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News Article

Investments at Risk Due to New Outsourcing Initiative

By Sofía Hanna | Fri, 11/20/2020 - 18:49

Andrés Manuel López Obrador announced on Oct. 27 that he was going to present his initiative to Congress to eliminate outsourcing in Mexico. This decision has already started to show repercussions and tensions between the private sector and the current government. By eliminating outsourcing in Mexico, forecasts show an impact on companies and employment. Job creation will become scarcer and more difficult as any new employee will have to receive a full salary and benefits, regardless of their temporary nature of the position they are fulfilling, mentioned a previous MBN article.

Forbes reports that based on recent interactions with investors, a prohibition on outsourcing could drive investments to other countries that are more competitive and offer certainty on the matter, like Panama, Nicaragua and Guatemala, among others located in South America. This is already happening, according to Arturo Fernández Díaz-González, President of the Sonora Federation and COPARMEX Sonora. "Mexico should be the favorite investment destination. We depend on this to reactivate the economy and to recover the jobs and businesses that disappeared," said Fernández.

As stated by INEGI, 4.6 million people were outsourced employees in 2019. This shows an active economy, but it does not mean that salaries and overall working conditions cannot improve, as mentioned by MBN. The situation is complicated on both fronts, however. Fernández mentions Ford as an example, which invested in expanding its plant in Hermosillo. This translates to a potential 50,000 new jobs. Nevertheless, 50 percent of those would be under the outsourcing scheme, which under this new regime would cut opportunities by half, says Fernández.

Tensions between the private sector and López Obrador’s administration have been growing. The President of COPARMEX, Gustavo de Hoyos, criticized López Obrador’s position as it "betrays the commitment to build legal change based on consensus with the private sector." This came after López Obrador said it will be prohibited to have companies dedicated to outsourcing only and that there will be specific cases that will be dealt with by the Chamber of Deputies, according to another Forbes article.

The data used in this article was sourced from:  
Forbes, MBN
Photo by:   TheDigitalArtist, Pixabay
Sofía Hanna Sofía Hanna Junior Journalist and Industry Analyst