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Viewing cable 08MEXICO96, MEXICO'S 2008 INVESTMENT CLIMATE STATEMENT -- PART

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Reference ID Created Released Classification Origin
08MEXICO96 2008-01-14 17:47 2011-08-25 00:00 UNCLASSIFIED Embassy Mexico
VZCZCXRO1757
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0096/01 0141747
ZNR UUUUU ZZH
P 141747Z JAN 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 0143
RUCPDOC/USDOC WASHDC PRIORITY
RUCPCIM/CIMS NTDB WASHDC PRIORITY
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
UNCLAS SECTION 01 OF 07 MEXICO 000096 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA AND WHA/MEX 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: OPIC KTDB USTR EINV MX
SUBJECT: MEXICO'S 2008 INVESTMENT CLIMATE STATEMENT -- PART 
1 OF 2 
 
REF: 07 SECSTATE 158802 
 
This part one of a two part cable that provides text for the 
2008 Mexico Investment Climate Statement. 
 
------------------------------ 
 
Openness to Foreign Investment 
 
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 efforts against organized crime, as well as 
successes in the reform agenda, have improved business 
confidence, underpinning increases in foreign investment. 
Mexico will have to continue this progress to regain 
competitiveness as a FDI destination, particularly for 
non-U.S. investors. 
 
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 electronic sectors have 
received the largest amounts of FDI. Historically, the United 
States has been the largest source of FDI in Mexico.  As of 
September, U.S. investors had provided 50.4 percent of 2007 
FDI. 
 
On June 13, 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 sectorial promotion plans, 
among other topics. 
 
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. 
 
Despite progress however, according to a World Bank study, it 
takes on average 27 days to complete all paperwork required 
to start a business in Mexico; compared to an average OECD 
figure of 15 days. The Embassy advises potential investors to 
contact ProMexico for detailed information on investing in 
Mexico. 
 
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. 
 
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. 
 
TABLE I 
 
MEXICO 00000096  002 OF 007 
 
 
 
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; 
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. 
 
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. 
 
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. 
 
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 
 
Energy 
------ 
 
The Mexican constitution reserves ownership of petroleum and 
other hydrocarbon reserves for the Mexican state. Oil and gas 
exploration and production efforts are 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 
 
MEXICO 00000096  003 OF 007 
 
 
(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, one LNG terminal 
has begun operation in Tamaulipas state, a second is under 
construction in Baja California, and CFE plans to build a 
third in Manzanillo, on Mexico's Pacific Coast. 
 
Finance Public Works Contracts (COPFs), formerly Multiple 
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. 
 
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 (America Movil 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. 
 
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. ; 
 
Telmex continues to dominate the market in Long Distance 
(local 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. 
 
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 
 
MEXICO 00000096  004 OF 007 
 
 
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. 
; 
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. 
 
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. 
 
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 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. 
 
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. 
 
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 
ΒΆ2007.  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.; 
 
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 
 
MEXICO 00000096  005 OF 007 
 
 
partnerships) and concessionary schemes.  The Office of the 
President provides an English language copy of the plan at: 
www.infraestructura.gob.mx. 
 
Conversion and Transfer Policies 
 
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 
 
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. 
 
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 
 
Chapter Eleven of NAFTA contains provisions designed to 
protect 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. 
 
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. 
 
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. 
 
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 
 
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 
 
MEXICO 00000096  006 OF 007 
 
 
cancellation of prior commitments. Foreign investors who 
failed to apply for the revocation of existing performance 
requirements remained subject to them. 
 
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. 
Investors should follow IETU developments closely. 
 
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. 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. 
 
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. 
 
There is a government-owned development bank, Nacional 
Financiera, S.A. (www.nafin.com), which 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). 
 
Mexico has two programs to stimulate manufactured exports - 
maquiladora and PITEX (Program for Temporary Imports to 
produce Exports) - that largely operate in the same manner. 
The first is focused 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.  Please refer to the Secretariat of Economy's 
IMMEX program website at: http://www.economia.gob.mx/ 
 
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 
 
MEXICO 00000096  007 OF 007 
 
 
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 
there are 22 PROSECs, 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 the last three years the Secretariat of Economy conducted, 
in partnership with the private sector, 12 studies, called 
"Programs for Sectoral Competitiveness", of the country's 
most important sectors according to their levels of exports, 
employment and FDI.  Studies covering the electronics, 
automotive, textile, maquiladora, leather and footwear, and 
software sectors are currently available at the website of 
the Secretary of Economy (http://www.economia.gob.mx/). 
 
Right to Private Ownership and Establishment 
 
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              Limited Liability Company 
(Sociedad Anonima)       (Sociedad de Responsibilidad 
                         Limitada) 
 
Can be up to 100         Can be up to 100 
percent foreign-owned.   percent foreign-owned. 
 
Must have a minimum of   Must have a minimum of 
50,000 Mexican pesos in  3,000 Mexican pesos in 
capital stock to start.  capital stock to start. 
 
Must have minimum of 2   Must have a minimum of 2 
shareholders, with no    partners to incorporate a 
maximum. Board of        corporation with limited 
Directors can run the    liability.  The partners 
administration of the    must manage the company. 
company. 
 
The enterprise has an    Exists only while there is a 
indefinite life          business purpose and partners 
span.                    remain the same. 
 
Free transferability     Restricted transferability of 
of stock ownership is    partnership shares.  Any changes 
permitted.               in the partnership composition 
                         may cause the partnership to be 
                         liquidated. 
 
Operational losses       If structured properly, it may 
incurred by the          offer tax advantages by 
Mexican entity or        allowing operational losses 
subsidiary may not be    incurred by the Mexican entity 
used by the U.S.         to be used by the U.S. parent 
parent company.          company. 
 
Limited liability to     Limited liability is afforded 
shareholders.            to the partners. 
 
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Text continued in part 2. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA