This week in Mexico – Mar 14, 2020

This Week in Mexico

March 14, 2020 to March 20, 2020

Recruiters in Mexico shelter in place and work from home

Communities across the United States continue to stay home to flatten the curve and reduce the rate of contagion of the coronavirus. The impact is beginning to reflect in the economy. The US announced today that over three million jobs had been lost during this period, and there is talk of a potential spike in the unemployment rate.

In Mexico, authorities have already begun to acknowledge the health threat of the coronavirus and have started issuing recommendations not to leave home and avoid gatherings.

Recruiters in Mexico have begun to see a freeze in current search projects and have started to see a drop in new projects as company leadership and the human resources departments devote their energy to COVID-19 contingency plans. Retailers and restaurants have been the hardest hit.

For now, recruiters in Mexico are starting to see a drop in hiring and open searches.

Mexico drops three points on index measuring rule of law

Summary

Mexico has fallen three places on an index that measured the rule of law in 128 countries based on the experiences and perceptions of the general public. Mexico’s score on the World Justice Project (WJP) Rule of Law Index 2020 declined 0.01 points to 0.44 and its ranking fell to 104th. The index uses a scale from 0 to 1, with 1 indicating the strongest adherence to the rule of law. In Latin America, Mexico ranked 26th out of 30 countries, ahead of only Honduras, Nicaragua, Bolivia and Venezuela. The WJP, an international civil society organization dedicated to advancing the rule of law around the world, found that Mexico rated most poorly among the 128 countries in absence of corruption and order and security. With scores of 0.27 and 0.53, respectively, Mexico ranked 121st in both areas, a blow to the government of President López Obrador, who has vowed to stamp out corruption and reduce insecurity.

U.S.-China Trade Disarray Sounds Like an Opportunity for Mexico—But It Isn’t Working Out That Way

Summary

Mexico’s increasing violence and economic conditions work against U.S. direct investment there. With global supply chains in disarray amid the U.S.-China trade war and the coronavirus pandemic, Mexico might seem a logical winner if U.S. companies decide they want to diversify away from China and make some products closer to home. Mexico clinched a new trade deal with the U.S. and Canada last year and has now replaced China as the U.S.’s largest single trading partner.

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‘We Call for Calm’: Mexico’s Restrained Response to the Coronaviru

Summary

The López Obrador government’s measured approach to battling the coronavirus played out this weekend in a full soccer schedule and a crowded music festival. “Yes, there’s worry,” one fan said, “but you have to have fun.” Before she headed to the soccer game this weekend, Gabriela Gómez considered the matter of the coronavirus and its transmissibility in crowds. But she wasn’t going to let fears of a global pandemic stand in the way of witnessing a special moment: For the first time since the founding of Mexico’s women’s professional league, two of its teams were playing in Mexico City’s landmark University Olympic Stadium..

600mn pesos earmarked for Guanajuato airport expansion

Summary

The operator of the Bajío International Airport in Guanajuato will invest over 600 million pesos (US $27.4 million) to expand and improve the airport’s facilities. Guanajuato Governor Diego Sinhue Rodríguez Vallejo announced that the Pacific Airport Group (GAP) will increase the number of arrival gates from eight to 14 and carry out upgrades in the lobbies and VIP area and on the roof.The investment will also go toward providing services to cargo planes and renovations to the customs and shopping areas Governor Sinhue said that despite a lack of growth in both the domestic and global economies, Guanajuato has an opportunity to consolidate its competitive position in the market and become a hub of economic development and logistics. “Despite the storm clouds in the global and domestic economies, Guanajuato sees a great opportunity. What is happening in China’s economy is an opportunity for Guanajuato, and with the signing of the USMCA [trade agreement] we’re seeing more confidence among investors,” he said. To take advantage of this opportunity, the state government has committed to investing over 400 million pesos (US $18.2 million) in promoting the growth of micro, small and medium-sized businesses, known as mipymes in Spanish, in Guanajuato. “We have to bet on the Mexican people … so that they can become professionals and can be suppliers in the industry. This year we increased the investment in mipymes from 200 to 400 million pesos,” said Sinhue. Another tool Sinhue plans to use to drive economic growth in the state is the Central-Bajío-West Alliance, an economic partnership between the states of Guanajuato, Aguascalientes, Jalisco, Querétaro and San Luis Potosí.

Mexico’s government under pressure over coronavirus response

Summary

While authorities in major cities shut their borders, announced major lockdowns and ordered curfews in an effort to stem the global spread of the coronavirus pandemic, thousands of people flocked to a two-day music concert in Mexico and the country’s top women’s football league played to a stadium full of cheering fans over the weekend. The government of Mexican President Andres Manuel Lopez Obrador has faced harsh criticism for its seemingly lax response and for downplaying the threat of an illness that has infected more than 179,000 people and killed more than 7,000 worldwide.

Battle over oil discovery is test case for Mexico investors

Summary

Energy companies trying to do a deal with Pemex to share one of Mexico’s biggest oil discoveries accuse the state giant of dragging its feet to win control of the project, in a test case for foreign investment under President Andrés Manuel López Obrador. A consortium made up of Talos Energy of the US, the UK’s Premier Oil and Wintershall DEA of Germany discovered the nearly 700m-barrel Zama field in 2017. They are awaiting a decision from the Mexican government on how to share responsibility for a resource that spills into acreage owned by Pemex.  But negotiations with Pemex have become bogged down, raising the alarm in a sector already concerned by Mr López Obrador’s efforts to build up the state-controlled company and limit private oil participation. “I don’t understand who a delay benefits — it’s not us, or the arrival of first oil, or workers or the Treasury — we can’t figure out who else that benefits except Pemex,” Tim Duncan, Talos chief executive, told the Financial Times.  Pemex is demanding a 50-50 split on the project and wants to operate it despite its fragile finances and lack of experience working at the depths of the Zama field, about 60km off the coast of Tabasco. The target is to begin pumping oil by 2023 — a year before the end of Mr López Obrador’s six-year term — by which time the president has promised that Mexico’s oil production will have risen to 2.6m barrels a day from 1.73m at the end of 2019.

Trump to close US-Mexico border to all but cargo and essential travel today

Summary

The Trump administration will announce on Friday that the US is closing its southern border with Mexico in an effort to slow the spread of the coronavirus. “We’re looking at both our northern and our southern border,” said Chad Wolf, the acting head of the Department of Homeland Security. He said that the new measures would restrict “non-essential” travel, and that an announcement would be made on Friday. Members of the White House’s coronavirus task force, possibly joined again by Donald Trump, are slated to brief reporters at 11:45 a.m. The US has already closed its northern border with Canada. Mr Trump said this week that he has been in discussions with Mexico to do the same. .

Exclusive: U.S., Canada, European nations meet to discuss concern over Mexico energy policy

Summary

The United States, the European Union, Canada and six European nations have held joint talks on concerns over Mexico’s energy policy, sources told Reuters, as President Andres Manuel Lopez Obrador pushes for a bigger role for the state in the sector. The unusually broad diplomatic encounter is a measure of how the leftist Lopez Obrador’s break with the energy policy of the previous government is worrying economies that have traditionally been some of Mexico’s biggest foreign investors. U.S., Canadian and European officials privately voice concern that Mexico’s energy policy is eroding the legal foundations of contracts worth billions of dollars with the previous administration, in what they fear is a creeping squeeze-out of their interests. Mexico’s government denies it is undermining those deals, but says prior contracts were often damaging to the country, and has sought to renegotiate the terms of some. At Friday’s meeting in Mexico City hosted by the U.S. embassy, diplomats from Britain, Canada, the EU, France, Germany, Italy, the Netherlands and Spain discussed their concerns and how best to relay them to Lopez Obrador, said five people familiar with the gathering. Asked for comment, the U.S. embassy responded to Reuters that it did not discuss its diplomatic conversations. The other foreign embassies did not reply to requests for comment, nor did Lopez Obrador’s office.

Mexico to let U.S. return Central American migrants caught at border

Summary

Mexican Foreign Minister Marcelo Ebrard said on Friday that Mexico will allow the United States to return to Mexico Central American migrants caught trying to enter the United States illegally at the U.S.-Mexico border. However, Ebrard noted that Mexico will not permit the United States to send back migrants detained on the joint frontier who are not Mexican or Central American. .

Mexico’s Budget Is Protected By Its Mega Oil Hedge

Summary

“Everything” in the Mexican budget that needs to be covered by oil revenues is covered, the country’s Finance Minister, Arturo Herrera, said as quoted by Reuters, in response to a local daily question about how safe the state oil company, Pemex, was. There have been reports that credit rating agencies might downgrade Pemex’s rating because of its high debt levels and the current international oil price situation but, according to Herrera, the company’s credit rating will not place Mexico’s finances in danger. Since the start of the year, Mexican crude has lost more than 56 percent of its value, according to Mexico News Daily, with a 31.6-percent plunge resulting from the start of the oil price war between Saudi Arabia and Russia. On March 18, the Pemex oil export basket closed trade at $14.54 a barrel, according to a Reuters report, down by more than 22 percent. According to Herrera, however, there is no need to worry. Some 80 percent of budget needs have been covered by the notorious Mexican oil hedge and the rest is covered be unspecified reserves. Earlier this month, Herrero, as cited by Reuters, said the hedge, at $1.4 billion, covered Mexico’s oil income completely.

Trump’s new Mexico policy will slash US food supply during coronavirus crisis, farmers warn

Summary

Farmers around the country warned of food supply shortages after the Trump administration imposed new restrictions on seasonal workers from Mexico amid the coronavirus pandemic. The Trump administration has used the public health crisis to impose new restrictions at the Southern border. The U.S. Embassy in Mexico announced Monday that “all U.S. consulates in Mexico will suspend routine immigrant and nonimmigrant visa services starting March 18, 2020, and until further notice.” Agriculture Secretary Sonny Perdue told American growers that his department would continue to process applications for returning guest workers. But new applicants, who make up nearly 60% of the H2A guest worker program applications, will be denied, Reuters reported. The restrictions come as stores across the U.S. have been stripped bare by individuals stockpiling food as states and cities urge residents to stay inside as much as possible. The latest move could devastate farms that grow fruits and vegetables and rely on seasonal guest workers for their operations. “American farmers will not have access to all of the skilled immigrant labor needed at a critical time in the planting season,” the American Farm Bureau said in response to the new policy. “This threatens our ability to put food on Americans’ tables.”

Spotlight: Mexico’s 2020 telecom investment outlook

Summary

Mexico’s 2020 investment outlook for telecommunication infrastructure appears uncertain as factors such as the coronavirus and deployment of 5G networks could lead to final capex adjustments. While some bigger players have already presented investment plans – with an eye on 5G – several variables could change these plans if an economic crisis emerges, Jesús Romo, an analyst at Teleconomía, told BNamericas. “Right now there are two things that concern me the most, and for which I am unable to provide a precise figure of how much capex we have. The first is the coronavirus [spread], which is already affecting everything that is financial markets, and there is also the uncertainty surrounding the resolution of the conflict between Russia and Saudi Arabia,” he said, adding that oil price variations often lead to changes in investors’ plans. Romo said that normally the programs the government cuts first during a crisis relate to its digital policy. During the 2015 crisis, for example, the government reduced the number of receivers for digital terrestrial television that was part of the freeing up of the 700GHz band. The analyst also said that companies modify investment plans if circumstances suddenly change a country’s economic perspective. BNamericas takes a look at the telecom investment panorama for Mexico in 2020.

Income Investors Should Know That Grupo México, S.A.B. de C.V. (BMV:GMEXICOB) Goes Ex-Dividend Soon

Summary

Grupo México, S.A.B. de C.V. (BMV:GMEXICOB) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 24th of March in order to be eligible for this dividend, which will be paid on the 26th of March. The upcoming dividend for Grupo México. de will put a total of Mex$0.80 per share in shareholders’ pockets, up from last year’s total dividends of Mex$0.14. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing..

For supply chain companies, U.S.-Mexico border closures could be catastrophic

Summary

Mexico’s deputy health minister says he’s worried about people coming into Mexico from the United States. The U.S. has far more cases of COVID-19 than Mexico. The Mexican government even said it might consider restricting access at its northern borders. For businesses that operate on both sides of the border, any shutdown could be catastrophic. That includes businesses like, Hessen Group, which has an office in Brownsville, Texas. There, an 18-wheeler carrying pipes for oil and gas backs up to a loading dock. Hessen is a supply chain company — it acquires parts and components for other companies to build stuff. Its headquarters are in Matamoros, Mexico, just a few miles away. The company’s president, Francisco Homs, says that those pipes are on their way to Canada, and a few of them will travel all the way to Alaska for an oil company up there. Homs picks up a little box and explains that inside is a little screw for a tractor. Without it, a farmer would have to stop working because the tractor wouldn’t function. That little screw was imported from China. Homs says the slowdown of factories in China, because of the coronavirus, means his suppliers, like the screw-maker, were running low. That makes it tough for him to get his hands on the parts his customers need. The Chinese government says the virus has peaked there and factories are starting to get back to normal. But Homs admits he doesn’t know if he can trust that. He says his company might have dodged a bullet if Chinese suppliers are indeed coming back online. His big concern now is the Texas/Mexico border. If they close the border, he said, it would cause problems and disrupt the economies of the United States, Mexico and Canada. We’d just stop doing business, he said. All of his shipments run from Mexico into the United States and then some into Canada. So any border closure would make Hessen’s work impossible. And we can’t be interrupted, he added, because that would have a knock-on effect to many other businesses that depend on the parts and components that he gets to them.