Economic substance and arm’s length – Mexico

taxes accounting business

10/15/19 – International Tax Review

By Oscar Campero and Yoshio Uehara of Chévez Ruíz Zamarripa y Cía

Mexican taxpayers are obliged to determine their taxable income and authorised deductions derived from related party transactions considering the prices that would have been used in comparable transactions with or between independent parties. This is, in Mexico the arm’s length principle is recognised for tax purposes.

In the previous administration (2), the transfer pricing department within Mexico’s Tax Administration (“SAT” for its acronym in Spanish) had an important role, from handling a mere documentation compliance matter to acting as a strategic risk assessment tool for multinational companies (“MNEs”).

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Brazil and Mexico Are Tired of Being Global Good Guys

1/16/2019 – Bloomberg Opinion

ball-shaped-blurred-background-close-up-1098515.jpgBy Mac Margolis

Latin American leaders have been famously demure about calling out the transgressions of their peers. Leave it to Venezuelan President Nicolas Maduro to rile up the club of diffident caballeros.

Only three regional heads of state showed up in Caracas for Maduro’s inauguration last Thursday. Paraguay broke off diplomatic relations with Venezuela, Peru placed Maduro on a list of personae non gratae and, in a rare display of neighborly resolve, 19 member nations of the Organization of American States (OAS) agreed not to recognize Maduro’s new mandate due to his government’s “negligence to meet the fundamental Inter-American standards of human rights and democracy.”

So, score one for hemispheric diplomacy and the clout of the international liberal order? Not quite yet. Eschewing Maduro, whose calamitous mismanagement and repression have left electoral democracy, the rule of law and the oil-rich economy in shambles, is important. And autocratic Nicaraguan President Daniel Ortega could be the OAS’s next target for reprimand. Yet galvanizing the Americas to cooperate through cross-border institutions and hew to international agreements looks to be a steeper challenge in the coming years.

AMLO’s Road Toward Energy Independence Is Full of Potholes

12/06/2018 – Bloomberg

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The Port of Dos Bocas Photographer: Alejandro Cegarra/Bloomberg

By Amy Stillman

In the tropical heat of southeastern Mexico, bulldozers prep the site of a massive new crude refinery on the outskirts of Paraiso, an impoverished oil town that’s never quite lived up to its name — “Paradise.”

The Dos Bocas refinery is the new government’s flagship energy project, a 160 billion-peso ($7.8 billion) promise to create jobs, lower gasoline prices and jumpstart the country’s slumping refining industry.

It’s only the beginning, according to freshly inaugurated president Andres Manuel Lopez Obrador — nicknamed AMLO. He has vowed to rehabilitate Mexico’s energy sector, in part by abandoning the free-market reforms of his predecessor in favor of protectionist policies that harken back to the 1980s.

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The Trump Immigration Crisis Rolls On

11/28/2018 – The New York Times

merlin_147373956_5d74148e-ac18-4dca-96c7-4c06354d829c-superJumbo.jpgBy David Leonhardt

The Trump immigration crisis goes in and out of the headlines, but it has never ended. Here’s a quick guide to understanding it:

The administration’s policy of separating migrant children from their parents at the Mexican border officially ended in June. A recent “60 Minutes” report concluded that the number of separated and detained children could top 5,000 — twice the number the White House lists. An unknown number remain in custody.

Many of the guards who implemented the policy continue to suffer from shame and guilt, writes Claudia Kolker, who volunteered in South Texas as an interpreter for separated children, in The Houston Chronicle. “What I saw at the border was far worse than I imagined, not only because of what these families experienced, but because of what had happened to the American workers guarding them,” she writes.


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AMLO’s New Guard Could Mean Even More Brain Drain at Pemex

11/13/2018 – Bloomberg

pexels-photo-87236.jpegBy Amy Stillman

On the day after Andrés Manuel López Obrador—nicknamed “AMLO”—was elected Mexico’s president, the streets outside the headquarters of Petróleos Mexicanos, the state-owned oil giant, were loud and rowdy in support. Inside the offices there was a morguelike quiet. Instead of shouting, there were whispers: “What are you going to do? Where are you going?”

Since 2015 a major restructuring of the company has trimmed Pemex’s workforce by about 16 percent, pushing many managers into retirement. It may now be facing a further brain drain even as the new president promises to boost oil production, say people familiar with the situation. Some managers and senior staff members have already left, the people say, and others are expected to follow.

Their fear is that they’ll be paid less to do more and that promotions will be stymied by outsiders selected to lead the company, the people say. López Obrador has already named Octavio Romero Oropeza, a political ally with no oil background, to lead Pemex and will help select a new board half-composed of government officials. While Pemex has more than 129,000 employees, the loss of talented senior staff and managers “could cause a lot of disruption and time wasted in learning and inefficiency, the No. 1 problem of the company today,” says Nymia Almeida, senior vice president and lead Pemex analyst for Moody’s Investors Service. When asked about the number of senior staff who’ve left since the election, Pemex said in a statement the information wasn’t available. A spokesman for López Obrador declined to comment.

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NAFTA 2.0’s Poison Pill For China Will Turn Out To Be A Dud

10/16/2018 – Forbes

44139464355_bc8fdde513_z.jpgHarry G. Broadman

The victory proclaimed by the Trump Administration for its renegotiation of a “modernized” North American Free Trade Agreement (NAFTA) is a hollow one. Despite many months of wrangling with our closest neighbors to the North and South of us—our second and third largest trading partners—in fact, few substantive changes have been introduced to the 1994 pact.

That hasn’t stopped the White House from touting the deal. Why?  Because Mr. Trump and his trade team see NAFTA 2.0 as the model to tame nations outside our hemisphere—especially the use of it as the vehicle to proliferate a poison pill lying at the heart of the agreement the U.S. wants to be deployed to corner China and clip its wings from engaging in pernicious trade practices.

But there are two fundamental barriers to this scenario playing out.  First, Washington will find it tough going to sell this framework to countries with whom there isn’t a pre-existing agreement similar to NAFTA to be amended.  Second, as a practical matter, the U.S.-inserted Chinese poison pill will turn out to be of little therapeutic value, not only in failing to coerce other countries to exercise this provision but to actually induce changes in Beijing’s trade policy conduct.

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Mexico’s president-elect has offered two important clues about his approach to NAFTA

07/16/2018 The Washington Post

On July 1, for the first time in over four decades, Mexican voters elected a left-wing president. Before Andrés Manuel López Obrador’s 30-point victory, Mexico had six consecutive administrations that embraced a free-market model while almost every other country in Latin America took a left turn.

The electoral result has been chalked up as a referendum on a presidency that oversaw rampant corruption, worsening cartel violence and a doubling of the national debt. But given the economic indicators, the election of a president who promises to confront inequality was well overdue. After average yearly growth rates of over 3 percent from the 1930s through the 1970s, per capita GDP growth has averaged less than 1 percent since 1980. Fifty-three percent of Mexicans live in poverty, the same proportion as in 1992. Over the same period, the wealth of Mexico’s 16 billionaires has grown more than fivefold.

Given this drain of wealth upward, why did Mexico lag so far behind the rest of Latin America in electing a leader aiming to change the economic model?

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Hardball Trade Tactics Will Leave US Workers Battered and Bruised

6/6/2018 The Hill

By Earl Anthony Wayne, Public Policy Fellow, Mexico Institute

A long-time U.S. trade guru joked last week that as a rule of thumb, he favors trying to manage only one trade war at a time, not multiple trade conflicts at once as the U.S. is attempting.

As the danger of costly missteps and negative consequences with international partners becomes more evident, the United States needs a serious debate over the current approach and making course adjustments. The alternative could leave the U.S. trying to recoup after paying the price at home and abroad.

The U.S. has imposed new tariffs on steel and aluminum targeting nations that are long-time allies and friends in Europe and North America for “national security” reasons, rather than focusing on rival and trade bad-boy China, sparking alarms from pundits and experts from across the political spectrum.

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UPCOMING EVENT | Beyond “Coyotes”: Current Trends in the Facilitation of Irregular Migration in Latin America

WHEN: April 5, 2018, 9-11am

WHERE: 6th Floor, Wilson Center

Click to RSVP

For generations, the persona of the coyote, or smuggler, as facilitator of irregular migration has been a central figure in Latin American migrants’ accounts of their journeys ‘up north.’ While traditionally viewed as providing a necessary service, smugglers are increasingly depicted as violent and predatory men often operating in collusion with other illicit networks for the sole purpose of obtaining financial profits. This narrative, while compelling, often obscures the fact that migrants’ reliance on coyotes is a response to multiple factors.

This event shifts the focus away from the coyote. It sheds light on how, across Latin America, the increasingly punitive nature of immigration enforcement, shifting migration trends, and the presence of other actors—including those from other illicit markets — have altered the landscape of traditional irregular migration facilitation strategies, often to the detriment of migrants’ safety.

Join us for a discussion about current trends in smuggling and its organization, the shifting roles of migrants in the market, and the additional criminal risks many of them face as a result.  Speakers will present findings from their research in South and Central America, Mexico, and the US-Mexico border:

Welcome and Moderator: 

Eric L. Olson, Senior Adviser, Mexico Institute; Deputy Director, Latin American Program Wilson Center


Victoria Stone Cadena: “Coyoterismo in the Americas: the myths of mobility”
Associate Director, Center for Latin American, Caribbean, and Latino Studies, The Graduate Center, CUNY

Gabriella Sanchez: “Care, protection and support during smuggling journeys in the Central America-Mexico -US Mexico border migration corridor” 
Research Fellow, Migration Policy Centre, The Robert Schuman Centre, European University Institute

Sheldon Zhang: “Migrant Smuggling and its convergence with other illicit markets along the US Mexico Border” 
Chair and Professor, School of Criminology and Justice Studies, University of Massachusetts Lowell


Dr. Louise Shelley
Omer L. and Nancy Hirst Endowed Chair; Director, Terrorism, Transnational Crime and Corruption Center (TraCCC), Schar School of Policy and Government,  George Mason University

Click to RSVP

How Violence Could Hijack Mexico’s Presidential Elections

03/28/2018 Insight Crime

shutterstock_230064685A spate of attacks against politicians ahead of the July presidential elections in Mexico has once again turned attention to the influence of criminal organizations in the country’s politics, with experts warning that these crimes have historically had negative effects on citizens’ participation on polling day.

More than a dozen political figures have been murdered in Mexico since the start of this year — an average of more than one per week. On March 27, gunmen opened fire on a congressional candidate in the state of San Luis Potosí, leaving him gravely wounded.

Incidents like these have further heightened concerns about rising levels of violence among citizens gearing up to choose a new president. But evidence suggests insecurity could discourage potential voters from showing up at the polls.

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