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Mexico debuts incentives

Congress approved the bill late last year

MEXICO CITY — After years of lobbying lawmakers, Mexican filmmakers have their first tax incentive in place that could be a significant push to Mexico’s struggling film industry.

Mexico’s Congress approved the bill late last year and tax authorities published the incentive’s operating rules.

Monica Lozano, head of indie Mexican prodco Altavista Films, said the incentive was a much need relief for Mexican producers. She said the incentive would also draw in fresh cash from companies that have never invested in film.

“Everyone is drawing up project proposals,” Lozano said. “This will allow producers to diversify risk and it will be a lot easier to speak of portfolios of investment.”

Mexican film production has been scraping its way up from lows of nine films per year in the mid-’90s to 50 productions last year.

Lozano, also president of the Mexican Association of Independent Producers, together with the government film institute has been lobbying lawmakers for years to approve the incentive, similar to an incentive approved in Brazil in the ’90s that has been credited in part with producing the Brazilian boom.

Mexican films average between only 3% to 5% of the annual box office, while in Brazil, incentives and quotas encouraging local production have pushed local shares to 20% of the B.O.

Under the Mexican incentive, private individuals or companies can use investments in domestic films to deduct up to 10% of their annual income tax obligation, i.e. a company that owes $1 million in taxes could invest up to $100,000 in a film.

Investors have a 20 million pesos cap per film and no one investor can apply for more than 50 million pesos per year. However, the same film may receive financing from various other investors seeking the tax incentive, said Pablo Fernandez, general coordinator at government film institute Imcine.

A production may not receive more than 80% of its financing from investors using the incentive and the other 20% must come from other sources.

Law establishes an annual cap of 500 million pesos for the total amount of incentives that may be approved. Projects must be approved by technical committees of one of Mexico’s two government film funds, Fidecine or Foprocine.

The incentive is similar to a bill approved in 2004, but the law contained errors that made it unable to be effectively applied.

The first project to receive approval is “Entre Canibales,” the first feature from Monterrey-based husband-and-wife creative team Lourdes Lopez Castro and Rodrigo Gonzales Mendoza.

Monterrey-based Coca-Cola bottler Arca is putting up the majority of the film’s $1.4 million budget.

Tragicomedy is about a championship Little League team that reunites as adults.

“The incentive was crucial to get the project off the ground,” Lopez said. 

Hollywood distribs that have opened local production houses — Warner Bros. Mexico, Columbia Pictures Mexico, and Disney’s Latin label Miravista — could also take advantage of the incentive.

“We are still trying to figure it out,” said Philip Alexander, head of Buena Vista/Columbia TriStar’s joint venture in Mexico. “We have to analyze it and see how you apply it.”

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