Companies evaluate how to face the end of outsourcing, and it is impossible for January

Opinion article published in El Economista, Opinión / Nombres, Nombres y… Nombres [Opinion / Names, Names and Names] Section by Alberto Aguilar.
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At the IMEF [Mexican Institute of Finance Executives] convention, Alfonso Romo was openly critical of the work done by the current administration by pointing out that a country cannot be handled as if it were growing, when the GDP will fall 9% in this year of 2020.

It is clear that there are deep disagreements within the government of President Andrés Manuel López Obrador and that the patience of the head of the Office of the Presidency may start to run out since, so far, many of the commitments with the CCE [Business Coordinating Council],headed by Carlos Salazar, have failed.

In the meantime, the recovery of the economy will take years. Covid-19 only intensified the descent on activity already in progress. The data on investment in August was just made known, and it decreased by 17.4 percent. 16 months of relapse have been strung together. The industrial sector also fell 6.2% in September, the eighteenth contraction, and there are no signs of improvement due to the uncertainty.

Recently, despite the agreement with the CCE of opening consultations, the bill on subcontracting was presented in an extremely untimely conjunction, given the situations of companies and employment. The excesses within the mechanism are public. Extensive fraud and damage to the working conditions of thousands of workers, even though the SAT [Tax Administration Service] headed by Raquel Buenrostro, had made progress in closing the clamp.

The discussion with representatives of this proposal prepared by the STPS [Department of Labor and Social Welfare], headed by Luisa María Alcalde, starts this week. It is taken for granted that it will progress quickly, as it did in the Senate, and outsourcing will have received a deathly blow, given the adjustments to the IMSS [Social Security Institute], Infonavit [National Worker’s Housing Fund Institute], Income Tax and VAT Laws. Its operation will carry the risk of incurring in tax fraud and even organized crime.

At this time, experts within thousands of companies are evaluating how to deal with this provision that would take effect in January. Given the scope of the reform, experts such as Oscar de la Vega, of the De La Vega and Martínez Rojas Firm, calculate that a minimum of one year is needed. The legislature must be aware that it is impossible to comply within a few weeks, he says. The government shot itself in the foot, since the use of this mechanism, which must be registered before the STPS which, by the way, does not have the capability of dealing with this responsibility, is frequent in government agencies.

It should also be taken into consideration that, upon the elimination of subcontracting, the labor cost will increase to 47% vs. 20% to which it was lowered in the United States, if you also add the recent ratification of the 10 percent PTU [Profit Sharing].

Many SMEs will not be able to subcontract and they will opt for informality. In general, the greater the rigidity in labor legislation, the less the formality. There are testimonies of the World Bank in this regard.

Thus, a lot is at stake with this bill and the 5 million workers involved.

Repuve is also ineffective, Mexico City without VAT and ISAN.

I was telling you about the problems faced by the automotive sector in the lag in Mexico City in the processing of plates and registration and deregistration procedures. The AMDA [Mexican Association of Automotive Distributors] presided by Guillermo Prieto and led by Guillermo Rosales, together with leasing groups have not ceased to insist on this matter. Think about the Amave [Mexican Association of Vehicle Leasing], headed by Mauricio Medina and the Amsofac [Mexican Association of Leasing, Credit and Factoring Financial Corporations], headed by Horacio Sisto. The lack of capability of the Semovi [Department of Mobility], headed by Andrés Lajous has caused great harm to the business, already damaged by the crisis. Hence the insistence of having Claudia Sheinbaum herself taking action in this regard. Within the scope of this problem, the Repuve [Public Vehicle Registry] headed by Eduardo Bonilla also operates with enormous inefficiency. The city is also, obviously, paying a price, as its collection of VAT and ISAN [Tax on New Cars] has contracted.

Canacintra presents the “Eagle Award” on Wednesday

Canacintra [National Chamber of the Manufacturing Industry], presided by Enoch Castellanos, will present the “2020 Eagle Award” this Wednesday. This will be its sixth edition and 14 senators and 12 representatives of the four main political forces will receive awards. Among them you will find Ricardo Monreal, Beatriz Paredes, Dante Delgado, Patricia Terrazas and Tonatiuh Bravo.