Overview of regime

In principle, Mexico is a jurisdiction open to foreign investment. The local statutes, and an important network of bilateral and multilateral investment treaties with countries around the world, makes Mexico one of the countries that accepts foreign investment in almost all industries, with very few limitations. These treaties typically require foreign investors to be treated in the same way as Mexican investors, without the need for any screening, and most favoured nation treatment, subject to certain restrictions in limited activities.

The current local legislation is mostly governed by Article 27 of the Mexican Constitution, the Foreign Investment Law (as amended) (FIL), originally published on 27 December 1993, and its implementing regulations.

The FIL created the Foreign Investments National Commission (the Commission), a body formed by several ministries within the executive branch of the government, including the Ministry of the Interior, the Ministry of Foreign Affairs, the Ministry of Finance and the Ministry of Economy.

As a general rule, foreign investors may acquire any percentage of shareholding in Mexican companies, acquire assets, manufacture new lines of products, open and close establishments, and in general participate in the economic activities within the country, without any limitation. To this end, the by-laws of Mexican entities with foreign investment are required to expressly include the ‘foreign admission clause’, which provides for an agreement that foreign investors be treated as Mexican nationals for the purposes of their investment and to waive the protection of their foreign government.

The FIL defines foreign investment as (1) the participation of foreign investors (understood as a natural or legal person of a nationality other than Mexican and foreign entities without legal personality), in any proportion, in the capital stock of Mexican entities, (2) that performed by Mexican entities with a majority of foreign capital, and (3) the participation of foreign investors in the activities contemplated under the FIL (as described below).

Notwithstanding the foregoing, there are certain activities or industries that are exclusively reserved to the Mexican state, others that are exclusively reserved to Mexican nationals, and others in which foreign participation is allowed albeit on a limited basis.

Activities reserved to the Mexican state

These activities are considered as strategic for the state and are therefore reserved to the state without allowing private participation, whether national or foreign:

  • exploration and extraction of oil, except for shared participation structures;
  • planning and control of the national electric system, and the public service for the transmission and distribution of electric energy;
  • generation of nuclear energy;
  • radioactive minerals;
  • telegraph services;
  • radiotelegraphy;
  • mail services;
  • issuance of legal currency (bills and coins); and
  • control, supervision and surveillance of ports, airports and heliports.

Activities reserved to Mexican nationals or Mexican companies with an express foreign exclusion clause

The following activities are reserved to Mexican investors (individuals or companies). In the case of companies, the requirement of having a ‘foreign exclusion clause’ means that the by-laws of the company shall expressly provide that no foreign investment is allowed (although as is explained below, a mechanism of neutral investment would allow limited foreign investment participation in these industries):

  • national ground transportation, whether freight, passenger or tourism. These restrictions do not include courier services;
  • development banks; and
  • professional and technical services, although the authority has never issued a specific list of these services.

Foreign investors cannot participate in these activities whether directly, through trusts, agreements or any other structure for indirect participation, unless investment is made through a neutral investment structure, as explained below.

Activities in which foreign investment is restricted

Foreign investors may participate in the following activities up to the percentage indicated:

  • cooperative production companies (10 per cent);
  • manufacturing and marketing of explosives, firearms, gun cartridges, ammunition and fireworks, not including the acquisition and use of explosives for industrial and extraction activities, nor the preparation of explosive mixtures for the carrying out of these activities (49 per cent);
  • the printing and publication of newspapers for exclusive distribution in the national territory (49 per cent);
  • Series T shares of companies owning agricultural, cattle raising and forestry grounds (49 per cent) – Series T shares evidence the contribution for the acquisition of land for these purposes;
  • fishing in fresh water, coastal waters and the economic exclusive zone of Mexico, not including aquaculture (49 per cent);
  • integral port administration (49 per cent);
  • port services for piloting of ships to perform interior navigating operations (49 per cent);
  • shipping companies engaged in the commercial exploitation of ships for interior navigation and cabotage, except for tourism cruise ships and the exploitation of dragging, and naval artefacts for the construction, maintenance and operation of ports (49 per cent);
  • the provision of gasoline and lubricants for ships, airships and train equipment in ports and airports (49 per cent);
  • radio and television broadcasting, subject to reciprocity conditions with the foreign investor’s country (49 per cent); and
  • for national air transportation services, international non-standard air taxi services and specialist air transportation (49 per cent).

Activities fully restricting foreign investment cannot exceed the percentages stated above, whether directly or indirectly, or through trusts or other agreements, unless through neutral investment.

Activities where approval is required for foreign investment to exceed 49 per cent

This approval is granted by the Commission, and requires an explanation as to why a foreign investor is requesting a controlling participation in:

  • port services for ships to perform interior navigation operations, such as towing, mooring and boating activities;
  • shipping companies engaged in the exploitation of ships exclusively in high traffic;
  • concessionaires of aerodromes for public service;
  • school services;
  • legal services; and
  • the construction, operation and exploitation of railroad tracks that are the means of general communication and the provision of rail transportation services.

Review process

There are only a few instances in which approval by the Commission is required, which include:

  • those activities in which foreign investment can exceed 49 per cent (as listed above);
  • those activities in which neutral investment is allowed; and
  • acquisition of 49 per cent or more of the shares of a company whose assets exceed 20,184,671,346.26 pesos (the approximate equivalent to US$1 billion). This amount is reviewed annually.

Authorisation allowing foreign investment exceeding 49 per cent

When a foreign investor proposes to acquire more than 49 per cent of the capital stock of companies engaged in the activities described above, prior authorisation from the Commission is required. This authorisation is normally granted without restrictions, and will only require a three-year investment project in respect of the general operating plans and investment budget by the foreign investors.

This authorisation is granted within a review period of 45 business days from the date of the response to any formal request for information.

Authorisation for neutral investment

As explained above, foreign investment is allowed in certain activities through neutral investment. Neutral investment is an investment carried out in a Mexican entity or in trusts that are specifically authorised by the Commission and does not count when foreign investment is limited to specific activities.

Neutral investment can be carried out through a trust or the issuance of a special series of shares in a Mexican company. In both cases, participation under a neutral investment regime does not grant voting rights or, at most, only limited voting rights as expressly approved by the Commission. When limited voting rights are granted, these would normally be constrained to extraordinary matters such as a merger of the company, amendment to the corporate by-laws or liquidation of the company; nevertheless, control will be held by the Mexican investors. The foreign investor would have economic rights, such as dividend distribution.

There is no rule as to the specific percentage of neutral investment that the Commission may authorise. The general standard is for neutral investment to represent between 25 per cent and 49 per cent of the total investment, but this will depend on the specific industry and the criteria of the officers at the time. For example, the Commission has authorised more than 89 per cent of neutral investment in specific cases, such as national freight transportation. The Commission will usually look at the nature of the investment, will screen a foreign investor in terms of its investment plans in the country and operation abroad, as well as the nature of the proposed minority rights.

The Commission has approved neutral investment when dealing with national air transportation (e.g., national ground freight transportation) and television broadcasting, among others.

The Commission has a deadline of 35 business days in which to resolve a neutral investment authorisation, as of the date the requesting party has responded to any requests for additional information.

Authorisation to acquire more than 49 per cent of shares when assets threshold is reached

This authorisation from the Commission is required only when foreign investment, whether direct or indirect, in a Mexican company whose assets exceed 20,184,671,346.26 pesos (the threshold applicable for 2021) exceeds 49 per cent.

If foreign investment in a Mexican company already exceeds this percentage, no authorisation will be required, even if the assets threshold is reached.

For this authorisation, the Commission will require certain commitments from a foreign investor, which may include the following:

  • employment: either increasing or maintaining employment levels in the specific company;
  • technology transfer: whether the foreign investment will result in innovative technology being transferred to Mexico as part of the transaction;
  • investments: whether the transaction will involve new investments in Mexico, including in production, distribution or other assets. Normally, the Commission requires a three-year investment plan;
  • environmental compliance: depending on the type of industry; and
  • training: whether the investment will result in training for Mexican employees.

The commitments are reviewed in each case and can include all the elements referred to above, or just some of them.

The time frame for the Commission to resolve the matter is 45 business days from the date the applicant has responded to all formal requests for information.

Acquisition of real estate property

The Mexican Constitution provides that foreigners may not acquire real estate property directly in a restricted zone in Mexico, which covers a strip of 100 kilometres through the international borders and a strip of 50 kilometres though beaches (the restricted zone).

However, foreigners are allowed to acquire real estate property in this restricted zone through trusts operated and managed by credit institutions in Mexico, which require prior approval from the Ministry of Foreign Affairs. Before granting approval, the Ministry will take into account the economic and social benefit of these potential acquisitions, although in practice these authorisations are normally granted without any special commitments.

Further, Mexican companies that include in their by-laws a commitment to consider foreign investors as nationals for the purposes of their investment in the company and waive the right to request the protection of a foreign government, may acquire real estate properties in the restricted zone, provided the real estate will be used for non-residential purposes or mixed purposes (i.e., residential and non-residential). To this end, the company in question is required to notify the Ministry of Foreign Affairs of the acquisition within 60 business days of closing the corresponding acquisition.

Branch offices

The General Law of Commercial Companies recognises the legal capacity of foreign entities that are legally formed. Therefore, foreign entities may establish branch offices in Mexico to do business in the country. These offices will require (1) a local presence, and (2) incorporation or formation documents, including the by-laws of the entity abroad to be recorded with the Public Registry of Commerce. The by-laws of the principal shall not be contrary to the provisions of public order in Mexico.

For the purposes of registration, prior approval from the Ministry of Foreign Affairs is required. However, this requirement is not applicable to countries that have a free trade agreement with Mexico or if the country of the principal is part of the World Trade Organization, provided a notice is submitted to the Ministry of Foreign Affairs prior to commencing operations.

Similarly, representative offices of foreign companies may operate in Mexico by providing a notice to the Ministry of Foreign Affairs prior to commencing operations. Unlike branch offices, representative offices do not carry out business in Mexico and their activities are limited to the promotion of products and the services of the foreign principal.

Both branch offices and representative offices are required to be registered with the tax and social security authorities in Mexico to comply with their respective tax and social security obligations, depending on their specific activities.

Foreign Investments National Registry

All Mexican companies with foreign investors, whether direct or indirect or through trusts, must be registered with the Foreign Investments National Registry (RNIE). In addition, branch offices of foreign entities performing business activities in Mexico also require registration with the RNIE, as do trusts investing in the restricted zone and neutral investment trusts.

Furthermore, Mexican companies with foreign investors are required to file periodic information, such as financial statements, and to notify the RNIE when carrying out certain activities, such as mergers, spin-offs, dissolution and liquidation, and transformation into a different type of company.


Sanctions can include revocation of authorisations that have been granted, administrative fines and declaration of nullity of the legal acts when so declared by the Ministry of Foreign Affairs.

Financial penalties of up to 450,000 pesos (or the amount of the transaction in the event of acquisitions of real estate in the restricted zone) are imposed for non-compliance with the statutory requirements.

Sanctions can be challenged through a review process before the Ministry of the Economy; a resolution under this proceeding may be subject to appeal through a nullity claim before the administrative courts. Furthermore, a resolution issued by an administrative court may be challenged through a constitutional lawsuit (amparo) before the federal courts. Finally, depending on the origin of the investment, resolutions may be challenged through specific arbitration proceedings under investment treaties.

Constitutional amendment – power industry

The Mexican President has just presented to Congress a proposal to modify the Mexican Constitution. The aim of this proposal is to fortify the state-owned electricity company and limit the participation of private investors, including foreign investors in the generation of power in the country. It is still too early in the process to know whether this proposal will pass or if significant amendments would be incorporated by Congress.

Impact of the covid-19 pandemic

No changes were implemented as a result of the pandemic. Mexico continues with a policy of open doors towards foreign investors in general, and no additional restrictions or obligations were imposed.


1 José Carlos Altamirano is a lawyer and Ricardo A Pons Mestre is a partner at Hogan Lovells International, LLP.

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