CHALLENGES AND OPPORTUNITIES IN MEXICO FOR BUSINESSES; A (VERY) BROAD LEGAL PERSPECTIVE
Fueled by a constant yet sometimes disappointing economic growth in the past two decades (roughly averaging a yearly 2% GDP growth), Mexico has positioned itself within the 12 largest economies in the world, and with a growing population of over 130 million (2019 estimate), it is the second largest consumer market in Latin America.
The above-mentioned facts adds to Mexico’s privileged access to the United States market, its integration into the latter’s manufacturing supply chains, an extensive network of free-trade agreements (FTAs) and a large internal market make it an attractive investment location among emerging markets, many companies have looked to obtain a “piece of the action” and have entered the Mexican market in the last years, with many more planning to enter in the near future, despite the uncertainty over the impact of the new policies announced by the recently-elected president Andres Manuel Lopez Obrador, as well as other key issues such as high crime-related violence in several regions of the country.
Notwithstanding the encouraging broad perspective, there are several key aspects of legal and judicial practice that remain a yet-to-be addressed challenge for our country, specifically concerning the ease of access to justice, the lengthy and sometimes cumbersome judicial procedures and the wide divergence of the criteria sustained by local (state) and federal courts, a situation that could be aggravated by budget cuts that the new federal government has imposed in several strategic areas, including the Federal Judiciary, the Supreme National Court and other autonomous courts such as the Federal Court for Administrative Affairs (TFJA), and the Supreme Electoral Tribunal (TRIFE), which have seen between 12% to 30% of their available funds for 2019, which in turn could further impact the availability of judicial services and impact the overall quality of judicial resolutions in different fields of the law and the general legal panorama in the country.
Moreover and following the implementation of Mexico’s latest judicial reform concerning criminal justice (enacted in 2008), which put into place a much-needed overhaul of the long-criticized trial system by devising an adversarial, open trial procedure inspired much like the criminal procedure in other countries such as the US, was aimed at reducing corruption in trials, protecting the often-abused rights of the accused, and streamlining the process for convicting and incarcerating the guilty.
Such reform included diverse provisions that created alternative processes to deal with certain crimes, and sought to standardize protocols for police responding to crimes, among other several different additional changes that, again, aimed for the professionalization and standardization to combat crime and violence by attempting to tackle the roots of Mexico’s violence by building an effective rule of law sustained by the newly-educated (professionalized) men and women working within the criminal justice system, that by virtue of the system would be kept from collusion and other perverse incentives with criminal actors. A reduction in corruption would therefore inspire greater trust from the broader population, which would participate with police bodies more willingly. This virtuous cycle would create, in an ideal world, a justice system more capable of resisting and successfully fighting organized crime.
The above-mentioned judicial reform established an eight-year window for implementation that expired in June 2016, thus it would be important to analyze if the lofty goals set over a decade ago have been met or if they are possible at all, considering the new political landscape which has already impacted the availability of the budgetary funds needed to implement them, along with other unforeseen obstacles that may be suffered by companies and individuals that seek justice in Mexico.
In this aspect it is worth to point out there have been gradual improvements in multiple measures of judicial effectiveness, which may be attributable to the reform: according to Mexico’s national victim survey, the likelihood of victims to denounce increased from 9.6 to 13.6 percent, which brings hope about things starting to change.
While there are encouraging results such as the one mentioned above, there are also several shortcomings that show there is much to do to change the broader criminal context in Mexico, as the levels of crime and violence are still alarming in several regions of the country.
Beyond the above-mentioned issues, another longstanding popular frustration has do with the government corruption, which was the main reason why leftist-nationalist Andres Manuel Lopez Obrador won 2018 elections by a landslide, and whose main motto is to “combat corruption” in all its forms.
In this sense, one of the most common demands from private citizens and the majority of business organizations is to attack the country’s rampant corruption, whose growing examples continue to feed the prevalent disenchantment, there is still much to do in the mechanisms and legal instruments concerning this particular subject, as the newly-elected president has been very ambiguous concerning the broadly accepted proposal to create a National anti-corruption system.
In addition to the above, the consequences of the encumbrance into power of MORENA party and Andres Manuel Lopez Obrador still poses an unsolved question, as the new government policies and its impact on the judiciary legal communities are still unclear, which in turn provokes a very present uncertainty in the business communities: for example, on last November, the MORENA party majority leader in Mexican Senate, Ricardo Monreal, proposed a bill seeking to eliminate or cap banking fees for personal-sector customers and reduce business charges: such fees and commissions account for over 30% of the sector’s revenues in Mexico, and after several days of economic turmoil, then President-elect Lopez Obrador intervened to state that “the modification of banking-related legislation was not among his priorities”, but he also declared that he “would respect the Mexican legislative’s independence and that lawmakers had freedom to progress legislation”.
The discrepancy of views between the newly-elected President and one of its top political ally and supporter highlight the existence of divisions and/or lack of co-ordination between the new President his party, a situation that is likely to maintain regulatory uncertainty not only in the specific sector, but in the general outline of public policies affecting the legal and business communities in the country.
Furthermore and despite the general uncertainty of the current situation, companies looking to either enter or expand its operations in the Mexican market may encounter not only an important set of challenges related not only to the political and social realities of the country, but also several key opportunities derived from the signature of the “ Treaty between Mexico-US-Canada” (T-MEC or otherwise known as NAFTA 2.0) and other international instruments that Mexico is part of, specifically concerning Intellectual Property Rights (IPR’s).
In this area and probably as a “preamble” of what is to come with T-MEC, the recent reform (Published in May of 2018, entered into force on August 10th, 2018) to the Mexican Industrial Property Law (MIPL), which include the possibility to register “Non-traditional trademarks”, such as scent, sound and holographic marks, as well as the protection for “trade dress”, which will endow mark owners with broader protection as the means to further distinguish their products and services are made possible by the further advances in technology
In this sense, it is important to point out that broad descriptions of goods and/or services will no longer be allowed and as a consequence, the goods and/or services to be covered by an mark application must be strictly specified.
Applicants will be able to use “class headings”, but it will be understood that the application covering such description, will be protecting literally those goods/services included within the phrase; in order words, it should not be considered that by covering a “class heading” the trademark in comment will be protecting each and every single good/service covered within such class.
Furthermore, the definition of “Bad Faith” is included and specified within the MIPL, and is understood when an application is filed contrary to good uses, commercial practices and pursues the obtention of an undue benefit that produces damage to its legitimate owner, which can now be exerted as a cause for cancellation.
The causes of infringement have been extended as now is considered as infringement the non-authorized use of names, pseudonyms, signatures and portraits of persons, without consent; the titles of intellectual, or artistic works and the titles of publications and periodicals distributed; the names of fictional, or symbolic characters, or real personages portrayed; artistic names and the names of performing groups.
Further to the above, there are high expectations concerning the implementation of the T-MEC due to its IP chapter, which contains several provisions that are of interest for patent owners (specifically those in the pharmaceutical sector), as it contains provisions concerning the extension of validity of certain patents, a whole chapter dealing with data protection and further provisions to improve the available means and remedies to enforce IPR’s in general, including a new set of mechanisms to enforce IP rights at the borders and in the digital domain, but such changes would be incorporated until the Treaty is duly ratified by the participating countries and, afterwards, the corresponding amendments are passed to secondary (domestic) law.
In this context, the prevalent situation is still quite unclear thus the main challenge is to find certainty in a historic moment where there appears to be none, considering the new government is yet to demonstrate whether or not is willing to support and properly fund the judiciary, and where the business opportunities may come for those who are able to decipher the current rarified environment.
Jose Luis Ramos Zurita, Sr. Associate at Uhthoff, Gomez Vega & Uhthoff, S.C.