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New Standards in Mexico for Gifts & Hospitality with Government Officials?

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Right out of the box, the new President of Mexico Andrés Manuel López Obrador (AMLO) has made clear his administration will have little patience for hospitality dealings between the private sector and public officials. His pronouncements raise questions about how companies will conduct themselves going forward, since zero tolerance is not always easy to implement in practice.

In his December 1, 2018 inaugural speech, incoming AMLO referenced corruption almost 20 times and specifically addressed gifts and hospitality restrictions with Mexican government officials. He stated, “Officials at the Ministries of Finance, Communications, Energy, and other agencies will be prohibited from attending parties, meals, sports events, or trips with government contractors, large contributors, providers of government services, or investors linked to public services.” He referenced that all government officials must comply with codes of ethics and prioritize austerity measures.

These pronouncements are relevant because some of the specific rules to date in Mexico on hospitality with government officials have been unclear. They mean that, while most other jurisdictions, including the United States under to the FCPA, permit the provision of reasonable forms of hospitality to government officials if directly related to the promotion, demonstration, or explanation of a company’s products or services, or if incurred pursuant to the execution or performance of a contract, Mexico is becoming the exception.

National Anti-Corruption System. On July 18, 2016, the Mexican Congress approved legislation that introduced Mexico’s new National Anti-Corruption System. A key component of that system is the General Administrative Liabilities Act (Ley General de Responsabilidades Administrativas or the LGRA). The National Anti-Corruption System became fully effective in July 2017. Violations of the LGRA can result in severe penalties, including criminal liability, fines, and ban from public service and public procurement.

The National Anti-Corruption System provided some, albeit incomplete, guidance on gifts and hospitality expenditures for government officials. Article 52 of the LGRA prevents public officials from accepting gifts or compensation from any person or organization, and Article 66 prohibits private parties from providing gifts to public officials. There is no de minimis exception to these rules, raising questions about what might qualify as a prohibited gift. As a result, most companies operating in Mexico have restricted the giving of all gifts.

The difficulty has been that LGRA does not explicitly address other forms of hospitality to government officials, including meals, entertainment, and travel. Mexican enforcement officials have not yet opined publicly as to whether such hospitality is to be considered gifts under the law and therefore prohibited. Nor has it been clear how Mexican enforcement and judicial authorities will treat hospitality activity in practice under the new rules. As a result, aspects of the LGRA have been subject to interpretation.

The resulting uncertainty has left companies to make their own judgement calls about the conditions under which they will permit meals, entertainment, and travel expenditures for Mexican government officials. Some have prohibited that conduct as well. Others have elected to permit, under limited circumstances and with heightened controls, certain forms of non-gift hospitality with government officials.

Developments under AMLO. AMLO’s views do not yet have the force of law, but they do suggest caution when companies engage in hospitality-related interactions with government officials. The pronouncements signal that the incoming administration could apply an expansive interpretation to the arguably vague hospitality restrictions under the LGRA.

As a result, not only are companies now prohibiting gifts. They are also prohibiting entertainment engagements and travel expenditures on government officials, if they had not done so already. When meals with government officials take place, they are requiring each participant to pay his or her own costs.

In practice, companies might find that these new standards are not so easy to implement in all circumstances. Do they mean that companies cannot give lucites or other nominal gifts to government officials to commemorate a commercial deal? Do they mean they cannot invite government officials to attend company holiday parties where light food and drinks are served? What if companies receive written approval from the government agencies themselves that these minor engagements are permissible? What happens if a government agency itself asks a company to pay for travel of an official for inspection purposes due to the limited resources available to the agency?

Companies will likely respond to these questions in different ways until AMLO’s administration begins to take concrete action.

The opinions expressed in this post are those of the author in his or her individual capacity and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author’s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2019 FCPAméricas, LLC


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