Expanding your business to Mexico can be a strategic move, given its growing economy and diverse talent pool. However, navigating the intricacies of hiring employees in a foreign country requires a clear understanding of the local labor laws, cultural nuances, and administrative processes. This guide aims to provide a comprehensive overview of the key considerations and steps involved in hiring employees in Mexico.
Understanding Mexican Labor Laws
Mexico, with its rich cultural heritage and vibrant economy, is a popular destination for businesses looking to expand their operations. However, before diving into the Mexican market, it is crucial for employers to familiarize themselves with the country’s labor laws. Mexico has a comprehensive set of regulations that govern the employer-employee relationship, ensuring fair treatment and protection for both parties. Here we will explore key aspects of Mexican labor laws to help businesses operate within the legal framework and foster a positive working environment
1. Labor Contract Types:
Mexican labor laws recognize different types of employment contracts, each with its own set of regulations. The two main categories are indefinite-term contracts and fixed-term contracts. Indefinite-term contracts have no specified end date, providing stability for employees. Fixed-term contracts, on the other hand, are for a specific duration, often tied to a particular project or seasonal work.
2. Working Hours and Overtime:
The standard workweek in Mexico consists of 48 hours, typically spread over six days. However, the maximum legal working hours per day are eight hours. Overtime is applicable for work beyond the standard hours, and employees are entitled to receive extra pay for overtime work. Understanding and adhering to these regulations is crucial to avoid legal complications.
3. Minimum Wage:
Mexico has a national minimum wage, but individual states may set higher rates. It is imperative for employers to be aware of the minimum wage in the specific location where their business operates. Compliance with minimum wage laws is essential to avoid penalties and ensure fair compensation for employees.
4. Benefits and Vacation:
Employees in Mexico are entitled to various benefits, including health insurance, social security, and retirement benefits. Vacation time is also an important aspect of Mexican labor laws. The law mandates that employees receive at least six vacation days after one year of service, and this entitlement increases with each subsequent year of employment.
5. Termination and Severance:
Terminating an employment contract in Mexico is subject to strict regulations. Employers must have a valid reason for termination, such as employee misconduct or business restructuring. Additionally, severance pay may be required based on the reason for termination and the length of service. Understanding these regulations is crucial to navigate the process smoothly and avoid legal disputes.
6. Collective Bargaining and Unions:
Mexican labor laws support the formation of unions, and employees have the right to engage in collective bargaining. Employers should be aware of the legal framework surrounding union activities, including the negotiation of collective bargaining agreements, to maintain positive labor relations.
7. Health and Safety Regulations:
Ensuring a safe working environment is a priority under Mexican labor laws. Employers are obligated to provide a safe workplace, implement health and safety measures, and train employees on safety protocols. Failure to comply with these regulations can result in severe consequences for employers.
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How to Hire Employees From Mexico?
Hiring employees from Mexico requires a thoughtful and culturally sensitive approach. Expanding your business by hiring employees from Mexico can bring diverse talents and perspectives to your team while fostering a global work environment. Navigating the hiring process in a different country, however, requires understanding the legal and cultural aspects unique to Mexico. In this guide, we will outline the essential steps and considerations for successfully hiring employees from Mexico.
1. Understand the Legal Landscape:
a. Employment Laws:
Before initiating the hiring process, familiarize yourself with Mexico’s labor laws. These laws govern various aspects such as working hours, overtime, vacation days, and termination procedures. Understanding these regulations is crucial to ensure compliance and create a positive working relationship with your Mexican employees.
b. Visa Requirements:
Determine the appropriate visa category for your employees. Temporary work visas, such as the FM3 and FM2, may be necessary depending on the nature and duration of their employment. Consult with legal professionals to navigate the visa application process successfully.
2. Create a Clear Job Description:
a. Bilingual Requirements:
Specify language requirements for the position. While English proficiency is valuable, especially in international business settings, considering candidates who are bilingual in Spanish and English can enhance communication within your team.
b. Cultural Sensitivity:
Acknowledge and respect cultural differences in your job description. Highlighting your company’s commitment to diversity and inclusion can make potential employees from Mexico feel more welcome.
3. Utilize Local Job Platforms:
a. Online Job Portals:
Leverage Mexican job portals and professional networks to reach a wider audience. Websites like OCCMundial, Indeed México, and LinkedIn are popular platforms where you can post job openings and connect with potential candidates.
b. Local Recruitment Agencies:
Consider partnering with local recruitment agencies. They can help you navigate the hiring process, source qualified candidates, and provide insights into the Mexican job market.
4. Conduct Effective Interviews:
a. Cultural Awareness:
Be mindful of cultural nuances during interviews. Establishing rapport and demonstrating cultural awareness can help candidates feel more comfortable and enable you to assess their fit within your organization.
b. Technical and Cultural Fit:
Evaluate both technical skills and cultural fit. Ensuring that candidates align with your company’s values and can seamlessly integrate into your team is essential for long-term success.
5. Offer Competitive Compensation:
a. Market Analysis:
Conduct a thorough analysis of salary levels in the Mexican job market. Offering competitive compensation demonstrates your commitment to fair employment practices and helps attract top talent.
b. Benefits Package:
Consider additional benefits such as health insurance, retirement plans, and professional development opportunities. A comprehensive benefits package can make your job offer more appealing to prospective employees.
6. Onboarding Process:
a. Language Support:
Provide language support during the onboarding process. This can include translated materials, language training programs, and mentorship to help new employees acclimate to your company culture.
b. Cultural Integration:
Foster cultural integration by organizing team-building activities and providing resources that promote cross-cultural understanding. This will help create a supportive and inclusive work environment.
Payroll and Taxes in Mexico
Mexico’s business landscape is vibrant and dynamic, attracting companies from around the world. As organizations expand their operations into this diverse market, understanding the nuances of payroll and taxes is crucial for maintaining compliance and ensuring smooth operations. This brief overview of key aspects related to payroll and taxes in Mexico.
1. Payroll Considerations:
- Minimum Wage: Mexico has a national minimum wage that is periodically adjusted. It is essential for employers to stay informed about these changes to ensure employees are paid in accordance with the law.
- Payroll Cycles: Payroll cycles in Mexico typically follow a monthly schedule. Employers need to establish clear and consistent payment dates to meet legal requirements and maintain employee satisfaction.
- Employee Benefits: Mexico mandates certain benefits for employees, including health insurance, life insurance, and retirement contributions. Understanding and providing these benefits is crucial for compliance and employee retention.
2. Taxation in Mexico:
- Corporate Income Tax (CIT): Mexico imposes a corporate income tax on resident companies and non-resident entities with a permanent establishment in the country. The standard corporate tax rate is 30%, although reduced rates may apply in specific situations.
- Value Added Tax (VAT): The VAT rate in Mexico is 16%. It applies to most goods and services, and businesses are required to register for VAT with the tax authorities.
- Individual Income Tax (IIT): Employees in Mexico are subject to individual income tax, with rates ranging from 1.92% to 35%. Employers are responsible for withholding and remitting these taxes on behalf of their employees.
- Social Security Contributions: Employers must contribute to social security programs, covering health, maternity, disability, and retirement benefits. Both employers and employees make contributions, with rates determined by salary levels.
3. Compliance and Reporting:
- Tax Filings: Businesses in Mexico are required to file periodic tax returns and comply with reporting obligations. Engaging with local tax experts or hiring a reliable accounting firm can help navigate the complex regulatory landscape.
- Legal Documentation: Maintaining accurate and up-to-date records is crucial. Employers should retain documentation related to payroll, taxes, and employee benefits to demonstrate compliance during audits.
4. Challenges and Future Trends:
- Regulatory Changes: Mexico’s tax laws may undergo amendments, and businesses need to stay informed about any changes that might impact their operations.
- Technology Integration: Leveraging technology, such as payroll and accounting software, can streamline processes and enhance accuracy, helping businesses stay compliant with tax regulations.
Employment Agreements in Mexico
Employment agreements serve as the cornerstone of the employer-employee relationship, establishing the rights and responsibilities of both parties. In Mexico, these agreements are governed by a combination of federal labor law, individual employment contracts, and collective bargaining agreements. Understanding the key components of employment agreements in Mexico is crucial for both employers and employees to ensure a fair and legal working relationship.
Key Elements of Employment Agreements in Mexico:
1. Types of Employment Contracts: In Mexico, there are two main types of employment contracts: individual contracts and collective bargaining agreements. Individual contracts are tailored for specific employees, while collective bargaining agreements are negotiated between employers and unions, covering multiple employees.
2. Duration of Contracts: Employment contracts in Mexico can be for a fixed or indefinite term. Fixed-term contracts are common for temporary or project-based work, while indefinite-term contracts are the norm for long-term, permanent positions.
3. Probationary Period: It is common for Mexican employment contracts to include a probationary period during which the employer can assess the employee’s performance. This period typically lasts for up to 180 days, and during this time, either party can terminate the contract without incurring significant legal consequences.
4. Compensation and Benefits: The employment agreement must clearly outline the employee’s compensation, including salary, bonuses, and any other benefits. Employers are also required to provide certain benefits, such as social security, vacation days, and profit-sharing, as mandated by Mexican labor law.
5. Working Hours and Overtime: Mexican labor law specifies the standard working hours, which generally amount to 48 hours per week. Any work beyond these hours is considered overtime and must be compensated accordingly. Employment agreements should clearly define the regular working hours and the terms for overtime pay.
6. Termination Clauses: Termination clauses are critical components of Mexican employment agreements. These clauses should outline the conditions under which either party can terminate the contract and the associated legal implications. Mexican labor law provides specific grounds for termination, and employers must adhere to these regulations to avoid legal disputes.
7. Non-Compete and Confidentiality Agreements: Employers often include non-compete and confidentiality clauses in employment agreements to protect their business interests. These clauses must be reasonable in scope and duration to be enforceable under Mexican law.
Why Hiring Talents in Mexico?
Hiring talents in Mexico presents a strategic advantage for companies seeking to diversify their workforce, reduce operational costs, and access a pool of highly skilled professionals. In today’s globalized economy, businesses are increasingly looking beyond borders to tap into diverse pools of talent. One country that has emerged as a promising destination for hiring skilled professionals is Mexico. With its strategic geographical location, a robust educational system, and a growing economy, Mexico offers a compelling case for companies seeking to bolster their teams with top-notch talent.
- Strategic Location: Mexico’s proximity to the United States makes it an ideal location for companies looking to establish nearshore operations. The geographical proximity ensures easier communication, collaboration, and a significant overlap in business hours. This closeness facilitates smoother project management, client interactions, and overall operational efficiency.
- Skilled Workforce: Mexico boasts a well-educated and skilled workforce, particularly in fields such as engineering, technology, finance, and manufacturing. The country has made substantial investments in education, producing a large pool of professionals ready to contribute to a variety of industries. Companies can leverage this talent pool to access individuals with diverse skill sets and experiences.
- Cultural Affinity: Cultural compatibility is a crucial factor in building cohesive and productive teams. Mexico shares cultural similarities with many Western countries, particularly the United States. This commonality can contribute to a smoother integration of Mexican talent into international teams, fostering collaboration and understanding.
- Cost Efficiency: While talent is abundant, labor costs in Mexico are often more competitive compared to those in developed nations. This cost efficiency can translate into significant savings for businesses without compromising on the quality of work. Companies can allocate resources more effectively and invest in other areas of their operations, leading to improved overall competitiveness.
- Growing Technology Hub: Mexico has emerged as a technology hub in recent years, with cities like Guadalajara and Monterrey gaining recognition as key players in the tech industry. The presence of a vibrant tech community, coupled with government support for innovation and entrepreneurship, makes Mexico an attractive destination for companies in the tech sector looking to expand their teams.
Employee Benefits in Mexico
Employee benefits play a crucial role in attracting and retaining talent, fostering job satisfaction, and promoting overall well-being in the workplace. In Mexico, as in many countries, the landscape of employee benefits has evolved to meet the changing needs of the workforce. Understanding the key elements of the Mexican approach to employee benefits is essential for both employers and employees.
Healthcare Benefits:
One of the cornerstones of employee benefits in Mexico is healthcare coverage. Employers often provide private health insurance plans that cover medical expenses, hospitalization, and even dental care. This not only contributes to the health and well-being of employees but also ensures that they have access to quality healthcare services.
Social Security:
Mexico has a comprehensive social security system, which includes benefits such as retirement pensions, disability insurance, and maternity leave. Employers are required to contribute to the social security system on behalf of their employees, providing a safety net for various life situations. Understanding the intricacies of the social security system is crucial for both employers and employees to make the most of these benefits.
Vacation and Time Off:
Paid time off is a vital aspect of employee benefits in Mexico. The country has a standard set of regulations governing vacation days, holidays, and other types of leave. Generally, employees are entitled to a certain number of vacation days based on their length of service. Additionally, there are national holidays and special days off, such as the Day of the Dead, which are observed across the country.
Profit Sharing
Mexican labor law mandates that companies share a portion of their annual profits with employees. This profit-sharing bonus, known as “aguinaldo,” is typically paid in December and is calculated based on the company’s profits and the length of an employee’s service. This practice fosters a sense of shared success and financial well-being among the workforce.
Flexible Benefits and Perks:
In recent years, there has been a growing trend towards offering flexible benefits and perks in Mexico. This may include options such as flexible work hours, remote work arrangements, gym memberships, and meal vouchers. These benefits cater to the diverse needs and preferences of the modern workforce, enhancing work-life balance and job satisfaction.
Retirement Benefits:
Retirement planning is a crucial aspect of employee benefits in Mexico. Many companies offer retirement savings plans, and employees can contribute a percentage of their salary to these funds. Employers may also match these contributions up to a certain limit, encouraging employees to actively plan for their future financial security.
How are Employees Paid in Mexico?
In Mexico, employees are typically paid through a monthly salary or, in some cases, on a weekly or bi-weekly basis. The payment structure may vary depending on the employer and the industry. It is common for employees to receive their salaries through direct deposit into a bank account, although some employers may still provide physical paychecks. The Mexican labor law requires employers to comply with certain payment regulations, including providing payslips that detail deductions for taxes, social security contributions, and other relevant withholdings.
Additionally, Mexican labor law establishes a minimum wage that employers must adhere to, although many employers pay above this minimum to attract and retain qualified talent. The payment of bonuses and benefits, such as annual bonuses (aguinaldo) and vacation pay, is also regulated by law. Employers are required to contribute to social security and retirement funds on behalf of their employees, ensuring access to healthcare and pension benefits. Overall, the payment structure in Mexico is governed by legal regulations to protect the rights and well-being of employees.
What Kind of Work Permits Do Workers Need in Mexico?
Mexico has specific work permit categories for foreign workers, and the process can vary based on the type of work and the individual’s qualifications. Here are some common types of work permits in Mexico:
1. Visitor Visa with Work Authorization (VVWA):
This type of visa allows foreign nationals to work in Mexico for up to 180 days. It’s suitable for short-term assignments, consultations, or training.
2. Temporary Resident Visa with Work Authorization:
Foreign workers intending to stay in Mexico for longer durations (more than 180 days) may apply for a Temporary Resident Visa. This visa allows them to work during their stay. The application process involves submitting various documents, including proof of employment, to the Mexican consulate in their home country.
3. Permanent Resident Visa:
In some cases, foreign workers may qualify for a Permanent Resident Visa. This type of visa allows individuals to live and work in Mexico without the need for regular renewals. It may be granted based on factors such as family ties, retirement, or economic solvency.
4. NAFTA Professionals (now USMCA):
The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA, includes provisions for professionals to work in Mexico. Certain professions, such as engineers, scientists, and business executives, may be eligible for streamlined work authorization under this agreement.
5. Employer-Sponsored Work Permits:
Companies in Mexico can sponsor foreign workers for specific job positions. The employer typically initiates the application process and provides necessary documentation to demonstrate that there are no qualified local candidates for the position.
6. Intra-Company Transfer Visa:
This visa category is designed for employees of multinational companies who are being transferred to a branch or subsidiary in Mexico. The employee must have worked for the company for a specified period before the transfer.
It’s important to note that the application process, required documents, and eligibility criteria can change, and it’s advisable to check with the National Institute of Migration (INM) or the nearest Mexican consulate for the most up-to-date information.
Additionally, Mexico has bilateral agreements with several countries that may affect the work permit requirements for citizens of those nations. It’s crucial for individuals and employers to thoroughly research and adhere to the current immigration regulations in Mexico.
Compliance Risks of Hiring Employees in Mexico
Hiring employees in Mexico entails navigating a complex landscape of compliance risks, shaped by the country’s intricate labor laws and regulations. One significant challenge arises from the extensive and ever-evolving legal framework governing employment relationships. Employers must adhere to strict requirements related to contracts, working hours, wages, and benefits, which can vary by region. Failure to comply with these regulations may result in legal consequences, including fines and penalties. Additionally, Mexico’s labor unions play a crucial role in shaping the employment landscape, and companies must carefully manage relationships with these entities to avoid potential disruptions and disputes.
The country’s cultural nuances and differences in business practices also pose compliance risks, as understanding and respecting local customs is essential to maintaining positive employer-employee relations. Staying abreast of changes in Mexican labor laws, maintaining transparent communication with employees, and seeking legal counsel are crucial steps to mitigate compliance risks associated with hiring in Mexico.
Job Market in Mexico
The job market in Mexico was characterized by a diverse economy with opportunities in various sectors. However, it’s essential to note that the job market can evolve due to economic, social, and global factors. Here are some key aspects of the job market in Mexico:
1. Economic Overview:
Mexico has a mixed economy with a strong industrial base, including manufacturing, mining, and services. The country has free trade agreements with several nations, contributing to its export-oriented economy.
2. Key Sectors:
- Manufacturing: Mexico is known for its manufacturing sector, particularly in automotive, aerospace, and electronics.
- Services: The services sector, including finance, tourism, and telecommunications, is significant and provides a range of job opportunities.
- Agriculture: Agriculture also plays a role in the job market, with opportunities in farming and related industries.
3. Labor Market Dynamics:
- Skilled Labor: There is a demand for skilled workers, especially in technology, engineering, and other specialized fields.
- Unskilled Labor: Opportunities also exist in areas such as agriculture, retail, and hospitality, providing jobs for unskilled and semi-skilled workers.
4. Job Search Channels:
- Online Platforms: Job seekers often use online platforms and job portals to search for employment opportunities.
- Networking: Building professional networks and utilizing personal connections can be crucial in the Mexican job market.
- Recruitment Agencies: Many companies use recruitment agencies to find suitable candidates for their job openings.
5. Challenges:
- Informal Economy: A significant portion of the workforce is employed in the informal economy, which can pose challenges for job stability and social security.
- Income Inequality: Income inequality is a concern in Mexico, with disparities between urban and rural areas.
6. Government Initiatives:
The Mexican government has implemented initiatives to attract foreign investment and stimulate economic growth, which can impact the job market positively.
7. COVID-19 Impact:
The COVID-19 pandemic has affected the global economy, including Mexico. The job market may have experienced fluctuations, and remote work trends may have become more prevalent.
It’s advisable to check more recent sources for the latest information on the job market in Mexico, as economic conditions and employment trends can change over time. Additionally, consider consulting local job market reports, government publications, and industry-specific sources for more targeted and up-to-date insights.
How to Terminate Employees in Mexico?
Terminating an employee is a sensitive and legally regulated process in Mexico, and it is crucial for employers to adhere to the country’s labor laws. The termination process generally involves both procedural and substantive requirements. Keep in mind that labor laws may change, and it’s essential to consult with legal professionals to ensure compliance with the most up-to-date regulations. Below are some general guidelines on how to terminate an employee in Mexico:
Understand Employment Contracts: Employment contracts in Mexico can be either for a definite or indefinite term. The terms and conditions of employment are usually specified in the contract, and it is important to adhere to these terms during termination.
Documented Grounds for Termination: Mexican labor laws require employers to have just cause for terminating an employee, especially in indefinite-term contracts. Common just causes include serious misconduct, repeated violations of work policies, or a material breach of the employment contract.
Notice Period: Depending on the length of employment, the notice period may vary. For indefinite-term contracts, employers are generally required to provide 15 days’ notice for employees who have worked for more than a month. The notice period may be longer for employees with more years of service.
Severance Pay: In addition to the notice period, employers may be required to pay severance to terminated employees. The amount depends on various factors, including the length of service and the employee’s salary. It is recommended to consult with legal professionals to calculate the correct amount.
Final Settlement: Ensure that all outstanding payments, including salary, vacation pay, and any other entitlements, are settled with the employee upon termination.
Consult with Legal Professionals: Labor laws in Mexico can be complex, and they may change over time. It is advisable to consult with legal professionals or labor law experts to ensure compliance with current regulations and to minimize the risk of legal disputes.
Follow Company Policies: Adhere to your company’s internal policies and procedures for termination. Make sure the termination process aligns with the organization’s values and ethical standards.
Exit Interview: Conduct an exit interview to gather feedback from the departing employee. This can provide insights into the reasons for the termination and help identify areas for improvement within the organization.
Handle Termination Meeting Professionally: Conduct the termination meeting respectfully and professionally. Clearly communicate the reasons for termination, the effective date, and the next steps in the process.
Record Keeping: Keep detailed records of the termination process, including documentation of the reasons for termination, the notice provided, and any communications with the employee. This documentation may be crucial in case of legal disputes.
Remember that employment laws can vary, and it is crucial to seek legal advice to ensure compliance with current regulations in Mexico. Always approach the termination process with sensitivity and professionalism to maintain a positive workplace culture.
Cost of Hiring Talents in Mexico
Hiring talent in Mexico involves various costs that employers need to consider. These costs can vary based on factors such as the industry, the level of expertise required, and the location within Mexico. Here are some key costs associated with hiring talent in Mexico:
1. Salary and Benefits:
- Base Salary: The primary cost is the employee’s salary, which varies depending on the position and the level of experience. Salaries in Mexico are generally lower than those in the United States or Europe, but they vary by industry and region.
- Benefits: In addition to the base salary, employers are typically required to provide benefits such as health insurance, vacation days, and sometimes retirement plans. These benefits can add a significant percentage to the overall compensation package.
2. Taxes and Social Security Contributions:
Employers are responsible for paying social security contributions, which include healthcare and pension contributions. The exact amount depends on the employee’s salary and is subject to government regulations.
3. Recruitment and Onboarding Costs:
Costs associated with recruiting, such as advertising job positions, conducting interviews, and performing background checks, contribute to the overall expenses. Onboarding costs, including training and orientation, should also be considered.
4. Legal and Compliance Costs:
Employers must comply with Mexican labor laws and regulations. Ensuring legal compliance may involve legal consultations and the development of employment contracts. Non-compliance can result in fines and legal consequences.
5. Visa and Work Permit Fees:
If hiring foreign talent, there may be costs associated with obtaining the necessary visas and work permits. These costs can include application fees and legal expenses.
6. Office Space and Equipment:
Depending on the nature of the work, employers may need to provide office space and equipment. Costs associated with leasing office space and providing the necessary tools for the job should be factored in.
7. Training and Development:
Ongoing training and development programs may be necessary to enhance the skills of the workforce. Investing in employee development contributes to long-term success but adds to the overall cost of hiring talent.
8. Employee Turnover Costs:
If turnover is high, the cost of recruiting and training new employees can accumulate. Retention strategies, such as competitive salaries and a positive work environment, can help mitigate these costs.
9. Technology and Software:
Providing employees with the necessary technology and software tools incurs additional expenses. This is particularly relevant in the digital age, where technology plays a crucial role in various industries.
10. Employee Perks and Incentives:
Offering additional perks and incentives, such as bonuses, stock options, or wellness programs, can attract and retain top talent. However, these perks contribute to the overall cost of employment.
Understanding and carefully considering these costs is crucial for businesses looking to hire talent in Mexico. It’s also important to stay updated on changes in labor laws and market conditions to make informed decisions about compensation and benefits.
How to Use an Employer of Record (EOR) in Mexico?
Using an Employer of Record (EOR) in Mexico can be a strategic and efficient solution for companies looking to expand their business operations in the country. The first step is to identify a reputable EOR service provider with expertise in Mexican labor laws and regulations. Once selected, the EOR will become the official employer of your workforce in Mexico, handling payroll administration, tax compliance, and legal obligations on your behalf. To initiate the process, you’ll need to provide necessary information about your employees, such as their roles, salaries, and work hours. The EOR will then draft employment contracts in compliance with Mexican labor laws. It is crucial to maintain clear communication with the EOR to ensure accurate handling of payroll, benefits, and statutory contributions.
Additionally, the EOR will assist with employee onboarding, ensuring that your team is well-integrated into the local work culture. By leveraging an Employer of Record in Mexico, businesses can focus on their core operations while navigating the complexities of local employment regulations efficiently and effectively.
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