Weekly Review I November 8, 2023 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review I November 8, 2023

RELEVANT NEWS MEXICO SITS FIRMLY ON THE THRONE OF AUTO PARTS SALES TO THE U.S.

Over the years, Mexico has established itself as the king in the supply of auto parts to U.S. automakers and has maintained the throne in a timely manner in this highly active market in the production and consumption of automobiles. From 2007 to the present, there has been no country that has surpassed Mexico in terms of growth in supplying the U.S. automotive sector, according to records of the National Auto Parts Industry (INA). In fact, the supply of Mexican parts has completely left behind the country that was an interesting rival for Mexico in 2007: Canada. In 2007, Canadian auto parts supply to the U.S. was 20.44%, behind Mexico’s 29.82%, but today Mexico supplies up to 42.93% of the parts needed by U.S. assemblers, while Canada, still in second place, has a supply of only 10.74%. “One of the constants that we have seen over the years is that the percentage of (Mexican) auto parts in the U.S. market is constantly increasing, and this is undoubtedly good news for Mexico, given the dynamism of the U.S. economy in the automotive sector,” said Armando Cortes, general director of the auto parts industry.

Finally, so far in 2023, the growth compared to 2007 has been more than 13 percentage points, up to 42.93%.

In a conference with the media, he detailed that from 2007 to 2013, Mexico registered an advance of 4 percentage points in the supply of auto parts to the U.S., but that by 2018, the advance was more than 8 percentage points.

SOURCE: FORBES MEXICO

Between January and August alone, Mexico exported approximately $61,087 million in auto parts to the U.S.

RELEVANT NEWS

PRIVATE INVESTMENT BEHIND RECORD EMPLOYMENT: INDUSTRY

The Confederation of Industrial Chambers (Concamin) assured that private investment is behind the record number of formal employment in Mexico, which at the end of October totaled 22 million 302 thousand 690 formal workers.

“This is due to the efforts that the private sector makes every day to create more and better jobs for the benefit of Mexican families, who in this way have the full right to social security services,” the Concamin added.

“The investments made by industrialists and businessmen in the country are a fundamental element for the sustained growth of formal employment in recent years, which shows that private initiative is a great ally of Mexicans, as it is the main generator of employment in the country,” said the organization, headed by Jose Abugaber Andione.

“And despite the fact that the annual rate of creation of formal jobs has slowed in recent months and that this may be related to the fact that a year ago we were still recovering the jobs lost during the pandemic, the truth is that there is a record number of formal jobs,” it said.

The Mexican Social Security Institute (IMSS) reported yesterday that a record 22 million 302 thousand 690 formal workers were employed in October. Last month alone, 173,257 jobs were created, bringing the total number of jobs registered with the IMSS in the last 12 months to 685,364, which is good news for the country.

The Concamin reaffirmed its commitment to continue working for the development of the country by continuing to promote formal employment so that more families benefit and more Mexicans enter the labor market. SOURCE: FORBES MEXICO

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE November 1 – 7, 2023

SUPPORT FOR HURRICANE OTIS • Guerrero Reconstruction Plan after Hurricane Otis President Andres Manuel Lopez Obrador announced a “20 Points Reconstruction Plan” for the municipalities of Acapulco and Coyuca. The key issues were: • Support for families affected by the hurricane, intensifying the search for missing persons. • Accelerated disbursement of welfare programs for elders, the disabled, students, and other support initiatives. • Electricity bill waiver, distribution of basic food baskets, financial aid for house repairs, among other extensive assistance measures. • The Secretary of Finance, Rogelio Ramirez de la O, detailed the plan’s investment of 61.313 billion pesos across the 20 outlined points. Besides, Governor Evelyn Salgado acknowledged the support and solidarity received and detailed the hurricane’s unprecedented impact, stating the deaths of 46 people and 58 missing, with ongoing search efforts. Over 1500 personnel are engaged in street cleanup, water distribution, food aid, and medical care. Support has been extended to small and medium-sized business owners, as well as agricultural support through financial institutions. The President

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

discussed hotel damages, public infrastructure, ongoing reconstruction, and emphasized prioritizing assistance to those in greater need. ISSUES WITH THE PRIVATE SECTOR • Conflict with the Vulcan company: The President addressed the ongoing conflict with the Vulcan company, emphasizing that the situation affects the national territory and environmental efforts to combat climate change. The President proposed a commercial assessment to address the conflict, offering payment for the land with a commitment to preserve 2,000 hectares as a natural reserve. • Meeting with Business Coordinating Council to provide aid to Acapulco President Andres Manuel Lopez Obrador announced a forthcoming meeting with the Business Coordinating Council on Wednesday 8th of November. The purpose is to activate at least 35 hotels in Acapulco by March or April 2024. They have invited prominent business figures to collaborate in preparing the Acapulco Tourism Market for a more successful outcome. GOVERNMENT ACTIONS AND POLICIES • Judicial Power trusts President Andres Manuel Lopez Obrador acknowledged the response from the Chief Justice of the Supreme Court as an excellent decision to allocate funds from the Judicial Power trusts to aid those affected by Hurricane Otis. If the promised funds (15 billion pesos) are not delivered, the federal government has the resources to assist, confirmed

the President. He proposed collaboration among the three branches of government, specifically the Ministry of the Interior (SEGOB) and the Ministry of Finance (SHCP). Furthermore, the Joint Political Coordination Board of the Chamber of Deputies accepted an invitation to form a committee to oversee the trust fund allocation. • AIFA (Aeropuerto Internacional Felipe Angeles Felipe Angeles International Airport) The President praised a joint effort between Viva Aerobus and Mexicana de Aviacion for increasing the number of flights departing from the Felipe Angeles International Airport due to the congestion at Mexico City’s airport. • Precautionary Measure for Murillo Karam President Lopez Obrador expressed concern about a judge’s decision to modify the precautionary measure of former Attorney General Jesus Murillo Karam, granting him house arrest, despite courts being closed. The President believed there might be political motivation behind the judge’s decision and asked for a formal recording of the proceedings. He noted that Murillo Karam couldn’t leave prison due to another criminal case. • Morena coordinators in Mexico City (CDMX)

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE The President addressed the challenges regarding Morena coordinators in Mexico City, emphasizing the importance of people’s participation in the selection process without political influence or favoritism. He emphasized the party’s steps to enable candidate selection through democratic means and the need for women’s participation in all political parties. INTERNATIONAL AGENDA • Upcoming trip to the U.S. Regarding his upcoming visit to the APEC summit in the United States, President Lopez Obrador shared the issues he plans to discuss with President Joe Biden, including support for Latin America and the Caribbean’s well-being and the blockade in Cuba. He confirmed the dates of his trip, which will take place on November 15, 16, and 17, and the possibility of bilateral meetings.

ECONOMIC ISSUES • Revenue from large taxpayers The President discussed outstanding debts by various large companies and individuals, citing some instances of settlements and continued negotiations to address pending tax issues. He highlighted challenges faced in collecting unpaid taxes and recalled historical cases where taxes were not fully paid by certain entities. • Federal Expenditure Budget (PEF) 2024 President Lopez Obrador emphasized the positive results of the budget voting, which will conclude ongoing projects and extend social support. It includes increased pensions for seniors, expanding scholarships, disability pensions, and increased spending on health, education, and security. • Job creation The President presented data showing a considerable monthly increase in job creation, positioning October as the fourth-highest month historically

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE for job creation. He emphasized the current administration continues to focus on generating jobs and creating a favorable environment for investment. HEALTH CONCERNS • Fentanyl Regarding the combat against fentanyl and its association with criminal activities, the President emphasized the strategy’s positive outcomes in reducing criminal incidents, particularly homicides. There is a government focus on preventing drug consumption, and he highlighted Mexico’s cultural traditions, which generally reject drug use. INFRASTRUCTURE • Road from Oaxaca to Puerto Escondido The President mentioned the collapse of a section of the Oaxaca to Puerto Escondido highway, which was scheduled to open on November 29. Due to landslides caused by heavy rains, its opening is delayed until January of next year.

NEWS BY STATE

BAJA CALIFORNIA So far this year Baja California has received an economic flow of close to 2.2 billion dollars in foreign investment, according to the Head of the State Secretariat of Economy and Innovation (SEI). Kurt Honold Morales stated that this would be 10% more than the amount of capital injected last year, assuring that investment could increase in the last two months of the year. SOURCE: EL IMPARCIAL

SONORA Over the last two years, construction consolidated its position as the leading sector in economic growth among the total productive activities in Sonora, mainly due to the execution of public and private works. The sector is relevant within the economic activity in the state and proof of this is that the Gross Domestic Product (GDP) of construction represents 10.86% of the industrial GDP and 4.89% of the total production in the state. SOURCE: EL IMPARCIAL

NEWS BY STATE

NUEVO LEON Nuevo Leon’s manufacturing sector is making steady progress, and is expected to reach a 4.5% rebound by the end of the year. The figure is below the 7.76% reported in 2022 for this sector, however, it is above the growth of the state’s economy, which was 3.18% at the end of 2022. SOURCE: EL HORIZONTE

COAHUILA The value of the production of automotive parts and components in Coahuila reached 12,361 million dollars in the accumulated January-August of this year, maintaining the national leadership with 15.3%, informed the National Auto Parts Industry (INA). According to data presented by INA’s CEO, Armando Cortes, national production reached a value of 80 billion 438 million dollars in the accumulated January-August period, so that by the end of the year it is estimated to reach 117 billion 530 million dollars.

TAMAULIPAS Authorities of Tamaulipas in the field of investment promotion and rural development promote export opportunities for products in China, by participating in the “International Import Expo”, organized by the Asian nation in Shanghai. The federal government opened in its pavilion the opportunity for businessmen from this northeastern Mexican state to negotiate with importers from the host country, who showed interest in mezcal, tequila, chile piquin products, as well as beef and pork. SOURCE: MILENIO

SOURCE: VANGUARDIA

NEWS BY STATE

GUANAJUATO Pirelli inaugurates today in Silao the first research and development center of the Italian group in Mexico, a little more than a year after the announcement of its creation. The result of an investment of 15 million dollars over a 2-year period, provided for in the 2021-2022|2025 Business Plan, the new hub of advanced technology and digitalization for tire production has a surface area of more than 6,000 m2, in addition to the previous 200,000 m2 of the Mexican plant. SOURCE: GOVERNMENT OF GUANAJUATO

AGUASCALIENTES During the signing of the articles of incorporation of the Aguascalientes Aerocluster, in which 25 companies participate, Manuel Alejandro Gonzalez Martinez, Secretary of Economic Development, Science and Technology, explained that the state is in the process of developing an aerospace ecosystem. This includes the training of talent in collaboration with educational institutions, such as the Polytechnic University of Aguascalientes (UPA) and the Technological Institute of Aguascalientes (ITA). Regarding the number of companies that could expand into the aerospace industry, Gonzalez Martinez reported that they are working with 25 companies in the process of obtaining IATF certification, the minimum requirement demanded by the aerospace industry. This achievement is expected to serve as a catalyst to attract even more companies to this expanding industry. SOURCE: HERALDO

NEWS BY STATE

QUERETARO The Governor of Queretaro, Mauricio Kuri Gonzalez, emphasized the importance of Nearshoring as a window of opportunity during his participation in the forum ‘Free Trade in North America 2.0 Encounter between Integration and Relocation Nearshoring’, organized by the Bank of America. The governor highlighted the strength of the state’s production chains and its readiness to receive international investment. The Governor highlighted Queretaro’s robust entrepreneurial ecosystem, which not only focuses on advanced manufacturing but also on innovation and diversification of industries. He emphasized the projected benefits, such as increased exports and foreign direct investment, as well as the creation of new jobs that will contribute to economic growth. SOURCE: CLUSTER INDUSTRIAL

SAN LUIS POTOSI The industrial real estate market in San Luis Potosi (SLP) recorded at the end of the third quarter of 2023, the consolidation of 10 transactions, equivalent to a gross absorption of 1.11 million square feet, mainly concentrated in the WTC and Las Colinas submarkets. This according to figures generated by Market Analysis, a market intelligence company, who highlighted that the strength of the automotive cluster was noted by demanding 88% of the industrial buildings in this market; while the electrical/electronic industry and furniture manufacturing absorbed the rest of the space (6.9% and 4.9%, respectively). SOURCE: REAL ESTATE MARKET

NEWS BY STATE

CDMX CDMX economy to grow 4% this year, Sedeco estimates Fadlala Akabani, the Secretary of Economic Development, foresees a 4% economic growth for Mexico City in 2023. He addressed local deputies, emphasizing the city’s economic progress, and expressing confidence in the expansion being a reality. He highlighted the city’s economic vitality in supporting businesses, job creation, Foreign Direct Investment, and various initiatives, dismissing claims of an economic depression. Akabani outlined the department’s activities, including economic support for businesses, renewable energy, and market interventions. He proposed initiatives for waste management and suggested tax waivers for micro-enterprises. He also urged the city’s Congress to monitor the progress of market restoration across boroughs. SOURCE: EL UNIVERSAL

STATE OF MEXICO Canaco-Servytur of Valle de Toluca calls for regulation of new forms of commerce Jorge Luis Pedraza Navarrete, President of the National Chamber of Commerce, Services, and Tourism (Canaco-Servytur) in Toluca Valley, emphasized the necessity of regulating new commercial methods. He urged federal authorities to intervene and prevent informal and unfair business competition. He particularly highlighted the ambiguity surrounding merchandise sold through online platforms, citing concerns about their authenticity, origin, and compliance with laws and regulations. SOURCE: MILENIO

INVESTMENT NEWS

NORTH

CENTRAL MEXICO

GRUPO BAFAR Mexican Industrial developer Grupo Bafar just announced a new deal for the construction of an industrial park near Ciudad Juárez, Chihuahua, the investment is a quarter of a billion dollars and will help for the infrastructure related to Nearshoring and new business trends.

KOCH Worldwide renowned company Koch just announced a significant investment of $150 million dollars for a new operations center in Jalisco, it will generate around 550 highly specialized jobs in the state. GERRESHEIMER German manufacturing company dedicated to the glass industry Gerresheimer has announced an expansion in Querétaro, the expansion will amount around $120 million dollars. SOURCES: MEXICO INDUSREY, LIDER EMPRESARIAL, EL DIARIO DE CHIHUAHUA