The History of Land Ownership in Mexico

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