House of Deputies generally approves the extinction of 109 public trusts

Trusts have been used for several years in Mexico as a way of doing business or creating organizations that manage an estate for certain purposes previously determined. This figure has been used in both the private and public sectors, and it is regulated by the General Law of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito), setting forth the parameters for public trusts in the Organic Law of the Federal Public Administration (Ley Orgánica de la Administración Pública Federal) and in the Law of Parastatal Entities (Ley de Entidades Paraestatales).

Public trusts are entities created by the federal government, or some dependency of the federal public administration to carry out a legal and determined purpose, to obtain certain economic and social development through the management of resources owned by the federal government and that become managers by a trustee.

In this sense, on April 2, the “Decree ordering the extinction or termination of public trusts, public mandates and similar” was published in the Official Federal Gazette (DOF), by means of which the Mexican President, Andrés Manuel López Obrador, instructed the Federal Public Administration agencies and entities, the Office of the President of the Republic and the Agrarian Courts to carry out the necessary processes to extinguish or terminate all public trusts without organic structure, mandates or analogous of a federal nature.

Excluded from such Decree were those public trusts created through Law or Legislative Decree and whose extinction or termination requires constitutional or legal amendments, and legal instruments that serve as public debt mechanisms, or that have the purpose of attending health emergencies or complying with labor or pension obligations.

It is important to mention that, at the time of the publication of the above mentioned Decree, the Ministry of Finance and Public Credit had a registry of more than 350 public trusts.

Last May, the Movement for National Regeneration Party (Partido de Movimiento de Regeneración Nacional) (MORENA) presented a reform initiative before the Permanent Commission of the House of Deputies to be able to extinguish those trusts which the Decree dated April 2 could not affect.

According to the initiative presented by the deputies of MORENA, the main objective of the elimination of public trusts is to eliminate the opacity and discretion in the use of public resources and to promote transparency, accountability and responsibility.

After various obstacles and amendments, the proposal to eliminate 109 public trusts was discussed by the plenary session of the House of Deputies, and was generally approved with 242 votes in favor, 178 against and 7 abstentions. However, the discussion of 398 article reservations is still pending.

It is important to mention that once the discussion of the initiative presented by MORENA in the House of Deputies is over, it will have to be discussed in the same way in the Senate, according to the legislative process of our country.

In case the proposal of MORENA is approved in the same way in the Senate, some of the 109 trusts that will be eliminated will be

• Technological Innovation Fund;
• Fund for the Promotion and Support of Scientific and Technological Research in Biosafety and Biotechnology;
• Sectoral Fund for Research in Agriculture, Livestock, Aquaculture, Agro-biotechnology and Phytogenetic Resources;
• Sectoral Fund for Research on Airport Development and Air Navigation;
• Sectoral Fund for Educational Research;
• Climate Change Fund;
• Trust to promote access to financing for MSMEs and entrepreneurs;
• Fund for the Protection of Human Rights Defenders and Journalists
• Natural Disasters Fund;
• National Fund for International Cooperation for Development;
• Fund for High Performance Sports;
• Trust Fund for Investment and Stimulus to Cinema (FIDECINE);
• Rural Finance Fund; among others.

Finally, it is important to highlight what has been mentioned several times by the Mexican President, Andrés Manuel López Obrador, who emphasizes that the resources granted through the public trusts subject to elimination will not cease to be provided; on the contrary, in case the initiative is approved in both houses, they will now be delivered by the federal government directly, without intermediaries.

Should you have any questions or require advice in relation to the above, please do not hesitate to contact any of our partners or associates.

Yours sincerely,

Cannizzo