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On Tuesday, the Decree that repeals the Declarations of all Special Economic Zones (“ZEEs”) was published in the evening edition of the Official Gazette of the Federation.
According to the Decree, one of the main reasons for ending this project is the omission of appointing the Integral Administrator, the person in charge of building and managing a Zone, due to the lack of compliance with legal requirements on behalf of the interested applicants; in addition, it was noted that the SEZ could not operate due to lack of both private and public investments.
The business sector in Mexico said it regrets the government’s decision since they were not consulted before officially ending the SEZ.
According to the Decree, the current administration will focus on the Mayan Train, the Tehuantepec Isthmus Development Program and the Northern Border Free Trade Zone Program.
In theory, a Mexican newspaper will share our Jr. Partner’s (Emilio Arteaga) thoughts in the following days regarding this decision. We will share the piece in our social media once published.
News outlets report that the points of disagreement regarding USMCA are now less between the Trump administration and the Democrats.
The president of the House of Representatives of the US Congress, Nancy Pelosi, said last week that an agreement on possible changes to the text of USMCA was imminent. However, Pelosi said during this week that there may not be enough time to close this agreement this year as there are still many legislative steps, such as the preparation of the implementing legislation and its voting.
The US Congress has only a few days of sessions left (there is the possibility of extending them) to resolve these pending issues and to approve the treaty in December. News outlets continue to highlight that the Democrats are not yet satisfied with the enforcement mechanism on the labor provisions, so it is possible that the “updated” USMCA will be approved next year in the US.
Everything seems to indicate that there will be a modification to USMCA’s text, these changes will obviously have to be approved by Mexico, possibly through amendment protocols.
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This Thursday in his morning press conference, Mexican President, AMLO, declared that the Special Economic Zone policy will disappear.
According to his statements:
“[SEZ] were supposedly going to help, but they never did anything to help. The business was made, the land was bought and the budget was used, which did not benefit anything.”
Though SEZs were officially created, “investment authorizations” (for private parties) were not been granted by the relevant Mexican Authority. It is evident that the results of the SEZ are not tangible since they are still at an “early” stage of their implementation.
The federal government now bets in creating “Development Projects”, which we believe refers to creating a sort of “Free Trade Zone” with industrial parks throughout the Isthmus corridor. The Master Plan of this project will be concluded in October.
The 24th of April the relevant Senate commissions approved the Mexican labor reform. As we have reported, this reform includes the creation of specialized tribunals, union transparency and guaranteeing collective bargaining so that just and competitive conditions prevail in the labor market, changes that seek to fulfill the Mexican obligations under USMCA. Now, it is the turn of the Senate to discuss and approve the reform.
Mexican news outlets, however, reported that the American Federation of Labor and Congress of Industrial Organizations, a major US union, expressed its rejection towards USMCA’s ratification as it considers that Mexico does not have the sufficient instruments to implement the labor reform successfully.
Another step towards USMCA’s ratification was taken on April 18th when the US International Trade Commission of the US issued its report. The report predicts USMCA’s economic impact in industrial and economic sectors; in fact, it predicts that the USMCA will allow the USA to grow less than 1% of its GDP.
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In a news outlet report, a member of the National Fund for the Promotion of Tourism (FONATUR, acronym in Spanish), Pablo Careaga Córdova, held that one of the most important infrastructure project of this administration, the Maya Train that will be located in the Yucatan Peninsula, would benefit from the Special Economic Zones policy, given that the statements made last week by representatives of the Ministry of Treasury about their possible elimination. According to Mr. Careaga, the SEZ and the Maya Train could create a synergy and foster investments, among other matters.
As reported by several news outlets, last Wednesday border patrol agents (CBP) were transferred to the cities that are most affected by the migration crisis. This situation has provoked a delay in the international trade operations in the border; for instance, two lanes of the Customs “Otay Mesa” have been closed temporarily. According to the media, 70% of the international trade between Mexico and the EEUU is done by land.
Meanwhile, President AMLO minimized the situation by declaring that “there are no grave problems”, notwithstanding that trucks take from 6 to 12 hours to cross the border, according to reports, which may cause exporters to have late deliveries.
Donald Trump has threatened to impose tariffs of 25% to cars and/or closing completely the border in the next year if Mexico does not stop the migration and drug flow. This action would be clearly incompatible with the auto side-letter that was signed under USMCA.
The Minister of Economy, Graciela Marquez, stated that Mexico would initiate a WTO dispute if the US closes its border.
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On September 29, 2017, the Mexican Federal Government published three decrees creating three Special Economic Zones (SEZ), namely Lázaro Cardenas-Union (State of Michoacán and Guerrero), Coatzacoalcos (State of Veracruz) and Puerto Chiapas (State of Chiapas). As previously reported by VTZ, the Federal and Local governments will provide tax, customs and business incentives and facilitation measures to investors located within the SEZ, incentives that have been informed in greater detail in the Decrees. Needless to say, there are slight nuances among the three Decrees.
It must be noted that only investors within the Special Economic Zone, who have been authorized by the relevant authorities, may benefit from the incentives, which cannot be modified in prejudice of the investor; in this case, 15 years as of the date authorization to invest has been granted. Furthermore, some activities are prohibited within the SEZ, such as petroleum refinement and natural gas processing as well as the storage, transportation, distribution, and trading of oil & gas goods to persons located outside their SEZ; additional activities may be listed in future guidelines. Finally, authorities have made an emphasis on employment and certain requirements on this matter are imposed in order to benefit from the tax incentives.
In this update, we will inform the following:
To access our complete update, click the following link: VTZ – SEZ -Decretos 02092017 – Final
Yesterday, the President of Mexico, Enrique Peña Nieto, signed the decrees that created Mexico’s Special Economic Zones (SEZ), which was published this Friday (September 29, 2017) in the Official Gazette.
The first three SEZs will be located at Lázaro Cardenas-Unión (State of Michoacán and Guerrero), Puerto Chiapas (State of Chiapas), and Coatzacoalcos (State of Veracruz), where investors will benefit from tax, business, and trade facilitation measures and incentives. These decrees contain the details of this new and aggressive economic policy that seeks to attract investment.
Throughout this year, VTZ has reported on Mexico’s SEZ and made available a report outlining the legal framework, check out our VTZ SEZ Report, along with several updates. For more information, contact Mr. Emilio Arteaga Vázquez (email@example.com).
On June 23, 2017, the Inter-Ministerial Commission approved the creation of five SEZ, namely those that will be located in the states of Chiapas (Puerto Chiapas), Veracruz (Coatzacoalcos), Michoacán (Lázaro Cárdenas), Guerrero (Puerto Unión), Yucatán (Progreso) and Oaxaca (Salina Cruz).
Now, the next step is for the President to issue the Decrees that will officially create each SEZ. It is expected that in the upcoming months, or even weeks, Decrees will start being published in the Official Gazette. The Mexican States also play an important role in the development of a SEZ.
Therefore, the purpose of this update is to inform which are the economic sectors that are being targeted by the Mexican government to invest in the SEZ, as well as the significant legal developments regarding the implementation of the Mexican SEZ at the state level.
To access our update, please download it from the following link: Update-SEZ-17082017
Economic Sectors, featured, Income Tax, Investing in Mexico, Lazaro Cardenas, Mexican Lawyers, Mexican SEZ, Puerto Chiapas, Puerto progreso, Puerto Unión, Salina Cruz–Coatzacoalcos, Special Economic Zones, Tax Incentives, VAT
On February 10, 2017, the Mexican Minister of Treasury – José Antonio Meade Kuribreña – attended a meeting of the National Confederation of Governors, held in Lázaro Cardenas, where he announced the tax incentives that the federal government will provide to those companies that invest within Mexico’s Special Economic Zones.
The present Update aims to complement our Report on SEZ, which was published last month, and it will inform the following:
To download the Update, please click here: Update-SEZ-13022017
Mexico is about to implement its Special Economic Zone policy, and VTZ has developed a report with the aim to assist potential investors to have a general idea on the applicable legal framework. In light of the recent international events, particularly regarding the new US administration, Mexico will probably use this new policy to respond to restrictive trade and investment policies by granting aggressive tax, customs, and business incentives.
To access the report, please click the following link: VTZ Report on Special Economic Zones