Reforms a hit for film, TV industry

Mexico's Congress remove tax breaks

By MICHAEL O'BOYLE

Mexico’s Congress on Friday approved legislation that hit at both its film and TV industries.

Legislators passed a tax reform bill that will do away with tax breaks for companies that fund film production. It will also require the nation’s broadcasters to air political spots for free.

Mexican media conglom Televisa and its smaller rival TV Azteca had furiously lobbied federal lawmakers against the latter measure. Televisa was estimated to have pulled in at least $75 million during last year’s official campaign season.

Neither web has fully disclosed election earnings, and they likely earned much more than is on the books from a down-and-dirty presidential race in which conservative President Felipe Calderon narrowly defeated leftist Andres Manuel Lopez Obrador.

The legislation will also curb the coin from loose spending seen outside official campaign seasons as well as the new trend in negative ads, similar to “soft money” ads Stateside.

The electoral reform still needs to be validated by two-thirds of state legislatures, and broadcasters will now turn their lobbying campaign toward local pols.

Mexico’s parties are funded largely through public funds, making the lavish spending on political campaigns a political sore spot in a nation where half the populace is below the poverty line.

Hundreds of millions of dollars are spent every year in ads that fuel a major portion of the income for TV affiliates and radio stations.

Meanwhile, a new alternative minimum business tax approved as part of a fiscal reform package will undermine the years of effort it took Mexico’s sputtering film industry to win an incentive to draw corporate investment into films.

“It will be impossible to get companies on board now,” said Monica Lozano, the head of Mexican indie shingle Altavista, as she and other industry leaders lobbied senators during Friday’s vote.

The incentive had spurred dozens of companies, such as Coca-Cola bottler Femsa and media tycoon Carlos Slim’s bank, to invest in film projects during 2007, giving a shot to anemic local production.

It took filmmakers about four years of lobbying efforts to get the break in place, but the new tax regime, which eliminates the usefulness of such deductions, will make the incentive unattractive to companies.