October 8th, 2021
1. Financial Intelligence Unit will investigate ‘Pandora Papers’
The tax-dodging businesses of 3,047 people were exposed through a new leak of 11.9 million documents obtained by the International Consortium of Investigative Journalists (ICIJ). Among the citizens and residents of Mexico who used opaque trusts or foundations, there are around 80 people, including politicians, who transferred millions of dollars to countries that offer anonymous tax havens beyond the reach of tax authorities.
Politicians close to President Andrés Manuel López Obrador, relatives of former opposition governors, and current members of state cabinets appeared in the investigation. The Pandora Papers records were sourced from 14 global firms specialized in creating paper companies for those seeking to eschew paying taxes. The investigation will test the President of Mexico’s commitment to the fight against corruption.
2. Electricity reform contravenes the USMCA and alters investments
The electricity reform proposed by the Executive Branch would return to the Federal Electricity Commission (CFE) the monopoly of the commercialization of electricity and private sector electricity generation investment to 46%.
In this sense, the reform would limit investment in the sector to USD $44 billion, excluding investments in projected plans. Carlos Salazar Lomelín, president of the Business Coordinating Council, criticized this counter-reform because it would catalyze a wave of international litigation under the United States-Mexico-Canada Agreement (USMCA), none of the three countries is allowed to close or expropriate sectors where investment and competition are already allowed. Articles 14.6 and 14.8 of the investment chapter prohibit the expropriation of US or Canadian company investments, if it did so, Mexico would be obliged to compensate by opening other sectors of the same size as electricity to private investment.
El Economista: Reforma eléctrica pone en jaque 44,000 mdd en inversiones: CCE.
El Financiero: Hace ‘cortocircuito’ la reforma eléctrica.
3. Economic recovery, inflation and remittances permeate more sectors
The Undersecretary of Finance and Public Credit, Gabriel Yorio, reported that the Mexican stock market is expected to make a gradual recovery. At the 2021 Digital Stock Market Convention organized by the Mexican Association of Stock Market Intermediaries (AMIB), the Undersecretary indicated that global stock markets recovered significantly and recently registered historical highs. Profitability growth in the industrial, consumer, telecommunications, construction, commercial services, and mining sectors are above their pre-pandemic levels
However, the National Consumer Price Index (INPC) rose to 6 percent (annual rate) in September, its highest level since April 2021. The non-core balance, which counts products with price high volatility, such as fuels, grew to 9.37 percent, a marked increase compared to other months. Finally, remittances will hit a new all-time high this year after surpassing the 2020 record by about USD $41 billion.
4. New security relationship with the United States
The High-Level Security Dialogue was attended by Secretary of State Antony Blinken, Secretary of Internal Security Alejandro Mayorkas, and Secretary of Foreign Relations Marcelo Ebrard. The Mexican administration proposed policies to reduce violence, arms trafficking, and drug use. They discussed migration, health coordination, the fight against drug trafficking, electricity reform, the energy sector, and other issues related to the T-MEC.
The meeting is predicated on a communication channel capable of creating a security zone affecting all of Latin American. Experts state that canceling the “Mérida Initiative” and proposing a new security and migratory agreement with the United States is driven by strong political factors. The foreign minister also asked Washington to not send more weapons to Mexico within the framework of the United States’ civil lawsuit against some companies’ commercial practices that facilitate illegal arms trafficking.
5. Changes in state governments pose new challenges
New governors in the north of the country are registering protest to allow businesses to stimulate Foreign Direct Investment (FDI) to generate more jobs and boost growth. Samuel García Sepúlveda, the new governor of Nuevo León, expressed the need to work with the executive, legislative, and judicial branches, as well as with businesses and municipal presidents of neighbouring states, to energize growth in the region.
The border states are working on a plan to achieve a comprehensive political and economic recovery plan focused on technological and security. The states will coordinate with metropolitan areas, including strategic cities such as Monterrey. The recovery initiative is being crafted with the support of Minister of Economy Tatiana Clouthier to increase regional growth and address economic challenges.