English, News

New Approach to Mexico Investment Promotion Policy

31 Jul , 2020  

The Decoupling of the Global Economy and its Implications for Mexico: A New Investment Promotion Policy is Needed 

(PDF)

The discourse about the trade war between China and the United States has intensified in recent months not only as an electoral strategy but rather it has extended also into other fronts damaging the bilateral relationship. This means that the decoupling of the global economy is likely to continue during the run-up to the elections in the United States; moreover, it may even accelerate once the winner is announced in November 2020.

 

The Trump administration has adopted a series of measures to stop the expansion of China, for instance, export prohibitions on a wide variety of sensitive products, tariffs, forced relocation of North American companies, and even threatening to withdraw from the WTO. More recently, the closure of the Chinese consulate in Houston was announced alleging intellectual property violations and espionage. In retaliation, the Chinese government ordered to close the American consulate in the city of Chengdu, measures that clearly raise the level of the conflict.

 

However, it is relevant to take into account the complexity to untangle the two largest economies in the world. On the one hand, the restructuring the world economy will have major implications from the destruction of business models to the reconstruction of entire industries. On the other hand, there are geopolitical consequences that are already being drawn on the map.

 

In this regard, Beijing has made significant efforts to strengthen and consolidate economic ties with emerging markets. Just last week, Foreign Minister Wang Yi held meetings with senior officials in Vietnam, while the conclusion of the negotiations of the Cambodia-China FTA negotiations was announced. In response to the crisis caused by the COVID-19 pandemic, it was also announced an important economic aid package for Latin America, which is one of many other ways China is offering support to emerging countries to combat the virus.

 

On the technological side, despite the fact that several countries have excluded or banned Huawei and other Chinese applications from their telecommunications system, the expansion of information giants, such as Alibaba and Tencent, in different commercial formats has not been stopped. Furthermore, the country continues to promote the local development of 5G and semiconductors, as well as technological infrastructure, to reduce its dependence on other countries.

 

What do these changes in the geopolitical paradigm mean for Mexican companies? What are the risks to consider?

Regardless of the current internal discussions of the WTO, Mexican companies can continue to depend on the rules and preferential access that Mexico enjoys under its free trade and investment agreements with more than 50 countries. This allows Mexican companies to continue expanding their operation across borders under clear rules.

 

However, this scenario of trade tensions between China and the United States may have a short and medium-term impact on Mexico’s promotion strategy as an investment destination for the manufacturing sector that seeks to export to the North American markets.

 

Although it is true that Chinese companies will continue to develop new markets for their products and technologies, it is also clear that there is opposition to US policies within China. This situation is not exclusive to mainland China, but it has also spread to the Hong Kong Special Administrative Region, which has been damaged by recent announcements by the Trump administration.

 

This week the Global Times newspaper shared the results of a quick online poll asking readers which American consulate would most likely close. 80% of the responses supported the closure of the United States consulate in Hong Kong. Said result reflects a clear anti-American feeling as a result of the US government’s interference in China’s internal affairs.

 

In this context of political and commercial tensions, it is evident that our closeness and preferential access to the North American market are not enough arguments for Chinese companies to invest in Mexico. By contrast, it is very necessary to update our approach strategy towards Chinese companies and investors, not only positioning the benefits of the USMCA, but also doing an in-depth job of identifying complementation opportunities in commercial, industrial, technological, and investment projects.

 

On the other hand, it is essential to offer guarantees for Chinese investments in sectors of interest such as mining, energy, infrastructure, and manufacturing; as well as incentives in sectors where there is still very little Chinese presence.

 

As the US elections approach, the candidates’ speech will intensify and so will the tensions rise between China and the United States and, in consequence, retaliatory measures between both economies. If Mexico, therefore, does not update its strategy and approach with a new speech, such as highlighting our economic openness, commitment to free trade, supply chain integration, privileged geographical location, and legal certainty for investors, our country runs the risk of disappearing from the Chinese map as an attractive investment destination under this scenario.

 

Susana Muñoz,
Partner of Chinese Desk

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English, News

Army Forces in Charge of Customs in Mexico? – The Trading Room

17 Jul , 2020  

International Trade News in Mexico

Issues at Mexican Customs and Ports?

Customs is a source of concern for the current administration, which has had three customs directors so far. On Monday, the President recognized that his administration has not been able to control corruption at customs. According to his statements, synthetic drugs are entering through the port of Manzanillo, Mexico’s most important port, while “anti-corruption” actions are taking place in the Nuevo Laredo customs.

 

While visiting Manzanillo today, President AMLO made a “general” announcement in his daily press conference that the armed forces will be “in charge” of the customs located in land or ports because they have been poorly “managed”. The specificities of the plan as well as what will be the powers of the armed forces at customs are yet to be announced.

 

In the words of the president:

 

“We have taken the decision… that the land and sea customs will be in charge of the Ministry of Defense, and the Ministry of the Navy will be in charge of the customs in the ports.”

 

This is not the first time that armed forces have intervened in customs or ports. For instance, we recall that the Ministry of Navy took “control” of the Lazaro Cardenas Port and Manzanillo in 2013 and 2014 (news reports in Spanish), respectively. Furthermore, a decree was published in the Official Gazette that authorized the intervention of the navy in the ports in 2014, but their powers were limited to “policing in ports”. Nevertheless, we are aware that during this period international operations, such as exports regarding certain products (e.g. minerals),  faced “difficulties” at customs.

 

Based on past experiences, we wonder whether importers or exporters in Mexico will face difficulties if the operation of customs or ports is indeed in charge of Mexican armed forces.

 

Experts propose to review internally USMCA

 

On Tuesday, Reforma published an article where experts called to review USMCA internally and periodically. Among the experts, Adrian Vázquez, our managing partner, considered that this review would allow to evaluate, for instance, if imports are integrating value chains or displacing national production.

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English, News

AMLO – Trump meeting : A review on Trade and USMCA

10 Jul , 2020  

USMCA, Labor, Trump, AMLO, Adrian Vazquez, Investment

AMLO – Trump: Trade and USMCA

In what was a highly expected meeting regarding the celebration of USMCA’s entry into force, AMLO and Trump held a bilateral meeting and had a “trade-dinner” with numerous executives from the US and Mexico. We highlight the following matters during Wednesday’s event:

 

Joint Speech: Trade-Related

  • Trump highlighted that USMCA “includes groundbreaking labor protections for workers in both nations”, that it would bring back overseas jobs to the USA; close cooperation to stop the illicit cross-border flow of drugs and guns, cash, and contraband, and very importantly, stopping human trafficking.

  • AMLO highlighted that North America is a trade-deficit region. USMCA seeks to address this issue by increasing the regional content value through its rules of origin; new and current investments in the region will have to provide fair working conditions, and “comply” with the rules of origin.

Joint Declaration Between the US and Mexico

  • Mexico was the largest goods trading partner of the US in 2019, “supporting American and Mexican businesses, jobs, and workers.”

  • The USMCA is the ideal instrument to provide “economic certainty”.

  • “The USMCA reaffirms our shared understanding that North America is a region that generates prosperity for all of its citizens and it strengthens our cooperation in fighting corruption[…]”

  • “The USMCA marks the beginning of a new era that will benefit the workers, farmers, engineers, and entrepreneurs of both countries,[…]”

 

Trade Dinner

Although the dinner was closed to the media, an attendee, Patricia Armendáriz CEO of Financiera Sustentable, tweeted what was going on during the dinner. In her tweets, she quotes speakers. For instance, AMLO mentioned that “[We] are in the best disposal to favor your investments in Mexico”.

Ms. Armendáriz tweeted that a representative of the US Steel industry expressed their intent to expand in Mexico.

 

Ms. Armendáriz also noted that a representative of the US dairy expressed their interest in Mexico as a result of the USMCA.

 


“Democrats” React to AMLO’s Visit

In a letter dated July 8, 2020, US house representatives issued a letter to AMLO, expressing their “serious” concerns regarding the implementation of the labor reform. We highlight the following statements:

 

  • The letter mentions that “new cases of freedom of association violations arise”;

  • The letter claims “…failure to address flaws in collective bargaining agreements contract legitimation protocols threaten the possibility of independent and democratic worker voices.”

 

The letter makes other somewhat specific statements, for instance, regarding reports of illegal firings and protection unions signing new contracts for the workplace before employees are hired, as well as “obstruction” in collective bargaining agreements on behalf of employers and “protection unions”. These issues are the “core” of Annex 23-A in the USMCA, which may be subject to the facility-specific rapid response labor mechanism. Needless to say, the letter recognizes that COVID may have posed an obstacle to implementing the labor reform, which it has, and another issue Mexico is that the labor reform implementation was planned in several phases that would conclude in 2022.

VTZ Comments

 

Away from the political controversy regarding some statements or the visit, the trade-related matters that were publicly discussed had a strong “labor” footprint. Both heads of states highlighted USMCA’s labor provisions, and that such rules will benefit workers in both countries.

Having failed to visit Joe Biden, the Democratic candidate to US President, democrats may take a more aggressive “labor” stance against the Government of Mexico. From our perspective, it is clear that labor matters will continue to be one of the main themes in the US – Mexico trade relations, and the private sector must avoid denying labor rights recognized in Mexican Labor Law, just as we stressed in our Labor & Trade webinars.

 

What also caught our attention is how AMLO welcomes investment in the light of the USMCA, but his administration has made “controversial” investment decisions regarding, for instance, energy policies.

 

We are also curious as to what the US steel industry might have meant regarding “expanding” in Mexico. Steel products are constantly targeted in trade remedy matters in Mexico. As for the dairy industry, we recall that Mexico recently introduces some technical standards or Official Standards on powder milk, cheese, and yogurt.

USMCA & VTZ in the news

 

The day arrived and USMCA has finally replaced NAFTA on July 1st, 2020. USMCA modernizes trade and investment rules and, thus, seeks to promote economic development in the region. Given that USMCA is attracting the media, a prestigious Mexican news outlet, Reforma, has interviewed and quoted Adrian Vázquez, VTZ managing partner, regarding USMCA’s entry into force and the Labor Chapter.

 

On the day USMCA entered into force, July 1st, 2020, Adrian Vázquez was quoted in an article regarding the rule of law. Mexican attorneys have expressed that Mexico must uphold the rule of law established in the USMCA provisions to reap its benefits. Our managing partner emphasized that Mexico must have the will to respect the rule of law established in the USMCA, and he expressed that the private sector also plays an important role since it must demand compliance of trade and investment provisions.

On July 6,  2020, Adrian Vázquez was quoted in an article of Reforma on the labor dispute settlement mechanisms in the USMCA, particularly regarding “anonymous witnesses”.

 

Our managing partner expressed that “[I]f this tool is used by American unions in order to submit an anonymous testimony, sending any person as a witness,  that is a danger and not whether if they are or not anonymous.”

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English, News

USMCA Labor Disputes | The Trading Room

19 Jun , 2020  

USMCA Labor Disputes, WTO, Webinar, VTZ, Trade Lawyers, Mexico

In our Trading Room economic newsletter, we address Robert Lighthizer’s appearance before the U.S. Senate to share the 2020 Trade Policy Agenda, where he commented on possible USMCA Labor Disputes and the use of the rapid response labor mechanism as well as WTO actions; we also address the selection process for the WTO Director-General.

 

Future Labor Disputes in the US Trade Policy Agenda in 2020

On Thursday, June 17, the US Trade Representative, Robert Lighthizer, appeared before the Senate to share the Trade Policy Agenda 2020. We highlight the following two points of his participation:

USMCA Labor Disputes

Lighthizer noted that as of July 1, the U.S. will meet with the corresponding committees to discuss the possible use of TMEC’s ​​enforcement mechanisms in environmental and labor matters.

In labor matters, the dispute settlement mechanisms are essentially the State-State dispute settlement panels (chapter 31 of the TMEC) and the rapid response labor mechanism

Mexican news outlets have reported that the possible first labor disputes could relate to child labor and forced labor issues, particularly in the agricultural sector; however, the freedom of association (i.e. unions) and collective bargaining should not be excluded.

The US-Mexico Bar Association (USMBA) earlier this month organized the webinar “Labor & Trade: Is Mexico Ready for USMCA’s Labor Chapter?”, where our Jr. Partner Emilio Arteaga participated. The panelists discussed the rapid response labor mechanism as well as the current labor environment in Mexico, the video of the webinar is available in the USMBA’s website:

USMBA, Labor and Trade, USMCA Labor Chapter, Video, Lawyers, Bar Association, Mexico, Labor Disputes

In addition, VTZ will organize a series of Labor & Trade webinar (in Spanish) on the specific challenges for the Mexican manufacturing industry. If you are interested in attending, please click the following link:

TMEC, Capítulo Laboral, Industria Maquiladora, Contratos Colectivos, Sindicatos

Regarding environmental disputes, it is reported that it could be about agricultural biotech products because Mexico has not granted the necessary permits to import said goods since 2018.

 

U.S. Bound Tariffs in the WTO

 

Robert Lighthizer also noted that the U.S. bound tariffs in the WTO are outdated; U.S. bound tariffs are notoriously low with an overall 4.6%.

 

In this sense, Mr. Lighthizer pointed out that the U.S.’ bound tariffs no longer reflect the economic and political conditions of WTO members, some who continue to maintain very high tariffs compared to the U.S.

 

In short, the U.S. may seek to increase its bound tariffs in the WTO. If such event occurs, such change would impact products originating from WTO members that do not have a Free Trade Agreement with the U.S., such as China However, all WTO members must agree with any change regarding in the Schedule of Concessions (i.e. the bound tariffs) of another WTO Member. In other words, the process is not unilateral and requires negotiations.

 

It should be noted that since last year, President Trump has questioned the developing status of certain WTO members (e.g. China) and the benefits that it entails.

 WTO Director-General Selection Process

On June 8, 2020, the Mexican government formally submitted Jesús Seade, USMCA chief negotiator and current Under Minister for North America, as a candidate for the Director-General of the World Trade Organization.

 

Seade’s candidacy sparked diverse opinions among renowned Mexican professionals in the international trade arena that were reported on a news outlet. For example, an opinion is that the Director-General must have a certain status, that is being an ex-minister or former head of state, and he must have sufficient leadership to overcome the paralysis situation in the WTO.

 

It is expected that the selection process will last 3 months, so the WTO may have a new Director-General by the 1st of September. So far, three other candidates appear along with the Seade: the Nigerian Ngozi Okonjo-Iweala, the Egyptian Abdel-Hamid Mamdouh, and the Moldovan Mr. Tudor Ulianovschi.

In the end, how much will the Mexican reactions affect Seade’s aspirations to Director-General?

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English, News

Labor and Trade: USMCA Labor Chapter

2 Jun , 2020  

USMBA webinar, trade and labor, USMCA, comercio y laboral, VTZ, despacho de abogados comercio internacional

USMCA’s Labor & Trade Relevant Materials

Welcome, thank you for attending the USMBA’s webinar on “Labor & Trade: Is Mexico Ready for the Labor Chapter?.” VTZ law firm has prepared the following parallel and supporting material so that you can review it during or after this event.

 

USMCA Labor Chapter: Labor Dispute Flowchart and Other Proceedings

USMCA Text

English

If you want to see a markup of the labor chapter, you can review the document made by Professor Kathleen Claussen.

 

USMCA”Labor” Texts in Spanish – Texto TMEC

Mark-up of USMCA’s text (in Spanish) made by our Jr. Partner, Emilio Arteaga, available through google docs:

  • Capítulo 23 – Laboral Integrado
  • Capítulo 31 – Solución de Controversisas Integrado
  • Anexo 31 – A  (Mexico-EEUU) – Texto

 

USMCA Implementation Act: US Congress

To access the US-Mexico-Canada Implementation Act, click the following link: USMCA Implementation Act

 

USMCA Labor Chapter: An Introduction.

USMCA Labor Chapter

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English, News

Trade & COVID-19 – THE TRADING ROOM: AN ECONOMIC NEWSLETTER

29 May , 2020  

Trade Balance, Mexico, Exports, Imports, COVID-19, USMBA, USMCA

Trade & COVID-19

(PDF Version)

The National Institute of Statistics, Geography, and Information (INEGI) released on Monday the data on Mexico’s trade balance during April 2020. According to the figures, Mexico’s trade balance had a trade deficit of 3,087 million dollars during  April. Compared with the same month of the previous year, INEGI reported that Mexico had a surplus of $ 1.51 billion.

This negative monthly performance is, of course, explained due to the measures implemented by the COVID-19 pandemic, both nationally and internationally.

Mexican Trade Balance, April 2020, INEGI

 

The monthly deficit of the Mexican trade balance is explained by the annual decline in exports of 40.9%, this has been the worst drop in the indicator since 1986. When comparing to April 2019, oil and non-oil exports decreased by 66.4% and 39.4%, respectively.

Among non-oil exports, the following data stand out:

1. Export Destination

Exports to the United States decreased by 40.7%, while those directed to the rest of the world decreased by 33.4%.

On this, Fernando Ruiz Duarte, general director of the Mexican Business Council of Foreign Trade, Investment, and Technology (COMCE), commented “the April figures were already expected since around 80% of sales abroad are directed to the United States and its economy was practically paralyzed, so it is logical that exports decrease. ” He also called for the need to diversify export markets.

2. Manufacturing Industry

The other noteworthy data is that exports from the manufacturing industry decreased by 41.9%, whereby 79.1% correspond to the automotive industry and 20.9 % correspond to non-automotive manufacturing exports decreased.

3. Imports

Imports decreased by 30.5% when compared to the figures in April 2019. According to the type of goods,  consumer goods, intermediate-use goods, and capital goods decreased by 46.5%, 28.1%, and 26.7%, respectively.

Source: https://www.inegi.org.mx/contenidos/saladeprensa/boletines/2020/balcom_o/balcom_o2020_05.pdf

Webinar USMCA Labor Chapter & Trade

Just another friendly reminder that on June 2nd, 2020, the free webinar on “Labor & Trade: Is Mexico ready for USMCA’s Labor Chapter?” will take place organized by the US-Mexico Bar Association, in conjunction with VTZ.

The Panel will be made up of Ricardo Aranda from the Ministry of Economy, Gabriela Peregrina from DeForest Abogados, Olga Torres from Torres Law and will be moderated by our Jr. partner Emilio Arteaga. The members of the panel will discuss the results of USMCA’s labor chapter, the rapid response mechanism as well as whether there is any other labor-related risk to Mexico-US international trade relation.

Register to the Webinar: https://docs.google.com/forms/d/e/1FAIpQLSfFxcD_hJCmCFAGuBhj2YdbYeHU8Gf6el5cKC67x1hYy-gslQ/viewform

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English, News

Webinar USMCA Labor & Trade

25 May , 2020  

USMBA webinar, trade and labor, USMCA, comercio y laboral, VTZ, despacho de abogados comercio internacional

Webinar: USMCA Labor Chapter & Trade

On June 2nd, 2020 the free webinar on “Labor & Trade: Is Mexico ready for USMCA’s Labor Chapter?” will take place organized by the US-Mexico Bar Association, in conjunction with VTZ.

Labor & Trade: Is Mexico ready for USMCA’s Labor Chapter?

The members of the panel will discuss the results of USMCA’s labor chapter, the rapid response mechanism as well as whether there is any other labor-related risk to Mexico-US international trade relation. Next, the panel will turn to the recent amendments to Mexican labor law related to freedom of association and collective bargaining. Taking into account the response mechanism and current labor environment in Mexico, the Panel will discuss whether the “priority sectors” are taking the necessary steps to minimize labor-related trade risks? Finally, members of the panel will discuss the future relationship between trade and labor lawyers, including cross borders.

 Register to Labor& Trade webinar

https://docs.google.com/forms/d/e/1FAIpQLSfFxcD_hJCmCFAGuBhj2YdbYeHU8Gf6el5cKC67x1hYy-gslQ/viewform

The panel, experts in Trade or Labor law.

Ricardo Aranda from the Mexican Ministry of Economy

Ricardo Aranda Girard is Director General for International Trade Disciplines in the Under-Secretariat for Foreign Trade of Mexico’s Secretariat of Economy. Ricardo was the Mexican negotiator in charge of the Environment and Labor Chapters of the United States-Mexico-Canada Agreement (USMCA). He has also been responsible for the negotiations of the Environment Chapter of the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) and the TBT chapters of the Pacific Alliance, the Mexico-Panama Free Trade Agreement, and the Mexico-Cuba Partial Scope Agreement.

Gabriela Peregrina from Deforest Abogados

Gabriela Peregrina is a partner at Deforest Abogados, her practice focuses on Labor Law. Gabriela has experience in labor litigation, audits, subcontracting, training workshops, as well as negotiating with different unions in Mexico.

Olga Torres from Torres Law

Olga Torres is the Managing Member of Torres Law, PLLC. Ms. Torres concentrates her practice in the areas of international trade and national security law, anti-corruption compliance, and Customs matters. In the area of customs, Ms. Torres advises clients on import compliance matters, including customs rulings, classification, country of origin, special duty programs such as NAFTA, focused assessments, C-TPAT, and seizures of goods by U.S. Customs and Border Protection. She also assists with antidumping/countervailing duty matters before the Import Administration of the U.S. Department of Commerce.

Emilio Arteaga from VTZ

Emilio Arteaga Vázquez, Antidumping, Comercio Internacional, Abogado

Emilio Arteaga, VTZ junior partner and member of the USMBA, will be the moderator of this webinar. Mr. Arteaga’s practice specializes in international trade and business, such as anti-dumping, rules of origin, origin checks, non-tariff restrictions, international contracts, among other topics.

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English, News

Mexican International Trade Weekly News – COVID update and Essential Activities, WTO Azevedo and G20 – The Trading Room

15 May , 2020  

Trading Room, VTZ abogados, Mexican Lawyers, COVID, Essential Activities in Mexico, WTO, Azevedo, G20

This week on the Trading Room, we address the Mexican the weekly news that impacts international trade in Mexico: Mexican COVID-19 strategy to resume activities, changes to the essential activities, Director General of the WTO steps down and its implications to Mexico, as well as the G20 decision. Download our newsletter in the following link: Trading Room – May 15.

Changes to “Essential Activities” and Mexican COVID-19 strategy to resume activities.

After requests from the US government and industry, the Mexican Ministry of Health finally published yesterday the decision that adds as an “essential activities” the transportation equipment manufacturing industry, as well as the construction and mining; the decision also establishes a three-stage strategy to resume educational, social, and economic activities.

However, the three aforementioned industries will be able to resume activities until June 1, so supply chains will likely be affected, particularly OEM plants in the US that will begin operations the following week, as we reported last week citing the MENA.

For more information on the stages, we prepared an Alert – COVID.

 

Mexican Official Gazette Controversy

We consider it important to share that the General Health Council published a similar decision on Wednesday, May 13, however, it was suddenly and incredibly withdrawn during the day by the Official Gazette of the Federation. The department issued a statement with an explanation.

 

A retired supreme court judge, Mr. Cossío, stated in a tweet that the alteration of the Official Gazette was done because public officials realized that the General Health Council lacked powers to issue such a decision.  

 

The Mexican Bar issued a statement regarding this event calling the government to protect the trustworthiness of the Official Gazette.

In VTZ we fully endorse the content of the letter. 

WTO Director General, Azevedo, resigns.

Yesterday, May 14, Roberto Azevedo, Director General (DG) of the WTO, announced that he will step down from his position on August 31 of this year. Roberto Azevedo began his position in 2013, a mandate that was renewed in 2017, and that ended in August 2021.

 

Within his mandate, the Commercial Facilitation Agreement, the expansion of the Information Technology Agreement, among other decisions, were agreed; Also, Azevedo has been criticized for being passive in defending the multilateral trading system due to the constant attacks of the US against the Appellate Body (including on a budgetary basis).

 

According to his farewell speech, Azevedo explains that he is resigning because, in part, members will be able to choose a new director who will have the time to prepare for the next Ministerial Conference as well as to set a new path for the future of the WTO, taking into account the new post-COVID-19 realities.

 

What implications are there for Mexico?

The WTO is going through a critical time, as no consensus has been reached, notably, with regard to the selection of Appellate Body members. Without a leader at the head of the WTO, the multilateral system will be paralyzed because members will hardly be able to reach new agreements to renew the foundations of the WTO, such as new agreements on subsidies, dispute settlement, fishery subsidies, etc.

 

Lighthizer, the US Trade Representative, stated that he looks forward to participating in the selection of the new DG; however, if the members do not manage to choose promptly, the trade uncertainty will continue because it will be difficult to reduce the tensions of the US-China trade war, to return the “Rule of Law” to international trade relations punishing unilateral-protectionist actions, as well as to face the post-COVID effects.

 

The regional blocs will continue to take on greater relevance in international trade, fragmenting and rendering the multilateral system obsolete. Although Mexico is a strong supporter of the multilateral system, Mexico has established itself in various regional blocs, notably USMCA (with a renewed dispute settlement chapter), CPTPP, Pacific Alliance, and now modernizing its trade relations with the European Union, which may allow Mexico to become an attraction pole for new regional and global value chains.

G20 Statement vs. COVID-19

On May 14, the Ministry of Economy reported that the Trade and Investment Ministers of the G20 agreed on a series of specific actions in the short and long term to counter the economic effects of the COVID-19 pandemic.

 

The actions foreseen in the short term focus mainly on issues of trade regulation and facilitation, global value chains, strengthening of foreign investment, transparency, and operation of logistics channels. In the long term, members agreed to strengthen the multilateral trading system.

 

Finally, the Ministry of Economy’s statement indicates that the G20 Trade and Investment Working Group must report the status of implementation of the agreed actions.

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English, News

COVID-19 – Reopening Activities in Mexico

14 May , 2020  

COVID-19 Reopening activities in Mexico

MEXICAN PLAN TO RESUME SOCIAL, EDUCATIONAL, AND ECONOMIC ACTIVITIES

Alert – Resuming Activities in Mexico

 

Today, 14 May 2020, the Ministry of Health published the “final” version of the Agreement[1] that contains the strategy to resume social, educational, and economic activities in the Official Gazette of the Federation; the Agreement adds new industries in the category of essential activities. Yesterday, a “draft” version of the agreement, issued under the authority of the General Health Council, was published in the Official Gazette that was suddenly removed, creating uncertainty.

Reopening Activities in Mexico

The strategy consists of a gradual reopening of the activities considering the following three phases:

 

Phase 1: Local Communities with 0 COVID cases.

Next Monday, 18 May 2020, phase 1 initiates with the reopening of activities in municipalities (local communities) that do not register COVID-19 cases and that are not in the vicinity of municipalities with COVID-19 cases. The Mexican Science and Technology Institution (CONACYT) developed a COVID-19 map that reports cases at a municipal level, visit in the following link.

Estrategia para la reanuadación de actividades, actividades esenciales y no esenciales, emergencia sanitaria por COVID-19, reanudación de actividades

 

The Ministry of Health, no later than Sunday 17 May 2020, will publish which municipalities will be able to resume school, social (whether public spaces may be open or not), and essential and non-essential economic activities.

 

Phase 2: Developing “Guidelines” For Resuming Activities in General

From 18 to 31 May, the following General “Guidelines” or “rules” aimed to prepare the reopening of activities in Mexico will be developed:

  • health protocols for resuming activities safely;
  • safety training for personnel in the work environment;
  • readjustment of spaces as well as production processes;
  • the implementation of entry filters, as well as sanitation and hygiene in the workplace;
  • among other matters determined by the Ministry of Health.

 

Phase 3: Reopening Activities 1 June 2020

On 1 June 2020, social, educational, and economic activities will resume per the “traffic light regional system” that will report every week and through “colors” the health and sanitary measures appropriate for the labor, educational and the use of public spaces:

 

 

Essential Activities: Construction, mining, and transportation equipment manufacturing industry.

Following article 4 of the agreement, the construction, mining and transportation equipment manufacturing industries will be considered as essential activities, but such industries may resume activities by June 1, 2020.

From 18 to 31 May, companies within said industries must implement the health and safety guidelines in the work environment that will be issued by the Ministry of Health, guidelines that will be developed in coordination with the Ministry of Economy, Ministry of Labor as well as with the Mexican Institute of Social Security.

Should you have any doubts, do not hesitate to contact us.

 

[1]Acuerdo por el que se establece una estrategia para la reapertura de ls actividades sociales, educativas y económicas, así como un sistema de semáforo por regiones para evaluar semanalmente el riesgo epidemiológico relacionado con la reapertura de actividades en cada entidad federativa, así como se establecen acciones extraordinarias

English, Reports

Tax Obligations for Foreign Shareholders in Mexico

11 May , 2020  

Shareholders of Mexican company, Registration in Federal Taxpayer Registry

Registration in the Federal Taxpayer Registry – Foreign Shareholders

PDF Version

In accordance with the provisions of the Federal Tax Code, the shareholders of Mexican companies are required to:

  1. Request registration in the Federal Taxpayer Registry.
  2. Provide the information related to identity, address, tax situation, as well as to indicate an email and telephone number.
  3. Request an electronic signature certificate (e-signature).

The code of the Federal Taxpayer Registry that is assigned to each shareholder must be placed in all documents and procedures, printed or electronic, related to the Tax Administration Service.

In addition, the code of the Federal Taxpayer Registry for each shareholder must be identified in the following documents:

  1. In the public deed that contains the incorporation of the Mexican company in which they participate as shareholders.
  2. In the partners and shareholders minute book that each company must hold.
  3. In each shareholders’ meeting deed.

In relation to the above, as of this fiscal year 2020, a notice must also be filed with the tax authorities, informing the name and code of the Federal Taxpayer Registry of the shareholders, every time a modification is made in the stock capital of the company.

As it can be seen, it is important that the shareholders of a Mexican company request its registration in the Federal Taxpayer Registry, since the assigned code must be inserted in a series of legal documents; in addition, the fact of not requesting the registration inscription in the aforementioned Registry when it is obliged to do so, constitutes a tax offense, having as first consequence a penalty, but above all, the company would not be able to access certain tax benefits by not proving that its shareholders are duly registered in the Federal Taxpayer Registry.

However, there is a facility that allows shareholders who reside abroad and participate in Mexican companies, to avoid the request of registration in the Federal Taxpayer Registry, provided that such companies carry out the following:

  1. Submit to the Tax Administration Service, within the first three months following the end of each fiscal year, a list of shareholders residing abroad.
  2. Indicate the address, tax residence and tax identification number of each shareholder residing abroad.

In the event that the Mexican company does not comply with the aforementioned requirements, the foreign shareholder has the legal obligation to request its registration in the Federal Taxpayer Registry.

Please feel free to address Jorge Montes, partner and leader of the Tax Practice Group in VTZ, for any doubts or comments in relation to the above.

Jorge Montes

Tax Partner

jorge.montes[@]vtz.mx

 

 

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