, marked by substantial public investment. The plan aims to enhance facilities, equipment, medical staff, and free medication supplies, with the goal of full implementation by March 2024. This initiative was delayed by pandemic priorities and seeks to eradicate past corruption in medication distribution. The model focuses on accessibility, preventive healthcare, and promoting well-being. The agreement marks a significant step toward healthcare reform in Mexico.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE ENVIRONMENT • Natural Protected Areas: The Secretary of Environment and Natural Resources reported that 21 Natural Protected Areas (ANP) covering 91 million hectares have been declared under this administration. Notable examples include “Cerro de San Miguelito” and “Lago de Texcoco,” both threatened by development. The focus is on safeguarding water reserves for 17 major cities. By the end of 2023, 22 additional ANPs totaling over 3 million hectares will be established, with “Canoas” in Colima being among them, driven by local concerns to prevent mining. • Sonora River: The SEMARNAT report on Sonora River spills revealed ongoing environmental damage and substantial economic losses. Grupo Mexico disassociated from the case. The President proposed a discussion with the Secretary of Environment and the Attorney General for Environmental Protection to address the issue. SECURITY • Quintana Roo: Quintana Roo’s tourism industry has seen a prosperous first half of the year, marked by an 11.7% rise in airport passengers, a 46% increase in foreign tourists in Cancun, and a 43.8% growth in cruise visits. The largest visitor segments are Americans (38.1%) and domestic tourists (35.1%). On the security front, human trafficking is a concern with a national high, but other high-impact crimes have decreased, and coordinated security efforts involve 4,997 state and municipal officers and 4,997 personnel from the Army, Navy, and National Guard.

INTERNATIONAL • Israel: The President mentioned that the Israeli Embassy in Mexico expressed dissatisfaction with Mexico’s stance on the war. He emphasized that Mexico’s foreign policy is based on principles defined in the Constitution, with a commitment to preventing war, violence, and loss of life for people of all nationalities, be they Israeli or Palestinian. The government is working to ensure the safety and return of around a thousand Mexican citizens and is actively following up on the case of two missing individuals.

NEWS BY STATE

BAJA CALIFORNIA Baja California registers six quarters of uninterrupted economic growth, in addition to a total of 3 billion 337 million dollars of foreign direct investment in the current state administration, which translates into better income and welfare for the families that need it most, according to the National Institute of Geography and Statistics (INEGI). This was stated by the Government of Baja California during the North Capital Forum 2023, which was attended by the Secretaries of Economy and Finance of the entity, Kurt Ignacio Honold Morales and Marco Antonio Moreno Mexia, on behalf of the head of the State’s Executive Power. Among the main investments are aerospace, automotive, life sciences, and semiconductors, and reiterated that with more than 88 thousand pesos, Baja California is the first place in quarterly income within households, in addition to maintaining second place in poverty reduction, as well as third place nationally in terms of results for the eradication of the gender income gap, in the sense established by the Mexican Institute of Competitiveness.

SONORA In order to strengthen communication ties and exchange experiences, projects and programs on economic, environmental and migration issues that improve the quality of life of the inhabitants of the United States-Mexico border, the Congress of Sonora participated in the 34th annual assembly of the Border Legislative Conference. In her message, Congresswoman Claudia Zulema Bours Corral (Green Party), president of the Sonora Congress, explained that the conference is a mechanism for dialogue and cooperation on binational issues among legislators from ten participating states. SOURCE: RADIO SONORA

SOURCE: INDUSTRIAL NEWS BC

NEWS BY STATE

CHIHUAHUA Participating directors of Municipal Economic Development in the State Meeting of Economic Development of the State of Chihuahua; the various representatives of the municipalities traveled to the capital to seek access to resources from this bag; this according to what was stated by Miguel Maldonado Miranda, director of Economic Development in Parral. In the context of economic development at the municipal level in the State of Chihuahua, the State Economic Development Meeting was held. In this event, the directors of Economic Development of various municipalities in the region participated actively. The main objective was to look for opportunities and access to resources from a fund destined to the economic development of the state. SOURCE: EL SOL DE PARRAL

COAHUILA According to information from the National Auto Parts Industry (INA), Coahuila remains the main producer of automotive parts and components in the country, since in the January-July period its production reached a value of 10 thousand 745 million dollars (mdd). In a videoconference, INA’s CEO, Armando Cortes Galicia, pointed out that the auto parts industry continues to show excellent dynamism, since in the aforementioned period it generated 70 thousand 394 million dollars, that is, 18.41% more than in the same period of 2022. This year is expected to close with production valued at 117.53 billion dollars. SOURCE: VANGUARDIA MX

NEWS BY STATE

TAMAULIPAS The hydrocarbon sector companies, both national and foreign, have the goal of strengthening the economic and social development of Tamaulipas, where there are 24 projects of the sector and whose investment during the last decade is 1,868 million dollars, said the president of the Amexhi Andres Brügmann.

NUEVO LEON Tesla Manufacturing Mexico and the government of Nuevo Leon, agreed that the latter will provide different supports to the company, without being obliged to do so, to support the development of the investment project in the Santa Catarina silver. Through an amendment to the non-binding Memorandum of Understanding between the two parties, effective September 28, the state government, headed by Samuel Garcia, will support Tesla Manufacturing Mexico’s recruitment, training and workforce development efforts. SOURCE: ARISTEGUI NEWS

In a meeting held with Governor Americo Villarreal Anaya, the head of the Mexican Association of Hydrocarbon Companies mentioned that after the talk, there are conditions to expand the benefits for the whole community in view of the potential in the extraction of oil and gas. SOURCE: MILENIO

NEWS BY STATE

GUANAJUATO The governor of the state of Guanajuato, Diego Sinhue Rodriguez Vallejo, said that the entity he governs is the best in terms of supply and sufficiency of basic services to receive companies that come to settle due to the nearshoring phenomenon that has already begun to impact the northern states of Mexico.

AGUASCALIENTES According to the report Quarterly Exports by Federal Entity of the National Institute of Statistics and Geography (INEGI) for the second quarter of 2023, Aguascalientes increased the value of its exports by 16.3 percentage points compared to the second quarter of 2022, placing it in third place nationally in its annual comparison. After learning the latest export report published by INEGI, which establishes a notable increase in the second quarter of this year, Governor Tere Jimenez said that these figures are a clear reflection of the productive capacity and the work done by the men and women of Aguascalientes. SOURCE: LIDER EMPRESARIAL

He affirmed that we are the state with the best infrastructure in electric energy, because we are not a city state, since in Guanajuato, there are more than 15 municipalities with more than 100 thousand inhabitants and this allowed the infrastructure to be dispersed throughout the state, especially in the Highway 45 corridor and this allows for there to be no transmission problems. SOURCE: EL SOL DE LEON

NEWS BY STATE

JALISCO The Government of Jalisco, through the Secretariat of Economic Development (SEDECO), has launched an agenda to promote the sale of local products in the international market and despite the fact that Jalisco is not a border state, it is positioned as one of the entities with the greatest increase in its operations and with the greatest contribution to total exports in the country. At a national level, the export figure for the first six months of the year is 262,104 million dollars and thanks to the boost of the entity’s export activity, Jalisco’s contribution for the same period is 5.4% of the total reported in Mexico and is positioned as the second non-border entity in the country for shipments of goods abroad. SOURCE: GOVERNMENT OF JALISCO

SAN LUIS POTOSI The state governments of Michoacan (Morena) and San Luis Potosi (Verde Ecologista) agreed on strategies to promote logistic and economic development to attract greater domestic and foreign investment, which will translate into more and better jobs for the population. They also agreed on a strategic relationship of mutual interest for the development of both entities, which will strengthen the metal-mechanic, automotive and steel industries, linked through the Canadian Pacific Kansas City railroad route that moves goods to the United States and Canada. SOURCE: EL UNIVERSAL

NEWS BY STATE

CDMX The Mexico City Congress has approved the temporary leave request of Gustavo A. Madero borough mayor, Francisco Chiguil, who will step down from his position to serve as the campaign coordinator for Clara Brugada, a Morena party candidate for the Mayorship of Mexico City. Chiguil’s leave will be in effect from October 7 to October 20. During his absence, Enrique Rodrigo Rojas Serafin, the Director General of Legal and Government Affairs for the borough, will serve as acting mayor. SOURCE: MILENIO

STATE OF MEXICO Studies by Standard & Poor’s project that the State of Mexico will face severe water stress in the coming decades. Business leaders emphasize the need for proactive measures to address water scarcity, focusing on water efficiency, conservation, and exploring new water-saving methods. A forum titled “Present and Future of Water” will be held to discuss and find solutions to these concerns. The goal is to ensure the sustainability of businesses and employment opportunities in the region. SOURCE: MILENIO

INVESTMENT NEWS

TEREX GENIE WILL CREATE 1,500 JOBS IN NUEVO LEON Terex Genie, a U.S. company dedicated to the manufacture of construction platforms and elevators, inaugurated its plant in the municipality of Cienega de Flores, Nuevo Leon, which will employ 1,500 people. Three types of elevators and construction platforms will be produced from these facilities. Welcome to Nuevo Leon Terex Genie! We are very honored to be your strategic partners in this new operation.

INVESTMENT NEWS

NORTHWEST BECTON DICKINSON The Sonora government has invested $2.3 million in Becton Dickinson’s Nogales facility to create around 1,000 direct and indirect jobs. This investment is part of an ongoing initiative to improve working conditions and enhance company operations. NORTHEAST KIA The Korean automotive firm Kia has invested $158 million in its new model K3, replacing its star model Rio. The K3 will be manufactured at the Pesqueria plant in Nuevo Leon, aiming to continue the success of Rio, which was the “best-selling car” last year for Kia in Mexico

SKF Swedish company SKF inaugurated its second plant in Nuevo Leon, Mexico, with an investment of $70 million. The new facility, aimed at expanding SKF’s capabilities and meeting the increasing demand in the automotive sector, will generate around 1,200 jobs. The plant will focus on the production of bearings, seals, and housing units. YURA The Korean automotive firm Yura has invested $3 million in its new facility in Durango, aiming to adapt into the new electromobility industry trends in Mexico. The facility is expected to create over 600 jobs.

INVESTMENT NEWS CENTRAL MEXICO S-RIKO Japanese firm S- Riko invested $17.8 million to expand its plant in Queretaro, generating 200 jobs. This investment will enhance its position in the automotive industry, reinforcing its operations in the industrial park O’Donnell, situated in El Marques municipality. ADM The nutrition company Archer Daniels Midland (ADM) invested $33 million in a third production line at its pet food plant in Guadalajara, aiming to triple its capacity. This expansion, expected to increase its workforce by 65%, and not only serves the Mexican market but extends its coverage to Central America and Colombia ELRAD ELECTRONICS ELRAD Electronics Mexico, originating from Slovenia, inaugurated a newplant in Apaseo el Grande, Guanajuato, with a total investment of $12.5 million. This plant, employing 120 individuals, manufactures PCB assemblies utilized in various industries such as automotive, electronics, and appliances.

CDMX VOLKSWAGEN Volkswagen is set to make a new investment in Puebla, Mexico, in 2024, focusing on electromobility. Although the exact details of the investment haven’t been revealed, it’s confirmed from the Secretariat of Economy. This investment aligns with the ongoing electromobility projects in the state, reinforcing Puebla’s position in the electromobility sector. SOURCES: MILENIO, CLUSTER INDUSTRIAL, EL SOL DE TORREON, PROYECTO PUENTE, RETO DIARIO, EL FINANCIERO.