Jueves, 10 De Noviembre De 2005

B U S I N E S S N E W S July 2006

Dear clients and friends,

With this issue, we inaugurate our new monthly newsletter for our foreign and English speaking clients. We seek to provide you with a short, executive summary of the salient matters that have occurred in Mexico during the past thirty or so days. We welcome any comments or suggestions you may have, and remain at your disposal should you require further information regarding the topics discussed.

Yours truly,

Vázquez Tercero y Asociados, S.C.

L e g a l M a t t e r s

1. Trade and Customs

On June 2nd, the Ministry of Foreign Affairs published the amendments to Annex 401 of NAFTA, which were approved by the Governments of Mexico, Canada and the United States. Such amendments refer to amended rules of origin for goods such as, cocoa, cranberry juice, metal minerals, leather and leather goods, various textile and non-textile fibers, television sets and several types of control equipment and controllers.

On June 7th, the Ministry of Economy published new guidelines for the importation of goods that are destined to scientific and technological research, as well as to technological development.

On June 14th, several amendments to the operative documents concerning origin of goods of the FTA with Japan were published.

On June 21st, NOM-004-SCFI-2006 was published, thereby providing a new Official Mexican Standard for Commercial Information – Labeling of Textile Products, Clothing and Accesories, and Home Garments.

Finally, throughout the month, antidumping duties have been imposed on table apples from the United States and plastic pencil sharpeners from China; while pursuant to their respective sunset reviews, duties have been extended on liquid caustic soda from the United States, knob and handle locks from China; non-alloy iron or steel wire from the Ukraine, corrugated rod from Brazil and denim cloth from Hong Kong; sunset reviews have begun for rolled steel plate from Russia and texturized textile filament polyester from Korea and Taiwan; and, finally, duties have been eliminated on crystal polystyrene from the United States.

2. Legislative Matters

On June 1st, the Ministry of Commerce and Transportation published a new Law on Maritime Navegation and Commerce (Ley de Navegación y Comercio Marítimos).

On June 23rd, the Ministry of Economy published several amendments to the Federal Competition Law (Ley Federal de Competencia Económica). The amendments seek to enhance the authority and powers of the Federal Competition Commission, while redefining important aspects of economic competition, including absolute and relative monopolistic practices and substantial power in the relevant market.

On June 28th, the Ministry of Finance published several amendments to the Federal Tax Code (Código Fiscal de la Federación). Such amendments refer to, inter alia: (a) revised procedures applicable to individuals who contest tax or administrative determinations, including new forms of curing any procedural defects of the contested determination, and manners in which the probable tax liability may be guaranteed; (b) new powers for verification for tax authorities; (c) new provisions governing tax refunds and set-offs by the tax authorities; and (d) liability for lawyers, accountants and other professionals that provide advice concerning tax matters.

E c o n o m i c M a t t e r s

1. Mexico

As expected, inflation decreased by 0.45%, thereby reaching 0.56 basis points for the year 2006. The expected annual inflation rate is at 3.0% -the lowest ever-, but a weighted increase is expected to occur as of the month of June.

The country’s trade balance has experienced exceptional performance throughout the year, accumulating a surplus of 1.041 billion Dollars, as a consequence of high oil prices, as well as important recovery of manufacturing exports to the United States.

Notwithstanding the volatility of the world’s economy and its repercussions in Mexico, as well as the volatility of our own financial markets due to the uncertain result of the elections held on July 2, recent figures on economic activity and inflationary performance are highly favorable. Accordingly, the greatest risk for Mexico’s economy is a reduction of U.S. economic activity.

2. The U.S.

The last meeting of the Federal Reserve Board highlighted its belief that U.S. economic growth may become moderate vis-à-vis the strong rhythm displayed last year, but that such moderation may help limit inflationary pressures. In this regard, expert analysts are concerned by the fact that the U.S. real estate market has turned stagnant and may even decrease. These concerns are fueled by the prospect of sharper decreases as a result of projected interest rate hikes, thereby increasing the possibility of recession towards early 2007.

P o l i t i c a l M a t t e r s

WHAT TO EXPECT AFTER JULY 2nd. The characteristics of Mexico’s presidential election of July 2nd were unknown until now, not only in Mexico but anywhere, since the winning candidate, Felipe Calderón, won by an extremely small margin (close to 0.5%), and with merely (about) a third of all votes cast.

Because of how the campaigns were handled, the Mexican society is polarized and divided, with much rancor among the different social and political groups. Evidence of this is the nearly 250,000 individuals who gathered last Saturday, July 8th, to hear the statements and calls to action of the losing candidate, López Obrador, as well as the fact that on July 9th the PRD and other parties that presented López Obrador as their candidate, filed legal action to declare the election void. The fact that Mexico’s Congress (Senate and Representatives) is also widely divided, with no party in the majority, is proof of the varied and strong differences of opinion among Mexicans, which, in turn, may prove to be a recipe for another six years of political stalemate. Regardless of the victory speeches and the legal contests, the TRIFE, Mexico’s electoral tribunal, is entitled to the last word regarding the result of the presidential election pursuant to law. It has until September 6th to declare a winner.

The Business News of Vázquez Tercero y Asociados is a free monthly publication for our clients and friends. It is not intended to provide specific legal or economic advice, which shall be obtained according to the particular case and the client’s particular needs. Reproduction or dissemination of this document for commercial purposes is strictly prohibited. Please contact Adrián Vázquez ([email protected]), Veronica Vázquez ([email protected]) or Horacio A. López-Portillo ([email protected]) should you have any comments or questions regarding this newsletter.