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Mexican standard for integrity policies

Written by Santamarina + Steta en . Published in Updates.

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In recent years, the need to implement integrity policies has re-emerged worldwide, mainly due to:

  • The entry into force of laws that administratively and criminally sanction acts of corruption.
  • Recognition of the criminal liability of companies.
  • The possibility that companies that adopt and implement optimal integrity policies and standards may be exempt from certain sanctions or receive reduced fines.
  • Implementation of ESG standards to access external financing.
  • The reputational risk to which companies are exposed due to complaints made through social networks.

To this end, a large number of companies, many of them multinational, have given greater importance to the creation and implementation of corporate integrity systems. However, some have limited themselves to translating standards adopted in their countries of origin or at a global level, without taking into consideration the particularities of each jurisdiction.

In the case of Mexico, it is important to remember that the General Law of Administrative Responsibilities establishes the minimum requirements that a company's integrity policies must contain so that, in the event of being involved in an investigation for alleged acts of corruption, they can avoid liability or, where appropriate, receive a reduced sanction.

The minimum elements that a corporate integrity system must contain, according to said Law, are the following:

  1. Clear company organization and procedures manuals.
  2. Have a published and disseminated code of conduct. The code must contain the systems and mechanisms for its application and enforcement.
  3. Adequate and effective control, monitoring and auditing systems.
  4. Adequate reporting systems (internal and to authorities).
  5. Disciplinary processes and specific consequences for offenders.
  6. Training and capacity building systems.
  7. Human resources policies that include the implementation of actions for due diligence prior to hiring employees.
  8. Mechanisms that ensure transparency and publicity of interests.

While the task of preparing these documents may seem simple, the reality is that for them to work in a real and effective manner, it is necessary to adopt a multidisciplinary approach, taking into account: (i) current legislation – including aspects of criminal law, administrative law, labor rights, human rights, etc. -, (ii) the structure and processes of the company, so as not to negatively impact its operation or create unnecessary bureaucracy, (iii) the objectives and risks of each company, as well as its relationships with third parties – including bodies at different levels of government, and (iv) the size of the company and its budget for the implementation of this type of policies.

In the team of Compliance At Santamarina + Steta Research we have adopted as a best practice the realization of a total immersion in each of the companies with which we work for the creation and implementation of corporate integrity systems, with the purpose of designing strategies and systems tailored to each one of them. It is vital that an integrity system becomes a living and important part of the business culture of each one of our clients, supporting them throughout their creation and implementation process.

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Nearshoring in Mexico: Real estate challenges

Written by Santamarina + Steta en . Published in Updates.

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As a result of China’s COVID-19 restrictions, semiconductor shortages, and the global supply chain crisis, Santamarina + Steta has received multiple requests from U.S. and Canadian companies to provide legal advice and support on how to establish new manufacturing facilities in Mexico and even relocate manufacturing activities from China and Southeast Asia to Mexico.

Despite the many advantages of relocating to Mexico, such as preferential tariff rates under the USMCA, labor costs, and the undeniable proximity to the United States and Canada, moving from one side of the world to the other can be more complex than expected. 

From a strictly real estate perspective, and in addition to any assessments relating to areas such as security, skilled labor and tax strategies, in this article we have attempted to identify the main real estate aspects to consider when relocating manufacturing activities to Mexico:

Geography of North America. The U.S., Canada, and Mexico have coastlines on both the Atlantic and Pacific Oceans, and the U.S.-Mexico border runs from coast to coast. However, the decision on where to locate a manufacturing plant in Mexico will need to be influenced by the market or region that the plant will serve.

For example, while locating a manufacturing plant in Ciudad Juarez, Chihuahua, may be a good idea for supplying goods to Texas, there may be better options for exporting to other countries. Similarly, while relocating to Tijuana or Mexicali would be the best option for supplying the California/Arizona markets, there may be better alternatives for supplying goods to the Northeast US/Canada or Europe. Likewise, the Yucatan Peninsula has become a top destination for multinationals due to its proximity to Florida.

Availability of properties. Since the phenomenon began nearshoring, it has become clear that although Mexico has world-class industrial parks along the U.S.-Mexico border and in other industrial cities, Mexico was not prepared to receive the wave of new companies interested in establishing facilities closer to the U.S. and Canada.

Fortunately, land in northern Mexico is not extremely limited and real estate developers have the capacity to serve new clients. However, this would typically mean that new companies would have to wait for real estate developers to build new industrial facilities or would have to invest additional resources to acquire and build their own facilities in Mexico.

To speed up this process, many of our clients have opted to sign “build-to-suit” agreements (“built-to-suit agreements”) with Mexican companies.

Infrastructure and transportation. Although there are significant areas of land to be developed in Mexico, it is important that the chosen location is well connected via roads, railways or nearby ports, in order to simplify logistics and reduce transportation costs and risks.

Availability of water and services. An additional issue our clients have considered has been whether the desired location has the capacity to provide them with the services and resources necessary for their processes.

For example, since industrial activities can have a high demand for water, it is crucial to locate new facilities in areas where there is sufficient capacity to support the exploitation of water by new companies, without being overexploited. The previous ones, as overexploited aquifers, are often subject to prohibitions on the issuance of new water concessions. Therefore, the supply of water can be more expensive. In this sense, while northern Mexico has problems with extreme drought, other regions have enough water to serve the new players.

Another issue under consideration is the capacity of the area's electrical grid and the existence of Natural Gas/LP Gas pipelines in the area.

Incentives and permitsWhen deciding on the location of a new facility, it is relevant to consider whether the Federal and State governments offer incentives for the investment to be made, as well as the permits, licenses and authorizations required to start operations of the manufacturing facilities and to keep them in compliance.

Relocating to Mexico has proven to be a viable and cost-effective option for many companies. However, it is essential to conduct a thorough assessment of how, where and when to relocate.

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Gala dinner | 75th anniversary

Written by Santamarina + Steta en . Published in Announcements.

Seventy-five years of formation, consolidation, solidity and prestige. 

Seventy-five years that add up and multiply, that recount the efforts, achievements and challenges, tears and joys of all those who have passed through the halls of our house. 

Seventy-five years that allow us to thank from the bottom of our hearts each and every one of the clients who have placed their trust in us. 

On October 14th, we celebrated the 75th anniversary of Santamarina + Steta with our clients, friends and family. To all those who have accompanied us throughout these more than seven decades, we express our deepest gratitude for being part of this family and this history, as well as the present and future of our Firm.

Yesterday, today and always… We are Santamarina + Steta.

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A wave of business conflicts could be triggered in several supply chains: Santamarina + Steta

Written by Santamarina + Steta en . Published in Updates.

  • It could saturate the courts again.
  • Much will depend on the certainty or uncertainty generated by the federal government.

CDMX, January 14, 2022. Roberto Fernández del Valle M., expert partner in dispute resolution at the law firm Santamarina + Steta He predicted a possible wave of conflicts between companies in various supply chains, which would significantly increase the backlog of courts in various parts of the country. “It would mean a huge loss of time and resources for the Mexican productive society,” said.

The expert considered the above, despite the progress of many judges, secretaries of agreements and litigating operators who learned to use digital platforms and new technological tools, which were enabled to continue the administration of justice in the midst of the pandemic. “It has been a formidable effort, but it involved a learning curve and a delay, which resulted in a backlog of files that the courts have not yet resolved. This is what the end of 2021 could look like, along with very heavy workloads, trials and increasingly longer periods to issue sentences, which is also very costly for companies.”

And he stressed: "We must add that there is growing reluctance on the part of federal courts to accept bankruptcy proceedings, which are a key tool for recovering companies and preserving workforces. The creation of specialized courts is truly urgent.".

The specialist explained that the perspective to be observed for 2022 will depend on whether or not the federal government increases the climate of conflict, for example, from an energy counter-reform that could break the agreements already established with investors in that sector, because “This would trigger an additional chain reaction. First with companies in the sector, and from there the impact would extend to third parties and countless collateral supply chains in many other branches of national economic activity.”

Roberto Fernández del Valle recommended that the Mexican productive sector be prepared for a wave of business disputes, review their contracts and verify that they have clauses that contemplate compliance risks and design models to address such risks strategically, with options to resolve disputes through alternative mechanisms to the courts.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

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InDepth: Commercial Arbitration 2022

Written by Santamarina + Steta en . Published in Updates.

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Arbitration is a popular means of resolving commercial disputes due to its finality and enforceability of awards. Arbitration has thrived despite the disruption caused by the coronavirus (COVID-19) pandemic and has adapted to the crisis with remote proceedings to ensure that cases can continue. Learn about other changes to the commercial arbitration process in Mexico.

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Lithium for no one: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • Reforms in a hurry. They forgot the transitional provisions!, which will bring a shower of injunctions.
  • The government, without resources for the exploration, exploitation and use of minerals.

CDMX. April 29, 2022. Mariano Calderon, expert partner in constitutional matters at the law firm Santamarina and Steta He pointed out that the reforms to the Mining Law are intended to create a State monopoly on lithium and cancel the participation of private investment in the entire value chain for the exploitation of this and other minerals.“They obey the same dogma of the constitutional reform initiative on energy matters that did not obtain a majority in Congress. Thus, they will stop granting concessions or permits if the mineral is considered strategic. The problem is that this dogma incurs a serious constitutional flaw and the federal government does not have the money or the knowledge to exploit it. Not even to create the institute that it intends to create,” said.

The expert explained that both the president and the legislative majority that promoted the reforms to the Mining Law did not analyze their scope in depth and - incredibly - forgot to establish transitional provisions, which leaves all the concessions granted and in force to date in complete uncertainty, which will surely be defended through injunctions, given that they have already acquired rights that will be affected by the approved text. "Of course, this can be considered unconstitutional and those people who are affected by the legal reform can resort to amparo proceedings or investment arbitration under trade treaties," reported.

Mariano Calderón added that the doctrine or principle that no type of private investment can participate in the mineral value chain goes against what the country requires, which are investments, business opportunities and employment for Mexicans. Not a bureaucracy that can now cancel entire sectors of the mining industry at its discretion. In exchange, it promotes establishing a State monopoly that will not have opportunities to enter or compete in the lithium market.

“It is also based on an error of origin and a serious constitutional flaw due to this ideology, given that the same constitutional article 27 has always established that the domain of the lands, waters and all the minerals in the subsoil belong to the nation and that it will be up to the State to see to their best use, through assignments or concessions. What the initiative is doing is excluding lithium from the scope of private investment. Now the federal government will have to allocate budgets to create a new organization, to give it resources so that it even begins to function. Not to mention to invest in the exploration, exploitation and use of the mineral. Given the scarcity of resources and the national and international economic challenges that we are experiencing, we are practically burying lithium for many years.”He said.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

INSIGHTS REFORMALIE SITE 2

The future of taxes on large taxpayers

Written by Santamarina + Steta en . Published in Updates.

printable version | May 2022

Large companies represent a source of oxygen for the Tax Administration Service (SAT) in the post-Covid era, despite the scrutiny that the agency has imposed on them with the new tax reform.

With 12 large taxpayers registered with the SAT, the new tax reform has generated a wave of uncertainty in the business community, where the vigil has been tightened for those who declare annual taxes exceeding 1,500 billion pesos —especially in the automotive, mining, manufacturing, food, banking and multinational sectors.

Read full note here

Do you know what to do in case of a cyber attack? 1

Do you know what to do in case of a cyber attack?

Written by Santamarina + Steta en . Published in Events and Webinars.

Metabase Q revealed that 8 out of 10 companies do not have a response plan for a cyberattack. According to data from the OAS and CONDUSEF, the cost of response and recovery from ransomware attacks for the affected organizations is 2.3 million dollars, on average, so the financial and banking sector is one of the most vulnerable.

Of the total number of cyber frauds in the second half of 2021, according to the claims initiated by CONDUSEF, 2 million 534,130 were in online commerce, 119 thousand 179 in mobile banking, 89 thousand 324 correspond to online operations by individuals, 3 thousand 076 online operations by legal entities and 29 payments by cell phone.

Adriana Villaseñor, Senior Director at FTI Consulting, together with Paola Morales and Marcela Flores from S+S, explain what companies should know about data protection.

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We don't need controls, but a change of direction to really stop inflation: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • Artificial measures will last very little time and may have negative consequences.
  • The consequences could deepen the crisis in Mexico.

CDMX. May 12, 2022. Vicente Grau, Expert in economic competition of the firm Santamarina and Steta, pointed out that the measures of the government's pact against inflation, which caps prices on 24 basic basket products, do not address the causes of inflation and are therefore artificial and may accentuate an inflationary spiral in Mexico in the near future, in addition to other damages to the economy.. “The experience of several countries has shown that what stops inflation are the measures taken by the Central Bank on interest rates and free competition, because there everyone sees the best way to lower prices to continue selling and not be left out of the market,” said.

The specialist also pointed out that the price control policy could end up ruining small and medium-sized companies, which cannot keep prices low for long when their inputs rise. “This is nothing new. We are repeating the measures taken by previous governments, such as that of Miguel de la Madrid. What is being forgotten are the serious consequences that these types of measures brought about: rampant inflation, black markets and massive bankruptcies. If these measures are maintained, only large companies will remain in the market. This is exactly the opposite of a real policy against inflation, which, in addition, if there is an agreement between companies to set prices or sell below cost, will end up being illegal.” stressed.

Among the various causes that are generating inflation worldwide and in Mexico, Vicente Grau highlighted the severe impact that supply chains have received. First, derived from the pandemic, which led to the suspension of activities and operating restrictions, which resulted in product shortages and lack of inputs. To this should be added the Russian invasion of Ukraine, which generated a global increase in fuel prices and a shortage of fertilizers, which strongly impacted the Mexican agroindustry. Additionally, the President's policy to reduce the lag in the minimum wage strongly pressures the flow and operating capacity of companies. “We were already experiencing negative growth. Then, with the pandemic, growth expectations were reduced. Recovery has not yet arrived and we are affected by global inflation. Now, companies will try to deal with shortages and rising prices, under price controls. Many simply will not be able to do so.  

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

INSIGHTS CANNABISENMX SITE

Cannabis Industry in Mexico

Written by Santamarina + Steta en . Published in Updates.

printable version | May 2022

Mexico can become the center of entrepreneurship and innovation in the cannabis industry region, which translates into economic growth and business opportunities for our country.

Since 2017, the legal provisions applicable to the use of Cannabis for medicinal purposes were reformed, however, it was not until January 12, 2021 that the "Regulations of the General Health Law on Sanitary Control for the production, research and medicinal use of Cannabis and its pharmacological derivatives" was published, which aims to regulate, control, promote and monitor the production of raw materials, pharmacological derivatives and medicines derived from Cannabis.

Read full note here.