1971- Originally established.|
1993- December,amended to the "New Foreign Investment law"
1998- October, amended again.
1973 A constitutional amendment known as the Foreign Investment Law allowed foreigners to purchase real estate anywhere in Mexico, except the restricted zone. The restricted zone consists of areas within 100 km (64 miles) of international borders or within 50 km (32 miles) from the coastline (at high tide).
This Foreign Investment Law is known as the: "Reglamento de la Ley Inversion Extranjera y del Registro Nacional de Inversiones Extranjeras".
Relative to properties within this prohibited area, the amended Foreign Investment Law's intent is to clearly and narrowly define what is residential property, what properties must be in a "fideicomiso" (Mexican bank trust), and what properties are considered non-residential and therefore can be purchased by foreigners in a Mexican corporation.
Article 5, Title Two of the Law, real estate used for "residential purposes" shall mean any real estate destined "exclusively for residential use of the owner or third parties".
19.2 Foreign Investment Regulations of 1989 (Reglamento de la Ley para Promover la Inversión Mexicana y Regular la Inversión Extranjera) D.O. of May 16, 1989 It entered into force on May 17, 1989.
Although these regulations derive from the original 1973 Foreign Investment Act, in reality they represent a drastic and welcome change in Mexico’s foreign investment. These regulations liberalized foreign investment beyond the original intention of the 1973 Act.
Formed by 86 sections (Artículos), these federal regulations expand and detail all the major areas on foreign investment. In essence, the 1989 Regulations not only departed substantially from the 1973 Act but created the more open policies in the area of foreign investment which were later on incorporated into the 1993 Act.
These regulations are particularly important because they allowed foreign investment without limitations in areas not included in the so-called "Classification," without requiring the authorization from SECOFI.
They promoted foreign investment through fideicomisos, neutral investment, immovable assets (Articles 5-26).
They also expanded the scope of foreign investment in industrial, commercial and service activities (Articles 27-29), allowing the direct acquisition and lease of immovable assets (Articles 36-38).
These regulations restructured the National Registry of Foreign Investments (Articles 42-79) and the National Commission of Foreign Investments (Articles 80-83).
19.1 Foreign Investment Act of 1993 (Ley de Inversión Extranjera) D.O. of December 27, 1993. It entered into force on December 28, 1993 As amended by D.O. of December 24, 1996. It entered into force on December 25, 1996.
This federal statute governs foreign investment in Mexico.
Contrary to the to the 1973 Act, considered to be rigid and inflexible, the new Act modernizes and promotes foreign investment.
Composed by 39 sections (Artículos), this statute regulates acquisition of real estate and trusts (Fideicomisos); foreign corporations and their investments; the peculiar concept of "neutral investment;" the functions of the National Commission on Foreign Investments and the corresponding Registry; and sanctions.
The new Act preserves the system of having strategic areas exclusively reserved to the State, economic activities exclusively reserved to Mexican nationals or Mexican corporations with an Exclusion of Foreigners Clause, and activities and acquisitions under specific regulations.
FOREIGN INVESTMENT: Regulations to the Foreign Investment Act of 1993 and to the National Register of Foreign Investments.
Diario Oficial of September 8, 1998; It entered into force 20 days later,(Except for Paragraph 4 of Articulo 18 which entered into force sixth months later).
On September 8, 1998, the government of Mexico through the Secretariat of Commerce and Industrial Development (SECOFI) enacted the Reglamento de la Inversion Extranjera y del Registro Nacional de Inversiones Extranjeras. The purpose of this legislative enactment by Mexico’s Executive Power is to regulate the volume, type and domestic behavior of foreign investments in Mexico.
Since the enactment of the new Foreign Investment Act in 1993 (D.O. of December 28, 1993), business persons, investors and legal practitioners within and outside Mexico awaited patiently for over five years for regulations to detail the 1993 Act. Prior to the enactment of the current 1998 regulations, the provisions of the 1993 Act were to be interpreted pursuant to the preceding Regulations which, although enacted in 1989, formally Acomplemented the 1973 Act to Promote Mexican Investment and Regulate Foreign Investment.
In reality, the now old 1989 Regulations were formulated to advance a new and more flexible legal regime to govern foreign investment; a regime which run contrary to the rigid and nationalistic regime based on 1973 Foreign Investment Act.
Legal scholars have pointed out the unconstitutionality of the 1989 Regulations. However, no legal action was ever taken against these important regulations because of the favorable and modern regime that they established welcoming and promoting foreign investment.
In many respects, the 1989 Regulations Bnow finally repealed by the current 1998 RegulationsB, may be characterized as the direct source and legal basis for the 1993 Foreign Investment Act, still in force.
The 1998 Regulation are composed of 49 sections (Artículos) divided into eight titles.
I General Provisions (Artículos 1-4), sets forth general definitions of legal terms used in the Act; in addition, it enumerates specific industries not subject to the rules and principles of the Act, such as freight, warehousing, and some activities associated with the generation of electricity and oil.
II Of the Acquisition of Real Estate, the Exploitation of Mines and Water, and of Trusts (Articulos 5-12).
This title governs the acquisition of real estate in Mexico, both in the Restricted Zone and elsewhere, for commercial and residential purposes.
Interestingly, contrary to Article 27 (I) of the Federal Constitution, the new regulations detail how a Mexican corporation with foreign investment may acquire the direct ownership of real estate anywhere in Mexico, even in the Restricted Zone, when said acquisition takes place for commercial purposes.
Trust contracts, known as Fideicomisos and now valid for fifty years, must continue to be used for residential purposes.
III Of Societies (Companies, Artículos 13-20).
This title enunciates the rules foreigners must comply with to invest and participate in Mexican legal entities, in particular when the company in question does not contain the so-called AExclusion of Foreigners Clause@ (Cláusula de Exclusión de Extranjeros). IV Of the Investment by Foreign Legal Entities (Artículo 21).
This sets out the manner in which foreign corporations must register with the Mexican government to be authorized to conduct business in Mexico.
V Of Neutral Investments (Artículos 22-25).
It establishes the requirements needed to obtain authorization from the Mexican government to establish or modify neutral investments.
VI Of the National Commission of Foreign Investments (Comisión Nacional de Inversiones Extranjeras, Artículos 26-29).
This title enumerates the legal and administrative duties imposed upon this National Commission, including its internal rules of procedure.
VII Of the National Register of Foreign Investments (Registro Nacional de Inversiones Extranjeras, Articulos 30-46)
Sets out the organization, activities, and basic inscriptions to be made by the Registry, whose major objective is to organize, keep and maintain an official register of all foreign investments in Mexico.
The Register is divided into three Asections:
1) Foreign individuals and foreign legal entities.
2) Societies (Companies).
3) Trust contracts (Fideicomisos).
VIII Of Supplementary Provisions (Artículos 47-49).
This chapter presents a discussion of the positive change in Mexico’s attitude regarding foreign investment since the 1973 Act to Promote Mexican Investment and Regulate Foreign Investment.
The Foreign Investment Act of 1993 was designed to establish a new legal framework in Mexico, promoting competitiveness providing legal certainty to foreign investors in order to channel international capital to productive activities.
The new Act formally repeals the 1973 Act, which was a highly restrictive approach to foreign investment, including such provisions as: 1) the 49/51 rule, and 2) prohibition of foreign ownership over land and water.
The 1993 Act, though similar in such areas as reserving certain activities to the Government and Mexican nationals to the earlier 1973 version, contains several unprecedented provisions, such as:
1) the abandonment of the 49/51 rule
2) the elimination of performance requirements upon foreign investors, thus reducing discretionary powers of the Commission and other Mexican authorities.
The Regulations of 1989 also took an unprecedented step towards liberalizing foreign investment and introduced significant changes to foreign investment.
Although the 1973 Act was not repealed by theses regulations, it was amended by them, thereby streamlining and liberalizing the legal framework applicable to foreign investment in Mexico. The Regulations also serve as a guide to interpret the 1993 Act, and contains areas in symmetry with the new Act, e.g, a simplified version of the fideicomiso.
Mexico’s Foreign Investment Act of 1993 is part of a general modernization of current policies, that, together with the inception of NAFTA, and other technological and scientific developments, serves as a sign of Mexico’s drive to become a mid-size power in the near future.
Assorted Notes - Commercial -
Constitution - Ejido -
Federal Zone - Fideicomiso -
Foreign Investment law notes - Glossary -
History notes - Procede notes -
State notes - Title Insurance -
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