August brings scandal to distract from COVID woes

After five months of restrictions on mobility and economic activity, in addition to measures to inhibit contagion, Mexico remains in the grip of the COVID-19 pandemic.  Some signs of optimism are emerging nonetheless.  Among Mexico’s 32 states, 10 have now been classified as yellow under the national traffic-light system governing the severity of restrictions, with yellow being the least strict before returning to green, or no restrictions.  The other 22 states, including Mexico City, remain at orange, which imposes significant barriers to full economic activity.  The national rate of new cases per day has declined slightly over the second half of August.  The impact on employment and industry, however continues to be severe with Mexico on track to register its steepest drop in GDP growth in decades.

ECONOMY AND INDUSTRY

  • Mexico posted a record high agricultural trade surplus with the United States during the October 2019 – June 2020 season, according to USDA data reported in the El Economista newspaper.  Mexico remains the largest source of agricultural imports into the United States. (El Economista, August 24, 2020)
  • Automotive production in July demonstrated recovery, jumping 80% from its low point in output in April when most plants were closed.  Production in July even exceeded the same month in 2019 by 0.7%. (Citibanamex Reporte Económico Diario, August 7, 2020)
  • Gross fixed investment in Mexico fell by 38.4% in May with respect to the same month last year, the National Statistics Institute (INEGI) reported.  The mark represents the steepest monthly drop since 1995. (El Financiero, August 6, 2020)
  • Remittances to Mexico from abroad in June jumped 11.1% with respect to the same month the previous year, despite the worldwide economic slowdown.  Remittances overall are running 10.6% ahead of 2019 through the first six months of this year.  (Reforma, August 3, 2020) 

 INVESTMENT                                                                                      

Investment and economic activity in general remain significantly lower than prior to the COVID-19 crisis, due to ongoing restrictions on business operations and mobility.

  • Electronics: Canadian electronics manufacturing services provider Creation Technologies initiated construction of a new plant in the northern state of Sonora for its recently acquired subsidiary Applied Technical Services (ATS), the company reported.  The facility, for which the amount of investment was not disclosed, is expected to provide services including PCB assembly, system integration and testing, as well as forward and reverse logistics. (Cobertura360, August 27, 2020)
  • Telecommunications: Swedish telecoms service provider Telia Carrier entered the Mexican market by establishing cloud services Points of Presence (POPs) in the cities of Monterrey and Querétaro, industry media reported.  Demand for internet and cloud services is surging during the COVID-19 pandemic. (Fierce Telecom, August 27, 2020)
  • Refrigeration: Danish heating and cooling equipment maker Danfoss announced plans to increase production at its manufacturing plant in the northeastern state of Nuevo León.  The boost in output, for which the cost was not specified, will allow the company to ship more valves, filters, electric motors, compressors, variable frequency units and other components to industrial refrigeration clients throughout the Americas. (Reforma, August 20, 2020)
  • Medical devices: U.S. medical equipment manufacturer Becton Dickinson initiated operations at a new production plant in the northwestern state of Sonora, the company reported.  The US$9 million facility will produce infusion sets for the Mexican, U.S. and Latin American markets. (Reforma, August 19, 2020)
  • Pharmaceutical: P&G Health, a division of consumer products multinational Procter & Gamble, reported plans to build a new production facility as an expansion to its existing plant outside Mexico City.  The new plant, for which investment was not specified, is expected to produce pharmaceutical tablets for brands such as Sedalmerck and Dolo-Neurobion. (El Financiero, August 16, 2020)
  • Hydraulics: Italian hydraulic and industrial fluid handling systems manufacturer Alfagomma inaugurated a new production plant in the northern sate of Coahuila.  The US$15 million facility is expected to produce hydraulic hoses and steel tubing for area customers include John Deere. (Milenio, August 11, 2020)
  • Railroad: U.S.-owned rail freight operator Kansas City Southern de México (KCSM) reported it will maintain its current investment program of approximately US$127 million for the current year.  Projects include expanding the Patio Sánchez railroad yard at the Nuevo Laredo border crossing and expanding and upgrading track sidings. (Reforma, August 11, 2020)
  • Infrastructure: Mexico’s federal government announced it plans to invest approximately US$2.1 billion through 2024 in its infrastructure mega-project in the southern Istmo de Tehuantepec region.  Projects are projected to include Atlantic-to-Pacific railroad upgrades, a natural gas pipeline and upgrades to electricity and airport infrastructure. (Reforma, August 5, 2020)
  • Solar power: Mexican renewable energy investment group Balam Fund initiated operations at a new 30 MW solar energy generation park in the northeastern state of San Luís Potosí.  The approximately US$40 million site is expected to provide electricity principally for the operations of telecommunications giant AT&T in the region. (Reforma, July 31, 2020)

 POLITICS AND SOCIETY

  • Former Director of national oil company Petróleos Mexicanos (Pemex) Emilio Lozoya, extradited to Mexico to face corruption charges, provided testimony implicating three former presidents and numerous other officials in various corruption schemes.  Politicians in various political parties scrambled to deny or distance themselves from the allegations as leaked documents and videos circulated widely. (Reforma, August 20, 2020)
  • The legislature of the southern state of Oaxaca approved legislation to prohibit the sale of sugary drinks and products considered “junk food” to children in schools or via vending machines in public places.  The new regulation – the first state-level law of its kind – was heavily criticized by the processed foods industry. (Reforma, August 6, 2020)
  • The Mexican government is planning to construct a new passenger rail line in southern Mexico in addition to the Tren Maya line currently under construction, according to government documents reported in local media.  The project to connect the Atlantic and Pacific coasts from Veracruz to Oaxaca would span approximately 186 miles and be managed by a government agency. (Reforma, August 28, 2020)

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