Newsletter March 02/2019 – Reforms to Labor Regulations

As part of the execution process of the new Commercial Treaty Mexico, United States and Canada (T-MEC), Mexico accepted to be part of “Agreement 98” of the International Labour Organization (ILO).

Agreement 98 main purpose, is to provide free association access with Unions, granting to workers the possibility to join new Unions, and the obligation to employers to recognize the Unions with whom a Collective Union Contracts is executed(*).

As result of amendments to Federal Constitutional provisions on labor matters, and to Mexican Congress ratification of Agreement 98, labor reforms at secondary legislations are expected to be effective from May, 2019. Most relevant reforms:

  1. Elimination of the current labor justice system

Current Labor Courts (Juntas de Conciliación y Arbitraje), will be replaced by State and Federal Labor Tribunals, who will be responsible of solving conflicts between employees and employers.

Creation of a decentralized and autonomous entity (the Entity) for Conciliation and Registration.

New judicial process will have to be followed: (a) employees and employers before going to the Labor Tribunals, must go to the Entity for a mandatory conciliatory audience. In case of local controversies, audience shall be conducted at local Conciliatory Centers.

The Entity will also be responsible for the registration of all Unions, and Collective Union Contracts.

  1. Unions and Collective Union Contracts

Negotiations between employers and Unions must ensure legit interest of both workers and employers, seeking to guarantee the following principles: (a) certainty in the execution, registration and deposit of the Collective Union Contracts, (b) effective representation of Unions, (c) all Unions shall be “Active”, (e) free selection of Unions by workers, will allow to have more than one Union at the same company.

Registration of all Collective Union Contracts, either local or federal, and all administrative procedures related shall be of the exclusive federal competence.

Reforms seek to reinforce relationship between workers and Union, by having a stronger link with Union’s directors, and more effective affiliation process with Union.

All Companies will be subject to inspections from labor authorities seeking to confirm (i) compliance with labor general conditions, safety and hygiene measures, (ii) training.

Derived from inspections, companies in breach of labor obligations will be subject to fines.

Companies without workers, shall have to prove such situation.

(*) Collective Union Contracts. Contracts executed between Unions and Companies as employers, establishing labor conditions for the benefit of workers members of such Union.

Newsletter February 01/2019 – Highlights on Presidency

1. After official cancellation of Mexico´s biggest infrastructure project, a new airport for Mexico City, President Lopez Obrador announced launching others important projects in southern Mexico, (i) construction of a refinery in his home state of Tabasco, and (ii) a tourist train called the Maya train.

2. On December 15th, President Lopez Obrador presented the Budget for 2019, which seeks to make the economy more self-sufficient, reduce  corruption and crime and support the poor.

3. The finance minister set a target for a primary surplus (i.e. before interest payments) of 1% of GDP after an expected 0.8% for this year 2019*. Although President Lopez Obrador has suggested that preventing corruption would result in massive savings, Budget does not rely on that promise, making
necessary for him to take hard decisions (reduced his plans for higher social spending).

4. President Lopez Obrador planned to spend about 0.5% of GDP*, on scholarships for the young, additional economic supports will be targeted for a universal pension for elder people.

5. President Lopez Obrador’ s promise, of cutting salaries of senior officials will be stopped, due to a ruling of México´s supreme court, which suspends a law that cuts the salaries of senior officials (including judges), arguing such law violates public employees´ rights.

6. Since December and most part of January, an important shortage on gasoline affected at least 8 States of Central Mexico. President Lopez Obrador explained that, the reason of such measure was to prevent robbery of gasoline by criminal groups. Although important affectations, an important sector of the population and main private commercial associations backed up President’s decision, since for the first time in many years, somebody is doing something against crime.

7. President Lopez Obrador also officially cancelled two important promotion entities, ProMexico and the Mexico Tourist Promotion Council arguing reduction of excessive operation expenses. Offices from both entities in Mexico and abroad have been already closed. President Lopez Obrador, announced that activities performed by these entities will be taken now by the Mexican embassies and consulates.

*The Economist

Our Clients

* Bridgestone (2013-2014)
Daifuku (2013)
* EKK Eagle Industries (2013)
* G-TEKT Corp (2013-2014)
* Hiruta Kogyo (2012)
iGate (2009)
* ISS America/Iino Manufacturing (2013-2014)
* KI USA (2014)
NOK Corporation (2013)
Nitto Kohkei (2016)
* Parker Trutec Mexicana (2016)
* Sankyo Kasei (2012)
* Shinsho/Kobelco Group (2013)
* Shinano Kenshi (2014)
Sojitz Corporation ( 2005)
Tokura Corporation (2014)
* Topy Fasteners ( 2015)
* Yutaka Giken (2012)
* Yuken Corporation (2014)
* Yuken Surface Technologies (2015)

*Manufacturing Operations

Real Estate Practice for Industrial (Manufacturing/Assembly) Projects

For many years now, partners of SLG Mexico have advise foreign corporations from the U.S., Canada and Asia (Japan, South Korea, Hong Kong, China, Malaysia, Singapore, Taiwan, India), in the opening and operational processes of manufacturing/assembly plants in different regions of Mexico, in such important sectors of the Mexican economy as: automotive, textiles, plastic injection, electronics, IT, food & beverage, and trading.

 Real Estate Practice

SLG Mexico´s partners have a diversified real estate experience. Our expertise includes representation of major national and multinational corporations on both sides of a real estate operation, including implementation of all kinds of transactions:
(i) preparation of site selection studies for the ideal location of new or expansion projects;
(ii) financing in connection with real estate projects;
(iii) construction/opening of manufacturing or assembly plants, office buildings;
(iv) structuring and creation of foreign investment trusts and other investment vehicles;
(v) acquisition of land, or existing buildings;
(vi) due diligence, including title search, title opinions, environmental, construction and zoning regulations;
(vii) preparation of contractual frame, including its negotiation and implementation;
(viii) the negotiation, drafting and implementation of easements, servitudes and use rights for infrastructure facilities and installations, and
(ix) the preparation of all kinds of transactional documents, contracts and agreements, in conducting due diligence work, and dealing/negotiations with federal, state and municipal governmental authorities, the Public Registries of Property, environmental matters and land zoning matters.

Land Purchase in Mexico (General Information)

(i) According to the Mexican Law, corporations with foreign investment participation can acquire land in any place within the Mexicana territory. The Law also provides that Foreign Direct Investment (FDI) may acquire real estate within the so-called “restricted zone” (i.e. the strip of land 100 kilometers wide along the border and 50 kilometers wide along the coast). This rule applies for industrial facilities and housing premises to be used by employees working at the facilities; consequently, foreign investors may acquire such properties without restrictions.

(ii) Foreign individuals may acquire residential real estate within the restricted zone, through the incorporation of a trust mechanism, by which the foreigner becomes the exclusive beneficiary of the rights to use such property.

(iii) In the specific case of manufacturing/assembly plants, location is a key decision to be made, not only due to the proximity to customers, but also considering infrastructure available, industrial costs and incentives granted by the State and Municipal authorities.

These incentives basically refer to: tax exemptions; training programs; special prices for land and improvement of infrastructure.

(iv) Under Mexican Law, an acquisition of real estate requires compliance with different formalities, to secure proper title (e.g. due diligence to confirm no liens and encumbrances; incorporation of a subsidiary, execution of different agreements with governmental agencies and/or private entities such as developers, industrial parks, obtaining of licenses, environmental, zoning).

(v) When acquiring land, other considerations must be taken into account, since in some cases, the government (city, state or federal) could be the owner of the land, or in some other cases an industrial park; private owners or agrarian communities (Ejidos) may be the owners. In any of the foregoing cases, different legal formalities must be accomplished, in order to have proper legal title on the properties. For instance in the case of the Ejidos, it is possible to acquire land from them, however, a special process is required in order to purchase land from the Ejido, by obtaining special approvals from the Board.

(vi) All real estate acquisitions must be legalized before a Public Notary, who will issue the title certificated included at a public deed.

(vii) Real estate acquisition, generates different taxes and duties such as:
Transfer of Property Taxes, Valued Added Tax (on constructions), appraisal expenses, registration duties with the Public Registry of the Property and other duties imposed by different authorities, depending on the nature of the project (environmental, land use, government concessions, permits, licenses).