May 12, 2020 / 1:47 PM / 15 days ago

Mexico signals auto industry return on eve of restart plan

MEXICO CITY (Reuters) - Mexico’s government gave the green light on Tuesday for the key automotive industry to restart production after weeks of disruption by the coronavirus pandemic, a decision that should pave the way to reopen North American supply chains.

FILE PHOTO: Mexico's President Andres Manuel Lopez Obrador holds a news conference at the National Palace in Mexico City, Mexico, March 17, 2020. REUTERS/Henry Romero

The government’s health committee, which issues binding sanitation rules, said it agreed to add makers of transport equipment, a category that includes automotive and aerospace industries, to the list of activities considered essential.

The decision came ahead of an announcement on Wednesday by President Andres Manuel Lopez Obrador, who is expected to give more details about how suspended business operations and other activities would reopen in coming weeks.

“Tomorrow we will lay out the plan to return to the new normal,” Lopez Obrador said at a regular news briefing. “It’s not going to be a return to normal,” he added, “because there have been changes.”

On Twitter, the health committee said mining and construction had also been deemed essential activities. The industries will all have to follow health measures ordered by authorities, it added.

Mexican auto output fell nearly 99% in April, and the government is under pressure from the United States to synchronize its restart with American companies that rely on supply chains from south of the border.

The virus outbreak in Mexico is several weeks behind the U.S. epidemic however, and health authorities have been cautious to avoid moving too fast and putting more lives at risk.

Mexico’s Social Security Institute said 555,247 people registered with it lost their jobs in April, while Mexico’s daily death toll on Tuesday was its highest yet from the outbreak.

“TRAFFIC LIGHT”

It was not immediately clear if industries would face further restrictions.

An official speaking on condition of anonymity said the announcement meant the auto industry was now able to restart. In practice, it will probably mean beginning on May 18, according to sources from the automotive industry and the government.

U.S.-based carmakers are also targeting a May 18 restart.

In addition, municipalities free of the virus adjacent to others without it will be allowed to start lifting curbs on school and work, the committee said.

Finally, a “traffic light” system would regulate the restart state-level activites from June, it added.

The pandemic has brought key industries to a juddering halt in Mexico, which has registered nearly 4,000 deaths from the pandemic and is poised for an economic contraction of up to 10% or more this year, analysts say.

Mexico, which sends about 80% of its exports to U.S. markets, became the United States’ biggest trade partner last year, with two-way commerce worth well over $600 billion.

Lopez Obrador signaled last week that industry would restart first, to be followed by service activities such as tourism.

Mexico has been studying the experience of other countries emerging from strict lockdowns and the government believes highly mechanized factories offer better conditions to control contagion risk, officials say.

Still, it has stepped up efforts to coordinate re-opening with the United States to win economic benefit from a U.S. recovery, said another Mexican official, speaking on condition of anonymity.

“We want to reboot with the United States,” the official said.

The government had already said curbs could start to be eased in some places on May 18, while harder-hit areas may have to wait until next month.

Data from the Tecnologico de Monterrey university shows some central states with heavy automotive operations, such as Guanajuato and San Luis Potosi, have logged far fewer cases per head than the national average.

A similar picture emerges in three key mining states, Zacatecas, Durango and Sonora, as well as the western state of Jalisco, an electronics manufacturing hub.

For an interactive graphic tracking global spread of coronavirus, click: tmsnrt.rs/3aIRuz7

Reporting by Dave Graham; Additional reporting by Sharay Angulo, Anthony Esposito and Ana Isabel Martinez; Editing by Dan Grebler and Clarence Fernandez

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