The Foreign Investment Act and its regulations (jointly, the FIA) constitute the main statutory framework governing foreign direct investments (FDI). In some specific instances, sectorial statutory frameworks (such as the Credit Institutions Act) or relevant permits, authorizations or concessions complement or supersede the provisions of the FIA.

Recent updates

There have not been any major changes to the FIA legal framework in 2022.

Who files

Under the FIA, FDI is generally allowed without prior authorization from any administrative agency, except with regard to legal entities that are:

1. Engaged in the activities described in Article 6 of the FIA (restricted investments) or
2. Engaged in the activities provided in Articles 7 and 8 of the FIA, or with assets valued in excess of the monetary threshold set forth in FIA's Article 9, in an amount in excess of the corresponding cap (capped foreign investments)

The scope of restricted and capped foreign investments are set out below.

Applications for prior authorization are generally submitted by the investor to the National Foreign Investment Commission (CNIE).

Types of deals reviewed

Restricted investments

Restricted investments entail the acquisition of a stake—in any amount—of the equity of Mexican companies engaged in land passenger and freight transport services within the Mexican territory or development banking.

Pursuant to the FIA, investments in such ventures are limited solely to Mexican nationals. Foreign investors are statutorily precluded from undertaking a restricted investment.

Capped foreign investments

Foreign investors cannot acquire more than a 10 percent capital stake in a Mexican cooperative production company, which is a special low-revenue company dedicated to a certain primary activity (such as fishing, artisanal products or agricultural production) with a preferential tax regime.

Foreign investors cannot acquire more than 49 percent of the capital stock of Mexican legal entities that are engaged in one of the following reserved activities:

• Manufacture and marketing of explosives, firearms, cartridges, ammunition and fireworks
• Printing and publication of newspapers for exclusive commercialization within the Mexican territory
• Ownership of agricultural, livestock and forest lands
• Fishing in freshwater, inshore and exclusive economic zones
• Integral port administration
• Piloting services in ports located within the Mexican territory
• Freight shipping within Mexican waters
• Ship, aircraft and rail equipment fuel and lubricant supply
• Broadcasting or
• Air transport services

The CNIE may still authorize any FDI entailing an acquisition of more than 49 percent of the capital stock of a Mexican legal entity engaged in:

• Maneuvering services in ports located within the Mexican territory
• Freight shipping via coastal and ocean navigation
• Aerodrome management or operation
• Education services
• Legal services
• Construction and/or operation of railways, as well as railroad transportation services or
• Holding assets with a book value that exceeds MXN 22.64 billion

Scope of the review

The CNIE has broad discretion whether to approve or deny an investment request.  Factors that the CNIE may take into account typically include the following:

• The investment's potential impact on the workers of the investment target entity
• Technological contributions to Mexico
•  The investment's potential contribution to the Mexican economy and
• National security concerns

Review process timeline

To obtain authorization from the CNIE, interested foreign investors are required to file a pre­investment control notice before the CNIE, attaching as exhibits a duly filled-in questionnaire issued by the CNIE; the financial and corporate documents of the interested foreign investors; a general description of its investment impact in terms of employment, technological contributions and competitiveness increase of the target company; or any other synergy that could derive therefrom; and evidence of payment of filing fees.

Once the pre-investment control notice is duly submitted, the CNIE has 45 business days to authorize the proposed investment. If the CNIE does not issue a decision within that period, the proposed investment will be deemed authorized according to the FIA.

The CNIE can deny an FDI request only for national security purposes. In such a case, the interested foreign investors may file an administrative appellate motion within 15 business days challenging the denial. If the motion is denied, they may file an amparo writ before a court within the following 15 business days challenging both resolutions.

Any FDI in connection with capped investments undertaken without the prior authorization from the CNIE will nullify all the legal acts executed to perform the investment. The CNIE can also fine the involved foreign investors up to MXN 434,400.

How foreign investors can protect themselves

Foreign investors may acquire a non-limited participation in the capital stake of companies engaged in capped activities without prior authorization if the investment is "neutral"—a preferred non-voting financial investment equity that is not characterized as an FDI under the FIA.

Although the FIA is the law generally applicable to FDI, foreign investments can be further limited or restricted by specific regulations or permits applicable to the target company. In any process involving the analysis of potential FDIs, investors should review the terms and conditions provided in the specific regulatory framework and in the permits, authorizations and/or concessions granted to the target company.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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