EY Law Flash - Amendment of article 27 of Mexico`s Constitution

EY LAW Flash
Amendment of article 27 of Mexico’s Constitution
On April 23, 2013, the Chamber of Deputies of Mexico’s Legislative Power approved a draft of
constitutional amendment with respect to the first paragraph of section I of article 27 of the Political
Constitution of the United Mexican States Constitution (hereinafter the “Draft of Amendment”) in order to
eliminate the prohibition contemplated by such article, pursuant to which foreigners are prevented from
acquiring real property located within one hundred kilometers from the borders and fifty kilometers from
the coast (the “Restricted Area”).
Current regulation
Pursuant to section I of constitutional article 27, foreigners may not acquire title to waters and land located
within the Restricted Area.
In order to allow foreign investment in real property located within the Restricted Area, it is currently
possible, as set forth in section 11 of Mexico’s Foreign Investment Act (Ley de Inversión Extranjera), for
the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores) to grant permits to allow financial
institutions, acting as trustees, to acquire in favor of foreign individuals or entities or in favor of Mexican
entities that do not include foreign investment restrictions in their constituent documents, rights over
real properties located within the Restricted Area. The foregoing, for purposes of allowing the respective
trust beneficiaries to use and enjoy the real property in question, without creating in their favor title to the
corresponding real property.
Proposal
In the event the Draft of Amendment is approved and eventually enacted, foreigners could directly acquire
title to land located within the Restricted Area, so long as the same is used exclusively for residential
purposes, in the understanding that the ability to carry out any acquisition for commercial, industrial or
agricultural purposes or otherwise involving economic exploitation will continue to be prohibited. In this
regard, it is important to note that the third transitory article of the Draft of Amendment contemplates the
inclusion of certain legal procedures in secondary laws, under which foreigner may forfeit any properties
so acquired, in case the same are used in an unauthorized manner.
Below is a transcript of the current language of section I of constitutional article 27, and language
approved by the Chamber of Deputies:
Text currently in effect:
Reform proposal
Article 27…
Article 27…
I. Only natural born Mexicans, Mexicans by
I. Only natural born Mexicans, Mexicans by
naturalization and Mexican entities are entitled
to acquiring title to land, waters and their
accessories, or to obtain licenses for mining or
water exploitation. The State may grant the same
right to foreigners, provided that they agree before
the Ministry of Foreign Relations to consider
themselves as nationals with respect to such
property and to not invoke the protection of their
governments in respect thereof; under penalty,
in case of noncompliance with this agreement,
of forfeiting the properties acquired by them for
the benefit of the Nation. Within one hundred
kilometers from the borders and fifty kilometers
from the coast, under no circumstance may
foreigners acquire direct title to land and waters.
naturalization and Mexican entities are entitled to
acquiring title to land, waters and their accessories,
or to obtain licenses for mining or water exploitation.
The State may grant the same right to foreigners,
provided that they agree before the Ministry of
Foreign Relations to consider themselves as
nationals with respect to such property and to
not invoke the protection of their governments
in respect thereof; under penalty, in case of
noncompliance with this agreement, of forfeiting
the properties acquired by them for the benefit of
the Nation. Within one hundred kilometers from
the borders and fifty kilometers from the coast,
under no circumstance may foreigners acquire
direct title; in the case of land, foreigners may
acquire title so long as it is exclusively for noncommercial residential purposes, in which case
they must agree with the Ministry of Foreign
Affairs in the terms described in this Section.
In accordance with the constitutional provision in question, foreigners are currently allowed to acquire
title to land not located within the Restricted Area, as long as they agree before the Ministry of Foreign
Relations to consider themselves as nationals with respect to such property and to not invoke the
protection of their governments in respect thereof, under penalty, in case of noncompliance with this
agreement, of forfeiting such property (agreement known as Cláusula Calvo). In this regard, it is important
to note that the Draft of Amendment contemplates that foreigners wishing to acquire the ownership of land
located within the Restricted Area will be subject to the same covenant.
Status of the legislative process
As mentioned above, the Draft of Amendment has already been approved by the Chamber of Deputies
of the Legislative Power. Since this amendment refers to a constitutional provision, in accordance with
constitutional article 135, it is necessary that the Draft of Amendment be sent to the revising chamber
(in this case, the Senate) and, once approved by both chambers, be sent for consideration of the local
Congresses. In order for the President to enact the corresponding amendment, it is necessary that at least
two thirds of the local legislatures approve the Draft of Amendment.
Conclusion
EY
In the event the first paragraph of section I of constitutional article 27 is enacted as described above, the
amendment would have positive economic implications in regions of the country that are located close
to the borders and, especially, in coastal areas, since it would simplify the process of acquisition of real
property for residential purposes by foreigners, which at the same time would stimulate this type of foreign
investment.
Aseguramiento | Asesoría | Fiscal | Transacciones
For more information, please contact:
Francisco Forastieri
Leader, Legal Services in Mexico, Central America and the Caribbean
Tel.: +52 (55) 1101-7293
[email protected]
Eduardo Díaz de Cossío
Partner, Legal Services (Real Estate, Hospitality & Construction)
Tel.: +52 (55) 1101-7292
[email protected]
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