The Employee Ownership Landscape of Mexico and Argentina
Perspectives from Latin America
As a researcher focused on employee ownership, I’ve developed the beginnings of an understanding of the US landscape on the topic. However, being Hispanic has piqued my interest in exploring employee ownership practices across Latin America. In this article, I will examine the diverse legal and regulatory frameworks that govern employee ownership in two different Latin American countries.
Mexico
Mexico, like several countries, has tax laws to accommodate ESOPs. Employers are required to allocate a portion of pre-tax profits to employees; however, these contributions are non-deductible and taxed upon receipt. In contrast, contributions to employee savings funds, including those structured as ESOPs, can be exempt from taxation for employees and tax-deductible for employers, enhancing the appeal of such plans.
Despite favorable tax treatments for ESOPs, the actual implementation and adoption of employee ownership is limited and underdeveloped. Mexico relies primarily on profit-sharing schemes, which distribute a portion of taxable income to employees without transferring ownership rights. In 2013, Maria Zorrilla wrote:
“It was hard to find recent evidence of legislative efforts towards implementing employee ownership in Mexico, but some have been done in the past. In 1990, the Financial Advisory Services Division of the World Bank explored the feasibility of enabling employees to purchase the SIDERMEX Steel Complex from the Government of Mexico through an ESOP. And in 1993, at the request of the Mexican Ministry of Finance and funded by the Inter-American Development Bank, the Equity Expansion International in collaboration with a highly respected private university, the Instituto Tecnológico de México, prepared a study resulting in ESOP legislation for Mexico, “Plan APOYE” (which stands for Plan de Acciones Para Obreros y Empleados - Plan of Actions for Workers and Employees). However, “Plan APOYE” never became an active part of the legislation. Therefore, my research investigation on other efforts about equity compensation was difficult to come by for this article".
Useful papers for employee ownership in Mexico
William G. Hopping, The Case for Employee Ownership in Overseas Operations of U.S. Multinational Enterprises in Central America, 8 MICH. J. INT'L L. 247 (1987). Available at: https://repository.law.umich.edu/mjil/vol8/iss1/10
Zorrilla, Maria. In Search of Employee Ownership Plans in Mexico. June 2013.
Argentina
Argentina has something called “empresas recuperadas” (recovered businesses). This movement emerged as a response to economic crises, particularly after the severe one in 2001 when Argentina defaulted on its sovereign debt. During this, many businesses went bankrupt or were simply abandoned by their owners. In many cases, workers who were left jobless began to take matters into their own hands by occupying these factories and companies. Although the prevalence and adoption of formal employee ownership plans vary and are not widespread or as structured as in other countries like the United States, I was able to find a few companies that are now employee-owned as a response to economic crises.
Farmacoop, a laboratory recovered by its employees in Buenos Aires
Mielcita Cooperativa Argentina Ltda, a candy and sweets factory run by 88 workers, mostly women in the outskirts of Buenos Aires, where they lost their jobs in mid 2019
In conclusion, while Mexico has tax laws fit for ESOPs, the implementation of employee ownership remains constrained by historical and regulatory challenges. Empresas recuperadas in Argentina is a great example of a grassroots approach where employees reclaim the businesses they once worked for amidst economic turmoil. Looking ahead, there is hope for further development of employee ownership not only in the United States but in other parts of the world where inclusive economies are constructed and employees share the benefits of their own labor.