This week our newsletter addresses the issue regarding the essential businesses in Mexico, developments as to when economic activities for non-essential businesses in Mexico will resume, proposals to reactivate the Mexican economy on behalf of the Business Coordinating Council, as well as VTZ alerts. Download our newsletter here.
Last Friday and in the last days, news outlets reported that a group of senators submitted a letter to the Secretary of State, Mike Pompeo, so that the government of Mexico may clarify the definition of “essential businesses”. In the letter, the senators ask Pompeo to pressure Mexico to include food, medical, transportation, infrastructure, aerospace, auto, and national security as essential businesses. The food, medical, and national security sectors are essential activities in Mexico as we reported in our previous edition.
On Tuesday, the Motor & Equipment Manufacturers Association (MENA), for its part, also submitted a letter to the Secretary of State regarding resuming activities in the auto and auto parts industry in Mexico. Although to our knowledge Pompeo has not made any public statements on this matter these days, MENA appreciated the efforts of the Secretary and his team, including Ambassador Christopher Landau.
In this regard, MENA informs Pompeo that the majority of the assembly plants (OEMs) will resume operations in the US on Monday 18 May. Hence, MENA requests that the automotive sector in Mexico resumes operations by next Tuesday, 12 May. MENA acknowledges that,
“[w]ithout parts from Mexico, it will be virtually impossible for U.S. motor vehicle assembly plants to restart.”
There is still no legal news about resuming activities for non-essential businesses in Mexico, but yesterday the Mexican President, AMLO, pointed out that Mexico is preparing to return to normality regarding productive activities and “once we have greater control over the pandemic, all economic, social, and cultural activity will be opened, of course, in a careful, gradual, and responsible manner.”
In response to a question of a journalist, the President said that communities that have not registered COVID cases may resume activities on Sunday 17 May. The president also announced that a plan to resume activities will be presented the following week. In this regard, the President also raised the possibility of establishing a sort of “traffic light” mechanism to determine if sectors, such as manufacturing, automotive, etc., can resume activities.
Needless to say, the Mexican States with the highest COVID registered cases, according to the federal government statistics, are:
*Figures dated May 6.
Fuente/Source: Secretaría de Salud
At a local level, we observe that cities or zones with a strong industrial activity register “considerable” COVID cases, which can be seen in the following map. Mexico is one of the countries with the lowest number of COVID tests per million people and, therefore, Mexico has a “low” number of registered cases because it is using the “sentinel surveillance” methodology.
#TestingForCovid19 has varied widely across countries ⤵️
— OECD ➡️ Better policies for better lives (@OECD) April 20, 2020
Taking into account the President’s public statements and the presence of COVID in industrial regions (such as Aguascalientes, León, Monterrey, Puebla, and northern border cities), we believe that it is extremely unlikely for the auto or manufacturing industry to resume operations the following week.
On May 6, the Mexican Business Coordinating Council (CCE) presented 68 recommendations to the Mexican President, AMLO, prepared by panelists from the private and public sectors. The recommendations aim to face the COVID-19 pandemic and its effects on the Mexican economy. The following three types of actions are submitted:
Within this last category, a Policy for the Mexican Economy is developed that includes, among other matters, the following recommendations on Investment and Trade:
We emphasize that these proposals are not new. For example, adding more regional or domestic content to the global value chains and promoting export diversification has been a goal of past administrations; in fact, they are policy objectives of the current administration.
This week the European Commission published the “updated” texts of the EU-Mexico FTA modernization. These texts are preliminary and subject to a legal review known as “legal scrubbing”. Read the texts here.
During this week, several news outlets reported incorrect information about the pilot test of a digital currency conducted by the People’s Bank of China. Our partner who heads the Chinese Desk, Susana Muñoz, prepared an alert where she clarifies the information about the digital currency in China, check it out here.
This week, the First Amendment to the Miscellaneous Tax Regulations was published, which provides for the suspension of certain tax acts due to the health emergency. Our partner, Jorge Montes, prepared a tax alert on such matters, visit here (in Spanish only).