The
History of Land Ownership in Mexico
The History of Mexican Land
To really understand
how ownership in Mexico works, it is important to understand the
history of property ownership and its evolution in Mexico. If you
picture a country that has been dominated by foreign owners since
the early 1500's, you will begin to see why Mexico is so protective
of its most valuable resource...land.
In 1517, when Hernandez
de Cordoba sailed from Spain to the Yucatan Peninsula, foreigners
laid claim to Mexican lands. Spain decided that since they had landed
here, it was now theirs. It was not until 1822 that Mexico declared
its independence from Spain, much like the U.S. declared independence
from England, but even with this new independence, the lands of
Mexico were still owned by wealthy foreigners, the Mexican upper
class and the Church. Porfirio Diaz, a former President of Mexico
for over 30 years, nearly sold all of Mexico to foreigners during
his term.
The end result was the
Mexican Revolution, which cost over one million lives and was the
basis for the Federal Constitution of 1917. The new constitution
imposed new laws and restrictions on foreign ownership and ownership
of lands by the Catholic Church. Article 27 of the constitution
allows Mexican Nationals and Mexican Companies to own property,
however it restricts foreigners from owning land with the restricted
zone. It is also said that the U.S. was involved in this new zoning
in an effort to prevent the installation of foreign military bases
on our borders or near our coastlines. This "restricted zone"
is defined as property within 60 miles from any Mexican border or
within 30 miles of any Mexican coastline.
Not until the 1930's
did the Mexican people truly see the property being returned to
them. President Lazaro Cardenas disassembled the large property
holding and distributed them in the form of cooperative farms or
"Ejidos". The people were given ownership of these properties
and were allowed to farm and cultivate them and receive the profit
from their efforts. After nearly 4000 years, over 50 million acres
of land was back in the hands of the Mexican people, however, it
was still owned by the Federal Government.
Even though the people
were allowed to farm the properties and profit from their work,
it was not until 1992 that they were allowed to sell the properties.
The 1992 Agrarian Law recognizes property rights within the Ejido
and allows for the owner of record to sell or lease the property
to a non-Ejido member. The property can be removed from the National
Agrarian Registry (removed from Federal Control) and placed in the
public land registry allowing it to be sold or leased. Today, thousands
of acres are being removed on a daily basis from the Ejidos, added
to the public lands and being sold or leased. There are well over
50 million acres of land that will go through this process to be
either leased or sold over the coming years.
Mexican
Property Trusts (Fideicomiso)
In 1994, amendments to
the Constitution permitted foreigners to purchase and own real estate
in Mexico located within the "restricted zone" which is
all land within 60 miles of a national border and within 30 miles
of the Mexican Coast. This Law permitted ownership through a land
trust or "Fideicomiso".
A "Fideicomiso"
is a Mexican Trust. The way it works is the Mexican Government issues
a permit to a Mexican Bank of your choice, allowing the bank to
act as purchaser for the property. The bank acts as the "Trustee"
for the Trust and you are the "Beneficiary" of the Trust.
The "Beneficiary" rights are very similar to Living Wills
or Estate Trusts in the U.S.
The law authorizes Mexican
banking institutions to act as trustees. A trustee takes instructions
only from the beneficiary of the trust (the foreign purchaser).
The beneficiary has the right to use, occupy and possess the property,
including the right to build on it or otherwise improve it. The
beneficiary may also sell the rights and instruct the trustee to
transfer title to a qualified owner.
Many people refer to
the trust arrangement in Mexico as a lease agreement... this is
not true. The home or property that you buy will be put into a trust
with you named as the beneficiary of the trust - you are not a lessee.
You have all the rights that an owner of property in the U.S. or
Canada has, including the right to enjoy the property, sell the
property, rent the property, improve the property, etc.
The initial term of the
trust is 50 years. An investor can renew the trust for an additional
period of 50 years within the last year of each 50-year period,
and this process can be continued indefinitely, providing for long
term control of the asset.
Documentation
La Punta Realty will
facilitate long-term investment by individuals and developer's by
listing and offering only properties with all necessary entitlements
and approvals. The property purchase procedure will be similar to
transactions in the United States. Documentation will be standardized
in both English and Spanish, and title insurance will be available
on all properties we sell.
Investing
in Mexico
Mexico offers the foreign
investor an attractive investment opportunity in an economy that
is undergoing dramatic improvement and growth. Following the country's
inability in 1982 to service its escalating foreign debt, Mexico
introduced structural changes in its economy designed to move the
country toward an open economy with more direct foreign investment.
Among the most significant changes were (1) Mexico's accession to
the General Agreement on Tariffs and Trade, (2) a government willing
to work with the International Monetary Fund and other sources to
restructure the country's foreign debt,(3) the liberalization of
policies concerning foreign ownership of Mexican companies, and
(4) the encouragement of tourism development.
In an effort to promote
foreign investment, Mexico enacted new regulations designed to relax
the restriction on foreign investment, which formerly limited foreign
ownership of Mexican companies to 49 percent. Under the new regulations,
foreign investor's can now own up to 100 percent of a large number
of enterprises, including hotel companies, development companies,
etc. without prior authorization from the Foreign Investment Commission.
Thus, foreign investors in these enterprises have been put on equal
footing with local investors and are no longer required to engage
a Mexican investment partner.
The Mexican Federal Corporate
Income Tax ranges from 25 to 38 percent. Provisions in the income
tax code have also been established to offset the detrimental effects
of inflation on monetary assets and liabilities, inventories and
depreciable assets.
Mexico will continue
to offer foreign investors close proximity to the world's largest
market, a solid communications infrastructure, ample supplies of
energy, low labor costs, and skilled and trainable labor resources.
The liberalization of the foreign investment rules is a clear indication
of the very favorable attitude the government has taken towards
foreign investment. The combination of a rapidly improving economy
and stable profitable base foretell and excellent ongoing investment
environment.
The Mexican
government has stated that it aims to double the number of foreign
tourist arrivals into Mexico, representing foreign exchange revenue
of $5 billion plus annually. A key to achieving the government's
goal of ten million visitors a year is to develop new tourist destinations
with modern facilities and infrastructure. The North Bay Puerto
Vallarta region is a priority area for this targeted growth.
This
article is taken from Snell Real Estate in Cabo San Lucas
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