Foreign Investment in Mexico: On the Way to More and better Opportunity

Mexico is now ranked as the 38th Best Place for Business according to World Bank Doing Business 2016 Report and continues to climb the ranks annually. [1]  This shows Mexico’s efforts to lure foreign investment in order to create additional employment and to increase industrial output.

This openness to foreign investment has resulted from a constantly evolving legal framework, as per ratification of international free trade agreements—for example, the North American Free Trade Agreement in 1992 and the Mexico-European Union Free Trade Agreement in 1997—and pro-foreign investment federal legislation.

Nowadays, foreign investors can choose to freely invest in Mexico (I). However, they may encounter restrictions in certain areas, which will be summarized hereafter (II).

 

I. Absence of restrictions for foreign investors

Articles 25 to 28 of the Political Constitution of the United Mexican States (hereinafter the “Constitution“)[2]  and the Law on Foreign Investment of Mexico (hereinafter the “LFE“)[3] are the most important basis of Mexico’s legal framework for foreign investment.

This legal framework has been modified constantly, to demonstrate a drive towards liberalization—for example, the opening of the oil and gas sector to foreign investors in 2014— these dispositions reflect changes in Mexico’s economic policy.

Article 4 of LFE stipulates that foreign investors may hold 100% of the capital stock of a Mexican corporation or association. The previous law restricted this participation to 49%.

These stipulations are not applying to neutral investment (financial investment without control rights) which belong to a specific title of the FIL.[4]

LFE grants to every foreign investor the same rights. There are no restrictions according to the investor’s nationality.

However, a State which entered into a Free Trade Agreement with México may have less restrictions on investment on some reserved activities according with the dispositions established in the treaty.

Except for reserved activities, foreign investors are free to invest in or set up companies in Mexico.

However, all foreign investors that aims to incorporate a company in Mexico,  require  to comply with specific obligations (as the registration before the National Registry of Foreign Investment of Mexico “Registro Nacional de Inversiones Extranjera”).

 

II. The ​​reserved activities

The Constitution provides in Articles 25 to 28, that foreign investors cannot hold freely 100% of the capital stock on some strategic activities in Mexico. The LFE applies the provisions of the Constitution and outlines the activities in which investment is limited and their regime.

These reserved activities are therefore an exception to Article 4 of LFE.

There are different legal regimes applicable according to the activities:

  • The activities which are reserved exclusively for the State both listed by the Constitution and Article 5 of LFE (exploration and extraction of oil and hydrocarbons ; electricity ; nuclear power ; radioactive minerals ; telegraph and radiotelegraph services ; postal services ; minting of coins ; supervision control and surveillance of ports, airports and heliports (…)[5]).
  • The activities which are reserved exclusively for Mexican investors listed by Article 6 of LFE (domestic land transportation for passengers, tourism and freight not including messenger or courier services ; development banking institution ; rendering of professional and technical services provision expressly defined by the applicable legal provisions (…)[6]).
  • The activities subject to a specific participation percentage listed in Article 7 of LFE where foreign investment is authorized up to the following percentages: (up to 10% in cooperative companies for production; up to 25% in Air transportation and up to 49% in firearms, explosives, newspaper, series “T” shares in companies owning agricultural, fresh and coastal water fishing (…)[7]).
  • The activities requiring prior approval defined in Article 8 of LFE. This approval must be given by the Foreign Investment Committee for a higher stake to 49% (port and marine services; air terminals; private education; legal services; construction; exploitation and operation of general railways (…)[8]).

This list may change according to legislative reforms.

 

As an outgrowth of its legal and structural changes, Mexico stands today as a reference country for foreign investment.

For several years, TMC Legal has advised many clients throughout investing in Mexico in order to develop and realize their projects both legally and strategically.

For more information, ProMéxico[9] (English website) https://www.promexico.gob.mx/ is a federal entity responsible for attracting foreign investment.

 

 

[1] World Bank Doing Business 2016 Report is available in both English and French.

[2] Political Constitution of the United Mexican States of 1917 (Spanish).

[3] Law on Foreign Investment of Mexico (Spanish).

[4] Ibid., footnote 3, FIL, Title 5 “Neutral Investment”

[5] To see the full list: Ibid, footnote 3, FIL, Article 5.

[6] To see the full list: Ibid, footnote 3, FIL, Article 6.

[7] To see the full list: Ibid, footnote 3, FIL, Article 7.

[8] To see the full list: Ibid, footnote 3, FIL, Article 8.

[9] ProMéxico website is available on French, English and Spanish.

2 thoughts on “Foreign Investment in Mexico: On the Way to More and better Opportunity

  1. Pingback: Migración profesional en México: VISA por oferta de empleo y VISA de inversionistas | TMC Legal

    • aurelien kropp Post author

      Buenas tardes,

      Si se puede emplear extranjeros por medio de la sociedad. Se necesita registrarse como empleador ante del Instituto Nacional de Migración.

      Después, la sociedad podrá emitir una oferta de empleo que permitirá a un extranjero tramitar la VISA por Oferta de Empleo que le permitirá trabajar en México.

      Para más informaciones, puede mandar un correo electrónico a info@tmclegal.com

      Saludos,

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