BBVA foresees ‘flow of lawsuits’ against companies in Mexico by USMCA after Biden’s arrival

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Joe Biden would be more strict with the fulfillment of the new Treaty between Mexico, the United States and Canada (USMCA).

BBVA predicted this Tuesday a possible “flow of lawsuits” against companies in Mexican territory after Joe Biden’s arrival at the White House because it would be stricter with compliance with the new Treaty between Mexico, the United States and Canada (USMCA).

“The new labor provisions could bring a stream of labor lawsuits against companies operating in Mexico. The relative activism of the Biden administration regarding punishing non-compliance with these new provisions will play a key role, ”an analysis indicates.

The report is published on the eve of Biden assuming the presidency of the United States and replacing Donald Trump, who blamed Mexico during his tenure for “stealing” US manufacturing jobs.

For this reason, Trump pushed to replace the North American Free Trade Agreement (NAFTA) with the new USMCA, in force since July 1.

However, BBVA’s economic analysis warned that the Democratic president could be more rigorous in the application of the norms contained in the trade agreement, which demands higher wages, union freedom, and more labor rights for Mexicans.

“The economic relationship between Mexico and the United States will fundamentally depend on the flexibility shown by the Biden government in complying with the commercial, labor, and environmental provisions that have been signed in the USMCA,” the bank said.

In particular, BBVA highlighted the new energy policy of President Andrés Manuel López Obrador, who favors the fossil fuels of Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE), two-state companies.

The banking institution considered that Biden “could ensure” stricter compliance with the Environmental Cooperation Agreement in the USMCA.

He also pointed out that the Democratic Administration could defend US investments affected by Mexican policies such as the cancellation of electricity auctions, the change in Clean Energy Certificates (CEL), and higher rates to connect to the transmission grid.

BBVA warned that “this type of nationalist energy policies in favor of the CFE could be violating the chapter on State-Owned Companies and Designated Monopolies contained in the USMCA. 

For this reason, he added, “an activism by the Biden administration in support of affected US companies could help to begin to reverse these types of policies.”

As another point of attention, he enunciated the new USMCA rules on the automotive industry, which must now reach a regional content of 75% for light vehicles in 2023 and 75% for heavy vehicles in 2027.

“Greater flexibility on the part of the new US administration in the application of these new regulations will allow the efficient production of the automotive industry to continue in the North American region, ” the report notes. 

Source: forbes.com.mx

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