Summary: foreign investment law and policy in Mexico | Aici

Law and policy

Policies and procedures

In general, what are your government’s policies and procedures regarding the supervision and review of foreign investments?

Until recent years, the Mexican government’s policy on the supervision and review of foreign investments focused only on verifying whether the foreign investment raised national security issues. However, in recent practice, government policies and procedures have changed to a more inclusive approach. Under this new approach, the government analyzes each case depending on the project’s characteristics – for example, the size of the company, the sector, the type of investment and the origin of the investor’s resources.

Specifically, restrictions on foreign investment are applied to foreign investors who want to participate directly or indirectly in the equity of companies that have a certain amount of sales in Mexico or that perform certain activities.

It needs to be considered that the officials of the National Commission of Foreign Investments (Comisión Nacional de Inversiones Extranjeras) (CNIE) took a policy-based approach to the review, and asked for more information on foreign direct investment (FDI) review procedures. Under this new method, it is advisable to contact the CNIE officials before submitting the file to discuss the proposed work, and what information they would like to see explaining the possible benefits of work in Mexico and prepare a notification in consideration of such discussions.

Although this means submitting more information to the official documents and information required for this type of process, it helps to speed up obtaining approval.

Finally, it is important to point out that Mexico does not have currency controls.

Basic rules

What are the main laws that directly or indirectly regulate acquisitions and investments by foreigners and investors on the basis of national interest?

The Foreign Investment Law and its Regulations (collectively, the FIA) form the main legal framework governing FDI in Mexico.

Although the FIA ​​is the law that generally applies to FDI, foreign investment may also be limited or subject to certain laws or permits that apply to the target company. In any process involving the analysis of potential FDI, investors should review the terms and conditions provided in the specific regulatory framework applicable to the target company.

This regulatory framework can be seen in the permits, approvals or agreements (or all of these) granted to the target company, as well as reviewing the law that applies to the activities of the target business (eg, financial services, the energy sector, transport. utilities and any type of public service).

Scope of application

Explain the scope of application of these rules, including what types of investments or transactions are covered. Are small interests held? Are there certain sectors in which the authorities have the power to monitor and prevent foreign investment or sectors in which special inspections are discussed?

The scope of the FIA ​​applies to any type of acquisition over shares that confer voting rights on the target company. In particular, under the FIA, foreign investment is generally allowed without prior approval from any administrative agency, except in the case of legal entities:

  • undertakes the activities described in article 6 of the FIA ​​(ie, ‘restricted investments’); or
  • involved in the activities provided for in articles 7 and 8 of the FIA, or in assets with a value exceeding the financial limit specified in article 9, in an amount exceeding the corresponding cap (ie, ‘capped foreign investments’).

Limited investment

Limited investments include the acquisition of a stake – in any amount – of the equity of Mexican companies involved in land passenger and cargo transportation services in the Mexican territory, or development banks.

Pursuant to the FIA, investment in these types of businesses is restricted to Mexican nationals only. Foreign investors are prohibited by law from making restricted investments.

Limited foreign investment

Foreign investors cannot acquire a majority stake of more than 10 percent in a Mexican co-production company, which is a specialized company with limited capital dedicated to a specific primary activity (such as fishing, handicrafts and agricultural production) with a preferential tax regime.

Foreign investors cannot acquire more than 49 percent of the capital stock of Mexican legal entities that engage in one of the following reserved activities:

  • manufacture and sale (trade) of explosives, firearms, shells, ammunition and explosives;
  • printing and publication of newspapers for exclusive sale and distribution in Mexico;
  • ownership of agricultural, livestock and forestry land;
  • fishing activities in freshwater, coastal and special economic zones;
  • priority port management;
  • inspection facilities at ports located within Mexican territory;
  • shipping of goods by sea in Mexican waters;
  • ship, aircraft and railway equipment fuel and lubricants;
  • broadcast; again
  • air transport services (including scheduled flights and chartered flights).

The CNIE may approve any foreign investment involving the acquisition of more than 49 percent of the capital stock of a Mexican legal entity that engages in:

  • navigation services in ports located within the territory of Mexico;
  • shipping of goods by sea and coast;
  • aerodrome management or operation;
  • educational facilities (including pre-school, primary school, middle school and college);
  • legal services;
  • construction or operation of railways (or both), and rail transport services; again
  • holding assets with a book value of more than 19.55 billion Mexican pesos (however, this value is revised each year).

Additionally, corporate agencies have broad authority to review mergers and acquisitions of their regulated companies. Thus, if the target company has a permit, approval or approval – or is subject to a specific regulatory framework – that requires the prior approval of a sector agency, the proposed transaction may be blocked. In some cases, a specific permit may prohibit any type of foreign investment in the equity of the permit holder. Due to the lack of homogeneity of existing permits in Mexico, this analysis must be carried out on a case-by-case basis during the due diligence process.


How is a foreign investor or foreign investment defined in the applicable law?

Foreign investment: (1) any type of direct or indirect participation of foreign investors, in any part, in the equity of companies incorporated in Mexico (except for neutral investments that do not confer voting rights); and (2) any type of direct or indirect participation of companies incorporated in Mexico (controlled by foreign investors), in any part, in the capital stock of Mexican companies.

Foreign investor: any person or legal entity with non-Mexican nationality.

Special rules for SOEs and SWFs

Are there special rules for investments by foreign state-owned enterprises (SOEs) and sovereign wealth funds (SWFs)? How is SOE or SWF defined?

The main legal framework governing FDI in Mexico provides specific rules for investments made by foreign SOEs and SWFs.

Nevertheless, it is advisable to review whether the target company has a permit, approval or authorization – or is subject to a specific regulatory framework – which may provide certain additional provisions regarding foreign investment.

In addition, it should be noted that during the review process before the CNIE, the case manager may consider it important to analyze the specific details of the regulatory framework applicable to the foreign SOE or SWF making the investment. The purpose of this is to understand the potential aspects of the project and their benefits in Mexico.

Appropriate authorities

What officials or authorities have the power to review mergers or acquisitions on grounds of national interest?

There are no regulatory agencies in Mexico that review mergers or acquisitions solely for reasons of national interest. However, the main regulatory body that reviews foreign investment is the CNIE and can only reject an application for foreign investment for national security purposes.

However, the target company may have a permit, approval or approval – or be subject to a specific regulatory framework – which includes additional provisions governing review procedures with industry regulators and emphasizing national interest policies. The probability of this situation is low, but considering that there is no standard form for permits, licenses and authorizations given in Mexico, it is advisable to review these documents for this purpose.

Apart from the laws and policies mentioned above, how much discretion do the authorities have to approve or reject transactions for reasons of national interest?

The CNIE can only reject a foreign investment application for national security purposes and has broad discretion to approve or reject any transaction based on these reasons. Apart from Mexico’s competition authorities (which must base their decision on economic analysis), corporate agencies have broad powers to approve or reject transactions. Therefore, they can also support their rejection in any case on the grounds of national interest.

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