Initiative for Constitutional Reform to Allow Foreigners to Acquire Residences in the Border and Coastal Zones of Mexico

On April 3, 2013, Federal Congresswoman Gloria Elizabeth Núñez Sánchez and Federal Congressman ManlioFabio Beltrones Rivera of the Institutional Revolutionary Party (PRI) submitted the initiative to Congress, alongwith the draft decree to amend section I of article 27 of the Constitution of the United Mexican States. Thisinitiative is the first attempt to reform the constitutional provision dating from 1917 which prohibits foreignersfrom directly acquiring ownership of real property located within the “restricted zone,” consisting of a strip ofland that covers 100 kilometers along Mexico’s land borders and 50 kilometers along the country’s coastlines.The initiative seeks to allow foreigners to acquire direct ownership of real property located within the restrictedzone, so long as the use is for residential purposes and not for commercial purposes. The initiative is based on,among other things, the following considerations: i) in 1917 the ban was justified primarily on the fear of thethreat of invasion by foreign troops, the same which as of today is believed to have disappeared; ii) the currentprohibition applies only to border and coastline areas given that for real property located within the interior of theRepublic, it suffices that the foreigners agree to consider themselves as Mexican nationals with respect to suchreal property in order to directly acquire ownership to such; iii) lifting the ban on ownership by foreigners willnot prejudice the sovereignty, territory or other legal rights protected by the Mexican State; iv) the ban has beenevaded and overcome by means of investing through trusts so that the Mexican trust is named as the direct ownerof the real property acquired by the foreigner who is the beneficiary under the trust; v) the trust structure requiresadditional costs and transactions that discourage investment opportunities offered by the global economy; and vi)removing the ban will ensure certainty in the legal protection demanded by foreign investors in Mexico. Subjectto the initiative’s goals of attracting more investment and generating greater economic development in certaincoastal areas of Mexico, it is expected that, either in House of Representatives or in the Senate, certain technicaladjustments will be made to, for example, define more precisely the concepts of residential and commercial use.