April 7, 2021

UPDATE 1-Mexican government reaches deal with business over outsourcing

(Adds context, details) MEXICO CITY, April 5 (Reuters) – Mexico’s government said on Monday it…

(Adds context, details)

MEXICO CITY, April 5 (Reuters) – Mexico’s government said on Monday it had reached a deal with business and labor representatives on a new legal framework for subcontracting staff that would boost profit sharing for workers and allow only specialized services to be outsourced.

The accords follow months of negotiation between business leaders and leftist President Andres Manuel Lopez Obrador over a draft bill to make outsourcing tougher, which has caused concern in the private sector in Mexico and the United States.

The measures agreed will now pass to Congress for debate, the government said in a statement after the conclusion of talks in which ruling party lawmakers also participated.

The agreement includes a new formula that would increase workers’ profit sharing by 156% and prevent it from taking place in a “discretional” manner, the government said.

Under the accord, subcontracting staff would be prohibited in general, but regulations would be created to allow work to be subcontracted provided it was for “specialized services” outside a company’s main line of business, the government said.

Labor advocates argue that workers in Mexico, where the statutory minimum wage is a fraction of U.S. levels, need to be better remunerated to strengthen domestic demand as well as to comply with new North American trade agreements.

Historically, outsourcing in Mexico had not provided adequate guarantees for workers’ rights, the government said in its statement on the accord, which occurred as Lopez Obrador gears up for mid-term legislative elections on June 6.

Business groups have warned that the government’s outsourcing plans could cost Mexico jobs and investment if it overly restricts companies’ room to maneuver.

Lopez Obrador has been at loggerheads with business for much of his nearly 2 1/2 year-old administration, and investment has suffered. However, his popularity remains robust, polls show. (Writing by Dave Graham, Editing by Rosalba O’Brien)