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Foreign investment regime

As previously mentioned, the FIL is the main legal instrument regulating foreign investment in Mexico. It defines 'foreign investment' as the participation, in any percentage, by foreign investors in the corporate capital of Mexican entities, investments in Mexican companies where the majority interest is composed of foreign capital, or the participation by foreign investors in the activities and sectors contemplated in the FIL. A 'foreign investor' is defined as any individual or entity of any nationality, other than Mexican, and foreign entities with no legal independent existence.

While in general foreign investors may participate in Mexican projects without major restrictions (such as being allowed to participate directly in the corporate capital of Mexican legal entities, purchase and sell assets, manufacture, import and export products, open and operate establishments or businesses of any legal nature), some limitations apply to certain economically 'strategic' activities in which foreign investment is restricted or, in some specific cases, not permitted at all.

The Mexican Constitution actually provides for certain strategic activities that are expressly reserved for the state to undertake exclusively, either in whole or in part. The strategic activities reserved for the state are:

  1. the postal service, telegraphy and radio-telegraphy;
  2. radioactive minerals and nuclear energy;
  3. the control of the national electricity system along with the transmission and distribution of electricity;
  4. the printing of money and coinage;
  5. hydrocarbons;
  6. basic petrochemicals; and
  7. control, supervision and oversight of airports, ports and heliports.

As part of the aforementioned reforms, the transmission of electricity and the exploration and extraction of hydrocarbons were significantly deregulated and, although still restricted, private entities, both foreign and domestic, are now allowed to participate to a certain extent in these activities, using a type of profit or production sharing mechanism with the state oil company Pemex.

There are some other economic sectors in which foreign investment is allowed but also restricted (i.e., capped); these are discussed further in Section IV.

Regarding real estate, there are no restrictions for Mexican commercial companies seeking to acquire urban real property, even if non-Mexican equity holders participate in the capital stock, whether as minority or majority stakeholders. However, companies may only acquire rural property to the extent that it is necessary for the fulfilment of their corporate purpose. In no event may these corporations acquire real property dedicated to agricultural, cattle or forestry activities of an area larger than the thresholds established for these activities.

Further, acquiring property in a restricted zone (which covers an area creating a belt around the country, 100 kilometres wide in the border regions and 50 kilometres wide along the coast) requires, inter alia, Mexican companies to include a Calvo Clause in their corporate by-laws. A Calvo Clause is a requirement for foreign shareholders to consider themselves as Mexican nationals in respect of the company's property, and includes an express agreement not to invoke the protection of a foreign government, under penalty of forfeiting their property in benefit of the nation.

Mexican companies with a Calvo Clause included in their by-laws are authorised to acquire real estate located in the restricted zone for non-residential purposes, and have beneficiary rights over real estate located within the restricted zone for residential purposes. If acquiring real estate for non-residential purposes, a corporation is required to register the acquisition with the Ministry of Foreign Affairs.

Foreign citizens cannot acquire real estate within the restricted zone by any means, regardless of the purpose for which the property would be acquired; however, they can hold beneficiary rights in trusts established for the purpose of holding ownership of the relevant real estate, subject to securing a prior authorisation from the Ministry of Foreign Affairs.