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04/05/2013

Buying land near Mexico's coasts

For nearly a century, foreigners have been holding deeds to land near Mexico’s borders or shoreline. The prohibition came as a result of fear of invasion by land or sea.

Over the past four decades, foreigners have indeed been able to obtain beachfront property but through a bureaucratic process in which they set up a Mexican bank trust. The bank actually holds the deed. Through the trust, the foreigners enjoy basically the same rights as Mexicans.

Now, change is in the air, and it could save money for thousands of American retirees and other foreigners who want to buy their piece of paradise in Mexico.

Two days ago, none other than Manlio Fabio Beltrones, put forth a proposal to amend article 27 of the Mexican constitution.

Beltrones is no ordinary politician. He’s a former governor of Sonora state, a former two-term congressman, a current senator, a perennial big shot of the Institutional Revolutionary Party and even a onetime presidential candidate.

Beltrones, presented the proposal along with another PRI deputy, Gloria Nunez Sanchez, and early signs are that members of the center-right National Action party may get behind it.

But first, a little more history: Mexico had legitimate fears of invasion back during the 1917 Revolution. So the constitution minted then included a blanket ban on foreigners owning land within 100 kilometers (62 miles) of any border or 50 kilometers (31 miles) of any shoreline. This website says the ban includes the entire Baja Peninsula.

Following a 1973 law that regulated creation of trusts, foreigners found a work-around. By paying around $2,000 for a permit and registration in the foreign investment registry, plus up to another $1,000 annually for bank trust administration fees, foreigners could buy land near the coasts and borders.

This has made quite a bit of money for banks.

In his proposal, Beltrones notes that fears of invasion are anachronistic.

“Hand to hand combat is no longer the way to settle disputes, thus the danger has disappeared of allowing foreigners to obtain property,” it says.

The trusts, the proposal notes, have confronted foreigners with “high costs of setting up trusts and fee payments for various registration procedures, assessments, taxes and permits prior to the government authority.”

Some Mexican realtors are already touting the proposed change, apparently eager to increase sales.

But any constitutional amendment is lengthy. Beltrones’s proposal has to be passed by both the Chamber of Deputies and the Senate, then approved by 17 state legislatures before it becomes law.

Moreover, the proposal would only affect those building housing with "no commercial objectives," and that a ban would remain on foreigners owning "direct dominion over the water." I'm not sure what that means. 

Anyone who knows more about the impact of this proposed change, please post below. Some readers would certainly be interested.

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Kevin

For those of us who current have a fideicomiso would love to see it go! Expensive to set up, expensive to make changes and it comes with a yearly fee. The Noteria's make the money and the banks collect a yearly fee.

As for the comment by ypochris about Mexicans affording Beach Front, most have been unable to for years. Being on the beach means hefty maintenance bills, paint, electrical, metal, concrete...all need to be repaired regularly in order to maintain the integrity of the building. Best to live off the beach away from the water and the storms.

Tim J

Good point, ypochris. Opening up shorelines to foreigners is not a democratizing measure. Will Russian tycoons park their money in Mexican coastal land?

ypochris

Although fears of a military invasion resulting from foreign beachfront ownership may no longer be applicable, there are other types of "invasions" which nust be considered. For example, in Hawai'i after the Japanese failed in their attempted military takeover, they simply came and bought up much of the state instead.

Allowing foreigners to own the choice land will not result in a loss of sovereignty over those lands, but it is certain that, just as few Hawaiians now own oceanfront land, very few Mexicans will be able to afford oceanfront if it is sold at the world market price.

Woooosh

A YouTube video about illegal building on the Rosarito Federal Zone:

http://www.youtube.com/watch?v=oCRflD9USro

Angela

That's really great news and it's about time!

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Tim

This blog is written by Tim Johnson, the Mexico bureau chief for McClatchy Newspapers.

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