Issue #
April–May 2021

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Economic Indicators

On May 5, 2021, updated financial indicators reflected:

Peso/Dollar Exchange Rate: $20.2077 pesos per Dollar.

Mexican Stock Exchange: The Mexican Stock Exchange (BMV) closed 48,399.8 points.

Interest Rates: The Average Interbank Rate (TIIE) for a 28-day period was at 4.2840%.

U.S. Agricultural Producers Address Concern as to Declining Trade with Mexico

April 22, 2021

On March 22, 2021, twenty-seven of the leading associations of agricultural producers in the United States, including the American Farm Bureau Federation, the American Feed Industry Association and the American Seed Trade Associationsent a letter to the U.S. Department of Agriculture Secretary, Thomas Vilsack and the U.S. Trade Representative, Katherine Tai, addressing their concerns as to the declining U.S.-Mexico food and agricultural trade relationship, urgently requesting their attention to this critical issue. 

Below is a selection of leading concerns in such trade relationship as highlighted in the letter:

1.         Glyphosate/GM Corn Ban.  The Mexican Presidential decree published in the Official Journal of the Federation on December 31, 2020 (the “Decree”) states the intent and course of action to be taken the by the Mexican government to gradually phase out the use, distribution and importation of glyphosate and genetically modified (GM) corn for human consumption.  The Decree establishes a transition period to achieve the total replacement of glyphosate, which period began on January 1, 2021 and will end on January 31, 2024.  While the Decree is considered to be unclear and vague in its scope, it has created uncertainty and risk for the U.S-Mexico trade of corn and corn products with the potential to negatively impact a considerable amount of U.S. agricultural exports bearing in mind that Mexico is the largest importer of corn products from the U.S.

2.         Front of Pack (FOP) Labeling (NOM-051).  Mexican Official Rule NOM-051-SCFI/SSA1-2010 establishes new general labeling requirements for food and prepackaged non-alcoholic beverages that must warn consumers when calories, total sugar, saturated fat, trans fat and/or sodium amounts exceed intake recommendations. Such warning labels must be in the form of black octagons resembling stop signs. The overarching concern among U.S. agricultural producers is that this labeling requirement seemingly lacks solid scientific support and appears to be more of a campaign by the Mexican government to attempt to restrict food and agricultural imports from the United States by branding such as potentially prejudicial for the health of Mexican consumers.

3.         Biotechnology Approvals.  In addition to the Decree referenced above, there is a sense that the Mexican government has created uncertainty regarding the approval of agricultural biotechnology considering that since May 2018, review and approval of applications filed for biotechnology permits in Mexico has stopped. As a result, Mexico has become a barrier for the launching of new biotechnology products in North America, potentially restricting access to new technologies that would help to address critical matters such as sustainability and climate change by farmers in such region.

4.         Organic Export Certification Requirement.   As of December 28, 2020, Mexico’s Health, Safety and Quality Agency (SENASICA for its Spanish acronym) required that all U.S. organic exports be certified in accordance with Mexico’s Organic Standards Law.  Nevertheless, this requirement was not notified to the World Trade Organization or formally notified to the U.S. government.  It is important to note that prior to this, any U.S. organic product certified by the United States Department of Agriculture (USDA) could be exported to Mexico and sold without any additional certification. As a result of efforts by the USDA and U.S. Trade Representative, the deadline to comply with such certification has been extended to June 26, 2021.  Nevertheless, it is considered that this is not enough time for its proper implementation and if enforced, U.S. organic producers are likely to experience significant interruptions to trade given that the certification process might take a year or more under the new organic standard, resulting in an increase in exportation costs to Mexico. Furthermore, SENASICA has not provided any clarity regarding which specific products must be certified and whether such certification process will include all organic products or only a select group.

The challenges faced by farmers, ranchers, producers and workers in the U.S.-Mexico food and agricultural trade relationship require action by both the U.S. and Mexico.  If you need any help understanding the legal implications of the gradual glyphosate/GM corn ban, FOP labeling requirements or organic export certification requirements, please contact us.

Agriculture and Ranching

Decree Amending and Supplementing Article 90 of the Mexican Federal Labor Law

April 19, 2021

A Decree published in the Official Journal of the Federation on March 30, 2021, amends and supplements Article 90 to the Mexican Federal Labor Law.

The main purpose of this amendment is to guarantee that the yearly review of the minimum wage, is set at a level above the inflation rate. With such change, the minimum wage will never be lower than the inflation rate during its established term, or in other words, during the year for which the minimum wage was set.

The amendment's purpose is to adjust the minimum wage to actual costs of basic goods and services based on sustained and generalized increases in costs reflected in the National Consumer Price Index. Such inflationary increase causes a change in the basic goods and services basket, which is comprised of main expenses borne by a high percentage of Mexican households.

This amendment seeks to protect the purchasing power of Mexican workers by providing for a sufficient wage for the head of a household to cover basic material, social and cultural needs, as well as compulsory education of minors.

Labor and Employment

Seniority Bonus Must Be Paid Even If Not Expressly Requested

April 13, 2021

On March 12, 2021, the Second Chamber of Mexico’s National Supreme Court of Justice published a ruling in contradiction to opinion number 2a./J. 66/2020 (10a.), titled “Seniority Bonus. Even if not expressly requested, its payment is required when the employee’s seniority is confirmed and such employee has been terminated or the employment relationship has otherwise been terminated”. In its holding, the Court resolved the contradiction of opinions 178/2020, between the opinion XIV.T.A.7 L (10a.), issued by the Labor and Administrative Collegiate Court of the Fourteenth Circuit (previously commented on CCN MexicoReport® September 2014 issue) and the opinion issued by the First Labor Collegiate Court of the Eighteenth Circuit by its resolution to the direct amparo 17/2020. In the new opinion analyzed here, the Second Chamber determined that “the payment of the seniority bonus is required if the seniority of the employee is confirmed, provided such employee was terminated or the employment relationship was otherwise terminated.”

The ruling was made considering that section III of article 162 of the Mexican Federal Labor Law provides that the payment of the seniority bonus is an immediate and direct consequence of the termination of the employment relationship. Thus, such bonus must be paid to employees who voluntarily resign or who have been terminated, notwithstanding whether the layoff was with or without cause. By confirming the employee’s seniority and a termination of the employment relationship, the authorities are required to charge the employer with paying the bonus, even if it was not expressly requested. However, the Second Chamber also establishes that in the case of a voluntary separation, the payment will apply if the employee has seniority of at least fifteen (15) years. Note also that if the employee is reinstated in his or her former position, payment of the seniority bonus will not apply, since the employment relationship would not be terminated.

Labor and Employment

Mexico Makes Changes to Its Federal Judiciary

March 26, 2021

A Decree published in the Official Journal of the Federation on March 11, 2021 amends and adds several provisions to the Mexican Constitution regarding the structure, functions and organization of the Mexican Federal Judiciary, as well as to the rules for handling certain constitutional cases. Such amendments were proposed by the Chief Justice of the National Supreme Court of Justice (“SCJN”) and presented to Congress by the Mexican President. The following are the most relevant amendments:

1.         Collegiate Courts of Appeal to Replace the Unitary Circuit Courts. Under the new system, federal appellate courts (tribunales unitarios de circuito) will go from one presiding Magistrate to three Magistrates, each retaining their existing constitutional authority.

2.         Regional Board Courts to Replace Circuit Board Courts. This change means that the Regional Board Courts replacing the Circuit Board Courts will have the express power to rule on any Contradictory Opinion of the Circuit Courts located within their respective regional jurisdiction. This is designed to establish mandatory precedents that will apply to future cases. Further, the Decree expands the territorial jurisdiction of such Courts. The amendment provides for the elimination of Circuit Board Courts; however, it does not identify which Collegiate Courts will comprise the respective Regional Board Courts.

By expanding the subject matter jurisdiction of the Regional Board Courts, the intent is that the SCJN will continue to have jurisdiction to rule on cases of high importance and national impact, avoiding the need for Mexico’s highest court to hear merely procedural cases.

3.         Precedents from the SCJN. The jurisprudence system of prior case authority is amended to provide that all decisions of the SCJN will be deemed relevant, authoritative and binding for all jurisdictional territories in Mexico.  This eliminates the prior requirement of confirmation by five decisions ruling the same way. Going forward, SCJN rulings will be binding if at least eight justices vote in favor in the Full Court and four favorable votes in each Court Board.

The system for evaluating case law precedents through reiteration remains unchanged for Collegiate Circuit Courts.

4.         Appointment of Judicial Bodies to Rule on Cases Involving Serious Human Rights Violations. The Federal Judicial Council is empowered to appoint one or more judicial bodies to hear cases involving serious human rights violations or those with an especially important social impact.

The amendment does not imply the formation of special courts to hear these cases, only that the cases will be heard by existing judicial bodies. In other words, such cases may be concentrated in one or more judicial bodies already in existence and in accordance with judicial rules expressly set forth for such purpose.

5.         General Declaration of Unconstitutionality. Article 107 of the Mexican Constitution is amended to provide that once a law is declared unconstitutional, the issuing authority is notified and the judicial decision is to be enforced as of the first judicial decision declaring such general law unconstitutional, instead of having to wait until such criteria is confirmed in several subsequent cases. 

6.         Review Appeals of Direct Amparos. Article 107 of the Mexican Constitution is amended to confer greater power to the SCJN to hear Appeals of Direct Amparos, specifically for cases that, in its discretion, involve issues that are of exceptional relevance in constitutional or human rights matters.

As a result of these new amendments, two new federal laws are expected to be enacted within the 180-day period following the publication of the Decree. Furthermore, changes to the Organic Law for Judicial Authority, Judicial Career Law and also, amendments to the following five different laws can be expected: Amparo Law; Regulations Law of sections I and II of Article 105 of the Mexican Constitution; Federal Public Defender Law; Federal Code of Civil Procedure, and Federal Public Servants Law, Regulatory of part B of Article 123 of the Mexican Constitution.

Factors to Consider in Mexico Labor Inspections

March 23, 2021

Mexico’s recent reforms with respect to tax and labor matters, which began in 2019, have led to an increase in labor inspections and resulted in the imposition of hefty fines. The fines imposed for alleged non-compliance in labor and social security matters are calculated based on the Unit of Measurement and Update (“UMA”). The fines for violations in labor matters range from 50 to 5,000 times the daily value of the UMA, depending on the violation, which is approximately between MX$4,481.00 and MX$448,100.00 Pesos (US$224.00 and US$22,405.00 Dollars at an approximate exchange rate of MX$20.00 Pesos per Dollar).

The fines to be imposed resulting from inspections conducted by the Mexican Ministry of Labor and Social Welfare (“STPS”) will be enforced by Mexican tax authorities and will be considered a current charge to the fined company.  This means the fines will be reflected in the tax obligations compliance opinion issued by the aforementioned authorities, in accordance with article 32-D of the Federal Tax Code.

The following factors will be considered in determining sanctions for labor matters: (a) the intentional nature of the action or omission constituting the offense; (b) its severity; (c) the damages that have occurred or may occur; (d) the economic capacity of the offending party; and (e) their re-incidence. Therefore, when a single act or omission impacts several workers the sanction will be imposed for each of the affected workers, which can add up to substantial amounts. Note also that if one act or omission results in various infractions, the sanctions applicable to each infraction will be applied independently, which can cause the fines to further increase considerably.

Fines may be imposed for various reasons, such as: (i) discrimination against employees; (ii) terminating pregnant women employees; (iii) allowing sexual or workplace harassment, workplace violence or psychosocial risks; (iv) non-compliance with Official Mexican Standards in matters pertaining to safety and hygiene (e.g., compliance with the COVID-19 related restrictions); (v) breach of home office rules; (vi) omissions in the calculation or delivery of social security payments; or (vii) for violations of the labor subcontracting regime, among others. Given that the STPS has expressed its intention to conduct more in-depth and detailed inspections through information exchanges with other agencies (including the IMSS, SAT and INFONAVIT), it is vital for all employers to conduct internal audits and reviews to ensure they fully comply with all labor, tax and social security obligations, with specific emphasis on the aspects that are being reviewed in the corresponding inspections.

Labor and Employment