Ecuador BusinessmanLast week, a group of Ecuadorian government officials and business stakeholders traveled to Washington, DC, to encourage increased trade and investment ties between the United States and Ecuador.  The delegation, which was led by Foreign Trade Minister Pablo Campana Sáenz, is seeking to revive US trade with, tourism to, and investment in Ecuador.

During his visit, Minister Campana highlighted a number of key trade priorities for Ecuador.  He encouraged the revival of the U.S.-Ecuador Trade and Investment Council, a bilateral panel originally established in 1990 to encourage discussion on trade and investment matters.  Minister Campana also emphasized the importance of the Generalized System of Preferences (GSP), a trade preference program that allows beneficiary developing countries to import select products into the U.S. duty-free.  The Ecuadorian Government is seeking to expand duty-free treatment to broccoli, roses, artichokes, and tuna.

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Upcoming Event: Key Issues in International Agency and Distribution Agreements

September 19, 2017 – Paula Galhardo and Fernando Cano-Lasa, Of Counsels at Squire Patton Boggs, will participate on a panel discussion on “Key Issues in International Agency and Distribution Agreements: Focus on Brazil, Colombia, Mexico and U.S.” at the Houston Bar Association’s Corporate Counsel Section Luncheon. Panelists will review the areas that most directly affect distribution and agency agreements: anti-corruption, termination, penalties, applicable law, among other provisions.

For additional information concerning this event, please see the full agenda.

U.S., Mexican, and Canadian Officials Conclude First Round of NAFTA Modernization Talks

Renegotiate NAFTAOn August 20, trade officials from the United States, Mexico, and Canada concluded the first round of negotiations to modernize the North American Free Trade Agreement (NAFTA). In a joint statement released following five days of talks, trade officials reiterated their commitment to updating the deal, continuing domestic consultations, and working on draft text. They also pledged their commitment to a comprehensive and accelerated negotiation process to set 21st Century standards and to benefit the citizens of North America.

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Brazilian DocumentThe Brazilian Senate has recently approved Law No. 13,467/2017 (the “New Law”) to amend the Brazilian Labor Code (Consolidação das Leis do Trabalho – CLT) and related regulations. The purpose of the labor reform is to lead to the creation of new jobs and reduce unemployment rates, through the implementation of less restrictive rules, which are consistent with present-day employment relationships.

Despite the strong antagonism by labor unions in the country, once the New Law enters into effect in November, it will unquestionably bring a breath of fresh air to a much outdated labor regime. The Brazilian Labor Code was enacted in 1945 and, although amended through the course of time, it has remained an inflexible and overprotective set of rules, incompatible to the present-day employment relations.

The pivotal changes about the Brazilian labor reform that you need to know are:

Effective Service Time. Under the New Law, if an employee remains at the employer’s premises in order to avoid inclement weather or unsafe conditions, that time will not be overtime. In addition, the time spent by the employee to commute to the workplace, even if the employer provides the transportation, will not be considered working hours if the employee is not at the employer’s disposal.

Remote Work. An employee that primarily performs work from home, or otherwise out of the premises of the employer, will be expressly excluded from the working hour system, so long as the employment agreement specifically states that arrangement.

Intermittent Work. The employee will be able to alternate between periods of work and inactivity. Under this arrangement, which must also be expressly stated in the employment agreement, the employer will be required to pay, at the end of each period of work: (i) pending salary, (ii) proportional holidays and additional 1/3; (iii) proportional Christmas bonus; (iv) paid weekly rest; and (v) social security and Severance Indemnity Fund (“FGTS”).

Part-Time Work. Presently, employers can employ workers under a part-time regime if the employee works for up to 25 hours per week, without the option of overtime. The New Law provides that the maximum hour limit will be 30 hours per week, without the option of overtime, or 26 hours per week, with the possibility of up to 6 overtime hours per week.

Vacation. Vacation time will be allowed to be split into three periods, so long as the employee agrees. One such period must last for at least 14 consecutive days and the other two remaining periods must be of at least 5 consecutive days.

Equal Pay. The New Law provides for different rules under which an employee can claim equal pay. Not only must the activities between the compared employees be the same, but it must also have been performed within the same business site. In addition, the compared employees cannot have a difference of more than 2 years in the same position and the difference between lengths of service cannot exceed 4 years.

Allowances. Meal vouchers, cost allowances, travelling expenses, bonuses and medical insurance will no longer be considered part of the employee’s remuneration, even if they are paid in a regular basis.

Economic Group. The mere fact of having the same individual or legal entity as an equity holder in two different legal entities will no longer be sufficient to establish economic group status among such entities. Evidence of pooled operations and common interests will be required to attribute them joint and several liability for labor obligations.

Retiring Partner/Shareholder. A retiring equity holder will only be liable for claims concerning labor obligations that are filed within two years from the date such equity holder formally retired from the company.

Termination. Termination of employment agreements will no longer need ratification by labor unions or the Ministry of Labor. The New Law also establishes the possibility of termination by mutual consent. In such cases, the employee will receive reduced prior notice indemnification and FGTS.

Voluntary Resignation Program. Voluntary resignation programs will be valid under the New Law. If the employee adheres to a Voluntary Resignation Program, the employee gives full and irrevocable discharge of their rights under the employment agreement, unless agreed otherwise between the parties.

Arbitration. The current Brazilian Labor Code, as a general rule, does not allow for arbitration clauses in employment agreements. Under the New Law, the parties to an employment agreement will be allowed to agree to an arbitration clause when the employee’s remuneration exceeds BRL 11,062.62.

Workers Representative Committee. Workers of companies with more than 200 employees may constitute a committee that will be a focal point for deliberations with the employer. The New Law also establishes the election criteria and provides for job stability for at least one year after the end of the mandate for the elected representatives.

Union Contributions. No longer mandatory, union dues will be optional to employees.

Collective Bargaining Agreements. The agreements executed between employers and the unions representing their employees’ interests will prevail over labor laws when their object concerns to: (i) working hours; (ii) annual time banking; (iii) breaks; (iv) employees’ representative in the workplace; (v) holiday exchange among other topics in article 611-A of the New Law.

It is important to note that President Michel Temer may still edit the New Law before its implementation in November 2017, through Provisional Measures.

Squire Patton Boggs is ready to assist you with any questions you may have concerning the Labor Reform in Brazil. For more information, please contact our Brazil Desk.

Mercosur Seeks to Expand Trade with Other Regions

On July 21, the presidents and other high-level officials of Mercosur’s member nations – Argentina, Brazil, Uruguay and Paraguay – met in Mendoza, Argentina to discuss the trade bloc’s next steps for increasing free trade with other regions. Top priorities on the agenda were the finalization of the trade negotiations with the European Union, as well as the continuation of trade talks with the Pacific Alliance, comprised of Chile, Colombia, Mexico and Peru. Mercosur is also aiming to establish strong trade relationships with Japan, India, Australia, and New Zealand.

The Mercosur region has suffered a number of political and economic challenges in recent years; however, the change in leadership in both Argentina and Brazil has opened the doors for rapid advancement of international trade deals and access to foreign markets. An important factor in Mercosur’s motivation to strengthen its trade ties with other countries is the economic recession in Brazil and its significant impact on neighboring countries and Latin America in general. Today, Brazil still faces a long road to recovery as it works through the high magnitude of corruption scandals and government mismanagement.

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Despite Protests, IMF Views Peru’s Labor Market Reforms As Strengthening Economic Growth

Peru FlagPeruvian miners recently took to the streets in a strike meant to protest proposed labor reforms. The labor reforms, proposed by President Pedro Pablo Kuczynski’s administration, aim to loosen restrictions on the termination of workers and generally relax regulations.[1] They have been perceived as hostile to workers’ interests by Peru’s mining unions, who claim that the reforms “would loosen safety rules, make it easier to fire workers and shift the burden of paying into an unemployment fund to workers from employers.”[2] Although Union officials called off the strike after the government’s promise to establish a task force creating dialogue regarding the labor laws,[3] some skepticism will remain.

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Trump Administration Unveils NAFTA Negotiating Objectives Ahead of First Round of Talks

NAFTA MembersThis week, the Trump Administration took a major step forward in laying the groundwork for the upcoming renegotiation of the North American Free Trade Agreement (NAFTA).  On July 17, the Office of the US Trade Representative (USTR) released a summary of the Administration’s negotiating objectives for the upcoming NAFTA talks.

Under Section 105 of Trade Promotion Authority (TPA) legislation passed into law in 2015, the Administration is required to publish a detailed and comprehensive summary of the specific objectives with respect to the negotiations, and a description of how the agreement, if successfully concluded, will further these objectives and benefit the United States at least 30 calendar days before initiating formal trade negotiations.

Most notably, USTR’s summary is framed as an overall renegotiation of NAFTA, and does not simply focus on those areas where the Administration is seeking changes to the existing deal.  The negotiating objectives covered a wide range of topics, including trade in goods and services, labor and environment, trade facilitation, trade remedies, and dispute settlement.  According to the summary, the Administration also plans to use upcoming NAFTA talks to address the United States’ trade deficit in goods with Canada and Mexico.

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Argentina Outlook: Optimism runs high

The flag of Argentina pinned on the map. Horizontal orientation. Macro photography.

Since President Mauricio Macri’s election in 2015, the global community has been closely watching South America’s second largest economy for signs of stability and economic growth.

Positive signs persist in this first half of 2017. The OECD June 2017 economic forecast indicates that Argentina has exited recession and points to wide-ranging structural reforms as a boost to inclusive growth.[1]  Additionally, Argentina recently received $9.75bn in bids from investors for a $2.74bn century bond placement with an 8% yield.[2]  The Macri government intends to continue to invest a great deal of time and effort in reintroducing Argentina to the world with a view to fomenting foreign investment having already visited the governments of China and US, and is scheduled to meet with German business leaders and politicians later this year.

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The Dominican Republic’s New Anti-Money Laundering and Terrorist Financing Act

Latin-american-currencies-hanging-from-clothespinIn an effort to bring the Dominican legal framework up to date with new international standards, on June 1, 2017, the Executive Power of the Dominican Republic promulgated the new Anti-money Laundering and Terrorist Financing Act 155-17 (“New Law”). The New Law overhauls the Anti-money Laundering Act 72-02 of June 7, 2002, to allow for a more adequate, coherent and contemporary legal framework.

The New Law aims to regulate more efficiently money laundering and terrorist financing activities according to the latest international guidelines and, to comply with international standards for transparency and transmission of available information regarding economic agents, their activities and their beneficial owners. The enactment of the New Law will likely help the Dominican Republic continue on a path of international cooperation, access to foreign credit and assistance by international organizations.

Some of the key provisions of the New Law introduce the following:

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President Trump Shifts the U.S. Policy Towards Cuba

A-USA-and-Cuba-flag-overlappingSquire Patton Boggs previously reported on the growing fear that the Trump Administration would roll back President Barack Obama’s plan to normalize relations with Cuba. Then-candidate Donald Trump was calling President Obama’s deals with Cuba “one-sided” and beneficial “only [to] the Castro regime.” Last week Friday, at an event at the Manuel Artime Theater in Miami, President Trump officially announced his Administration’s new public policy towards Cuba and fulfilled a campaign promise.

President Trump’s speech culminated in the issuance of a National Security Presidential Memorandum and an accompanying White House Fact Sheet on the U.S. Policy toward Cuba.  In sum, President Trump’s directive:

(a)    Ends economic practices that “benefit the Cuban government” by prohibiting most economic activities with the Cuban military conglomerate, Grupo de Administración Empresarial (“GAESA”). This change is most likely to affect the hotel and tourism industry sectors, since these are the industries said to be largely controlled by GAESA. A list of companies that will be on the “blacklist” will be issued by the State Department at a later date.

(b)    Adheres “to the statutory ban on tourism to Cuba,” by amending regulations related to educational travel (i.e., by ending individual people-to-people travel) and enforcing the strict record keeping requirements related to travel to Cuba.

(c)     Opposes any efforts in the United Nations or other international forums to lift the embargo on Cuba.

(d)    Supports the expansion of internet services and free press in Cuba by convening a task force that will work with non-governmental organizations and private sector entities to examine the challenges and opportunities in those areas.

(e)    Keeps in place the Obama Administration’s elimination of the “Wet Foot, Dry Foot” policy.

(f)      Ensures that engagement with Cuba in general is advancing the interests of the United States.

As explained in the new FAQs issued by the U.S. Department of the Treasury, the policy changes will not go into effect until the Treasury Department and the U.S. Department of Commerce have finalized their new regulations. Importantly, the new Cuba policy changes will not have retro-active effect. Those travel arrangements and commercial engagements that were in place prior to the issuance of the upcoming regulations will not be affected.

Al Cardenas, who heads the Latin America practice group at Squire Patton Boggs and previously served as the former Chairman of American Conservative Union and former Chairman of the Florida GOP, explains:  “Despite the emotional setting and rightful remembrance of the struggles of the Cuban people found in President Trump’s speech, which was focused on a Cuban exile audience, President Trump’s executive action preserves many of the changes made during President Obama’s Administration (some of which were outlined in President Obama’s 2014 Speech). For example, the respective embassies in Washington and Havana will remain open, the U.S. licenses issued to airlines and cruise line companies have been kept, efforts to expand direct telecommunications and internet access will continue, and the additional categories for travel to Cuba for the most part remain in place. While one-step back is the prohibition on U.S. travelers from staying at government-owed facilities, this should be a boon to the family-owned B&B’s and other rentals on the island. It remains to be seen whether there will be a significant drop off in tourist travel to the island.”

Viewed as a whole, President Trump is tightening some areas where improved economic relations with the United States could have benefitted some auspices of the Cuban Government.  Squire Patton Boggs’ Washington and Miami offices are closely monitoring the precise impact these policy changes and the forthcoming regulations may have on U.S. and foreign businesses investing in Cuba.