Mexico: Special Economic Zones

Last Updated: 13 July 2017
Article by Santamarina Y Steta SC

On June 1st, 2016, it was published on the Mexican Federal Official Gazette, the decree by which the Special Economic Zones Federal Law was issued (the "Law").

On the other hand, on June 30th, 2016, it was published in the Mexican Federal Official Gazette the regulation of the Law. This new regulation is an innovative and cutting-edge legal instrument that complements and establishes the institutional and legal design of the Law. In addition, that same day, it, was published in the mentioned Gazette, the decree by which the Federal Authority for the Development of the Special Economic Zones was created.

Background

On September 29th 2015, the President of the Mexican United States, in exercise of his constitutional faculties, sent to the House of Representatives, the Legislative Initiative of the Law. Such initiative aims to set the standards for the planning, establishment and further operation of the Special Economic Zones (the "Zones"), as instruments to contribute and enhance growth and sustainable and balanced economic development of the regions of the country with greater social backwardness and high underdevelopment rates, through the promotion of productive and social investments. Likewise, on December 14th, 2015, the House of Representatives approved the Legislative Initiative of the Law submitted by the President of the Mexican United States and proceeded to submit the Minute of the Decree of Issuance of the Law to the Senate. In ordinary session on April 14th, 2016, the Senate approved with amendments the above mentioned Minute, and submitted it to the House of Representatives for the corresponding constitutional approval. On April 19th, 2016, the Board of the House of Representatives turned over the Minute containing the Decree of Issuance of the Law to its Economic Commission for the corresponding review.

What are the Special Economic Zones?

The Zones are specific geographical areas located within the national borders of the Mexican United States where business rules are different and apply in a special way. Such rules are designed to regulate a free market economy rather than the traditional business rules that prevail in national territory. The Zones are to be used as a tool to boost trade, investment and a differentiated industrial policy, which aims to overcome investment barriers to a wider economy, including security policies, lower governance indexes, inadequate infrastructure and property access problems. In this regard, the issue of the Law is intended to establish the regulation, planning, establishment and further operation of the Zones, within the framework of the planning of the national development, as an instrument to eradicate inequality and allow to close the everyday growing gaps regarding regional development through an economic, sustainable and balanced economic growth of the regions of the country that present the largest social backwardness levels. The development of the Zones will be carried out through the promotion and procurement of certain policies, such as investment, productivity, competitiveness, employment and a better income distribution among the population. In addition, the creation and operation of the Zones by the Federal Government will help position Mexico as a world leader in international trade, while simultaneously developing an innovative process of economic integration with Asia-Pacific markets. This integration, from the commercial and industrial processes point of view, will allow to build an institutional framework based on the legal standards of the North American free trade Agreement, to develop regional competitiveness in order to face new global challenges. The Zones will be operated following a Master development program with the main objective of establishing the necessary public policies and actions to provide a comprehensive and long-term approach for the establishment and proper way to operate such Zones. Certain relevant and key aspects of the Law are: A. Private Sector The construction, development, management and maintenance of the Zones are expected to be carried out by the private sector when in relation to private real state property, or by the public sector when in relation to Public Federal real state property. Likewise, domestic and foreign companies that meet the necessary requirements and standard issued by the competent authorities are expected to carry out productive economic activities within the Zones. B. Coordination and Participation of the different levels of Government The Law addresses the need to celebrate, subscribe and execute certain coordination agreements into by and between the President of the Mexican United States and the heads of the State and Municipal executive power, where the Zones will be located. These agreements will regulate the obligation of the Federal, as well as of the corresponding State and Municipal Governments, to maintain a permanent coordination with each other, in order to perform in a coordinated and efficient way, all actions, procedures and efforts necessary to achieve an optimal development and operation of the Zones. C. Incentives Tax and Customs Regime The President of the Mexican United States shall establish and provide certain tax benefits considered to be necessary to promote and enhance the establishment and development of the Zones. These benefits will aim to encourage the generation of permanent jobs and productive investments that foster the economic development of the Zones, as well as the creation of infrastructure, formation of human capital, training and education of the workers. In addition, the President of the United States shall create and design a specific customs regime for the Zones. Such regime will be at all times subject to the provisions stated in the Customs Law, and will regulate the import and export of foreign, domestic or nationalized goods, and will also establish facilities, requirements and controls for the import and export of goods, as well as for the activities carried out within the Zones. The aforementioned, in order to promote the development and operation of the Zones. D. One Stop Shop Each Zone will have a One Stop Shop, in order to simplify and streamline all formalities and procedures necessary to build, develop, operate and manage the Zones, carry out productive economic activities, or install and operate businesses in the Influence Area of the Zones. All parties and agents involved in the development and operation of the Zones will have the advantage of a One Stop Shop through which they will be able to submit all procedures and formalities regarding and in connection with the Zones, such One Stop Shop will be responsible to remit and refer all submissions to the competent authorities for their corresponding resolution, thus facilitating the relationship between the involved parties and the competent authorities. E. Social and Environmental Impact In order to protect, preserve and respect the human rights of the vulnerable social groups, as well as of the communities situated within the Zones and their Influence Areas. All principles of sustainability, progressiveness and respect for human rights will be taken into account for the development, implementation and installation of the Zones. In this regard, the Law mandates the realization of a strategic evaluation regarding the environmental and social impact and status regarding the Zones and their Influence Areas. The results and findings of such evaluation will be taken into account and considered for the development plans of the Zones. Likewise, the realization of a prior, free and informed consultation is considered in the Law in order to consider and respect the rights of the communities and of the indigenous people groups, as well as their interests in the Zones and their Influence Areas, as well as other additional activities necessary for protection of their rights and interests. F. Federal Authority for the Development of the Special Economic Zones The Secretary of Finance and Public Credit will be the Authority of the federal government responsible of regulating and ensuring the proper development and implementation of the Zones. Accordingly, the creation of an administrative body of the Secretary of Finance and Public Credit called Federal Authority for the Development of the Special Economic Zones was conducted. Such administrative body will have the necessary authority and sufficient powers to carry out all tasks and functions regarding the regulation of the Zones. In this respect, on June 30th, 2016, it was published in the Mexican Federal Official Gazette, the decree by virtue of which the Federal Authority for the Development of the Special Economic Zones was created.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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