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News Article

Mexico’s Automotive Industry and Outsourcing

By Jorge Ramos Zwanziger | Thu, 12/10/2020 - 13:45

Challenges for the automotive industry have been a topic of discussion in the last few weeks, as reported by MBN. Outsourcing has been of particular interest to the industry, particularly due to the possibility of its elimination. José Zozaya, Executive President of AMIA, shared with Expansión his concerns regarding potential changes to outsourcing regulation and their effect on the automotive industry. Mexico’s government submitted an initiative that involves regulation in three areas of outsourcing: personal outsourcing, specialized services and projects and placement agencies. It also includes sanctions for failing to follow these new rules. Zozaya expressed concerns about the lack of clarity in future regulation and made clear his opposition to applying the same rules to every sector. He also highlighted that the Mexican automotive industry is in favor of penalizing tax evasion. “The automotive sector is characterized by attaining to legality and we do not use outsourcing as a way to not share profits. Instead, we use it to avoid having a certain number of employees under the company(’s payroll),” Zozaya told Expansion.

 

Experts in the industry remain concerned about the impact of this regulation. El Economista reports that the Mexican industry urges authorities to be clearer in regards to outsourcing. The sector needs a clear definition of what encompasses legal and illegal outsourcing, as lacking a proper definition could be detrimental for the automotive industry. “We should not condemn the term outsourcing. Instead, we should condemn tax evasion,” Zozaya continued. The creation of mechanisms to supervise companies is vital, in this sense. Miguel Elizalde, Executive President of ANPACT, is also concerned about the impact of Mexico’s outsourcing regulation. He told El Economista that the elimination of outsourcing could affect Mexico’s competitiveness as a foreign direct investment (FDI) destination. To him, “If there is no clear definition, you have no way of knowing what you are going to do starting January 2021. (The new regulation) needs to be very clean, so the automotive value chain is not affected.”

“We do not agree with the elimination [of outsourcing] nor with its penalization, as it is written in the initiative sent by the Executive branch to Congress,” said Guillermo Rosales, Director General of AMDA, to El Economista. Meanwhile, Larry Rubin, President of the American Society of Mexico, warned El Economista that if Mexico eliminates outsourcing, this would hinder its bilateral relationship with the US and place under great risk investment projects that are scheduled for the next five years in the Mexican territory. “Legislators need to be aware that when they decide on outsourcing, American companies have the opportunity to make investments in different parts of the world. Mexico is not the only option. If Canada, for example, has more stability and gives more certainty, investments will go to Canada or any other country, instead,” Rubin sentenced.

 

This week, President Andrés Manuel López Obrador said that he would ask Congress to wait on his proposed outsourcing initiative so that it can be resolved through dialogue between the business sector and the government to reach an agreement that benefits both parties, reported MBN. The initiative will be held back until February 2021. Rosales told El Economista that he deems this future negotiation very favorable for the industry, as well as important so that a modified initiative is presented to the Legislative branch.

The data used in this article was sourced from:  
MBN, El Economista, Expansion
Photo by:   Buffik, Pixabay
Jorge Ramos Zwanziger Jorge Ramos Zwanziger Junior Journalist and Industry Analyst