Foreign Land Ownership in Mexico Revisited

Mexidata.com recently posted an article by Barnard R. Thompson entitled Mexico Should Allow Foreigners Unrestricted Ownership of Beachfront Property that addresses the ongoing issue of whether foreigners should be allowed to own land along the borders and coastlines of Mexico. I was aware that this issue was up for review with the Mexican senate, but I didn’t realize that it was shot down in April of this year; a resolution to drop the ownership limitation did not pass as was hoped by many.

A legislative initiative submitted by Baja California Sur Senator Luis Alberto Coppola Joffroy in July of 2007, which after (occasional) debate — and failures of committees to act — was ultimately rejected by the Mexican Senate last April.

This is unfortunate. As Barnard mentions…

…such a change could be huge for Mexico’s tourism industry and economy, considering the number of non-Mexicans who would like to live, retire or have a second home on a sunny beach with actual ownership and title to the property.  And this is to say nothing about positive publicity, or added income from fees and taxes, increased foreign exchange, investment opportunities, development and growth, and the creation of jobs for Mexican workers, among other things.

And there is the ongoing argument, why is it that Mexicans can go up and buy real estate in the U.S. or Canada, but Americans or Canadians cannot? (or at least not along the border or coastline)

And also, why is it that Americans and Canadians CAN obtain title if they buy in the interior of Mexico but not in the restricted zones and what possible ramifications could this hold for them? Well, a situation came up recently when the IRA stated that all Americans that have a foreign trust must report it to them. I’m sure when they did this they were thinking more of those who have monetary trusts that have been set up in a tax haven country. But unfortunately, this is also affecting Americans who own real estate along the coast or border of Mexico. But, Americans who own property away from the coast or border don’t have to file, as they have title and don’t have to use the trust system! Doesn’t quite seem right…

Barnard explains more about how the trust came about…

The Mexican Constitution, in Article 27 (an Article that in one way or another has been amended some 16 times since 1917), deals with national ownership and territorial jurisdiction of lands and waters, and it grants the state “the right to transmit ownership thereof to private persons, thereby constituting private property.”  However, the first paragraph of Part I of Article 27 continues:

“Only Mexicans by birth or naturalization, and Mexican companies, have the right to acquire ownership of lands, waters, and their appurtenances, or to obtain concessions for the exploitation of mines or waters.  The State may grant the same right to foreigners, provided they agree before the Secretariat of [Foreign] Relations to be considered as nationals with respect to said property and not to invoke the protection of their governments, for that very reason, in matters relating thereto; under penalty, in case of noncompliance with the agreement, of losing the property they acquired by virtue of the same to the Nation.  Under no circumstances may foreigners acquire direct ownership of lands or waters within a zone of 100 kilometers along the borders and 50 [kilometers] along the coastline.

It should be noted that many foreign residents already “own” restricted zone properties in Mexico, through fideicomisos.  However, a fideicomiso — in this case a type of real estate trust, with a Mexican bank designated as trustee and holding possession of the land title — is not direct ownership.  With a fideicomiso, the foreign buyer acquires tenure rights to the property through the (up to 50-year) trust, which is renewable and transferable.

But, as mentions above, means you have to report that you have this trust with the IRS.

Certainly all nations have border concerns and sovereign needs to safeguard their coasts and territorial limits; however is it (still) realistic for Mexico to fear a foreign invasion from the north?  Could anyone today believe that hostilities might be instigated by non-citizens who have met the requisite qualifications to reside in Mexico — full or part-time residents living under the rule of Mexican law? As well, in today’s world considerations with respect to coastal properties should include economic assessments and not simply the behind-the-times discrimination of Article 27.  The latter being prohibitions that inhibit foreign investment and cost the nation money — outmoded concerns that should be addressed through up-to-date regulations.

Exactly right. These rules regarding foreign land ownership, established nearly a 100 years ago, are no longer relevant as they are don’t in any way protect Mexico from getting invaded. Its silly to even think so. If anything they are holding back investment in the country.

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3 Responses to Foreign Land Ownership in Mexico Revisited

  1. Johnny Miller says:

    Totally agree with your argument here. This law is holding back significant progress for Mexico and now is the time to do something that would stimulate the economy.

    Unfortunately it is probably banking interests that keep this measure from passing. The trust fees are very profitable for these banks.

    • John Youden says:

      I’m not so sure about the banks seeing this as a good revenue source. Too many of them have decided to not even continue with it, finding it more of a hassle. And the service they sometimes give with regards to this, shows they aren’t that interested. This is more about nationalism, and somehow people believe (incorrectly), that this is protecting the country from being taken over, or a portion of it as has happened in the past. That’s just not going to happen. But its pretty inbred and goes deep, which will make it difficult to get through, as it means changing the constitution. Not so something you move into lightly.

  2. Dean says:

    As a foreigner wishing to outright own the land I paid for, I would love to for them to pass this law. Having said this, I do understand their hesitation.

    The Mexican civil war was a revolt against land being held by a very rich (and quite often American & European) elite. That was less than 100 years ago. Maybe when the Mexican middle class starts to flourish (and mortgages become more widely used) we will see these laws changed. Until then, I doubt they would be willing to forget this recent past and allow for the possibility of their beautiful coastline to be snapped up by foreigners.

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