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Thursday, September 20, 2012

Mexico is getting hungrier for overseas assets!

During the first semester of 2012, Mexicans’ direct investments abroad reached $11.5 billion.  This is a record amount!  In addition, it is the first time in the past 10 years that such amount exceeds the total amount of inbound direct investment. Here are the numbers:

First Semester of 2001
Money Going In: $8,718,110 million
Money Going Out: $319,640 million
First Semester of 2007
Money Going In: $16,835,900 million
Money Going Out: $5,083,960 million
First Semester of 2012
Money Going In: $9,621,680 million
Money Going Out: $11,498,900 million!
This has several meanings.  The first and most obvious one is that Mexicans have money to invest.  The second one is that they are hungry for overseas assets. And the third one, given the amount, is that the receiving country or countries need to take those investments seriously.
The initial legal factors that Mexicans investing abroad need to consider include, among others:
-          What type of entity to form?
-          Should it be a holding entity, a subsidiary, or an independent entity?
-          In which state should it be formed (e.g., Delaware v. California v. Nevada)?
-          Which provisions should be included in the operating documents?
-          Will the entity be owner managed or manager managed?
-          Will they have any fiduciary duties as managers?
-          Are there any immigration issues?
-          What are the tax consequences?
-          Is an exit strategy recommended?
-          What dispute resolution mechanism should they select?
To solve these and other questions and to remain compliant, Mexicans investing abroad should receive competent legal advice on how to do business abroad, preferably by a bilingual cross-border attorney who understands the nature of their business, their business culture, Mexican laws as well as the laws of the target country, all applicable international laws, and how all of these factors interact.  More importantly, the legal advisor should be someone with the ability to see – and understand – the big picture, as treating each country’s business independently may lead to inauspicious results.

Mauricio Leon de la Barra is an international law attorney licensed to practice law in Mexico and California, and has more than 15 years of experience representing clients in cross-border business and real estate transactions and litigation involving international, U.S. and Mexican laws