2023 Investment Climate Statements: Mexico

Policies Towards Foreign Direct Investment

Mexico is open to foreign direct investment (FDI) in most economic sectors and has consistently been one of the largest emerging market recipients of FDI. Mexico’s proximity to the United States and preferential access to the U.S. market, macroeconomic stability, large domestic market, growing consumer base, increasingly skilled workers, and lower labor costs combine to attract foreign investors. The COVID-19 economic crisis showed how linked North American supply chains are and highlighted new opportunities for partnership and investment. Still, recent policy and regulatory changes have created doubts about the investment climate, particularly in the energy, agriculture, and the formal employment pensions management sectors.

The United States has been the largest source of FDI in Mexico, with 35 percent of the stock as of 2021 (IMF). According to Mexico’s Secretariat of Economy, total FDI flows for 2021 were USD 35.3 billion, a 11.9 percent increase compared to 2021 (USD 31.5 billion). The automotive, aerospace, telecommunications, financial services, and electronics sectors typically receive large amounts of FDI.

Most foreign investment is concentrated in northern states near the U.S. border, where most maquiladoras (export-oriented manufacturing and assembly plants) are located, or in Mexico City and the nearby “El Bajio” (e.g., Guanajuato, Queretaro, etc.) region. In the past, foreign investors have overlooked Mexico’s southern states, although the administration is focused on attracting investment to the region, including through large infrastructure projects such as the Maya Train, the Dos Bocas refinery, and the trans-isthmus logistics and industrial corridor. In 2021, the Government of Mexico ramped up public spending and widely promoted private investment in these projects. In December 2021, the Government of Mexico issued a controversial decree naming these projects “national security” priorities, allowing them to proceed before the completion of environmental and other impact studies. Though courts enjoined the executive decree, it still generated concerns about the Government of Mexico’s commitment to transparency.

The 1993 Foreign Investment Law, last updated in March 2017, governs foreign investment in Mexico, including which business sectors are open to foreign investors and to what extent. It provides national treatment, eliminates performance requirements for most foreign investment projects, and liberalizes criteria for automatic approval of foreign investment. Mexico is also a party to several Organization for Economic Cooperation and Development (OECD) agreements covering foreign investment, notably the Codes of Liberalization of Capital Movements and the National Treatment Instrument.

The Government of Mexico dissolved the former trade and investment promotion agency ProMexico in 2019, and Mexico’s Secretariat of Foreign Relations (SRE) assumed most of its responsibilities with the establishment of the General Directorate for Global Investment (GDGI) in June 2021. The GDGI launched three specific projects: the California Economic Council; an interactive data base to attract FDI called the “Atlas Prospectivo;” and the U.S.-Mexico Task Force for Transport Electrification. The GDGI works closely with Mexico’s state secretaries of economy to promote trade and attract FDI through partnerships with SRE’s diplomatic missions overseas.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mexico reserves certain sectors, in whole or in part, for the State, including: petroleum and other hydrocarbons; control of the national electric system, radioactive materials, telegraphic and postal services; nuclear energy generation; coinage and printing of money; and control, supervision, and surveillance of ports of entry. Certain professional and technical services, development banks, and the land transportation of passengers, tourists, and cargo (not including courier and parcel services) are reserved entirely for Mexican nationals. See section five for restrictions on foreign ownership of certain real estate.

Reforms over the past decade in the energy, power generation, telecommunications, and retail fuel sales sectors have liberalized access for foreign investors. While reforms have not led to the privatization of state-owned enterprises such as Pemex or the Federal Electricity Commission (CFE), they have allowed private firms to participate in their sectors. However, the current Government of Mexico has made significant regulatory and policy changes that favor Pemex and CFE over private participants.

Hydrocarbons: Private companies participate in hydrocarbon exploration and extraction activities through contracts with the government under four categories: competitive contracts, joint ventures, profit sharing agreements, and license contracts. All contracts must include a clause stating subsoil hydrocarbons are owned by the State. Between 2015 and 2018, when President Lopez Obrador took office, Mexico auctioned more than 100 land, shallow, and deep-water blocks with significant interest from international oil companies. The President Lopez Obrador administration ceased further auctions but committed to respecting the existing contracts awarded under the previous administration.

Telecommunications: Mexican law states telecommunications and broadcasting activities are public services, and the government will at all times maintain ownership of the radio spectrum. The Federal Telecommunication Institute (IFT), roughly analogous to the U.S. Federal Communications Commission (FCC), is an independent agency responsible for spectrum auctions and for regulating, monitoring, and sanctioning telecommunications activities. As of June 2023, the Government of Mexico has left three of seven IFT commissioner positions vacant. Due to the vacancies, the IFT is unable to update telecommunications regulations or make meaningful decisions. Fees for radioelectric spectrum rights in Mexico, set by IFT and Hacienda, are among the highest in the region and world, a condition that industry believes stifles innovation and connectivity.

Aviation: The Foreign Investment Law limited foreign ownership of national air transportation to 25 percent until March 2017, when the limit was increased to 49 percent.

The USMCA, which entered into force July 1, 2020, maintained several NAFTA provisions, granting U.S. and Canadian investors national and most-favored-nation treatment in setting up operations or acquiring firms in Mexico. Exceptions exist for investments restricted under the USMCA. Currently, the United States, Canada, and Mexico have the right to settle any legacy disputes or claims under NAFTA through international arbitration for a sunset period of three years following the end of NAFTA. Only the United States and Mexico are party to an international arbitration agreement under the USMCA, though access is restricted as the USMCA distinguishes between investors with covered government contracts and those without. Most U.S. companies investing in Mexico will have access to fewer remedies under the USMCA than under NAFTA, as they will have to meet certain criteria to qualify for arbitration. Sub-national Mexican governments must also accord national treatment to investors from USMCA countries.

Approximately 95 percent of all foreign investment transactions do not require government approval. Foreign investments that require government authorization and do not exceed USD 165 million are automatically approved unless the proposed investment is in a legally reserved sector.

The National Foreign Investment Commission (la Comisión Nacional de Inversiones Extranjeras) under the Secretariat of the Economy is the government authority that determines whether an investment in restricted sectors may move forward. The Commission has 45 business days after submission of an investment request to decide. Criteria for approval include employment and training considerations, and contributions to technology, productivity, and competitiveness. The Commission may reject applications to acquire Mexican companies for national security reasons. Mexico’s Secretariat of Foreign Relations must issue a permit for foreigners to establish or change the nature of Mexican companies.

Other Investment Policy Reviews

The latest World Trade Organization’s (WTO) trade policy review of Mexico is from August 2022: https://www.wto.org/english/tratop_e/tpr_e/tp529_e.htm 

Mexico’s Center for Public Policy Research (IMCO) evaluated Mexico compared to other countries in its 2022 Index for International Competitiveness: https://imco.org.mx/indice-de-competitividad-internacional-2022/ . IMCO also analyzed Mexico’s states in its 2022 Index of States’ Competitiveness: https://imco.org.mx/indice-de-competitividad-estatal-2022/ 

United Nations (UN) experts urged the Government of Mexico, companies, and investors to ensure respect for human rights and the environment during construction of the Train Maya on the Yucatan peninsula and to take appropriate measures in line with the UN Guiding Principles on Business and Human Rights in a December 2022 statement: https://www.ohchr.org/en/press-releases/2022/12/mexico-government-and-business-must-address-negative-impacts-train-maya 

Business Facilitation

A 2016 law created a new category of simplified businesses called Sociedad for Acciones Simplificadas (SAS) and allows registration of such new companies online in 24 hours. Still, it can take between 66 and 90 days to start a new business in Mexico, according to the World Bank. The Government of Mexico maintains a business registration website, www.tuempresa.gob.mx,  and one for general information on opening a business, https://www.gob.mx/tuempresa?tab=Abre . The Secretariat of the Economy offers a website “Invest in Mexico” to provide information about investment procedures for foreign investors: www.economia.gob.mx/invest-in-mx/ . Companies operating in Mexico must register with the tax administration authority (Servicio de Administracion Tributaria or SAT), the Secretariat of the Economy, and the Public Registry. Additionally, companies engaging in international trade must register with the Registry of Importers, while foreign-owned companies must register with the National Registry of Foreign Investments. The Federal Commission for the Protection from Sanitary Risks (COFEPRIS), which regulates food and health product safety, has made progress on a backlog of sanitary registration and import permit approvals for, primarily but not limited to, pharmaceutical and medical devices. However, U.S. companies remain concerned that accumulated approval delays since 2019 prevent the introduction of innovative healthcare and other products.

Since October 2019, SAT has launched dozens of tax audits against major international and domestic corporations, resulting in hundreds of millions of dollars in new tax assessments, penalties, and late fees.  Multinational and Mexican firms have reported audits based on diverse aspects of the tax code, including adjustments on tax payments made, waivers received, and deductions reported during the previous federal administration. SAT also changed its methodology used to reimburse some companies, retroactively for five years and to the detriment of these companies, for value-added tax (VAT) collections. Private sector stakeholders reported a continuation of SAT’s aggressive tax auditing practices in 2022.

Outward Investment

Various offices at the Secretariat of Economy and the Secretariat of Foreign Relations handle promoting Mexican outward investment and assistance to Mexican firms acquiring or establishing joint ventures with foreign firms. Mexico does not restrict domestic investors from investing abroad.

Bilateral Investment Treaties

The USMCA entered into force on July 1, 2020, and contains an investment chapter.

Mexico has 14 trade agreements and 32 Reciprocal Investment Promotion and Protection Agreements covering 33 countries. Mexico is a member of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force December 30, 2018. Mexico currently has 31 Bilateral Investment Treaties in force: https://investmentpolicy.unctad.org/international-investment-agreements/countries/136/mexico .

Mexico and the European Union finalized a trade agreement in May 2020, but it has not been signed. Mexico and the United Kingdom’s (UK) agreement for trading under existing terms following the UK’s exit from the European Union entered into force June 2021.

Bilateral Taxation Treaties

Mexico is a member of the Organization for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting and a party to the Inclusive Framework’s October 2021 Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy.

The United States-Mexico Income Tax Convention, which came into effect January 1, 1994, governs bilateral taxation between the two nations. Mexico has negotiated double taxation agreements with 55 countries.

In 2019, the Government of Mexico approved a value-added tax (VAT) on digital services. Since June 30, 2020, foreign digital companies are required to register with SAT and to collect VAT on the majority of goods and services customers purchase online and remit the VAT and sales reports to SAT. SAT is authorized to block a foreign digital company’s internet protocol (IP) address in Mexico for non-compliance with tax requirements until the company complies. The Government of Mexico also introduced a series of fiscal measures in 2019 to combat tax evasion and fraud.

Transparency of the Regulatory System

The National Commission on Regulatory Improvement (CONAMER), within the Secretariat of the Economy, is the agency responsible for streamlining federal and sub-national regulation and reducing the regulatory burden on business. Mexican law requires secretariats and regulatory agencies to conduct impact assessments of proposed regulations and engage in notice and comment rule making, which CONAMER carries out. Impact assessments are made available for public comment via CONAMER’s website: https://www.gob.mx/conamer . The official gazette of state and federal laws currently in force in Mexico is publicly available via: http://www.ordenjuridico.gob.mx/ . Mexican law provides for a 20-day public consultation period for most proposed regulations. Any interested stakeholder can comment on draft regulations and the supporting justification, including regulatory impact assessments. Certain measures are not subject to a mandatory public consultation period. These include measures concerning taxation, responsibilities of public servants, the public prosecutor’s office executing its constitutional functions, and the Secretariats of National Defense (SEDENA) and the Navy (SEMAR). Beginning in 2021, CONAMER approved waivers of full notice and/or shortened public comment periods to speed some regulatory action deemed to be in the national interest. In October 2021, CONAMER allowed pensions sector regulator CONSAR an exemption to the 20-day public consultation period for a proposed cap on private pensions management service fees. Investors expressed concern with the regulation’s fast track approval without sufficient industry consultation.

Given SAT’s mandate to collect taxes and revenue from international trade, many of its regulations circumvent the notice and public comment process. In 2021, SAT proposed a new requirement for a “digital waybill complement” or “complemento de carta porte” for nearly all goods shipments within Mexican territory effective January 1, 2022. Mexican and U.S. private sector representatives called the digital document “onerous” as it would have required 180 data points for shipments across all modalities—rail, truck, air, and maritime shipping—many of which are unknown at the onset of a shipment. Despite the domestic nature of the new requirement, U.S. companies raised concerns about the “carta porte” as a technical barrier to trade given the potential delays it could cause for shipments to and from ports of entry. The U.S. government has advocated for better SAT coordination with the private sector to address compliance challenges with the new requirement. This advocacy led to the postponement of “carta porte’s” entry into force and SAT’s formation of private sector working groups to discuss implementation. Following multiple extensions, SAT announced November 25, 2022, an extension to July 31, 2023, of its planned enforcement of updated carta porte requirements.

The National Quality Infrastructure Program (PNIC) is the official document used to plan, inform, and coordinate standardization activities, both public and private. The PNIC is published annually by the Secretariat of Economy in Mexico’s Official Gazette. The PNIC describes Mexico’s plans for new voluntary standards (Normas Mexicanas; NMXs) and mandatory technical regulations (Normas Oficiales Mexicanas; NOMs) as well as proposed changes to existing standards and technical regulations. The last PNIC was published in February 2023; however, the Secretariat of the Economy’s new leadership has committed to carrying out an exhaustive review of the PNIC 2023 and publishing a PNIC Supplement in April 2023.

The Quality Infrastructure Law (QIL), which entered into force August 31, 2020, replaced the Federal Law on Metrology and Standardization (LFMN). The law governs standardization, accreditation, conformity assessment, and metrology activities in Mexico and addresses the coordination of metrology activities between the Government of Mexico and the private sector. U.S. exporters must be familiar with this important law, as it governs Mexico’s standards system and may affect exports to this market. The final QIL’s secondary regulations have not been published.

Mexico’s antitrust agency, the Federal Commission for Economic Competition (COFECE), plays a key role in protecting, promoting, and ensuring a competitive free market in Mexico as well as protecting consumers. COFECE is responsible for eliminating barriers both to competition and free market entry across the economy (except for the telecommunications sector, which is governed by its own competition authority) and for identifying and regulating access to essential production inputs. In addition to COFECE, the Energy Regulatory Commission (CRE) and National Hydrocarbon Commission (CNH) are both technical-oriented independent agencies that play important roles in regulating the energy and hydrocarbons sectors. CRE regulates national electricity generation, coverage, distribution, and commercialization, as well as the transportation, distribution, and storage of oil, gas, and biofuels. CNH supervises and regulates oil and gas exploration and production and issues oil and gas upstream (exploration/production) concessions. In addition, the National Center for Energy Control (CENACE) is the independent electricity grid operator. Energy experts assert that these agencies, particularly CRE, are no longer fully independent as they have favored PEMEX and CFE with regulations and permits over private participants.
Mexico has seen a shift in the public procurement process since the onset of the COVID-19 pandemic. Government entities have increasingly awarded contracts either as direct awards or by invitation-only procurements using rules allowing exemptions from the competitive bidding process. In addition, there have been tenders that favored European standards over North American standards, or whose specifications appeared to advantage competitors over U.S. companies.

International Regulatory Considerations

The Mexican government has established in general legal, regulatory, and accounting systems that are transparent and consistent with international norms. Still, Mexico’s current executive administration has eroded the autonomy and publicly questioned the value of specific antitrust and energy regulators and has proposed dissolving some of them to cut costs. Furthermore, corruption continues to affect equal enforcement of some regulations. The Mexican government’s budget is published online and readily available. The Bank of Mexico also publishes and maintains data about the country’s finances and debt obligations.

Investors remain concerned the administration is undermining confidence in the “rules of the game,” particularly in the energy sector, by questioning or undermining the autonomy of independent regulatory institutions such as COFECE, CONAMER, CNH, CENACE, and CRE. Still, COFECE has successfully challenged regulatory changes in the electricity sector that favor state-owned enterprises over private companies. The administration has appointed five of the seven current CRE commissioners. The administration’s budget cuts resulted in significant government layoffs, which has reportedly hampered agencies’ ability to carry out their work. The independence of the CRE and CNH was further undermined by a 2020 memo from the government to both bodies instructing them to use their regulatory powers to favor state-owned PEMEX and CFE. The government has not filled vacant commissioner positions at CONAMER.

Legal System and Judicial Independence

Mexico had an inquisitorial criminal justice system adopted from Europe in which proceedings were largely carried out in writing and sealed from public view. Mexico amended its Constitution in 2008 to facilitate change to an oral accusatorial criminal justice system to better combat corruption, encourage transparency and efficiency, and ensure respect for the fundamental rights of both the victim and the accused. An ensuing National Code of Criminal Procedure passed in 2014 and is applicable to all 32 states. The national procedural code is coupled with each state’s criminal code to provide the legal framework for the new accusatorial system, which allows for oral, public trials with the right of the defendant to face his/her accuser and challenge evidence presented against him/her, right to counsel, due process, and other guarantees. Mexico fully adopted the new accusatorial criminal justice system at the state and federal levels in June 2016.

Mexico’s Commercial Code, which dates to 1889, was most recently updated in 2014. All commercial activities must abide by this code and other applicable mercantile laws, including commercial contracts and commercial dispute settlement measures. Mexico has multiple specialized courts regarding fiscal, labor, economic competition, broadcasting, telecommunications, and agrarian law.

The judicial branch and Prosecutor General’s office (FGR) are constitutionally independent from each other and the executive. The Prosecutor General is nominated by the president and approved by a two-thirds majority in the Senate for a nine-year term, effectively de-coupling the Prosecutor General from the political cycle of elections every six years. With the historic 2019 labor reform, Mexico also created an independent labor court system run by the judicial branch (formerly this was an executive branch function). Federal and state level labor courts were set up in all 32 states as of October 3, 2022. (See section 11 – “Labor Policies and Practices” for more details.)

In 2022, U.S. companies increasingly reported the introduction of criminal charges against company officials and related parties stemming from contractual or other commercial disputes. U.S. firms investing or doing business in Mexico should take care to familiarize themselves with Mexican laws and procedures that permit parallel criminal cases, largely stemming from allegations of fraud, to proceed simultaneously with relevant commercial disputes.

Laws and Regulations on Foreign Direct Investment

Mexico’s Foreign Investment Law sets the rules governing foreign investment into the country. The National Commission for Foreign Investments, formed by several cabinet-level secretariats, including Interior (SEGOB), Foreign Relations, Finance (Hacienda), and the Economy, establishes the criteria for administering investment rules.

Competition and Antitrust Laws

Mexico has two constitutionally autonomous regulators to govern matters of competition – the Federal Telecommunications Institute (IFT) and COFECE. IFT governs broadcasting and telecommunications, while COFECE regulates all other sectors. For more information on competition issues in Mexico, please visit COFECE’s bilingual website at: www.cofece.mx . As mentioned above, Mexico’s current executive administration has publicly questioned the value of COFECE, and the ruling party unsuccessfully introduced a proposal in 2021 which would have dramatically reduced its resources and merged COFECE and other regulators into a less-independent structure. COFECE currently has the full seven-members board of commissioners, including its new chair appointed in March 2023, required to issue final resolutions determining competition barriers as well as anti-competitive practices.

Expropriation and Compensation

USMCA (and NAFTA) contain clauses stating Mexico may neither directly nor indirectly expropriate property, except for public purpose and on a non-discriminatory basis. Expropriations are governed by international law and require rapid fair market value compensation, including accrued interest. Investors have the right to international arbitration. The USMCA contains an annex regarding U.S.-Mexico investment disputes and those related to covered government contracts.

Dispute Settlement

ICSID Convention and New York Convention

Mexico ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) in 1971 and has codified this into domestic law. Mexico is also a signatory to the Inter-American Convention on International Commercial Arbitration (1975 Panama Convention) and the 1933 Montevideo Convention on the Rights and Duties of States. Mexico signed in 2018 the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention) and codified it into law the same year.

Investor-State Dispute Settlement

The USMCA covers investor-state dispute settlement (ISDS) between the United States and Mexico in chapter 31. Foreign investors who are “part[ies] to a covered government contract” and belong to five “covered sectors”: (i) oil and gas; (ii) power generation; (iii) telecommunications; (iv) transportation; and (v) infrastructure will have access to ISDS per USMCA provisions but only after first defending their claims in local courts before initiating arbitration. A less favorable regime will apply to all other foreign investors under the USMCA, who can only access the USMCA’s ISDS system to enforce a limited number of claims and must first defend their claims in local courts before initiating arbitration. Investors will be able to file new NAFTA claims before July 1, 2023, provided that the dispute arises out of investments made when NAFTA was still in force and remained “in existence” on July 1, 2020.

According to the International Centre for Settlement of Investment Disputes (ICSID) there are eight pending cases filed against Mexico by U.S. investors who allege expropriation and/or other violations of Mexico’s NAFTA or USMCA obligations. Twelve other cases have been concluded. For more details on the cases, visit: https://icsid.worldbank.org/en/Pages/cases/searchcases.aspx 

International Commercial Arbitration and Foreign Courts

The Arbitration Center of Mexico (CAM) is a specialized, private institution administering commercial arbitration as an alternative dispute resolution mechanism. The average duration of a CAM-conducted arbitration process conducted is 14 months. The Commercial Code dictates an arbitral award, regardless of the country where it originated, must be recognized as binding. The award must be enforced after presenting a formal written petition to a judge.

The internal laws of both PEMEX and CFE state all national disputes of any nature will have to be resolved by federal courts. State-owned Enterprises (SOEs) and their productive subsidiaries may opt for alternative dispute settlement mechanisms under applicable commercial legislation and international treaties of which Mexico is a signatory. When contracts are executed in a foreign country, PEMEX and CFE have the option to follow procedures governed by non-Mexican law, to use foreign courts, or to participate in arbitration.

Bankruptcy Regulations

Mexico’s Reorganization and Bankruptcy Law (Ley de Concursos Mercantiles) governs bankruptcy and insolvency. Congress approved modifications in 2014 to shorten procedural filing times and convey greater juridical certainty to all parties, including creditors. Declaring bankruptcy is legal in Mexico and it may be granted to a private citizen, a business, or an individual business partner. Debtors, creditors, or the Attorney General can file a bankruptcy claim. Mexico ranked 33 out of 190 countries for resolving insolvency in the World Bank’s 2020 Doing Business report (the last it produced). The average bankruptcy filing takes 1.8 years to be resolved and recovers 63.9 cents per USD, which compares favorably to average recovery in Latin America and the Caribbean of just 31.2 cents per USD. The “Buró de Crédito” is Mexico’s main credit bureau. More information on credit reports and ratings can be found at: http://www.burodecredito.com.mx/ .

Investment Incentives

Land grants or discounts, tax deductions, and technology, innovation, and workforce development funding are commonly used incentives. Additional federal foreign trade incentives include: (1) IMMEX (a program which allows qualifying export companies to temporarily import inputs without paying general import tax and value added tax (VAT)); (2) Import tax rebates on goods incorporated into products destined for export; and (3) Sectoral promotion programs allowing for preferential ad-valorem tariffs on imports of selected inputs. Industries typically receiving sectoral promotion benefits are footwear, mining, chemicals, steel, textiles, apparel, and electronics. While there have been some improvements, manufacturing and other companies report continued challenges in requesting and receiving reimbursements from SAT of the VAT based on applicable fiscal benefits, with significant reimbursement delays and arrears reaching tens of millions USD for some companies. SAT also started auditing some companies retroactively up to five years to re-assess qualifications for VAT reimbursements.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Government of Mexico renewed until December 31, 2024, a program launched in January 2019 that established a border economic zone (BEZ) in 43 municipalities in six northern border states within 15.5 miles from the U.S. border. The BEZ program entails: 1) a fiscal stimulus decree reducing the VAT from 16 percent to 8 percent and the Income Tax (ISR) from 30 percent to 20 percent; 2) a minimum wage increase to MXN 176.72 (USD 8.75) per day; and 3) the gradual harmonization of gasoline, diesel, natural gas, and electricity rates with neighboring U.S. states. The purpose of the BEZ program was to boost investment, promote productivity, and create more jobs in the region. Sectors excluded from the preferential ISR rate include financial institutions, the agricultural sector, and export manufacturing companies (maquilas).

On December 30, 2020, the Government of Mexico launched a similar program for 22 municipalities in Mexico’s southern states of Campeche, Tabasco, and Chiapas, reducing VAT from 16 to 8 percent and ISR from 30 to 20 percent and harmonizing excise taxes on fuel with neighboring states in Central America. Chetumal in Quintana Roo will also enjoy duty-free status. The benefits extend from January 1, 2021, to December 31, 2024.

Performance and Data Localization Requirements

Mexico does not follow a “forced localization” policy—foreign investors are not required by law to use domestic content in goods or technology. However, investors intending to produce goods in Mexico for export to the United States should take note of the rules of origin prescriptions contained within USMCA if they wish to benefit from USMCA treatment. Chapter four of the USMCA introduced new rules of origin and labor content rules, which entered into force on July 1, 2020.

Regulations issued by the Central Bank of Mexico (or Banxico) and the National Banking and Securities Commissions (CNBV – Mexico’s principal bank regulator) entered into force in April 2021 mandating electronic payments companies operating in Mexico and that rely on a third party for cloud data storage abroad to guarantee operational continuity through one of the following options: a back-up data storage provider in a different location than the primary data storage; their own infrastructure to carry out operations; or any other mechanism authorized by Banxico or the CNBV. The financial services industry is concerned the back-up storage requirement could violate provisions of the USMCA financial services chapter prohibiting data localization.

Other Industrial Policy Aspects

Mexico’s government is increasingly turning to its military for the construction and management of economic infrastructure, and any private sector participation is via subcontracts issued by the military. In the past three years, the government entrusted the Army (SEDENA) with building the new Felipe Ángeles International Airport (AIFA) in the state of Mexico, and sections 5, 6, 7 of the Maya Train railway project in Yucatan state. SEDENA created a state-owned company to operate and manage the newly completed AIFA airport, along with those in Tulum, Palenque, Chetumal, and Campeche. SEDENA is also issuing contracts for the construction of over 300 social development bank branches throughout Mexico and other projects, including the modernization of border ports of entry. In late 2022 the government gave the rights to the Navy (SEMAR) for construction, management, and operations of the Trans-Isthmic train project to connect the ports of Coatzacoalcos in Veracruz state and Salina Cruz in Oaxaca state. The Government of Mexico has transferred the administration of land and seaports from the Secretariat of Infrastructure, Communications, and Transportation (SICT) to SEDENA and SEMAR, respectively, and has appointed retired military personnel to port administrator positions at most ports.

Real Property

Mexico ranked 105 out of 190 countries for ease of registering property in the latest World Bank’s 2020 Doing Business report, falling two places from its 2019 report. Article 27 of the Mexican Constitution guarantees the inviolable right to private property. Expropriation can only occur for public use and with due compensation. Mexico has four categories of land tenure: private ownership, communal tenure (ejido), publicly owned, and ineligible for sale or transfer.

Mexico prohibits foreigners from acquiring title to residential real estate in so-called “restricted zones” within 50 kilometers (approximately 30 miles) of the nation’s coast and 100 kilometers (approximately 60 miles) of the borders. “Restricted zones” cover roughly 40 percent of Mexico’s territory. Foreigners may acquire the effective use of residential property in “restricted zones” through the establishment of an extendable trust (fideicomiso) arranged through a Mexican financial institution. Under this trust, the foreign investor obtains all property use rights, including the right to develop, sell, and transfer the property. Real estate investors should be careful in performing due diligence to ensure that there are no other claimants to the property being purchased. In some cases, fideicomiso arrangements have led to legal challenges. U.S.-issued title insurance is available in Mexico and U.S. title insurers operate here.

The Public Register for Business and Property (Registro Publico de la Propiedad y de Comercio) maintains publicly available information online regarding land ownership, liens, mortgages, restrictions, etc. Tenants and squatters are protected under Mexican law. Property owners who encounter problems with tenants or squatters are advised to seek professional legal advice, as the legal process of eviction is complex.

Mexico has a nascent but growing financial securitization market for real estate and infrastructure investments, which investors can access via the purchase/sale of Fideicomisos de Infraestructura y Bienes Raíces (FIBRAs) and Certificates of Capital Development (CKDs) listed on Mexico’s BMV stock exchange.

Intellectual Property Rights

Intellectual Property Rights (IPR) in Mexico are covered by the Federal Law for Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) and the Federal Copyright Law (Ley Federal del Derecho de Autor). Responsibility for the protection of IPR is spread across several government authorities. The Prosecutor General’s Office (Fiscalia General de la Republica or FGR) oversees a specialized unit that prosecutes intellectual property (IP) crimes. The Mexican Institute of Industrial Property (IMPI), the equivalent of the U.S. Patent and Trademark Office, administers patent and trademark registrations, and handles administrative enforcement cases of IPR infringement. The National Institute of Copyright (INDAUTOR) handles copyright registrations and mediates certain types of copyright disputes, while the Federal Commission for the Prevention from Sanitary Risks (COFEPRIS) regulates pharmaceuticals, medical devices, and processed foods. The National Customs Agency of Mexico (ANAM) is responsible for ensuring illegal goods do not cross Mexico’s borders.

The process for trademark registration in Mexico normally takes six to eight months. The registration process begins by filing an application with IMPI, which is published in IMPI’s Gazette for opposition by a third party. If no opposition is filed, IMPI undertakes a formalities examination, followed by a substantive examination to determine if the application and supporting documentation fulfills the requirements established by law and regulation to grant the trademark registration. Once the determination is made, IMPI then issues the registration. A trademark registration in Mexico is valid for 10 years from the date of registration and is renewable for 10-year periods. Any party with standing can challenge a trademark registration through a cancellation proceeding. IMPI employs the following administrative procedures: nullity, expiration or lapsing, opposition, cancellation, trademark, patent, and copyright infringement. Once IMPI issues a decision, the affected party may challenge it through an internal reconsideration process or go directly to the Specialized IP Court for a nullity trial. An aggrieved party can then file an appeal with a Federal Appeal Court based on the Specialized IP Court’s decision. In cases with an identifiable constitutional challenge, the plaintiff may file an appeal before the Supreme Court.

To improve efficiency, in 2020 IMPI partnered with the United States Patent and Trademark Office (USPTO) to launch the Parallel Patent Grant (PPG) initiative. Under this work-sharing arrangement, IMPI will expedite the grant of a Mexican patent for businesses and individuals already granted a corresponding U.S. patent. This arrangement allows for the efficient reutilization of USPTO work by IMPI. The USPTO also has a Patent Prosecution Highway (PPH) agreement with IMPI. Under the PPH, an applicant receiving a ruling from either IMPI or the USPTO that at least one claim in an application is patentable may request that the other office expedite examination of the corresponding application. The PPH leverages fast-track patent examination procedures already available in both offices to allow applicants in both countries to obtain corresponding patents faster and more efficiently.

Mexico undertook significant legislative reform to comply with the USMCA. The Federal Law for Protection of Industrial Property (Ley Federal de Protección a la Propiedad Industrial) went into effect November 5, 2020. This new law replaced the Industrial Property Law (Ley de la Propiedad Industrial), substantially strengthening IPR across a variety of disciplines. Mexico amended its Federal Copyright Law and its Federal Criminal Code to comply with the USMCA. The amendments went into effect July 2, 2020. Regulations for the new industrial property law and the amended copyright law have not yet been published. Once fully implemented, these amendments should significantly strengthen intellectual property law in Mexico. Still, there are concerns that constitutional challenges filed against notice and takedown provisions as well as TPMs in the copyright amendments may weaken these provisions.

Still, Mexico has widespread commercial-scale infringement that results in significant losses to Mexican, U.S., and other IPR owners. There are many issues that have made it difficult to improve IPR enforcement in Mexico, including legislative loopholes; lack of coordination between federal, state, and municipal authorities; a cumbersome and lengthy judicial process; relatively widespread acceptance of piracy and counterfeiting, and lack of resources dedicated to enforcement. In addition, the involvement of transnational criminal organizations (TCOs), which control the piracy and counterfeiting markets in parts of Mexico and engage in trade-based money laundering by importing counterfeit goods, continue to impede federal government efforts to improve IPR enforcement. TCO involvement has further illustrated the link between IPR crimes and illicit trafficking of other contraband, including arms and drugs.

Mexico remained on the Watch List in the 2023 Special 301 report published by the U.S. Trade Representative (USTR). Obstacles to U.S. trade include the wide availability of pirated and counterfeit goods in both physical and virtual notorious markets. The 2022 USTR Out-of-Cycle Review of Notorious Markets for Counterfeiting and Piracy listed these Mexican markets: Tepito in Mexico City, La Pulga Rio in Monterrey, and Mercado San Juan de Dios in Guadalajara. Mexico is a signatory to numerous international IP treaties, including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.

Resources for Rights Holders

Intellectual Property Rights Counselor for Mexico, Central America, and the Caribbean
U.S. Trade Center Liverpool No. 31 Col. Juárez
C.P. 06600 Mexico City
Tel: (52) 55 5080 2189

National Institute of Copyright (INDAUTOR)
Puebla No. 143
Col. Roma, Del. Cuauhtémoc
06700 México, D.F.
Tel: (52) 55 3601 8270
Fax: (52) 55 3601 8214
Web: http://www.indautor.gob.mx/ 

Mexican Institute of Industrial Property (IMPI)
Periférico Sur No. 3106
Piso 9, Col. Jardines del Pedregal
Mexico, D.F., C.P. 01900
Tel: (52 55) 56 24 04 01 / 04
(52 55) 53 34 07 00
Fax: (52 55) 56 24 04 06
Web: http://www.impi.gob.mx/ 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The Mexican government is generally open to foreign portfolio investments, and foreign investors trade actively in various public and private asset classes. Foreign entities may freely invest in federal government securities. The Foreign Investment Law establishes foreign investors may hold 100 percent of the capital stock of any Mexican corporation or partnership, except in those few areas expressly subject to limitations under that law. Foreign investors may also purchase non-voting shares through mutual funds, trusts, offshore funds, and American Depositary Receipts. Changes to tax regulations introduced by the 2022 miscellaneous tax bill, a part of the annual budget legislative package, modified Article 174 of Mexico’s Income Tax Law (ISR) to include new requirements that legal representatives appointed by non-Mexican residents should satisfy in addition to existing requirements under administrative procedure 160 of the ISR. U.S. companies expressed concern the new and existing requirements for legal representatives are excessive, and noted unless SAT simplifies such requirements, they will complicate the transfer by non-Mexican residents of shares within Mexico.

They also have the right to buy directly limited or nonvoting shares as well as free subscription shares, or “B” shares, which carry voting rights. Foreigners may purchase an interest in “A” shares, which are normally reserved for Mexican citizens, through a neutral fund operated by one of Mexico’s six development banks. Finally, Mexico offers federal, state, and local governments bonds that are rated by international credit rating agencies. The market for these securities has expanded rapidly in past years and foreign investors hold a significant stake of total federal issuances. However, foreigners are limited in their ability to purchase sub-sovereign state and municipal debt. Liquidity across asset classes is relatively deep. The Secretariat of Finance announced plans to send to Mexico’s congress by the end of 2023 legislation to amend the Securities Market Law to boost growth of Mexico’s stock market by making it an accessible financing option for medium-sized companies.

Mexico established a fiscally transparent trust structure known as a FICAP in 2006 to allow venture and private equity funds to incorporate locally. The Securities Market Law (Ley de Mercado de Valores) established the creation of three special investment vehicles which can provide more corporate and economic rights to shareholders than a normal corporation. These categories are: (1) Investment Promotion Corporation (Sociedad Anonima de Promotora de Inversion or SAPI); (2) Stock Exchange Investment Promotion Corporation (Sociedad Anonima Promotora de Inversion Bursatil or SAPIB); and (3) Stock Exchange Corporation (Sociedad Anonima Bursatil or SAB). Mexico also has a growing real estate investment trust market, locally referred to as Fideicomisos de Infraestructura y Bienes Raíces (FIBRAS) as well as FIBRAS-E, which allow for investment in non-real estate investment projects. FIBRAS are regulated under Articles 187 and 188 of Mexican Federal Income Tax Law.

Money and Banking System

Financial sector reforms signed into law in 2014 have improved regulation and supervision of financial intermediaries and have fostered greater competition between financial services providers. While access to financial services – particularly personal credit for formal sector workers – has expanded in the past four years, bank and credit penetration in Mexico remains low compared to OECD and emerging market peers. Coupled with sound macroeconomic fundamentals, reforms have created a positive environment for the financial sector and capital markets. According to the National Banking and Stock Commission (CNBV), the banking system remains healthy and well capitalized.

Mexico’s banking sector is heavily concentrated, and majority foreign-owned: the seven largest banks control 85 percent of system assets and foreign-owned institutions control 70 percent of total assets. The USMCA maintains national treatment guarantees. U.S. securities firms and investment funds, acting through local subsidiaries, have the right to engage in the full range of activities permitted in Mexico.

The Central Bank maintains independence in operations and management by constitutional mandate. Its main function is to provide domestic currency to the Mexican economy and to safeguard the Mexican Peso’s purchasing power by gearing monetary policy toward meeting a 3 percent inflation target over the medium term. The Central Bank is developing a Central Bank Digital Currency (CBCD), estimated to roll out by 2025 with the goal of increasing financial inclusion.

Mexico’s Financial Technology (FinTech) law came into effect in March 2018 and administration released secondary regulations in 2019, creating a broad rubric for the development and regulation of innovative financial technologies. The law covers peer-to-peer lending, or crowdfunding institutions, e-wallet services, virtual assets subject to authorization by the Central Bank, and a regulatory “sandbox” for start-ups to test the viability of products. The reforms have attracted significant investment by fintech and mobile payment companies. However, industry stakeholders suggest insufficient clarity in the authorities’ implementation of the secondary regulations may be eroding the legal certainty the FinTech Law brought to the sector. Companies also remain concerned insufficient competition in Mexico’s electronic payment system for credit card transactions increases operating costs and inhibits innovation.

Foreign Exchange and Remittances

Foreign Exchange

The Government of Mexico maintains a free-floating exchange rate.

Mexico maintains open conversion and transfer policies. In general, capital and investment transactions, remittance of profits, dividends, royalties, technical service fees, and travel expenses are handled at market-determined exchange rates. Mexican Peso (MXN)/USD exchange is available on same day, 24- and 48-hour settlement bases. In order to prevent money-laundering transactions, Mexico imposes limits on USD cash deposits. Businesses in designated border and tourism zones may deposit more than USD 14,000 per month subject to reporting rules and providing justification for their need to conduct USD cash transactions. Individual account holders are subject to a USD 4,000 per month USD cash deposit limit. In 2016, Banxico launched a central clearing house to allow for USD clearing services wholly within Mexico to improve clearing services for domestic companies with USD income.

Remittance Policies

There have been no recent changes in Mexico’s remittance policies. Mexico continues to maintain open conversion and transfer policies.

Sovereign Wealth Funds

The Mexican Petroleum Fund for Stability and Development (FMP) was created as part of 2013 budgetary reforms. Housed in the Central Bank, the fund distributes oil revenues to the national budget and a long-term savings account. The FMP incorporates the Santiago Principles for transparency, placing it among the most transparent Sovereign Wealth Funds in the world. Both the Central Bank and Mexico’s Supreme Federal Auditor regularly audit the fund. Mexico is also a member of the International Working Group of Sovereign Wealth Funds. The Fund resources totaled MXN 23.4 billion (approximately USD 1.2 billion) in 2021. The FMP is required to publish quarterly and annual reports, which can be found at www.fmped.org.mx .

PEMEX

As a result of Mexico’s 2013 energy reform, the private sector is now able to compete with PEMEX or enter into competitive contracts, joint ventures, profit sharing agreements, and license contracts with PEMEX for hydrocarbon exploration and extraction. Liberalization of the retail fuel sales market, which Mexico completed in 2017, created significant opportunities for foreign businesses. Given PEMEX frequently raises debt in international markets, its financial statements are regularly audited. The Natural Resource Governance Institute considers PEMEX to be the second most transparent state-owned oil company after Norway’s Equinor. PEMEX’s ten-person Board of Directors contains five government ministers and five independent councilors. The administration has identified increasing PEMEX’s oil, natural gas, and refined fuels production as its chief priority for Mexico’s hydrocarbon sector. Since taking office in 2018, the administration has taken numerous legal and regulatory steps to limit private competition for PEMEX.

CFE

Changes to the Mexican constitution in 2013 and 2014 opened power generation and commercial supply to the private sector, allowing companies to compete with CFE. Mexico held three long-term power auctions since the reforms, in which over 40 contracts were awarded for 7,451 megawatts of energy supply and clean energy certificates. CFE remains the sole provider of transmission and distribution services and owns all transmission and distribution infrastructure. The 2013 energy reform separated CFE from the National Energy Control Center (CENACE), which controls the national wholesale electricity market and ensures non-discriminatory access to the grid for competitors, though recent actions call into question CENACE’s independence. Legal and regulatory changes adopted by the Mexican government attempt to modify the rules governing the electricity dispatch order to favor CFE. Dozens of private companies and non-governmental organizations have successfully sought injunctions against the measures, which they argue discriminate against private participants in the electricity sector.

Independent power generators were authorized to operate in 1992 but were required to sell their output to CFE or use it to self-supply. Those legacy self-supply contracts have come under criticism with an electricity reform law and proposed constitutional amendment giving the government the ability to cancel contracts it deems fraudulent. Under the 2013 reform, private power generators may now install and manage interconnections with CFE’s existing state-owned distribution infrastructure. The 2013 reform also required the government to implement a National Program for the Sustainable Use of Energy as a transition strategy to encourage clean technology and fuel development and reduce pollutant emissions. The executive administration has identified increasing CFE-owned power generation as its top priority for the utility, breaking from the firm’s recent practice of contracting private firms to build, own, and operate generation facilities. CFE has underinvested in transmission and distribution, significantly constraining the grid’s resilience, efficiency, and capacity to incorporate additional generation from renewables. Rather than using revenue from transmission fees to expand and upgrade the grid, CFE has diverted those resources to finance generation projects. CFE forced several foreign and domestic companies to renegotiate previously executed gas supply contracts, which raised significant concerns among investors about contract sanctity.
One of the main non-market-based advantages CFE and PEMEX receive vis-a-vis private businesses in Mexico is related to access to capital. In addition to receiving direct budget support from the Secretariat of Finance, both entities also receive implicit credit guarantees from the federal government. As such, both are able to borrow funds on public markets at below the market rate their corporate risk profiles would normally suggest. In addition to budgetary support, the CRE and SENER have delayed or halted necessary permits for new private sector gas stations, fuel terminals, fuel imports, and power plants, providing an additional non-market advantage to CFE and PEMEX.

CFE-TIPT

In August 2019, an executive branch agreement created CFE Telecommunications and Internet for All (CFE-TIPT) as a subsidiary of CFE. The TIPT board is led by the CFE director general and has a partnership with Altan Redes, which holds the 700 MHz spectrum band to provide internet and mobile phone service through a 4.5 G shared network (Red Compartida). Red Compartida only operates in municipalities other Mobil Virtual Operators (MVO) do not reach, which limits its market to around 121,407 locations (99,239 with fewer than 250 habitants), most of which are in rural or remote areas. Altan’s goal is to provide coverage for 92.2 percent of the currently offline population by 2028. As of January 2023, Altan Redes provides services to 80,939,542 persons in 112,152 locations, covering 72 percent of their target population. In February 2023, Viasat Inc and CFE-TIPT announced a partnership to bring free internet access to 850 underserved communities across Mexico.

LitioMx

Mexico reformed its mining law in April 2022 to nationalize lithium and published a decree August 2022 to create state-owned entity LitioMx dedicated to the exploration and exploitation of lithium. President Lopez Obrador signed a decree February 2023 creating a lithium reserve zone spanning 234 thousand hectares in the northern state of Sonora. This decree does not impact the rights and obligations of holders of existing concessions. The president also signed an agreement designating the Energy Secretariat (SENER) as the lead secretariat to oversee Mexico’s lithium development, which will be carried out by LitioMx. The Mexican Geological Survey will support LitioMx with the exploration phase. The president and other administration officials continue to maintain the private sector will play a key role in developing Mexico’s critical mineral resources, though LitioMX must retain control.

Privatization Program

Mexico’s 2014 energy reforms liberalized access to these sectors but did not privatize state-owned enterprises.

Additional Resources 

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/)
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/)
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions )

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  )
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
• Comply Chain ( https://www.dol.gov/ilab/complychain/ )

Climate Issues

Mexico’s 2012 General Law for Climate Change mandated the creation of the National Strategy for Climate Change. During each presidential term, the Secretariat of Environment and Natural Resources (SEMARNAT) develops a sector program as required by the National Development Plan (PND). During President Lopez Obrador’s term, SEMARNAT launched the 2020-2024 strategy aligned to the UN 2030 Agenda for Sustainable Development with the goals of promoting the conservation and sustainable use of ecosystems and biodiversity; strengthening climate action and environmental governance; and improving water management.

Mexico published the National Strategy of Climate Change in 2013 with no further update since then and published the Special Program for Climate Change (PECC) in November 2021. Mexico presented its sixth climate change communications report to the UNFCCC in 2018 and submitted its updated National Determination Contribution (NDC) to the UNFCCC in November 2022. Mexico published its National Biodiversity Strategy in 2016. Mexico published the second extensive country study of Natural Capital in 2006. Mexico presented its Sixth National Report to the UN Convention on Biological Biodiversity in 2019.

Mexico has not released an official net-zero carbon emissions policy or strategy.

The PECC 2021 highlights include private sector climate change actions and fostering the inclusion of the private sector in the National Infrastructure Fund (Fonadin) to invest in sustainable infrastructure.

In October 2019, the Secretariat of Environment and Natural Resources (SEMARNAT) released an agreement to set the bases for a pilot program for a cap-and-trade emissions system for the energy and industry sectors. SEMARNAT has not reported updates on this pilot program.

The 2023 Government of Mexico budget allocated USD 9.4 billion (from USD 3.8 billion in 2022) for the adaptation and mitigation of the effects of climate change and for the promotion of the use of clean technologies and fuels.

Mexico has designated 185 federally protected natural areas (NPA) (90,958,374 hectares) and 382 areas voluntarily designated for conservation, totaling 623,090.49 hectares. These areas are protected by the National Commission of National Protected Areas (CONANP). The National Forest Commission (CONAFOR) manages a program for the sustainable development of forests, supporting community forest management and forest restoration.

Resources to Report Corruption

Contact at government agency:
Secretariat of Public Administration
Miguel Laurent 235, Mexico City
52-55-2000-1060

Contact at “watchdog” organization:
Transparencia Mexicana
Dulce Olivia 73, Mexico City
52-55-5659-4714
Email: info@tm.org.mx 

U.S. International Development Finance Corporation (DFC)

Since 2018 the U.S. DFC has pursued potential investment projects in Mexico, and the country rapidly became one of the top destinations for projects with DFC support. Still, Mexico and the DFC do not have a formal agreement in place.

US Trade and Development Agency (USTDA)

Mexico is a priority country for the USTDA, and the Agency is supporting infrastructure projects in the country with grant funds for feasibility studies and technical assistance. USTDA also has a robust pipeline of prospective project opportunities they plan to support with their project preparation tools.