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Implications of downgrading to category two in aviation. The data: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • Austerity and its limits. No resources were invested.
  • Losses for airlines, passengers and security alerts.

CDMX. May 23, 2022. Juan Carlos Machorro, partner in charge of the transactional area and expert in aeronautical and airport law of the law firm Santamarina and Steta, listed the points that are taking us further away from the possibility of returning to category one every day.

1.- It is very important to note that the downgrading of Mexican civil aviation to Category 2 by the Federal Aviation Administration (FAA) of the Department of Transportation applies only to government authorities in matters of aviation, not to the aviation sector as a whole. The FAA is the authority in charge of regulating and supervising the aviation industry in the United States.

2.- The FAA conducted an evaluation of the Mexican government's Federal Civil Aviation Agency (AFAC), corresponding to the period from October 2020 to February 2021. The FAA announced on May 25, 2021, that the AFAC did not comply with air operation safety standards dictated by the International Civil Aviation Organization (ICAO), an agency of the United Nations created under the Convention on International Civil Aviation (Chicago Convention - 1944), downgrading the Mexican authority to Category 2.

Category 2 indicates that the country's regulations lack the necessary requirements to adequately supervise airline operations in accordance with minimum international safety standards, that the authority has significant areas of opportunity in areas such as technical expertise, qualified personnel, follow-up of issues and complete files, inspection procedures and/or the effective management and resolution of problems in aviation safety matters.

Currently in Category 2, in addition to Mexico, are Bangladesh, Curaçao, Ghana, Malaysia, Pakistan, Russia, Thailand, Venezuela and the Organization of Eastern Caribbean States.

3.- In the case of Mexico, the authority is in a bad position after the year of degradation. Not only because of recent incidents, but because the AFAC did not invest the necessary resources to address this situation.

This May 25 marks one year since the Mexican authority was downgraded to Category 2.

There are no signs of improvement, and recent incidents and statements by pilots and air traffic controllers are not helping. Information is coming to light about budget cuts, which include qualified strategic personnel, particularly flight controllers, who were replaced by arbitrary hiring without considering the key need to have expert and security personnel for the crew, passengers and population near the airports. Added to this are the pending union conflicts from previous administrations that are making the work environment more difficult. Summary: less personnel, with fewer salary resources, with fewer budgetary resources. It is also coming to light that flight controllers were instructed not to report incidents in their entirety.

These critical points were aggravated by a change of routes and the simultaneous operation of two airports in Mexico City, with several incidents reported recently.

The FAA made 28 observations, including: inconsistencies between the Civil Aviation Law and its regulations (which do not allow for the effective implementation of provisions of the Chicago Convention); the lack of an adequate number of qualified and experienced technical personnel and a system to ensure that inspector salaries are equivalent to those of the industry personnel being monitored and to ensure that technical personnel receive adequate training; there is no process to ensure adequate qualifications of medical personnel who perform evaluations of aviation personnel and there is no system to monitor the medical evaluation process for licenses; recurrent training of airworthiness inspectors was not completed in a timely manner; there is no system to adequately know information on aircraft defects and failures; and there is no comprehensive system to ensure the continued operational safety of the holder of an Air Operator Certificate (AOC) and no system to ensure that deficiencies in AOC certifications are corrected in a timely manner.

In short, we have a very deteriorated sector. Safety protocols that send planes back into the sky to reorganize routes are becoming recurrent. Combined with the above points, they constitute a wake-up call in terms of air safety.

4.- Technical common sense, scientific thinking and market logic are being ignored. This lethargy may prolong and deteriorate the situation.

5.- What does it mean to remain in category 2? Let's start with greater FAA scrutiny of flights operated by Mexican airlines to the United States.

Additionally, as long as we remain in Category 2, it is not possible for Mexican airlines to add or modify routes or frequencies to the United States, nor to incorporate new aircraft to the fleet with which they operate to that territory, nor to initiate code-sharing programs with American airlines. They cannot reinvent themselves with new routes. They are tied up.

North American airlines, for their part, can expand operations to Mexico (routes or frequencies), taking away market share from Mexican airlines.

The downgrade to Category 2 also affects Mexican airlines with non-scheduled services (air taxis), which also cannot incorporate new aircraft into their fleet. With the downgrade, neither new routes nor new frequencies can be created from Mexico to the United States.

Airports are also affected. Not a single plane bound for the United States can take off from AIFA, and not a single plane coming from there can land. Toluca airport, which is in a state of operational abandonment, cannot add new routes or frequencies to the United States either.

What can be said about the deteriorating passenger experience? Delays, anxiety and a deteriorating service, not to mention the lack of new routes that the market is demanding and the impossibility of flying on new planes that paradoxically cannot be used on the most popular routes to the USA.

Finally, as a consequence of the downgrade to Category 2, the insurance and surety market has reacted by increasing the cost of premiums for aircraft operating in Mexico.

6.- Austerity has its limits. Air safety is one of them. Air safety is not to be trifled with. It is extremely costly, even before risking human lives.

Mexico City Office

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Monterrey Office

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INSIGHTS REFORMALIE SITE

Electricity Industry Law: Action of Unconstitutionality before the Supreme Court of Justice of the Nation

Written by Santamarina + Steta en . Published in Updates.

printable version | April 2022

The Court's imprecision increases the atmosphere of uncertainty in the sector and leaves the rights and means of defense of individuals untouched.

  • On March 9, 2021, the Ministry of Energy (“SENER”) published the “Decree amending and adding various provisions of the Electricity Industry Law".
  • On April 8, 2021, Senators of the Republic filed an action of unconstitutionality before the Supreme Court of Justice of the Nation ("SCJN”) against the Decree (the “Action of Unconstitutionality").
  • On April 7, 2022, in a public session, the Plenary of the SCJN concluded the analysis, discussion and resolution of the Action of Unconstitutionality, based on the draft judgment of Minister Loretta Ortiz Ahlf, segmenting said analysis of the norm into seven sections.

Read full note here

opportunities in the aeronautical sector of Galicia

The cost of operating by consultation and by decree, turning its back on scientific thought: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • The government has spent hundreds of billions of pesos demolishing one airport and building another without solving the underlying problem.
  • What does the immediate future hold for the airport sector in the Valley of Mexico?

CDMX. May 10, 2022. Juan Carlos Machorro, partner in charge of the firm's Transactional area Santamarina and Steta and expert in aeronautics and airport infrastructure, reviewed the counterproductive measures that have generated costs and risks for the Mexican airport system.You don't play with aeronautical safety"I affirm.

  • For more than 30 years all serious feasibility studies have shown that the unique viable alternative is Texcoco. In the words of MITRE, Texcoco “was the ideal place…, a place aeronautically excellent".
  • We are suffering the result of acting on the basis of a consultation without methodological rigor and without any legal basis. Through consultation and decree, the most important airport infrastructure project in the country was cancelled and the reconfiguration of a military base was started at forced marches.
  • At the beginning of Covid-19, international organizations recommended that governments (i) suspend investments in new airport infrastructure projects, and (ii) allocate resources to support airlines.
  • In Mexico, these recommendations were not heeded and resources were spent on the construction of the project in Santa Lucía, without any government support for the airlines.
  • The decree aims to manage passengers through the Felipe Ángeles International Airport (AIFA).
  • AICM has been in intensive care for years due to deteriorating operational and financial health.
  • With the cancellation of the Texcoco project, an airport that was destined to close permanently remains alive.
  • AICM's main income is TUA, which represented 65% of its income at the end of 2021. All TUA revenue is transferred to pay the MexCat Bonds, issued to finance the Texcoco project.
  • Put into context, AICM's increased income is condemned to pay the debt of a cancelled project, which will not exist for decades to come.
  • To date, there is no certification issued by an authority or international organization on the matter that conclusively proves that AICM and AIFA can operate simultaneously and at their maximum capacity without risk in the airspace of the Valley of Mexico.
  • MITRE itself confirmed at the time: “The AICM-Santa Lucía alternative is worrying as it requires the creation of an extremely complex airspace…” “…far from satisfying the needs of CDMX for much of this century, it will become re-saturated in a very short period…” “…no one has developed the required airspace study.”
  • Instead of reducing AICM saturation, it has increased.
  • The reconfiguration of the airspace in the Valley of Mexico to accommodate the operation of the AIFA has resulted in more problems than solutions. The new configuration puts pilots and aircraft operators in unnecessary predicaments, resulting in longer approach routes, delays, excessive fuel consumption and noise pollution. And this is with the AICM operating at 70% of the pre-pandemic stage.
  • The outlook is not promising. A dying airport (in operational and financial terms) coexisting with another whose capacities do not represent a solution to the problem.
  • The reputational cost of cancelling Texcoco will accompany this administration for the rest of the six-year term and ad perpetuamThe loss of economic resources is enormous. The delay in connectivity will be measured in years or decades. The damage is done. We are left to demand that the situation does not go beyond the sphere of operational security and wait for better times. 

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

ARTICLES BREASTFEEDING SITE 1

The reality of breastfeeding in Mexico: being a mother and a full-time worker

Written by Santamarina + Steta en . Published in Updates.

Denisse Ávila is a lawyer and mother. With more than 6 years of professional experience, she is an expert in labor and immigration law at Santamarina + Steta, she supports individual and mass redundancy processes, as well as workers and managers, and advises clients in individual labor lawsuit processes in various Conciliation Boards around the Mexican Republic.

In addition, over the past year, Denisse has experienced breastfeeding and working full-time first-hand. On Mother's Day, she shares her testimony with us as she seeks to raise awareness and encourage companies to make changes to support breastfeeding.

Today marks one year of breastfeeding, 90% of which was deferred due to my full-time job. The term “delayed” refers to feeding with expressed breast milk that is given to the baby via a cup, spoon, bottle or any other mechanism chosen by the mother.

I know that this is not the case for most working mothers, as many currently face various barriers that reduce the possibility of successful breastfeeding. I firmly believe that motherhood and work are compatible as long as the company where you work creates the conditions to protect motherhood.

For a successful delayed breastfeeding, it is not only necessary that the mother wants it, as there are other factors that directly or indirectly influence this process and decision, and I think it is necessary for you to know them because in Mexico we lack a lot of information on the subject. In particular, as you may have anticipated, I will focus on my experience and the recommendations I would make to companies and workplaces.

Many companies will wonder what benefit there is in supporting mothers in this process. To name a few:

  • Studies have shown that breastfed babies get sick less often, which leads to less absenteeism on the part of mothers.
  • Breastfeeding causes women to produce oxytocin and other hormones that prevent postpartum depression, which makes mothers perform their duties better.
  • When women feel supported in their work environment, they are more likely to decide to return after their period of disability.

The above are just some of the benefits, but we cannot ignore that the Federal Labor Law itself, in article 170, contemplates support for a certain period for women during breastfeeding:

IV. During the breastfeeding period for a maximum period of six months, they will have two extraordinary breaks per day, of half an hour each, to feed their children, in a suitable and hygienic place designated by the company, or, when this is not possible, by prior agreement with the employer, their working day will be reduced by one hour during the period indicated.

Speaking from my own experience, I can say that this time I had a different breastfeeding experience than with my first daughter. I had to travel and visit clients during this process and I realized how much we as a country need to know more about the subject and be a support for all those working mothers.

On my trips, I had to ask and defend myself with the people at the airport to transport the milk that I extracted during the trip without having to check it in. It is clear that I would not want it to go downstairs with my suitcases, in temperatures that I do not know if they are adjusted to the temperature necessary to preserve breast milk during the trip. It is impressive how the policy of many airports only allows the transport of breast milk when you bring the infant with you but not without him. What happens when the mother works and cannot take her children on the trip, but has the need to extract food? It is illogical and absurd that they ask you to document or, if necessary, throw away that breast milk, because to begin with it is not easy to extract it, it requires time and sacrifice from each mother.

Today I am writing from my personal experience and I reiterate that I know that the challenges faced by Mexican working mothers are very different; including the fact that I have been fortunate enough to have been able to acquire an electric breast pump that has the features I need, which is not the case for many women. In other countries, the government provides support so that working mothers can acquire a breast pump, an incredible policy that really supports working mothers.

Finally, my intention in expressing this testimony about my breastfeeding process is to raise awareness and open the eyes of all those people who have the ability and power to generate some change in their company so that breastfeeding is supported. I know without a doubt that I chose the right firm because at all times Santamarina + Steta has sought a way to support me throughout this wonderful process.

SAT

SAT strategic plan, more aggressive with the righteous, turning a blind eye to sinners: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • They are going to invest significant resources in oversight and they are not going to find much, while the big evaders persist and the informal economy grows..
  • Nothing to increase the taxpayer base.

CDMX. May 4, 2022. Mariano Calderon, Partner in charge of the firm's tax area Santamarina and Steta He pointed out that the Strategic Plan for Large Taxpayers presented a few days ago by the SAT confirms the view that captive taxpayers, those who already pay, will continue to be exploited, without really taking a fundamental measure to address the country's major fiscal problems.

“The problem is that large taxpayers already pay their taxes according to the law and what is coming are lengthy reviews, litigation and loss of time that will not leave much more revenue for the SAT. They are guided by the false dogma that large companies in Mexico do not pay taxes and they are going to come up against the reality, which is very different, given that in Mexico 20% of total revenue comes from corporations, which places us as the seventh country with the highest corporate revenue within the OECD, while we continue to have a huge fiscal gap derived from the invoice companies and the formal economy that continues to grow, without any fiscal consequences,” reported.

Mariano Calderón clarified that with the strategic plan, tax litigation will increase, given that large taxpayers have the right to demonstrate that their operations comply with the law and not accept unfounded assumptions from the SAT, so that it is the courts that decide in light of the law and the truth, no matter how aggressive the criteria of the authorities may be. “The problem is doctrinal, dogmatic, that companies do not pay and that the government requires resources, even when the latter are squandered on projects without social and economic profitability. But before the law, we all have rights and obligations. They want to increase the tax burden on large taxpayers without collecting taxes from the bulk of informality,” clarified.

According to the expert, toughening the criteria for large corporations will eventually end up reducing their capacity for investment and job creation and the detonation of production chains, creating a vicious circle against economic growth. “Unfortunately, we believe that the already strong wave of acts of supervision, persecution and audits of large corporations will increase, and will be fought in court.” concluded.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

Image for post 2020 10 30T092936.972

Deadlines for filing appeals against unconstitutional provisions of the SAT expire: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • Some have unconstitutional aspects, which are the subject of filing appeals..
  • Various limitations and rules that are already tax persecution.

CDMX, February 9, 2022Mariano Calderón, expert partner in tax matters at the law firm Santamarina+Steta announced that the first window of opportunity for companies to file appeals against provisions arising from the 2022 tax reform that have unconstitutional aspects expires in the first half of February. “Several entrepreneurs have expressed to us a feeling that obligations, restrictions and oversight are increasing, in an environment of terrorism and fiscal persecution, even when they have traditionally fulfilled their obligations to the public treasury,” said.

The expert pointed out that the productive society has the right to defend itself against undue burdens, or problems in the fulfillment of tax obligations that are unconstitutional and that therefore can be fought through an amparo trial. 

Among the main provisions that may be used to request protection, Mariano Calderón highlighted a new limitation for deducting uncollectible credits, new rules for the deduction of interest, notices for the sale of shares and cases of joint liability.We are concerned about the behaviour of the authorities, which do not recognise the right of taxpayers to act in good faith. The authorities see them as tax evaders from the start. They have the right to defend themselves," he concluded.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

foreign investment

Mexico has many attractions for foreign investors… that are getting ugly: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • Foreign investment opportunity available.
  • Its advantages are overshadowed by obstacles, uncertainty and little respect for the rule of law.

CDMX, February 24, 2022. Jorge Leon Orantes, mergers and acquisitions expert at the law firm Santamarina and Steta He pointed out that our country still has many attractions for national and foreign investors, but unfortunately they are becoming increasingly uglier. “All this, while in other countries investment environments are being stimulated for economic recovery,” said.

The specialist indicated that there is a lot of money in the world and that it is turning to look at Mexico as an opportunity to invest, given that first world governments injected support into their productive society, which left a lot of investment available.“Supply lines will return to the Americas and Mexico has a great opportunity due to its geographic position, since this relocation reduces the risk for American companies. In fact, everyone is looking for growth; eight out of 10 global CEOs say they will achieve growth through mergers and acquisitions,” reported. 

The expert also pointed out the factors that changed Mexico's attractiveness for capital flows. “They were energy and infrastructure, but that was delayed due to the dramatic change in public policies. Meanwhile, the pandemic triggered and accelerated the appeal of other sectors that were second-order trends. Among the winners, the technology sector stands out, which is transversal because it affects the financial, retail, and e-commerce sectors.” pointed out

The executive also stressed that the early and clear adoption of environmental, social and corporate governance (ESG) strategies is playing a key role in certain sectors in attracting capital. “For example, in Mexico there is also an appetite for investing in the agricultural sector under these precepts”.

Jorge León Orantes concluded by saying that due to its geopolitical position and demographic bonus, our country is extremely attractive and strategic for investments, “Even though it is not doing its homework, several obstacles in key sectors are not being resolved, and there is an atmosphere of uncertainty and little respect for the rule of law. If it were to do so, it would be one of the most attractive investment zones in the world. It is time for Mexico to stop being the Cinderella of America. The energy and infrastructure sectors are key for our region, but the government cannot do it alone,” concluded.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

expropriation

Federal government expropriations for megaprojects could get bogged down: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • There is no way to force individuals to sell without meeting legal requirements.
  • Purchases and expropriations in four municipalities of Quintana Roo remain unresolved according to law.

CDMX, March 9, 2022. Mariano Calderón, an expert in amparos from the legal firm Santamarina y Steta, pointed out that the appropriation of private lands for the completion of the federal mega projects of the Mayan Train and Felipe Ángeles Airport may become bogged down due to lack of legal procedures."We see progress in the works without having the corresponding lands and declarations of expropriation that leave us with doubts about whether they covered the steps dictated by law," reported.

The expert said that the impression that the Executive is leaving for these works is that it arrives at the projected areas, selects the land and intends to force the sale, when it must first meet several requirements, even before resorting to expropriation, which should be a last resort.“There is no legal way to force individuals to sell without these requirements, which can end badly for the government in court. Any affected person has the possibility of resorting to the law and promoting means of defense, to prove that these requirements are not met,” clarified.

Mariano Calderón listed some basic steps required by law to acquire land, which, if not followed, will lead to disputes in court.

For the purchase of land:

1.- Check in advance that there is no available property in the federation's real estate assets. In such a case, the acquisition would mean a waste of resources.

2.- If in fact there is no property available, an analysis should be carried out and documented to determine which property in question is the only and best one, which meets all the characteristics to fulfill the purpose of the government project.

3.- The value of the property must be verified and there must be authorization from the SHCP and a budget allocation must be provided for its acquisition.

4.- An appraisal must be made in terms of the General Law of National Assets.

If these requirements are not met, the last resort is expropriation, which is not unrestricted and must also comply with the law:

1.- It is essential to determine and justify that the land is suitable for the cause of public utility.

2.- Carry out a complete technical, legal, material, etc. analysis to determine and support that the situation is indeed a cause of public utility.

3.- Gather the documentation, grounds and reasons, all the legal and factual support.

4.- Make the expropriation declaration.

5.- Make compensation, which, as a constitutional requirement, must take into account the commercial value of the property being expropriated.

“Given these legal requirements, it is striking that in recent days, for the construction of Section 5 North and 5 South of the Maya Train project, in four municipalities of Quintana Roo, the federal government announced that it has agreements with 70% of the owners, when it should have had not only agreements, but also covered all the procedures and purchase operations and, where appropriate, expropriation files before starting the project,” concluded.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290

commercial competition

Finally, judicial respite for companies with financial difficulties in Mexico: Santamarina and Steta

Written by Santamarina + Steta en . Published in Updates.

  • In 2021, 7 out of 10 bankruptcy applications were rejected.
  • There will be fully specialized courts with legal and economic vision to support negotiations between companies, creditors, tax authorities and employees.

CDMX, March 15, 2022. Carlos Olvera, leading partner of the firm's insolvency area Santamarina and Steta, reported that the Federal Judicial Council has finally approved and ordered the creation of two new courts specializing in commercial bankruptcy, which will surely reverse the dramatic tendency of the courts to reject requests from companies with economic difficulties, which have resorted to this legal mechanism to restructure and reinsert themselves into economic activity.

Report on dismissed bankruptcy proceedings

“The creation of two courts specializing in bankruptcy matters is encouraging news. Last year alone, around 7 out of 10 applications were rejected. In addition to being saturated, the courts previously did not have the material and human resources to assess and address with integrity this type of judicial process, which resulted in further difficulties in achieving negotiations and agreements between the company, its creditors, the tax authorities and the employees, who are the factors involved in the economic and social equation that, if they decide to move in the same direction, can save the entire productive cell,” said.

The specialist pointed out that after almost 22 years since the Bankruptcy Law was published, the entry into operation of the specialized courts on March 7 will undoubtedly contribute to finding a platform to solve all the conflicts and problems that accompany the insolvency and illiquidity of companies, which will be a relief for Mexico's productive society, so affected by the recent political, economic and health events.“Having carried out the main bankruptcy proceedings and restructurings in Mexico, the experience we have had in our Office is that this resource has not only allowed companies to survive, but has reinserted them into the economy with new vigor,” concluded.

Mexico City Office

Tel. +52 55 5279 5400

Monterrey Office

Tel. +52 81 8133 6000

Queretaro Office

Tel. +52 442 290 0290