Mexican Ministry, Economy, Clouthier, International Trade, VTZ, Lawyers, Energy, Consultations

New Mexican Minister of Economy: USMCA Energy Consultations and RRLM petition

In recent days, there has been a lot of movement regarding the Mexican Ministry of Economy. In this post, we discuss about the developments regarding the energy consultations between Mexico and the United States under the USMCA. Furthermore, we address the resignation of the Mexican Minister of Economy, Tatiana Clouthier, and the appointment of the new Minister, Raquel Buenrostro. Finally, we also inform about the most recent petition for a Rapid Response Labor Mechanism (RRLM).

USMCA Energy Consultations Are Prolonged

On July 20, 2022, the United States Trade Representative (USTR), Katherine Tai, announced the request for consultations with Mexico regarding measures aimed at favoring state electricity companies, the Federal Electricity Commission (CFE, by its acronym in Spanish), and the state oil and gas company, Petróleos Mexicanos (PEMEX). In particular, the United States argues that Mexico has adopted measures that appear incompatible with USMCA provisions regarding the national treatment of goods and investment, among other matters. The request for consultations is available in the following link: Consultation.  Incidentally, Canada also expressed interest in participating in the consultations.

The USMCA states that the Complaining State may request the constitution of a panel within 75 days of initiating consultations. This deadline expired on Monday, October 3, 2022.

Position of the United States of America and Mexico

Despite the expiration of the consultation period, the United States or Canada have not yet expressed their interest in activating a Panel.  By contrast, three officials from the U.S., Mexican or Canadian governments told Reuters that progress in the talks meant they would drag on beyond October 3. For its part, the Mexican government has mentioned that it will continue with joint efforts to explore a solution.

Rosanety Barrios, a former Mexican energy official, said that although Mexican regulators were trying to give the impression of being more flexible, many issues remained unresolved.

Extension of Consultations

As is clear from the text of the USMCA, once the time to resolve a conflict through consultations has elapsed, the Complaining Party may request the constitution of the Panel. However, there is no obligation to activate a Panel. That is why, consultations can run their course.

In this regard, it is important to note that USMCA provides for a second consultation period, which its duration may be determined by the parties. Rosanety Barrios mentioned that «Instead of reaching a final resolution, the two sides seemed to be able to ‘kick the can until the next (Mexican) government.'»

As we mentioned, everything seems to indicate that the consultations on energy will continue. However, the US may request a Panel any time now, if there is few progress in this «second» period of consultations.

Resignation of Tatiana Clouthier

Two weeks after presenting the new industrial policy plan, Tatiana Clouthier publicly announced her resignation as Secretary of Economy at the Press Conference of President Andrés Manuel López Obrador, last Thursday, October 6, 2022.

During the conference, Clouthier mentioned: «I played in the big leagues and one must know when to retire. I now will go to the fan-side, where I will support the team [government].» The former Secretary also commented that «she was exhausted» and that she no longer «contributes».

Some opinion-experts consider that the reasons for his resignation are not entirely clear or transparent. In fact, some comment that Clouthier did not have much room for maneuver within the government. In the end, one can only wonder whether this resignation is linked to the USMCA energy dispute.

Raquel Buenrostro, the New Minister of Economy

Friday 7 of October 2022, the President announced that Raquel Buenrostro will be the new Minister of Economy. Buenrostro is a person close to the president, occupying positions of trust in this administration, such as being Head of the Tax Administration Authority (SAT) and Director of Budgetary Control in the Ministry of Finance and Public Credit.

Despite the recession and low economic growth, the SAT has managed to maintain the same levels of tax collection and even increase them under the direction of  Ms. Buenrostro. That is, the SAT has been a pillar for the viability of the government’s social programs and projects.

 However, these results were achieved, in part, through certain  «aggressive» tax policies against taxpayers (see, our 2020-2021 tax collection outlook).  For example, the SAT does not allow external lawyers to attend its meetings with taxpayers; it excluded IMMEX services from the VAT/IEPS certification; is promoting the famous «carta porte», which the industrialists have asked to reconsider, among other actions.

What does the future look like with the new Minister of Economy?

Interestingly, on the day of Miniter Clouthier’s resignation, the business community made a call for the new head of the Ministry of Economy to be a person open to dialogue. Therefore, Raquel Buenrostro must abandon the vision of increasing tax collection, and now she must look towards trade and investment facilitation projects and competition to boost the national economy. That is, a real change of perspective.

Regardless, we obviously emphasize that the new Minister of Economy has the following major duties:

  • Industrial Policy.
  • USMCA Controversies and Consultations.
  • FTA negotiation with South Korea and the United Kingdom.
  • Fight against inflation.

Rapid Response Labor Mechanism for the sixth time?

The Glass Industry Union (Sindicato de Trabajadores de la Industria de Vidrio or STIV), affiliated to the Workers and Farmers Confederation (Confederación de Trabajadores y Campesinos or CTC), won the Union Representation vote against the Free and Democratic Workers Independent Union (Sindicato Independiente de los Trabajadores Libres y Democráticos).

This victory on Union Representation and ownership of the Collective Bargaining Agreement occurred in the company Saint Gobain Mexico. This vote was held on September 28 and 29, 2022. Saint Gobain Mexico is a company with mostly French capital, located in the State of Morelos and produces automotive glass.

Petition to Review Alleged Denail of Labor Rights

On September 27, 2022, AFL-CIO filed a complaint against Saint Gobain for alleged denials of collective rights before the Interagency Labor Committee for Surveillance and Compliance (ILC) of the United States Congress. For its part, the United Steelworkers (USW) also joined the petition. The ILC may recommend the USTR to activate the rapid response labor mechanism, if the case has merits.  

According to the AFL-CIO, Saint Gobain supported the Glass Workers Union, which had held the collective bargaining agreement ownership since1996.

On the other hand, USW considers that the company allowed the STIV/CTC to intimidate workers to influence the vote. USW also alleges that STIV/CTC representatives threatened a leader of the new independent union and stopped production lines to pressure workers to support the STIV/CTC.

What are the implications of this new Labor Mechanism petition?

If the ILC considers that AFL-CIO and USW provided sufficient and credible evidence of a denial of rights, this case would represent the sixth rapid response labor mechanism case concerning a facility of an automotive good. If denied, Saint Gobain would represent the second case in which the ILC decides not to recomend activating the rapid response labor mechanism.

Can We Expect New Labor Disputes?

According to the president of the National Council of the Maquiladora and Export Manufacturing Industry (Index), Luis Manuel Hernández, the maquiladora industry expects new labor complaints against Mexican manufacturing plants, as well as in the automotive, electrical, and medical sectors. During the press conference to present the 47th National Convention Index, Hernández explained that

"These complaints will continue to arrive because it is natural. We are close to May (2023), which is when we will have to reach compliance (of the labor reform) and the complaints will continue to arrive." 
Luis Manuel Hernández
Index President

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