Buying Real Estate In Mexico Buying property in any country can be stressful. A property purchase in Mexico can be just as safe and secure as in the United States or Canada - if it is done correctly. As a purchaser of real estate, be aware that in most Mexican states there is neither licensing nor registration of real estate agents. However, most real estate professionals are members of AMPI - the Mexican national real estate association. You should ask for references and check them out. Many Texas real estate licensees have established relationships with their counterparts in various areas of Mexico. Ask a local real estate broker you trust if he or she can make a recommendation for an agent to represent you. Insist that the person representing you, represent only you - the buyer - and not also the seller unless you understand, agree to, and sign an agency disclosure agreement. Be satisfied that the person representing you is experienced in all aspects of a Mexican transaction. Consider only the purchase of private property. Ejidal property, similar to Indian lands in the U.S., was established as a result of the Mexican revolution of 1917. Ejidal property is not private property, however, and is offered often at a far lower price but it cannot be sold legally or promised to be sold until it becomes private property. Be certain that you and your agent are dealing only with the owner of record or someone who has his or her legitimate power of attorney. Insist upon receiving a copy of the seller’s deed as a condition of your offer. If you or your agent does not understand Spanish, get it translated. Get a title investigation and buy title insurance for the full amount of your purchase price. While the initial search may seem expensive for some areas, the title policy transfers risk to the insurance company and minimizes yours as the buyer. Think carefully about how you acquire title in order to avoid or minimize probate and transfer costs in the future. Avoid costly and time-consuming litigation by insisting upon a binding arbitration clause in your contracts. Be sure to budget for closing costs and get a full estimate in writing from the company supervising your transfer. Certain costs are fixed regardless of value but others depend on the sales price. Closing costs may run from 4% to 6% of the cost of a US$ 50,000.00 dollar property but be only 3.5% of a multimillion-dollar property. The major portion of your payment should be withheld or held in escrow until the seller has signed the deed and, if applicable, the bank trustee (if a fideicomiso). Insist upon receiving a registered title document for your property. If the seller is financing the property, sign a document protecting his interests in the event of your default. Be sure you know the amount, which is declared, in your deed and understand the tax implications involved. Finally, make sure you use an experienced neutral third party to supervise the transfer of title to you. By following the above points you can become a proud and satisfied owner of real estate in Mexico - a country with mountains, lakes, rivers, forests, deserts and seashore, a nation with history, ancient cultures, handcrafts, folklore and many other wonderful aspects. Buying property in mexico CAN FOREIGNERS REALLY OWN PROPERTY IN MEXICO?
Yes, Americans and other foreigners may obtain direct ownership of property in the interior of Mexico. However, under Mexican law, foreigners cannot own property outright within the restricted zone. Instead, a real estate trust must be set up to hold title for the foreigner. Since foreigners are not able to enter into contracts in buy real estate, they must have a bank act on their behalf, much as a trust is use to hold property for minors because they also can not contract. The following is a brief outline of the law regarding such trust, known as "fideicomisos", but potential buyers should always get advice and have all real estate transactions overview by a Mexican attorney. WHO'S INVOLVED IN REAL ESTATE TRANSACTIONS IN MEXICO?
Normally, there are three to four players involved in any real estate transaction in the restricted zone:
· A real estate company · The buyer's lawyer · A bank · A public notary All four are helpful in their respective areas in assisting with real estate transactions. Transactions outside of the restricted zone do not involve a bank since it is not necessary to establish a real estate trust in those areas. Otherwise the transactions are much the same. Because of the similarities of real estate transactions in general, it is easy to assume that the basic terms and principles which are familiar in the United States also hold true in Mexico. This assumption becomes easier to make when United States real estate terminology is adopted for transactions in Mexico. Much of the paperwork is similar, if not exactly the same, as that used in the US. Although, there are many aspects of Mexican real estate transactions that are identical to procedures carried out in the United States, there are many aspects that are completely different. As a rule, a foreigner should assume nothing. Mexican real estate transactions are not carried out in the same manner as United States real estate transactions. The buyer must retain professionals to assist in the transaction. Mexico has yet to regulate real estate transactions. Real estate agents and brokers are not legally licensed in Mexico. Consequently, a foreign buyer cannot always depend on the normal safeguards that would be applied to real estate transactions in the United States. The old saying "let the buyer beware" is very appropriate. Anyone can set up a real estate company in Mexico. There are no special requirements or brokerage licenses to obtain. A would-be real estate agent merely has to establish a Mexican corporation, obtain a work visa, and he is in business. There are good reasons why the real estate industry in the United States is highly regulated. Until the real estate industry is regulated in Mexico, there will always be some real estate companies who prefer that buyers know as little as possible about real estate transactions. After all, a buyer cannot ask questions if he does not have any knowledge of the laws. Currently there is nothing similar to a Real Estate Commissioner or a Department of Real Estate in Mexico. Some states are beginning to look at some kind of real estate legislation, but it might be some time before this is a reality. The American Embassy and the American consulates in Mexico are good places to start when trying to determine if a real estate company is reputable. Some of the real estate companies have established quite a reputation for themselves at some of the Consulates. A Mexican attorney should be involved to draw up contracts and to review the conditions and terms of sale. Additionally, an attorney can do a title search and point out any problems or alternatives a buyer may have. The buyer should always have his or her own attorney rather than using the attorney of the seller or some attorney used by a real estate company free of charge. As the old saying goes, you get what you pay for, and usually if someone's services are offered free of charge you are probably paying for them in some other way. Besides formalizing your real estate transaction, an attorney can be very helpful in saving you money. This is because attorneys are involved in many different transactions and have contacts with banks, notaries, and the Mexican government on a regular basis. Because of this they are aware of the most competitive cost and fees involved in a transaction and can make sure that the buyer is given the best possible prices. An attorney can also inform the buyer regarding his or her legal options and by doing so can make sure that no opportunities are missed: tax planning considerations, closing costs which should be paid by the seller, and ways of taking title to the trust rights which make sense for the particular circumstances of a specific buyer. Very often one piece of good advice can save the buyer thousands of dollars in tax savings or other savings when the buyer eventually sells the property. When looking for an attorney it is important to remember that any Mexican attorney can normally handle a real estate transaction. The buyer is not limited to only the local attorneys where the property is located. All real estate transactions involving a trust are governed by federal law. This means that all such transactions are carried out the same way regardless if the property is in Cancun or Los Cabos. THE RESTRICTED ZONE AND "FIDEICOMISOS" The law declares that the Mexican nation has original ownership to all land and water in Mexico, as well as minerals, salts, ore deposits, natural gas and oil; but that such ownership may be assigned to individuals. The Mexican Constitution prohibits direct ownership of real estate by foreigners in what has come to be known as the "restricted zone." The restricted zone encompasses all land located within 100 kilometers (about 62 miles) of any Mexican border, and within 50 kilometers (about 31 miles) of any Mexican coastline. However, in order to permit foreign investment in these areas, the Mexican government created the "fideicomiso," (FEE-DAY-E-CO-ME-SO) which is, roughly translated, a real estate trust. Essentially, this type of trust is similar to trusts set up in the United States, but a Mexican bank must be designated as the trustee and, as such, has title to the property and is the owner of record. The Mexican Government created the "fideicomiso" to reconcile the problems involved in developing the restricted zone and to attract foreign capital. This enabled foreigners, as beneficiaries of the trusts, to enjoy unrestricted use of land located in the restricted zone without violating the law. A "fideicomiso" is a trust agreement created for the benefit of a foreign buyer, executed between a Mexican bank and the seller of property in the restricted zone. Foreign buyers cannot own real estate in the restricted zone due to Constitutional restrictions. The bank acts on behalf of the foreign buyer, taking title to real property. The bank, as trustee, buys the property for the foreigner then has a fiduciary obligation to follow instructions given by the foreigner who is the trust beneficiary. The trust beneficiary retains and enjoys all the rights of ownership while the bank holds title to the property. The foreigner is entitled to use, enjoy, and even sell the property that is held in trust at its market value to any eligible buyer. In order to allow foreigners to enter into the agreement contained in the Calvo Clause, Mexico requires all foreigners to apply for and obtain a permit from the Ministry of Foreign Affairs prior to contracting to acquire real estate in Mexico. This is currently done by the trustee/bank at the time a real estate trust is set-up. Given the changes made for 1997 in the foreign investment Law, and the fact that a buyer can now apply for and obtain a trust permit in a matter of days, it is always better to secure the trust permit from the Ministry of Foreign Affairs before entering into any contract. The bank, as trustee, must get a permit from the Ministry of Foreign Affairs to establish a real estate trust and acquire rights on real property located within the restricted zone. The purpose of the trust is to allow the trust's beneficiary the use and exploitation of the property without constituting real property rights. The beneficiaries of the trust (fideicomisarios) may be: · Mexican corporations with foreign investment · Foreign individuals or legal entities The law defines "use" and "exploitation" as the right to use or possess the property, including its fruits, products, or any revenue that results from its operation and exploitation by third parties or from the bank/trustee. The law does not clarify how trust permits will be issued. Article 14 of the law states that the Ministry shall decide on issuing the permits "...considering the economic and social benefit, which the realization of such operations imply for the nation." The basic criteria used to determine such benefits changed somewhat with the publication of the new foreign investment regulations. However, it is reasonable to state that some of the unwritten rules used by the Mexican government in the area of real estate trusts were included in the new foreign investment regulations. Also, some of the confusing elements were eliminated. It is important to understand the application of the current regulations, even if they are going to be replaced, as well as some of the unwritten policies the government has used in the past, to better understand what criteria will be used by the Ministry in the future. The Ministry of Foreign Affairs must grant any petition for a trust permit that complies with the stipulated requirements within 5 working days following the date of its presentation to the Ministry's central office in Mexico City. It must be granted in 30 days if the application is submitted to one of the Ministry's state offices. The Ministry of Foreign Affairs must confirm the registration of any property acquired by foreign-owned Mexican corporations a maximum period of 15 days following the filing of the petition. In both cases, if the maximum period passes with no action by the Ministry, the trust permit or registration are considered authorized. There is a common misconception among foreigners investing in Mexico that once the trust expires, the beneficiary loses all rights and benefits of the sale of the property held in trust. This is not the case. On the contrary, the beneficiary has a contractual right under the trust agreement with the Mexican bank to all benefits that may result from the use or sale of that property, even though he does not hold title to the property. Under Mexican Law, the bank, as trustee, has a fiduciary obligation to respect the rights of the beneficiary. A real estate trust is not a lease. The beneficiary can instruct the bank to sell or lease the property at any time. The beneficiary can develop and use the property to his liking and benefit, within the provisions of the law. Generally, the law allows most activities engaged in by foreigners.
The Real Property Trust in Mexico
Introduction This paper explores the creation and operation of the trust mechanism used in Mexico. Particular attention will be paid to its operation and application to foreign investment, as it applies to the ownership of real property. The Players to the Deal: At its most basic, a trust is a mechanism through which the Maker transfers ownership over property or rights over to a Trustee, who pursuant to instructions from the Maker, administers the property for the Beneficiary until the fulfillment of a stated objective, by agreement or by law. 1. The Maker: The Maker is the party who creates the trust, transferring the property over to the Trustee and specifying what the purpose of the trust shall be. Often, the Maker will have ownership over the thing or right to be placed in trust, such as property to guarantee the performance of an obligation. However, with respect to foreign investment in Mexico through real property trusts, the Maker is the seller, who upon sale transfers of the property over to the Trustee for the Beneficiary buyer. Mexican Law requires that the Maker of a trust be an individual or entity which is competent under Mexican law to effect the transfer of property or the rights thereto. Provided it is for a lawful end, and assuming the property is theirs to transfer, the Maker of the trust is given wide latitude for the construction of the trust. The Maker may designate and remove Beneficiaries and Trustees, and may name itself as the Beneficiary of the trust. The Maker may also reserve any or all rights of action that accrue by virtue of the Trustee’s obligations. The options which the Maker chooses will be reflected in the agreement with the Trustee which creates the trust. A Maker may extinguish the trust created when the right to do so is reserved, but is precluded from doing so in some instances, such as where the trust is classified as “irrevocable”. Upon the extinguishing of the trust, the property or rights in trust revert back to the Maker, or its heirs, unless the purpose for the trust is accomplished, thereupon which it goes to the beneficiary. 2. The Trustee: In the operation of a trust, the Trustee is the party in whose care the property or rights are placed in. The Trustee is charged with the administering that which is placed in trust, as per the agreement with the Maker and operation of law. The Trustee must be a financial institution duly authorized by the Federal government to engage in trust operations which are found in the Law of Credit Institutions. Federal government authorization consists of the discretionary approval of the Finance Ministry, which consults the Bank of Mexico and the National Banking Commission. Subject to the document creating the trust, if there is no acting Trustee, one must be appointed or the trust extinguishes. If their is no named Trustee in the document creating the trust, the Beneficiary must select one, or it is done by a judge in the property’s jurisdiction. Under Mexican law, a Trustee institution may execute, refuse to accept or be removed from the performance of its obligations. If undertaken, the Trustee is empowered with the rights and actions to administer the trust for the accomplishment of its purpose, subject to the terms and conditions of the trust agreement. There are also several corresponding obligations on the Trustee in order to prevent abuse. The Trustee must adhere to the terms of the trust agreement and cannot resign as Trustee except for serious causes and only with the approval of a judge. The Trustee must exercise due care to preserve the property or rights in trust because it will be liable for any losses or damages due to its negligence. On the institutional level, the authorized Trustee institution must carry out its trust operations by means of its Trustee representatives, which are themselves authorized by the Mexican government. The staff of the trust department may not operate in the rendering of other financial services or operate with the other departments of the Trustee institution. A Trustee may not be named as a Beneficiary in any trust that it oversees, or else it is nullified. The Trustee must also keep a separate accounting for each trust constituted and cannot use the property in trust to further any other ends than those specified in the trust agreement. 3. The Beneficiary: The Beneficiary of a trust is the party who receives the benefit of the trust, either through the express wish of the Maker or the operation of the trust. An individual or legal entity may be a beneficiary of the trust, provided that it possesses the legal capacity to enjoy the benefits of the trust under Mexican Law. In addition to those rights accorded the beneficiary by way of the trust agreement, the rights of a beneficiary include: the right to force the Trustee’s compliance with the trust agreement; the right to attack the legal validity of any acts by the Trustee which are detrimental to the beneficiary, in bad faith or in excess of their Trustee powers, and the right to recover the property which was taken out of the trust. The recovered property goes back in trust. There may be several Beneficiaries to a trust, or none at all. When there are several beneficiaries, it is necessary that there be a decision reached by majority agreement in order to exercise those rights and decisions not contemplated by the trust agreement. Subject to the agreement creating the trust, the Beneficiary gets any remainder of the trust that is extinguished by the accomplishment of its purpose. On The Legal Framework of the Mexican Trust: A. Historical Background: The Mexican trust began its development as a series of projects. It first appeared in Mexican law in 1926, in the General Law of Credit Institutions and Banking Establishments, with the features of the Anglo-Saxon trust used in Great Britain and the United States. B. The Law of Credit Instruments and Credit Operations: The Law of Credit Instruments and Credit Operations was the first Federal legislation that addressed the component parts of the trust and how it functions. Under its provisions, all trusts are commercial acts in nature. A person may create a trust by will or through a public deed. A trust is required to have a definite purpose, which must be lawful. A trust meeting these two requirements will be presumed valid, even if there is no beneficiary named. All trusts must be in writing. Any kind of property may be put in trust. Rights may also be placed in trust, except for those whose alienation are prohibited by law. If the trust involves real property, there is an obligation to register the trust in the Registry of Public Property, in order to become binding on third parties. In any event, trusts constituted through fraud enables a third party to attack its validity. Trusts may extinguish for a variety of reasons: the purpose for their creation may either be accomplished or deemed impossible; the Maker of the trust may revoke it, when the right to do so is reserved; when no Trustee can be appointed; or on written agreement between the Trustee and Maker. When it extinguishes, the property or rights in trust revert back to the Maker of the Trust, or its heirs. The Law of Credit Instruments and Credit Operations prohibits secret trusts, which can be attacked through the writing requirement, the constructive notice requirement, or the various obligations and duties imposed on the Trustee. The Law also prohibits transfers in perpetuity, limiting the term to any life in being or in conception at the time of the death of the Maker. The maximum term a trust may operate for is set at 30 years. C. The Law of Credit Institutions Under Mexican law, the Trustee must be a Mexican entity regulated by the Law of Credit Institutions, which states that only those Mexican credit institutions duly authorized by the Mexican government can engage in those trust operations mentioned in the Law of Instruments and Credit Operations, The Trustee credit institution will engage in these services only through its duly authorized representatives. The Fideicomiso in the Foreign Investment Arena: The evolution of the real property trust for foreign investment in Mexico is best explained by looking at the historical evolution and treatment of foreign investment in Mexico. 1. The Constitution of 1917 The Constitution of Mexico directly resulted from the Civil war that had been fought. One of the key tenets of the revolution was the desire for land ownership for the common man, which could only be effectuated through a redistribution of the land. It was in direct response to the perceived exploitation of the land and natural resources of Mexico by foreign elements, mostly from the United States, Great Britain and France and the failure of the benefits of that economic development to reach the common people. Consequently, the Constitution contained egalitarian provisions designed to promote social welfare for the Mexican people. The provisions for land ownership are contained in Article 27. Article 27 begins by stating that original title to all lands and waters is vested in the nation of Mexico. The nation may transfer ownership rights to private persons and thereby create private property. Mexicans have the right to acquire ownership over real property in Mexico. Foreigners do not have the right to acquire property in Mexico, but may do so if the Mexican government so grants them. But in order to so qualify, Foreigners must agree to waive all protections of their home country and agree to Mexico’s exclusive jurisdiction in all matters related to the acquisition. This is done through the execution of an affidavit agreement with the Foreign Ministry. A final point on the Constitution: under no circumstances were foreigners allowed to acquire ownership rights over real property situated within 50 kilometers of the coastline and 100 kilometers from its national borders. 2. The Presidential Agreement of 1971: The introduction of the trust mechanism into the area of foreign investment began in the administration of President Luis Echeverria. In the preceding years, foreign investment had gone through a case by case screening process to determine its approval. Now, in order to develop Mexico’s industrial and tourism infrastructure, the Ministry authorized duly certified Mexican financial institutions to acquire title to real property as trustee in the name of the beneficiary foreign investor, who acquired beneficiary rights to use and profit from the real property without constituting ownership rights. In response to the Agreement, the Mexican banking sector began to set up offices in key industrial and tourist cities to offer fiduciary services.[Note: The 1971 Agreement was Repealed by the 1989 Regulations to the Foreign Investment Law ] 3. The Law to Promote Mexican Investment and Regulate Foreign Investment: In 1973, Mexico enacted its first legislation attempting to comprehensively address foreign investment. The Law limited foreign participation in the management and control of an enterprise to the percentage of its capital contribution, and in any event to 49%. Foreign investment was prohibited in a variety of sectors. which were reserved for participation by Mexican investment. To continue the controlled development of select areas of its infrastructure with foreign capital, Mexico allowed foreign investment to acquire the rights to the use and profits from real property located along the border and coastline of Mexico by means of the irrevocable trust held through a duly certified Mexican financial institution. The purpose of the trust had to be commercial or industrial in nature and no ownership rights were acquired. In order that the Trustee institution could purchase the property for the Beneficiary foreign buyer, authorization by Mexico was needed beforehand in the form of a permit by the Foreign Ministry. The National Commission on Foreign Investment was created to coordinate participation among the government ministries, which consulted the Foreign Ministry on granting authorization. Upon authorization the property was purchased by the fiduciary institution which issued nontransferable certificate(s) of participation to the beneficiary foreign investor, whose rights could last up to a maximum of 30 years. The transaction had to be registered with the National Registry of Foreign Investments. [Note: The 1973 Foreign Investment Law was repealed by the 1993 Foreign Investment Law]. 4. Regulation to The Law to Promote Mexican Investment and Regulate Foreign Investment: Mexico was in its sixth year of economic reform when President Salinas issued the Foreign Investment Regulations. These regulations were issued in supplement of the 1973 Foreign Investment Law and are still in force. The major change is its provision which allows for up to 100% foreign investment in a newly created Mexican company which operates in certain sectors left unclassified by the 1973 Foreign Investment Law, upon meeting six conditions. The Regulations address foreign acquisition of Real Property in Mexico and the requisite authorization process. The 100 km/ 50 km strip of land is now called the Restricted Zone. Foreign investors are given guidance as to what are the industrial and tourist purposes permitting the acquisition of rights in this zone. They also clarify the rights of use and profit that the beneficiary foreign investor acquires through the required trust. One year before expiration of the 30 year term, when the parties to and the terms of the original trust agreement are the same, application for a new 30 year trust over the same real property may be made, with automatic approval from the Foreign Ministry. The registration process for real property trusts is also clarified. Registry of real property trusts is made in Section III of the National Registry of Foreign Investments by the Trustee institution within 60 days after the creation of the trust or the acquisition of rights by the Beneficiary Foreign investor. The information required for proper registration and the time within which it should be furnished is also clarified. [Note: The 1989 Regulations were repealed by the 1993 Foreign Investment Law in areas which contradict it.] 5. The North American Free Trade Agreement: The agreement, which went into force on January 1st, 1994, makes Mexico, Canada and the United States the largest trading bloc in the world. The NAFTA covers among other things: tariffs, rules of origin, standards and dispute settlement procedures. In the area of foreign investment, the three parties agree to give each other’s investors and their investments the better of the treatment they give to their Most Favored trading partner or the same treatment as they do their own nationals. This would have allowed Canadian and American Investors the ability to circumvent the trust requirement and acquire ownership rights over real property in the Restricted Zone since it is given to Mexicans by right. However, Mexico negotiated a reservation from these provisions, maintaining the Constitution’s Article 27 prohibition on direct title for foreigners in the Restricted Zone. The threshold requirements for review from the National Commission on Foreign Investment have also been adjusted for American and Canadian interests: for the years 1994-96, the threshold level to trigger review is at $US 25 Million; for the years 1997-99, it is 50 Million; 2000-2002, 75 Million; and after 2003, the level is set at 150 Million. 6. The Foreign Investment Law: On December 27, 1993, Mexico enacted a new comprehensive law dealing with its treatment of foreign investment. The Foreign Investment Law was signed by President Carlos Salinas and printed in the Official Government Daily the same day the NAFTA and its implementing legislation was adopted by the United States, the final partner to do so. The provisions detail Mexico’s policy of opening itself up to foreign investment to foster its development and bring itself more into the world economy. Its basic contrast with the Foreign Investment Law of 1973 is simple: rather than prohibiting foreign investment as a general rule and carving out exceptions where foreign investment may be made, the Law opens Mexico to foreign investment as a general rule and carves out exceptions where foreign investment is either prohibited or regulated. In the area of Real Property, the Law gives Foreign Investment the right to acquire ownership rights over real property in the Restricted Zone, provided three basic conditions are met: (1) it must be for nonresidential purposes, (2) it must be through the vehicle of a Mexican company and (3) the transaction must be registered with the Ministry of Foreign Relations. Acquisition of real property by a Mexican company with foreign investment for purposes deemed residential must be undertaken through a trust mechanism through an authorized Credit Institution. Foreign Ministry permission is required for the institution to acquire the land. The trust gives the Mexican company, as beneficiary, the rights to the use and profit from the land, without acquiring ownership rights. If the foreign investor chooses to make the investment itself, for whatever purpose, a trust mechanism through a certified Credit Institution is required, with permission form the Foreign Relations Ministry needed for the institution to acquire the real property as Trustee. The trust gives the Beneficiary foreign investor the rights to the use and profit from the land without acquiring ownership rights. As mentioned, registration with the Foreign Ministry is accomplished through the National Registry of Foreign Investments. All trusts involving real property in the Restricted Zone must be registered in Section 3 of the Registry. It is the duty of the Trustee institution to register the acquisition with the National Registry of Foreign Investments within 40 business days after the occurrence of a triggering event. The information required for proper registration is also clarified. When the registration requirements have been met, the National Registry of Foreign Investments must issue a certificate of registration. The registration is subject to an annual renewal by the Ministry of Foreign Relations. The trusts created under these provisions are good for up to 50 years, an extension of the 30 year terms allowed in the 1973 Foreign Investment Law and the General Law of Credit Instruments and Credit Operations. They may be renewed for up to another 50 years at the request of an interested party. This new legal framework gives the foreign investor the ability to acquire ownership rights over real property located in the Restricted Zone, while giving Mexico the ability to regulate its development via jurisdiction over the nationals making the investment The Ministry of Foreign Relations is given the lead role in the regulation of foreign investment. For example, all parties (Mexicans and foreigners) need Ministry authorization to constitute a Mexican company and during this process, the newly created entity much choose 1 of 2 options: adoption of the Exclusion of Foreigners Clause or the execution of the Art 27 Calvo agreement. Foreigners who regularly operate in Mexico and Mexican companies with foreign investment must also register with the Ministry’s National Registry of Foreign Investments. Existing Mexican companies need Ministry permission to change their Exclusion of Foreigners Clause. Presumably, upon the admission of foreign investment, the company must then make the Article 27 agreement in order to acquire real property or rights thereto in Mexico. The Ministry reserves the right to verify compliance on any matter associated with the trust permits. The Law has prescribed time limits for the Ministry of Foreign Relations. The permit for the credit institution to acquire title to the land as Trustee must be granted or denied within 30 business days of the application or it is deemed automatically granted. The registration of the acquisition into the National Registry of Foreign Investments must be within 15 business days of its application for registration or it is deemed automatically granted. The Law also prescribes sanctions for the contravention of its provisions. Anyone involved in an effort to transfer ownership rights over to foreign investment in violation of the relevant provisions of the Law may be subject to fines from the Ministry of Commerce and Industrial Development up to the amount of the transaction, in addition to possible civil and criminal penalties. Conclusion: Two years after entry into force of the NAFTA and one year after the economic crisis brought on by the peso devaluation, Mexico finds itself in the midst of an economic crisis. The administration of President Ernesto Zedillo finds itself in the midst of a difficult paradox: on the one hand, a weak peso proves favorable for Mexico’s export industry, earning hard currency, yet makes domestic savings impossible, which is needed to lower Mexico’s interest rates. Foreign capital will be needed for the recovery. Having learned its lessons in the past year as to the speed with which foreign portfolio investment can leave the country, Mexico will be promoting foreign direct investment, one tenet of which is the acquisition of Real Property. And with the majority of foreign investment along the borders and coasts of Mexico, foreign investors must be made aware of the real property trust in order to properly plan a foreign investment strategy. ----------------------------::: ---------------------------- ROBIN G. HAMMOND LLM INVESTMENT CONSULTANT CANCUN QUINTANA ROO. MEXICO 77500 robin44@prodigy.net.mx or to info@kallistoinvestment.com for more information | 
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