Policies Towards Foreign Direct Investment

Costa Rica actively courts FDI, placing a high priority on attracting and retaining high-quality foreign investment. There are some limitations to both private and foreign participation in specific sectors, as detailed in the following section.

PROCOMER and CINDE lead Costa Rica’s investment promotion efforts. CINDE has had great success over the last several decades in attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing, and the food industry. In addition, the Tourism Institute (ICT) attends to potential investors in the tourism sector. CINDE, PROCOMER, and ICT are strong and effective guides and advocates for their client companies, prioritizing investment retention and maintaining an ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Costa Rica recognizes and encourages the right of foreign and domestic private entities to establish and own business enterprises and engage in most forms of remunerative activity. The exceptions are in sectors that are reserved for the state (legal monopolies – see #7 below “State Owned Enterprises, first paragraph) or that require participation of at least a certain percentage of Costa Rican citizens or residents (electrical power generation, transport services, professional services, and aspects of broadcasting). Properties in the Maritime Zone (from 50 to 200 meters above the mean high-tide mark) may only be leased from the state and with residency requirements. In the areas of medical services, telecommunications, finance and insurance, state-owned entities dominate, but that does not preclude private sector competition. Costa Rica does not have an investment screening mechanism for inbound foreign investment, beyond those applied under anti-money laundering procedures. U.S. investors are not disadvantaged or singled out by any control mechanism or sector restrictions; to the contrary, U.S. investors figure prominently among the various major categories of FDI.

Other Investment Policy Reviews

The OECD accession process for Costa Rica, which began in 2015, resulted in a wide swath of legal and technical changes across the economy that should help the economy function in a more just and competitive manner. Toward that goal, the OECD will continue to monitor Costa Rican progress in a number of areas and will publish periodic progress updates and sector analysis that may be useful to prospective investors. A comprehensive review of the Costa Rican economy was published by the OECD at the conclusion of the accession process, which offered valuable insights into challenges faced by the economy, “OECD Economic Surveys Costa Rica 2020: https://www.oecd.org/countries/costarica/oecd-economic-surveys-costa-rica-2020-2e0fea6c-en.htm  . In the same context, the OECD offers a review of international investment in Costa Rica: https://www.oecd.org/countries/costarica/OECD-Review-of-international-investment-in-Costa-Rica.pdf .

Additionally, in recent years the OECD has published a number of reports focused on specific aspects of economic growth and investment policy – several of these reports are referenced elsewhere in this report. For the index of OECD reports on Costa Rica, go to https://www.oecd.org/countries/costarica/3/ .

The World Trade Organization (WTO) conducted its 2019 “Trade Policy Review” of Costa Rica in September of that year. Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals: https://www.wto.org/english/tratop_e/tpr_e/tp492_e.htm  .

The United Nations Conference on Trade and Development (UNCTAD) produced in 2019 the report Overview of Economic and Trade Aspects of Fisheries and Seafood Sectors in Costa Rica: https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2583  .

https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2583  .

Business Facilitation

Costa Rica’s single-window business registration website, crearempresa.go.cr  , brings together the various entities – municipalities and central government agencies – which must be consulted in the process of registering a business in Costa Rica. A new company in Costa Rica must typically register with the National Registry (company and capital registry), Internal Revenue Directorate of the Finance Ministry (taxpayer registration), National Insurance Institute (INS) (basic workers’ comp), Ministry of Health (sanitary permit), Social Security Administration (CCSS) (registry as employer), and the local Municipality (business permit). Legal fees are the biggest single business start-up cost, as all firms registered to individuals must hire a lawyer for a portion of the necessary paperwork. Crearempresa is rated 17th of 33 national business registration sites evaluated by “Global Enterprise Registration” ( www.GER.co ), which awards Costa Rica a relatively lackluster rating because Crearempresa has little payment facility and provides only some of the possible online certificates.

Traditionally, the Costa Rican government’s small business promotion efforts have tended to focus on participation by women and underserved communities.  The National Institute for Women (INAMU), National Training Institute (INA), the Ministry of Economy (MEIC), and PROCOMER through its supply chain initiative have all collaborated extensively to promote small and medium enterprise with an emphasis on women’s entrepreneurship. In 2020, INA launched a network of centers to support small and medium-sized enterprises based upon the U.S. Small Business Development Center (SBDC) model.

Within the World Bank’s “Doing Business” evaluation for 2020, http://www.doingbusiness.org , Costa Rica is ranked 144/190 for “starting a business”, with the process taking 10 days.

Outward Investment

The Costa Rican government does not promote or incentivize outward investment. Neither does the government discourage or restrict domestic investors from investing abroad.

Real Property

The laws governing investments in land, buildings, and mortgages are generally transparent. Secured interests in both chattel and real property are recognized and enforced. Mortgage and title recording are mandatory and the vast majority of land in Costa Rica has clear title. However, the National Registry, the government entity that records property titles, has been successfully targeted on occasion with fraudulent filing, which has led in some cases to overlapping title to real property. Costa Rican law allows long-time occupants of a property belonging to someone else (i.e. squatters) to eventually take legal possession of that property if unopposed by the property owner. Potential investors in Costa Rican real estate should also be aware that the right to use traditional paths is enshrined in law and can be used to obtain court-ordered easements on land bearing private title; disputes over easements are particularly common when access to a beach is an issue. Costa Rica is ranked 49th of 190 for ease of “registering property” within the World Bank 2020 Doing Business Report.

Foreigners are subject to the same land lease and acquisition laws and regulations as Costa Ricans with the exception of concessions within the Maritime Zone (Zona Maritima Terrestre – ZMT). Almost all beachfront is public property for a distance of 200 meters from the mean high tide line, with an exception for long-established port cities and a few beaches such as Jaco. The first 50 meters from the mean high tide line cannot be used for any reason by private parties. The next 150 meters, also owned by the state, is the Maritime Zone and can only be leased from the local municipalities or the Costa Rican Tourism Institute (ICT) for specified periods and particular uses, such as tourism installation or vacation homes. Concessions in this zone cannot be given to foreigners or foreign-owned companies.

Intellectual Property Rights

Costa Rica’s legal structure for protecting intellectual property rights (IPR) is quite strong, but enforcement is sporadic and does not always get the attention and resources required to be effective. In the 2019 United States Trade Representative (USTR) Special 301 Report, USTR noted the substantial progress made by Costa Rica in protecting IPR. As a result, USTR did not include Costa Rica in the 2020 or 2021 Special 301 reports. Costa Rica was not listed in USTR’s 2020 Review of Notorious Markets for Counterfeiting and Piracy.

Costa Rica is a signatory of many major international agreements and conventions regarding intellectual property.  Building on the existent regulatory and legal framework, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) required Costa Rica to strengthen and clarify its IPR regime further, with several new IPR laws added to the books in 2008.  Prior to that, the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) took effect in Costa Rica on January 1, 2000.  In 2002, Costa Rica ratified the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty and the WIPO Copyright Treaty.

The IP Registry presented two bills to the General Directorate of the National Registry on January 12, 2021 for approval before sending to the National Assembly for final approval. In 2020, the IP Registry drafted a bill that will include the new proposed reform of the Law on Invention Patents, Industrial Designs, and Utility Models.  This bill will adjust the current law to international standards to make it a more useful tool for the promotion of innovation in the country. Additionally, the National Registry merged the Law on Copyrights and Related Rights and the Law on Procedures for the Enforcement of Intellectual Property Rights into a single draft bill, with the aim of incorporating the provisions of the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled and the Beijing Treaty on Audiovisual Performances.

On June 22, 2020, the General Directorate of the National Registry merged the Registry of Industrial Property and the Registry of Copyright and Related Rights into a single Registry of Intellectual Property, improving the National Registry’s efficiency and fulfilling a reform called for in the National Registry Law from 2010.

While online piracy remains a concern for the country, in February 2019, Costa Rica modified the existing regulation on internet service providers (ISPs) to shorten significantly the 45 days previously allowed for notice and takedown of pirated online content, creating an expeditious safe harbor system for ISPs in Costa Rica. To meet a longstanding CAFTA-DR requirement mandating government use of legal software, in March 2020, the National Registry launched LegalSoft, a new software program to track software licenses and renewal dates across 95 government institutions, with all agencies set to report by July 2020, followed by external audits to verify implementation. With the tracking program now in place, Costa Rica has a systematic solution for monitoring and ensuring the purchase and use of legal software.

In August 2020, Costa Rica’s Intellectual Property Registry launched a WIPO online platform that will allow interested parties to submit online applications to register trademarks.  The online service has improved efficiency and encouraged registrations from small-to-medium-sized companies across the country. During 2019, the National Registry of Industrial Property announced implementation of TMview and DesignView, search tools that allow users to consult trademarks and industrial design data.

The Costa Rican government does not release official statistics on the seizure of counterfeit goods, but the Chamber of Commerce compiles statistics from Costa Rican government sources: http://observatorio.co.cr/  In 2020, Costa Rica’s Economic Crimes Prosecutor investigated 14 IPR cases, down from the totals in the last four years. As in years past, prosecutors ultimately dismissed several cases due to lack of interest, collaboration, and follow-up by the representatives of trademark rights holders.  Government authorities complained that the lack of response by trademark representatives is a recurring behavior dating back to at least 2016 and may explain the drop in IPR cases.  In 2020, the Prosecutor’s Office established a specialized cybercrime unit with the purpose of improving the country’s response toward computer-oriented crimes, including copyrights infringements. The Costa Rican government publishes statistics on IPR criminal enforcement at http://www.comex.go.cr/estad percentC3 percentADsticas-y-estudios/otras-estad percentC3 percentADsticas/ .

On September 4, 2019, Costa Rican Customs issued an executive decree titled “Contact of the Representatives of Intellectual Property Rights for Enforcement Issues” establishing a formal customs recordation system for trademarks that allows customs officers to make full use of their ex officio authority to inspect and detain goods. Under the decree, customs offices have the power to include new trademark rights holders in a formal database for use by customs officials in the field. As of 2020, 150 trademarks are included in this database.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ . Resources for Rights Holders

Resources for Rights Holders

Contact at the U.S. Embassy in Costa Rica:

Attention: Investment Climate Statement
Economics Section
Embassy San Jose, Costa Rica
2519-2000
SanJoseEcon@state.gov 

Corporations in Costa Rica, particularly those in the export and tourism sectors, generally enjoy a positive reputation within the country as engines of growth and practitioners of Responsible Business Conduct (RBC). The Costa Rica government actively highlights its role in attracting high-tech companies to Costa Rica; the strong RBC culture that many of those companies cultivate has become part of that winning package. Large multinational companies commonly pursue RBC goals in line with their corporate goals and have found it beneficial to publicize RBC orientation and activities in Costa Rica. Many smaller companies, particularly in the tourism sector, have integrated community outreach activities into their way of doing business. There is a general awareness of RBC among both producers and consumers in Costa Rica.

Multinational enterprises in Costa Rica have not been associated in recent decades in any systematic or high-profile way with alleged human or labor rights violations. The Costa Rican government maintains and enforces laws with respect to labor and employment rights, consumer protection and environmental protection. Costa Rica has no legal mineral extraction industry with its accompanying issues, but illegal small scale gold mining, particularly in the north of the country, is a focal point of serious environmental damage, organized crime, and social disruption. Costa Rica encourages foreign and local enterprises to follow generally accepted RBC principles such as the OECD Guidelines for Multinational Enterprises (MNE) and maintains a national contact point for OECD MNE guidelines within the Ministry of Foreign Trade (see https://www.comex.go.cr/punto-nacional-de-contacto/  or http://www.oecd.org/investment/mne/ncps.htm ).

Costa Rica has been a participant since 2011 in the Montreux Document reaffirming the obligations of states regarding private military and security companies during armed conflict.

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/);
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf)

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings ) and;
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods).
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

Costa Rica has laws, regulations, and penalties to combat corruption. Though the resources available to enforce those laws are limited, Costa Rica’s institutional framework is strong, such that those cases that are prosecuted are generally perceived as legitimate. Anti-corruption laws extend to family members of officials, contemplate conflict-of-interest in both procurement and contract award, and penalizes bribery by local businessmen of both local and foreign government officials. Public officials convicted of receiving bribes are subject to prison sentences up to ten years, according to the Costa Rican Criminal Code (Articles 347-360). Entrepreneurs may not deduct the costs of bribes or any other criminal activity as business expenses. In recent decades, Costa Rica saw several publicized cases of firms prosecuted under the terms of the U.S. Foreign Corrupt Practices Act.

Costa Rica ratified the Inter-American Convention Against Corruption in 1997. This initiative of the OECD and the Organization of American States (OAS) obligates subscribing nations to implement criminal sanctions for corruption and implies a series of follow up actions: http://www.oas.org/juridico/english/cri.htm . Costa Rica also ratified the UN Anti-Corruption Convention in March 2007, has been a member of the Open Government Partnership (OGP) since 2012, and as of July 2017 is a party to the OECD Convention on Combatting Bribery of Foreign Public Officials.

The Costa Rican government has encouraged civil society interest in good governance, open government and fiscal transparency, with a number of NGO’s operating unimpeded in this space. While U.S. firms do not identify corruption as a major obstacle to doing business in Costa Rica, some have made allegations of corruption in the administration of public tenders and in approvals or timely processing of permits. Developers of tourism facilities periodically cite municipal-level corruption as a problem when attempting to gain a concession to build and operate in the restricted maritime zone.

For further material on anti-bribery and corruption in Costa Rica, see the OECD study: https://www.oecd.org/countries/costarica/costa-rica-has-improved-its-foreign-bribery-legislation-but-must-strengthen-enforcement-and-close-legal-loopholes.htm 

Also on the OECD website, information relating to Costa Rica’s membership in the OECD anti-bribery convention: https://www.oecd.org/countries/costarica/costarica-oecdanti-briberyconvention.htm 

Resources to Report Corruption

Contact within government Anti-Corruption Agency:

Name: Armando López Baltodano
Title: Procurador Director de la Area de la Etica Publica, PGR
Organization: Procuraduria General de la Republica (PGR)
Address: Avenida 2 y 6, Calle 13. San Jose, Costa Rica.
Telephone Number: 2243-8330, 2243-8321
Email Address: evelynhk@pgr.go.cr 

Contact at “watchdog” organization:

Evelyn Villarreal F.
Asociación Costa Rica Íntegra
Tel:. (506) 8355 3762
Email 1: evelyn.villarreal@cr.transparency.org 
Email 2: crintegra.vice@gmail.com 

Since 1948, Costa Rica has not experienced significant domestic political violence. There are no indigenous or external movements likely to produce political or social instability. However, Costa Ricans occasionally follow a long tradition of blocking public roads for a few hours as a way of pressuring the government to address grievances; the traditional government response has been to react slowly, thus giving the grievances time to air. This practice on the part of peaceful protesters can cause logistical problems.

Crime increased in Costa Rica in recent decades and U.S. citizen visitors and residents are frequent victims.  While petty theft is the main problem, criminals show an increased tendency to use violence. Some crime in Costa Rica is associated with the illegal drug trade.  Please see the State Department’s Travel Advisory page for Costa Rica for the latest information- https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/costa-rica-travel-advisory.html

In 2020, the Covid-19 pandemic affected employment significantly by decreasing the number of employed persons. In general, the loss of employment affected women the most, as shown by a lower participation in the labor market compared to 2019. The National Statistics Institute (INEC) reported that during the last quarter of 2020, the labor force reached 60.8 percent, 2.1 percentage points below the same period in 2019. The unemployment rate remained high at 20 percent (16.4 percent among males and 25.2 percent among females), 7.6 percentage points higher than the same period in 2019 (the unemployment rate peaked at 24.4 percent during the second quarter of 2020). During the last quarter of 2020, 43.3 percent of the non-agricultural workforce was in the informal economy. In 2020, informal employment decreased to 44.1 percent (compared to 46.3 percent in in 2019) because of the loss of nearly 237,000 jobs, mainly affecting women and independent workers. From November 2020 to January 2021, the unemployment rate maintained a downward trend, reaching 19.1 percent.

The Costa Rican labor force has high educational standards. The country boasts an extensive network of publicly funded schools and universities while Costa Rica’s national vocational training institute (INA) and private sector groups provide technical and vocational training.

The growth of Costa Rica’s service, tourism, and technology sectors has stimulated demand for English-language speakers. The pool of job candidates with English and technical skills in the Central Valley is sufficient to meet current demand. However, the current finite number of job candidates with these skills limits the ability of foreign and local businesses to expand operations. In 2020, the U.S. Embassy provided support for English language education during the Covid-19 crisis, including virtual programs to improve English language learning and teaching.

The March 2020 border closure due to the pandemic caused a shortage of foreign labor in the agricultural sector throughout 2020, seriously affecting the coffee harvest, which depends almost entirely on foreign labor from Panama and Nicaragua. Initially, the government implemented a temporary program for undocumented migrants who were already in the country. Later, the government allowed a controlled entry of foreign migrant workers through the northern border under strict sanitary measures. The government also allowed entry of indigenous migrant workers through the southern border.

The government does not keep track of shortages or surpluses of specialized labor skills. Foreign nationals have the same rights, duties, and benefits as local employees. The government is responsible for ensuring that foreign nationals do not displace local employees in employment. Labor law provisions apply equally across the nation, both within and outside free trade zones. The Immigration Law and the Labor Ministry’s regulations establish a mechanism to determine in which cases the national labor force would need protection. The Labor Ministry prepares a list of recommended and not-recommended jobs to be filled by foreign nationals.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions. The law does not differentiate between layoffs and dismissal without cause. There are concepts established in the law related to unemployment and dismissals such as the mandatory savings plan (Labor Capitalization Fund (Fondo de Capitalizacion Laboral, FCL), as well as the notice of termination of employment (preaviso) and severance pay (cesantia). The FCL, which is funded through employer contributions, functions as an unemployment insurance; the employee can withdraw the savings every five years if the employee has worked without interruption for the same employer. Costa Rican labor law requires that employees released without cause receive full severance pay, which can amount to close to a full year’s pay in some cases. Although there is no insurance for workers laid off for economic reasons, employers may voluntarily establish an unemployment fund.

In response to government-ordered temporary business closures due to the Covid-19 pandemic, in 2020, the Labor Ministry implemented the temporary suspension of employment contracts, a procedure established in the Labor Code, which grants employers the option of stopping the payment of wages temporarily during an emergency. Executive orders (Nos. 42522-MTSS and 42248-MTSS) established the procedures for employers to request the temporary suspension of labor contracts with their employees. Employers requested the suspension of contracts through the Labor Inspectorate of the Labor Ministry.

The National Assembly approved a new law to reduce working hours during the pandemic. Under the law, if income in a company decreases by 20 percent, compared to the income during the same month in 2019 or compared to the income of the previous three months, the employer can reduce the employees’ working hours and salaries up to 50 percent. If the decrease in income is greater than 60 percent, the reduction in salary can reach 75 percent. Legislators initially authorized this reduction for three months and employers could request extensions for two equal terms (9 months) and then to five terms (15 months) as the emergency continued.

The National Assembly authorized the employees, whose labor contracts were terminated or suspended or whose salaries were reduced during the state of emergency declaration, to withdraw their contributions to the FCL plan (Law 9839).

Costa Rican labor law and practice allows some flexibility in alternate schedules; nevertheless, it is based on a 48-hour week made up of eight-hour days. Workers are entitled to one day of rest after six consecutive days of work. The labor code stipulates that the workday may not exceed 12 hours. Use of temporary or contract workers for jobs that are not temporary in nature to lower labor costs and avoid payroll taxes does occur, particularly in construction and in agricultural activities dedicated to domestic (rather than export) markets. No labor laws are waived to attract or retain investment‒all labor laws apply in all Costa Rican territory, including free trade zones. The government has been actively exploring ways to introduce more flexibility into the labor code to facilitate teleworking and flexible work schedules.

Costa Rican law guarantees the right of workers to join labor unions of their choosing without prior authorization. Unions operate independently of government control and may form federations and confederations and affiliate internationally. Most unions are in the public sector, including in state-run enterprises. Collective bargaining agreements are common in the public sector. “Permanent committees of employees” informally represent employees in some enterprises of the private sector and directly negotiate with employers; these negotiations are expressed in “direct agreements,” which have a legal status. Based on 2020 statistics, 98.8 percent of government employees are union members as compared to 3.6 percent in the private sector. In 2020, the Labor Ministry reported 118 collective bargaining agreements, 84 with public sector entities and 34 within the private sector, covering 11.8 percent of the working population. The Ministry reported a total of 119 “direct agreements” mainly in the agriculture sector during 2020, as compared to 149 in 2019.

In the private sector, many Costa Rican workers join “solidarity associations,” through which employers provide easy access to saving plans, low-interest loans, health clinics, recreation centers, and other benefits. A 2011 law solidified that status by giving solidarity associations constitutional recognition comparable to that afforded labor unions. Solidarity associations and labor unions coexist at some workplaces, primarily in the public sector. Business groups claim that worker participation in permanent committees and/or solidarity associations provides for better labor relations compared to firms with workers represented only by unions. However, some labor unions allege private businesses use permanent committees and solidarity associations to hinder union organization while permanent workers’ committees displace labor unions on collective bargaining issues in contravention of internationally recognized labor rights.

The Ministry of Labor has a formal dispute-resolution body and will engage in dispute-resolution when necessary; labor disputes may also be resolved through the judicial process. The Ministry of Labor’s regulations establish that conciliation is the mechanism to solve individual labor disputes, as defined in the Alternative Dispute Resolution (ADR) Law (No. 7727, dated 9 December 1997). The Labor Code and ADR Law establish the following mechanisms: dialogue, negotiation, mediation, conciliation, and arbitration. The Labor Law promotes alternative dispute resolution in judicial, administrative, and private proceedings. The law establishes three specific mechanisms: arbitration to resolve individual or collective labor disputes (including a Labor Ministry’s arbitrator roster list); conciliation in socio-economic collective disputes (introducing private conciliation processes); and arbitration in socio-economic collective disputes (with a neutral arbitrator or a panel of arbitrators issuing a decision). The Labor Ministry also participates as mediator in collective conflicts, facilitating and promoting dialogue among interested parties. The law provides for protection from dismissal for union organizers and members and requires employers found guilty of anti-union discrimination to reinstate workers fired for union activities.

The law provides for the right of workers to conduct legal strikes, but it prohibits strikes in public services considered essential (police, hospitals, and ports). Strikes affecting the private sector are rare and do not pose a risk for investment.

Child and adolescent labor is uncommon in Costa Rica, and it occurs mainly in agriculture in the informal sector.  In 2020, the government published the results of a child labor risk identification model and a strategy to design preventive measures at local level. It also began to implement a pilot project for the prevention of child labor in two at-risk cantons in the province of Limón.

Chapter 16 of the U.S.-Central American Free Trade Agreement obliges Costa Rica to enforce its laws that defend core international labor standards. The government, organized labor, employer organizations, and the International Labor Organization signed a memorandum of understanding to launch a Decent Work Program for the period 2019-2023, which aims to improve labor conditions and facilitate employability for vulnerable groups through government-labor-business tripartite dialogue.

The government enacted the following labor-related laws: on March 23, 2020, the reduction of working hours in the private sector during the national emergency (Law No. 9832) and its amendment (dated January 13, 2021) extending the reduction of working hours during the national emergency (Law No. 9937); on April 3, 2020, authorization to withdraw the FCL funds by employees affected by the economic crisis (Law No, 9839); and on July 18, 2020, moving national holidays to Mondays to boost domestic tourism from 2020 to 2024 (Law No. 9875).

The National Assembly has been discussing a public employment reform bill that aims to establish the same salary for equal responsibilities in the public sector, eliminating different wage systems and salary bonus structures, which would reduce the fiscal deficit.

Policies Towards Foreign Direct Investment

The Dominican Republic presents both opportunities and challenges for foreign investment. The government strongly promotes inward FDI and has prioritized creating a sound enabling environment for foreign investors. While the government has established formal programs to attract FDI, a lack of clear rules and uneven enforcement of existing rules can lead to difficulties.

The Dominican Republic provides tax incentives for investment in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector. The country is also a signatory of CAFTA-DR, which mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes. However, some foreign investors indicate that the uneven enforcement of regulations and laws, or political interference in legal processes, creates difficulties for investment.

There are two main government agencies responsible for attracting foreign investment, the Export and Investment Center of the Dominican Republic (CEI-RD) and the National Council of Free Trade Zones for Export (CNZFE). CEI-RD promotes foreign investment and aids prospective foreign investors with business registration, matching services, and identification of investment opportunities. It publishes an annual “Investment Guide of the Dominican Republic,” highlighting many of the tools, incentives, and opportunities available for prospective investors. The CEI-RD also oversees “ProDominicana,” a branding and marketing program for the country launched in 2017 that promotes the DR as an investment destination and exporter. CNZFE aids foreign companies looking to establish operations in the country’s 75 free trade zones for export outside Dominican territory.

There are a variety of business associations that promote dialogue between the government and private sector, including the Association of Foreign Investor Businesses (ASIEX).

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign Investment Law No. 16-95 states that unlimited foreign investment is permitted in all sectors, with a few exceptions for hazardous materials or materials linked to national security. Private entities, both foreign and domestic, have the right to establish and own business enterprises and engage in all legal remunerative activity. Foreign companies are not restricted in their access to foreign exchange, there are no requirements that foreign equity be reduced over time or that technology be transferred according to defined terms, and the government imposes no conditions on foreign investors concerning location, local ownership, local content, or export requirements. See Section 3 Legal Regime for more information.

The Dominican Republic does not maintain a formalized investment screening and approval mechanism for inbound foreign investment. Details on the established mechanisms for registering a business or investment are elaborated in the Business Facilitations section below.

Other Investment Policy Reviews

The Dominican Republic has not been reviewed recently by multilateral organizations regarding investment policy. The most recent reviews occurred in 2015. This included a trade policy review by the World Trade Organization (WTO) and a follow-up review by the United Nations Conference on Trade and Development (UNCTAD) regarding its 2009 investment policy recommendations.

2009 UNCTAD – https://unctad.org/en/pages/PublicationArchive.aspx?publicationid=6343 

2015 WTO – https://www.wto.org/english/tratop_e/tpr_e/s319_e.pdf

2015 UNCTAD – https://unctad.org/en/PublicationsLibrary/diaepcb2016d2_en.pdf

Business Facilitation

Foreign investment does not require any prior approval in the Dominican Republic, but once made it must be registered with the CEI-RD. Investments in free zones must be registered with the CNZFE, which will notify the CEI-RD.  Foreign investment registration is compulsory, but failure to do so is not subject to any sanction.  In the World Bank’s “Doing Business” report, the Dominican Republic’s overall ranking for ease of doing business fell from 102 in 2019 to 115 in 2020, reflecting stagnant performance in several of the indicator categories.

Law No. 16-95 Foreign Investment, Law No. 98-03 on the Creation of the CEI-RD, and Regulation 214-04 govern foreign investment in the Dominican Republic and require an interested foreign investor to file an application form at the offices of CEI-RD within 180 calendar days from the date on which the foreign investment took place. The required documents include the application for registration, containing information on the invested capital and the area of the investment; proof of entry into the country of the foreign capital or physical or tangible goods; and documents of commercial incorporation or the authorization of operation of a branch office through the setting up of legal domicile in the country.  The reinvestment of profits (in the same or a different firm) must be registered within 90 days. Once the documents have been approved, the CEI-RD issues a certificate of registration within 15 business days subject to the payment of a fee which varies depending on the amount of the investment.

Lack of registration does not affect the validity of the foreign investment; but the fact that it is needed to fulfil various types of procedures, makes registration necessary in practice. For example, the registration certificate has to be presented to repatriate profits or investment in the event of sale or liquidation and to purchase foreign exchange from the authorized agencies for transfers abroad, as well as to process the residency of the investor.  In April 2021, CEI-RD launched an online Registry of Foreign Direct Investment, which aims to streamline and make the registration processes more transparent to investors. For more information on becoming an investor or exporter, visit the CEI-RD ProDominicana website at https://prodominicana.gob.do .

The Dominican Republic has a single-window registration website for registering a limited liability company (SRL by its Spanish acronym) that offers a one-stop shop for registration needs ( https://www.formalizate.gob.do/ ). Foreign companies may use the registration website. However, this electronic method of registration is not widely used in practice and consultation with a local lawyer is recommended for company registrations. According to the “Doing Business” report, starting a SRL in the Dominican Republic is a seven-step process that requires 16.5 days. However, some businesses advise the full incorporation process can take two to three times longer than the advertised process.

In order to set up a business in a free trade zone, a formal request must be made to the CNZFE, the entity responsible for issuing the operating licenses needed to be a free zone company or operator. CNZFE assesses the application and determines its feasibility. For more information on the procedure to apply for an operating license, visit the website of the CNZFE at http://www.cnzfe.gov.do .

Outward Investment

There are no legal or government restrictions on Dominican investment abroad, although the government does little to promote it. Outbound foreign investment is significantly lower than inbound investment. The largest recipient of Dominican outward investment is the United States.

Real Property

The Dominican Constitution guarantees the right to own private property and provides that the state shall promote the acquisition of property, especially titled real property, however, a patchwork history of land titling systems and sometimes violent political change has complicated land titling in the Dominican Republic. By law, all land must be registered, and that which is not registered is considered state land. There are no restrictions or specific regulations on foreigners or non-resident owners of land.

In 2008, the country transitioned to a new system based on GPS coordinates and has been working towards establishing clear titles, but, in March 2021, an industry source estimated that only 25 percent of all land titles were clear. The government advises that investors are ultimately responsible for due diligence and recommends partnering with experienced attorneys to ensure that all documentation, ranging from title searches to surveys, have been properly verified and processed.

Land tenure insecurity has been fueled by government land expropriations, institutional weaknesses, lack of effective law enforcement, and local community support for land invasions and squatting. Political expediency, corruption, and fraud have all been cited as practices that have complicated the issuance of titles or respect for the rights of existing title holders. Moreover, while on the decline, long-standing titling practices, such as issuing provisional titles that are never completed or providing titles to land to multiple owners without requiring individualization of parcels, have created ambiguity in property rights and undermined the reliability of existing records.

The Dominican Republic’s rank for ease of registering property in the 2020 World Bank’s “Doing Business” report improved from 77 to 74 (out of 190 countries). Registering property in the Dominican Republic requires 6 steps, an average of 33 days, and payment of 3.4 percent of the land value as a registration fee. In the last decade, the Dominican government received a $10-million, Inter-American Development Bank (IDB) loan to modernize its property title registration process, address deficiencies and gaps in the land administration system, and strengthen land tenure security. The project involved digitization of land records, decentralization of registries, establishment of a fund to compensate people for title errors, separation of the legal and administrative functions within the agency, and redefinition of the roles and responsibilities of judges and courts.

Mortgages and liens do exist in the Dominican Republic. The Title Registry Office maintains the system for recording titles, as well as a complementary registry of third-party rights, such as mortgages, liens, easements, and encumbrances. Property owners maintain ownership of legally purchased property whether unoccupied or occupied by squatters, however, it can be difficult and costly to enforce private rights against squatters. This may in part be due to a provision in the law known as “adverse possession,” which allows squatters to acquire legal ownership of land without a title (thereby state-owned).

Intellectual Property Rights

The Dominican Republic has strong intellectual property rights (IPR) laws and is meeting its IP obligations under international agreements such as the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Nevertheless, weak institutions and limited enforcement can present challenges for investors. Under the Abinader administration, the country’s posture toward the protection and enforcement of IPR appears to have improved. Still, illicit and counterfeit goods, as well as online and signal piracy, are common and continue to present challenges for authorities. In the Dominican Republic, illicit or counterfeit goods include the full gamut of fashion apparel and accessories, electronics, pharmaceuticals, cosmetics, cigarettes, and alcohol.

Several IP authorities in the Dominican Republic grant intellectual property rights. The National Office of Industrial Property (ONAPI) issues trademarks and patents, the National Copyright Office (ONDA) issues copyrights, the Ministry of Public Health and Social Assistance (MISPAS) issues sanitary registrations required for marketing foods, pharmaceuticals, and health products, and the Directorate of International Trade (DICOEX) has jurisdiction over the implementation of geographical indications. IPR registration processes have improved in recent years, but delays and questionable adjudication decisions are still common. These institutions are in the process of implementing electronic filing systems to streamline procedures, however.

IPR Enforcement is carried out by the Customs Authority (DGA), the National Police, the National Copyright Office (ONDA), the Dominican Institute of Telecommunications (Indotel), the Special Office of the Attorney General for Matters of Health, and the Special Office of the Attorney General for High Tech Crimes. Although the Dominican government has taken steps that appear to indicate a strengthened posture and commitment to IP enforcement, in practice, the country faced challenges in 2020 that contributed to a net decrease in counterfeit seizures, arrests, and convictions. The government attributed much of this decrease to the pandemic and ensuing safety measures, which hampered enforcement activities for much of the year.

Although the Dominican Republic did not enact any new IP-related laws or regulations in the past year, the Office of the Attorney General launched a new IP Unit in November 2020. This unit plans not only to pursue more IP cases but also to develop an interagency mechanism uniting all the institutions involved in IP prevention and prosecution. As a result, these institutions are expected to collaborate more in enforcement activities and in capacity building efforts. For example, in February 2021, the new IP Unit partnered with ONAPI and ONDA to launch an IP training academy for prosecutors and judges to improve the country’s judicial capacity.

Since 2003, the U.S. Trade Representative (USTR) has designated the Dominican Republic as a Special 301 Watch List country for serious IPR deficiencies. The country, however, is not listed in USTR”s Review of Notorious Markets for Counterfeiting and Piracy.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en .

The government does not have an official position or policy on responsible business conduct, including corporate social responsibility (CSR). Although there is not a local culture of CSR, large foreign companies normally have active CSR programs, as do some of the larger local business groups. While most local firms do not follow OECD principles regarding CSR, the firms that do are viewed favorably, especially when their CSR programs are effectively publicized.

The Dominican Constitution states, “Everyone has the right to have quality goods and services, to objective, truthful and timely information about the content and characteristics of the products and services that they use and consume.” To that end, the national consumer protection agency, ProConsumidor, offers consumer advocacy services.

The country joined the Extractive Industries Transparency Initiative (EITI) as a candidate in 2016. The government incorporates EITI standards into its mining transparency framework. In 2019, EITI conducted a validation study of the Dominican Republic’s implementation of EITI standards.

Additional Resources 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

The Dominican Republic has a legal framework that includes laws and regulations to combat corruption and provides criminal penalties for corruption by officials. However, enforcement of existing laws is often ineffective. Individuals and NGOs noted the greatest hindrance to effective investigations was a lack of political will to prosecute individuals accused of corruption, particularly well-connected individuals or high-level politicians. Government corruption remained a serious problem and a public grievance, so much so, that it was a primary political motivation in the 2020 elections, leading to widespread protests. The Dominican Republic’s rank on the Transparency International Corruption Perception Index held at 137 in 2020 (out of 180 countries assessed) but indicated that “the election of a new government…raised hopes for the fight against corruption.”

U.S. companies identified corruption as a barrier to FDI and some firms reported being solicited by public officials for bribes. U.S. investors indicate corruption occurs at all phases of investment, not just in public procurement or during the process for awarding tenders or concessions, as is most often alleged. At least one firm said it intended to back out of a competition for a public concession as a result of a solicitation from government officials. U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act.

In September 2019, the Dominican Supreme Court began a trial against six of the 14 defendants indicted in 2017 for alleged links to $92 million in bribes paid by aBrazilian construction company to obtain public works contracts. A 2016 plea agreement between the U.S. Department of Justice and the Brazilian company implicated high-level public officials in the Dominican Republic; the six current defendants include a senator, a lower house representative, a former senator, and a former minister of public works. Civil society welcomed the trial as a step forward in the fight against corruption, but activists highlighted what they perceived as a lack of political will to investigate thoroughly the case, which involved the country’s political and economic elites. U.S. companies also frequently cite the government’s slow response to the Odebrecht scandal as contributing to a culture of perceived impunity for high-level government officials, which fuels widespread acceptance and tolerance of corruption at all levels.

President Abinader has made it clear since his inauguration in August 2020 that fighting corruption will be a top priority of his administration. He appointed officials with reputations for professionalism and independence including a career anti-corruption advocate now serving as head of the Public Procurement General Directorate. In addition, the Abinader administration created the Directorate of Transparency, Prevention, and Control of Public Spending, and implemented other administrative and legislative measures that should increase internal auditing mechanisms.

In November 2020, the Attorney General’s Office detained 11 former officials and alleged front men, including two siblings of former President Danilo Medina, as part of the “Anti-octopus operation.” They are accused of “having used their family connections” to gain privileged access to the public procurement process and, consequently, of having accumulated fortunes illicitly during the past administration. Analysts have suggested that these arrests dealt a blow to the widespread practice of impunity around issues of corruption, particularly where politically connected people and families were involved, and sent a strong warning against such behavior. The arrests also appear to have appeased the demands of civil society, who threatened to protest if arrests did not happen before January 2021. However, it remains to be seen the extent to which the government will prioritize passage of legislative reforms to strengthen rule of law and prevent similar abuses in the future.

Civil society has been a critical voice in anti-corruption campaigns to date. Several non-governmental organizations are particularly active in transparency and anti-corruption, notably the Foundation for Institutionalization and Justice (FINJUS), Citizen Participation (Participacion Ciudadana), and the Dominican Alliance Against Corruption (ADOCCO).

The Dominican Republic signed and ratified the UN Anticorruption Convention. The Dominican Republic is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Procuraduría Especializada contra la Corrupción Administrativa (PEPCA)
Calle Hipólito Herrera Billini esq. Calle Juan B. Pérez,
Centro de los Heroes, Santo Domingo, República Dominicana
Telephone: (809) 533-3522
Email: pepca@pgr.gob.do 

Linea 311 (government service for filing complaints and denunciations)
Phone: 311 (from inside the country)
Website: http://www.311.gob.do/ 

Participación Ciudadana
Wenceslao Alvarez #8, Zona Universitaria
Phone: 809 685 6200
Website: https://pciudadana.org/
Email: info@pciudadana.org 

Despite political stability and strong pre-pandemic economic growth, citizen and public security concerns in the Dominican Republic impose significant costs on businesses and limit foreign and domestic investment. There are no known national security threats affecting foreign investment within the Dominican Republic.

Citizen Security

The U.S. Department of State has assessed Santo Domingo as a critical-threat location for crime. According to the Latin American Public Opinion Project, there is a steady increase in crime-related victimization and a growing perception of insecurity in the Dominican Republic since 2010. In 2020, Fund for Peace ranked the Dominican Republic 110 out of 176 countries in its security threats index, and 71 for human rights and rule of law. Other than domestic violence, criminal activity is mostly associated with street-level incidents consisting of robberies and petty larcenies. Of these, street robbery is particularly concerning as criminals often use weapons to coerce compliance from victims. In addition, the Dominican Republic faces challenges with organized crime. Mob schemes in the Dominican land, airspace, and territorial waters include transshipment of South American drugs destined for the United States and Europe, transshipment of ecstasy from the Netherlands and Belgium destined for United States and Canada, substantial money laundering activity particularly by Colombian narcotics traffickers, and significant amphetamine consumption.

Public Security

The U.S. Department of State has assessed the Dominican Republic as being a low-threat location for terrorism and a medium-threat location for political violence. There are no known organized domestic terrorist groups in the Dominican Republic. Nonetheless, the Dominican Republic is a likely transit point for extremists from within the Caribbean, Africa, and Europe.

Politically motivated protests, demonstrations, and general strikes occur periodically, particularly during general election years. In February and March of 2020, there were multiple, mostly peaceful protests throughout the country over the Dominican electoral authority’s decision to suspend national municipal elections after widespread failure of its electronic voting system. Sabotage of electrical facilities for political purposes also allegedly occurred during the 2020 electoral cycle. In addition, civil unrest has become a common occurrence in the last several years due to the lack of adequate electricity, water resources, and the public opinion from certain groups that the government is not actively protecting the national interest.

Border porosity remains an ongoing concern for the Dominican Republic as the security situation with Haiti has arguably been complicated by the withdraw of the United Nations Stabilization Mission in Haiti (MINUSTAH) in 2017. Dominican officials have expressed concerns about the potential for widespread civil unrest or instability in Haiti contributing to illegal flows of people and illicit goods across the border.

National Security

There are no known national security threats menacing the survival of the Dominican Republic state. Therefore, its armed forces define a series of citizen and public security concerns as their priority security interests. The Dominican government uses its armed forces to support the police and border security forces within the framework of the Dominican Republic constitution. In this context, the military has deployed through citizen security programs in collaboration with the police and plays an important role in securing the border with Haiti, alongside border security forces.

An ample labor supply is available, although there is a scarcity of skilled workers and technical supervisors. Some labor shortages exist in professions requiring lengthy education or technical certification. According to 2020 Dominican Central Bank data, the Dominican labor force consists of approximately 5 million workers. The labor force participation rate is 61.1 percent; 56.8 percent of the labor force works in services, 10.6 percent in industry, 9.6 percent in education and health, 9.2 percent in agriculture and livestock, 7.9 percent in construction, and 5.9 percent in public administration and defense. Approximately 46 percent of the labor force works in formal sectors of the economy and 54 percent in informal sectors. In 2020, unemployment increased from 5.9 percent to 7.4 percent over the course of the year due to pandemic-induced challenges. When factoring in discouraged workers and others who were not actively seeking employment, however, the unemployment rate increased from 9.9 percent to 15.0 percent. Youth unemployment remained steady at 13.5 percent, indicating the pandemic had a greater impact on employment for older, more vulnerable segments of the population. With respect to migrant workers, the most recent reliable statistical data is from 2017 and shows a population of 334,092 Haitians age ten or older living in the country, with 67 percent working in the formal and informal sectors of the economy. Migration experts believe that this number has increased to approximately 500,000 since 2017. The Dominican government and the United Nations are expected to provide an updated migrant survey in 2021.

The Dominican Labor Code establishes policies and procedures for many aspects of employer-employee relationships, ranging from hours of work and overtime and vacation pay to severance pay, causes for termination, and union registration. The code applies equally to migrant workers, however, many irregular Haitian laborers and Dominicans of Haitian descent working in the construction and agricultural industries do not exercise their rights due to fear of being fired or deported. The law requires that at least 80 percent of non-management workers of a company be Dominican nationals. Exemptions and waivers are available and regularly granted. The law provides for severance payments, which are due upon layoffs or firing without just cause. The amount due is prorated based on length of employment.

Although the Labor Code provides for freedom to form unions and bargain collectively, it places several restrictions on these rights, which the International Labor Organization (ILO) considers excessive. For example, it restricts trade union rights by requiring unions to represent 51 percent of the workers in an enterprise to bargain collectively. In addition, the law prohibits strikes until mandatory mediation requirements have been met. Formal requirements for a strike to be legal also include the support of an absolute majority of all company workers for the strike, written notification to the Ministry of Labor, and a 10-day waiting period following notification before proceeding with the strike. Government workers and essential public service personnel, in theory, may not strike; however, in practice such employees, including healthcare workers, have protested and gone on strike.

The law prohibits dismissal of employees for trade union membership or union activities. In practice, however, the law is inconsistently enforced. The majority of companies resist collective negotiating practices and union activities. Companies reportedly fire workers for union activity and blacklist trade unionists, among other anti-union practices. Workers frequently have to sign documents pledging to abstain from participating in union activities. Companies also create and support company-backed unions. Formal strikes occur but are not common.

The law establishes a system of labor courts for dealing with disputes. The process is often long, with cases pending for several years. One exception is workplace injury cases, which typically conclude quickly – and often in the worker’s favor. Both workers and companies report that mediation facilitated by the Ministry of Labor was the most rapid and effective method for resolving worker-company disputes.

Many of the major manufacturers in free trade zones have voluntary codes of conduct that include worker rights protection clauses generally aligned with the ILO Declaration on Fundamental Principles and Rights at Work; however, workers are not always aware of such codes or the principles they contain. The Ministry of Labor monitors labor abuses, health, and safety standards in all worksites where an employer-employee relationship exists. Labor inspectors can request remediation for violations, and if remediation is not undertaken, can refer offending employers to the public prosecutor for sanctions.

* Source for Host Country Data: Central Bank of the Dominican Republic (BCRD). The BCRD does not report investment stock positions.

No information for the Dominican Republic is available on the IMF’s Coordinated Direct Investment Survey (CDIS) website. According to the Dominican Central Bank (BCRD), total inward flows of FDI for 2020 were $2.6 billion. The BCRD provides a breakdown of FDI to the Dominican Republic by individual source country for the top investing countries. The five largest investing countries accounted for 82.3 percent of total inward FDI in 2019. Neither World Bank nor Dominican sources break down FDI from the Dominican Republic to individual destination countries.

* Source for Host Country Data: Central Bank of the Dominican Republic (BCRD), 2020 FDI inward flows.

Table 4: Sources of Portfolio Investment
No information for the Dominican Republic is available on the IMF’s Coordinated Portfolio Investment Survey (CPIS) site and the Dominican government only publishes information on general investment flows ( https://www.bancentral.gov.do/a/d/2532-sector-externo ).

Policies Towards Foreign Direct Investment

Mexico is open to foreign direct investment (FDI) in the vast majority of economic sectors and has consistently been one of the largest emerging market recipients of FDI.  Mexico’s proximity to the United States and preferential access to the U.S. market, macroeconomic stability, large domestic market, growing consumer base, and increasingly skilled yet cheap labor combine to attract foreign investors.  The COVID-19 economic crisis showed how linked North American supply chains are and highlighted new opportunities for partnership and investment.  Still, recent policy and regulatory changes have created doubts about the investment climate, particularly in the energy and the formal employment pensions management sectors.

Historically, the United States has been one of the largest sources of FDI in Mexico.  According to Mexico’s Secretariat of Economy, FDI flows for 2020 totaled USD 29.1 billion, a decrease of 11.7 percent compared to the preliminary information for 2019 (USD 32.9 billion), and a 14.7 percent decline compared to revised numbers.  The Secretariat cited COVID’s impact on global economic activity as the main reason for the decline.  From January to December 2020, 22 percent of FDI came from new investment.  New investment in 2020 (USD 6.4 billion) was only approximately half of the new investments received in 2019 (USD 12.8 billion), and 55.4 percent came from capital reinvestment while 24.9 percent from parent company accounts.  The automotive, aerospace, telecommunications, financial services, and electronics sectors typically receive large amounts of FDI.

Most foreign investment flows to northern states near the U.S. border, where most maquiladoras (export-oriented manufacturing and assembly plants) are located, or to Mexico City and the nearby “El Bajio” (e.g. Guanajuato, Queretaro, etc.) region.  In the past, foreign investors have overlooked Mexico’s southern states, although the administration is focused on attracting investment to the region, including through large infrastructure projects such as the Maya Train, the Dos Bocas refinery, and the trans-isthmus rail project.

The 1993 Foreign Investment Law, last updated in March 2017, governs foreign investment in Mexico, including which business sectors are open to foreign investors and to what extent.  It provides national treatment, eliminates performance requirements for most foreign investment projects, and liberalizes criteria for automatic approval of foreign investment.  Mexico is also a party to several Organization for Economic Cooperation and Development (OECD) agreements covering foreign investment, notably the Codes of Liberalization of Capital Movements and the National Treatment Instrument.

The administration has integrated components of the government’s investment agency into other ministries and offices.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mexico reserves certain sectors, in whole or in part, for the State, including:  petroleum and other hydrocarbons; control of the national electric system, radioactive materials, telegraphic and postal services; nuclear energy generation; coinage and printing of money; and control, supervision, and surveillance of ports of entry.  Certain professional and technical services, development banks, and the land transportation of passengers, tourists, and cargo (not including courier and parcel services) are reserved entirely for Mexican nationals.  See section six for restrictions on foreign ownership of certain real estate.

Reforms in the energy, power generation, telecommunications, and retail fuel sales sectors have liberalized access for foreign investors.  While reforms have not led to the privatization of state-owned enterprises such as Pemex or the Federal Electricity Commission (CFE), they have allowed private firms to participate.  Still, the Lopez Obrador administration has made significant regulatory and policy changes that favor Pemex and CFE over private participants.  The changes have led private companies to file lawsuits in Mexican courts and several are considering international arbitration.

Hydrocarbons:  Private companies participate in hydrocarbon exploration and extraction activities through contracts with the government under four categories:  competitive contracts, joint ventures, profit sharing agreements, and license contracts.  All contracts must include a clause stating subsoil hydrocarbons are owned by the State.  The government has held nine auctions allowing private companies to bid on exploration and development rights to oil and gas resources in blocks around the country.  Between 2015 and 2018, Mexico auctioned more than 100 land, shallow, and deep-water blocks with significant interest from international oil companies.  The administration has since postponed further auctions but committed to respecting the existing contracts awarded under the previous administration.  Still, foreign players were discouraged when Pemex sought to take operatorship of a major shallow water oil discovery made by a U.S. company-led consortium.  The private consortium had invested more than USD 200 million in making the discovery and the outcome of this dispute has yet to be decided.

Telecommunications:  Mexican law states telecommunications and broadcasting activities are public services and the government will at all times maintain ownership of the radio spectrum.  In January 2021, President Lopez Obrador proposed incorporating the independent Federal Telecommunication Institute (IFT) into the Secretariat of Communications and Transportation (SCT), in an attempt to save government funds and avoid duplication.  Non-governmental organizations and private sector companies said such a move would potentially violate the USMCA, which mandates signatories to maintain independent telecommunications regulators.  As of March 2021, the proposal remains pending.  Mexico’s Secretary of Economy Tatiana Clouthier underscored in public statements that President López Obrador is committed to respecting Mexico’s obligations under the USMCA, including maintaining an autonomous telecommunications regulator.

Aviation:  The Foreign Investment Law limited foreign ownership of national air transportation to 25 percent until March 2017, when the limit was increased to 49 percent.

The USMCA, which entered into force July 1, 2020, maintained several NAFTA provisions, granting U.S. and Canadian investors national and most-favored-nation treatment in setting up operations or acquiring firms in Mexico.  Exceptions exist for investments restricted under the USMCA.  Currently, the United States, Canada, and Mexico have the right to settle any legacy disputes or claims under NAFTA through international arbitration for a sunset period of three years following the end of NAFTA.  Only the United States and Mexico are party to an international arbitration agreement under the USMCA, though access is restricted as the USMCA distinguishes between investors with covered government contracts and those without.  Most U.S. companies investing in Mexico will have access to fewer remedies under the USMCA than under NAFTA, as they will have to meet certain criteria to qualify for arbitration.  Local Mexican governments must also accord national treatment to investors from USMCA countries.

Approximately 95 percent of all foreign investment transactions do not require government approval.  Foreign investments that require government authorization and do not exceed USD 165 million are automatically approved, unless the proposed investment is in a legally reserved sector.

The National Foreign Investment Commission under the Secretariat of the Economy is the government authority that determines whether an investment in restricted sectors may move forward.  The Commission has 45 business days after submission of an investment request to make a decision.  Criteria for approval include employment and training considerations, and contributions to technology, productivity, and competitiveness.  The Commission may reject applications to acquire Mexican companies for national security reasons.  The Secretariat of Foreign Relations (SRE) must issue a permit for foreigners to establish or change the nature of Mexican companies.

Other Investment Policy Reviews

There has not been an update to the World Trade Organization’s (WTO) trade policy review of Mexico since June 2017 covering the period to year-end 2016.

Business Facilitation

According to the World Bank, on average registering a foreign-owned company in Mexico requires 11 procedures and 31 days.  Mexico ranked 60 out of 190 countries in the World Bank’s ease of doing business report in 2020.  In 2016, then-President Pena Nieto signed a law creating a new category of simplified businesses called Sociedad for Acciones Simplificadas (SAS).  Owners of SASs are supposed to be able to register a new company online in 24 hours.  Still, it can take between 66 and 90 days to start a new business in Mexico, according to the World Bank.  The Government of Mexico maintains a business registration website:  www.tuempresa.gob.mx.  Companies operating in Mexico must register with the tax authority (Servicio de Administration y Tributaria or SAT), the Secretariat of the Economy, and the Public Registry.  Additionally, companies engaging in international trade must register with the Registry of Importers, while foreign-owned companies must register with the National Registry of Foreign Investments.

Since October 2019, SAT has launched dozens of tax audits against major international and domestic corporations, resulting in hundreds of millions of dollars in new tax assessments, penalties, and late fees.  Multinational and Mexican firms have reported audits based on diverse aspects of the tax code, including adjustments on tax payments made, waivers received, and deductions reported during the Enrique Peña Nieto administration.

Changes to ten-digit tariff lines conducted by the Secretariat of Economy in 2020 created trade disruptions with many shipments held at the border, stemming from lack of clear communication between government agencies that resulted in different interpretation by SAT.

Outward Investment

Various offices at the Secretariat of Economy and the Secretariat of Foreign Affairs handle promoting Mexican outward investment and assistance to Mexican firms acquiring or establishing joint ventures with foreign firms.  Mexico does not restrict domestic investors from investing abroad.

Real Property

Mexico ranked 105 out of 190 countries for ease of registering property in the World Bank’s 2020 Doing Business report, falling two places from its 2019 report.  Article 27 of the Mexican Constitution guarantees the inviolable right to private property.  Expropriation can only occur for public use and with due compensation.  Mexico has four categories of land tenure:  private ownership, communal tenure (ejido), publicly owned, and ineligible for sale or transfer.

Mexico prohibits foreigners from acquiring title to residential real estate in so-called “restricted zones” within 50 kilometers (approximately 30 miles) of the nation’s coast and 100 kilometers (approximately 60 miles) of the borders.  “Restricted zones” cover roughly 40 percent of Mexico’s territory.  Foreigners may acquire the effective use of residential property in “restricted zones” through the establishment of an extendable trust (fideicomiso) arranged through a Mexican financial institution.  Under this trust, the foreign investor obtains all property use rights, including the right to develop, sell, and transfer the property.  Real estate investors should be careful in performing due diligence to ensure that there are no other claimants to the property being purchased.  In some cases, fideicomiso arrangements have led to legal challenges.  U.S.-issued title insurance is available in Mexico and U.S. title insurers operate here.

Additionally, U.S. lending institutions have begun issuing mortgages to U.S. citizens purchasing real estate in Mexico.  The Public Register for Business and Property (Registro Publico de la Propiedad y de Comercio) maintains publicly available information online regarding land ownership, liens, mortgages, restrictions, etc.

Tenants and squatters are protected under Mexican law.  Property owners who encounter problems with tenants or squatters are advised to seek professional legal advice, as the legal process of eviction is complex.

Mexico has a nascent but growing financial securitization market for real estate and infrastructure investments, which investors can access via the purchase/sale of Fideicomisos de Infraestructura y Bienes Raíces (FIBRAs) and Certificates of Capital Development (CKDs) listed on Mexico’s BMV stock exchange.

Intellectual Property Rights

Intellectual Property Rights (IPR) in Mexico are covered by the the Mexican Federal Law for Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) and the Federal Copyright Law (Ley Federal del Derecho de Autor).  Responsibility for the protection of IPR is spread across several government authorities.  The Prosecutor General’s Office (Fiscalia General de la Republica or FGR) oversees a specialized unit that prosecutes intellectual property (IP)  crimes.  The Mexican Institute of Industrial Property (IMPI), the equivalent to the U.S. Patent and Trademark Office, administers patent and trademark registrations, and handles administrative enforcement cases of IPR infringement.  The National Institute of Copyright (INDAUTOR) handles copyright registrations and mediates certain types of copyright disputes, while the Federal Commission for the Prevention from Sanitary Risks (COFEPRIS) regulates pharmaceuticals, medical devices, and processed foods.  The Mexican Customs Service’s mandate includes ensuring illegal goods do not cross Mexico’s borders.

The process for trademark registration in Mexico normally takes six to eight months.  The registration process begins by filing an application with IMPI, which is published in the Official Gazette.  IMPI first undertakes a formalities examination, followed by a substantive examination to determine if the application and supporting documentation fulfills the requirements established by law and regulation to grant the trademark registration.  Once the determination is made, IMPI then publishes the registration in the Official Gazette.  A trademark registration in Mexico is valid for 10 years from the date of registration and is renewable for 10-year periods.  Any party can challenge a trademark registration through an opposition system, or post-grant through a cancellation proceeding.  IMPI employs the following administrative procedures:  nullity, expiration, opposition, cancellation, trademark, patent and copyright infringement.  Once IMPI issues a decision, the affected party may challenge it through an internal reconsideration process or go directly to the Specialized IP Court for a nullity trial.  An aggrieved party can then file an appeal with a Federal Appeal Court based on the Specialized IP Court’s decision.  In cases with an identifiable constitutional challenge, the plaintiff may file an appeal before the Supreme Court.

To improve efficiency, in 2020 IMPI partnered with the United States Patent and Trademark Office (USPTO) to launch the Parallel Patent Grant (PPG) initiative.  Under this new work-sharing arrangement, IMPI will expedite the grant of a Mexican patent for businesses and individuals already granted a corresponding U.S. patent.  This arrangement allows for the efficient reutilization of USPTO work by IMPI.  The USPTO also has a Patent Prosecution Highway (PPH) agreement with IMPI.  Under the PPH, an applicant receiving a ruling from either IMPI or the USPTO that at least one claim in an application is patentable may request that the other office expedite examination of the corresponding application.  The PPH leverages fast-track patent examination procedures already available in both offices to allow applicants in both countries to obtain corresponding patents faster and more efficiently.

Mexico has undertaken significant legislative reform over the past year to comply with the USMCA.  The Mexican Federal Law for Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) went into effect November 5, 2020.  The decree issuing this law was published in the Official Gazette on July 1, 2020, in response to the USMCA and the CPTPP.  This new law replaced the Mexican Industrial Property Law (Ley de la Propiedad Industrial), substantially strengthening IPR across a variety of disciplines.  Mexico amended its Federal Copyright Law and its Federal Criminal Code to comply with the USMCA.  The amendments went into effect July 2, 2020.  These amendments should significantly strengthen copyright law in Mexico.  Still, there are concerns that constitutional challenges filed against notice and takedown provisions as well as TPMs in the amendments may weaken these. provisions.

Still, Mexico has widespread commercial-scale infringement that results in significant losses to Mexican, U.S., and other IPR owners.  There are many issues that have made it difficult to improve IPR enforcement in Mexico, including legislative loopholes; lack of coordination between federal, state, and municipal authorities; a cumbersome and lengthy judicial process; relatively widespread acceptance of piracy and counterfeiting, and lack of resources dedicated to enforcement.  In addition, the involvement of transnational criminal organizations (TCOs), which control the piracy and counterfeiting markets in parts of Mexico and engage in trade-based money laundering by importing counterfeit goods, continue to impede federal government efforts to improve IPR enforcement.  TCO involvement has further illustrated the link between IPR crimes and illicit trafficking of other contraband, including arms and drugs.

Mexico remained on the Watch List in the 2021 Special 301 report published by the U.S. Trade Representative (USTR).  Obstacles to U.S. trade include the wide availability of pirated and counterfeit goods in both physical and virtual notorious markets.  The  for Piracy and Counterfeiting listed several Mexican markets:  Tepito in Mexico City, La Pulga Rio in Monterrey, and Mercado San Juan de Dios in Guadalajara.  Mexico is a signatory to numerous international IP treaties, including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.

Resources for Rights Holders

Intellectual Property Rights Attaché for Mexico, Central America and the Caribbean
U.S. Trade Center Liverpool No. 31 Col. Juárez
C.P. 06600 Mexico City
Tel: (52) 55 5080 2189

National Institute of Copyright (INDAUTOR)
Puebla No. 143
Col. Roma, Del. Cuauhtémoc
06700 México, D.F.
Tel: (52) 55 3601 8270
Fax: (52) 55 3601 8214
Web: http://www.indautor.gob.mx/

Mexican Institute of Industrial Property (IMPI)
Periférico Sur No. 3106
Piso 9, Col. Jardines del Pedregal
Mexico, D.F., C.P. 01900
Tel: (52 55) 56 24 04 01 / 04
(52 55) 53 34 07 00
Fax: (52 55) 56 24 04 06
Web: http://www.impi.gob.mx/

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Mexico’s private and public sectors have worked to promote and develop corporate social responsibility (CSR) during the past decade.  CSR in Mexico began as a philanthropic effort.  It has evolved gradually to a more holistic approach, trying to match international standards such as the OECD Guidelines for Multinational Enterprises and the United Nations Global Compact.

Responsible business conduct reporting has made progress in the last few years with more companies developing a corporate responsibility strategy.  The government has also made an effort to implement CSR in state-owned companies such as Pemex, which has published corporate responsibility reports since 1999.  Recognizing the importance of CSR issues, the Mexican Stock Exchange (Bolsa Mexicana de Valores) launched a sustainable companies index, which allows investors to specifically invest in those companies deemed to meet internationally accepted criteria for good corporate governance.

In October 2017, Mexico became the 53rd member of the Extractive Industries Transparency Initiative (EITI), which represents an important milestone in its Pemex effort to establish transparency and public trust in its energy sector.

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/);
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings);
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

Corruption exists in many forms in Mexican government and society, including corruption in the public sector (e.g., demand for bribes or kickbacks by government officials) and private sector (e.g., fraud, falsifying claims, etc.), as well as conflict of interest issues, which are not well defined in the Mexican legal framework.

Complicity of government and law enforcement officials with criminal elements is a significant concern.  Collaboration of government actors with criminal organizations (often due to intimidation and threats) poses serious challenges for the rule of law.  Some of the most common reports of official corruption involve government officials stealing from public coffers or demanding bribes in exchange for awarding public contracts.  The current administration supported anti-corruption reforms (detailed below) and judicial proceedings in several high-profile corruption cases, including former governors.  However, Mexican civil society asserts that the government must take more effective and frequent action to address corruption.

Mexico adopted a constitutional reform in 2014 to transform the current Office of the Attorney General into an Independent Prosecutor General’s office in order to shore up its independence.  President Lopez Obrador’s choice for Prosecutor General was confirmed by the Mexican Senate January 18, 2019.  In 2015, Mexico passed a constitutional reform creating the National Anti-Corruption System (SNA) with an anti-corruption prosecutor and a citizens’ participation committee to oversee efforts.  The system is designed to provide a comprehensive framework for the prevention, investigation, and prosecution of corruption cases, including delineating acts of corruption considered criminal acts under the law.  The legal framework establishes a basis for holding private actors and private firms legally liable for acts of corruption involving public officials and encourages private firms to develop internal codes of conduct.  The implementation status of the mandatory state-level anti-corruption legislation varies.

The new laws mandate a redesign of the Secretariat of Public Administration to give it additional auditing and investigative functions and capacities in combatting public sector corruption.  Congress approved legislation to change economic institutions, assigning new responsibilities and in some instances creating new entities.  Reforms to the federal government’s structure included the creation of a General Coordination of Development Programs to manage the newly created federal state coordinators (“superdelegates”) in charge of federal programs in each state.  The law also created the Secretariat of Public Security and Citizen Protection, and significantly expanded the power of the president’s Legal Advisory Office (Consejería Jurídica) to name and remove each federal agency’s legal advisor and clear all executive branch legal reforms before their submission to Congress.  The law eliminated financial units from ministries, with the exception of the Secretariat of Finance, the army (SEDENA), and the navy (SEMAR), and transferred control of contracting offices in other ministries to the Hacienda.  Separately, the law replaced the previous Secretariat of Social Development (SEDESOL) with a Welfare Secretariat in charge of coordinating social policies, including those developed by other agencies such as health, education, and culture.  The Labor Secretariat gained additional tools to foster collective bargaining, union democracy, and to meet International Labor Organization (ILO) obligations.

Mexico ratified the OECD Convention on Combating Bribery and passed its implementing legislation in May 1999.  The legislation includes provisions making it a criminal offense to bribe foreign officials. Mexico is also a party to the Organization of American States (OAS) Convention against Corruption and has signed and ratified the United Nations Convention against Corruption.  The government has enacted or proposed strict laws attacking corruption and bribery, with average penalties of five to 10 years in prison.

Mexico is a member of the Open Government Partnership and enacted a Transparency and Access to Public Information Act in 2015, which revised the existing legal framework to expand national access to information.  Transparency in public administration at the federal level improved noticeably but expanding access to information at the state and local level has been slow.  According to Transparency International’s 2020 Corruption Perception Index, Mexico ranked 124 of 180 nations.  Civil society organizations focused on fighting corruption are increasingly influential at the federal level but are few in number and less powerful at the state and local levels.

Business representatives, including from U.S. firms, believe public funds are often diverted to private companies and individuals due to corruption and perceive favoritism to be widespread among government procurement officials.  The GAN Business Anti-Corruption Portal states compliance with procurement regulations by state bodies in Mexico is unreliable and that corruption is extensive, despite laws covering conflicts of interest, competitive bidding, and company blacklisting procedures.

The U.S. Embassy has engaged in a broad-based effort to work with Mexican agencies and civil society organizations in developing mechanisms to fight corruption and increase transparency and fair play in government procurement.  Efforts with specific business impact include government procurement best practices training and technical assistance under the U.S. Trade and Development Agency’s Global Procurement Initiative.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Mexico ratified the UN Convention Against Corruption in 2004.  It ratified the OECD Anti-Bribery Convention in 1999.

Resources to Report Corruption

Contact at government agency:

Secretariat of Public Administration
Miguel Laurent 235, Mexico City
52-55-2000-1060

Contact at “watchdog” organization:

Transparencia Mexicana
Dulce Olivia 73, Mexico City
52-55-5659-4714
Email: info@tm.org.mx

Mass demonstrations are common in the larger metropolitan areas and in the southern Mexican states of Guerrero and Oaxaca.  While political violence is rare, drug and organized crime-related violence has increased significantly in recent years.  Political violence is also likely to accelerate in the run-up to the June 2021 elections as criminal actors seek to promote election of their preferred candidates.  The national homicide rate remained stable at 29 homicides per 100,000 residents, although the number of homicides fell slightly from 35,618 to 35,498.  For complete security information, please see the Safety and Security section in the Consular Country Information page at https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Mexico.html.  Conditions vary widely by state.  For a state-by-state assessment please see the Consular Travel Advisory at https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/mexico-travel-advisory.html.

Companies have reported general security concerns remain an issue for those looking to invest in the country.  The American Chamber of Commerce in Mexico estimates in a biannual report that security expenses cost business as much as 5 percent of their operating budgets.  Many companies choose to take extra precautions for the protection of their executives.  They also report increasing security costs for shipments of goods.  The Overseas Security Advisory Council (OSAC) monitors and reports on regional security for U.S. businesses operating overseas.  OSAC constituency is available to any U.S.-owned, not-for-profit organization, or any enterprise incorporated in the United States (parent company, not subsidiaries or divisions) doing business overseas (https://www.osac.gov/Country/Mexico/Detail ).

Mexico’s 54.1. percent rate of informality remains higher than countries with similar GDP per capita levels.  High informality, defined as those working in unregistered firms or without social security protection, distorts labor market dynamics, contributes to persistent wage depression, drags overall productivity, and slows economic growth.  In the formal economy, there exist large labor shortages due to a system that incentivizes informality.  Manufacturing companies, particularly along the U.S.-Mexico border and in the states of Aguascalientes, Guanajuato, Jalisco, and Querétaro, report labor shortages and an inability to retain staff due to wages sometimes being less that what can be earned in the informal economy.  These shortages are particularly acute for skilled workers and engineers.

On May 1, 2019, Lopez Obrador signed into law a sweeping reform of Mexico’s labor law, implementing a constitutional change and focusing on the labor justice system.  The reform replaces tripartite dispute resolution entities (Conciliation and Arbitration Boards) with independent judicial bodies and conciliation centers.  In terms of labor dispute resolution mechanisms, the Conciliation and Arbitration Boards (CABs) previously adjudicated all individual and collective labor conflicts.  Under the reform, collective bargaining agreements will now be adjudicated by federal labor conciliation centers and federal labor courts.

Labor experts predict the labor reform will result in a greater level of labor action stemming from more inter-union and intra-union competition.  The Secretariat of Labor, working closely with Mexico’s federal judiciary, as well as state governments and courts, created an ambitious state-by-state implementation agenda for the reforms, which started November 18, 2020, and will end May 1, 2022.  On November 18, 2020 the first phase of the labor reform implementation began in eight states:  Durango, State of Mexico, San Luis Potosi, Zacatecas, Campeche, Chiapas, Tabasco, and Hidalgo.  On December 11, 2020 the Secretariat of Labor commenced preparations for the second phase in 14 additional states beginning in October 2021.  Further details on labor reform implementation can be found at: www.reformalaboral.stps.gob.mx

Mexico’s labor relations system has been widely criticized as skewed to represent the interests of employers and the government at the expense of workers.  Mexico’s legal framework governing collective bargaining created the possibility of negotiation and registration of initial collective bargaining agreements without the support or knowledge of the covered workers.  These agreements are commonly known as protection contracts and constitute a gap in practice with international labor standards regarding freedom of association.  The percentage of the economy covered by collective bargaining agreements is between five and 10 percent, of which more than half are believed to be protection contracts.  As of March 23, 2021, 600 collective bargaining contracts have been legitimized, according to the Secretariat of Labor.

The reform requires all collective bargaining agreements must now be submitted to a free, fair, and secret vote every two years with the objective of getting existing protectionist contracts voted out.  The increasingly permissive political and legal environment for independent unions is already changing the way established unions manage disputes with employers, prompting more authentic collective bargaining.  As independent unions compete with corporatist unions to represent worker interests, workers are likely to be further emboldened in demanding higher wages.

According to the International Labor Organization (ILO), government enforcement was reasonably effective in enforcing labor laws in large and medium-sized companies, especially in factories run by U.S. companies and in other industries under federal jurisdiction.  Enforcement was inadequate in many small companies and in the agriculture and construction sectors, and it was nearly absent in the informal sector.  Workers organizations have made numerous complaints of poor working conditions in maquiladoras and in the agricultural production industry.  Low wages, poor labor conditions, long work hours, unjustified dismissals, lack of social security benefits and safety in the workplace, and lack of freedom of association were among the most common complaints.

* data from the IMF’s Coordinated Direct Investment Survey

* data from the IMF’s Coordinated Portfolio Investment Survey (CPIS)