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Mexico wagers an indiscriminate war against outsourcing

2020-11-22T22:29:19.346Z


A bill sent by President López Obrador to Congress proposes to criminalize the abusive practice of subcontracting and opens a pending discussion on job insecurity


As an employee of the Government of Mexico, Ana - who has given her testimony on condition of anonymity - had serious responsibilities: her job consisted of documenting the process of searching for missing persons and had to handle sensitive information, a task for which she was He specialized and trained beyond having two bachelor's degrees and a master's degree.

However, on paper, his employer was not the federal government, but a subcontracting company that changed its name regularly.

He earned 24,000 pesos a month (just under $ 1,200) and, with each change of his employer's name, his social benefits and job guarantees also changed.

"One day they took our computer away, as if they were running us but without telling us anything, and the next day they tell us that we were

outsourcing,

" recalls the former employee, who prefers not to reveal her real name for fear of reprisals.

According to experts, Mexico is the only Spanish-speaking country that uses the terms

outsourcing

and subcontracting interchangeably, to refer equally to the provision of a service, a temporary job or an agency job.

Ana worked for the Executive Commission for Attention to Victims (CEAV) from 2015 until the beginning of this year, when the unit changed direction.

“The new commissioner arrived, the people from the new commissioner arrived and fired my entire area, including me: 14 to 15 people.

They didn't give us anything, they just took us out and didn't let us in anymore.

Afterwards, those from the

outsourcing

company spoke to us

with threats so that we could sign the resignation ”, says Ana.

“And well, that's how it ends, because in the end you don't have anyone to go to argue with, to fight your rights.

Because the company changes its name every year ”, he says.

Until today, Ana remains unemployed.

These are the bad practices that President Andrés Manuel López Obrador wants to put an end to.

In mid-November, the president sent Congress an initiative that would reform several laws and criminalize subcontracting in almost all its forms, both in the public and private sectors.

This has sparked an uncomfortable and long-pending discussion about precariousness and abuses in the Mexican labor market, limiting the potential of Latin America's second largest economy.

The initiative is expected to be approved in Congress in the coming weeks and before the start of 2021.

The moment is undoubtedly risky.

The loss of jobs globally due to the pandemic has been massive and governments around the world are looking for ways to preserve jobs through different formulas of flexibility.

Mexico, for its part, seeks to toughen the labor market rules in such a radical way that, according to businessmen and critics of the initiative, it can destroy legitimate job sources in its attempt to end bad practices.

Last week, when asked at a morning conference how many employees his own government outsourced, the president did not offer a figure but said he would order no more to be done.

The Ministry of Labor and Social Welfare assures that there are just over four and a half million subcontractors in the country.

Many of them are part of the informal economy, since they are not registered with the social security institute.

Many others are listed but underreported, since employers report a much lower salary than they actually receive to evade taxes.

But these are not the only practices that have made López Obrador so angry.

What bothers the president the most are companies that abuse the legal figure of subcontracting to issue false invoices for services not performed, which can be used to evade taxes or launder money.

These companies are known in Mexico as “invoices”.

In August 2019, Congress passed a domain extinction law, also designed to go against these invoices, to be able to put in preventive detention or to freeze the accounts of those suspected of laundering money, simulating services or evading tax to through false invoices.

To date, no invoices have been jailed.

The new bill against outsourcing has lawyers and analysts sounding the alarms of the economic damage it could cause the country if it is passed.

At best, they argue, the law will push subcontractors into informality;

and, in the worst case, unemployment.

For some businessmen, the law is designed to give the government one more weapon to pressure the private sector.

But for many Mexicans who have seen their labor rights and retirement plans violated, the initiative is necessary.

A radical proposal

The abuses of the legal figures that allow subcontracting are not a problem unique to Mexico, nor are they a new problem.

In 1997, the International Labor Organization (ILO), made up of workers, governments and companies, created Convention 181, specifically designed to prevent abuses by labor agencies and the protection of labor rights.

In 2014, the Organization for Economic Cooperation and Development (OECD) organized consultations involving more than 80 developing countries and the world's 20 largest economies to discuss how to prevent abuse of tax treaties and measures.

But this proposal to criminalize the practice is unique to Mexico, says Fiona Coombe, director of Legal and Regulatory Research at the Staffing Industry Analysts organization.

In the Philippines and Brazil, laws have been passed that are close to what Mexico proposes, although much more flexible, says Coombe.

"Brazil went through something quite similar a while ago, but it didn't go as far as Mexico."

The South American country, says the expert from the United Kingdom, threatened to prevent businesses from being able to subcontract services that correspond to their core activities.

"There seemed to be a threat to all kinds of outsourcing, but in recent years the Brazilian government has relaxed."

His colleague in Argentina, the analyst Martín Padulla, adds: “It is as if to solve road safety problems and traffic accidents we prohibited riding in a car, in any type of vehicle.

I mean, it doesn't seem like a rational measure.

In any case, specific actions will have to be taken where the problem lies and the problem here is clear: the problem is that there are companies that are outside the law, they should be brought down with the mechanisms that exist today. "

If Mexico really wants to protect workers' rights, Padulla points out, the government could start by ratifying ILO Convention 181: despite being a member of the ILO and having signed the protocol in 1997, the country has not ratified it nor updated, explains the analyst.

Legislation that already exists

López Obrador's proposal, as it stands today, does not include provisions to attack what the government says it wants to attack, argues Alfredo Kupfer, co-director of Labor Practice at the Sánchez Devanny firm and member of the work commission of the Business Advisory Council , a civil association that brings together the largest companies in Mexico.

"The proposal does not establish a frontal attack on certain illegal acts, it simply gives consequences of fines, payments of criminal offenses to those who fail to comply," says Kupfer.

"We already have legislation on labor, social security and tax matters where the obligations of companies are established, such as the payment of the full salary, duly reporting it, making the corresponding payments, and there are consequences."

“What we have not seen from this government is a concerted action between the different levels of government to try to stop the practice, because we already have the legislation.

Now we have to go and find them and when we find them we have to process them, ”says the lawyer.

"We believe that, given this inability that the Government has found in its bodies and institutions, it is easier to destroy the figure."

Kupfer says that he has been in "endless" calls with his clients for two weeks to find a way to "do more with less", since companies do not have the ability to include temporary workers on their payrolls that they hire through a third party or an agency.

In Mexico, 57% of the economy is informal and during the pandemic more than four million people have lost their source of income, formal or informal.

In some parts of the country the wages paid are lower than those in China and even in some Central American countries.

Padulla agrees with Kupfer that the initiative will push millions more to informality, if not unemployment.

"We do not believe that this will happen", says the Secretary of Labor María Luisa Alcalde: "It is not that we are hardening the labor market, what we are doing is enforcing the law, precisely that the rights of workers who are established today in our laws.

It does not seem to me that it is worth saying today that the workers are going to be fired because I cannot pay the responsibilities that the labor laws of decades already established ”.

"Far from bringing unemployment, it is going to build a more equitable, fairer, but also more productive labor market," says the official.

Poor quality employment

The Mexican Association of Human Capital Companies (AMECH) encompasses all private employment agencies in the country, such as ManpowerGroup, Adecco and Kelly, among others.

These transnational companies not only specialize in finding and recruiting talent, they are also specialists in keeping payroll and offer this service to hundreds of companies, large and small, that do not have the financial or technical capacity to do it themselves.

"Why is it assumed that outsourcing equals poor quality of employment?

No, it is not.

There are companies that are not outsourced and that do not respect the rights of workers, do not pay decent wages, do not provide benefits and mistreat employees, ”says Flores.

Mayor, for his part, maintains that the law, in addition to prohibiting the outsourcing of personnel, regulates specialized services (that is, the services that a company requires to hire but are not part of its business model).

To offer these services, the law requires that a company must obtain an authorization from the Ministry of Labor and be on a public registry, explains the official.

And, in order to obtain this authorization, you not only have to demonstrate your specialized activity or specialized nature, but also compliance with the Social Security institutions and the Public Treasury.

"We agree that laws and rules be made to regulate the outsourcing industry in a practical way, because it is a primary need to eliminate evasion, simulation, under-registration, abuse of workers, and the violation of workers' rights. employees ", says Flores," but we do not agree to overregulate or prohibit, because the outsourcing industry that operates globally generates important benefits for the economy. "

You can have many opinions about it, says the Mayor, "but we really believe that this proposal and this initiative achieves something that had not been achieved, which is to put an end to these abuses and respond to this demand of millions of workers."

Public and private

One Manpower client is Armando Santacruz, CEO of raw materials company Grupo Pochteca.

Santacruz explains how the number of workers his company needs fluctuates during a year, which is why he resorts to the employment agency regularly.

For example, before a tax audit, Pochteca temporarily needs a large group of accountants.

"I don't have the capacity to recruit 30 people in four days and Manpower does, because that's what they do," says the businessman by phone from Mexico City.

"Now we are going to have to turn our heads."

“Many of these measures seem to me to come from the heads of people who in their lives have paid a payroll, who have dedicated their entire lives, as we say in Mexico, to the grid, who have a deep disconnection with the way of operation of the real economy and that they have their preconceptions of what it is and what it is not and are not willing to listen to those who are in the pool, to those who can tell them if the water is cold or hot ", says Santacruz:" If you speak from outside in the pool, you don't know what temperature the water is ”.

"What these laws are leading to is that the government can extort money from you, it no longer has to do with whether or not you really owe the money," "says Santacruz.

“They, with the possibility of unofficial preventive detention in the face of the simple accusation, can put you in jail, they can freeze your accounts and they can apply the extinction of domain ... This lends itself so that the government can dedicate itself to collecting based on threaten everyone with jail ”.

Source: elparis

All news articles on 2020-11-22

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