Nuevo León govt reaches deal with Kia to cut tax breaks

The governor of the Mexican state of Nuevo León, Jaime Rodríguez, on Wednesday said that officials had reached a deal with Korean carmaker Kia Motors to cut the tax breaks it would receive after building its first Mexican plant in the state.

Nuevo León's economy minister, Fernando Turner, said the deal would reduce the incentives from 28 percent of the amount invested by Kia and its suppliers to 10.5 percent.

Turner said the deal would eliminate an income tax rebate and the carmaker had also agreed to increase its purchases from local suppliers.

Rodríguez was elected as modern Mexico's first independent governor last year and his administration had been demanding that Kia renegotiate some of the incentives pledged in an accord struck in 2014 under his predecessor.

Nuevo León said the 2014 accord violated state law by offering what it had called "excessive" incentives, such as waiving Kia's obligation to pay state income taxes for 20 years.

A statement from Nuevo León's government said the deal had also eliminated other incentives, such as paying for a party to inaugurate the plant, as well as committing the state government to provide water and electricity services.

The agreement should bring relief to the federal government, as senior officials see the spat over the Kia plant as a potential impediment to future foreign investment in Mexico.