April 19, 2013

Initiative for Constitutional Reform to Allow Foreigners to Acquire Residences in the Border and Coastal Zones of Mexico

By Iker Dieguez

On April 3, 2013, Federal Congresswoman Gloria Elizabeth Núñez Sánchez and Federal Congressman Manlio
Fabio Beltrones Rivera of the Institutional Revolutionary Party (PRI) submitted the initiative to Congress, along
with the draft decree to amend section I of article 27 of the Constitution of the United Mexican States. This
initiative is the first attempt to reform the constitutional provision dating from 1917 which prohibits foreigners
from directly acquiring ownership of real property located within the “restricted zone,” consisting of a strip of
land that covers 100 kilometers along Mexico’s land borders and 50 kilometers along the country’s coastlines.
The initiative seeks to allow foreigners to acquire direct ownership of real property located within the restricted
zone, so long as the use is for residential purposes and not for commercial purposes. The initiative is based on,
among other things, the following considerations: i) in 1917 the ban was justified primarily on the fear of the
threat of invasion by foreign troops, the same which as of today is believed to have disappeared; ii) the current
prohibition applies only to border and coastline areas given that for real property located within the interior of the

Republic, it suffices that the foreigners agree to consider themselves as Mexican nationals with respect to such
real property in order to directly acquire ownership to such; iii) lifting the ban on ownership by foreigners will
not prejudice the sovereignty, territory or other legal rights protected by the Mexican State; iv) the ban has been
evaded and overcome by means of investing through trusts so that the Mexican trust is named as the direct owner
of the real property acquired by the foreigner who is the beneficiary under the trust; v) the trust structure requires
additional costs and transactions that discourage investment opportunities offered by the global economy; and vi)
removing the ban will ensure certainty in the legal protection demanded by foreign investors in Mexico. Subject
to the initiative’s goals of attracting more investment and generating greater economic development in certain
coastal areas of Mexico, it is expected that, either in House of Representatives or in the Senate, certain technical
adjustments will be made to, for example, define more precisely the concepts of residential and commercial use.