In an interview with El Economista, Raquel Buenrostro also acknowledges that there is an underreporting of Chinese investment in Mexico and explains that coordination with state governments will be necessary to correct the issue.

There is no pause in investments or cancellations due to the Judicial Reform, says Raquel Buenrostro Sánchez, Mexico's Secretary of Economy. "We do have pauses in the automotive sector, but they are related to Trump's announcement that the entry of electric cars with Chinese content would not be allowed. Paradoxically, these are Ford and General Motors, US companies that have many parts that come from China."

Secretary Buenrostro spoke to the local newspaper El Economista and took stock of the pending issues: “The controversies over genetically modified corn and energy are very close to being resolved. This will happen before the end of 2024, most likely.”

He acknowledges that there is an under-registration of Chinese investment in Mexico and explains that coordination with state governments will be necessary to correct the issue, “there are offices that are responsible for registering some Chinese investments as Mexican.”

In terms of industrial policy, he underlines the importance of incorporating Mexico into the global semiconductor chip manufacturing chain, which is in the process of being redefined. “We have made a lot of progress with the United States, but we need them to make the way the incentives that could be applied to projects in Mexico work more flexible. As they are, they are US$500 million, with annual maximums of US$100 million.”

Raquel Buenrostro Sánchez joined the Ministry of Economy in October 2022 and as of next week she will be in charge of the Secretariat of Public Function, “we left the diagnosis with everything and a map of what industrial policy should be. It is an issue that is very important to Dr. Sheinbaum.”

- What impact has the judicial reform had on companies that want to invest in Mexico? Is it true that some investments have been put on hold?

There have been no setbacks in investment announcements by international companies in Mexico due to the approval and entry into force of the reform to the Judicial Branch; what has occurred is a pause here and there, given the intention of the US presidential candidate, Donald Trump, to impose tariffs on cars produced in Mexico, if he wins the election, due to the trade war between the United States and China.

That is what is holding back automotive investments somewhat, not all of them, we are talking specifically about a couple of companies. Paradoxically, currently the car manufacturers that have the most Chinese suppliers are Ford and General Motors. Many others, such as the European, Japanese and Korean ones, do not depend as much on Chinese suppliers and are maintaining their growth rates. In everything else, we have not seen any decrease; we even continue to have meetings every week; they continue to inform us of investment commitments.

We can say that it is in the national private sector where there is more concern about the entry into force of the judicial reform, but this is due to a mixture of uncertainty, because the reform is not well known, and there are also questions of an ideological nature. We have told them to wait to see the secondary laws.

- What has happened to the hardening of the US position against the alleged triangulation of Chinese steel?

The United States had planned to impose tariffs on steel in 2027, but it brought this forward to 2024. This had some repercussions, the most important of which are for Ternium, which is in the process of investing US$3.5 billion to expand one of its plants in Mexico. The solution to the problem is to seek an exception from the United States for supplies coming from Brazil.

The issue is being discussed by the Ministry of Foreign Affairs with the White House, which has been affected by the electoral process underway in the United States. Ternium is making its own arrangements. We hope that the issue will be resolved shortly after the presidential elections next November.

It should be noted that the United States imposed a tariff under Section 232 of 25% on steel and derived articles imported from Mexico, if said steel is melted and poured in a country other than North America.

Mexico issued decrees on tariffs to protect all imports made through unfair trade, identifying in advance everything that arrives in the country with unfair prices and subsidies in order to apply tariffs to them.

- Speaking of China, what can you tell us about the underreporting of Chinese investments in Mexico?

It has been detected that there is an underreporting of Chinese investment through Mexican companies that serve as a front for Chinese investments. We have identified some firms that carry out this type of actions.

Our response is to strengthen work with state authorities to identify where and how they operate. What remains pending in this matter is greater coordination with state governments. Sometimes, at a local level, it is easier to know when and how this simulation is taking place.

- A very relevant sector is the semiconductor chip sector, you have said that it could generate a new industrial wave in Mexico...

Mexico is seriously committed to making it a relevant country on the world map of semiconductors. In the coming years, the sector could be something similar to what the automotive industry has been for Mexico. It would generate regional development and very well-paid jobs.

Dr. Sheinbaum has positioned it as a strategic sector and a substantial part of her economic project. We have made progress in negotiations with the United States authorities so that they consider us in their plans to bring the semiconductor value chain closer, which is now concentrated in Asia.

The Americans wanted to concentrate the value chain on their territory, but they realized that they had contradictory policies that prevented them from achieving this. Specifically, their immigration regulations prevent them from having enough personnel to cope with the required investments.

Faced with this situation, Mexico proposed to collaborate, which involved convincing them that there would be no problems related to their national security if both countries shared the value chain. What was proposed was that the manufacturing, which involves the substantive and cutting-edge technology part of the microchips, would be kept by them and the rest would be done in Mexico.

This required demonstrating Mexico's capabilities in terms of highly qualified labor. Proving how many engineers we have and where they are located, as well as professionals in the areas of science, technology, engineering and mathematics and their levels of ability. The people from Intel who work in Mexico have been an invaluable ally.

They already make chips at the design and development level and have participated in the conversations explaining the capabilities that exist in Mexico. There are high-level research centers and human resources here.

- What is left to do, where are we?

Last November, the United States declared itself in favour of the initiative and now the conditions are being created to establish the value chain, including the manufacture of technological legacies, which are the semiconductors used, for example, in refrigerators, which are among the first to appear on the market.

For its part, Mexico identified that it would have to generate tax incentives in order to attract investments. The Ministry of Finance is working on incentive schemes on the Mexican side and in the United States there is an issue that they must review. As things stand, there is a maximum of incentives that could reach Mexico. It is US$ 500 million, with a maximum of US$ 100 million per year. It is a small amount if we consider that each project involves investments of billions of dollars.

Currently, there are at least 14 applications from Mexican projects to access US funds for the development of these implements. Some are from the private sector, and even Conahcyt is involved in some via Public Research Centers.

- What has happened with the energy controversy within the T-MEC?

To resolve the energy controversy (which was raised by the United States in July 2022), we have drafted a memorandum of understanding, which summarizes much of the work we have done. The process and timelines were made transparent, and a system was designed that gives investors clarity and knowledge about the stage of their energy-related procedures, so that they do not feel that there is unequal treatment. There was a lot of cross-cutting work from the Ministry of Economy to other areas of government that allowed us to de-escalate issues that caused friction with the United States.

The memorandum of understanding, which has already been signed by Mexico and is expected to be signed by the United States in the coming weeks, sets out concerns and proposals to de-escalate the disputes. One of the most worrying issues that remained pending was related to the Electricity Industry Law; however, with the resolution of the Supreme Court of Justice of the Nation (SCJN) that declared some articles unconstitutional, the dispute raised in the consultation was ended.

- What about the controversy over genetically modified corn?

The United States argued that there was harm to its producers because trade was being hindered; however, this argument is very easy to discredit, since, despite the decree in question, Mexican imports of transgenic corn from the United States have been increasing. So there can be no allegation of harm.

The other issue has to do with Mexico's position of not allowing genetically modified corn to be planted here, because Mexico is the place of origin of 57 of around 60 varieties of that grain. Within the USMCA itself, Mexico has obligations related to the environment, including preserving species that are in danger.

We hope that there will be a resolution before the end of 2024 (the notification by the United States was in August 2023). There is a good chance that there will be a tie or that the panel will resolve in favor of Mexico. The worst that can happen is that they tell us to modify the decree. What is certain is that there is no economic damage.

- What news do you have for us on industrial policy?

We identified and mapped strategic sectors for the country's economic development. These are electrical and electronic semiconductors; agribusiness, medical and pharmaceutical devices, and electromobility. This was the first list to which Dr. Sheinbaum decided to incorporate mining, chemicals, and petrochemicals, with the aim of taking advantage of the value chains from the ground up.

In addition, we are grouping those related to technologies and innovation, in sectors such as aerospace, aeronautics and petrochemicals, which will allow progress in the energy transition.

After identifying and mapping, we tried to define the incentives and public policies that would promote and encourage them. We integrated working groups that have been submitted for consideration by the next federal administration.

- How long will it take to see results?

We know from experience that once strategic sectors are identified and work begins on their development, it takes around two to three years for investments to begin to materialize. An example of this is the entry into operation of the data centers in Querétaro and the Stellantis plants in Toluca and Coahuila, which are about to be inaugurated.

- How is an industrial policy for the 21st century different?

What is required is to rearrange the tax and other incentives that have been given. Everything has been done with a view to being competitive in the final part of the production chain, which is the assembly of the product. The result is that we have greatly increased exports, but we have not been able to increase the percentage of national content.

What we intend is to influence the other stages of the value chain that come before assembly. To place incentives there to increase the national content in products and services. This would allow us to increase employment and national supply. It is in the interest of the United States to have more Mexican content in our exports. This is something that they let us know in the binational conversations.

- Where are the SMEs?

It is essential to deploy a policy to support micro, small and medium-sized enterprises (MSMEs), since seven out of 10 jobs are generated by them. From the Federal Government we see that one of the greatest challenges is the articulation of the dialogue between large companies and MSMEs; between government projects and the private sector and the vision of what type of investments come to the country that could benefit MSMEs based on their skills and capabilities.

The issue of financing remains to be resolved. This is an issue that the next president has entrusted to the Secretary of Finance, Rogelio Ramírez de la O. The objective is to generate an agile financing instrument in accordance with the needs of these companies. The Secretary announced a budget of 70 billion pesos (US$ 3.603 billion) for this purpose, although work is being done on a simplification strategy for the management and access to resources part. Something that is not so complicated.