On December 17, 2018, Mexican President Andres Manuel Lopez Obrador announced an agreement with the business sector and the Bank of Mexico to increase the minimum wage to $102.68 Mexican pesos per day, effective January 1, 2019, representing a 16.21% increase. Such an increase, although not yet published, has been approved by the National Minimum Wage Commission (“CONASAMI” for its acronym in Spanish).

Significantly, the CONASAMI also agreed to create an Economic Wage Zone with a new minimum wage of $176.72 Mexican pesos, effective January 1, 2019.  The Economic Wage Zone consists of municipalities located within the immediate 25 kilometers of the national northern border and other neighboring municipalities.  The new minimum wage applicable to this zone represents an increase of 100% compared to the current general minimum wage in the area.  President Lopez Obrador has stated that the high increase in the minimum wage at the border will not increase inflation, given his administration’s commitment to reducing the income tax from 35% to 20% and the VAT from 16% to 8% at the border.

As reported by the Ministry of Labor, the municipalities included in the new Economic Wage Zone are as follows: (i) Baja California Norte: Ensenada, Playas de Rosarito, Tijuana, Tecate and Mexicali; (ii) Sonora: San Luis Rio Colorado, Puerto Peñasco, General Plutarco Elias Calles, Caborca, Altar, Saric, Nogales, Santa Cruz, Cananea, Naco and Agua Prieta; (iii) Chihuahua: Janos, Ascension, Juarez, Praxedis G. Guerrero, Guadalupe, Coyame del Sotol, Ojinagua and Manuel Benavides; (iv) Coahuila: Ocampo, Acuña, Zaragoza, Jimenez, Piedras Negras, Nava, Guerrero and Hidalgo; (v) Nuevo Leon: Anahuac; and (vi) Tamaulipas: Nuevo Laredo, Guerrero, Mier, Miguel Aleman, Camargo, Gustavo Diaz Ordaz, Reynosa, Río Bravo, Valle Hermoso and Matamoros.

Employers in Mexico should review and adjust their payroll practices to comply with this new increase to the minimum wage.