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FOREIGN INVESTMENT LAWS AND REGULATIONS

LAWS , NATIONAL COMMISSION ON FOREIGN INVESTMENT , LISTING OF ACTIVITIES AND THEIR LIMITS FOR FOREIGN INVESTMENT , FOREIGN INVESTMENT IN REAL PROPERTY IN MEXICO , TRUSTS , INCORPORATED ENTITIES , "T" and "N" STOCK , NATIONAL REGISTRY OF FOREIGN INVESTMENT , CALVO CLAUSE , RENTAL BY FOREIGNERS OF REAL ESTATE.

LAWS EXISTING

Regulations to the Foreign Investment Law dated May 16, 1989 (applicable in all that is not contrary to the subsequent Foreign Investment Law). This regulatory law is still applicable in that portion that it is not contrary to the new Foreign Investment Law of December 27, 1993.

Foreign Investment Law dated December 27, 1993. This is the fundamental law governing over foreign investment in Mexico.

NATIONAL COMMISSION ON FOREIGN INVESTMENT

This is the federal Mexican Government agency that is charged with the compliance and application of the rules on foreign investment in Mexico.

The Commission normally considers approvals in the light of : Capitalization requirements, Maximum investment levels for fixed assets; Financing form Non-Mexican sources; Compliance with environmental regulations; Permanent job creation programs and training programs; Positive balance on exports (vs. imports); Investment in fixed assets; Acquisition of new or better technology; Contribution to less developed zones, How well does it complement Mexican investment, and Other similar items that will improve the country and business climate of Mexico.

(A). LISTING OF ACTIVITIES AND THEIR LIMITS FOR FOREIGN INVESTMENT IN MEXICO (LIMITING LIST).

Economic Classifications. Economic activities are now classified into seven categories (the 8th would be no limit on foreign investment). I call them: i.) New areas of economic activity, ii.) Strategic state areas of activity, iii.) Areas reserved for Mexicans, iv.) Areas of foreign investment up to 34%, v.) Areas of foreign investment up to 40%, vi.) Areas of foreign investment up to 49%, and vii.) Areas of foreign investment requiring the Commission's approval for up to 100% (opening new areas).

Within the 7th group there were originally 58 activities, amongst which were (a few have been liberalized by the Commission over time): agricultural, cattle breeding , magazine and newspaper editing, housing and several types of construction activities, water recycling plants, drilling of oil and water wells, educational and certain professional services, legal and accounting counseling services, certain air transportation services and administration of airports and heliports.

(There is a tendency to relax the controls, so if the reader is interested in a particular activity and finds it listed as controlled in some manner, it might be worth checking with the National Commission on Foreign Investment to verify whether there are new rules lessening the controls on it.)

1. ACTIVITIES RESERVED FOR THE STATE (FEDERAL GOVERNMENT)
a: Petroleum and all other Hydrocarbons
b: Basic Petrochemical
c: Electricity
d: Generation of Nuclear Energy
e: Radioactive Minerals
f: Communications via Satellite
g: Telegraph
h: Radiotelegraphic
i: Mail
j: Railroad
k: Issuance of paper money
l: Making of metallic money
m: Control, supervision, and vigilance of Ports, Airports
     and heliports
n: Those specifically foreseen in laws. 

2. ACTIVITIES FOR MEXICAN INDIVIDUALS AND MEXICAN COMPANIES
THAT HAVE A FOREIGNER EXCLUSION CLAUSE (which may be incremented by means of the neutral
 investment foreseen under Title V of the Foreign Investment Law)
a: National land transport of passengers, tourism and freight (not including messenger and packages services).
b: Retail sale of gasoline and distribution of liquid petroleum gas.
c: Services of Radio Broadcasting and other Radio and Television services, other than cable television.
d: Credit Unions.
e: Development banking institutions (in the terms of the law that applies to that area).
f: The rendering of professional and technical services that are expressly identified in the
 legal dispositions applicable. 

3. ACTIVITIES WITH CERTAIN PERCENTAGE RESTRICTIONS FOR FOREIGN
INVESTMENT PARTICIPATION (IN THE ACTIVITY OR CORPORATE
CAPITAL OF THE COMPANY THAT PERFORMS THE ACTIVITY): (which
may be incremented by means of the neutral investment fore-
seen under Title V of the Foreign Investment Law). 

FOREIGN INVESTMENT UP TO 10% IN:
a: Cooperative Production Companies. 

FOREIGN INVESTMENT UP TO 25% IN: 

a: National Air Transport.
b: Air Taxi Transport.
c: specialized Air Transport.

FOREIGN INVESTMENT UP TO 30%
a: Controlling Companies of Financial Groups.
b: Multiple Banking Credit Institutions.
c: Stock Brokerage Firms .
d: Stock Market Specialists. 

4 . FOREIGN INVESTMENT UP TO 49%
a: Insurance Institutions.
b: Bonding Institutions.
c: Money Exchange Houses.
d: General Depository Warehouses.
e: Financial Lessors.
f: Financial Factoring Companies.
g: Financial Companies of limited scope (referred to in article 103, fraction iv of the Credit Institutions Law).
h: Those companies referred to in article 12 bis of the Stock Market Law.
i: Stock representative of the fixed capital of investment companies and operating companies of investment companies.
j: Fabrication and commercialization of explosives, fire arms, cartridges, munitions and fireworks (not including
   the acquisition and using of explosives for industrial and extractive activities nor the elaboration of explosive mixtures
   for consumption for said activities).
k: Printing and publication of periodicals exclusively for national circulation.
l: "T" series shares of stock of companies that hold (in ownership) agricultural, ranching and forestry lands.
m: Cable television.
n: Basic telephonic services.
o: Fishing in fresh water, along the coast, and in the exclusive economic zone (not including aqua culture).
p: Integral port administration.
q: Piloting services in ports for performance of interior
    navigation by boats.
r: Navigating companies dedicated to the commercial exploitation of water traveling vessels for interior naviga-
   tion and pilotage (coasting trade), (not including touristic cruisers and exploitation of dredgers and naval
   artifacts for construction, conservation and port operation.
s: Services connected to the railroad sector, that consist in services to passengers, maintenance and rehabilitation of
   railways (tracks), easements, repair shops for tractive and pulling (dragging) equipment, organization and commercial-
   zation of unitary trains, operation of interior freight terminals railroad telecommunications.
t: Providing of combustibles and lubricants to water traveling vessels, airplanes and railroad equipment. 

ACTIVITIES WHEREIN RESOLUTION IS REQUIRED FROM THE NATIONAL
COMMISSION ON FOREIGN INVESTMENT, IN ORDER THAN FOREIGN
INVESTMENT MAY EXCEED 49% (IN THE ACTIVITY OR CORPORATE
CAPITAL OF THE COMPANY THAT PERFORMS THE ACTIVITY''.

a: Port services...
b: Navigating services ...
c: Air terminal administration
d: Private Education ...
e: Legal services.
f: Credit Information services.
g; Institutions that qualify stock and similar.
h: Insurance agencies.
i: Cellular telephone services.
j: Duct (CHANNEL) construction for the transport of petroleum and derivatives.
k: Perforation of petroleum and gas wells. 

5. ACTIVITIES WITH PERCENTAGE INCREMENTS PERMITTED IN THE
   CORPORATE CAPITAL OF MEXICAN COMPANIES (FOR FOREIGN
   INVESTMENT) OVER TIME. 

	I. INTERNATIONAL LAND TRANSPORT OF PASSENGERS, TOURISM AND
	   FREIGHTS, BETWEEN POINTS INSIDE MEXICO; AND THE ADMINIS-
                  TRATIVE SERVICES OF BUS STATIONS AND AUXILIARY SERVICES.
		

	a: Through December 17, 1995 - 0% Foreign Investment.
	b: From December 18, 1995 through December 31, 2000 - Up to 49% Foreign Investment.
      	c: From January 1, 2001 through December 31, 2003 - Up to 51% Foreign Investment.
      	d: From January 1, 2004 and thereafter, Up to 100% - Foreign Investment, without prior requirement of
           a favorable resolution from the National Commission on Foreign Investment. 

	II. ACTIVITIES OF FABRICATION AND ASSEMBLY OF PARTS, EQUIP-    
	   MENT AND ACCESSORIES FOR THE AUTOMOTIVE INDUSTRY. 

	a: Through December 31, 1998 - Up to 49% Foreign Investment (Subject to that set forth in the Decree
            for the Development and Modernization of the Automotive Industry).
	b: From January 1, 1999 and thereafter - Up to 100% Foreign Investment, without prior requirement of
	    a favorable resolution from the National Commission on Foreign Investment. 

	III. ACTIVITIES OF PROVIDING THE SERVICES OF VIDEOTEXT AND    
	   COMMUTATION IN PACKAGE.

	a: Through June 30, 1995 - Up to 49% Foreign Investment. 
	b: From July 1, 1995 and thereafter Up to 100%, without the prior requirement of a favorable resolution from    
            the National Commission on Foreign Investment. 

	IV. EDIFICATION, CONSTRUCTION AND INSTALLATION JOBS 

	a: Through December 31, 1998 - Up to 49% Foreign Investment (with the understanding that the % 
            may increase if prior favorable resolution from the National Commission on Foreign Investment is 
   	    obtained) (Note: restriction take off before that date)

 	b: From January 1, 1999 and thereafter - Up to 100% without prior requirement of a favorable resolution    
            from the National Commission on Foreign Investment. 

6. IF NOT IN ANY OF THE PRECEDING CATEGORIES AND THE INVESTMENT 
   BY FOREIGN INTERESTS IS LESS THAT $85 MILLION PESOS (NEW PESOS), 
   THEY MAY PARTICIPATE AT WILL. IF THE INVESTMENT IS GREATER THAN 
   $85 MILLION NEW PESOS, THEN PERMIT IS REQUIRED FROM THE NATIONAL 
   ON FOREIGN INVESTMENT TO EXCEED 49% INTEREST.

(B). FOREIGN INVESTMENT IN REAL PROPERTY IN MEXICO.

1. INSIDE THE RESTRICTED ZONE .

Foreigners may not directly acquire ownership of real property in the Restricted Zone.

Foreigners may acquire qualified residential property in the Restricted Zone via the long term irrevocable title transfer (Mexican) bank trust mechanism or via a Mexican incorporated entity (subject to the limited of foreign investment per the company activity see LISTINGS above ).

Foreigners may acquire qualified business property in the Restricted Zone via the irrevocable long term title transfer (Mexican) bank trust or by direct title in the name of their Mexican incorporated entity (subject to the limited of foreign investment per the company activity see LISTINGS above ).

2. OUTSIDE THE RESTRICTED ZONE

Foreigners may directly acquire real property outside the Restricted Zone, provided that it is qualified for private ownership and then only subject to the limitations of use, means of holding and size permitted by law (see the Qualified information).

Real Estate Qualified for Foreign Investment. Is that which is not within those limiting areas (physical location: Restricted Zone , Ejidos and similar Ejidos and similar ) or used for those limiting activities (business/commerce see: Agrarian, Ranching, Farming , Forest, and Limiting List ) restricted to Mexican Government ownership or Mexican individuals sole ownership, and the ownership of which is permitted by either 1. Direct title to the foreign individual, 2. via a Mexican incorporated entity of one type or another (as may be required by specific law) or via a long term irrevocable title transfer (Mexican) bank Trust, as the case may be.