February 22, 2023
5 Trends to Watch in 2023: Administrative & Tax Litigation in Mexico
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- Crucial Final Decision for the Electric Power Industry - In January 2023, the Mexican Supreme Court announced that it would resolve the constitutional injunctions (amparos) filed by private electric companies, challenging a 2021 amendment to the country's Electric Industry Law. The privately held companies argue that the new amendment favors the state-owned power company (Comisión Federal de Electricidad - CFE), to the detriment of private companies operating in this sector. The resolution, when issued by the supreme court, will have an impact on the electric industry dynamics and could lead to a series of further modifications to the regulation.
- No Change in Energy Regulator Activities - The Mexican Energy Regulators (CRE and CNH) and the Mexican Energy Ministry (SENER) will continue to make essential decisions, primarily related to granting or rejecting of new permit applications or modifications to existing permits in the hydrocarbon and electric power sectors for building new power plants, allowing their connection with the grid, the importing and marketing of gasoline, all of which could lead to new litigation activity.
- Aggressive Taxation Likely to Continue - We will likely continue to see modifications in tax laws to increase taxation in different sectors, along with continuous audits by the Mexican Revenue System (SAT) to verify compliance with tax obligations. Specifically, several states of the Mexican Federation have added new "ecological taxes" to their existing regulation to tax the emissions of greenhouse gases in order to increase tax revenues.
- Proposed Regulation Could Allow Foreign Carriers to Operate Domestic Flights in Mexico - The Mexican president filed a bill in late December that would allow foreign airlines to perform cabotage in Mexican airports - operate domestic flights carrying passengers, cargo and mail within Mexico - which is prevented by current international air transport treaties and current Mexican law. If the bill passes later this year, Mexican airlines could challenge the new regulation.
- Current Administration Likely to Promote Favored Projects - As Mexican President Andrés Manuel López Obrador approaches the end of his term in office in September 2024, we are likely to see political decisions and measures implemented to further advance the public infrastructure projects his administration has championed - including the operation of the Dos Bocas Refinery in Tabasco; the construction of the Maya Train in Yucatán; the completion of the Felipe Angeles International Airport in the municipality of Zumpago which the current administration believes will alleviate congestion at Mexico's City Bentio Juarez International Airport; the financial rescue of state-owned company PEMEX; and the increased participation of state-owned Comisión Federal de Electricidad (CFE) in the electric sector - any of which could be met with public and business opposition and lead to future administrative litigation.
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