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Tuesday, February 28, 2012

Investing in Mexican Real Estate: Outlook, Framework and Special Considerations (Part 2)

Purchasing Real Property - Legal Framework

A. Constitutional Limitations on Land Acquisition

Under Article 27, Section I, of the Mexican Constitution, all land is the property of the Nation, and legal capacity to acquire ownership of lands and waters from the Nation is limited to Mexicans by birth or naturalization and Mexican companies. The federal government, through the Ministry of Foreign Relations, may grant the same right to foreigners provided they agree to consider themselves as Mexican nationals with respect to such property and bind themselves not to invoke the protection of their governments in matters relating thereto. Noncompliance with such agreement would result in forfeiture of the property to the Nation. This “agreement,” commonly known as the Calvo Clause or Calvo Doctrine, is named after the Argentine diplomat and historian Carlos Calvo, who propounded it in his 1868 book “Derecho internacional teórico y práctico de Europa y América,” justifying it as necessary to protect the jurisdiction of weaker nations from those more powerful. Further, the Constitution of Mexico provides that “under no circumstances may foreigners acquire direct ownership of lands or waters within the ‘Restricted Zone’”, which is the area located one hundred kilometers along the international borders and fifty kilometers along the shores. (To be continued)