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INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE

188166
2009-01-21 22:38:00
09MEXICO160
Embassy Mexico
UNCLASSIFIED
08STATE123907
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FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 4683
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUCPCIM/CIM NTDB WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE

UNCLAS SECTION 01 OF 14 MEXICO 000160 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA 
STATE PASS USTR 
STATE PASS OPIC 
 
E.O.12958: N/A 
TAGS: ECON EINV EFIN ETRD OPIC USTR KTDB MX
SUBJECT: 2009 INVESTMENT CLIMATE STATEMENT - MEXICO 
 
REF: 08 STATE 123907 
 
Openness to Foreign Investment 
------------------------------ 
 
¶1. Mexico is open to foreign direct investment (FDI) in most 
economic sectors and has consistently been one of the largest 
recipients of FDI among emerging markets. In recent years, Mexico 
has become increasingly aware of its loss of competitiveness 
relative to other emerging economies, notably China and India, as it 
had failed to address serious crime and safety issues or pass much 
needed reforms. Recent government successes in the reform agenda 
have improved business confidence, underpinning increases in foreign 
investment. Mexico has significantly increased the tempo of efforts 
against organized crime, but rising narcotics-related violence 
remains a cause for concern.  Mexico will need progress on both 
fronts to regain competitiveness as an FDI destination, particularly 
for non-U.S. investors.  The current international economic downturn 
adds to the challenge, as FDI grows scarcer and investors more 
cautious. 
 
¶2. Foreign investment in Mexico has largely been concentrated in the 
northern states close to the U.S. border where most maquiladoras are 
located, and in the Federal District (Mexico City) and surrounding 
states. The Yucatan peninsula, historically an area for tourism 
investment, has seen industry in other sectors grow due in part to 
the ability to quickly send goods from its ports to the United 
States. Financial services, automotive and electronics have received 
the largest amounts of FDI.  Historically, the United States has 
been the largest source of FDI in Mexico.  U.S. investors provided 
39 percent of FDI in 2007. 
 
¶3. In June 2007, President Calderon created ProMexico, a federal 
entity charged with promoting Mexican exports around the world and 
attracting foreign direct investment to Mexico.   Through ProMexico, 
federal and state government efforts, as well as related private 
sector activities, are coordinated with a goal of harmonizing 
programs, strategies and resources aimed at common objectives and 
priorities while supporting the globalization of Mexico's economy. 
ProMexico maintains an extensive network of offices abroad as well 
as a multi-lingual website (http://www.investinmexico.com.mx) which 
provides information on establishing a corporation, rules of origin, 
labor issues, owning real estate in Mexico, the maquiladora 
industry, and sectoral promotion plans, among other topics. 
ProMexico will coordinate Mexico's hosting of the 2010 World 
Conference of Trade Promotion Agencies in Riviera Nayarit. 
 
¶4. The Secretariat of Economy (SECON) also maintains a bilingual 
website (www.economia.gob.mx) offering an array of information, 
forms, links and transactions. Among other options, interested 
parties can download import/export permit applications, make on-line 
tax payments, and chat with on-line advisors who can answer specific 
investment and trade related questions.  State governments have also 
passed small business facilitation measures to make it easier to 
open businesses. 
 
¶5. Despite progress however, it takes on average 28 days to complete 
all paperwork required to start a business in Mexico, against an 
average OECD figure of 13.4 days, according to a World Bank study. 
The Embassy advises potential investors to contact ProMexico for 
detailed information on investing in Mexico. 
 
¶6. The 1993 Foreign Investment Law is the basic statute governing 
foreign investment in Mexico. The law is consistent with the foreign 
investment chapter of NAFTA (the North American Free Trade 
Agreement). It provides national (i.e. non-discriminatory) treatment 
for most foreign investment, eliminates performance requirements for 
most foreign investment projects, and liberalizes criteria for 
automatic approval of foreign investment. 
 
¶7. The Foreign Investment Law identifies 704 activities, 656 of 
which are open for 100 percent FDI stakes. There are 18 activities 
in which foreigners may only invest 49 percent; 13 of which require 
Foreign Investment National Commission approval for a 100 percent 
stake; 5 reserved for Mexican nationals; and 10 reserved for the 
Mexican state. Below is a summary of activities subject to 
investment restrictions. 
 
SECTION 1: SECTORS RESERVED FOR THE STATE IN WHOLE OR IN PART: 
 
A) Petroleum and other hydrocarbons; 
B) Basic petrochemicals; 
C) Telegraphic and radio telegraphic services; 
D) Radioactive materials; 
E) Electric power generation, transmission, and distribution; 
F) Nuclear energy; 
 
MEXICO 00000160  002 OF 014 
 
 
G) Coinage and printing of money; 
H) Postal service; 
I) Airports; 
J) Control, supervision and surveillance of ports and heliports. 
 
SECTION 2: SECTORS RESERVED FOR MEXICAN NATIONALS: 
 
A) Retail sales of gasoline and liquid petroleum gas; 
B) Non-cable radio and television services; 
C) Credit Unions, Savings and Loan Institutions, and Development 
Banks; 
D) Certain professional and technical services; 
E) Domestic transportation for passengers, tourism and freight, 
except for messenger or package delivery services. 
 
¶8. U.S. and Canadian investors generally receive national and 
most-favored-nation treatment in setting up operations or acquiring 
firms. Exceptions exist for investments for which the Government of 
Mexico recorded its intent in NAFTA to restrict certain industries 
to Mexican nationals. U.S. and Canadian companies have the right 
under NAFTA to international arbitration and the right to transfer 
funds without restrictions. NAFTA also eliminated some barriers to 
investment in Mexico, such as trade balancing and domestic content 
requirements. Local governments must also accord national treatment 
to investors from NAFTA countries. Mexico is also a party to several 
OECD agreements covering foreign investment, notably the Code of 
Liberalization of Capital Movements and the National Treatment 
Instrument. 
 
¶9. Approximately 95 percent of all foreign investment transactions 
do not require government approval. Foreign investments requiring 
applications and not exceeding USD 165 million are automatically 
approved, unless the proposed investment is in a sector subject to 
restrictions by the Mexican constitution and Foreign Investment Law 
that reserve certain sectors for the state and Mexican nationals 
(see Table 1). The National Foreign Investment Commission determines 
whether investments in restricted sectors may go forward and has 45 
working days to make a decision. Criteria for approval include 
employment and training considerations, technological contributions, 
and contributions to productivity and competitiveness. The 
Commission may reject applications to acquire Mexican companies for 
national security reasons. The Secretariat of Foreign Relations 
(SRE) must issue a permit for foreigners to establish or change the 
nature of Mexican companies. 
 
¶10. Despite Mexico's relatively open economy, a number of key 
sectors in Mexico continue to be characterized by a high degree of 
market concentration.  For example, the telecommunications, 
electricity, television broadcasting, petroleum, beer, and tortilla 
sectors feature one or two or several dominant companies (some 
private, others public) with enough market power to restrict 
competition.  The Mexican Congress strengthened the enforcement 
powers of the Federal Competition Commission (CFC) in 2006 and is 
considering stiffer penalties for anti-competitive conduct, but the 
CFC remains weak relative to its OECD counterparts in terms of 
enforcement.  CFC Commissioner Eduardo Perez Motta and leading 
members of the Calderon Administration, including the President, 
have publicly committed to opening up the Mexican economy to greater 
competition.  For more information on competition issues in Mexico 
visit CFC's bilingual website at: www.cfc.gob.mx. 
 
¶11. ENERGY: The Mexican constitution reserves ownership of petroleum 
and other hydrocarbon reserves for the Mexican state. The energy 
reform package approved by the Mexican Congress October 2008 did not 
address this prohibition, and oil and gas exploration and production 
efforts remain under the sole purview of Pemex, Mexico's petroleum 
parastatal.  The constitution also provides that most electricity 
service may only be supplied by two state-owned companies, the 
Federal Electricity Commission (CFE) and Central Power and Light 
(LYFC). There has been some opening to private capital. Private 
electric co-generation and self-supply are now allowed. Private 
investors may build independent power projects but all of their 
output must be sold to CFE in wholesale transactions. Private 
construction of generation for export is permitted. In 1995, 
amendments to the Petroleum Law opened transportation, storage, 
marketing and distribution of natural gas imports and issued open 
access regulations for Pemex's natural gas transportation network. 
Retail distribution of Mexico's natural gas is open to private 
investment, as is the secondary petrochemical industry.  Since the 
government's announcement in August 2001 that national and foreign 
private firms will be able to import liquefied petroleum gas 
duty-free, LNG terminals in Tamaulipas state and Baja California 
have begun operations, and CFE plans to build a third in Manzanillo, 
on Mexico's Pacific Coast. 
 
¶12. Finance Public Works Contracts (COPFs), formerly Multiple 
 
MEXICO 00000160  003 OF 014 
 
 
Service Contracts (MSCs) designed to comply with the country's 
constitution, mark Mexico's most ambitious effort to attract private 
companies to stimulate natural gas production by developing 
non-associated natural gas fields.  Under a COPF contract, private 
companies will be responsible for 100 percent of the financing of a 
contract and will be paid for the work performed and services 
rendered. However, the natural gas produced in a specific field 
remains the property of Pemex.  Examples of work that contractors 
can perform include seismic processing and interpretation, 
geological modeling, fields engineering, production engineering, 
drilling, facility design and construction, facility and well 
maintenance, and natural gas transportation services.  Some Mexican 
politicians still oppose COPFs as a violation of the Mexican 
constitution's ban on concessions. Some contracts have failed to 
attract any bids, demonstrating the limited success of COPFs. 
 
¶13. TELECOMMUNICATIONS: Mexico allows up to 49 percent FDI in 
companies that provide fixed telecommunications networks and 
services. This includes the Cable TV (CATV) industry, with one 
exception: companies can issue Neutral or "N" stocks up to 99 
percent, which can be owned by a foreign company. In fact, one CATV 
company operates under this ownership scheme. There is no limit on 
FDI in companies providing cellular/wireless services.  However, 
Telmex and Telcel (Amrica Msvil) continue to reign as the dominant 
telecom fixed and wireless powers and wield significant influence 
over key regulatory and government decision makers. Mexico's 
dominant landline and wireless carriers are traded on the New York 
Stock Exchange.  An initiative is currently in the Congress that 
would completely open fixed telephony to FDI. 
 
¶14. Several large U.S. and international telecom companies are 
active in Mexico, partnering with Mexican companies or holding 
minority shares.  Following a 2004 WTO ruling, international 
resellers are authorized to operate in Mexico and some companies are 
also looking to sell wholesale minutes to resellers.  Telcel 
(technically independent, but majority owned by Telmex owner's Grupo 
Carso - Carso Global Telecom) still retains a majority share (about 
75 percent) of the cellular market. However, Spain's Telefonica 
Movistar, among others, continues to grow and challenge the status 
quo. They have deployed extensive mobile infrastructure to increase 
coverage across the country. 
 
¶15. Telmex continues to dominate the market in Long Distance 
(domestic and international), Internet access through DSL, and 
bundle services. The Convergence Accord, published in October 2006, 
allowed Telmex to offer broadcasting or TV services.  However, the 
Federal Telecommunications Commission ruled that Telmex must first 
comply with interconnection, interoperability and number portability 
requirements before receiving permission to complete its triple-play 
offering. The accord has elicited strong concerns from the CATV 
industry, which fears that it will push CATV operators to 
consolidate.  Under the accord, CATV operators (including TV 
duopolist Televisa's Cablevision) are allowed to independently offer 
Triple Play Service (VoIP-Telephony, Data-Internet and TV-Video), 
which might increase competition in the telephony market. 
 
¶16. As in telecommunications, there are concerns that the two 
dominant television companies -- Televisa and TV Azteca, who share 
duopoly status in the sector -- continue to exercise influence over 
Mexican judicial, legislative and regulatory bodies to prevent 
competition.  However, in August 2007 the Mexican Supreme Court 
ruled against the most blatant anti-competition measures of the 
April 2006 Radio and Television Law.  Among other decisions, the 
Court ruled that it was unfair for broadcasting companies to keep 
and use at no cost analog spectrum freed from the digitalization 
process.  Currently the Mexican Legislature is working on a new 
media law based on the Supreme Court's ruling. 
 
¶17. U.S. firms remain unable to penetrate the Mexican television 
broadcast market, despite the fact that both Televisa and TV Azteca 
benefit from access to the U.S. market. 
 
¶18. REAL ESTATE: Investment restrictions still prohibit 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. In all, the restricted zones total about 40 percent of 
Mexico's territory. Nevertheless, foreigners may acquire the 
effective use of residential property in the restricted zones 
through the establishment of a 50-year extendible trust (called a 
fideicomiso) arranged through a Mexican financial institution that 
acts as trustee. 
 
¶19. Under a fideicomiso the foreign investor obtains all rights of 
use of the property, including the right to develop, sell and 
transfer the property. Real estate investors should, however, be 
 
MEXICO 00000160  004 OF 014 
 
 
careful in performing due diligence to ensure that there are no 
other claimants to the property being purchased. Fideicomiso 
arrangements have led to legal challenges in some cases. U.S. issued 
title insurance is available in Mexico and a few major U.S. title 
insurers have begun operations here.  Additionally, U.S. lending 
institutions have begun issuing mortgages to U.S. citizens 
purchasing real estate in Mexico. 
 
¶20. TRANSPORT: The Mexican government allows up to 49 percent 
foreign ownership of 50-year concessions to operate parts of the 
railroad system, renewable for a second 50-year period. The Mexican 
Foreign Investment Commission and the Mexican Federal Competition 
Commission (CFC) must approve ownership above 49 percent.  In a 
positive sign for competition, the CFC recently struck down a 
proposed merger between two of the three major railroad companies. 
The decision has been appealed.  Consistent with NAFTA, foreign 
investors from the U.S. and Canada are now permitted to own up to 
100 percent of local trucking and bus companies, however, several 
companies have encountered long wait times and legal tie-ups when 
trying to obtain permits. 
 
¶21. CINTRA, the government holding company for the Mexican airline 
groups, Mexicana and Aeromexico, sold Grupo Mexicana to Grupo 
Posadas in December 2005.  Grupo Aeromexico was sold to a consortium 
led by Citibank-owned Banamex in October 2007.  The emergence of 
low-cost domestic airlines such as Volaris, Click Mexicana, and 
Interjet have increased competition and led to lower prices. 
However, foreign ownership of Mexican airlines remains capped at 25 
percent. Foreign ownership in airports is limited to 49 percent. 
Foreign express delivery service companies continue to complain that 
Mexican legislation unfairly favors Mexican companies by restricting 
the size of trucks international carriers are allowed to use. 
 
¶22. INFRASTRUCTURE: Mexican infrastructure investment, with certain 
previously noted exceptions, is open to foreign investment.  The 
Mexican government has been actively seeking an increase in private 
involvement in infrastructure development in numerous sectors, 
including transport, communications, and environment.  Improvement 
in the national infrastructure is seen as a key element in 
strengthening economic competitiveness and attracting investment to 
disadvantaged regions of the country.  In July 2007, President 
Calderon presented the National Infrastructure Program 2007-2012 a 
key aspect of which is an increase in private investment through 
means of Service Lending Projects (public-private partnerships) and 
concessionary schemes.  In October 2008 and January 2009 discourses, 
President Calderon underlined his commitment to the National 
Infrastructure Program as a countercyclical tool in the face of a 
slowing economy.  The Office of the President provides an English 
language copy of the plan at: www.infraestructura.gob.mx. 
 
Conversion and Transfer Policies 
-------------------------------- 
 
¶23. Mexico has open conversion and transfer policies as a result of 
its membership in NAFTA and the OECD. In general, capital and 
investment transactions, remittance of profits, dividends, 
royalties, technical service fees, and travel expenses are handled 
at market-determined exchange rates. Peso/dollar foreign exchange is 
available on same-day, 24- and 48-hour settlement bases. Most large 
foreign exchange transactions are settled in 48 hours. In June 2003, 
the U.S. Federal Reserve Bank and the Bank of Mexico announced the 
establishment of an automated clearinghouse for cross-border 
financial transactions. The International Electronic Funds Transfer 
System (TEFI) began operating in 2004 and commissions on transfers 
through the system have dropped rapidly. 
 
Expropriation and Compensation 
------------------------------ 
 
¶24. Under NAFTA, Mexico may not expropriate property, except for a 
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 for violations of this or any other 
rights included in the investment chapter of NAFTA. 
 
¶25. There have been twelve arbitration cases, of which two are still 
pending, filed against Mexico by U.S. and Canadian investors who 
allege expropriation, and other violations of Mexico's NAFTA 
obligations. Details of the cases can be found at the Department of 
State Website, Office of the Legal Advisor (www.state.gov/s/l). 
 
Dispute Settlement 
------------------ 
 
¶26. Chapter Eleven of NAFTA contains provisions designed to protect 
 
MEXICO 00000160  005 OF 014 
 
 
cross-border investors and facilitate the settlement of investment 
disputes. For example, each NAFTA Party must accord investors from 
the other NAFTA Parties national treatment and may not expropriate 
investments of those investors except in accordance with 
international law. 
 
¶27. Chapter Eleven permits an investor of one NAFTA Party to seek 
money damages for measures of one of the other NAFTA Parties that 
allegedly violate those and other provisions of Chapter Eleven. 
Investors may initiate arbitration against the NAFTA Party under the 
Arbitration Rules of the United Nations Commission on International 
Trade Law ("UNCITRAL Rules") or the Arbitration (Additional 
Facility) Rules of the International Center for Settlement of 
Investment Disputes ("ICSID Additional Facility Rules"). 
Alternatively, a NAFTA investor may choose to use the registering 
country's court system. 
 
¶28. The Mexican government and courts recognize and enforce arbitral 
awards. The Embassy has heard of no actions taken in the Mexican 
courts for an alleged Chapter 11 violation on behalf of U.S. or 
Canadian firms. 
 
¶29. There have been numerous cases in which foreign investors, 
particularly in real estate transactions, have spent years dealing 
with Mexican courts trying to resolve their disputes. Often real 
estate disputes occur in popular tourist areas such as the Yucatan. 
American investors should understand that under Mexican law many 
commercial disputes that would be treated as civil cases in the U.S. 
could also be treated as criminal proceedings in Mexico. Based upon 
the evidence presented a judge may decide to issue arrest warrants. 
In such cases Mexican law also provides for a judicial official to 
issue an "amparo" (injunction) to shield defendants from arrest. 
U.S. investors involved in commercial disputes should therefore 
obtain competent Mexican legal counsel, and inform the U.S. Embassy 
if arrest warrants are issued. 
 
Performance Requirements and Incentives 
--------------------------------------- 
 
¶30. The 1993 Foreign Investment Law eliminated export requirements 
(except for maquiladora industries), capital controls, and domestic 
content percentages, which are prohibited under NAFTA. Foreign 
investors already in Mexico at the time the law became effective 
could apply for cancellation of prior commitments. Foreign investors 
who failed to apply for the revocation of existing performance 
requirements remained subject to them. 
 
¶31. The Mexican federal government has eliminated direct tax 
incentives, with the exception of accelerated depreciation. A fiscal 
reform package was passed in September 2007 that includes a Flat 
Rate Corporate Tax (IETU).  This tax limits the deductions that 
companies are allowed, though changes made at the behest of the 
business community still allow some credits for previous inventories 
and investments, as well as for companies that fall under the 
maquiladora scheme.  In 2009, the IETU will increase from 16.5% to 
17%, and to 17.5% in 2010.  Investors should follow IETU 
developments closely. 
 
¶32. Most taxes in Mexico are federal; therefore, states have limited 
opportunity to offer tax incentives. However, Mexican states have 
begun competing aggressively with each other for investments, and 
most have development programs for attracting industry. These 
include reduced price (or even free) real estate, employee training 
programs, and reductions of the 2 percent state payroll tax, as well 
as real estate, land transfer, and deed registration taxes, and even 
new infrastructure, such as roads. Four northern states -- Nuevo 
Leon, Coahuila, Chihuahua and Tamaulipas -- have signed an agreement 
with the state of Texas to facilitate regional economic development 
and integration.  Investors should consult the Finance, Economy, and 
Environment Secretariats, as well as state development agencies, for 
more information on fiscal incentives. Tax attorneys and industrial 
real estate firms can also be good sources of information. 
 
¶33. U.S. Consulates have reported that the states in their consular 
districts have had to modify their incentive packages due to 
government decentralization. Many states have also developed unique 
industrial development policies. Sonora, for example, is working to 
expand the free entry area for tourists (south from the border to 
the port of Guaymas.) Sonora is one state that has implemented 
long-term agriculture and infrastructure development plans. The 
government of Yucatan provides information and support to potential 
investors and business entrepreneurs through several programs that 
target different industries such as technology, agroindustry and 
energy exploration. Several states are competing to attract 
manufacturing in the aerospace industry. 
 
 
MEXICO 00000160  006 OF 014 
 
 
¶34. A government-owned development bank, Nacional Financiera, S.A. 
(www.nafin.com), provides loans to companies in priority development 
areas and industries. It is active in promoting joint 
Mexican-foreign ventures for the production of capital goods. 
Nacional Financiera offers preferential, fixed-rated financing for 
the following types of activities: small and medium businesses; 
environmental improvements; studies and consulting assistance; 
technological development; infrastructure; modernization; and 
capital contribution.  The Mexican Bank for Foreign Trade, 
Bancomext, offers a variety of export financing and promotion 
programs (www.bancomext.com). 
 
¶35. Mexico's maquiladora and PITEX (Program for Temporary Imports to 
produce Exports) programs aim to stimulate manufactured exports and 
operate in largely the same manner. The first focuses on companies 
that specialize in in-bond manufacturing and export, while the 
second is for companies that may have significant domestic sales. 
In November 2006, the maquiladora and PITEX programs were combined 
into the renamed IMMEX (Industria Manufacturera, Maquiladora y 
Servicios de Exportacion) program.  The IMMEX program adds services, 
such as business process outsourcing, to the maquila scheme and also 
simplifies and streamlines the processes under the two previous 
schemes.   The new program continued to exempt companies from import 
duties and applicable taxes (e.g. VAT) on inputs and components 
incorporated into exported manufactured goods.  In addition, capital 
goods and the machinery used in the production process are tax 
exempt, but are currently subject to import duties. Companies 
interested in investing in industrial activity in Mexico need to 
follow the new IMMEX guidelines closely, preferably in close 
consultation with locally based legal advisors.  Two export programs 
implemented during the 1990s, ALTEX (Empresas Altamente 
Exportadoras) and ECEX (Empresas de Comercio Exterior), also allow 
expedited VAT returns and financing from government-owned 
development banks.  Please refer to the Secretariat of Economy's 
IMMEX program website at http://www.economia.gob.mx/?P=immex. 
 
¶36. In order to maintain competitiveness of maquiladora and PITEX 
companies and comply with NAFTA provisions, since 2001 Mexico has 
applied "Sectoral Promotion Programs" (PROSEC). Under these 
programs, most favored nation import duties on listed inputs and 
components used to produce specific products are eliminated, or 
reduced to a competitive level. These programs comply with NAFTA 
provisions because import duty reduction is available to all 
producers, whether the final product is sold domestically or is 
exported to a NAFTA country.  Currently PROSECs support 22 sectors, 
including electronics and home appliances, automotive and 
auto-parts, textile and apparel, footwear, and others. The lists of 
inputs and components incorporated under each PROSEC are not 
exhaustive, and the Mexican government regularly consults with 
industries to include more goods.  In December 2008, President 
Calderon issued in the Official Gazette (Diario Oficial) an 
immediate and gradual reduction of import duties in order for 
companies to obtain inputs at competitive prices. 
 
¶37. In the last four years the Secretariat of Economy conducted, in 
partnership with the private sector, 12 studies of the country's 
most important sectors according to their levels of exports, 
employment and FDI, called "Programs for Sectoral Competitiveness." 
These studies are currently available at the website of the 
Secretariat of Economy (http://www.economia.gob.mx/?P=944). 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
¶38. Foreign and domestic private entities are permitted to establish 
and own business enterprises and engage in all forms of remunerative 
activity in Mexico, except those enumerated in Section 1 Table 1. 
Private enterprises are able to freely establish, acquire and 
dispose of interests in business enterprises. The two most common 
types of business entities are corporations (Sociedad Anonima) and 
limited partnerships (Sociedad de Responsibilidad Limitada). Under 
these legal entities a foreign company may operate an independent 
company, a branch, affiliate, or subsidiary company in Mexico. The 
rules and regulations for starting an enterprise differ for each 
structure. 
 
CORPORATION (SOCIEDAD ANONIMA): 
 
A) Can be up to 100 percent foreign-owned; 
B) Must have a minimum of 50,000 Mexican pesos in capital stock to 
start; 
C) Must have minimum of 2 shareholders, with no maximum. Board of 
Directors can run the administration of the company; 
D) The enterprise has an indefinite life span; 
E) Free transferability of stock ownership is permitted; 
F) Operational losses incurred by the Mexican entity or subsidiary 
 
MEXICO 00000160  007 OF 014 
 
 
may not be used by the U.S. parent company; 
G) Limited liability to shareholders. 
 
LIMITED LIABILITY COMPANY (SOCIEDAD DE RESPONSIBILIDAD LIMITADA): 
 
A) Can be up to 100 percent foreign-owned; 
B) Must have a minimum of 3,000 Mexican pesos in capital stock to 
start; 
C) Must have a minimum of 2 partners to incorporate a corporation 
with limited liability.  The partners must manage the company; 
D) Exists only while there is a business purpose and partners remain 
the same; 
E) Restricted transferability of partnership shares.  Any changes in 
the partnership composition may cause the partnership to be 
liquidated; 
F) If structured properly, it may offer tax advantages by allowing 
operational losses incurred by the Mexican entity to be used by the 
U.S. parent company; 
G) Limited liability is afforded the partners. 
 
Protection of Property Rights 
----------------------------- 
 
¶39. Two different laws provide the core legal basis for protection 
of intellectual property rights (IPR) in Mexico -- the Industrial 
Property Law (Ley de Propiedad Industrial) and the Federal Copyright 
Law (Ley Federal del Derecho de Autor).  Multiple federal agencies 
are responsible for various aspects of IPR protection in Mexico. 
The Office of the Attorney General (Procuradura General de la 
Republica, or PGR) has a specialized unit that pursues criminal IPR 
investigations.  The Mexican Institute of Industrial Property 
(Instituto Mexicano de la Propiedad Industrial, or IMPI) administers 
Mexico's trademark and patent registries and is responsible for 
handling administrative cases of IPR infringement.  The National 
Institute of Author Rights (Instituto Nacional del Derecho de Autor) 
administers Mexico's copyright register and also provides legal 
advice and mediation services to copyright owners who believe their 
rights have been infringed.  The Mexican Customs Service (Aduana 
Mxico) plays a key role in ensuring that illegal goods do not cross 
Mexico's borders. 
 
¶40. Despite strengthened enforcement efforts by Mexico's federal 
authorities over the past several years, weak penalties and other 
obstacles to effective IPR protection have failed to deter the 
rampant piracy and counterfeiting found throughout the country.  The 
U.S. Government continues to work with its Mexican counterparts to 
improve the business climate for owners of intellectual property. 
 
¶41. Mexico is a signatory of at least fifteen international 
treaties, including the Paris Convention for the Protection of 
Industrial Property, the NAFTA, and the WTO Agreement on 
Trade-related Aspects of Intellectual Property Rights.  Though 
Mexico signed the Patent Cooperation Treaty in Geneva, Switzerland 
in 1994, which allows for simplified patent registration procedure 
when applying for patents in more than one country at the same time, 
it is necessary to register any patent or trademark in Mexico in 
order to claim an exclusive right to any given product.  A prior 
registration in the United States does not guarantee its exclusivity 
and proper use in Mexico, but serves merely as support for the 
authenticity of any claim you might make, should you take legal 
action in Mexico. 
 
¶42. An English-language overview of Mexico's IPR regime can be found 
on the WIPO website at: http://www.wipo.int/about-ip/ 
en/ipworldwide/pdf/mx.pdf. 
 
¶43. Although a firm or individual may apply directly, most foreign 
firms hire local law firms specializing in intellectual property. 
The U.S. Embassy's Commercial Section maintains a list of such law 
firms in Mexico at: http://www.buyusa.gov/mexico/en/business_ 
service_providers.html. 
 
Transparency of Regulatory System 
--------------------------------- 
 
¶44. The Federal Commission on Regulatory Improvement (COFEMER) under 
the management of the Secretariat of Economy is the agency 
responsible for reducing the regulatory burden on business. The 
Mexican government has made progress in the last few years.  On a 
quarterly basis, these agencies must report to the Presidency on 
progress achieved toward Presidential goals for reducing the 
regulatory burden. In December 2006, President Calderon replaced the 
Regulatory Moratorium Agreement, issued by the previous 
administration to ensure agencies streamline their regulatory 
promulgation processes, with the Quality Regulatory Agreement.   The 
new agreement intends to allow the creation of new regulations only 
 
MEXICO 00000160  008 OF 014 
 
 
when agencies prove that they are needed because of an emergency, 
because of the need to comply with international commitments, or 
because of obligations established by law. 
 
¶45. The federal law on administrative procedures has been a 
significant investment policy accomplishment. The law requires all 
regulatory agencies to prepare an impact statement for new 
regulations, which must include detailed information on the problem 
being addressed, the proposed solutions, the alternatives 
considered, and the quantitative and qualitative costs and benefits 
and any changes in the amount of paperwork businesses would face if 
a proposed regulation is to be implemented. Despite these measures, 
many difficulties remain. Foreign firms continue to list 
bureaucracy, slow government decision-making, lack of transparency, 
a heavy tax burden, and a rigid labor code among the principal 
negative factors inhibiting investment in Mexico.   The Mexican 
government, with the OECD, the private sector and several think 
tanks, is currently working to implement a project to streamline 
bureaucracy and procedures. 
 
¶46. The Secretariat of Public Administration has made considerable 
strides in improving transparency in government, including 
government contracting and involvement of the private sector in 
enhancing transparency and fighting corruption. The Mexican 
government has established several Internet sites to increase 
transparency of government processes and establish guidelines for 
the conduct of government officials. "Normateca" provides 
information on government regulations; "Compranet" allows for 
on-line federal government procurement; "Tramitanet" permits 
electronic processing of transactions within the bureaucracy thereby 
reducing the chances for bribes; and "Declaranet" allows for on-line 
filing of income taxes for federal employees. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶47. The Mexican banking sector has strengthened considerably since 
the 1994 Peso Crisis left it virtually insolvent. Since the crisis, 
Mexico has introduced reforms to buttress the banking system and to 
consolidate financial stability.  These reforms include creating a 
more favorable economic and regulatory environment to foster banking 
sector growth by reforming bankruptcy and lending laws, moving 
pension fund administration to the private sector, and raising the 
maximum foreign bank participation allowance.  The bankruptcy and 
lending reforms passed by Congress in 2000 and 2003 effectively made 
it easier for creditors to collect debts in cases of insolvency by 
creating Mexico's first effective legal framework for the granting 
of collateral.  Pension reform allows employees to choose their own 
pension plan.  Allowing banks or their holding companies to manage 
these funds provides additional capital to the banking sector, while 
the increased competition focuses fund managers on investment 
returns.  In December 2007, the Mexican Congress approved amendments 
to the Law of Credit Institutions (LIC) that include creating a new 
limited banking license and transferring power from Hacienda to the 
Banking and Securities Commission (CNBV), the primary banking 
regulator. 
 
¶48. The financial profile of the banking sector has improved due to 
the reduction in the problem assets brought about by write-offs, 
problem loan sales, and the conclusion of most debt-relief programs. 
 These developments, combined with more stringent capital 
requirements, have contributed to an improvement in the level and 
composition of capital across the banking system, particularly among 
the larger institutions. 
 
¶49. The banking sector remains highly concentrated, with a handful 
of large banks controlling a significant market share, and the 
remainder comprised of regional players and niche banks.  Hacienda 
has approved the opening of several new banks since 2006, including 
Wal-Mart Bank and Prudential Bank, but the sector's competitive 
dynamics and credit quality are still being driven by the six large 
banks-five of which are foreign owned.  The newcomers are mostly 
focused on the unbanked population (D, E market segments) and will 
present only limited competition to the group of old banks. 
 
¶50. Bank lending, especially consumer lending and mortgages, grew 
rapidly in 2005 and 2006, fueled by lower interest rates and 
historically low inflation.  Small- and medium-sized businesses 
still complain of a lack of access to credit, but government-owned 
development banks have expanded their lending to this sector. 
Despite the expansion, such lending remains low as a percentage of 
GDP.  Private banks argue that due diligence in lending to such 
business is difficult given the large amount of revenue they keep 
off the books to avoid increased tax liability. 
 
¶51. Commercial loans to established companies with well-documented 
 
MEXICO 00000160  009 OF 014 
 
 
accounts are available in Mexico, but many large companies utilize 
retained earnings to fund growth.  Supplier credit is the main 
source of financing for many businesses.  The largest companies are 
able to issue debt for their financing needs, tapping into a growing 
pool of pension funds looking for investment options.  Non-bank 
financing is generally available, however, only to large companies 
with strong credit ratings and important commercial ties with their 
suppliers -- i.e., companies that could easily procure bank 
financing. 
 
¶52. The Secretariat of Finance and Public Credit sets regulatory 
policy and oversees the CNBV.  Mexico's central bank, the Bank of 
Mexico (BOM), also has a regulatory role in addition to setting 
monetary policy.  The Institute for the Protection of Bank Savings 
(IPAB) handles deposit insurance. 
 
¶53. Reforms creating better regulation and supervision of financial 
intermediaries and fostering greater competition have helped 
strengthen the financial sector and capital markets.  These reforms, 
coupled with sound macroeconomic fundamentals, have created a 
positive environment for the financial sector and capital markets, 
which have responded accordingly. 
 
¶54. The implementation of NAFTA opened the Mexican financial 
services market to U.S. and Canadian firms.  Banking institutions 
from the U.S. and Canada have a strong market presence, holding 
approximately 70 percent of banking assets. Under NAFTA's national 
treatment guarantee, 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. 
 
¶55. Foreign entities may freely invest in government securities. 
The Foreign Investment Law establishes, as a general rule, that 
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 (Table I). 
Regarding restricted activities, foreign investors may also purchase 
non-voting shares through mutual funds, trusts, offshore funds, and 
American Depositary Receipts. They also have the right to buy 
directly limited or non-voting 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 a Mexican 
Development Bank.  Finally, state and local governments, and other 
entities such as water district authorities, now issue 
peso-denominated bonds to finance infrastructure projects. These 
securities are rated by international credit rating agencies.  This 
market is growing rapidly and represents an emerging opportunity for 
U.S. investors. 
 
Political Violence 
------------------ 
 
¶56. Potential investors should not find political violence a source 
of major concern.  Peaceful mass demonstrations are common in the 
larger metropolitan areas such as Mexico City, Guadalajara, and 
Monterrey.  Actual violence generally takes the form of local 
conflicts and inter-communal disputes and has occurred mostly in 
limited regions of Mexico's southern states.  Since the initial 
January 1994 uprising of the Zapatista National Liberation Army 
(EZLN) in the state of Chiapas, government forces and the EZLN have 
clashed only once, although Chiapas has also experienced unrelated 
local violence. The Popular Revolutionary Army (EPR) and the 
Revolutionary Army of the People's Insurgency (ERPI) emerged in June 
1996 and June 1998, respectively. They have carried out a number of 
small attacks, principally confined to the state of Guerrero. 
 
¶57. In November 2006, the EPR claimed responsibility for three 
explosions in Mexico City, one of which damaged a branch of Scotia 
Bank.  On two occasions in the summer of 2007, the EPR also claimed 
responsibility for bombings of PEMEX pipelines in the states of 
Guanajuato and Veracruz.  While no injuries were reported, there was 
extensive property damage and temporary disruption to flows of oil 
and natural gas along damaged pipelines, negatively impacting up to 
1000 businesses.  Economic losses were reported to be in the 
hundreds of millions of dollars. 
 
¶58. The last half of 2006 saw intense protests in the state of 
Oaxaca demanding, principally, the state governor's resignation. 
The capital city of Oaxaca was under siege by demonstrators for more 
than five months.  Businesses -- particularly those in the tourist 
sector -- reported millions of dollars in losses and many Western 
countries, including the United States, issued travel warnings 
advising their citizens to avoid the area.   At least 11 civilian 
deaths, including that of an American journalist, occurred as a 
direct result of the violence in Oaxaca and hundreds more were 
 
MEXICO 00000160  010 OF 014 
 
 
injured and/or arrested.   State police forces were accused of 
denying due process to protestors and using excessive force to 
break-up the demonstrations.  In response to the escalating 
violence, the federal government sent the sent the Federal 
Protective Police to restore order.  In 2008, Oaxaca remained calm 
for the most part and experienced only sporadic disturbances. 
 
¶59. CRIMINAL AND NARCOTICS VIOLENCE: While political violence has 
been relatively minimal, narcotics and organized criminal violence 
has spiked over the past three years.  As President Calderon 
continues a full-court press against the four major cartels 
operating in Mexico, kingpins have lashed back with violent acts 
unprecedented both in number and nature.  2008 set a new record for 
organized crime-related homicides with some 5,500 killings, more 
than double the previous record of approximately 2,500 reached in 
¶2007.  Violence has been endemic across the country, but 
particularly severe in cities bordering the United States.  48 
percent of all killings took place in Chihuahua and Baja California 
states and were concentrated in large urban areas, presenting new 
challenges to the Mexican military and law enforcement's efforts to 
control violence.  Cartel tactics evolved as well - victims were 
tortured or mutilated, and then left in public venues to intimidate 
others.  Institutions including major media outlets and a U.S. 
Consulate have been subject to unprecedented attack.  Moreover, 
frustrated traffickers have turned to kidnappings and extortion to 
compensate for increased pressure from the Mexican government, 
targeting those innocent of any involvement in narcotics 
trafficking. 
 
¶60. The United States is working with Mexico more closely than ever 
to combat organized crime and drug trafficking.  The Merida 
Initiative was signed into law in June 2008 and will provide an 
initial $400 million dollars for Mexico.  Funding in the first stage 
will provide, among other things, helicopters and surveillance 
aircraft, non-intrusive inspection equipment, technical advice and 
training to strengthen justice institutions to help bolster Mexico's 
interdiction, eradication, and administration of justice. 
 
¶61. Though not political in nature, the Embassy has noticed that 
general security concerns remain an issue for companies looking to 
invest in the country.  Many companies find it necessary to take 
extra precautions for the protection of their executives.  They also 
report increasing security costs for shipments of goods.  The 
Overseas Security Advisory Council (OSAC) monitors and reports on 
regional security for American businesses operating overseas. 
Eligible companies should become OSAC members.  OSAC constituency is 
available to any American-owned, not-for-profit organization, or any 
enterprise incorporated in the U.S. (parent company, not 
subsidiaries or divisions) doing business overseas 
(https://www.osac.gov/). 
 
¶62. The Department of State maintains a Travel Alert for U.S. 
citizens traveling and living in Mexico, available at: 
http://travel.state.gov/travel/ cis_pa_tw/pa/pa_3028.html. 
 
Corruption 
---------- 
 
¶63. Corruption has been pervasive in almost all levels of Mexican 
government and society. President Calderon has stated that his 
government intends to continue the fight against corruption and 
government agencies at the federal, state and municipal levels are 
engaged in anti-corruption efforts.  Aggressive investigations and 
operations have exposed corruption at the highest levels of 
government.  In 2008, Calderon launched "Operacion Limpieza," 
investigating and imprisoning alleged corrupt government officials 
in enforcement agencies.  The Secretariat of Public Administration 
has the lead on coordinating government anti-corruption policy. 
 
¶64. Other government entities, such as the Superior Audit Office of 
the Federation (ASF, the equivalent of the GAO), have been playing a 
role in promoting sound financial management and accountable and 
transparent government with limited success as most Mexican external 
audit institutions (mostly at the state level) lack the operational 
and budgetary independence to protect their actions from the 
political interests of the legislators they serve. 
 
¶65. Mexico ratified the OECD convention on combating bribery in May 
¶1999. The Mexican Congress passed legislation implementing the 
convention that same month. The legislation includes provisions 
making it a criminal offense to bribe foreign officials. A bribe to 
a foreign official cannot be deducted from Mexican taxes. Mexico is 
also a party to the OAS Convention against Corruption and has signed 
and ratified the United Nations Convention against Corruption. 
 
¶66. The government has enacted strict laws attacking corruption and 
 
MEXICO 00000160  011 OF 014 
 
 
bribery, with average penalties of five to ten years in prison.  A 
Federal Law for Transparency and Access to Public Government 
Information Act, the country's first freedom of information act, 
went into effect in June 2003 with the aim of increasing government 
accountability.  Mexico's 31 states have passed similar freedom of 
information legislation that mirrors the federal law and meets 
international standards in this field.  Five years after its 
passage, transparency in public administration at the federal level 
has noticeably improved, but access to information at the state and 
local level has been slow. 
 
¶67. Mexico is ranked 72nd in international NGO Transparency 
International's Corruption Perception Index for 2008, on par with 
China, India, and Brazil. The NGO's 2008 Bribe Payer's Index also 
named Mexican firms as some of the most likely to use bribes when 
doing business abroad.  Local civil society organizations focused on 
fighting corruption are still developing in Mexico. The USAID-funded 
Project Atlatl has worked to coordinate and promote anti-corruption 
activities with Mexican civil society (www.atlatl.com.mx) and other 
key players in the anticorruption arena, such as federal and state 
audit institutions. The Mexican branch of Transparency International 
also operates in Mexico. The best source of Mexican government 
information on anti-corruption initiatives is the Secretariat of 
Public Administration (www.funcionpublica.gob.mx). 
 
Bilateral Investment Agreements 
------------------------------- 
 
¶68. NAFTA governs U.S. and Canadian investment in Mexico. In 
addition to NAFTA, most of Mexico's eleven other free trade 
agreements (FTAs) cover investment protection, with a notable 
exception being the Mexico-European Union FTA. The network of 
Mexico's FTAs containing investment clauses encompasses the 
countries of Bolivia, Chile, Costa Rica, Colombia, El Salvador, 
Guatemala, Honduras, Japan, and Nicaragua. 
 
¶69. Mexico has enacted formal bilateral investment protection 
agreements with 24 countries: 14 European Union Countries (Austria, 
Belgium, Luxemburg, Denmark, Finland, France, Germany, Greece, 
Italy, Netherlands, Portugal, Spain, Sweden, United Kingdom), as 
well as Australia, Argentina, Cuba, Iceland, India, Panama, South 
Korea, Switzerland, Trinidad and Tobago, and Uruguay. Agreements 
with China, Belarus and Slovakia were signed in 2007 and 2008, but 
the Senate still has to ratify them. Mexico continues to negotiate 
bilateral investment treaties with Russia, Saudi Arabia, Malaysia, 
Singapore, and the Dominican Republic. 
 
¶70. The United States and Mexico have a bilateral tax treaty to 
avoid double taxation and prevent tax evasion. Important provisions 
of the treaty establish ceilings for Mexican withholding taxes on 
interest payments and U.S. withholding taxes on dividend payments. 
The implementation of the IETU on January 1, 2008 has led to 
questions as to whether the new tax meets the requirements of the 
bilateral tax treaty.  The U.S. Internal Revenue Service presently 
allows businesses to credit the IETU against their U.S. taxes. 
However, businesses should continue to monitor this issue. 
 
¶71. Mexico and the United States also have a tax information 
exchange agreement to assist the two countries in enforcing their 
tax laws. The Financial Information Exchange Agreement (FIEA) was 
enacted in 1995, pursuant to the Mutual Legal Assistance Treaty. The 
agreements cover information that may affect the determination, 
assessment, and collection of taxes, and investigation and 
prosecution of tax crimes. The FIEA permits the exchange of 
information with respect to large value or suspicious currency 
transactions to combat illegal activities, particularly money 
laundering. Mexico is a member of the financial action task force 
(FATF) of the OECD and has made progress in strengthening its 
financial system through specific anti-money-laundering legislation 
enacted in 2000 and 2004. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶72. In August of 2004, Mexico and the U.S. Overseas Private 
Investment Corporation (OPIC) finalized an agreement that enables 
OPIC to offer all its programs and services in the country.  Since 
then, OPIC has aggressively pursued potential investment projects in 
Mexico, and the country rapidly became one of the top destinations 
for projects with OPIC support.  As of September, 2008, OPIC was 
actively providing over $730 million in financing and political risk 
insurance support to 17 projects in Mexico. 
 
¶73. In addition, OPIC-supported funds are among the largest 
providers of private equity capital to emerging markets.  Since 
1994, OPIC has committed (as of FY2008) almost 3.2 billion USD in 
 
MEXICO 00000160  012 OF 014 
 
 
funding to 43 private equity funds.  The OPIC funds which are 
currently investing in Mexico include Alsis Latin America Fund, 
Darby-BBVA Latin America Private Equity Fund, Darby ProBanco II 
Fund, Latin Power Trust III, and Paladin Realty Latin America 
Investors II. For a more detailed description of these funds 
including fund contact information and investment strategy, please 
consult OPIC's website at www.opic.gov. 
 
Labor 
----- 
 
¶74. Mexico's Federal Labor Law, enacted in 1931 and revised in 1970, 
is based on article 123 of the Mexican constitution. Under the law, 
Mexican workers enjoy the rights to associate, collectively bargain, 
and strike.  The law sets a standard six-day workweek with one paid 
day off. For overtime, workers must be paid twice their normal rate 
and three times the hourly rate for overtime exceeding nine hours 
per week. Employees are entitled to most holidays, paid vacation 
(after one year of service), vacation bonuses, and an annual bonus 
equivalent to at least two weeks pay. Companies are also responsible 
for these additional costs.   These costs usually add about 30 to 35 
percent to the average employees' salary. Employers must also 
contribute a tax-deductible two percent of each employee's salary 
into an individual retirement account. Most employers are required 
to distribute ten percent of their pre-tax profits for profit 
sharing.  Speaking on behalf of the current administration, the 
Labor Secretary has repeatedly affirmed that labor reform is and 
remains one of the top priorities of President Calderon's 
government. 
 
¶75. There is a large surplus of labor in the formal economy, largely 
composed of low-skilled or unskilled workers. On the other hand, 
there is a shortage of technically skilled workers and engineers. 
Labor-management relations are uneven, depending upon the unions 
holding contracts and the industry concerned. Mexican manufacturing 
operations are experiencing stiff wage competition from Central 
America, China, India, and elsewhere in low technology work, such as 
textile and garment manufacture. 
 
¶76. For the past few years, with the possible exception of the 
mining industry, strikes have been limited and usually settled 
quickly.  Strikes that are more difficult will usually draw 
government mediators to help the settlement process.  Independent 
unions have been playing an increasingly significant role, 
particularly since the formation of the new Labor Federation 
(National Union of Workers) in November 1997.    Information on 
unions registered with federal labor authorities is supposed to be 
available to the public via Internet (www.stps.gob.mx), but this 
database is incomplete. 
 
Foreign Trade Zones/Free Ports 
------------------------------ 
 
¶77. In addition to the IMMEX programs that operate as quasi-free 
trade zones, in 2002 Mexico approved the operation of more 
traditional free trade zones (FTZ). Unlike the previous "bonded" 
areas that only allowed for warehousing of product for short 
periods, the new FTZ regime allows for manufacturing, repair, 
distribution, and sale of merchandise. There is no export 
requirement for companies operating within the zone to avail 
themselves of tax benefits. Regulatory guidance for the new regime 
is still being amended; therefore investors should consult a tax 
lawyer for detailed information. Most major ports in Mexico have 
bonded areas ("recinto fiscalizados") or customs agents ("recintos 
fiscal") within them. There are currently two approved FTZ's, both 
operating in San Luis Potosi. The first major plant in the FTZ is 
currently under construction. Several states have filed to convert 
their bonded areas into Free Trade Zones. 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
¶78. Foreign Direct Investment in Mexico (USD Million) 
2003  2004  2005  2006  2007 
Total FDI 
Inflow: 
18,249 25,578 24, 756 21,632 29, 046(G) 
New Investments 
7,070 14,003 11,823 5,332 13,011 
Earnings Reinvestment 
2,082 2,489 3,883 7,693 8,022 
Inter-company Investment 
7,094 7,082 7,045 6,602 6,006 
 
¶79. Foreign Direct Investment Realized in Mexico By Industrial 
Sector Destination (USD Million) 
 
MEXICO 00000160  013 OF 014 
 
 
2003  2004  2005  2006  2007 
Total FDI 
Inflow: 
18,249 25,578 24,756 21,632 29,046 
Agriculture 
12  22  10  22  132 
Extractive 
90  174  203  367  1,919 
Manufacturing 
7,594 13,127 11,934 9,785 12,020 
Electricity and Water 
326  202  202  (87)  164 
Construction 
81  389  280  357  1,732 
Retail 
1,453 1,268 2,805 579  1,453 
Transport and Communication 
2,198 1,658 2,869 633  800 
Financial Services 
2,910 5,737 1,605 5,340 6,606 
Others 
1,587 999  2,844 2,630 2,213 
 
¶80. Foreign Direct Investment Inflows Realized By Country/Economy of 
Origin (USD Million) 
2003  2004  2005  2006  2007  5yr Totals 
Total FDI Inflow: 
18,249 8,538 24,756 21,632 29,046 119,260 
United States 
9,120 8,538 11,595 12,958 11,276 53,487 
Spain 
2,857 7,854 2,126 1,462 5,182 19,481 
Holland 
711  3,340 2,437 2,695 4,318 13,501 
France 
532  226  364  118  203  1,443 
United Kingdom 
1,074 274  1,283 1,232 580  4,443 
Virgin Islands 
(6)  56  2,051 292  1,093 3,492 
Canada 
259  531  425  557  819  2,591 
Switzerland 
286  1,135 313  565  584  2,883 
Germany 
466  408  341  207  477  1,899 
Argentina 
3  10  541  22  22  598 
South Korea 
57  48  96  71  40  312 
Brazil 
19  48  49  50  21  187 
Taiwan 
10  10  24  22  8  74 
China 
26  12  5  4  8  55 
Japan 
122  370  119  (1460) 372  (487) 
Notes FDI Investment Charts: 
A) Sources: Inflow - Mexican Secretariat of Economy, Director 
General of Foreign Investment. 
B) Period: 2007 data (January through December) 
C) Data: Millions of U.S. Dollars (USD), unless noted. 
D) The Secretariat of Economy has recalculated values for past 
years. All values for past years are the most up to date data 
provided by the Secretariat of Economy. 
E) With the passage of the IMMEX law integrating Maquila and Pitex 
industries, "Maquiladora Investment in Fixed Assets" is no longer 
reported separately and is included in the category "Inter-company 
Investments". 
F) Yearly amounts may differ from 5 year totals due to rounding 
error. 
G) The total FDI inflow for 2006 and 2007 by type of investment is 
less than the total FDI in Mexico because it does not include an 
estimate that has been reported in the total FDI. 
 
¶81. FDI Inflow as a Percentage of GDP 
2003  2004  2005  2006  2007 
GDP 
639,100 683,500 767,700 840,000 893,000 
FDI Inflow 
16,589 22,777 20,960 19,212 27,000 
Percent of GDP 
2.6  3.3  2.7  2.3  3.0 
Notes on "FDI as a Percentage of GDP" chart: 
A) GDP figures are taken from the Mexican Statistics Agency, INEGI. 
 
MEXICO 00000160  014 OF 014 
 
 
Figures in millions of dollars at current market prices. 
 
¶82. U.S. FDI Flow and Stock in Mexico (USD Millions) 
2004  2005  2006  2007 
U.S. FDI Flow in Mexico 
8,435 9,596 8,777 8,815 
U.S. FDI Stock in Mexico 
63,384 73,687 83,219 91,663 
Notes U.S. FDI Flow and stock in Mexico chart: 
A) Source: U.S. Department of Commerce Bureau of Economic Analysis. 
 
¶83. Mexico FDI Flow and Stock in U.S. (USD Millions) 
2004  2005  2006  2007 
Mexico FDI Flow in U.S. 
(629) (19)  1886  63 
Mexico FDI Stock in U.S. 
7,592 3,595 5,332 5,954 
Notes U.S. FDI Flow and stock in Mexico chart: 
A) Source: U.S. Department of Commerce Bureau of Economic Analysis. 
 
¶84. In 2008 the U.S. and other nations' companies announced several 
large investments, including: 
 
A) Goldcorp (a Canadian mining company), USD 1.5 billion in 
Zacatecas 
B) General Motors, USD 900 million in Ramos Arizpe, Coahuila 
C) Ford, USD 3 billion in Cuautitlan, Chihuahua, and Guanajuato 
D) Bombardier, USD 250 million in Queretaro 
E) Q-Cells (a German photovoltaics company), USD 3.5 billion in 
Mexicali, Baja California 
F) Goodrich, USD 92.5 million for an aeroparts plant in Baja 
California 
 
¶85. Web Resources 
 
ProMexico: http://www.investinmexico.com.mx 
Federal Competition Commission: www.cfc.gob.mx 
National Infrastructure Plan: www.infraestructura.gob.mx 
Department of State Legal Advisory: www.state.gov/s/l 
Nacional Financiera Development Bank: www.nafin.com 
Sec. of Economy's IMMEX Program: http://www.economia.gob.mx/?P=2297 
WIPO: http://www.wipo.int/about-ip/ en/ipworldwide/pdf/mx.pdf 
Secretariat of Public Administration: www.sfp.gob.mx 
Overseas Private Investment Corporation: www.opic.gov 
 
BASSETT 
 
1/21/2009