Labour market changes welcomed in Mexico

Labour market changes welcomed in Mexico

Mexico is undergoing the biggest change in workplace laws in almost 50 years which will result in the country’s labour market being more flexible and competitive, it is claimed. The move is being hailed as good news for international companies wishing to do business with Mexico.  The recent changes regulate many labour practices that have been in place for a long time and more are expected to modernise trade unions, bringing more transparency and accountability to the sector.

‘Many large labour unions in Mexico, with budgets running into hundreds of millions of pesos every year, receive little or no independent oversight into the management of their finances,’ said Armando Nuricumbo, founder of Nuricumbo + Parners, a finance, risk and strategy consultancy and a member of the Mexico-UK Committee at the Mexican Council for Foreign Trade, Investment and Technology (COMCE). ‘These institutions should start adopting world class standards of corporate governance immediately. The risk is that, if they do not do so, they will continue to be a target for corruption, dishonesty and even used as a platform for money laundering by organised crime,’ he explained.

‘Of course, as is always the case, generalisations do not tell the whole story as many labour unions are an example of transparency and good management, while there are many others that are way behind in this regard. The unions that are already democratic and transparent should join forces with other sectors of Mexican society in order to push for this change,’ he added.

One of the key objectives of the reform is to promote labour flexibility and competitiveness in companies of all sizes. Nuricumbo pointed out that the transaction costs and potential liabilities related to formal employment have long been identified as detractors of job creation, particularly for small enterprises in Mexico. ‘They also contribute to the formation of businesses of all sizes outside the formal economy, which originates other problems such as tax evasion, unequal competition, and counterfeiting. If the bill is successful at detonating job growth in the small business sector, this could prove to be a very clever piece of legislation,’ he said.

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Critics of the reform argue that it will represent a retreat from stronger hiring standards. ‘The truth is the older standards were often evaded through legal mechanisms and strategies that over time created a kind of parallel job market, one that was generating job growth but was surrounded by legal uncertainty for all stakeholders. In that sense, it is positive that the attempts to regulate the outsourcing industry, which gained a lot of popularity in recent years as a means of obtaining the flexibility that the legal environment could not offer,’ he added.

He is predicting that President Elect Enrique Pena Nieto and his new government will make changes of perhaps historic proportions in Mexico. ‘He is a young president that understands both the old ways of doing business as well as the new demands and realities of the global economy and of civil society. He will find support from other visionary political leaders who understand the importance of making these long awaited reforms,’ said Nuricumbo, adding, ‘His political party should be effective at establishing the necessary political arrangements in order to move the country forward, while at the same time obtaining leverage from the numerous positive aspects that exist today’.