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The fifth edition of Going Global is now available, spotlighting the mid-market outlook in Latin America.
This edition explores how geopolitical shifts, regional reforms, and emerging investment priorities are shaping opportunities for mid-sized businesses across the region.
Download the latest magazine here.
Latin America’s evolving investment landscape
Amid increasing global tensions and shifting international policy, Latin America is playing a more central role in the global economy. In this edition, we examine the implications of new trade policies, regional development programmes, and shifting investor interest—from US-led trade repositioning to China’s capital reallocation.
Featured articles include an analysis of Argentina’s new investment framework, RIGI, designed to attract large-scale foreign direct investment, and Mexico’s ‘Plan Mexico’ initiative, which focuses on economic modernisation and cross-border trade.
Kreston Global ranks as the 17th largest accounting network in Latin America, with 24 member firms and over 1,300 professionals across 17 countries. Our teams offer deep local insight and global perspective to help businesses navigate complexity and seize opportunity in this fast-changing market.
Our research shows that businesses in the region are reassessing their strategies in response to new investment flows and regulatory trends. From trade realignments to sector-specific incentives, mid-sized enterprises must stay agile and informed. Across industries, adaptability and regional knowledge are proving essential to staying competitive.
We explore these themes and more in this edition. You can download the full magazine or browse the individual articles online here:
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Large-scale investors can capitalise on the RIGI investment opportunity in Argentina, a two-year window backed by a regime that guarantees long-term political and economic stability. While Argentina is recovering from its economic woes, it still has issues with how stable a country it is perceived to be for investors. In an effort to decouple its economic system from its political one, Argentina has implemented the Incentive Regime for Large Investments (Régimen de Incentivo para Grandes Inversiones or RIGI).
While many countries offer financial incentives for large-scale projects, the RIGI is specifically designed to create conditions of predictability, stability, and legal certainty for large projects in Argentina. For instance, the RIGI guarantees regulatory tax stability for up to 30 years, providing long-term fiscal security for investors.
Politically, Argentina already has a legal framework in place to prevent the state from interfering with large projects, in the form of its Mining Investment Law, enacted in 1993, which has remained unchanged despite shifts in political leadership. This law assures that mining projects can continue without disruptions from sudden changes in policy. The RIGI aims to replicate this framework across other sectors, insulating private projects from direct state control.
The RIGI itself was created through a formal law, meaning it can only be modified or repealed by a new law passed by the Argentine National Congress, one of the three independent branches of government. For a new government to alter or eliminate the RIGI, it would need to secure approval from both the House of Deputies and the Senate, requiring a majority vote across various political parties.
Argentina is banking on the RIGI to give it the boost it needs to position itself as a global supplier in several sectors. Historically, the country has been a global leader in agriculture and livestock. In recent years, it has made strides in the oil and gas sector, particularly with the discovery of Vaca Muerta, the second-largest natural gas reserve in the world and the fourth-largest unconventional oil reserve. In mining, Argentina shares the Andes mountain range with Chile, which is one of the world’s top mining countries, producing copper, gold, silver, and lithium. While Argentina’s mining sector is currently underdeveloped, it has the potential to rival or even surpass Chile as a global mining powerhouse, particularly with the increasing global demand for lithium.
‘As the Regime’s incentives begin to take effect and local industries scale up, Argentina could emerge as a more competitive player in global markets, particularly in the oil and gas, mining, and agricultural sectors,’ said Ricardo Gameroff, Managing Partner of Kreston BA Argentina. ‘The timeline for this depends on the successful implementation of the RIGI projects, infrastructure development, and the cultivation of a skilled workforce. In the short to medium term, Argentina is likely to see growth in niche areas, but in the longer term, there is significant potential for the country to become a key player on the global stage.’
Investors keen to take advantage of the RIGI need to move quickly – the scheme is only open for two years.
‘The two-year window is a strategic decision to generate a quick influx of investments and restore confidence in Argentina’s economy,’ said Esteban Babino, CEO of Kreston BA Argentina. ‘With the country needing to rapidly align itself with global investment standards and attract foreign capital, the government is offering a short window to fast-track investments. The need for dollar reserves and the current economic climate, which demands a boost in economic activity, makes this window critical to jumpstart key projects and drive the country’s growth in the near future.’
The RIGI has opened significant opportunities for Kreston BA Argentina, particularly as companies looking to invest in Argentina will require a wide range of specialised services to establish and grow their operations. These services include valuations, due diligence, tax planning and compliance, business law advisory, and business process outsourcing—all essential to ensure smooth market entry and long-term sustainability.
‘As more companies consider setting up operations in Argentina, there will be an increasing demand for advisory services that help them navigate the complexities of local regulations and financial requirements,’ said Gameroff. ‘Moreover, as these businesses grow and expand, there will be a need for audits and risk management consultancy, areas where Kreston BA Argentina can provide considerable expertise.’
According to Babino, Kreston BA Argentina is already seeing an uptick in the number of proposals and inquiries it receives, as more firms recognise the importance of partnering with a local firm that combines global expertise with regional knowledge. This is an excellent opportunity for Kreston BA Argentina to expand its market presence. As Argentina’s fortunes rise under the RIGI, so does Kreston’s and its partners.
Latin America‘s trade is increasingly caught in a balancing act between two of its biggest investors, China and the U.S. As U.S. foreign policy grows more aggressive, creating the risk of a trade war with China, the region needs to tread carefully.
In 2023, China became both Brazil’s largest export market and the main source of imports. In 2022, trade between the two countries reached US$ 157 billion. You would think this could only be good news, however, Brazil is having to exercise caution in its relationship with China as it seeks to avoid tensions with the US.
So far, the balancing act seems to be working. ‘Despite possible divergences between Brazil’s economic policy and the strategies of Trump’s new administration, there is no sign of reduced Chinese or American investment in Brazil,’ said Tatiana Andrade, Partner, Kreston KBW Auditores. ‘This is due to Brazil’s importance as a major commodity exporter to both countries and as a significant import market, with China as its largest supplier and the US in third place as of 2023.’
Brazil is being cautious about joining China’s Belt and Road Initiative, while seeking more favourable trade terms with China. As a leading BRICS (Brazil, Russia, India, China, and South Africa) bloc member, Brazil faces potential risks, particularly concerning tariffs, if BRICS countries decide to replace the dollar in global trade. However, South Africa and India have denied any intent to replace the US dollar as a reference currency for BRICS.
Jorge Oropeza, Transfer Pricing Partner at Kreston BSG Mexico, is concerned that the tariffs imposed by Trump could have a significant impact in the medium and long term.
‘The price increase caused by these tariffs, both on manufactured goods and agricultural products, could lead to inflationary pressures in the US, affecting consumers’ purchasing power and potentially reducing demand,’ he warned. ‘This scenario could trigger a cycle of lower exports to the US, leading to a slowdown in investment in Mexico. In the long term, the instability generated by protectionist trade policies could also make investors more cautious, which would impact economic growth expectations and the investment climate in the country.’
However, Oropeza pointed out that Mexico could consider a strategy of diversifying its markets and focusing more on Latin America, where growth potential exists, particularly in sectors such as manufacturing, technology, and e-commerce. By strengthening trade ties with other countries in the region, Mexico could offset the negative impact of US tariffs and reduce its dependency on the North American market.
Trump’s aggressive stance on tariffs might just be enough to push Mexico into the BRICS bloc. Becoming a BRICS member could offer Mexico a platform to access new markets and sources of investment. By joining this group, Mexico could benefit from strategic alliances with emerging economies that are expanding. This would further diversify Mexico’s trade relationships and could mitigate the effects of global economic uncertainty, allowing the country to seize growth opportunities in markets outside of North America.
At the moment, Mexico is still very US-centric in its approach, and it is already slowing down investment in the country.
The measures taken by the Mexican government to review products more rigorously from China, both at customs and in stores, is a response to Trump’s pressures on combating unfair trade practices. ‘This approach has generated a climate of uncertainty, which could slow the arrival of Chinese investment in Mexico, particularly in sectors like manufacturing and technology, which are sensitive to trade tensions,’ said Eduardo Solana, Manager of Transfer Pricing for Kreston BSG Mexico.
While Mexico could benefit in the short term by aligning with US expectations, Solana pointed out that there are risks in this approach. ‘Increased reviews and controls could create friction with Chinese companies operating in the country, affecting the flow of foreign direct investment,’ he said. ‘In the long term, if tensions between the US and China escalate, Mexico may face a dilemma: either capitalise on the redirection of Chinese investment to the region or confront a slowdown in trade relations with China that limits its growth potential.’
The Kreston network’s ability to collaborate is proving invaluable at the moment, as firms share regional expertise. This network of collaboration optimises tax and accounting compliance, and also supports client expansion during such turbulent times.
The Mexican government has launched Plan Mexico, an ambitious economic strategy aimed at attracting foreign investment, modernising infrastructure, and promoting sustainable business practices. Published in the Official Gazette of the Federation, the plan introduces significant fiscal incentives and regulatory reforms designed to drive economic growth and enhance Mexico’s competitiveness on the global stage.
A key focus of the plan is to make Mexico more attractive to international investors by streamlining bureaucratic procedures and removing barriers to entry. At the same time, the government is committing substantial resources to infrastructure projects in sectors such as energy, transportation, and telecommunications. By improving these critical areas, officials hope to create a more efficient business environment that will encourage long-term investment and economic expansion.
To support this growth, the plan also introduces several fiscal measures designed to reduce the tax burden on businesses and stimulate investment. Companies investing in priority sectors will be able to claim additional tax deductions of up to 30% for infrastructure, machinery, and equipment costs. Additionally, businesses that establish operations in newly designated Special Economic Zones (ZEEs) will benefit from a reduced corporate tax rate of 20% for their first ten years, a significant decrease from the general 30% rate. Other tax benefits include accelerated asset depreciation for firms in clean energy and technology sectors, as well as exemptions from local payroll and property taxes for up to five years in select regions.
Sustainability is also a central pillar of Plan Mexico. The government has introduced a range of incentives to encourage businesses to adopt environmentally friendly practices. Companies investing in renewable energy projects, such as solar, wind, or geothermal power, will be eligible for tax credits covering up to 25% of their total investment. Businesses purchasing clean technologies, including electric vehicles and energy-efficient equipment, will be able to deduct these expenses immediately. Meanwhile, firms that successfully reduce their carbon emissions will receive tradable carbon certificates, which can be used to offset tax liabilities or sold on international markets. The plan also includes financial incentives for businesses implementing circular economy practices, such as recycling and material reuse, through reduced environmental duties.
A key element of the strategy is the creation of four Special Economic Zones (ZEEs) aimed at driving regional development and attracting industry-specific investment. The Southeast ZEE, covering states such as Tabasco and Chiapas, will focus on renewable energy, agribusiness, and sustainable tourism. The Northern ZEE, which includes regions like Nuevo León and Coahuila, will prioritise advanced manufacturing, logistics, and information technology. The Pacific ZEE, spanning Guerrero, Oaxaca, and Michoacán, will concentrate on port infrastructure, sustainable fishing, and clean energy initiatives. Meanwhile, the Central ZEE, covering Hidalgo, Puebla, and Tlaxcala, will support the growth of the automotive, textile, and agribusiness sectors.
The implementation of Plan Mexico is expected to create significant opportunities for businesses, but it also brings challenges. Experts recommend that companies assess whether relocating or expanding into Special Economic Zones could provide financial advantages. Businesses should also review their tax strategies to ensure they maximise available deductions and reduced rates. Additionally, adopting sustainable practices could unlock further incentives while aligning operations with global environmental standards. Given the complexity of the new tax regulations, firms are advised to seek expert guidance to ensure compliance and avoid potential penalties.
With Plan Mexico, the government is positioning Mexico as a leading destination for international business while driving domestic economic expansion. The combination of tax incentives, infrastructure development, and sustainability measures is expected to attract significant investment. However, businesses will need to navigate the evolving regulatory landscape carefully to take full advantage of the opportunities presented by this sweeping economic reform.
March 20, 2025
Kreston FLS in Mexico is pleased to announce that from the 3 March, they have added Corporate Finance Consulting services to their portfolio.
Kreston FLS have invited CPA José Luis Madariaga Cervantes to lead the Corporate Finance Consulting services (FCA) division. The firm is confident that his expertise will bring significant benefits to their clients, making the firm more comprehensive, integrated, and robust.
José Luis career’s spanning over forty-two years, forty of which have been in the financial market. He began as a private banker and established himself as a successful broker in the Mexican capital market.
His curriculum includes roles such as Director of Commercial Banking and subsequently Director of Corporate Banking at Banco Mexicano, now Banco Santander, where he managed credit products, electronic banking, international banking, foreign exchange, etc.
For six years, he served as a partner in an M&A firm. He has been the Commercial Director at Unifin Financiera, which became the largest non banking financial company in Latin America. His tenure at UNIFIN led the institution to place credits and pure leasing.
A summary of his professional experience in the financial sector:
Professional experience in the non-financial sector:
Enrique Pastor, Director Partner at Kreston FLS Mexico City, commented: “We are confident that this service will be highly appreciated by our current and future clients, as José Luis will bring new options to solve corporate finance problems, with the high-quality standards and trust of our firm. José Luis will now provide services including company valuation for purchase or sale, capital raising, financing through his relationships with investment funds, and the engineering of mergers, acquisitions, and spin-offs, as well as financial engineering, thereby completing a segment of services that offer concrete solutions for our clients.”
With this important addition, Kreston FLS (Mexico) provides solutions for both domestic and foreign investors, as they can not only establish a company but also buy one or set up joint ventures or other forms to achieve their objectives.
For more information about doing business in Mexico, click here.
November 20, 2024
Argentina’s 2025 debt crisis looms menacingly if it does not take decisive action. A challenging 12 months lie ahead for President Javier Milei. A point highlighted by a recent Financial Times analysis. In 2025, the country is set to meet debt maturities exceeding $14 billion, while its net reserves in the Central Bank are currently in negative territory. Read the article written by Ricardo Gameroff, Managing Partner of Kreston BA Argentina, in FDI Intelligence, or read the summary below.
Despite recognising the fiscal efforts of the current government and the credibility it has built so far, credit rating agency Moody’s warns of a likely need to renegotiate part of Argentina’s foreign debt next year. This outlook is based on the country’s narrow external balance, a constraint that Moody’s projects will persist through at least 2026.
The prospect of another default—an event that has repeatedly impacted Argentina’s economy—raises concerns among investors and the global financial community. Given this situation, President Javier Milei’s administration has prioritised fulfilling these financial obligations, understanding that a new default would severely damage Argentina’s credibility and significantly restrict its access to global financial markets.
The government’s strategy to prevent a new default relies on a zero-deficit budget planned for 2025. This initiative mandates that expenditures will not exceed revenues, marking a shift toward responsible fiscal management aimed at restoring investor confidence. Milei’s administration has pledged not to take on new debt or resort to monetary issuance to fund public spending, focusing instead on maintaining a balanced budget. This fiscal discipline is essential, as any surplus will be directed toward debt repayment, reducing the need for additional borrowing.
President Javier Milei’s economic approach has brought Argentina’s macroeconomic indicators back to stability with surprising speed. Looking ahead to 2025, the outlook is encouraging, with GDP growth forecasted at 5% as foreign investment incentives take effect. Our recent article on investing in Argentina outlined some of these opportunities that have piqued the interest of foreign investors. At the heart of these efforts is the Large Investment Incentives Program (RIGI), which offers significant tax, foreign exchange, and customs benefits, along with regulatory stability for 30 years, for investments over $200 million in key sectors like mining, energy, technology, oil & gas, construction, tourism, and forestry.
A recent example of this policy in action is the $4 billion investment announced by BHP in partnership with Canada’s Lundin mining group, a clear show of confidence in Argentina’s investment climate. These mining projects bring foreign currency into the economy while expanding national production and exports, which in turn helps build dollar reserves.
In addition, the government’s Undeclared Assets Program aims to encourage people to report previously unregistered assets. This effort not only helps grow foreign currency reserves and combat tax evasion, but also strengthens domestic investment. So far, around $14 billion has been declared, with hopes of reaching $40 billion by the end of the program. While these funds can’t be used directly to pay down international debt, they’re a crucial boost for domestic sectors like agriculture, mining, energy, construction, and manufacturing. This influx of investment is expected to kickstart a cycle of job growth, higher consumption, and increased exports, that will bring in more foreign currency.
The projected GDP growth for 2025 also aligns with an ambitious goal to reduce inflation, one of Argentina’s biggest economic hurdles. The target is to bring annual inflation down to 18.3% next year—a significant drop from the current rate of 236.7% as of August 2024. While ambitious, reaching this goal would provide essential stability and improve purchasing power for Argentinians.
Signs of progress are already visible. Over the past year, wholesale inflation has dropped from 54% in December 2023 to just 2% monthly, while retail inflation has fallen from 25.5% to 3.5%, with expectations that this downward trend will continue.
On the political front, both the International Monetary Fund (IMF) and the United States have expressed their willingness to support Argentina. With concerns that economic failure could fuel a return to populist governments, international powers are leaning toward backing Argentina’s current financial stabilization policies. This support could come through new funding or debt refinancing, which would give Argentina’s government the breathing room needed to prevent a financial crisis.
Following a recent Financial Times article, Luis Caputo’s meeting with IMF Director Kristalina Georgieva in Washington strengthened these signals of international support. Georgieva highlighted Argentina’s economic progress, noting a “shared understanding of the country’s priorities,” and opened the door to a new IMF program, potentially adding funds to bolster Argentina’s Central Bank reserves.
The interactions have been notably positive, with Georgieva reiterating the IMF’s commitment to supporting Argentina’s ongoing structural reforms and exploring a financing package that would relieve pressure on Central Bank reserves.
Caputo’s recent recognition as “Finance Minister of the Year” by LatinFinance and Wall Street bankers underscores the confidence of the international financial community in Argentina’s economic strategy. This backing reflects a shared consensus among major financial players on the importance of Argentina’s reforms in meeting its obligations without default.
Despite progress, significant challenges remain. The IMF has emphasized the need for additional reforms, including greater exchange rate flexibility, a unified exchange rate, and the lifting of currency controls that restrict foreign currency purchases and outbound capital flows. These measures would enhance Argentina’s currency market flexibility and improve its international market access.
While the IMF sees these reforms as essential for long-term stability, the Milei administration is concerned that implementing them immediately could trigger another inflationary surge, risking recent economic gains. This tension highlights the government’s goal of avoiding inflationary pressures that could destabilize Argentina’s political and social landscape.
Despite these hurdles, Argentina’s 2025 economic outlook remains positive. Milei’s strategy, anchored in fiscal discipline, inflation control, and foreign investment incentives through the RIGI program and others, is showing promising results. Support from the IMF and the international financial community further reinforces confidence in Argentina’s ability to meet its obligations and avoid a default.
If the government can sustain its structural reforms and balance the IMF’s demands with internal stability, Argentina’s growth and fiscal balance goals appear within reach. A solid investment strategy, backed by international markets, offers Argentina a real opportunity to kickstart its recovery and move past its cycle of recurring crises.
If you would like to speak to an expert about Argentina, please get in touch.
October 15, 2024
Nearshoring, particularly in Mexico, is becoming an increasingly popular answer for US firms who are struggling with a labour shortage. US companies are looking south of the border as they search for new ways to stay profitable. A big push to nearshore in Mexico comes from the labour market, but Veronica Quintana, Director at CBIZ, finds that strong cultural links between Mexico and America are also adding to the allure.
“We increasingly have more clients coming to us looking for advice on nearshoring,” she said. ‘Some still have family in Mexico and they want to invest in their hometowns. I have seen an uptick in US businesses wanting to invest in tequila and spirits. However, US firms across the board are finding it difficult to be profitable due to the rising costs of materials and labour. They have mentioned that perhaps it is best to invest in Mexico, where the labour market is cost-efficient and highly motivated.’
There is a national labour shortage in the US. Many baby boomers are retiring, and others left the workforce during the pandemic. Offshoring can look different for each company, depending on the industry and their reasons for offshoring.
‘Companies are mostly looking to reduce or optimise costs, access specialised skills, staff augmentation, and effective scaling,’ said Quintana. ‘Offshore employees are often more flexible, which is important if business conditions change, and they need to downsize quickly and efficiently.’
Mexico has a skilled workforce with lower labour costs, and Quintana pointed out that this is especially true in the manufacturing industry.
‘The close proximity to the US also makes it easier to transport goods and materials quickly and at a cost savings,’ she said. ‘The United States-Mexico-Canada Agreement (USMCA) provides several benefits, such as reducing or eliminating tariffs, US firms turn to nearshoring for labour streamlines customs procedures, and provides market access to a large consumer base.
India is another country that has seen an increase in offshoring. They also have a talented labour force, especially in the business field, and CBIZ has personal experience here that it can draw on to help clients.
‘We have had success offshoring some our income tax preparation to India,’ said Quintana. ‘We have worked with their team for several years now, trained them on our processes, software and procedures. They do good quality work, and that gives us the confidence and assurance that offshoring has been a success.’
The pandemic and growing instability in the world’s geopolitics has also pushed nearshoring up the list of priorities for US companies. The disruption to supply chains during the pandemic made the thought of investing in manufacturing sites closer to customers much more attractive. More recently, Russia’s invasion of Ukraine and growing tensions between Washington and Beijing have made nearshoring even more of a priority.
Over the past few years, nearshoring from the US has created a boom in Mexico. US imports from Mexico totalled US $455 billion in 2022, up nearly 19% from the previous year and up 64% from 2012, according to the United States Census Bureau. At the same time, the share of Mexico’s imports from China went from 1% in 1994 to 20% in 2022 according to a recent study by academics Laura Alfaro and Davin Chor.
New manufacturing plants could add an additional 3% to the country’s GDP over the next five years as well as over 1 million jobs, according to a recent study by Deloitte.
New manufacturing plants could add an additional 3% to the country’s GDP over the next five years as well as over 1 million jobs, according to a recent study by Deloitte. The Mexican government is cashing in by making the country’s tax laws more favourable to foreign companies. For instance, as of October 2023, international electric vehicle manufacturers could claim an 86% tax deduction on investments in the country.
US investors have been made nervous, however, by a bill of judiciary reforms that has been passed by the Mexican government, that makes Mexico the first country to allow judges to be elected rather than appointed.
Several big-name investors have come out against the reforms, including US investment banking giant Morgan Stanley. More recently, Julius Baer warned that rating agencies could change Mexico’s creditworthiness as soon as next year if the judicial reform is approved. But Mexico’s outgoing president Andrés Manuel López Obrador has hailed the approval of controversial reforms, saying they would be an “example to the world”.
Obrador who left office on October 1, 2024, accuses the current judicial system of serving the interests of the political and economic elite. ‘It’s very important to end corruption and impunity,’ he said.
Investors will be watching the market closely, as energy and tax reforms would stall the nearshoring boom if they are not followed through. But US firms seem to be happy to be moving South, for now.
September 19, 2024
SAN Group is a multinational corporation that operates across five continents, offering innovative solutions in animal health, crop protection, and food safety. Their business strategy centres on three key pillars: Plant Health, Animal Health, and Planet Health. This structure supports their long-term vision of contributing to a sustainable future.
With ambitions to expand into Mexico, SAN Group required the guidance of a professional services firm with both local expertise and global insight. They sought a partner who could navigate Mexico’s regulatory landscape while aligning with their global operational standards.
When SAN Group decided to establish its operations in Mexico, they faced several challenges. From navigating complex legal and tax frameworks to managing the operational setup, they needed a partner who could provide local insight while ensuring global business continuity. Establishing a new entity required expert knowledge of local compliance, tax regulations, and business structuring to ensure a smooth and cost-effective entry into the market.
SAN Group partnered with Kreston FLS, who provided tailored guidance from the outset. With Enrique Pastor, Partner at Kreston FLS, leading the collaboration, the firm worked closely with SAN Group’s headquarters and Brazilian teams to devise an operational structure for Mexico that minimised costs and risks while maximising benefits.
Kreston FLS advised on the optimal corporate structure, aligning with SAN Group’s global values and business strategy. They ensured compliance with local laws, provided monthly financial reports, and offered expert tax advisory services to meet the stringent demands of Mexican regulatory authorities.
Since 2016, Kreston FLS has been an integral partner in SAN Group’s successful expansion into Mexico. They delivered professional and timely advice, ensuring that SAN Group’s operations in Mexico remained compliant, efficient, and strategically aligned with their global objectives. By managing financial reporting, tax advisory, and compliance, Kreston FLS enabled SAN Group to focus on their core business and growth.
“Kreston supported us in implementing our business unit in Mexico, always working with great professionalism and transparency.” – Ricardo Felix, Regional Finance Director, AMERICAS
September 16, 2024
Laboratorios Karizoo Mexico SA de CV is a part of Sequent Alivira, a global pharmaceutical leader with operations across more than 100 countries. The company specialises in pharmaceutical products for the animal protein industry and is headquartered in Mumbai, with its financial office in Ireland. It has a strong presence in Latin America through its operations in Mexico and Brazil.
Sequent Alivira is the leading pharmaceutical company in India, with recognition from the FDA, USDA, and EU as a certified “safe company.” This approval allows the business to manufacture and distribute its products globally. The company operates eight research and development centres, enabling it to innovate and create new pharmaceutical products for the animal health sector.
Laboratorios Karizoo Mexico SA de CV was undergoing a significant internal restructuring. As part of this transformation, the company sought to outsource its financial management processes. This presented a challenge, as the company needed to find a reliable partner capable of handling complex legal, financial, tax, and HR functions while allowing them to focus on core business activities.
Kreston FLS, led by Enrique Pastor, stepped in to provide a comprehensive solution. After carefully assessing Laboratorios Karizoo’s needs, Kreston FLS developed a tailored outsourcing strategy that addressed their financial management requirements.
The collaboration covered a wide range of services, including legal support, financial management, tax compliance, transfer pricing, human resources, and IT solutions. This approach ensured that Laboratorios Karizoo could optimise its resources and operate with full confidence in the accuracy and efficiency of its financial processes.
The shift from an in-house financial management model to a fully outsourced one was seamless. Laboratorios Karizoo Mexico SA de CV now operates with optimised resources, allowing the company to focus on growth and innovation. The outsourcing model provided by Kreston FLS has become a critical part of the company’s operations, ensuring compliance, efficiency, and strategic financial management.
“Working with Kreston FLS for a long time now has been an experience of constantly improving our business. They have supported us across diverse areas—legal, finance, tax, transfer pricing, HR, and IT—allowing our company to operate in a professional, simple, and confident manner. Kreston FLS is more than just an outsourced consultant; they have become our partners in growth.” – Alejandro Wainstein, Laboratorios Karizoo Mexico SA de CV
If you are interested in doing business with us, contact us here.
September 5, 2024
Stanton Chase is a global leader in Executive Search and Leadership Advisory services, dedicated to providing exceptional value to clients through high-quality, customer-focused solutions. As the company expanded, managing the complexities of accounting, taxes, and financial reporting became increasingly difficult. In particular it was challenging to stay compliant with new tax regulations, which impacted the business’ operational efficiency and growth.
Kreston FLS was engaged to help the business overcome these challenges, and use their expertise in managing complex accounting tasks, tax calculations, and financial advisory service. The main Kreston contact Enrique Pastor, worked closely with the finance team to integrate the accounting solutions into Stanton Chase’s business operations.
As a result Stanton Chase has seen considerable performance improvement in all aspects of financial business management, including more accurate financial reporting and full compliance with all tax laws and regulations, reducing the risk of penalties. The streamlining of financial processes has save the business considerable time and resources allowing them to concentrate on their core business, and Kreston FLS is now an essential extension of their management team.
Mónica Brogeras, Managing Partner, Stanton Chase Mexico commented, “We have been working with Kreston for 20 years now for their accounting services and fiscal advisory, and the experience has been exceptional. Enrique and his team have become an extension of our business, providing timely responses, accurate information, and invaluable support. Their trustworthy service has significantly improved our operational efficiency and compliance.”
If you are interested in doing business with Kreston Global, contact us here.
Ricardo is a fraud, audit and risk expert with over two decades at Ernst & Young (EY), where he served as an Audit and Forensics Partner across Canada, Chile, and Argentina. He led major clients in utilities, retail, manufacturing, and mining sectors, including Coca-Cola, McDonald’s, Siemens, Fluor Daniels, and others. Ricardo is a Certified Public Accountant (CPA) in the United States, Chile, and Argentina, a Certified Fraud Examiner (CFE), and holds an MBA designation. He’s also a university professor at Universidad de los Andes and a published author on occupational fraud.
June 10, 2024
Ricardo Gameroff, Managing Partner at Kreston BA Argentina and Global Audit Business Development Director at Kreston Global, emphasises the crucial role of internal audit in combating cyber threats. His article in the Audit & Risk magazine, the Chartered IIA’s publication, discusses how evolving internal audit practices enhance resilience against threats like ransomware, phishing, BEC attacks, and brand impersonation through meticulous risk assessment and proactive monitoring. Click here to access the complete publication, or read the summary below.
Internal audits have always played a key role in mitigating cyber risks and protecting organizational assets. Moreover, recent advancements in auditing processes have expanded its capabilities beyond traditional methods. Now, internal audit teams can leverage innovative technologies to adapt quickly to evolving cyber threats.
Key recommendations for internal audit teams:
A strong understanding of ethics and a robust corporate culture are crucial for protecting organizations against cyber threats. Additionally, internal audits can help management monitor and support organizational culture. Consequently, this ensures all employees understand expected behaviors regarding cybersecurity and ethics. This fosters good decision-making and strengthens governance and controls.
With the rise of AI in decision-making and automation, ensuring transparency, accountability, and bias-free systems is essential. Furthermore, internal auditors can aid in implementing ethical AI practices by auditing AI algorithms and ensuring regulatory compliance. Early involvement in AI initiatives allows auditors to advise on risks and suggest solutions.
Preparation is key in combating cyber threats. Establishing enterprise cyber preparedness involves governance, strategy, incident response, and employee training.
It’s difficult to find examples of internal audits preventing cyber security incidents, as “near misses” aren’t publicised. However, successful cyber attacks often highlight how effective audit practices could mitigate or prevent breaches.
In the automotive industry, the 2023 Tesla data breach affected over 75,000 individuals due to an “inside job” by two former employees. This incident underscores the importance of comprehensive employee training, stringent access controls, regular audits, and whistleblower policies to detect unauthorised access and risky behaviour.
In the financial services sector, the March 2017 Equifax data breach, which affected nearly 150 million people, resulted from attackers exploiting IT system vulnerabilities. Additionally, while external attacks are complex to prevent, internal audit teams focusing on robust cyber security measures, data management practices, and internal controls can help detect breaches quickly and ensure swift damage mitigation and notification.
Mailchimp, a provider of email marketing services, has faced numerous data breaches due to social engineering attacks on its employees, resulting in compromised user accounts and customer data exposure. Internal audits should ensure employees receive adequate cyber security training and assess the implementation of two-factor authentication and practical identity management practices. Additionally, policies and systems must be in place to detect and mitigate vulnerabilities swiftly and promptly address breaches.
As technology evolves rapidly, so do the associated risks. Internal audit must adapt its practices and utilise technology advancements, such as AI, data analytics, and machine learning, to proactively identify potential vulnerabilities and predict emerging threats. Internal audit teams capable of foreseeing future risks can provide valuable guidance to management, positioning the organisation optimally to respond to inevitable cyber-attacks. For more information on implementing cyber security protocols into your business, click here.
Francisco’s academic background spans degrees in Law and Public Accounting and two master’s degrees in Business and Tax Law. He participated in the High Business Management Program at IESDE Business School. An expert in legal and tax matters, with special attention to international taxation. He advises national and multinational companies with extensive experience in wealth, succession consulting, and business restructuring operations. He has been a professor of tax matters for over 20 years. He is an active member of the College of Public Accountants of the State of Puebla, the International Fiscal Association, and the tax commission of Coparmex. He regularly contributes to various national publications specialising in tax matters, regularly participates in specialised radio programs, and has taken part in international congresses on tax issues. In 2003, he was certified through examination by the Mexican Institute of Public Accountants, A.C. (IMCP), with recognition for obtaining the highest score nationwide. He is currently a member of the board of directors of Kreston Global and the Regional Director of Kreston Latin America.
May 9, 2024
Mexican tax law and transfer pricing regulations have recently updated tax obligations for the common practice for subsidiaries, which are Mexican tax residents and part of a multinational group, to make payments to another group company residing abroad for administrative services. In some instances, these payments are disallowed as deductions by the tax authority. This often occurs because taxpayers fail to convincingly demonstrate that such services were provided or do not adhere to the formalities prescribed in the Income Tax Law (ITL) for such deductions. Francisco Bracamonte, Tax Partner from Kreston BSG in Mexico explains more.
Frequently, taxpayers either do not have a written contract or, if they do, it contains a very generic description of services, such as accounting services, budgeting, computer system assistance, legal advice, and human resources consulting. Additionally, the service description on the invoice might merely state “administrative services” or a similarly vague term.
It is also typical for the evidence supporting the provision of such services to be inadequately documented. Many services are delivered via phone calls, foreign personnel visits, emails, letters, and reports, making proper documentation impractical. For example, consider a scenario where a group company manages the subsidiary’s monthly accounting and suggests adjustments to certain accounts via a few phone calls. Documenting each interaction in a logbook would be both impractical and costly and might still not satisfy the tax authorities.
Moreover, the valuation of these services often does not employ the transfer pricing method known as “comparable uncontrolled price” because the group company providing the services does not offer them to unrelated third parties. Instead, costs are allocated among group companies based on criteria like sales volume, number of employees, computer equipment, and asset values, sometimes with an added profit margin.
The issue arises during tax audits when authorities challenge these deductions due to insufficient proof of the services’ existence and lack of detailed documentation as required by the authority. Arguments are also made that the prices do not reflect market rates and some formal requirements are not met.
The evidentiary standard required by the tax authority for these services typically exceeds the documentation that taxpayers maintain. Merely presenting invoices, contracts, bank statements, and accounting records is often insufficient. Additional information and documentation are required to verify the service provision, such as evidence demonstrating that the service is not duplicative of functions performed by the taxpayer, the names and professional experience of the individuals involved, the service location, dates, rationale for the service’s necessity, pricing determination process, deliverables, and benefits obtained. Such extensive documentation is often difficult to compile.
Recent judicial decisions from the Mexican federal courts have defined the evidentiary standard in very general terms. For instance, in a criterion from October 2023, registration number 2027498, it was stated that proof might consist of a set of indirect evidence made up of private documents accepted by business practices, as no specific legal formalities are mandated. Another criterion from the same period, registration number 2027497, suggests that the evidentiary standard should be objective and reasonable, without demanding proof of impossible or excessive extremes.
The question then arises as to what level of documentation detail should be maintained. In my opinion, at a minimum, documentation should include:
a) A clear and specific contract detailing the type of services contracted, along with the corresponding invoice.
b) Conditions under which the services were provided, which can be evidenced through correspondence, travel logs, meeting minutes, personnel lists, venue rentals, plane tickets, hotel stays, etc.
c) Outcomes of the service, documented in reports containing analyses, recommendations, and conclusions.
If these documents are in another language, they can be retained as such, but translations may be required by the authority per administrative rule 2.8.1.2.
Moreover, transfer pricing guidelines indicate that these are low-value-added services because:
Documentation should also include:
This documentation is crucial not only to meet legal requirements but also to provide additional support during audits. Sometimes, the non-deductibility of an expense stems not from its non-existence, but from failing to meet specific requirements in the tax receipts supporting these transactions. This includes ensuring that receipts issued by residents abroad comply with certain specifications (RMF 2.7.1.14):
I. Issuer’s business name, address, and, if applicable, tax identification number or equivalent.
II. Place and date of issuance.
III. Tax ID and business name of the recipient.
IV. Description and quantity of goods or services covered.
V. Unit value and total amount in both numbers and letters.
Additional reasons for deduction denial include failures in withholding income tax on the services provided by the non-resident, or non-compliance with obligations under article 76 of the Income Tax Law, such as issuing tax receipts for payments made, presenting foreign financing details by February 15, and detailing related party transactions by May 15 annually.
Regarding income tax withholdings, a 25% rate must be applied to the total income received by the non-resident, without deductions, provided that the service is rendered in Mexico. Proof of tax residency is necessary to apply for treaty benefits, which can be substantiated with a certificate from the foreign authority, valid for the calendar year issued and not requiring legalization.
Finally, compliance with additional procedural provisions is required, such as submitting financial statement reports when demanded and verifying adherence to foreign financing and related party disclosure requirements. Proper documentation is essential to convincingly demonstrate the service provision, timing, outcome, benefits received, and other considerations mentioned herein.
To speak to one of our tax experts in Mexico, please get in touch.
German Moya is a Tax Manager at Kreston Ecuador, serving since April 2020, and concurrently holds the position of Jefe de Impuestos & BPO at CMA CONSULTING since November 2018. With a solid foundation in accounting and taxation, German has enhanced his expertise through a Master’s in Financial Management from Universidad Internacional de La Rioja (UNIR) and a certification in Tax Management from Universidad Espíritu Santo. He is also a licensed professional accountant, accredited by the Colegio De Contadores Bachilleres y Publicos Del Guayas since May 2016.
April 11, 2024
Ecuador will see VAT rates increase in 2024 to tackle a $5 billion deficit, driven in part by a reduction in oil production and increased spending on tackling the country’s ongoing unrest. The rise also satisfies a new financing agreement with the International Monetary Fund.
The Value Added Tax (VAT) rate in Ecuador will rise immediately from 12% to 13%, although there will be an additional temporary rise to 15% from 1 April until 31 December 2024, in accordance with the decision of President Daniel Noboa in March. This was made after legal changes to counter the effects of the Internal Armed Conflict.
Noboa based his decision on Ecuador’s Organic Law and was as mentioned to confront the Internal Armed Conflict, but also due to the Social and Economic Crisis. These empower the president to modify the VAT rate if there is a favourable opinion from the Ministry of Economy and Finance. On March 12, the ministry issued that opinion in favour of the increase.
All goods, services and products subject to VAT will increase in price. A summary below:
As for food, there are 115 that make up the basic basket, but only 21 will increase the price, for example: biscuits, cereals, coffee, mayonnaise, tomato sauce, gelatin, etc. It also applies to personal hygiene products such as: soaps, shampoo, skin creams, razors, talcum powder, deodorants, perfumes, toothpaste and toothbrushes.
However, there are 94 foods in this basket that have 0% VAT, so consumers will not have to pay more with the new law. These are the foods most consumed by Ecuadorians, among which are: rice, flour, oatmeal, bread, meat, chicken, eggs, milk, sausages, tuna, cheese, oil, fruits, vegetables, legumes, grains, tubers.
Clothing, cars, motorcycles, bicycles, batteries, tyres, oils, and technological equipment will also increase in price. As well as streaming services, cell phone and internet service plans. Food prepared in restaurants, as well as airfare, will also increase with the increase in VAT.
For businesses, the VAT increase may have negative effects, considering its impact on consumption. The prices of goods and services will increase and consumption may be reduced. If consumers spend less to avoid a decrease in their resources, companies will experience a decrease in their sales, which would generate a reduction in the production of their goods and services.
Likewise, as the value of goods and services increases due to VAT, inflation tends to increase and causes a reduction in consumers’ purchasing power. In a contracting economy, it is vital to avoid measures that increase inflation, as this may further aggravate the economic recession.
So considering all mentioned above, VAT increases can discourage investment and business activity by discouraging consumption, possibly increasing inflation and slowing investment turnover.
If you would like specific advice on increasing the VAT rate in Ecuador, please get in touch with one of our VAT specialists at Kreston Ecuador.
