CEO’s Executive Summary:

In this newsletter, we dig into two legislative/regulatory issues in Mexico that could have a profound impact on U.S. companies operating there. First, we look at President Andrés Manuel López Obrador’s (AMLO) proposed legislation that would upend the electricity sector in Mexico and effectively cancel the historic 2013 reform that opened the sector to competition. Much has already been written about the policy details of the bill currently working its way through Congress, but we focus on the president’s strategy to get the constitutional reform approved, the political benefits he hopes to accrue regardless of the bill’s fate, and the very weak U.S. response so far to a measure that will have negative implications for U.S. firms operating in the electricity sector and on North American integration more broadly. The proposed changes are controversial within Mexico, and Monarch does not think approval as currently written is the most likely outcome, but it cannot be ruled out. Consequently, we believe that a much more aggressive U.S. effort to defend the interests of U.S. companies lawfully operating in Mexico is in order.

Second, we discuss a less well-known development in Mexico that could have significant impact on all firms operating in the country – new requirements from the Mexican tax authority requiring a detailed, digital bill of lading designed to fight the trade in illegal and counterfeit goods. These changes are scheduled to go into effect on December 1 despite the short lead time, the onerous burden of the requirements, and the fact that the requirements have not yet been codified in any legally enforceable document.

Full Newsletter: Monarch News – November 16, 2021

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