Volume 4, Number 22, Page 5
RECENT DEVELOPMENTS in Brief
Agriculture, Mines & Cattle Industry
Mines Now Open for Concession
Lien release 11/9, covering mining properties in the states of Coahuila, Chihuahua, Jalisco and Sonora, was published in the Diario Oficial of 4/22/97 by the Department of Commerce and Industrial Development. Lien release 12/97, covering properties in the states of Coahuila, Chihuahua, Sonora and Zacatecas, was published on 4/23/97. Lien release 13/97, covering properties in the states of Coahuila, Chihuahua, Durango and Sonora, was published on 4/28/97. Lien release 14/97, covering properties in the states of Coahuila, Chihuahua, Jalisco, Aguascalientes and Sonora, was published 4/29/97.
Antitrust/Antidumping Cases
Antidumping Duties Revised
A preliminary revision to a resolution that imposed antidumping duties on polystyrene from the United States was published in the Diario Oficial of 5/12/97 by the Department of Commerce and Industrial Development. On 11/11/94 the Department set antidumping duties ranging from 11.82–44.32% for a type of polystyrene imported from the United States. The products enter Mexico under tariff categories 3903.19.02 and 3903.19.99.
On 11/30/95, Fina Oil and Chemical Company appealed the Department’s resolution.
The preliminary resolution to the appeal did not change the previously imposed antidumping duties.
Banking & Credit
Financial Group Bylaws Amended
Modifications to the authorization granted to Grupo Financiero Inbursa, S.A. de C.V. to operate as a financial group were announced by the Department of the Treasury in the Diario Oficial of 4/25/97.
Authorization to Financial, Insurance Group Amended
The authorization granted to Liberty México Seguros, S.A. was modified in the Diario Oficial of 4/30/97 to increase its capital stock. The authorization granted to J.P. Morgan, S.A., J.P. Morgan Grupo Financiero, S.A. de C.V. to operate as a multiple banking affiliate was modified on 4/30/97. Net capital stock is now 340 million pesos.
Financial Laws Amended
Several financial laws were amended by a decree published in the Diario Oficial of 5/7/97. The amendments published by the Department of the Treasury require financial institutions to give notice when money laundering may be involved.
Communications
Update on Mail Privatization
Decree 265/9 of March 24, 1997, allows the executive branch to grant concessions for mail services in compliance with Article 11 of Bill 23696, which establishes that Encotessa (Argentina’s state-owned mail company) is subject to privatization. An executive branch decree established the privatization of mail services. The term for purchasing the tender documents expired on May 2, 1997. The French postal service, Brazil’s VASP airline and leading Argentine companies have shown interest in participating in the bidding process.
Telecommunications Bill
With the privatization of the telecommunications industry, the Brazilian government has sent to Congress a bill providing for the regulation of this sector. Pursuant to the bill, the independent National Telecommunication Agency will be created for the purpose of regulating the market for three years in order to prevent private monopolies and to provide for the inspection of private telecommunication companies. After the initial three-year period, a free market system will be established in the telecommunications area.
TV Subscriptions
TV subscription, which is a major topic in the Telecommunications Plan recently made public by the Government, was recently regulated by the Commission of National Television, CNTV.
Agreement 14 of March 20, issued by the CNTV, establishes the conditions under which the operation and exploitation of such service would be granted. The concession to render these services will be granted by means of a public bidding, based on the requirements provided in the mentioned agreement and on the terms of reference that shall be published by the CNTV. The future operators shall broadcast a minimum of one hour of their own TV production per day and must reserve a channel for the transmission of the events originated from the Congress of the Republic. The operators must pay the Nation a one-time fixed sum as payment for the possibility to exploit the service. In addition, they must pay to the CNTV 10% of the total monthly gross income derived from the rendering of the service as well as 10% of such income gained from the advertisement.
On the other hand, CNTV, through its Agreement 016 of March 26, regulated the Unique Registry for Operators of the Public Service Television. The operators who wish to render the service must register in such Registry. Only those companies that are duly registered can participate in the bidding process, be awarded the license and execute the corresponding concession agreement. Among other requirements, it is necessary to have a minimum authorized corporate capital of Colombian pesos $5.000 million at the moment of presentation of the petition for inscription. It is expected that private channels in Colombia would be duly installed and rendering the TV service in January 1998.
Consumer Law
Technical Standard Canceled
Technical standards NOM-072-STPS-1993, which deal with a special process to identify the presence of silicon in air particles, were canceled by the Department of Labor and Social Welfare in a decision published in the Diario Oficial of 4/30/97.
Customs
Amendments to Foreign Trade Rules Published
The Department of Commerce and Industrial Development published several amendments to fiscal rules that apply to foreign trade (Regulación Miscelánea de Comercio Exterior para 1997). The rules are published each year and regulate specific issues related to taxes and trade. The original rules were published in the Diario Oficial of 3/24/97 and amended on 5/6/97.
Environment
Protection of Lands Proposed
Protection of the environment by companies involved in livestock and agriculture and those operating on non-cultivated lands would be subject to new rules under standards proposed by the Department of Agriculture, Livestock and Rural Development.
Proposed standards NOM-116-ECOL-1996 were published in the Diario Oficial of 4/21/97.
Soil Protected from Oil
Installation and maintenance of systems for the transport and distribution of hydrocarbons and petrochemicals in liquid and gaseous states along existing routes (vías existentes) in agricultural and livestock zones, as well as on non-cultivated lands, would be subject to new rules under proposed standards NOM-117-ECOL-1996. The proposed standards were published in the Diario Oficial of 4/21/97.
Medicine & Health
Sample Bags Regulated
Bags used for the collection of urine samples are the focus of technical standards NOM-136-SSA1-1995 proposed in the Diario Oficial of 4/23/97 by the Department of Health.
Health Law Amended
Amendments to the Health Law were published in the Diario Oficial of 5/7/97 by the Department of Health. The changes aim to modernize Mexico’s health system with scientific improvements.
Intellectual Property
Intellectual Property Law Entered into Force
The new intellectual property law, Law No. 9.279, was published in 1996 and became effective May 15, 1997. Significant innovations ushered in by the new law include the possibility of registering patents for chemical, medicinal, pharmaceutical and food products. Some countries, including the United States, have accused Brazil of countervailing these patents.
The new law should improve the country’s image in international markets. Currently, it can take up to two years to obtain a patent registration for the products covered by the new law. Article 239 provides administrative and financial autonomy to the internal structure of the National Institute of Intellectual Property (INPI).
Double Taxation Treaty Signed with Switzerland
On December 20, 1996, Switzerland and Venezuela signed a treaty to avoid double taxation.
Double Taxation Treaty Entered with United Kingdom
On January 1, 1997, a treaty between the United Kingdom and Venezuela to avoid double taxation took effect in Venezuela (O.G. 36.148 of 02/18/97). The treaty took effect in the U.K. in April 1997 at the beginning of the British fiscal year. The essential points include the following:
a) A nondiscrimination article prevents either country from levying discriminatory taxes.
b) Investors are allowed to present grievances to their home tax authority, which in turn can then raise the point with the authority of the other country.
c) Limitations are placed on withholdings for dividends (0%–10%), interest (5%) and royalties (5%–7%).
Transportation
Airport Privatization
The executive branch passed Decree 375/97, allowing concessions for 28 commercial airports. Other provincial airports may be included later. The schedule for this concession is as follows:
• June 2: approval for tender documents
• August 28: pre-award
• September 15: award
• September 17: contract signing
• September 19: executive branch approval
• September 22: transfer to the awardee.
The Executive Power decree elicited a great deal of criticism from the opposition party, which is ready to begin legal actions. The judicial aspects of the decree are being examined by the opposition’s legal experts.
Some of these experts believe that, although the president is constitutionally allowed to sign decrees such as the one regulating the privatization of airports, some elements in this decree may be unconstitutional.
Legal conflict between the city of Buenos Aires and the federal government exists regarding former claims of ownership of lands where the city airport is located. The decree does not cover privatization of air traffic control.
Train Inspection Rules Set
The Department of Communications and Transportation published a technical standard to regulate the inspection and repair of trains. NOM-044/2-SCT2-1995 establishes rules of inspection and maintenance at every three months or 48,000 kilometers.
Port Concession to Private Entity
The Department of Communications and Transportation published a concession to operate a port facility in Baja California Sur. The concession to administer the port of Cabo San Lucas was published in the Diario Oficial of 5/12/97.
Various
Supreme Court Reviews Arbitration Law
Enforceability of provisions contained in Law No. 9.307/96, which regulates the arbitration procedure, is being analyzed by the Brazilian Supreme Court (STF). A dispute arose between the companies MBV Commercial and Management Establishment and Reseil Indústria e Comércio Ltda.
The litigation involved a US$1.21 million compensation to be paid by Reseil due to the termination of an export contract. The decision was issued by a Spanish lawyer who acted as an arbitrator. The question before the STF is whether the arbitration decision should have been awarded by the Spanish local court before being enforceable in Brazil. Provisions in Law No. 9.307 foresee that foreign arbitral decisions do not need to be awarded by the local court to be applicable in Brazil.
Amendment in the Government Procurement Bill
The current Minister of Administrative Reform has stated that the bill providing for government procurement procedures can be modified. Some types of pre-qualification items in order to take part in a bid, such as technical criteria, are to be extinguished due to their subjective elements, which can be easily manipulated by the government. The best price criteria will replace the technical criteria. In bids whose values are less than US$3,000.00, bid procedures are not required. However, this value is to be decreased by the government because the quantity of government procurement at this value is large and the system can possibly favor a government’s interested supplier.
Privatizations Continue
In 1996, privatizations and acquisitions were trademarks of the Colombian economy. More than ten significant state-owned companies were sold through the procedures established in the privatization law. The electric power and financial sectors benefited the most from these policies.
During 1996, the electric generation plants of Termotasajero, Termocartagena, Betania and Chivor were acquired in their majority by foreign investors. In the financial sector, Banco Popular and Banco Tequendama were acquired by national and foreign investors, respectively. Acquisitions in the private financial, cement, food, retail and mining sectors and industries also affected the Colombian economy. Privatizations and acquisitions are expected to continue through 1997.
Gas Transport Permit
Clarified
Clarification of the gas transport permits issued to TransCanada Pipelines Limited, NorAm Energy de México, S.A. de C.V., and Gutsa Construcciones, S.A. de C.V., originally published 4/14/97, was published in the Diario Oficial of 4/28/97 by the Energy Commission.
New Foreign Investment Forms Published
An advisory approving transaction forms used by the National Registry of Foreign Investments was published in the Diario Oficial of 4/21/97. Nineteen different kinds of forms are covered, including those required to request registration of a foreign corporation. The 19 forms are included as image files (bmp).
NAFTA-Related Secretariat Changes
An agreement amending the bylaws of the Mexican Section of the Secretariat of the Free Trade Agreements was published in the Diario Oficial of 4/28/97 by the Department of Commerce and Industrial Development. The amendment basically modifies the legal department, the Registry and the administrative office of the Mexican Section of the Secretariat.
Coin to Change
Pursuant to a decree published by the Department of the Treasury on 5/7/97, the materials of Mexico’s 10 peso coin will soon be changed.
Andean Trujillo Protocol
As a member (although qualified) of the Cartagena Agreement comprised of the Andean Group of countries (Bolivia, Colombia, Ecuador, Peru and Venezuela), the Venezuelan Congress has now ratified O.G. 36.116 of 12/30/96, the so-called "Trujillo Protocol" that modifies the Charter of the Cartagena Agreement. The essential points include the following:
a) The name of the regional agreement changes from "Cartagena Agreement" to "Andean Community."
b) The essential agencies and auxiliary mechanisms are designated as Andean Presidential Council, Andean Council of Ministers of Foreign Affairs, Commission of the Andean Communities, General Secretariat of the Andean Community (replacing the Junta) and the Court of Justice of the Andean Community, among others.
c) Decisions will be adopted by the Commission and "shall be part of the Andean Community legal system." However, this text does not revoke Venezuela’s reservations, issued upon joining the Andean Community, regarding the legal requirement that Andean decisions modifying Venezuelan law secure prior congressional approval.
New Social Laws
Representatives of labor unions, government officials and the private sector have signed an agreement whereby the present social security system will be replaced. Some key aspects of this agreement are as follows:
* Recapitalization of the Social Security Institute, pension funds and unemployment insurance;
* Assignment of the responsibilities to the newly formed permanent three-party commission;
* Decentralization or privatization of hospital management;
* The replacement of fringe benefits and severance payments by a combination of severance payments and funds.
This reform is expected to reactivate industrial investments and stimulate the national economy with a minimum inflationary impact.
Contributors to the Summaries: Gomez Pinzon & Asociados, Graciela Molinelli, and Noronha Advogados
