Weekly Review I January 24, 2024 by PRODENSA

GENERAL SITUATION IN MEXICO

Weekly Review I January 24, 2024

RELEVANT NEWS 37 BILLION DOLLAR BUSINESS OPPORTUNITY FORESEEN IN MEXICO’S AUTOMOTIVE INDUSTRY

Since last year, a new business opportunity of more than $37 billion has emerged for the entire value chain of the automotive sector, according to the national president of the Mexican Industry Suppliers Chain, Rene Mendoza. In a joint conference with authorities from Queretaro and representatives of the national auto parts industry, he explained that this business opportunity was created after the entry into force of Mexico’s new trade agreement with the United States and Canada. He explained that with the trade agreement, the import of automotive inputs from Mexico, the United States, and Canada was reduced from 40% to 25%, and this difference of 15 percentage points is valued at approximately $37 billion. The opportunity was consolidated after Covid when there was a disruption of chains and companies realized how complicated it was to have suppliers in other continents, he added. Speaking about the industry players that want to take advantage of the new business opportunity, Mendoza said that it is not only those who assemble cars or make auto parts but also those who carry out production processes and provide services.

He explained that one of the ways is through digital tools or presence in business meetings. He illustrated that the next International Automotive Supply Summit, which will hold its second edition in Queretaro in May, is one of the options for entrepreneurs since this year it is expected that the event will close deals for more than 8 billion dollars. SOURCE: FORBES MEXICO

To take advantage of this great business opportunity, Mendoza added, local companies must have the necessary resources to link up.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE January 17-23, 2024

LEGAL ISSUES • Presidential Reform to Eliminate Independent Regulatory Agencies: President Lopez Obrador plans to propose a reform package to Congress aimed at eliminating Independent Regulatory Agencies. He accused them of being a façade, using anti-monopoly rhetoric as a pretext, while actually promoting private over public interests. The president highlighted the reform’s goal to abolish these organizations, emphasizing their redundancy and the potential economic savings from their removal. He also questioned the lack of action against monopolies in other sectors like cement, communications, and banking, reaffirming his commitment to prioritizing public interest and continuing democratic transformation in Mexico. • Shorter Workweek Reform: President Lopez Obrador stated that the issue of reducing the workday should be discussed in Congress, with the involvement of business owners. He expressed his support for workers, mentioning policies related to wages, pensions, and profit sharing, and hinted at a potential increase in profit sharing for miners.

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE BUSINESS • Ties Between the Private and Public Sector in Past Administrations: President Lopez Obrador criticized the close ties between the private sector and the federal executive in past administrations. He recalled instances where previous Presidents, such as Enrique Peña Nieto, Felipe Calderon, and Ernesto Zedillo, were seemingly influenced or involved with private companies like OHL and Iberdrola, or in Zedillo’s case, with railway companies. He stressed the importance of separating economic power from political power, comparing it to Benito Juarez’s separation of church and state. He accused previous governments of serving private interests through influence and corrupt contract dealings. In contrast, he described his administration’s commitment to a mixed economy with clear rules and integrity, free from irregularities. He also mentioned the financial discrepancies in the Toluca - CDMX train project, which exceeded initial cost estimates significantly. • Constellation Brands: President Lopez Obrador mentioned that there have been requests for a decree to ensure the continued cancellation of the Constellation Brands plant in Mexicali. He assured that the cancellation will remain in effect even after his term. The National Water Commission (CONAGUA) and the Secretariat of Government (SEGOB) are working on the corresponding legal actions related to this matter. TRANSPORTATION • Passenger Trains Proposals: Jorge Nuño Lara, the head of Secretary of Communications and Transportation, reported that proposals from Grupo Mexico (Ferromex), Ferrosur, and Canadian Pacific Kan-

sas City are being analyzed. These companies have proposed rail routes including Mexico - Queretaro, Queretaro – Leon, Leon – Aguascalientes – Guadalajara, and Queretaro – San Luis Potosi. Details are being clarified and a detailed announcement will be made after final discussions with these companies. President Lopez Obrador mentioned plans for a future passenger train network covering 18,000 km, aiming to connect the entire country by rail. INTERNATIONAL AFFAIRS • Israel-Palestine Conflict: Regarding the conflict between Israel and Palestine, the president stated that Mexico advocates for peace and the cessation of what it considers an inhumane and cruel war. He explained that this is the purpose of the UN Security Council, which aims to approve a ceasefire while diplomacy is in action. • Mexico-U.S. Relation: Lopez Obrador praised the work of the Secretariat of Foreign Affairs, noting that Mexico has become the top trade partner of the United States, surpassing China and Canada. He acknowledged ongoing challenges such as migration, drug trafficking, and arms trafficking that

KEYPOINTS OF PRESIDENT ANDRES MANUEL LOPEZ OBRADOR’S MORNING PRESS CONFERENCE need to be addressed. He also mentioned the positive relationship with the current U.S. President and a potential meeting with Texas congresspersons. Foreign Secretary Alicia Barcena emphasized the success of the meeting held at the White House on January 18th. Regarding migration, she highlighted that the migratory phenomenon is not exclusively bilateral, requiring a regional approach, as agreed upon in the Campeche Conference. Among the agreements resulting from the meeting with the United States, she highlighted the creation of a joint panel, a trilateral board (Mexico, United States, Guatemala), as well as close collaboration to combat trafficking networks. Regarding the potential victory of Donald Trump in the United States elections, the president indicated that it is necessary to wait, but he affirmed that he maintains a good relationship with both Joe Biden and Donald Trump. HEALTH • Supply of medicines: Zoe Robledo, Director of IMSS, revealed that from 2012 to 2018, pharmaceutical distribution was concentrated among ten companies, with three holding half the market. In response, the 2023-2024 strategy shifted to consolidated purchases to diversify the market, involving specialized companies like BIRMEX to streamline distribution. Significant investments were made in updating health systems and combating medication procurement corruption. The Secretariat of Health reported improvements in state health services, including hemodynamics rooms. The president is committed to establishing a world-class health system in Mexico, ensuring the right to free health care and medication.

NATURAL RESOURCES • Water Management in Queretaro: From Queretaro, President Lopez Obrador pledged to sign a water collaboration agreement. Governor Mauricio Kuri highlighted the development of the El Batan system aimed at ensuring water supply, capable of providing 1,500 liters per second, including two water treatment plants, with an environmental protection approach. CONAGUA’s director, German Martinez, committed to coordinating technical assistance for wastewater treatment and the licensing of the plants. The Queretaro government appreciated the investment and the federal government’s commitment to water projects, marking the collaboration agreement’s formalization. • Water Supply in Veracruz: President Lopez Obrador stated that he will review a problem regarding water supply in the Coatepec area of Veracruz, which has resulted in a water shortage for the region and has been linked with the extraction of water by Nestle and Coca-Cola. However, he did not provide further details.

NATURAL DISASTERS: • Aid for Hurricane Otis: Garcia Vilchis refuted claims that assistance for rebuilding homes in Acapulco post-Hurricane Otis had not been distributed. She presented a video countering Joaquin Lopez Doriga’s statement that the president of the Business Coordinating Council’s (CCE) claims about the support data for the victims were false. Additionally, she stressed that there is over 96% progress in all types of support for those affected by the hurricane.

NEWS BY STATE

BAJA CALIFORNIA The Governor of Baja California, Marina del Pilar Avila Olmeda, promotes agreements at the World Economic Forum, to materialize and expand investments in the state and generate economic spillover and more employment opportunities for all Baja Californians. Furthermore, in these meetings, entrepreneurs, businessmen and investors have expressed their interest in investing and reinvesting in Baja California, because it is globally competitive and has the human talent, but also because it shares a border with one of the most important markets in the world: California. SOURCE: EL UNIVERSAL

SONORA During his second day of participation in the World Economic Forum Davos 2024 in Switzerland, Governor Alfonso Durazo Montaño held meetings with executives from the most important companies in the world, including Justin Bird, CEO of Sempra Infrastructure, which represents the largest investment funds for the state, in order to establish alliances with investors from the Middle East and join efforts to benefit the development of the state. The head of the state government said that international events like these place Sonora in the eyes of all the elite investors who meet to seek innovative projects that promote industrial development through clean energy, such as the Sonora Sustainable Energy Plan. SOURCE: ENTORNO INFORMATIVO

NEWS BY STATE

TAMAULIPAS With investments totaling 385 million dollars, new companies will be installed and others will be expanded in the first quarter of 2024, informed Ninfa Cantu Deandar, head of the Ministry of Economy of Tamaulipas. There are 15 domestic and foreign companies that will start these investment projects, which represent an estimated generation of 8,615 new productive jobs. SOURCE: EL UNIVERSAL

NUEVO LEON Since 2000, Nuevo Leon has led the implementation of clusters, a strategy that merges government, business and academia to boost economic development and business competitiveness. With eight strategic sectors initially identified, 13 clusters have been created, highlighting manufacturing, automotive, information technology and health, among others.

COAHUILA The president of Canaco commented that they sought a rapprochement and have proposals on how to contribute to the administration of Frontera and with this also seek the promotion of traders in the entity.

Nuevo Leon leads secondary activities nationwide, with 10.8%, and has consolidated its position in the national economy.

They presented several proposals, among them is how to contribute to the administration of Frontera and for the economic development, but they are also looking for training for employees, development in industry in terms of export and import, linking with maquiladoras to be in contact with foreign trade.

SOURCE: EL ECONOMISTA

SOURCE: PERIODICO LA VOZ

NEWS BY STATE

QUERETARO The President of CANACINTRA, Queretaro Delegation, Esau Magallanes Alonso, revealed the results that consolidated the entity as the fifth power in the generation of employment and industrial growth during the year 2023. Since the middle of last year, the creation of more than 30 thousand jobs was forecast for the end of 2023. Magallanes Alonso informed that the contribution of the industrial sector reached 12 thousand formal jobs, exceeding expectations. In total, around 32 thousand new jobs were created, including close to 11 thousand temporary jobs. These figures placed Queretaro in fifth place nationally in the generation of formal jobs. SOURCE: CLUSTER INDUSTRIAL

SAN LUIS POTOSI The availability of labor in San Luis Potosi is sufficient to meet the demand that the industry will have this year, in the profiles and training required to carry out its processes. Nestor Garza, head of the Ministry of Labor and Social Welfare (STPS), said that with the government program, created last year, 30 thousand people directly linked to companies in recruitment processes could be impacted. SOURCE: PLANO INFORMATIVO

AGUASCALIENTES Aguascalientes ranked as the fifth state in the country with the best performance in its industrial activity, especially in the manufacturing and construction sectors, according to data published by the National Institute of Statistics and Geography (INEGI). In this regard, the governor said that for the State Government, it is essential to continue promoting actions and programs that strengthen productive activities in the state, as this will allow for a greater and better supply of jobs for the families of Aguascalientes. SOURCE: LIDER EMPRESARIAL

NEWS BY STATE

CDMX Mexico City announces investments of over 19,500 million pesos in public projects in 2024. The Head of Government of Mexico City, Marti Batres Guadarrama, announced the 2024 Public Works Program, allocating 19.57 billion pesos for 21 key projects. The program is a major part of the city’s focus on public projects, representing a significant increase in investment over previous years. The projects are categorized into seven areas: City of Rights, Sustainable City, Public Space, Road Infrastructure, More and Better Mobility, Cultural Capital of America, and Chapultepec: Nature and Culture. Key projects include the pedestrianization of the Zocalo area, the construction of the Living Muralism Museum, and collaborations with the national government like the “El Insurgente” Interurban Train. There’s a focus on waste management, school maintenance, and public space enhancement, including over 200 kilometers of Safe Pathways. SOURCE: FORBES

STATE OF MEXICO Construction of Chinese Car Dealership in Ecatepe. Ernesto Santillan Ramirez, First Councilor of Ecatepec, along with representatives of Geely Auto Mexico, initiated the construction of the Geely Santa Clara car dealership, aiming to boost local employment. Santillan Ramirez highlighted Ecatepec’s improved safety and growing investor confidence. The dealership is part of broader economic development efforts in the municipality, reflecting a safer and more attractive environment for investment. The project, symbolizing a collaboration between the private sector and local government, is expected to contribute to the community’s economy and well-being, creating new job opportunities. SOURCE: DIARIO BASTA

INVESTMENT NEWS NATIONAL DANONE French company DANONE has announced an investment of 109 million dollars in Mexico. This is a national plan to promote innovation and research projects, the amount of jobs that will be created has not been disclosed yet. NORTHWEST ESSILORLUXOTTICA French-Italian company EssilorLuxottica, has invested 130 million dollars to inaugurate a new facility in Chihuahua, City, creating 2,000 jobs in the region. CENTRAL MEXICO NORTHEAST MAHLE DEBHR MAHLE DEBHR, a German automotive manufacturing company, has invested 70 million dollars to establish its third facility in Ramos Arizpe, Coahuila, generating 400 jobs in the region. RYMCO RYMCO, a Mexican automotive manufacturing company, has invested 45 million dollars to inaugurate a new project in Frontera, Coahuila, creating 230 job opportunities in the region. KUKA HOME Kuka Home, a Chinese furniture company, has invested 150 million dollars to inaugurate a new project in Salinas Victoria, Nuevo Leon, creating 1,000 jobs in the region.

METSO Finnish company METSO will invest 40 million dollars to inaugurate an automotive manufacturing facility in Irapuato, Leon, creating 70 job opportunities in the region. UNION SHANGAI Union Shangai, a Chinese automotive manufacturing company, will invest 400 million dollars to establish its first facility in Villa de Reyes, San Luis Potosi. This project is expected to create 3,000 jobs in the region. SOURCES: EXPANSION, CLUSTER INDUSTRIAL, MEXICO INDUSTRY, EL ECONOMISTA,