Issue #
January - February 2023

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Economic Indicators

On March 6, 2023, updated financial indicators reflected:
Peso/Dollar Exchange Rate: $18.0166 pesos per Dollar.
Mexican Stock Exchange: The Mexican Stock Exchange (BMV) closed 53,924.19 points.
Interest Rates: The Average Interbank Rate (TIIE) for a 28-day period was at 11.2850%.

New Decree Terminates Air Cargo Operations at Mexico City’s Benito Juarez International Airport

February 15, 2023

On February 2, 2023, a Decree was published in the Official Journal of the Federation (the “Decree”) ordering the termination of domestic and international air cargo transport operations, both regularly scheduled and unscheduled flights, at the Mexico City International Airport (“AICM”).

The new Decree was preceded by a separate decree published on March 3, 2022, stating that AICM terminals 1 and 2 were saturated.

The Decree grants a period of 108 business days for concessionaires and permit holders that provide scheduled and unscheduled domestic and international transportation services, exclusively for cargo, to relocate their operations outside the AICM, which term ends on July 5, 2023.

It is important to note that concessionaires and permit holders that provide combined passenger and cargo services are exempt from the closure, provided that cargo is transported in the same aircraft as the passengers.

It is worth noting that even though the Decree does not expressly state it, the Decree’s apparent intent is to transfer air cargo operations to the Felipe Ángeles International Airport (“AIFA”), located in the municipality of Zumpango de Ocampo, in the State of Mexico. However, as it is not specifically stated, the concessionaires and permit holders that provide scheduled and unscheduled passenger air transportation services to the public, may choose to continue with their operations at any airport that meets their needs.

It is also important to consider that both the Latin American and Caribbean Air Transport Association and the International Air Transport Association have stated that the termination of air cargo operations could cause disruption in Mexico’s economy and affect supply chains, since the new AIFA airport still does not have the necessary technical requirements to receive AICM cargo operations, which could affect the country's participation in international trade.

Transportation and Logistics

Legal Liability for Soil Contamination in Mexico

January 19, 2023

Although environmental law issues should generally be considered in any transaction, this article undertakes a brief review of the relevance of such issues in projects involving real estate.

In accordance with the provisions of article 4 of Mexico’s Political Constitution, any environmental damages will be the legal responsibility of the party who causes such damages, all pursuant to applicable environmental laws.

In real estate transactions such as acquisitions, sales, or leases, one of the most sensitive issues to review and determine is the existence of soil contaminants and, where appropriate, the scope and objectives of potential remedies and attributing liability to the party who is legally responsible.

These specific environmental issues in the real estate sector are especially relevant, since the effects of contamination sometimes tend to be revealed slowly, coupled with the continued and ongoing effects of such contamination. This means that contamination at a given site may not be conspicuous at the time of performance of a real estate transaction and any traces of pollution may become visible or notorious after the acquisition of real property. Additionally, the actual causing of such pollution generates continuous damages and liability from the time it was caused until the environmental damage ceases, or the respective remediation and compensation has been accomplished.

It is also relevant to consider that in accordance with article 70 of the General Law for Comprehensive Waste Management, “The owners or possessors of private property and the titleholders of concession zones, in which soils are polluted, will be jointly and severally liable for performing remediation actions as needed, without prejudice to any action against the party who caused said pollution.”

From the above statutory language one can be deduce that the environmental authorities consider both the owner and tenant responsible for the remediation of the contaminated real property, regardless of whether or not they caused the contamination, and regardless of the actions they have to claim liability for the damage caused from the party who caused the contamination. Therefore, it is essential that before acquiring or leasing real property, parties verify that such property is free from contamination. To confirm this, it is advisable to conduct necessary environmental studies (Phase I or II) that allow the parties to understand the environmental status of the property, and in the event that there is contamination, understand the legal and practical risks and implications.

In addition to conducting an adequate due diligence prior to the purchase or lease of real property, it is also important to review: a) the project’s feasibility, taking into consideration the provisions of applicable environmental laws at the three levels of government; b) the current level of compliance with the environmental obligations to which the project is subject; and c) the existing risks due to non-compliance.

Environmental aspects are a fundamental part to consider in real estate development and projects. Reviewing the environmental conditions of a real property prior to its acquisition or lease is of the utmost importance to avoid or limit environmental risks and liabilities.


USMCA Arbitration Panel Issues Final Report Interpreting North American Automotive Rules of Origin

January 16, 2023

On January 11, 2023, the Arbitration Panel established in accordance with article 31 of the Unites States – Mexico – Canada Agreement (“USMCA”) published its final report regarding the enforcement and interpretation of important provisions governing the rules of origin applicable to the automotive industry under the USMCA.

It should be noted that on August 20, 2021, Mexico’s government requested consultations with the government of the United States as to the interpretation and application of Articles 3 (Regional content value for passenger vehicles, light trucks and their parts) in connection with the Appendix to Annex 4-B (Provisions related to the rules of origin by specific product for automotive goods) and 4.5 fourth paragraph (Regional Value Content “RVC”) and the Uniform Regulations of the USMCA. Such request for, consultations was also joined by Canada’s government.

In general terms, the argument of Mexican and Canadian governments is that under the provisions of the USMCA, if a good that contains non-originating materials qualifies as originating under the Agreement, the value of those non-originating materials should not be considered in the calculation of the RVC of the goods into which said materials are incorporated. In other words, if a good is produced in a country that is a Party to the Agreement and said good qualifies as originating, that good will be considered 100% originating when it is used in the production of another good (commonly known as the “roll-up” rule).

However, under the interpretation of the United States government, the calculation of the RVC of a vehicle and the calculation of the RVC of the “essential parts” of a passenger vehicle or light truck must be made separately and independently of each other. In other words, under the U.S. interpretation, even when an essential part qualifies as originating, if it contains non-originating materials, these must be taken into consideration when calculating the RVC of the vehicle. This interpretation is reflected in the letters of approval of the Alternative Staging Regime issued by the United States to producers in the automotive sector.

As per the final report dated December 14, 2022, the Arbitration Panel issued its decision in accordance with the criteria of Mexico’s and Canada’s governments, stating that the “roll-up” rule is applicable to the calculation of the RVC of the vehicle, and that, contrary to the United States government’s position, the USMCA does allow vehicle manufacturers to consider the essential parts of a finished vehicle (engine, transmission, chassis, etc.) as originating as long as said auto parts comply separately with the minimum percentage of regional content (75%), applying the alternative processes established by the USMCA.

In accordance with the above, the United States government must abide by the final report of the Arbitration Panel within a period which may not exceed 45 days after it was notified of the Panel’s decision. In case of non-compliance with the final report, Mexico’s and Canada’s governments may suspend USMCA treaty benefits on imports from the United States in an equivalent amount of the damages sustained, which will apply until a final resolution is reached.

International Trade and Customs

Justice Norma Piña - Mexico Supreme Court President

January 12, 2023

The new year brought magnificent news for the Mexican judicial system and for the balance in the division of powers within the Mexican government. As per the powers of the Plenary Session of Mexico’s Supreme Court, the justices elected Justice Norma Piña as their president for the 2023-2026 time period, in accordance with constitutional terms. She is the first woman to hold this high office, which has been received with great approval by both the President of the Republic and by Mexican society as a whole. Additionally, Justice Piña has a career in the Mexican judicial system, which constitutes a distinct element and a sense of professional affection for district judges and circuit magistrates who consider her as someone "from home."

The president of the Supreme Court does not have a formal hierarchy with respect to the other justices. This is technically known as primus interpares, which means first among equals. However, it has plenty of other relevant functions: the Organic Law of the Judiciary of the Federation authorizes her, among other tasks, to represent the Supreme Court. Another relevant power is that when she considers a matter as questionable or important, she may designate a justice as first reviewer to submit a draft judgment to the Court’s Plenary group. From an administrative standpoint, the president manages the Supreme Court of Justice and must submit to the President of the Republic annual budget proposals for expenses of the Federal Judiciary as a whole, as well as managing the budget of the Supreme Court. Additionally, as president Justice Piña presides over the Federal Judicial Council, the entity in charge of the administration, discipline system and judicial careers of the Federal Judiciary.

The professional background and voting record that Justice Norma Piña has issued in her performance appears to ensure that she will safeguard the independence of the federal courts and the autonomy of jurisdictional entities, including the National Supreme Court of Justice over which she now presides. Her appointment is very good news for judges and litigants in Mexico.

Business and Politics Outlook

The Three Amigos

January 11, 2023

It is known as the Three Amigos Summit and is of enormous importance to the strength and integration of North America. At the beginning of 2023, the United States-Canada-Mexico group received a decided boost from the three leaders, Canadian Prime Minister Justin Trudeau and Presidents Joe Biden and Andrés Manuel López Obrador. The three met in Mexico City to discuss issues related to migration, the economy, and regional politics. Before the meetings began, there were signs that promised an adequate climate for discussions, although some signs of tension emerged due to the complexity of trilateral relations. On the one hand, the Mexican president declared verbatim that the time had come to "put an end to that oblivion and disdain towards Latin America." President Biden's visit to Mexico occurs 10 years after President Obama's last visit when he briefly visited the country. However, both Trudeau and Biden, in a sign of good neighborliness, accepted the request made by the Mexican president to land at the recently opened and controversial Felipe Ángeles airport (AIFA). Everything was settling in for the success of the important international summit.

Beyond the careful diplomatic forms, the issues to be discussed are notoriously complex. President Biden did not hesitate to point out the relevance of the security issue for the region. He pointed out emphatically: “If we are safer, we will work better together.” The thorny issue of drug trafficking was also present as Biden recalled, fentanyl trafficking has claimed more than 100,000 lives in the United States. Without mentioning it, the recent arrest in Sinaloa of Arcibaldo Guzmán, the son of the Mexican drug trafficker el Chapo Guzmán extradited and subject to prison in the United States, was present. In a constructive manner, the US president spoke of expanding supply chains, to be more competitive, and of the need to control irregular immigration. For Biden, the issues may be the same, but what is relevant is that the focus, priorities, and internal policy messages between partners are different. In the Mexico-United States bilateral meeting, the Mexican president emphasized speaking not only about the North American region, but also insisted on the importance of generating a program that promotes development in Latin America that curbs migration to the north. The relationship between the two countries must be deepened, Biden said, probably taking up what was proposed by the Mexican president, emphasizing that it was also needed with the Western Hemisphere.

President López Obrador received the Prime Minister of Canada, Justin Trudeau, at the AIFA, who will participate in the X Summit of North American Leaders. López Obrador went ahead to mention that Canada has shown generosity with Mexico by granting temporary work visas for Mexicans, but also stressed that relations between the two countries are "more than good" and that Canadian companies invest in Mexico without obstacles.

At night, the Mexican president offered a dinner to the two leaders, Biden and Trudeau, in which the ties of friendship and cooperation between the three countries were reaffirmed. The results of the Summit will be an incentive for the companies of the three countries to continue working together to strengthen their economies, which will strengthen other equally important developments in the social and cultural aspects.

Business and Politics Outlook