Mexico’s Business Community Proposal for Economic Stimulus – Recent Government Actions

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Overview


The Mexican business community recently issued a proposal to the federal government outlining certain policy proposals focused on protecting jobs, as well as mitigating the adverse effects that the COVID-19 pandemic has brought upon the Mexican economy. The federal government has expressed interest in enacting most of their proposals in the coming days.

In Depth


The Mexican business community, represented by the Business Coordinating Council (“Consejo de Coordinador Empresarial” or “CCE“) recently issued a proposal to the federal government outlining certain policy proposals focused on protecting jobs, as well as mitigating the adverse effects that the COVID-19 pandemic has brought upon the Mexican economy.

Among the actions suggested by the CCE are the following:

  1. Provide the financial markets with needed liquidity to allow for continued fluidity in the market in the short and long term;
  2. Maintain financial discipline in the management of public finances; however, any liquidity measures should prioritize the restart of the economy, notwithstanding the immediate effects such measures would have on the federal budget;
  3. Strengthen the public-private agreement on infrastructure investment, broadly, and specifically, jump-start private investments in energy infrastructure projects;
  4. Allow for an immediate tax deduction of investments made in 2020, without limitations or conditions;
  5. Enact measures to allow employers to use tax payments due to provide employees who will be laid off with a minimum wage for sustenance;
  6. Ensure the application of the rule of law to protect investments already made by employers and other investors;
  7. Accelerate payments owed to federal, state and municipal government suppliers, with special emphasis on those with commercial arrangements with the national oil (PEMEX) and utility (CFE) companies;
  8. Accelerate the refund of federal taxes to taxpayers entitled to the same, particularly value-added tax, and reinstate the ability for taxpayers to offset all federal taxes owed from value-added and other federal tax refunds due to them;
  9. Form a task force to include representatives from the government, the business community and labor to continually monitor the situation and propose actions to respond to this crisis; and
  10. Implement programs, through the development of the banking system, to allow for the countercyclical investment in sectors most affected by this crisis.

The proposals outlined above are being discussed by the CCE with the Mexican Congress, and the federal government has expressed interest in enacting most of these proposals in the coming days.

Of special interest to foreign investors are (1) the reinstatement of the ability to offset all federal tax liabilities, and (2) the jump-start of infrastructure investment programs. These two measures will provide investors with additional liquidity, as well as new investment opportunities in critical infrastructure projects, which are federally insured by the Mexican government.

Finally, in recent days, the federal government declared a national health emergency, and as a consequence of that, put in place certain policies to (1) protect the vulnerable population, (2) establish “social distancing” policies, such as the shut-down of “non-essential” businesses and the restriction of gatherings exceeding 100 people, among others, and (3) protect employees and employers from the adverse effects brought upon the economy by this crisis.

McDermott is actively advising companies with operations in Mexico on all aspects of the COVID-19 pandemic. We are tracking developments and are available to assist foreign investors with questions about Mexico’s economic stimulus proposals.