|
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 to 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 Untied States, but Mexican banks must be designated as the trustee and, as such, have title to the property and are the owners of record. The Mexican Government created the “Fideicomiso” to reconcile the problems involved in developing the restricted zone and to attract foreign capital. These enable foreigners, as beneficiaries of the trust, 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 a 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, and 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, 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.
|
|
... published 2007-08-10 |
|
