1) Environmental Regulations in mexico To carry out manufacturing activities, you must first submit an environmental impact statement with

the Secretary of the Environment, Natural Resources and Fisheries (Secretara de Medio Ambiente, Recursos Naturales y Pesca, SMARNP). Your company may also need special permits for air or noise emissions, water discharge or solid waste.

History In response to the environmental problems inherent in industrial growth and trade liberalization, Mexico adopted the General Law on Ecological Balance and Environmental Protection, which took effect March 1, 1988 (the Ecology Law).The Ecology law was followed by numerous regulations later that year: Environmental Impact Regulations (June 8, 1988), the Atmospheric Pollution Regulations (November 26, 1988), and the Hazardous Waste Regulations (November 26, 1988). In 1994, Anne Rowley, a staff attorney in the International Activities Division of the United States Environmental Protection Agency (EPA) Office of General Counsel noted that in only six years Mexico has established the foundation of a credible legal framework to control environmental contamination.35 Many United States environmental statutes are media specific such as the Clean Water Act, the Clean Air Act and the Resource Conservation and Reclamation Act. They were generally developed individually and in response to specific crises. Mexicos Ecology Law, however, has a broad reach contained in one comprehensive law. Furthermore, Mexicos legislature was able to enact such a comprehensive legal framework in a short amount of time because Mexican law derives expressly from the 1917 Mexican Constitution. At the top of the framework provided by the Ecology Law, sits the Ministry of Social Development (SEDESOL), the executive agency entrusted to administer the Ecology Law. It issues ecological Technical Standards which, as defined by the Ecology Law, set forth the requirements, specifications, conditions, Spring, 2003] RECENT DEVELOPMENTS 333 procedures, parameters, and permissible limits that must be observed where activities cause or may cause ecological imbalance, or harm the environment.39 NAFTA directives for the harmonization of member states environmental laws make it likely that Mexico will develop a body of Technical Standards comparable in scope to those issued by the EPA.40 During the mid-1990s, Mexico intended to complete and promulgate 71 new technical norms. This was touted a very ambitious goal due to the Federal Law on Measurements and Standardization enacted in 1993, which required proposed norms to achieve desired goals at the highest net benefit feasible to society feasible.41 Although capable of hindering environmental legislation, this requirement does not appear to be as rigid as the cost-benefit

analysis requirements of Executive Order 12291 for United States regulatory initiatives.This executive order requires all United States Federal agencies take no regulatory action unless they chose the regulatory alternative involving the least cost to society with objectives that will maximize net benefits to society. Beyond issuing technical standards, SEDESOL also has the important task of Environmental Impact Evaluation. Under Article 28 of the Ecology Law, all works or actions that may either 1) cause ecological imbalance or 2) exceed the limits and conditions of environmental regulations or technical standards, cannot be carried out without preparation of an environmental impact statement environmental impact statements and prior authorization from the corresponding federal, state or local environmental agencies.

Regulatory bodies in Mexico

NAFTA The North American Free Trade Agreement (NAFTA) addresses the issue of environmental protection in the three participating countries (Canada, United States and Mexico). However, it leaves the establishing of environmental rules and standards to the three participating countries, with tow exceptions: 1 They are to comply with existing treaties between themselves, and 2 They are not to reduce their environmental standards as a means of promoting investment in business. THE LAW AND "SEMARNAP"
Presently there exist federal regulations on environment protection in Mexico. They are extensive and patterned in good part after the rules applicable in the state of California (U.S.A.). The federal law (General law on Ecological Equilibrium and Environmental Protection) is dated from December 23, 1987 (effective March 1, 1988). Its' regulatory law is dated June 6, 1988, with changes November 18 and 23 , 1988. The Federal Government of Mexico, through the Secretariat of the Environment, Natural Resources and Fishing ( Secretara de Medio Ambiental , Recursos Naturales y Pesca (SEMARNAP) , has sole jurisdiction over those acts that effect two or more states , acts that include hazardous waste, and procedures for the protection and control of acts that can cause environmental damage or serious emergencies to the environment. The Secretariat's main activities are to make environmental policy and enforce it; assist in urban planning; develop rules and technical standards for the environment; grant (or deny) license, authorizations and permits; decide on environmental impact studies; and grant opinions on and assist the states with their environmental programs. This Secretariat enforces the law, regulations, standards, rulings,

programs and limitations issued by it through the National Environment Institute and the Federal Attorney Generalship of Environmental Protection ("PROFEPA"). The law covers environmental protection, natural resources conservation, environmental impact statements, risk determination, ecological zoning, and sanctions. The air, water, hazardous waste, pollutants, pesticides and toxic substances are covered by this law.

In the initial period of startup and application of this law and its regulations, a lack of experience by the authorities of Mexico and the miss-understanding of employees at plants in Mexico caused difficulties for companies. However, there is a better understanding now. THE NATIONAL ENVIRONMENT INSTITUTE This institute is to develop, conduct and evaluate environmental policy; issue technical environmental standards and approve environmental impact studies presented by the public and private sectors; grant permits, concessions, licenses, resolutions and other; regulate handling of hazardous waste and materials and resolve appeals submitted to it. This National Environment Institute is also responsible for the design,
implementation and assessment of the regulatory framework for both environmental policies and programs.

PROFEPA (Federal Attorney Generalship of Environmental Protection / Procuradura

Federal de Proteccin de Ambiente") This is the enforcement agency of Secretariat of the Environment, Natural Resources and Fishing (SEMARNAP) (the federal head ministry). Profepa is to monitor compliance; investigate claims; conduct inspections and environmental audits; resolve administrative appeals on environmental issues and promote the participation of the public in environmental law creation. It is also responsible for ensuring strict observance of standards and regulations set by the Institute, as well as those contained in rules and laws enacted by the Mexican Congress. It performs audits and evaluations, imposes fines and other sanctions, it hears public complaints and demands related to insufficient compliance and it is to inform and teach the public of the environmental rules.

STATES DELEGATIONS OF SEMARNAP/PROFEPA

There are Regional Delegations of SEMARNAP , and as well there are State Delegations of PROFEPA .

FOCUSED EFFECT ON 7 GENERAL GROUPING INDUSTRIES ACTIVITIES

There are seven (7) general categories of industries that are focus points of review by the Mexican Federal Government for verification of compliance with the law and rules applicable in environmental matters. The seven categories are: 1) federal publics activities; 2) water works, general communications networks, AND oil, gas and carbon transportation activities; 3) chemical and petrochemical plants, iron and steel mills, paper factories, sugar refiners, drink manufacturers, cement producers, automotive parts makers, and the generation and transmission of electricity activities; 4) mineral and non-mineral exploration, extraction, treatment and refining activities; 5) federal touristic developments activities; 6) treatment, storage and disposal plants of hazardous waste activities, including nuclear waste; 7) exploitation of slow regenerating vegetation in forests and tropical jungles activities.

HAZARDOUS WASTE
A substance is considered hazardous waste when it is explosive, ignitable, corrosive, chemically reactive or is toxic (directly or indirectly) to plants, animals and/or humans. There is an official list of the hazardous waste items, and when someone is to produce it or handle it, they are to get authorization, prior thereto for that purpose.

AIR
The law and regulations require certain pollutants not be emitted into the air or not be emitted in quantities greater than it approves of. When someone has a standing (non-moving) pollution source, they are to get a permit to emit, prior to emitting.

WATER
The law and regulations require certain contaminates not to be introduced into the uncontrolled or public water source or not to be introduced in quantities greater than it approves of. When someone has a standing (non-moving) pollution source, they are to get a permit to emit, prior to emitting.

CONSTRUCTION
An environmental impact study is to be done and approved prior to the construction of "new facilities". When someone has a standing (non-moving) pollution source, they are to get a permit to emit, prior to emitting.

AUTHORIZATIONS & DOCUMENTATION The authorizations and documentation that may be required in each case are: Operating License; Waste Water Discharge Registration; Hazardous Waste Generator's Manifest; Monthly Log of Hazardous Waste Generation; Ecological Waybills for the Importation and/or Exportation of hazardous Materials and Wastes;

Semi-annual Report on Hazardous Wastes Sent to Recycling, Treatment or Final Disposition; Accidental Hazardous Waste Spill Manifest; Delivery, Transport and Receipt of hazardous Wastes Manifests; and Environmental Impact Studies. SANCTIONS
Sanctions can include monetary fines, imprisonment, repair of damage, closing of facilities, seizure of toxic materials, changes in facilities or destruction of facilities, as each case requires.

Additional Regulations, Standards, Decree and Agreement

The Regulation to that of the Law for Hazardous Wastes (The Hazardous Waste Regulation), effective as of November 26, 1989. The Regulation to that of the Law for the Prevention and Control of Atmospheric Contamination (The Air Regulations), effective as of November 26, 1988. The Regulation to the Law for Environmental Impact (The Environmental Impact Regulation) , effective as of June 8, 1988. The Regulation to the Law to Promote Mexican Investment and Regulate Foreign Investment (The Foreign Investment law), effective May 17, 1989. The Environmental Technical Standards (NTE's). These establish the quantitative elements and limits on a general sector basis for the Law and it's Regulations, that control the mentioned substances. The Decree for the Development and Operation of the In-Bond ("Maquiladora") Export Industry (The "Maquiladora" Decree). The Agreement for Cooperation between the U.S. and Mexican and its' Annexes (The Environmental Agreement), effective August 14, 1983; Annex II (on hazardous waste discharges in the border areas), effective July 15, 1985, and Annex III (on transborder shipments of hazardous materials and waste), effective November 12, 1986.
STATUS: Lax Environmental Standards EXAMPLE OF SLAB One of the benefits of moving an environmentally hazardous industrial operation like SLAB recycling to Mexico is the ability to take advantage of the countrys underdeveloped environmental regulations. Quantifying the difference between environmental standards in the United States and Mexico is a difficult process because of Mexicos reliance on a voluntary audit system that necessitates industry participation. As such violations of law are seldom ferreted out by authorities who are primarily reactive to problems brought to them by under funded environmentalists and affected

communities. It is widely accepted that Mexicos environmental standards and practices are far below the United States; however, understanding the role loose regulations and standards play in encouraging the transshipment of hazardous materials like SLABs is a difficult process. With no recent studies measuring the investment effect of loose environmental compliance programs, anecdotal evidence, older case studies and surveys of firms suggest that lower environmental regulation does play a role in companies choosing to move to Mexico. For example, one study found that 26 percent of maquiladora operators in Mexicali cited Mexicos lax environmental enforcement as an important reason for their relocation there.[1] The U. S. General Accounting Office found that between 11 and 28 wood furniture manufacturers in the Los Angeles area relocated to Mexico between 1988 and 1990, taking with them 960 to 2,547 jobs.[2] About 80 percent of the firms cited stringent air pollution standards as well as lower labor costs as major factors in their location decision. In Mexico, these firms faced no air pollution standards for the application of paint coatings and solvents.[3] PROFEPAs Audit Mexicos agency, PROFEPAs, (Procuradura Federal de Proteccin al Ambiente) main function is enforcement of environmental law. This goal is achieved basically in two ways: inspection (with its related enforcement authority to shut down operations) and the environmental audit. The first one is a powerful legal action with a big limitation: the Federal Government can only demand the compliance with such items that have already been regulated, which is a small host of issues. As such, since 1992 PROFEPA has encouraged industrial facilities to carry out voluntary environmental audits. The Federal Government decided to use the non-punitive environmental audit approach because: Mexico has an unfinished and dislocated environmental legal framework; Environmental consciousness among industry and the general population is not well developed; Obsolete production technologies still in use presents significant compliance issues; Enormous amounts of improperly stored and disposed hazardous wastes already exist.

y y y y

All of these features promoted an industrial sector which was reluctant to commit to supporting an inspection-based system so the Federal Government had to engage the industrial sector through environmental audits. An important part of the audit is that if an enterprise decided to enter the program, PROFEPA would exclude it from normal inspection activities. The purpose of these audits is to allow industry to identify any and all issues that require special attention and corrective actions, and at the same time work out with PROFEPA specific compliance programs. The audit program has spread throughout Mexico, but particularly in large cities where there is a significant industrial base. The audits are generally conducted by private companies supervised by PROFEPA, and involve a comprehensive evaluation of an industrial facilitys compliance or lack in the area of air and water pollution, risk, and handling of hazardous

substances. Once an environmental audit has concluded, the evaluated facility is given an opportunity to develop a specific compliance program. This ability to determine how and when a facility will comply is one of the main features of the voluntary environmental audit program. Many companies that receive notification of compliance use the certification as a sort of Good Housekeeping Seal of Approval to market themselves. In a country with a weak environmental consciousness and a limited oversight and enforcement agency, one must ask, why would a battery recycler seek to engage in the voluntary audit process? Until such time as PROFEPA develops a stronger enforcement protocol and regularly inspects companies handling hazardous materials, one must assume that companies are evading even the most basic of Mexican environmental laws.

2)LEGAL environment in Mexico: Summary:

OVERVIEW ON DOING BUSINESS IN MEXICO I.- Investment Vehicles. For foreign corporations or individuals who seek to do business in Mexico, there are several ways for them to invest their capital in this country. As in many other jurisdictions, a very common vehicle for doing business in Mexico is through the incorporation of a Mexican company, where foreigners may own and participate in their capital stock. Unlike several other countries including the Unites States, in Mexico, the legal provisions governing the incorporation of companies are of Federal nature, which means that regardless of the place of incorporation within the Mexican Republic, all companies are uniformly regulated by the Mexican Law Governing Commercial Companies (Ley General de Sociedades Mercantiles) (LGSM). The LGSM regulates five different kind of commercial companies. Considering the fact that the Mexican Income Tax Law grants the same tax treatment to such five types of companies, corporate practice has only left two of them as the most common choice used by foreign investors for doing business in Mexico: (i) the variable capital limited liability stock corporation (sociedad anonima de capital variable) (SA); and (ii) the non stock variable capital limited liability corporation (sociedad de responsabilidad limitada de capital variable) (SRL). II.- The SA and the SRL. The SA has been widely used in Mexico as an investment vehicle. This corporation has a capital stock divided into shares, where the shareholders liability is limited only and exclusively to the full payment of their capital contributions and the stock capital must be incorporated with a minimum of two shareholders (either corporations or individuals) and with a minimum aggregate capital contribution of $50,000.00 pesos (approximately US$4,500 Dollars), repre

both allow the management to be handled by one or more directors which may not necessarily need to be shareholders or partners of the company. III.- Differences between the SA and the SRL. We can mention three main differences between the SA and the SRL: 1. - Equity Structure. The SA issues stock, which is considered to be a negotiable credit instrument which can be used in exchange operations, such as endorsements; on the other hand, in the SRL the capital is divided in participation units instead of stock, therefore evidence of participation as a partner does not reside in a stock certificate, but rather in an equity participation recorded in the companys ledger book (no physical title exists) and may only be transferred with the approval of the other partners. In the SRL, each partner has the right to own only one equity participation and each equity participation can have different values. Notwithstanding the foregoing and pursuant to the LGSM, the participation of a shareholder in a SA as well as the participation of a partner in a SRL are evidenced by the corporate books of the company, either through the stock ledger book in the case of a SA or the equity participation ledger book in the case of a SRL. Additionally, regarding SRLs, equity participations without par value are par value. 2.- Transmission of the partner/shareholder status. In the SRL capital increase requires the approval of the other partners and the acceptance of a new partner requires a special quorum. As a general rule, such special quorum requires the vote of the majority holders of the equity participations, unless a higher quorum is established in the by-laws of the SRL. The general rule for the SA is the free transferability of the stock, provided that, it is very common for an SA to determine restrictions or special quorums in their by-laws to limit the transferability of the stock. 3.- Number of shareholders/partners. With respect to the number of shareholders, the SA may have an unlimited number of shareholders (but should always have at least two shareholders), while the SRL may have a maximum of fifty partners and a minimum of two. Therefore, the SRL structure may not be used nor allowed for an initial public offering through the Mexican stock exchange. Only an SA may list their shares in the Mexican stock exchange. As you can see, the concept of corporations with only one partner or single stock holder is not allowed, nor contemplated under Mexican Law. IV.- Minimum capitalization requirements. As mentioned above, the minimum capitalization requirement for the SA is $50,000.00 Mexican Pesos (approximately US$4,500.00). On the other hand, the SRL requires a smaller capital investment. The minimum capitalization requirement for the SRL is $3,000.00 Mexican Pesos (approximately US$270.00), and each equity participation of the SRL must have a value of $1.00 Mexican Peso or a multiple thereof. V.- Incorporation Process. The incorporation of a Mexican company is quite unique and may

not be compared with the incorporation process followed in common law countries. We can say that the incorporation process is complex and may take from a couple of weeks to more than a month to have the business entity ready to start doing business in Mexico. Due to our civil legal system, the participation of state appointed officers is required (with the same name but different functions as notary publics in common law countries), either Notarios Pblicos or Corredores Pblicos to carry out public certification of legal acts. The participation of such state appointed officers in the incorporation process plays a very important role. Such officers are professionals (who, in the case of notaries, must be lawyers) that are granted with public faith (fe pblica) by the government with the function to certify legal acts and should not be considered as equal to the notaries in the United States or in other common law countries. Generally, the participation of such certifying officers is to formalize the consent of the shareholders or partners of the company and therefore, such shareholders or partners (or their representatives) must appear before them to execute the relevant incorporation documents. The process for the incorporation of a company would need to follow the following steps: 1.- To obtain from the Ministry of Foreign Affairs (MFA) a permit to use the corporate name of the company; 2.- To draft the by-laws of the company (based on the provisions of the LGSM and/or any shareholders agreement or other kind of agreement when different groups of shareholders or partners that shall be equity holders of the company); 3.- To execute the incorporation deed containing the companys by-laws before a public faith officer (including powers-of attorney granted to officers of the relevant company); 4.- To file before the Public Registry of Commerce of the companys domicile the public deed containing the articles of incorporation (and powers-of-attorney) of the company. 5.- To file and obtain before the Mexican Tax authorities the tax identification number (Registro Federal de Contribuyentes or RFC); 6.- Filing and registration before other Mexican authorities (such as the Foreign Investment Registry, the Business Information System (Sistema de Informacin Empresarial Mexicana)). Thereafter and during the life of the company, it will have to provide to such authorities periodical information and/or renewal filings. persons that will appear before the Mexican certifying officer to incorporate the company on their behalf. Such power-of-attorney would also need to be valid and enforceable pursuant to Mexican Law and therefore if granted abroad it shall be granted before a notary and comply with International Treaties signed by Mexico, such as the Inter-American Convention on the Legal Regime of Powers of Attorney to be used Abroad, the Washington Protocol on the Uniformity of Powers of Attorney and the Convention de La Haye. In order for such power-ofattorney

to be effective in Mexico, it must also be translated into the Spanish language by an expert translator appointed by the relevant court. (c) The amount of the capital stock of the Mexican Company and the participation of each shareholder or partner in such capital stock (we would recommend to start with the minimum capital required under Mexican corporate law). (d) The name of each member of the Board of Directors or in the even that it is so decided, the name of the Sole Administrator (as the case may be) of the company, and the names of the examiner and main officers thereof. (e) The names of the persons that will receive powers-of-attorneys from the company, and limitations to such powers-of-attorney (generally such persons would be carrying out the day to day management of such company). VI.- Taxation. Both companies, the SA and the SRL, once incorporated shall obtain from the Mexican Ministry of Finance a Tax Payers identification number and will be considered as full Mexican entities for tax purposes, since such entity will be a Mexican resident with permanent establishment in Mexico. When the tax payers identification number is obtained, the company may start issuing invoices for their business. Residents of Mexico (individuals and corporations) are subject to taxation on their worldwide income, irrespective of the source of income or their nationality. Business entities having the principal administration of their business in Mexico are considered Mexican residents for tax purposes. We would recommend consulting a Mexican accountant or tax expert if specific and further information is required regarding tax matters. VII.- Foreign ownership of Mexican real estate. Under Mexican Foreign Investment Law there are a set of rules to be enforced in connection with foreign ownership of real estate properties located in Mexico. A Mexican entity with foreign investment (foreign shareholders or partners) may acquire a real estate property in Mexico; however, it should be noted that, if such property is located within what is determined as the restricted zone (an area of 100 km across the Mexican border and 50 km across the Mexican beaches) and is acquired for residential purposes, then, such Mexican entity (as well as foreign individuals or foreign corporations) may not directly acquire such property (residential purposes shall be considered as those destined exclusively for living purposes of the owner or third parties). In such cases, a Mexican trust must be created whereto the property is settled in trust and whereby such Mexican entity, foreign individual or foreign entity is appointed as beneficiary thereto (no real estate rights can be owned by such Mexican entity, foreign individual or foreign entity, only trust rights and the maximum duration of such trust is 50 years, subject to renewal); provided further that, in such cases it is required to obtain a permit from the MFA in order for such trust to own the relevant real

state property in the restricted zone. On the other hand, a Mexican entity with foreign investment but which agrees to a statement called the Calvo Clause (which basically states that any foreign shareholder or partner shall be considered to be Mexican with respect to such participation or interest and shall agree not to invoke the protection of their Government, under the penalty, in case of failure to honor such commitment, to forfeit such interest or equity participation to the benefit of the Mexican Nation), may acquire property located in the restricted zone for non residential purposes, in which case, they would require to give a notice to the MFA of such acquisition within the next sixty (60) days following the date of the acquisition. Non residential purposes pursuant to the regulations of the Foreign Investment Law are considered as those destined to time sharing, industrial, commercial, or tourism related activities and generally those used by entities pursuant to their corporate purpose, such as sales or transfers, urbanization, construction, or development of real estate developments. Foreigners may acquire real estate properties outside of the restricted zone provided that they obtain a permit from the MFA. VIII.- Labor Consideration. Mexican Labor Law is quite unique and different from other Labor legislations in the world. Labor relationships in Mexico are governed by the Mexican Federal Employment Law. The provisions of the Mexican Federal Employment Law are non-waivable, and in resolving disputes, the burden of proof often lies with the employer rather than the employee when contesting an issue. When interpreting labor law provisions, in case of doubt, the most favorable interpretation for the employee shall prevail. The lack of labor agreement does not deprive an employee of the rights arising from the labor laws and the services performed. This lack of agreement shall be imputable to the employer. It is a common practice to enter into labor agreements with high level employees or key employees. Mexican Labor Law grants profit-sharing rights to employees. It is common practice within the corporate policies of some groups of companies, to establish a service company to provide labor force for other companies within the same group. This practice is done in order to reduce the impact of profit sharing rights. While permitted under law, labor joint liability issues must be considered in following this practice. In this case, the company or companies obtaining the benefit of the labor force of the service company are jointly liable for the obligations contracted with the employees of the former. Mexican labor law does not recognize the existence of work performed by the hour. Pursuant to the Mexican labor law, relationships may be for a determined task or for limited time, or for an undetermined period. In case of silence, the relationship will be of undetermined duration. In Mexico, bankruptcy of the company is not accepted as a reason for termination of a labor relationship nor for nonpayment to employees for services. Under Mexican Federal Employment Law, employees are entitle to the following minimum benefits, provided that, employers may elect to grant additional

benefits such as saving plans, food assistance, insurance and others: (i) Christmas bonus. Employees are entitled to an annual bonus at least equivalent to 15 days salary, including a partial bonus if an employee has worked for the company for a period of less than one year. (ii) Vacation. Employees are entitled to pre-specified paid vacation days per year according to the number of years of employment. While on vacation, employees are entitled to receive their normal salary, plus a vacation premium of an additional 25% over their current salary. (iii) Days off and holidays. Employees are entitled to take one day off for every six consecutive working days. In addition to weekly days off, employees are entitled to receive a minimum of seven prescribed holidays per year, plus every six (6) years, on the date of Mexicos president change of office. (iv) Working shifts. A maximum six-day, forty eight-hour work week. (v) Termination and severance payment. Employers are obligated to pay their employees an amount equivalent to three months salary plus twenty days salary for each year the employee has been employed by the employer, unless termination occurs as a result of mutual consent, resignation on the part of the employee, or for a justified cause, as provided under the Mexican Federal Employment Law. Additionally, employers must pay a seniority premium equivalent to twelve days salary for each year the employee has been employed by the employer to any employee terminated without the employees consent; provided, however, that if the employees salary exceeds twice the relevant mandatory minimum salary, the seniority premium would then be based on a salary equivalent to twice the mandatory minimum salary. Employers must also contribute in the benefit of its employees to the (i) Low Income Housing Fund (Infonavit), (ii) Mexican Social Security System (IMSS), and (iii) Retirement Savings Fund. ---------------------------------------------------------------------------------------------------------------Doing_Business_in_Mexico http://www.bomchilgroup.org/doing_business_in_latin_america/Doing_Business_in_Mexico_the_Bomc hil_group.pdf
Quick Guide on the Basic Legal Aspects of Doing Business in Mexico

http://www.lcilaw.com/QuickGuideMexico.pdf http://www.doingbusiness.org/data/exploreeconomies/mexico/

These links can be of some use for us

may be

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More details on laws (may not be needed): STATUS:Corruption, bribes, mordidas, tips Doing business in Mexico
There are perceptions and realities associated with bribery and corruption when doing business in Mexico. Corruption, bribery, mordidas (translated as bites, but are actually bribes) and tips are part of Mexico and the foreigners perception of Mexico. Its a difficult subject to address because it involves ethical and moral decisions for the foreign visitor or business person. What is culturally OK in Mexico, may be seen as immoral and corrupt by an individual from another country. Historically, corruption in Mexico is blamed upon the Spanish conquistadors. While corruption no doubt existed prior to the Spanish conquest, they certainly did institutionalize it in government and throughout the Mexican (and Latin American) culture. Today corruption, bribery and tipping occur at all levels of Mexican society and at many different degrees. For one reason or another it has become part of daily life. Most of it involves small sums of money, and is thought of as tipping and not as a bribe. In fact, to eliminate corruption in Mexico overnight is unrealistic and would probably result in chaos. As some Mexican observers have noted, La mordida is the grease that makes the system work. All of the following might occur in Mexico. Which of the following are acts of corruption or bribery? Which are totally unethical, somewhat unethical, and no big deal? Which of these events occurs in your country ?

y y y

The garbage collectors come by every 2 weeks, rings the doorbell and ask for money for a soft drink, US $1 or $2. While waiting in a long line, someone comes up to you and asks if you would like to avoid the line and be attended right away. It will cost US $ 5 to US $ 10, and save you 2 hours. Your application for a permit/license has been in the government office for several weeks, and no one seems to be able to tell you what is wrong. The secretary asks if you would like to buy a raffle ticket for some organization. After buying the ticket the application suddenly appears. You visit a local political leader and take him to dinner and a theater event to discuss your project. At holiday time, you send gifts to politicians, suppliers and business associates. Your daughter copies exam answers from another student at school. The police stop you for a traffic violation (which may or may not have occurred). They suggest that for US $ 20 or $ 50 you can make it disappear, and youll be on your way in 5 minutes. You need government agency approvals for your business project. In order to make sure everything is done correctly, you hire an official in the department as a consultant. You require a zoning change on a piece of land, you invite a government official to participate as an investor in the project, or perhaps give him some shares. Your son or daughter wants to get into a nightclub, the doorman says no. They give him US $ 5 and walk right in. A city inspector finds code violations in your restaurant. A call to a family member, who knows someone, who knows someone, results in the violations being revoked.

y y y y y y y y

y y

A drug enforcement agent receives a phone call that tells him to choose between accepting USD $ 20,000 payment this year to let a drug shipment go by unharmed or to have his children shot. Your immigration papers are not quite right. There is a document missing. You are able to convince the official (though words and tears) to overlook the situation, no money is exchanged. Can you live and work in Mexico and not pay bribes? Yes. (Im lived and worked in Mexico over the past 14 years and have never paid a mordida in my private or business life.) Are bribes necessary for doing business in Mexico? I think it depends on the circumstances. Most business can be done without them. It depends on you, and your evaluation of the situation. There must be certain areas where influence peddling, and mordidas are an integral part of the business, and other areas where its not required in the least. This is not unique to Mexico. All Mexican local, state and federal governments and government agencies are not corrupt. In fact, in the past 10 years there have been great advances in transparency in government, including guarantees for the time involved in processing applications and permissions. Mexican federal public policy and local and state governments have been actively reducing and eliminating institutionalized corruption and penalizing government workers involved in illegal acts. There is still a long way to go before its completely eliminated, but there has been a noticeable change in many areas. Mexicos poverty, unequal distribution of wealth, history and culture make it difficult to eradicate corruption overnight. Mexico is a country with many laws, but they are not well enforced. Its similar to the temptation one might feel on the lonely country road at 3:00 AM and confronting a red light..do you stopor run through it? You should develop and hold firm to your own ethical and moral principals in order to live and do business in Mexico. If you dont do it at home, why would you do it in Mexico? Your company should have a clear policy about corruption and bribery, and hold to it when doing business in Mexico, or internationally.

Mexico Business Law

Padua Law firm is a Houston, TX based, boutique law firm providing high quality Mexico business law services. Our Mexico business law practice offers a full range of transactional, regulatory, and litigation services to our business clients with interests throughout Mexico, especially for United States companies and investors. Our practice areas include: business and finance, franchising and licensing, export and import controls, cross-border investment, cross-border debt collections, tax, real estate development, environmental, and other niches. Due to the Mexicos rapid economic growth, international trade activity, and geographical proximity, more United States companies are establishing and/or expanding operations in Mexico. We opened an office and established operations in Mexico City, Mexico in order to better serve our clients. Additionally, we have been developing in-house capabilities as well as establishing collaborative relationships with highly qualified Mexico-based law firms and attorneys in most areas of Mexican business law.

Business in Mexico Requires Experienced and Well-Connected Legal Counsel

Doing Business in Mexico, although can be highly profitable if managed properly, is usually complex due to the combination of applicable federal, state, and local laws and regulations, potential inefficiency in the enforcement of contracts that American

businesses are accustomed to, cross-border operational issues involved, and generally the emerging or developing nature of the economy, the Mexican legal system, and its participants. Our Mexico business law practice is focused upon our ultimate goal to help you get your transactions, projects, and other business objectives completed efficiently and economically by helping you navigate through the Mexican legal and regulatory landscape. You need legal advice from an experienced and battle-tested law firm who knows the Mexico business terrain. We have both Mexico and United States licensed attorneys who are bilingual, bicultural, and most importantly possess strong relationships with Mexicos government officials and business leaders. Attorneys Alejandro Padua (Houston-based, Licensed to practice in Texas) and Jose Luis Anton Morelos (Mexico City-based licensed to practice in Mexico) business experience in Mexico, in addition to their formal legal training and experience is an invaluable asset to help you successfully complete your objectives. We understand that your ultimate goals are financial success and always ensure that the most cost-effective and appropriate mechanism and players are employed to achieve a successful outcome.

Law Information CORPORATIONS, COMPANIES AND ASSOCIATIONS IN MEXICO

TYPES: There are two general group of companies: Civil and Commercial. The civil companies and associations are governed by the different Civil Codes of Mexico. The commercial entities are governed by the Federal Law on Commercial Companies of Mexico. PERMITS AND REGISTRIES: All corporations, companies and associations are to acquire a permit to incorporate from the Federal Mexican Ministry of Foreign Affairs/Relations (all entities are licensed federally, therefore they can act in any state of Mexico)., are to be incorporated through a Mexican notary public in a public instrument (escritura pblica) and registered at the local Public Registry of Commerce (corresponding to the company domicile, which is freely chosen at the time of permit acquisition). Where the permit to incorporate allows (as determined by the applicant's request) the ability to have foreign investment (as a shareholders, partholder, associate, etc.), then the incorporated entity is to also be registered at the Federal Registry of Foreign

Investment, under the control of the Federal Ministry of Commerce and Industrial Development. If, sometime after incorporation, the partners/shareholders/associates agree on permitting foreign investment into the company ownership (where there was no permission prior thereto), they must notify the Secretariat of Foreign Affairs /Relations in its Constitutional Article 27 Permits Department of this decision and register the company with the National Registry of Foreign Investment. All entities are to be registered with the federal taxing authorities known as the **Federal Ministry of Hacienda and Public Credit, the **Federal Institute of Social Security, ** the Federal Housing authority known as INFONAVIT. They are also to be registered with the national chamber of commerce corresponding to the type of business in which it is involved. There may be other additional registries, depending upon the type of business (example: mining, where concessions are required to mine and therefore there is a registry of the concessions / concessionaires).

SPECIFIC COMMERCIAL TYPES The commercial entities are where two or more persons (individuals or entities) contract and unit in a permanent manner to perform a common licit, possible goal of a preponderantly economic nature, constituting commercial speculation, and under certain formalities of incorporation an registry, under one of the following types: The "Sociedad en Nombre Colectivo" (Company in Collective Name, also known as General Partnership), is a company in firm or trade name (including all the names of all of the partners or where there is a name missing, you are to place the words "and company" or other equivalent), where all of the partners have ancillary / subsidiary, unlimited and joint responsibility for the company's obligations. If you allow your name to be used in the company name, you become liable for the company's obligations. The company capital and/or ownership is not represented by negotiable instruments, instruments payable to the order of a person (stock) or bearer instruments (stock) and which company parts have restricted transferability. This company type description can be abbreviated by the letters "S. en N.C.". This type of company is a personal type company.

The "Sociedad en Comandita Simple" (Company in Simple Silent Partnership also known as a Limited Partnership), is a company in firm name or trade name (including all the names of the "comanditados" partners), and which consists of one or more "comanditado" partners that respond with ancillary/subsidiary, unlimited and joint responsibility for the company obligations and one or more "comanditario" partners that are solely responsible for the payment of their portions attributed to the company. The company capital/ownership is not represented by negotiable instruments, instruments payable to the order of a person (stock) or bearer instruments (stock), and which company parts have restricted transferability. This company type description (at the end of the company name)can be abbreviated by the letters "S. en C.S.". This type of company is a personal type company. The "Sociedad de Responsibilidad Limitada" (Limited Responsibility Company, also known as the Limited Liability Company) is a company with a firm/trade name or denomination (made-up name), consisting of partners whose only obligation is to deliver their portions (money or assets) attributed to the company, which corporate parts are not represented by negotiable instruments, instruments payable to the order of a person (stock) or bearer instruments (stock) and which company parts have restricted transferability. If the person's name is included in the company name, that person will be liable for the larger of the company partner portions. This company can not have more than 25 partners and the company description (at the end of the name) can be abbreviated by the letters "S. de R. L.". This type of company is a mixed type (personal/assets). The "Sociedad Annima" (Limited Liability Stock Company, also known as the corporation) is a company with a denomination (made-up name) consisting of shareholders whose only obligation is to deliver the portions they subscribe to (in the corporate capital) and which are attributable to the company, which parts are represented by negotiable instruments (stock), (no bearer instruments/stock), and which company parts may or may not be of restricted transferability (depending on the company bylaws). This type of company requires a minimum of two stockholders in order to incorporate and exist. This type of company may, (if set in the articles of incorporation) have a variable capital portion which would permit it to raise or lower the variable portion without changing the articles of incorporation or bylaws (however it would require an extraordinary shareholders' meeting). This company type description (at the end of the name) can be abbreviated by the letters "S. A.", or if of the variable capital type then "S.A. de C.V.". This company is a capital type company (no personal) and is the one most commonly used in business in Mexico. The "Sociedad en Comandita por Acciones" (Company in Silent Partnership by Stock, also known as the Limited Partnership with Shares") is a company subject to the rules that govern the "Sociedad Annima" company (with exceptions); made up of

one or more "comanditado" partners/shareholders with ancillary/subsidiary, unlimited and joint responsibility for the company obligations and one or more "comanditario" partners/shareholders that are only responsible for the payment of the company stock they subscribed. This company only issues nominative stock and the "comanditado" partners may not sell their stock without the the prior approval of all of the "comanditado" partners and two thirds of the "comanditario" partners. This company may exist under a firm name or a trade name or a denomination distinct to that of the names of the comanditado" partners. If all of the "comanditado" partners are not in the company name, then the words "and company" must be used in the name. Certain of the collective name company rules apply as well as do certain of the simple silent partnership company rules. This company type description (at the end of the name) can be abbreviated by the letters "S. en C. por A." and it is a mixed type company (personal and assets oriented).

CIVIL LAW TYPES The "Sociedad Civil" (Civil Company) in Mexico is foreseen and governed by the Civil Codes of the several states of Mexico. This is a company where two or more persons contract and unit in a permanent manner to perform a common licit, possible goal of a preponderantly economic nature, without constituting commercial speculation (therefore not a commercial company). This company type description (at the end of the name) can be abbreviated by the letters "S. C.". The "Asociacin Civil" (Civil Association) in Mexico is foreseen and governed by the Civil Codes of the several states of Mexico. This is a company where two or more persons contract and unit in a permanent manner to perform a common licit, possible goal of a preponderantly non-economic nature, and without constituting commercial speculation. This also known as a common goal company. (Therefore not a civil company). This company type description (at the end of the name) can be abbreviated by the letters "A. C."

Civil Law Partnership (Joint Venture) The U.S. difference between partnership and joint venture and the different types of partnerships are not that common in Mexico. What is common in Mexico is the

"Association in Participation". For discussion purposes herein, we will say that the partnership is an ongoing relationship of more stability than that of the joint venture. However, since there is no legislation (in general terms) that restricts it, the parties can contractually agree on the durability (one specific deal, one specific venture limited in time or place, or ongoing) of the business and create a hybrid of the association in participation, a partnership and a joint venture (the key is to be specific, complete and avoid agreeing on items contrary to law). The "Association in Participation" (Asociacin en Participacin) is not a company nor corporation (it does not have separate existence), still it is a common way of doing business in Mexico. This is an agreement where one or more partners ("asociados") deliver goods and/or services to the managing partner ("asociante") for use in a specific business venture. The managing partner is the one responsible before third parties and the one that performs the business. Both the silent and managing partners will have the right to participate in the profits of a commercial venture. Mexico has not enacted a Dealer's Act or Transfer of Technology. Joint Ventures should have: compatibility of business sense and culture attitude, there should be a continuity of management, be flexible to change and understand the market. The restrictions on joint venture in Mexico in the past have been the Foreign Investment policy, Industrial Development policy and certain practical effects in the country.

Sole Proprietorship: Any individual (physical person) (foreigner with immigration status or Mexican national) in Mexico may open a business and/or do business in his or her own name without creating a separate entity, which is known as a Sole Proprietorship. He, the individual, is fully personally liable for the losses of the enterprise.

Business Association: Businesses are required to organize themselves as associations. When there are 20 or more in any specific type of industry they are to organize themselves in that type of national industrial association (or chamber) (example: National Association of Steel Manufacturers). When there are fifty or more in any specific type of commercial activity, then they are to organize into a national chamber of commerce of that type of commerce (example: National Chamber of Commerce of Hotels). LIQUIDATION AND DISSOLUTION

One must first receive and review the present corporate existence of the Mexico Company. This should include the incorporation and changes to the bylaws and articles. to: Verify type Verify place of registry How it functions Any changes since incorporation Present day officers. Prior shareholders meetings (to verify that none are missing - if missing we will need to complete them - which we can do in the last ordinary annual shareholders meeting)

2. Then perform final ordinary shareholders meeting and approval of the administration of the company and actions of the officers and authorized agents. Here we include a prior publication of notice of intent to meet. After the meeting we may need to register it at the corresponding public registry of commerce (where it is registered).

3. Then perform shareholders meeting of liquidation appointing liquidators and authorization for them to carry out the liquidation. Here we include a prior publication of notice of

intent to meet. After the meeting we will need to register it at the corresponding public registry of commerce (where it is registered).

4. Then perform liquidation, by publication of announcements to creditors of intent to liquidate and to perform collection against debtors.

5. Then perform shareholders meeting of approval of actions under the liquidation process and to approve final dissolution of the company. Here we include a prior publication of notice of intent to meet. After the meeting we will need to register it at the corresponding public registry of commerce (where it is registered).

6. Then final final notice of liquidation and dissolution of the company with the National Registry of Foreign Investment. These two notices can be done together if accomplished in the same fiscal (calendar) year. If in separate calendar years, then they will need to be registered separately. 7. Final final notice of liquidation and dissolution of the company with the Federal Income tax Authority.

8.Final notice of dissolution with any other agencies or chambers of commerce, etc. as the case may be (determined by the industry in which the company was active).

Mexico's labor market and laws(already written in short above)

Mexicos labor force is growing at an annual rate of 2.4 percent, but the agricultural sector has been shrinking as the urbanization process continues and people move to the major cities in search of manufacturing employment. Semi-skilled and skilled laborers make up approximately one-third of the labor market.

LABOR LAW
Labor regulations in Mexico are based on the Mexican Constitution of 1917, and the Mexican Federal Labor Law (MFLL). Although wages continue to be low in comparison to the United States, the MFLL is strict in its prevention of unsafe working conditions. The Federal Labor Law regulates labor contracts, minimum wages, employee benefits and union activity within Mexico. You should familiarize yourself with labor law as part of your feasibility study for operations in Mexico. Index

THE WORK RELATIONSHIP

If a work relationship is not specifically defined as temporary from the beginning, there are few circumstances under which you legally can dismiss an employee without incurring compensation responsibilities. There is no time limit on the length of the work relationship, unless it is explicitly defined for a set time or for a specific job. Also, employers cannot discriminate on the basis of race, sex, age, religious or political beliefs, or social standing.

EMPLOYEE PRIVILEGES
As an employer, you may not infringe on a workers rights of safety, work shift, minimum salary, and required benefits. American Chamber/Mexico publishes an annual Survey of Salaries which analyzes the compensation paid to 98 key job positions within companies, it also produces annually a Benefit Survey, that examines what benefit packages firms are offering their executives, salaried employees and salesmen. Index

BENEFITS
Employee benefits can substantially add to labor costs.
y Profit Sharing - Federal law requires firms to participate in a profit sharing program in which employees receive 10 percent of the firms annual profits. Executive officers and general managers often do not participate in this program. y Christmas Bonus (Aguinaldo) - Firms are also required to pay a year-end Christmas bonus (Aguinaldo) to all employees equivalent to at least two-weeks pay. Those who have worked less than one year receive a pro-rated bonus. y Legal Holidays - Mexican Federal Labor Law establishes 7 legal paid holidays per year. Besides these holidays many businesses and labor contracts observe additional days for religious and national celebrations. y Vacation - Vacation time is guaranteed and rewarded based on seniority. Six days of paid vacation must be offered after one year of service, plus two additional days each year for the next three years. By the 5th year of service, this adds up to two weeks of paid vacation. After five years of employment, two more days must be added for each five-year block of service. y Social Security - All workers are automatically covered by the public health care system the Mexican Institute of Social Security (Instituto Mexicano de Seguro Social, IMSS), whether registered or not. It is the responsibility of the employer to register employees as well as contribute a minimum of 17.42 percent of each workers salary, depending on the risk-factor of the job, into the social security fund. Benefits include basic health care and medications, attention to occupational accidents and care for illnesses. y Employee Housing - Employers also are required to pay a 5 percent fixed payroll tax to finance the Institute for the National Fund for Employee Housing (Instituto Nacional del Fondo de la Vivienda para los Trabajadores, INFONAVIT). The goal of this federal program is to provide benefits allowing employees to more easily acquire a home. y Retirement Insurance - Under the Retirement Savings System (Sistemas de Ahorro para el Retiro, SAR), employers must pay 2 percent of a workers salary (up to 25 times minimum wage) to a retirement fund in a bank account under the workers name.

SAFETY
The employer is responsible for staffing labor inspectors to ensure compliance with occupational hazard regulations. Workers who suffer any form of occupational accident are entitled to whatever medical attention is deemed necessary, regardless of his or a co-

workers negligence. Medical care is administered by IMSS. Employers are obligated to modify facilities for the safety and health of workers. Index

WORK SCHEDULES
The blue collar work force is accustomed to a six-day, 48-hour work week, the maximum allowed by law. The white collar work force usually works an average of 40 hours per week. White collar workers usually have more flexible schedules and sometimes work into the late evening. Neither pregnant women nor minors are allowed to work in areas of potential health risks, after 10:00 pm, or overtime. The minimum legal working age is 16 years with the permission of parents and a permit from the Secretary of Labor and Social Welfare (Secretara de Trabajo y Previsin Social, STPS). Overtime is paid at twice the hourly wage for the first 9 hours after 48 or for working on a legal holiday, Saturday or Sunday, and triple-time beyond 9 hours.

SALARY
According to the Federal Labor Law, the daily minimum wage should represent a purchasing power for a basic standard of living and is set annually in accordance to geographic region. In the middle of 1995, the average national daily minimum wage was N$16.74. The National Minimum Wage Commission (Comisin Nacional de Salarios Mnimos) has the authority to modify the minimum wage as needed. The minimum wage in the Federal District (Distrito Federal D.F.), which encompasses Mexico City, is considerably higher than in other parts of the country, and there are also higher minimum wages established for some industries. Salaries can be established according to unit of time or work, a lump sum, commission, or any other criteria to which the parties agree. Index

TERMINATION OF THE WORK RELATIONSHIP

Terminating a work relationship can be an expensive process. To dismiss a worker without just cause, you must pay him three months salary plus 20 days pay per year of service. Employees with 15 or more years seniority who leave voluntarily are entitled to a minimum compensation of 12 days pay per year of service since May 1970, when this law went into effect. Under certain conditions, such as temporary disability or contagious disease, employers may lay-off workers without having to pay severance. Firing employees without incurring financial compensation is possible only when an employee grossly violates the work relationship. For example: sabotage, flagrantly

neglecting safety procedures or working under the influence of controlled substances. Other reasons for which an employer can avoid severance pay include:
y y y less than one year of service completion of the labor contract physical or mental disability that prevents a worker from fulfilling his duties.

Written notification within 30 days of the violation stating reasons and effective date of termination is needed to legally fire an employee. Dismissed employees with two or more years of service have the right to sue for reinstatement. If the employee wins the suit he will regain his job, receive full back pay, and may even receive punitive damages.

UNIONS
If you are planning to hire Mexican workers, you must be prepared to deal with labor unions (sindicatos). Unions are an important and highly politicized component of the labor market that are especially strong within the public and industrial sectors. The constitution and the Federal Labor Law both favour unionization. Approximately 30 percent of the Mexican work force is unionized, about twice the U.S. rate. It is imperative to contract a Mexican labor lawyer prior to hiring a work staff. Unions tend to be very territorial, and by law, companies can only establish relations with one. You should research the unions which represent your particular region and sector. The key to establishing good union relations is communication. Labor contracts are difficult or even impossible to change once established, so you should discuss in detail the plans and goals of the firm with the union representatives during the bargaining stages. For example, if you plan to implement any sort of productivity bonus system, it should be explicitly stated in the labor contract prior to signing. The goal of the unions is to protect the interest of employees, with emphasis on workers with more seniority. This could pose a problem if your senior workers are not the most productive. Also be aware that under the philosophy of acquired rights, if you give a certain bonus one year, the union will expect the same bonus the next year. The union system is quite complex but most unionized workers belong to the nine largest labor syndicates. Unions may be formed freely by registering with federal or state authorities, but this tends to be a long process filled with delays.

Mexicos largest and most politically powerful union, the Confederation of Mexican Workers (Confederacin de Trabajadores Mexicanos, CTM), claims to represent 5.5 million workers or 85 percent of the private sector. Ninety-five-year-old Fidel Velzquez had been the confederations Secretary General since the early 1940s. The CTM is allied with the Institutional Revolutionary Party (Partido Revolucional Institucional, PRI) which has held the Mexican presidency and a legislative majority since its founding in 1929. The CTM provides political direction as well as legal advice and services to members. The Congress of Labor (Congreso del Trabajo, CT) was formed in the 1960s and is an umbrella organization that represents 37 other labor confederations and independent unions, most of which are PRI-affiliated.

STRIKES
Although the constitution establishes the right of registered unions to strike, very few strikes actually occur. In 1993, less than 5 percent of all strike notices filed actually led to strikes. Strikes must be filed and approved by the Federal Labor Conciliation and Arbitration Board (Junta Federal de Conciliacin y Arbitraje, JFCA) to be deemed legal. If JFCA does not grant permission to strike, employees have 24 hours to return to work or face termination. If the strike is ruled legal, management can neither enter the premises nor hire replacements. All operations must stop until the strike is resolved.