The minimum wage in Mexico has increased by 3.9 %On December 18, 2013 the National Commission on Minimum Wages (the “Commission”) approved a 3.9%increase in the minimum wage, the same which became effective on January 1, 2014. Such increase is relevant inthat employees in Mexico have a right to receive wages that are not less than the general or professionalminimum wages.The minimum wage is defined by the Mexican Federal Labor Law as the minimum amount to be received, incash, by an employee for services rendered in a work shift, the same which should be sufficient to satisfy thenormal needs of a head of household with respect to material, social and cultural matters and to provide for themandatory education of his children. They are classified as follows:(i). The general minimum wage is determined by geographic area pursuant to the cost of living in each place.Pursuant to the last adjustment, the new general minimum wage for geographic area “A” is $67.29 pesos per day(this area consists of the following areas. among others, Baja California and Southern Baja California, the FederalDistrict and its metropolitan area, Acapulco, Ciudad Juarez, Guadalajara and its suburbs, Monterrey and itsmetropolitan area, Hermosillo, Matamoros, Reynosa and Coatzacoalcos). For geographic area “B,” it is $63.77pesos per day (this area consists of the following, areas among others, Aguascalientes, Campeche, Coahuila,Colima, Chiapas, Durango, Guanajuato, Hidalgo, Michoacán, Morelos, Nayarit, Oaxaca, Puebla, Querétaro andSan Luis Potosí).(ii). The professional minimum wage is applicable to special professions, occupations or work (within one orvarious geographical areas).This increase does not mean that all wages must be increased in such proportion; rather only the wages of thoseemployees receiving minimum wages must be increased. In the case of employees who receive wages above thegeneral minimum wage, the increase is optional, and the same should be negotiated by each company and itsemployees and/or union, as applicable.It is important for employers to pay their employees the correct salaries, because if they fail to do so, theDepartment of Labor and Social Welfare, during the visits it makes to companies on a regular basis, may imposefines.
There exist many trusts in Mexico that were created in order for foreigners to acquire and own real estate in therestricted zone (a strip of 50 kilometers – approximately 31 miles – along the coast, or 100 kilometers -approximately 62 miles – from the border). In any of these situations, a foreigner contracts a Mexican bank (the“Trustee”), so that real estate is transferred to the trust and the foreigner, in his/her capacity as trust beneficiary,has the right to use and enjoy the real property. If the trust was duly structured and formalized, the foreigner, astrust beneficiary, shall designate successor trust beneficiaries, meaning that he/she will name the person orpersons who will replace him or her in the event of death. In the event of death, the designated successor(s) willsubstitute the trust beneficiary, without the need for a will in Mexico, and, irrespective of the provisions of thesame, if any, upon only the presentation of the death certificate of the foreign person, the identificationcredentials of the successor beneficiary, among other limited items, and upon payment for and formalization ofthe required trust amendment documents and payment of taxes that are necessary for documenting the transfer ofthe beneficial rights in and to the trust.A problem arises when, due to lack of appropriate advice or for any other reason, the trust does not include thedesignation of a substitute beneficiary and the foreign person does not have a will in Mexico, which is usually thecase, being that his/her permanent residence is not in Mexico. In such case, the heirs are confronted with theobstacle that the Trustee requires a judicial order from a Mexican judge that indicates the identity of the heir(s) ofthe trust beneficiary who is entitled to receive the benefits and rights of the trust beneficiary. In order to obtainsuch, the heirs would first need to probate the will in the corresponding jurisdiction, which is generally not inMexico, and, once the probate is finalized, the competent authority will issue a judicial order, the same whichwill designate the heir(s) that inherit the property and rights belonging to the decedent’s estate, which shallinclude the rights with respect to the Mexico trust. After the procedure outside of Mexico is completed, then the heirs will need to request the judge in the probate jurisdiction to issue a request or letter rogatory requesting aMexican judge (normally from the jurisdiction where the property is located) to recognize the probate designationof heirs and to order the Trustee to transfer the trust beneficiary interest to the heirs. Once such order or letterrogatory is obtained, the heirs will need to hire a Mexican lawyer to follow up on the letter rogatory process andto request the Mexican judge to issue the order. However, the Mexican judge will have to review the order andprobate process to be sure that it complies with Mexican public policy and that such request is enforceable. Ifthese steps are followed and there are no issues, then the Mexican judge will issue an order to the Trustee torecognize the new trust beneficiary or beneficiaries.Given the foregoing, it is of utmost importance that Mexico real estate trusts owned by foreign individualscontain a designation of a successor trust beneficiary, in order to avoid the potentially expensive and lengthyjudicial procedures to designate a successor trust beneficiary.
On December 21, 2013, the decree that reformed Articles 25, 27 and 28 of the Mexican Constitution relating tothe energy, electric and hydrocarbon sectors came into effect. This decree is best known as the “EnergyReform.”In addition to reforming the three constitutional articles cited above, the Energy Reform decree contains 21transitory articles which establish, among other things, that within the following 120 days, Congress must makethe necessary modifications to applicable secondary legislation in order to fully implement the new EnergyReform decree. The Energy Reform encompasses both hydrocarbons and electricity.(A) Hydrocarbons:The Energy Reform does not open Petróleos Mexicanos (“PEMEX”) to direct private ownership and investment;however, it will allow PEMEX to develop as a “productive entity of the state” in conjunction with private,domestic and foreign entities. Consequently, the Energy Reform will allow domestic and/or foreign companies tojoin PEMEX as participants in developing new oil and gas exploration and extraction projects. Similarly, theEnergy Regulation Commission (Comisión Reguladora de Energía [“CRE”]) is authorized to grant to PEMEXand/or certain companies various permits for refining, petrochemical production, transportation, and storage ofsuch hydrocarbons and their derivatives, including regulation for third party access to pipelines and first handsale of such products.The Energy Reform allows private sector investment in exploration and extraction of oil and hydrocarbons insolid, liquid or gas form by means of certain flexible contracts, the same which are standard in this branch of theindustry. In accordance with the decree, such contracts may be for: (i) services; (ii) profit or production sharing;or (iii) licenses. Similarly, and in relation to such contracts, the Energy Reform also contemplates the followingpotential forms of payment/consideration: (a) cash, for service contracts; (b) a percentage of profits for profitsharing contracts; (c) a percentage of production obtained for shared production contracts; (d) transfers ofhydrocarbons in exchange for good and valuable consideration once extracted from the subsurface pursuant tolicense contracts; and (e) any combination of such forms of consideration.During the next few months, various amendments will be made to the secondary legislation in order to regulatethe mentioned contracts mentioned, including the tax regime applicable to such contracts and the privateinvestment companies that may be formed for such purposes. It is important to note that, to date, it is uncertainwhether the production of oil and/or gas will be subject to the application of any tax such as: (i) a tax on profits,such as the income tax (Impuesto Sobre la Renta [“ISR”]); (ii) royalties or tax on consumption, meaning apercentage of the value of production; (iii) a bonus; and/or (iv) a combination of the prior items.The Energy Reform will also create three important new entities: (i) the Center for Control of Natural Gas(Centro de Control de Gas Natural [“CENEGAS”]), which will be responsible for the operation of the nationalsystem of pipelines for transportation and storage of natural gas; (ii) the Mexican Oil Stabilization andDevelopment Fund (Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo [“FMPED”]), whichwill be in the form of a public trust in which the Mexican Central Bank (Banco de México) will act as trustee; and(iii) the National Agency for Industrial Safety and Environmental Protection in the Hydrocarbon Sector (AgenciaNacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos), which will beresponsible for regulating and supervising the facilities and activities of such sector with respect to industrial andoperational safety and environmental protection.(B) Electric Energy:With respect to electric energy, the Energy Reform allows for individuals to participate in the generation ofelectricity. Under the new law, electricity generators will have open access, without discrimination, to Mexico’selectricity transmission and distribution networks.Even though the government will maintain exclusive control of the National Electrical System, including thepublic services necessary for the country’s electricity transmission and distribution networks, individuals willnow be allowed, by means of contracts with the government, to perform financing, installation, maintenance,management, operation and expansion activities of infrastructure to provide public services for the transmissionand distribution of electrical energy.Under the new law, the Federal Electricity Commission must also convert itself into a “productive company ofthe State” within the following two years, which will strengthen its operating and organizational structure andserve to make its services more efficient and lower in cost.The creation of the National Energy Control Center is contemplated, the same which will be in charge of theoperating controls for the National Electrical System, operating the electrical wholesale market and open access,without discrimination, to the national transmission of electricity and the general electricity distribution networks.The technological development and adoption of lower cost and cleaner energy sources will be developed, such asgas, solar and wind energy, as well as to regulate the exploration and exploitation of geothermal resources inorder to take advantage of underground energy to generate electrical energy or to designate it for various uses.