Foreign Direct Investment In Mexico (FDI) Essay Example

group is extremely interested in investment opportunities in Mexico. This is mainly the result of the possibilities generated by the North American Free Trade Agreement for the automotive and auto-parts industries.

President Vicente Fox mentioned that the Mexican people want an economy that generates the resources required to bring education and health care to more people, and increase the coverage of housing programs, electricity, drinking water and drainage networks to overcome backwardness and give Mexicans the chance to break the circle of poverty through their own efforts

Investors Legally Permitted

Foreign individuals or companies carrying out commerce activities in Mexico and Foreign Investors' offices established in the country.

Mexican Societies with foreign participation of any kind in DFI's.Trust Institutions participating in real estate trusteeships from which rights that favor foreign investors emerge.

Legal Framework

The Foreign Investment Law was published in the Federation's Official Gazette the 27th of December of 1993 and reformed by decrees published the 24th of December of 1998 and the 23rd of January of 19998.

The Foreign Investment and National Foreign Investment Records Office Regulations were published the 8th of September of 1998 and came into effect the 7th of September of the same year.

In the dispositions of such regulations it is established that foreign investments may participate in any proportion of the capital stock of Mexican societies, acquire fixed assets, enter new fields of economic activity or manufacture new lines of products, open and operate establishments and enlarge or move those already existing.

The Mexican Government defines the following activity groups specifically regulated:

•  State's exclusive activities.
• Mexican citizens'
  

exclusive activities.

State’s Exclusive Activities

Article 5 specifies the following strategic areas in which neither foreigners nor Mexican societies may participate, that is, these areas are exclusively for the Mexican government: Oil and other hydrocarbons basic petrochemical activities electricity nuclear energy generation radioactive minerals satellite communication mail services  rail roads bill issuing coining control  supervision and vigilance of ports telegraphs radiotelegraphy

Activities Exclusively Reserved for Mexican Citizens

Article mentions the societies and economic activities exclusively reserved to Mexican citizens or to Mexican societies (excluding foreigners):

• National terrestrial passenger transportation;
• tourism and load transportation, not including shipping services;
• retail sale of gasoline and liquefied gas distribution;
• radio broadcasting services and other radio and television services (except cable TV);
• credit unions;
• development banking institutions (under the terms of the applicable law);
• and the rendering of professional and technical services expressly established by current legal dispositions.

For no reason may the DFI directly participate in activities and societies mentioned by this article; nor even through trusteeships, agreements, social or statutory treaties, pyramidal schemes or through any other mechanism that gives them some kind of control or participation.

Areas Where Fdi Can Participate With an Established Percentage

Article details the following economic activities and societies in which DFI may participate with the following percentages:

• 10% and Up in Cooperative Production Societies.
• 25% and Up in National Air Transportation, aerial-taxi transportation and specialized Air Transportation.

National Foreign Investment Registry (Rnie)

The Commerce and Industrial Promotion Secretariat (SECOFI) is in charge of this registry which is under the direction of the Executive Secretary of the Foreign Investment National Commission.The RNIE is divided in three sections where persons, societies and trusteeships are to be subscribed, according to article 32 and which denominations are:

• First Section: Individuals and Foreign Corporations
• Second Section: Societies
• Third Sections: Trusteeships

Requirements to Enter the Rnie

A written application using the official format must be presented in original and two copies and the following documents must be annexed:

• Incorporation papers, contract or any other establishing documents;
• the statutes by means of which the corporation is governed;
• the legal representative's power of attorney given before a notary public and evidence of rights payment as established in the Federal Rights Law.

Whenever it is needed the applicant must obtain a favorable resolution from the Commission in order to participate in a given activity, such resolution must be previously negotiated and annexed to the application.All documents presented in a language different to Spanish must come with a translation made by an expert translator.

Sectors Where

the Foreign Direct Investment Is Directed To

• Manufacture Industry participates with 79.0%
• Transportation and Communications with 3.0%
• Financial Services with 2.9%
• Construction with 0.4%
• Extractive Industry with 0.3%
• Farming with 0.1%
• Electricity and water with 0.1%

Countries From Where the Foreign Direct Investment Comes From

Direct Foreign investments made in Mexico come mainly from the United States, Holland, Germany, Canada, Spain, the United Kingdom and Japan.

FDI has enabled Mexico to acquire new technologies, improve infra-structure, stimulate productivity, and increase competitiveness in world markets. Today, Mexico is a major producer and exporter of automobiles, TV sets and laptop computers.

More and more, foreign companies are participating in Mexico's development and have become a key element in Mexico's industrial transformation. Fresh capital has contributed the remaking of its industrial base, turning the country into what Business Week has called a new "industrial powerhouse."