Mexico is going through a period of generalized technical stoppages in different industries, particularly in the automotive and auto parts sector, as a result of economic uncertainty, a decrease in exports and tension over the review of the Mexico-United States-Mexico-Canada Agreement (USMCA)”. Óscar de la Vega, founding partner of the De la Vega & Martínez Rojas Law Firm, warned.
In addition to the foregoing, there have been sustained increases in payroll costs due to the labor reforms, such as the increase of the number of vacation days, the minimum wage and the increase of benefits, which has put a great amount of pressure particularly on micro, small and medium-sized businesses (Micro and SMEs).
“As we don’t know what is going to happen, a suspension of the effects of labor relationships is triggered, generally with a negotiation of a payment of 50% of the wages. “Workers do not work, but the employment relationship is maintained, in order to see what happens in a few months”, De la Vega explained.
The labor lawyer pointed out that, while this is legal and a temporary measure, its extended use is a reflection of the degree of pressure that companies are under in face of a more rigid regulatory framework and an uncertain economic environment.
In the last few months, several companies within the automotive and manufacturing industries have reported technical stoppages or partial closures of operations as a measure for adjusting production in response to lower demand and market caution.
In Aguascalientes, the Jobar company announced its permanent closure, while Nissan temporarily halted production lines. In Coahuila, Daimler Saltillo, General Motors in the Ramos Arizpe automotive corridor, and Ternium Galvanizadora implemented suspension schemes; Maxion and Nemak are now done with their shutdown periods.
Coparmex [Employers’ Confederation of the Mexican Republic]
The Coahuila Southeast chapter estimated that between 5% and 10% of its members are facing similar situations. General Motors in Silao, Honda in Celaya, and Mazda, for example, reported adjustments to work shifts. In Puebla, both Audi Mexico and Volkswagen México have halted operations during brief periods of time in order to reprogram their production.
In San Luis Potosí, the BMW Group, Pirelli, and approximately 250 companies that are affiliated to the Association of Users of the Industrial Zone (UUZI) applied similar schemes, according to the local CTM [Confederation of Mexican Workers].
De la Vega warned that a wave of calls to strike could take place next year, as democratically elected unions will seek better salaries and working conditions, while companies face financial limitations.
“We may see more strikes because the companies’ economic situation is not the best, while unions will demand wage increases and better benefits”, he said.
The specialist warned that the tightening of work conditions and the increase to the cost of labor could lead to the loss of formal employment, particularly within a context in which over 50% of the Economically Active Population (EAP) works in the informal sector, according to data provided by the INEGI [National Institute of Statistics and Geography].
“Many countries, like Spain, have differentiated support programs for companies that have less than 50 workers. A similar policy is needed in Mexico; strengthening micro and small businesses with tax credits or incentives, even with a legal framework that is different from that of large corporations,” De la Vega stated.
The lawyer insisted that providing incentives for formal jobs and making the labor reforms flexible could prevent more technical stoppages and preserve formal employment, recalling that, according to the World Bank, “the greater the flexibility in labor laws, the greater the number of people in formal employment.”
