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the Secretary of the Environment, Natural Resources and Fisheries (Secretaría de Medio Ambiente, Recursos Naturales y Pesca, SMARNP). Your company may also need special permits for air or noise emissions, water discharge or solid waste.
History In response to the environmental problems inherent in industrial growth and trade liberalization, Mexico adopted the General Law on Ecological Balance and Environmental Protection, which took effect March 1, 1988 (the Ecology Law).The Ecology law was followed by numerous regulations later that year: ³Environmental Impact Regulations´ (June 8, 1988), ³the Atmospheric Pollution Regulations´ (November 26, 1988), and ³the Hazardous Waste Regulations´ (November 26, 1988). In 1994, Anne Rowley, a staff attorney in the International Activities Division of the United States Environmental Protection Agency (³EPA´) Office of General Counsel noted that ³in only six years Mexico has established the foundation of a credible legal framework to control environmental contamination.´35 Many United States environmental statutes are media specific such as the Clean Water Act, the Clean Air Act and the Resource Conservation and Reclamation Act. They were generally developed individually and in response to specific crises. Mexico¶s Ecology Law, however, has a broad reach contained in one comprehensive law. Furthermore, Mexico¶s legislature was able to enact such a comprehensive legal framework in a short amount of time because Mexican law derives expressly from the 1917 Mexican Constitution. At the top of the framework provided by the Ecology Law, sits the Ministry of Social Development (³SEDESOL´), the executive agency entrusted to administer the Ecology Law. It issues ecological Technical Standards which, as defined by the Ecology Law, set forth the ³requirements, specifications, conditions, Spring, 2003] RECENT DEVELOPMENTS 333 procedures, parameters, and permissible limits that must be observed´ where activities cause or may cause ecological imbalance, or harm the environment.39 NAFTA directives for the harmonization of member state¶s environmental laws make it ³likely that Mexico will develop a body of Technical Standards comparable in scope´ to those issued by the EPA.40 During the mid-1990s, Mexico intended to complete and promulgate 71 new technical norms. This was touted a ³very ambitious goal´ due to the Federal Law on Measurements and Standardization enacted in 1993, which required proposed norms to achieve desired goals at the highest net benefit feasible to society feasible.41 Although capable of hindering environmental legislation, this requirement does not appear to be as rigid as the cost-benefit
analysis requirements of Executive Order 12291 for United States regulatory initiatives.This executive order requires all United States Federal agencies take no regulatory action unless they chose the regulatory alternative ³involving the least cost to society´ with objectives that will ³maximize net benefits to society.´ Beyond issuing technical standards, SEDESOL also has the important task of Environmental Impact Evaluation. Under Article 28 of the Ecology Law, all works or actions that may either 1) cause ecological imbalance or 2) exceed the limits and conditions of environmental regulations or technical standards, ³cannot be carried out without preparation of an environmental impact statement environmental impact statements and prior authorization from the corresponding federal, state or local environmental agencies.´
Regulatory bodies in Mexico
NAFTA The North American Free Trade Agreement (NAFTA) addresses the issue of environmental protection in the three participating countries (Canada, United States and Mexico). However, it leaves the establishing of environmental rules and standards to the three participating countries, with tow exceptions: 1 They are to comply with existing treaties between themselves, and 2 They are not to reduce their environmental standards as a means of promoting investment in business. THE LAW AND "SEMARNAP"
Presently there exist federal regulations on environment protection in Mexico. They are extensive and patterned in good part after the rules applicable in the state of California (U.S.A.). The federal law (General law on Ecological Equilibrium and Environmental Protection) is dated from December 23, 1987 (effective March 1, 1988). Its' regulatory law is dated June 6, 1988, with changes November 18 and 23 , 1988. The Federal Government of Mexico, through the Secretariat of the Environment, Natural Resources and Fishing ( Secretaría de Medio Ambiental , Recursos Naturales y Pesca (SEMARNAP) , has sole jurisdiction over those acts that effect two or more states , acts that include hazardous waste, and procedures for the protection and control of acts that can cause environmental damage or serious emergencies to the environment. The Secretariat's main activities are to make environmental policy and enforce it; assist in urban planning; develop rules and technical standards for the environment; grant (or deny) license, authorizations and permits; decide on environmental impact studies; and grant opinions on and assist the states with their environmental programs. This Secretariat enforces the law, regulations, standards, rulings,
investigate claims. conduct and evaluate environmental policy. issue technical environmental standards and approve environmental impact studies presented by the public and private sectors. it hears public complaints and demands related to insufficient compliance and it is to inform and teach the public of the environmental rules. environmental impact statements. a lack of experience by the authorities of Mexico and the miss-understanding of employees at plants in Mexico caused difficulties for companies. there is a better understanding now. FOCUSED EFFECT ON 7 GENERAL GROUPING INDUSTRIES ACTIVITIES . concessions. The law covers environmental protection. grant permits. It performs audits and evaluations. STATES DELEGATIONS OF SEMARNAP/PROFEPA There are Regional Delegations of SEMARNAP . natural resources conservation.programs and limitations issued by it through the National Environment Institute and the Federal Attorney Generalship of Environmental Protection ("PROFEPA"). licenses. resolve administrative appeals on environmental issues and promote the participation of the public in environmental law creation. pesticides and toxic substances are covered by this law. resolutions and other. pollutants. It is also responsible for ensuring strict observance of standards and regulations set by the Institute. risk determination. The air. hazardous waste. imposes fines and other sanctions. ecological zoning. as well as those contained in rules and laws enacted by the Mexican Congress. This National Environment Institute is also responsible for the design. and as well there are State Delegations of PROFEPA . THE NATIONAL ENVIRONMENT INSTITUTE This institute is to develop. However. Natural Resources and Fishing (SEMARNAP) (the federal head ministry). In the initial period of startup and application of this law and its regulations. implementation and assessment of the regulatory framework for both environmental policies and programs. conduct inspections and environmental audits. regulate handling of hazardous waste and materials and resolve appeals submitted to it. PROFEPA (Federal Attorney Generalship of Environmental Protection / Procuraduría Federal de Protección de Ambiente") This is the enforcement agency of Secretariat of the Environment. Profepa is to monitor compliance. and sanctions. water.
When someone has a standing (non-moving) pollution source. automotive parts makers. gas and carbon transportation activities. they are to get authorization.There are seven (7) general categories of industries that are focus points of review by the Mexican Federal Government for verification of compliance with the law and rules applicable in environmental matters. animals and/or humans. chemically reactive or is toxic (directly or indirectly) to plants. 4) mineral and non-mineral exploration. Monthly Log of Hazardous Waste Generation. When someone has a standing (non-moving) pollution source. There is an official list of the hazardous waste items. When someone has a standing (non-moving) pollution source. 7) exploitation of slow regenerating vegetation in forests and tropical jungles activities. prior to emitting. AUTHORIZATIONS & DOCUMENTATION The authorizations and documentation that may be required in each case are: Operating License. ignitable. corrosive. WATER The law and regulations require certain contaminates not to be introduced into the uncontrolled or public water source or not to be introduced in quantities greater than it approves of. iron and steel mills. HAZARDOUS WASTE A substance is considered hazardous waste when it is explosive. 5) federal touristic developments activities. extraction. 3) chemical and petrochemical plants. cement producers. prior thereto for that purpose. CONSTRUCTION An environmental impact study is to be done and approved prior to the construction of "new facilities". they are to get a permit to emit. Ecological Waybills for the Importation and/or Exportation of hazardous Materials and Wastes. treatment and refining activities. 2) water works. general communications networks. paper factories. 6) treatment. and the generation and transmission of electricity activities. storage and disposal plants of hazardous waste activities. sugar refiners. they are to get a permit to emit. drink manufacturers. Hazardous Waste Generator's Manifest. and when someone is to produce it or handle it. AIR The law and regulations require certain pollutants not be emitted into the air or not be emitted in quantities greater than it approves of. The seven categories are: 1) federal publics activities. AND oil. including nuclear waste. prior to emitting. prior to emitting. . they are to get a permit to emit. Waste Water Discharge Registration.
The Regulation to the Law to Promote Mexican Investment and Regulate Foreign Investment (The Foreign Investment law). 1983. effective August 14. repair of damage. effective as of June 8. 1989. Treatment or Final Disposition. The Agreement for Cooperation between the U. that control the mentioned substances. Transport and Receipt of hazardous Wastes Manifests. imprisonment.Semi-annual Report on Hazardous Wastes Sent to Recycling. 1985. as each case requires. and Mexican and its' Annexes (The Environmental Agreement). changes in facilities or destruction of facilities. Quantifying the difference between environmental standards in the United States and Mexico is a difficult process because of Mexico¶s reliance on a voluntary audit system that necessitates industry participation. The Environmental Technical Standards (NTE's). Decree and Agreement The Regulation to that of the Law for Hazardous Wastes (The Hazardous Waste Regulation). and Environmental Impact Studies. As such violations of law are seldom ferreted out by authorities who are primarily reactive to problems brought to them by under funded environmentalists and affected . The Regulation to that of the Law for the Prevention and Control of Atmospheric Contamination (The Air Regulations). These establish the quantitative elements and limits on a general sector basis for the Law and it's Regulations. seizure of toxic materials. 1988. Annex II (on hazardous waste discharges in the border areas). effective July 15.S. SANCTIONS Sanctions can include monetary fines. The Regulation to the Law for Environmental Impact (The Environmental Impact Regulation) . 1989. Additional Regulations. effective May 17. closing of facilities. 1986. effective November 12. 1988. effective as of November 26. Delivery. STATUS: Lax Environmental Standards EXAMPLE OF SLAB One of the benefits of moving an environmentally hazardous industrial operation like SLAB recycling to Mexico is the ability to take advantage of the country¶s underdeveloped environmental regulations. effective as of November 26. Standards. The Decree for the Development and Operation of the In-Bond ("Maquiladora") Export Industry (The "Maquiladora" Decree). and Annex III (on transborder shipments of hazardous materials and waste). Accidental Hazardous Waste Spill Manifest.
anecdotal evidence. PROFEPA¶s. The U. y y y y All of these features promoted an industrial sector which was reluctant to commit to supporting an inspection-based system so the Federal Government had to engage the industrial sector through environmental audits. Enormous amounts of improperly stored and disposed hazardous wastes already exist. S. The Federal Government decided to use the non-punitive environmental audit approach because: Mexico has an unfinished and dislocated environmental legal framework. which is a small host of issues. taking with them 960 to 2. General Accounting Office found that between 11 and 28 wood furniture manufacturers in the Los Angeles area relocated to Mexico between 1988 and 1990. PROFEPA would exclude it from normal inspection activities. The audit program has spread throughout Mexico. Obsolete production technologies still in use presents significant compliance issues. With no recent studies measuring the investment effect of loose environmental compliance programs. The purpose of these audits is to allow industry to identify any and all issues that require special attention and corrective actions. An important part of the audit is that if an enterprise decided to enter the program. older case studies and surveys of firms suggest that lower environmental regulation does play a role in companies choosing to move to Mexico.547 jobs. PROFEPA¶s Audit Mexico¶s agency. For example. (Procuraduría Federal de Protección al Ambiente) main function is enforcement of environmental law. and handling of hazardous . The first one is a powerful legal action with a big limitation: the Federal Government can only demand the compliance with such items that have already been regulated. these firms faced no air pollution standards for the application of paint coatings and solvents. and involve a comprehensive evaluation of an industrial facility¶s compliance or lack in the area of air and water pollution. This goal is achieved basically in two ways: inspection (with its related enforcement authority to shut down operations) and the environmental audit. however. one study found that 26 percent of maquiladora operators in Mexicali cited Mexico¶s lax environmental enforcement as an important reason for their relocation there. As such. and at the same time work out with PROFEPA specific compliance programs.communities. Environmental consciousness among industry and the general population is not well developed. risk. but particularly in large cities where there is a significant industrial base. The audits are generally conducted by private companies supervised by PROFEPA. since 1992 PROFEPA has encouraged industrial facilities to carry out voluntary environmental audits. In Mexico. About 80 percent of the firms cited stringent air pollution standards as well as lower labor costs as major factors in their location decision. understanding the role loose regulations and standards play in encouraging the transshipment of hazardous materials like SLABs is a difficult process. It is widely accepted that Mexico¶s environmental standards and practices are far below the United States¶.
which means that regardless of the place of incorporation within the Mexican Republic. Once an environmental audit has concluded.Investment Vehicles.00 pesos (approximately US$4. and (ii) the non stock variable capital limited liability corporation (sociedad de responsabilidad limitada de capital variable) (³SRL´). The SA has been widely used in Mexico as an investment vehicle. there are several ways for them to invest their capital in this country. where the shareholders¶ liability is limited only and exclusively to the full payment of their capital contributions and the stock capital must be incorporated with a minimum of two shareholders (either corporations or individuals) and with a minimum aggregate capital contribution of $50.500 Dollars). the evaluated facility is given an opportunity to develop a specific compliance program. This ability to determine how and when a facility will comply is one of the main features of the voluntary environmental audit program. all companies are uniformly regulated by the Mexican Law Governing Commercial Companies (Ley General de Sociedades Mercantiles) (³LGSM´). one must ask. Considering the fact that the Mexican Income Tax Law grants the same tax treatment to such five types of companies. Unlike several other countries including the Unites States.. in Mexico. a very common vehicle for doing business in Mexico is through the incorporation of a Mexican company. 2)LEGAL environment in Mexico: Summary: OVERVIEW ON DOING BUSINESS IN MEXICO I. In a country with a weak environmental consciousness and a limited oversight and enforcement agency.. where foreigners may own and participate in their capital stock. For foreign corporations or individuals who seek to do business in Mexico. As in many other jurisdictions. repre . Many companies that receive notification of compliance use the certification as a sort of Good Housekeeping Seal of Approval to market themselves. The LGSM regulates five different kind of commercial companies. This corporation has a capital stock divided into shares. one must assume that companies are evading even the most basic of Mexican environmental laws. the legal provisions governing the incorporation of companies are of Federal nature. corporate practice has only left two of them as the most common choice used by foreign investors for doing business in Mexico: (i) the variable capital limited liability stock corporation (sociedad anonima de capital variable) (³SA´). why would a battery recycler seek to engage in the voluntary audit process? Until such time as PROFEPA develops a stronger enforcement protocol and regularly inspects companies handling hazardous materials.substances.000.The SA and the SRL. II.
Notwithstanding the foregoing and pursuant to the LGSM. On the other hand.both allow the management to be handled by one or more directors which may not necessarily need to be shareholders or partners of the company. each partner has the right to own only one equity participation and each equity participation can have different values. The minimum capitalization requirement for the SRL is $3.00 Mexican Peso or a multiple thereof. it is very common for an SA to determine restrictions or special quorums in their by-laws to limit the transferability of the stock. equity participations without par value are par value. As a general rule.Equity Structure. As mentioned above. In the SRL capital increase requires the approval of the other partners and the acceptance of a new partner requires a special quorum. V. in the SRL the capital is divided in participation units instead of stock.. the minimum capitalization requirement for the SA is $50. IV. With respect to the number of shareholders. such special quorum requires the vote of the majority holders of the equity participations. which is considered to be a negotiable credit instrument which can be used in exchange operations.Differences between the SA and the SRL. Only an SA may list their shares in the Mexican stock exchange. The general rule for the SA is the free transferability of the stock. The SA issues stock..00 Mexican Pesos (approximately US$4.000.00). In the SRL. Therefore. 3. The incorporation of a Mexican company is quite unique and may . provided that. either through the stock ledger book in the case of a SA or the equity participation ledger book in the case of a SRL. Additionally.00).00 Mexican Pesos (approximately US$270. the concept of corporations with only one partner or single stock holder is not allowed.Minimum capitalization requirements.. the SA may have an unlimited number of shareholders (but should always have at least two shareholders)..Incorporation Process. while the SRL may have a maximum of fifty partners and a minimum of two.Transmission of the partner/shareholder status. We can mention three main differences between the SA and the SRL: 1. nor contemplated under Mexican Law. the SRL requires a smaller capital investment. III. unless a higher quorum is established in the by-laws of the SRL.000. the SRL structure may not be used nor allowed for an initial public offering through the Mexican stock exchange. therefore evidence of participation as a partner does not reside in a stock certificate.500. As you can see. the participation of a shareholder in a SA as well as the participation of a partner in a SRL are evidenced by the corporate books of the company. on the other hand. 2. regarding SRLs. such as endorsements. and each equity participation of the SRL must have a value of $1. but rather in an equity participation recorded in the company¶s ledger book (no physical title exists) and may only be transferred with the approval of the other partners.Number of shareholders/partners. ..
The process for the incorporation of a company would need to follow the following steps: 1. such shareholders or partners (or their representatives) must appear before them to execute the relevant incorporation documents..To obtain from the Ministry of Foreign Affairs (³MFA´) a permit to use the corporate name of the company.Filing and registration before other Mexican authorities (such as the Foreign Investment Registry.. Generally. persons that will appear before the Mexican certifying officer to incorporate the company on their behalf. 2.. The participation of such state appointed officers in the incorporation process plays a very important role. We can say that the incorporation process is complex and may take from a couple of weeks to more than a month to have the business entity ready to start doing business in Mexico..To file before the Public Registry of Commerce of the company¶s domicile the public deed containing the articles of incorporation (and powers-of-attorney) of the company. 3. it will have to provide to such authorities¶ periodical information and/or renewal filings. 6. Thereafter and during the life of the company. the participation of state appointed officers is required (with the same name but different functions as notary publics in common law countries).. 5. Such officers are professionals (who. In order for such power-ofattorney .not be compared with the incorporation process followed in common law countries.To draft the by-laws of the company (based on the provisions of the LGSM and/or any shareholders agreement or other kind of agreement when different groups of shareholders or partners that shall be equity holders of the company). the Washington Protocol on the Uniformity of Powers of Attorney and the Convention de La Haye. must be lawyers) that are granted with ³public faith´ (fe pública) by the government with the function to certify legal acts and should not be considered as equal to the notaries in the United States or in other common law countries. the participation of such certifying officers is to formalize the consent of the shareholders or partners of the company and therefore. Such power-of-attorney would also need to be valid and enforceable pursuant to Mexican Law and therefore if granted abroad it shall be granted before a notary and comply with International Treaties signed by Mexico. Due to our civil legal system.To file and obtain before the Mexican Tax authorities the tax identification number (Registro Federal de Contribuyentes or RFC).. 4.To execute the incorporation deed containing the company¶s by-laws before a public faith officer (including powers-of attorney granted to officers of the relevant company). in the case of notaries. such as the Inter-American Convention on the Legal Regime of Powers of Attorney to be used Abroad. the Business Information System (Sistema de Información Empresarial Mexicana)). either Notarios Públicos or Corredores Públicos to carry out public certification of legal acts.
the name of the Sole Administrator (as the case may be) of the company. irrespective of the source of income or their nationality. Under Mexican Foreign Investment Law there are a set of rules to be enforced in connection with foreign ownership of real estate properties located in Mexico. subject to renewal). We would recommend consulting a Mexican accountant or tax expert if specific and further information is required regarding tax matters. in such cases it is required to obtain a permit from the MFA in order for such trust to own the relevant real . it must also be translated into the Spanish language by an expert translator appointed by the relevant court. since such entity will be a Mexican resident with permanent establishment in Mexico. once incorporated shall obtain from the Mexican Ministry of Finance a Tax Payer¶s identification number and will be considered as full Mexican entities for tax purposes. foreign individual or foreign entity is appointed as beneficiary thereto (no real estate rights can be owned by such Mexican entity.Taxation. When the tax payers¶ identification number is obtained. Business entities having the principal administration of their business in Mexico are considered Mexican residents for tax purposes. the company may start issuing invoices for their business. it should be noted that. and the names of the examiner and main officers thereof.. foreign individual or foreign entity. Both companies. however. if such property is located within what is determined as the ³restricted zone´ (an area of 100 km across the Mexican border and 50 km across the Mexican beaches) and is acquired for residential purposes. a Mexican trust must be created whereto the property is settled in trust and whereby such Mexican entity. such Mexican entity (as well as foreign individuals or foreign corporations) may not directly acquire such property (residential purposes shall be considered as those destined exclusively for living purposes of the owner or third parties). VII. the SA and the SRL.. VI. (e) The names of the persons that will receive powers-of-attorneys from the company. In such cases. A Mexican entity with foreign investment (foreign shareholders or partners) may acquire a real estate property in Mexico. Residents of Mexico (individuals and corporations) are subject to taxation on their worldwide income. provided further that.Foreign ownership of Mexican real estate.to be effective in Mexico. and limitations to such powers-of-attorney (generally such persons would be carrying out the day to day management of such company). (c) The amount of the capital stock of the Mexican Company and the participation of each shareholder or partner in such capital stock (we would recommend to start with the minimum capital required under Mexican corporate law). only trust rights and the maximum duration of such trust is 50 years. then. (d) The name of each member of the Board of Directors or in the even that it is so decided.
may acquire property located in the restricted zone for non residential purposes. bankruptcy of the company is not accepted as a reason for termination of a labor relationship nor for nonpayment to employees for services. On the other hand. Under Mexican Federal Employment Law. in case of failure to honor such commitment. such as sales or transfers. to forfeit such interest or equity participation to the benefit of the Mexican Nation). they would require to give a notice to the MFA of such acquisition within the next sixty (60) days following the date of the acquisition. The lack of labor agreement does not deprive an employee of the rights arising from the labor laws and the services performed. It is common practice within the corporate policies of some groups of companies. or for an undetermined period. In Mexico. a Mexican entity with foreign investment but which agrees to a statement called the ³Calvo Clause´ (which basically states that any foreign shareholder or partner shall be considered to be Mexican with respect to such participation or interest and shall agree not to invoke the protection of their Government. It is a common practice to enter into labor agreements with high level employees or key employees. employees are entitle to the following minimum benefits. in case of doubt. Non residential purposes pursuant to the regulations of the Foreign Investment Law are considered as those destined to time sharing. construction. In this case. This lack of agreement shall be imputable to the employer. commercial. urbanization. provided that. industrial. When interpreting labor law provisions. to establish a service company to provide labor force for other companies within the same group. the burden of proof often lies with the employer rather than the employee when contesting an issue. While permitted under law. This practice is done in order to reduce the impact of profit sharing rights.. in which case. Mexican Labor Law grants profit-sharing rights to employees. VIII. or tourism related activities and generally those used by entities pursuant to their corporate purpose. the company or companies obtaining the benefit of the labor force of the service company are jointly liable for the obligations contracted with the employees of the former. employers may elect to grant additional . Mexican Labor Law is quite unique and different from other Labor legislations in the world. under the penalty.Labor Consideration. Mexican labor law does not recognize the existence of work performed by the hour. labor joint liability issues must be considered in following this practice. the relationship will be of undetermined duration. In case of silence. Pursuant to the Mexican labor law. the most favorable interpretation for the employee shall prevail. or development of real estate developments. relationships may be for a determined task or for limited time. Foreigners may acquire real estate properties outside of the ³restricted zone´ provided that they obtain a permit from the MFA. and in resolving disputes.state property in the ³restricted zone´. The provisions of the Mexican Federal Employment Law are non-waivable. Labor relationships in Mexico are governed by the Mexican Federal Employment Law.
(ii) Vacation. employees are entitled to receive their normal salary.lcilaw. as provided under the Mexican Federal Employment Law. or for a justified cause. In addition to weekly days off. unless termination occurs as a result of mutual consent. employers must pay a seniority premium equivalent to twelve days¶ salary for each year the employee has been employed by the employer to any employee terminated without the employee¶s consent.pdf Quick Guide on the Basic Legal Aspects of Doing Business in Mexico http://www.bomchilgroup. provided. While on vacation.doingbusiness. Additionally. Employers are obligated to pay their employees an amount equivalent to three months¶ salary plus twenty days¶ salary for each year the employee has been employed by the employer. on the date of Mexico¶s president change of office. A maximum six-day.benefits such as saving plans.org/data/exploreeconomies/mexico/ These links can be of some use for us may be --------------------------------------------------------------------------- . food assistance. employees are entitled to receive a minimum of seven prescribed holidays per year. however. (iv) Working shifts. (ii) Mexican Social Security System (IMSS). the seniority premium would then be based on a salary equivalent to twice the mandatory minimum salary. ---------------------------------------------------------------------------------------------------------------Doing_Business_in_Mexico http://www. (iii) Days off and holidays.pdf http://www. Employees are entitled to pre-specified paid vacation days per year according to the number of years of employment. (v) Termination and severance payment. plus every six (6) years. plus a vacation premium of an additional 25% over their current salary.com/QuickGuideMexico.org/doing_business_in_latin_america/Doing_Business_in_Mexico_the_Bomc hil_group. including a partial bonus if an employee has worked for the company for a period of less than one year. Employees are entitled to an annual bonus at least equivalent to 15 days¶ salary. insurance and others: (i) Christmas bonus. Employees are entitled to take one day off for every six consecutive working days. that if the employee¶s salary exceeds twice the relevant mandatory minimum salary. resignation on the part of the employee. and (iii) Retirement Savings Fund. forty eight-hour work week. Employers must also contribute in the benefit of its employees to the (i) Low Income Housing Fund (Infonavit).
Corruption. The police stop you for a traffic violation (which may or may not have occurred). They suggest that for US $ 20 or $ 50 you can make it disappear. While corruption no doubt existed prior to the Spanish conquest. rings the doorbell and ask for money for a soft drink. someone comes up to you and asks if you would like to avoid the line and be attended right away. What is culturally OK in Mexico. results in the violations being revoked. While waiting in a long line. but are actually bribes) and tips are part of Mexico and the foreigner¶s perception of Mexico. may be seen as immoral and corrupt by an individual from another country. and no one seems to be able to tell you what is wrong. who knows someone. and is thought of as tipping and not as a bribe. tips ± Doing business in Mexico There are perceptions and realities associated with bribery and corruption when doing business in Mexico. who knows someone. In order to make sure everything is done correctly. All of the following might occur in Mexico. Historically. A call to a family member. The secretary asks if you would like to buy a raffle ticket for some organization. Which of the following are acts of corruption or bribery? Which are totally unethical. suppliers and business associates. A city inspector finds code violations in your restaurant. At holiday time. After buying the ticket the application suddenly appears. and no big deal? Which of these events occurs in your country ? y y y The garbage collectors come by every 2 weeks. Today corruption. You require a zoning change on a piece of land. US $1 or $2. you hire an official in the department as a consultant. bribes. bribery and tipping occur at all levels of Mexican society and at many different degrees. ³mordidas´ (translated as ³bites´. They give him US $ 5 and walk right in. and you¶ll be on your way in 5 minutes. somewhat unethical. Your daughter copies exam answers from another student at school. It will cost US $ 5 to US $ 10. you invite a government official to participate as an investor in the project. ³La mordida´ is the grease that makes the system work. Your son or daughter wants to get into a nightclub. y y y y y y y y . and save you 2 hours. As some Mexican observers have noted. You visit a local political leader and take him to dinner and a theater event to discuss your project. You need government agency approvals for your business project.More details on laws (may not be needed): STATUS:Corruption. bribery. It¶s a difficult subject to address because it involves ethical and moral decisions for the foreign visitor or business person. they certainly did institutionalize it in government and throughout the Mexican (and Latin American) culture. corruption in Mexico is blamed upon the Spanish conquistadors. the doorman says no. mordidas. Your application for a permit/license has been in the government office for several weeks. For one reason or another it has become part of daily life. In fact. you send gifts to politicians. or perhaps give him some shares. Most of it involves small sums of money. to eliminate corruption in Mexico overnight is unrealistic and would probably result in chaos.
more United States companies are establishing and/or expanding operations in Mexico. in the past 10 years there have been great advances in transparency in government. but they are not well enforced. international trade activity. environmental. In fact. Your immigration papers are not quite right.000 payment this year to let a drug shipment go by unharmed or to have his children shot. cross-border debt collections. unequal distribution of wealth. Due to the Mexico¶s rapid economic growth. including guarantees for the time involved in processing applications and permissions. we have been developing in-house capabilities as well as establishing collaborative relationships with highly qualified Mexico-based law firms and attorneys in most areas of Mexican business law. especially for United States companies and investors. and geographical proximity. You are able to convince the official (though words and tears) to ³overlook´ the situation. There is still a long way to go before it¶s completely eliminated. and hold to it when doing business in Mexico. state and federal governments and government agencies are not corrupt. Our Mexico business law practice offers a full range of transactional. and your evaluation of the situation. Mexico in order to better serve our clients. Most business can be done without them. It¶s similar to the temptation one might feel on the lonely country road at 3:00 AM and confronting a red light«. potential inefficiency in the enforcement of contracts that American . real estate development. and other areas where it¶s not required in the least. TX based. cross-border investment. Business in Mexico Requires Experienced and Well-Connected Legal Counsel Doing Business in Mexico. is usually complex due to the combination of applicable federal. All Mexican local. export and import controls. Mexico¶s poverty. franchising and licensing. This is not unique to Mexico. state. and other niches. and local laws and regulations. why would you do it in Mexico? Your company should have a clear policy about corruption and bribery. Our practice areas include: business and finance. There is a document missing. We opened an office and established operations in Mexico City. or internationally. and litigation services to our business clients with interests throughout Mexico. history and culture make it difficult to eradicate corruption overnight. although can be highly profitable if managed properly. regulatory. It depends on you. Mexican federal public policy and local and state governments have been actively reducing and eliminating institutionalized corruption and penalizing government workers involved in illegal acts. Mexico Business Law Padua Law firm is a Houston. and ³mordidas´ are an integral part of the business. There must be certain areas where influence peddling. Additionally. If you don¶t do it at home. Can you live and work in Mexico and not pay bribes? Yes. tax. (I¶m lived and worked in Mexico over the past 14 years and have never paid a ³mordida´ in my private or business life.. Mexico is a country with many laws. boutique law firm providing high quality Mexico business law services.do you stop«or run through it? You should develop and hold firm to your own ethical and moral principals in order to live and do business in Mexico. but there has been a noticeable change in many areas.) Are bribes necessary for doing business in Mexico? I think it depends on the circumstances.y y A drug enforcement agent receives a phone call that tells him to choose between accepting USD $ 20. no money is exchanged.
and its participants. are to be incorporated through a Mexican notary public in a public instrument (escritura pública) and registered at the local Public Registry of Commerce (corresponding to the company domicile.. We have both Mexico and United States licensed attorneys who are bilingual. etc.businesses are accustomed to. You need legal advice from an experienced and ³battle-tested´ law firm who knows the Mexico business terrain. bicultural. cross-border operational issues involved. companies and associations are to acquire a permit to incorporate from the Federal Mexican Ministry of Foreign Affairs/Relations (all entities are licensed federally. and other business objectives completed efficiently and economically by helping you navigate through the Mexican legal and regulatory landscape. in addition to their formal legal training and experience is an invaluable asset to help you successfully complete your objectives. The commercial entities are governed by the Federal Law on Commercial Companies of Mexico. Where the permit to incorporate allows (as determined by the applicant's request) the ability to have foreign investment (as a shareholders. Our Mexico business law practice is focused upon our ultimate goal to help you get your transactions. therefore they can act in any state of Mexico). and most importantly possess strong relationships with Mexico¶s government officials and business leaders. COMPANIES AND ASSOCIATIONS IN MEXICO TYPES: There are two general group of companies: Civil and Commercial. and generally the ³emerging´ or ³developing´ nature of the economy. The civil companies and associations are governed by the different Civil Codes of Mexico.). the Mexican legal system. which is freely chosen at the time of permit acquisition). projects. Attorneys Alejandro Padua (Houston-based. then the incorporated entity is to also be registered at the Federal Registry of Foreign . associate. PERMITS AND REGISTRIES: All corporations. partholder. We understand that your ultimate goals are financial success and always ensure that the most cost-effective and appropriate mechanism and players are employed to achieve a successful outcome. Licensed to practice in Texas) and Jose Luis Anton Morelos (Mexico City-based licensed to practice in Mexico) business experience in Mexico. Law Information CORPORATIONS.
where concessions are required to mine and therefore there is a registry of the concessions / concessionaires). This company type description can be abbreviated by the letters "S. also known as General Partnership). The company capital and/or ownership is not represented by negotiable instruments. SPECIFIC COMMERCIAL TYPES The commercial entities are where two or more persons (individuals or entities) contract and unit in a permanent manner to perform a common licit.C. and under certain formalities of incorporation an registry. en N. They are also to be registered with the national chamber of commerce corresponding to the type of business in which it is involved. sometime after incorporation. they must notify the Secretariat of Foreign Affairs /Relations in its Constitutional Article 27 Permits Department of this decision and register the company with the National Registry of Foreign Investment. constituting commercial speculation.Investment. you are to place the words "and company" or other equivalent). If. .". under the control of the Federal Ministry of Commerce and Industrial Development. depending upon the type of business (example: mining. ** the Federal Housing authority known as INFONAVIT. possible goal of a preponderantly economic nature. under one of the following types: The "Sociedad en Nombre Colectivo" (Company in Collective Name. is a company in firm or trade name (including all the names of all of the partners or where there is a name missing. If you allow your name to be used in the company name. the partners/shareholders/associates agree on permitting foreign investment into the company ownership (where there was no permission prior thereto). There may be other additional registries. where all of the partners have ancillary / subsidiary. unlimited and joint responsibility for the company's obligations. instruments payable to the order of a person (stock) or bearer instruments (stock) and which company parts have restricted transferability. you become liable for the company's obligations. All entities are to be registered with the federal taxing authorities known as the **Federal Ministry of Hacienda and Public Credit. the **Federal Institute of Social Security. This type of company is a personal type company.
The "Sociedad en Comandita Simple" (Company in Simple Silent Partnership also known as a Limited Partnership). This type of company requires a minimum of two stockholders in order to incorporate and exist. This type of company is a personal type company. and which company parts may or may not be of restricted transferability (depending on the company bylaws). made up of . unlimited and joint responsibility for the company obligations and one or more "comanditario" partners that are solely responsible for the payment of their portions attributed to the company.". also known as the Limited Liability Company) is a company with a firm/trade name or denomination (made-up name). also known as the Limited Partnership with Shares") is a company subject to the rules that govern the "Sociedad Anónima" company (with exceptions).A. or if of the variable capital type then "S. that person will be liable for the larger of the company partner portions. and which consists of one or more "comanditado" partners that respond with ancillary/subsidiary. de R. If the person's name is included in the company name. which parts are represented by negotiable instruments (stock). A. The company capital/ownership is not represented by negotiable instruments. which corporate parts are not represented by negotiable instruments. This company type description (at the end of the company name)can be abbreviated by the letters "S. The "Sociedad en Comandita por Acciones" (Company in Silent Partnership by Stock. de C. The "Sociedad de Responsibilidad Limitada" (Limited Responsibility Company. consisting of partners whose only obligation is to deliver their portions (money or assets) attributed to the company.". This type of company is a mixed type (personal/assets). en C. and which company parts have restricted transferability. This type of company may. The "Sociedad Anónima" (Limited Liability Stock Company. instruments payable to the order of a person (stock) or bearer instruments (stock) and which company parts have restricted transferability. This company is a capital type company (no personal) and is the one most commonly used in business in Mexico. instruments payable to the order of a person (stock) or bearer instruments (stock).". (if set in the articles of incorporation) have a variable capital portion which would permit it to raise or lower the variable portion without changing the articles of incorporation or bylaws (however it would require an extraordinary shareholders' meeting). also known as the corporation) is a company with a denomination (made-up name) consisting of shareholders whose only obligation is to deliver the portions they subscribe to (in the corporate capital) and which are attributable to the company. (no bearer instruments/stock).".S.V. L. is a company in firm name or trade name (including all the names of the "comanditados" partners). This company type description (at the end of the name) can be abbreviated by the letters "S. This company can not have more than 25 partners and the company description (at the end of the name) can be abbreviated by the letters "S.
This also known as a common goal company. This company may exist under a firm name or a trade name or a denomination distinct to that of the names of the comanditado" partners. (Therefore not a civil company). This is a company where two or more persons contract and unit in a permanent manner to perform a common licit. por A. What is common in Mexico is the . The "Asociación Civil" (Civil Association) in Mexico is foreseen and governed by the Civil Codes of the several states of Mexico. This company type description (at the end of the name) can be abbreviated by the letters "S. CIVIL LAW TYPES The "Sociedad Civil" (Civil Company) in Mexico is foreseen and governed by the Civil Codes of the several states of Mexico. and without constituting commercial speculation. then the words "and company" must be used in the name.S. difference between partnership and joint venture and the different types of partnerships are not that common in Mexico." and it is a mixed type company (personal and assets oriented). unlimited and joint responsibility for the company obligations and one or more "comanditario" partners/shareholders that are only responsible for the payment of the company stock they subscribed. This is a company where two or more persons contract and unit in a permanent manner to perform a common licit. C. C. Certain of the collective name company rules apply as well as do certain of the simple silent partnership company rules. If all of the "comanditado" partners are not in the company name. This company only issues nominative stock and the "comanditado" partners may not sell their stock without the the prior approval of all of the "comanditado" partners and two thirds of the "comanditario" partners. possible goal of a preponderantly economic nature. possible goal of a preponderantly non-economic nature. This company type description (at the end of the name) can be abbreviated by the letters "A. without constituting commercial speculation (therefore not a commercial company).". This company type description (at the end of the name) can be abbreviated by the letters "S." Civil Law Partnership (Joint Venture) The U.one or more "comanditado" partners/shareholders with ancillary/subsidiary. en C.
For discussion purposes herein."Association in Participation". Business Association: Businesses are required to organize themselves as associations. or ongoing) of the business and create a hybrid of the association in participation. complete and avoid agreeing on items contrary to law). is fully personally liable for the losses of the enterprise. This is an agreement where one or more partners ("asociados") deliver goods and/or services to the managing partner ("asociante") for use in a specific business venture. LIQUIDATION AND DISSOLUTION . Mexico has not enacted a Dealer's Act or Transfer of Technology. The managing partner is the one responsible before third parties and the one that performs the business. Sole Proprietorship: Any individual (physical person) (foreigner with immigration status or Mexican national) in Mexico may open a business and/or do business in his or her own name without creating a separate entity. Industrial Development policy and certain practical effects in the country. The restrictions on joint venture in Mexico in the past have been the Foreign Investment policy. The "Association in Participation" (Asociación en Participación) is not a company nor corporation (it does not have separate existence). the individual. However. When there are 20 or more in any specific type of industry they are to organize themselves in that type of national industrial association (or chamber) (example: National Association of Steel Manufacturers). there should be a continuity of management. a partnership and a joint venture (the key is to be specific. Both the silent and managing partners will have the right to participate in the profits of a commercial venture. still it is a common way of doing business in Mexico. When there are fifty or more in any specific type of commercial activity. since there is no legislation (in general terms) that restricts it. then they are to organize into a national chamber of commerce of that type of commerce (example: National Chamber of Commerce of Hotels). we will say that the partnership is an ongoing relationship of more stability than that of the joint venture. be flexible to change and understand the market. one specific venture limited in time or place. which is known as a Sole Proprietorship. Joint Ventures should have: compatibility of business sense and culture attitude. He. the parties can contractually agree on the durability (one specific deal.
Then perform final ordinary shareholders meeting and approval of the administration of the company and actions of the officers and authorized agents.which we can do in the last ordinary annual shareholders meeting) 2. This should include the incorporation and changes to the bylaws and articles.One must first receive and review the present corporate existence of the Mexico Company. 3. Here we include a prior publication of notice of .if missing we will need to complete them . Here we include a prior publication of notice of intent to meet. After the meeting we may need to register it at the corresponding public registry of commerce (where it is registered). Prior shareholders meetings (to verify that none are missing . Then perform shareholders meeting of liquidation appointing liquidators and authorization for them to carry out the liquidation. to: Verify type Verify place of registry How it functions Any changes since incorporation Present day officers.
Here we include a prior publication of notice of intent to meet. After the meeting we will need to register it at the corresponding public registry of commerce (where it is registered). Then perform shareholders meeting of approval of actions under the liquidation process and to approve final dissolution of the company. by publication of announcements to creditors of intent to liquidate and to perform collection against debtors. then they will need to be registered separately. . 7. These two notices can be done together if accomplished in the same fiscal (calendar) year. Then final final notice of liquidation and dissolution of the company with the National Registry of Foreign Investment. 5.intent to meet. If in separate calendar years. 6. After the meeting we will need to register it at the corresponding public registry of commerce (where it is registered). Final final notice of liquidation and dissolution of the company with the Federal Income tax Authority. 4. Then perform liquidation.
salaried employees and salesmen. Semi-skilled and skilled laborers make up approximately one-third of the labor market. age. sex.4 percent. American Chamber/Mexico publishes an annual Survey of Salaries which analyzes the compensation paid to 98 key job positions within companies. etc. Although wages continue to be low in comparison to the United States. employee benefits and union activity within Mexico. EMPLOYEE PRIVILEGES As an employer. You should familiarize yourself with labor law as part of your feasibility study for operations in Mexico. and the Mexican Federal Labor Law (MFLL). religious or political beliefs. the MFLL is strict in its prevention of unsafe working conditions. LABOR LAW Labor regulations in Mexico are based on the Mexican Constitution of 1917. minimum salary. There is no time limit on the length of the work relationship.8. or social standing. and required benefits. it also produces annually a Benefit Survey. you may not infringe on a worker·s rights of safety. The Federal Labor Law regulates labor contracts. Mexico's labor market and laws(already written in short above) Mexico·s labor force is growing at an annual rate of 2. Also. Index . but the agricultural sector has been shrinking as the urbanization process continues and people move to the major cities in search of manufacturing employment. unless it is explicitly defined for a set time or for a specific job. as the case may be (determined by the industry in which the company was active). minimum wages. work shift. there are few circumstances under which you legally can dismiss an employee without incurring compensation responsibilities. employers cannot discriminate on the basis of race. that examines what benefit packages firms are offering their executives. Index THE WORK RELATIONSHIP If a work relationship is not specifically defined as temporary from the beginning.Final notice of dissolution with any other agencies or chambers of commerce.
All workers are automatically covered by the public health care system the Mexican Institute of Social Security (Instituto Mexicano de Seguro Social. Executive officers and general managers often do not participate in this program. y Legal Holidays . depending on the risk-factor of the job.Federal law requires firms to participate in a profit sharing program in which employees receive 10 percent of the firm¶s annual profits. By the 5th year of service. Six days of paid vacation must be offered after one year of service.Vacation time is guaranteed and rewarded based on seniority. SAFETY The employer is responsible for staffing labor inspectors to ensure compliance with occupational hazard regulations.Employers also are required to pay a 5 percent fixed payroll tax to finance the Institute for the National Fund for Employee Housing (Instituto Nacional del Fondo de la Vivienda para los Trabajadores. y Employee Housing . IMSS). this adds up to two weeks of paid vacation. y Profit Sharing .Firms are also required to pay a year-end Christmas bonus (Aguinaldo) to all employees equivalent to at least two-weeks pay.42 percent of each worker¶s salary. y Social Security . Benefits include basic health care and medications. regardless of his or a co- . whether registered or not.Under the Retirement Savings System (Sistemas de Ahorro para el Retiro. into the social security fund. y Vacation . attention to occupational accidents and care for illnesses. INFONAVIT).BENEFITS Employee benefits can substantially add to labor costs. y Retirement Insurance . Besides these holidays many businesses and labor contracts observe additional days for religious and national celebrations.Mexican Federal Labor Law establishes 7 legal paid holidays per year. employers must pay 2 percent of a worker¶s salary (up to 25 times minimum wage) to a retirement fund in a bank account under the worker¶s name. After five years of employment. It is the responsibility of the employer to register employees as well as contribute a minimum of 17. plus two additional days each year for the next three years. The goal of this federal program is to provide benefits allowing employees to more easily acquire a home. Those who have worked less than one year receive a pro-rated bonus. SAR). Workers who suffer any form of occupational accident are entitled to whatever medical attention is deemed necessary. y Christmas Bonus (Aguinaldo) . two more days must be added for each five-year block of service.
worker·s negligence.74. SALARY According to the Federal Labor Law. 48-hour work week. Under certain conditions.F. The minimum legal working age is 16 years with the permission of parents and a permit from the Secretary of Labor and Social Welfare (Secretaría de Trabajo y Previsión Social. or any other criteria to which the parties agree. when this law went into effect. Firing employees without incurring financial compensation is possible only when an employee grossly violates the work relationship. after 10:00 pm. Medical care is administered by IMSS. a lump sum. Employees with 15 or more years seniority who leave voluntarily are entitled to a minimum compensation of 12 days pay per year of service since May 1970. To dismiss a worker without just cause. which encompasses Mexico City. Employers are obligated to modify facilities for the safety and health of workers. In the middle of 1995. For example: sabotage. the daily minimum wage should represent a purchasing power for a basic standard of living and is set annually in accordance to geographic region. employers may lay-off workers without having to pay severance.). and triple-time beyond 9 hours. White collar workers usually have more flexible schedules and sometimes work into the late evening. the average national daily minimum wage was N$16. or overtime. such as temporary disability or contagious disease. The minimum wage in the Federal District (Distrito Federal D. flagrantly . commission. The National Minimum Wage Commission (Comisión Nacional de Salarios Mínimos) has the authority to modify the minimum wage as needed. the maximum allowed by law. The white collar work force usually works an average of 40 hours per week. Index WORK SCHEDULES The blue collar work force is accustomed to a six-day. Saturday or Sunday. you must pay him three months salary plus 20 days pay per year of service. Neither pregnant women nor minors are allowed to work in areas of potential health risks. STPS). Salaries can be established according to unit of time or work. Index TERMINATION OF THE WORK RELATIONSHIP Terminating a work relationship can be an expensive process. is considerably higher than in other parts of the country. Overtime is paid at twice the hourly wage for the first 9 hours after 48 or for working on a legal holiday. and there are also higher minimum wages established for some industries.
Dismissed employees with two or more years of service have the right to sue for reinstatement. rate. Approximately 30 percent of the Mexican work force is unionized. if you plan to implement any sort of productivity bonus system.S. . Unions are an important and highly politicized component of the labor market that are especially strong within the public and industrial sectors. The key to establishing good union relations is communication. with emphasis on workers with more seniority. For example. and by law. If the employee wins the suit he will regain his job. Unions tend to be very territorial. The constitution and the Federal Labor Law both favour unionization. The goal of the unions is to protect the interest of employees. receive full back pay. You should research the unions which represent your particular region and sector. It is imperative to contract a Mexican labor lawyer prior to hiring a work staff. so you should discuss in detail the plans and goals of the firm with the union representatives during the bargaining stages. Unions may be formed freely by registering with federal or state authorities. but this tends to be a long process filled with delays. if you give a certain bonus one year. the union will expect the same bonus the next year. Written notification within 30 days of the violation stating reasons and effective date of termination is needed to legally fire an employee. Other reasons for which an employer can avoid severance pay include: y y y less than one year of service completion of the labor contract physical or mental disability that prevents a worker from fulfilling his duties. Also be aware that under the philosophy of acquired rights. companies can only establish relations with one. UNIONS If you are planning to hire Mexican workers.neglecting safety procedures or working under the influence of controlled substances. and may even receive punitive damages. The union system is quite complex but most unionized workers belong to the nine largest labor syndicates. Labor contracts are difficult or even impossible to change once established. you must be prepared to deal with labor unions (sindicatos). about twice the U. it should be explicitly stated in the labor contract prior to signing. This could pose a problem if your senior workers are not the most productive.
claims to represent 5. most of which are PRI-affiliated. .5 million workers or 85 percent of the private sector. CTM). All operations must stop until the strike is resolved. very few strikes actually occur. Strikes must be filed and approved by the Federal Labor Conciliation and Arbitration Board (Junta Federal de Conciliación y Arbitraje. less than 5 percent of all strike notices filed actually led to strikes. In 1993. CT) was formed in the 1960s and is an umbrella organization that represents 37 other labor confederations and independent unions. Ninety-five-year-old Fidel Velázquez had been the confederation·s Secretary General since the early 1940s. The Congress of Labor (Congreso del Trabajo.Mexico·s largest and most politically powerful union. employees have 24 hours to return to work or face termination. management can neither enter the premises nor hire replacements. If the strike is ruled legal. The CTM is allied with the Institutional Revolutionary Party (Partido Revolucional Institucional. the Confederation of Mexican Workers (Confederación de Trabajadores Mexicanos. The CTM provides political direction as well as legal advice and services to members. If JFCA does not grant permission to strike. PRI) which has held the Mexican presidency and a legislative majority since its founding in 1929. JFCA) to be deemed legal. STRIKES Although the constitution establishes the right of registered unions to strike.