Extinction or termination of public trusts and similar mandates in the culture sector

April 13, 2020

On April 2, 2020, the federal government issued a decree, ordering the extinction or termination of public trusts and similar mandates. This decree instructs the agencies and entities of the Federal Public Administration, the office of the President of the Republic, as well as the Agrarian Courts that act as responsible or controlling units, to initiate the processes of extinction or termination of all public trusts, without organic structure and mandates or analogous, of a federal nature.

Among the trusts of the Ministry of Culture are the following:

1. The Trust to support the construction of the National Center for the Arts (“FICENART”);
2. The Trust for the Conservation of the Casa del Risco and Pinacoteca Isidro Fabela;

III. The Trust for the Adaptation of the Diego Rivera and Frida Kahlo Museums

1. The Irrevocable Trust for the Administration of the Guadalupe Regional Museum, Zacatecas
2. The Irrevocable Private Trust for the Administration of Santo Domingo de Guzmán, Chiapas;
3. The Irrevocable Trust for the Administration of Central Santo Domingo, Oaxaca;

VII. The Trust for the Promotion and Conservation of the Anthropological, Archaeological and Historical Cultural Heritage of Mexico

VIII. The Trust for the Cineteca Nacional (“FICINE”);

1. The Fund for Investment and Stimulation of the Cinema, (“FIDECINE”);
2. The Trust for Educal’s seniority premium workers;
3. The Trust of the Museum of Popular Mexican Art; and

XII. The National Fund for the Promotion of Arts (“FONART”).

XIII. The Fund for Quality Film Production (“FOPROCINE”); and

XIV. The National Fund for Culture and the Arts (“FONCA”)

However, Article 5 of the decree excludes from the scope of the same, those public trusts, mandates or analogous constituted by mandate of law or legislative decree and whose extinction or termination requires constitutional or legal reforms, as well as legal instruments that serve as public debt mechanisms, or that have the purpose of attending to health emergencies or fulfilling labor or pension obligations.

In this regard, both FIDECINE and FICINE were exempted by virtue of having been constituted through the Federal Law of Cinematography.

On the other hand, it is important to make the distinction between the different public trusts constituted with contributions and resources from the federal government. Broadly speaking, there are those created by mandate of law and those created by contract, the latter being those that must be extinguished or terminated by the corresponding agency.

In particular, the most important trusts in relation to the audiovisual industry that are under threat of being terminated are FOPROCINE and FONCA.

Therefore, the decision of the federal government is concerning as the above-mentioned trusts have granted numerous supports and incentives to the cinematographic and audiovisual production without analyzing the effects on the production of audiovisual works since the production companies lack the resources of these trusts. Specifically, FOPROCINE is under threat of extinction despite being one of the most important funds for the film industry having assisted more than 400 film works from 1998 to 2019.[1]

As far as FONCA and FOPROCINE are concerned, in principle the decree is applicable to these trusts. However, the Ministry of Culture is evaluating the mechanisms and possible reforms to maintain them and continue to provide the respective support to cinema and culture.

FONCA is currently based upon a third agreement amending the mandate contract, and is therefore under consideration by the Ministry of Culture for its conservation. The members of the Commission of Culture and Cinematography of the Chamber of Deputies seek to incorporate FONCA into the General Law of Culture and Cultural Rights and thus avoid its extinction.

The Ministry of Finance and Public Credit and the Ministry of Culture will announce the result of the cultural trusts that will be appropriate for extinction before April 15, 2020, as established by the decree.

It is important to mention that, with respect to trusts such as the Trust for the Promotion and Development of Mexican Cinema in Mexico City (“PROCINE”), this would be exempted both for being local and for having been constituted by mandate in terms of the Law for the Promotion of Mexican Cinema in Mexico City and the Organic Law for the Public Administration of the Federal District.

We believe that the federal government’s decision was hasty, and generalized, without considering individually the usefulness and benefits of each of the trusts to be extinguished.

Consequently, it will be important that authors and audiovisual production companies or any other user of the funds or credits make written statements concerning this matter. In OLIVARES, we offer to assist you in the management and elaboration of such written statements and to send them electronically to the authorities involved, which are the Ministry of Culture and the Ministry of Finance and Public Credit, as well as the Culture and Film Commission of the Chamber of Deputies and the Culture Commission of the Senate for their intervention.

Finally, it is important to mention that the fiscal incentives for film production or distribution, which are contemplated in the Income Tax Law (“EFICINE 189”), will not be affected, since it is a fiscal incentive and not a trust.

We will continue to monitor as the present situation evolves to keep you informed.

[1] http://www.imcine.gob.mx/wp-content/uploads/2019/08/PELÍCULAS-FOPRO-APOYADAS-1998-2019.pdf