Decisive Moment for Mexican EmploymentBy Sofía Hanna | Thu, 09/02/2021 - 12:12
This week, experts questioned how Mexico’s outsourcing reform will affect companies in the near future. Unemployment continues to increase in some Mexican states, which was expected given the pandemic. Associations are taking initiative to support indigenous groups, which were some of the most affected in the last year and a half. Finally, the use of Information and Communication Technologies (ICTs) is rapidly increasing in Mexico, but there is still a challenge in reducing the regional gaps between Mexico’s rural and urban areas to reach digital inclusion.
Interested in more? Here are the week’s major headlines in Talent!
- Hugo Hernández-Ojeda, Labor and Employment Partner at Hogan Lovells and an MBN Expert Contributor, explained how the outsourcing reform could be a game-changer. Although subcontracting labor structures were prevalent in Mexico for many years and even regulated under the former regulation, several outsourcing schemes were also used for the underpayment of taxes and social security contributions, leading to massive tax frauds and reductions of the employee’s lawful compensation. There are several material consequences for using or benefiting from the subcontracting of personnel or for not having the corresponding registration. Administrative fines can add up to 50,000 times the Unit of Measurement and Update (US$224,050). He also advises companies and investors, regardless if they are local or international, to initiate a business inquiry in Mexico prior to the incorporation of a Mexican entity to define the specific activities that will be part of the corporate purpose of the company to avoid risks when contracting specialized services. Full article here.
- The National Institute of Statistics and Geography (INEGI) revealed that unemployment rates ticked upwards in July across seven states, while an additional 17 entities reported fluctuations between 3-5 percent. Mexico City and Queretaro had the highest rates of unemployment last month; of their economically active population, respectively, 7.48 percent and 6.53 percent were absent from the local workforce. Both of these economic centers are characterized by significant internal mobility, which has placed additional strain on the labor market. The State of Mexico followed up these states with 6.50 percent unemployment, Tabasco with 5.86 percent, Guanajuato with 5.53 percent and Tlaxcala with 5.34 percent. Despite the increase in unemployment, according to a publication in the FRBSF Economic Letter, a ‘normal’ unemployment rate usually stands at around 5 percent and given new market conditions, this figure may have risen as high as 6.7 percent. In light of this perspective, the numbers reported by INEGI may be considered normal in the exceptional circumstances brought on by the pandemic. Full article here.
- FILAC highlighted the relevance of indigenous people in a transformative post-COVID-19 recovery in a recent event, during which Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), stated that “it is critical that recovery policies emphasize the collective rights of these people and that their pivotal themes be participation and consultation with a view to obtaining free, prior and informed consent for any measure that would affect them, including the participation of indigenous women and young people. Although it is undeniable that progress has been made in recent decades on their recognition and collective rights in all the region’s countries, important gaps still remain.” Indigenous communities continue to be one of the groups without proper accounting of the number of COVID-19 victims. About 617,000 people belonging to indigenous communities in the Americas had been infected with COVID-19 by June and at least 15,000 had died from complications. This is particularly problematic in Mexico, where, according to the UNDP, income concentration is extremely high as the revenue of 50 companies represents around 40 percent of the Mexican GDP, heavily limiting the opportunity for social mobility and access to better financial and social opportunities. Full article here.
- Three out of every four Mexicans have access to a cell phone and many more to the internet. However, there is still a long way to go before Mexico can fully achieve digitalization. The use of Information and Communication Technologies (ICTs) accelerated during the pandemic thanks to the numerous advantages they represent in terms of time and cost reduction. They also provide growth and economic development opportunities and are great incentives to promote that no one is left behind. However, there is still a real challenge in reducing the regional gaps between Mexico’s rural and urban areas. In 2020, only 50.4 percent of the population in rural areas were internet users, while in urban areas, the percentage was 78.3 percent. “The following years will be decisive in determining whether the country managed to digitally and financially include most of the population in Mexico, especially those outside urban areas,” according to the BBVA report. Full article here.