FDI: neutral investment in Mexico

Despite the existing restrictions in Mexico, foreigners may use the neutral investment mechanism to participate in activities reserved for Mexicans or invest in those activities and companies with limits (although in this case 100% neutral investment is not allowed).

Consequently, through the neutral investment mechanism, foreigners may participate in the capital stock of Mexican companies, without their investment being computed as foreign investment.

In this type of investment, foreigners obtain economic rights derived from their participation as investors (shares or equity).

However, they cannot participate in the decision making of the company, nor can they control it.

In addition, according to information from the World Trade Organization (WTO), authorization from the Ministry of Economy (SE) is required in order to benefit from the neutral investment mechanism; companies that operate in the banking sector or are listed on the stock exchange, in addition to authorization from the SE, require authorization from the National Banking and Securities Commission (CNBV).

Mexico’s investment regime is relatively open, although some exceptions and restrictions on FDI persist.

Certain activities, mainly in the energy and services sectors, are still reserved for the State or for Mexican legal entities and individuals, while in other sectors the percentage of FDI participation is limited (to 10, 25 or 49%) or majority FDI participation is conditioned to the authorization of the National Foreign Investment Commission (CNIE).

Neutral investment

Between 2017 and 2022, neither the maximum allowable FDI ceilings were modified, except for domestic air transport companies, nor the activities and companies in which they apply, according to the WTO.

Despite the restrictions, and in order to allow the capitalization of Mexican companies, Mexico continues to use the neutral investment mechanism whereby foreigners may invest in sectors reserved for Mexicans or beyond the maximum limits imposed on FDI, without the investment being considered as foreign. However, this mechanism confers limited rights to the foreign investor.

Aeronautics

Pursuant to the Foreign Investment Law, there is a 49% limit to the participation of foreign investment in air services in terms of article 7, paragraph «y», which refers to domestic scheduled and non-scheduled air transportation services, as well as international scheduled air transportation in the form of air cab.

These limits to the participation of foreign investment may not be exceeded directly, nor through trusts, agreements, social or statutory covenants, pyramid schemes, or any other mechanism that grants control or a greater participation than the one established, except for what is established in the fifth title of the Law that refers to neutral investment.

The activity carried out by concessionaire or permit holder companies of public service aerodromes, in terms of Article 8, section III of the Foreign Investment Law requires authorization from the CNIE to participate in a percentage greater than 49 percent.