July’s Presidential election in Mexico was peaceful, decisive and exemplary. With 53% of the vote and the majority of both Federal Houses of Congress in Mexico, the MORENA party should have a ready hand to establish a government plan and program.

Several unusual campaign promises for a left-leaning presidential candidate, now the virtual Mexican President-elect Andres Manuel Lopez Obrador (known as “AMLO”), were made to northern Mexicans:

  1. Reduce VAT rate from 16% to near or around 8%.
  2. Reduce Mexican federal income tax from 35% to 20%.
  3. Mirror liquid fuel (gasoline/diesel) prices in Mexico to the ones in the bordering states of the US.

These measures (and some analog for the Isthmus of Tehuantepec and southern border with Guatemala & Belice), are destined to create a “Zona Libre o Franca”, 30 kilometers deep from the US-MEXICO border, with the purpose of “promoting investment, production and technological development, and the creation of jobs. This as a last curtain to retain workers in our territory”. Source (Spanish).

Other promise is that these areas will have to double the Mexican minimum wage, and a very aggressive plan to reorder urban development, improve public utilities such as water, sewerage, pavement, childcare, sports, cultural and healthcare facilities of the northern border.

AMLO also invited Trump to create a common fund between the US, Mexico and Central American countries where 75% would be used to fund the creation of jobs and fight poverty and 25% to improve migratory control and security.

We are off to a great start!

However, these questions remain:

  1. Is the special “Zona Libre o Franca” going to extend to import duties (it should in order to be a true free-trade zone), and if so, what safeguards are going to be established to disallow for transshipment to other NAFTA countries if rules of origin in NAFTA are not complied with?
  2. Is Ensenada and even La Paz, Cabos and other traditional free zones in the Baja peninsula going to be included later?
  3. What sort of clearances or safeguards will be established for free zone imports regarding other domestic territories in Mexico?

 

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Daniel Gutiérrez

Daniel Gutiérrez

Managing Partner at GD Legal. Experienced at IP & Technology Law, Commercial, Real Estate, Ejido, Construction, Secured Financing, Insolvency, Customs, Tax and NAFTA.