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01 February 2019
One of the first actions that the new federal government administration undertook after taking office on 1 December 2018 was to prepare the expenses budget in accordance with President Andres Manuel López Obrador's austerity principles. On 15 December 2018 the draft budget was submitted to the Chamber of Deputies, where it was the subject of heated discussions. An amended budget was finally approved on 24 December 2018.
On 10 January 2019 the Federal Telecommunications Institute (IFT) – along with other constitutional autonomous bodies – filed a constitutional challenge against the budget. The IFT argued that the budget will affect its ability to perform its constitutional regulatory functions, and that its allocation in the final budget was $14 million less than the amount that it had requested. This was despite the fact that this requested amount had already been reduced by more than 14% compared with 2018 following an internal review to accommodate the new government's goals.
In sum, the approved budget provides for a 25% reduction in nominal terms compared with Budget 2018 and a 37.5% reduction in real terms since 2014.
According to the IFT, the budget will result in it having insufficient resources and has thus put its effective functionality at risk. This is particularly true for the IFT's main responsibilities, such as the promotion of the efficient development of the telecoms and broadcasting sector, and its duties as the economic competition authority for both telecoms and broadcasting matters.
In addition, public servants are now prohibited from earning more than López Obrador, so the budget has significantly reduced the salaries of IFT officials. The IFT had also challenged this decision in its court action.
The IFT has stressed that the telecoms and broadcasting sectors have positively contributed to the country since the 2013 reforms. For example, prices of communication services have decreased by more than 25%, with mobile services prices having decreased by approximately 43% in the past five years. Further, access to mobile broadband has tripled, the impact of which can be seen in a wide variety of telecoms, broadcasting and TV services. The IFT fears that the budget will halt such benefits and compromise their continuity.
Other autonomous bodies, such as the Federal Economic Competition Commission and the Bank of Mexico, have submitted similar constitutional challenges against the budget.
The IFT's concerns that the budget will affect its activities in 2019 and damage its autonomy are well founded. The Supreme Court will finally decide the challenges of all constitutional bodies within the coming months.
For further information on this topic please contact Federico Hernández Arroyo at Hogan Lovells BSTL by telephone (+52 55 5091 0000) or email (firstname.lastname@example.org). The Hogan Lovells website can be accessed at www.hoganlovells.com.
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