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Mexico’s Senate passed President Andrés Manuel López Obrador’s (AMLO) controversial outsourcing bill with near-unanimous approval on Tuesday, April 20, thus limiting the public and private sector’s ability to subcontract and outsource labor for projects.

The bill passed through the Senate with 118 votes in favor, two in abstention and none against, allowing the reform to continue with ease. 

It previously passed through the Mexican Chamber of Deputies on Wednesday, April 14, without a single change, though with more divide, with 284 votes in favor of and 108 votes against the reform.

The newly approved reform will require six changes to the Constitution, including forcing employment agencies to join a public registry, restricting the possible situations where subcontracting can be legally used, making companies stay up to date on tax and social security payments, and creating company liability in the event of labor violations.

“The competitiveness of companies cannot be based on the payment of operating wages, one of the lowest in Latin America,” said National Regeneration Movement (Morena) Senator and President of the Labor and Social Welfare Commission Napoleón Gómez Urrutia.

“The real wages [of the workers], their real benefits, must be recognized and registered as such before the health, housing, and pension agencies.”

“The problem is not outsourcing; the underlying problem is that these companies do not pay legal salaries, benefits, to employees,” said opposition National Action Party (PAN) Senator Xóchitl Gálvez, while lobbying for the positive effects outsourcing can have on specialized projects.

The private sector will be given three months to incorporate all subcontracted workers who do not fit into exceptions provided by the legal framework onto its payroll by hiring them directly.

Meanwhile, the public sector will be given until January 2022 to implement the changes, causing much controversy among opposition parties, which claim the reform gives the public sector undue favoritism over the private sector, potentially pushing out foreign investment from Mexico.

The private sector had reacted critically to the reform since its proposal, claiming it unfair to not have been consulted and noting the negative effects the changes could have on Mexico’s already-suffering economy following the covid-19 pandemic.

Mexico currently has over 4 million subcontracted workers that represent 17 percent of the country’s workforce, more than double the amount from 15 years ago. Along with the rise of subcontracted workers came unfair practices by employers, like declaring minimums of workers’ salaries to avoid contributing to the nation’s Social Security system. 

Gómez Urrutia argued the new reform will help prevent tax evasion by companies  as well as bolstering workers rights, and helps take the necessary steps toward eradicating inequality and poverty in Mexico.

…April 23, 2021

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