Commercial Real Estate in Mexico: Can I Buy It?

While the Mexican Constitution prevents investors from owning residential properties along coastal and border regions, parties seeking property for commercial purposes may directly own real estate within these areas. Mexico is more lenient on commercial real estate ownership because, according to some, foreign direct investment provides “the only reliable source of economic growth” for Mexico’s impoverished regions. For example, a retiree building a vacation beach house provides a minor stimulus to the local economy during the construction term. However, an investor establishing a maquiladora in Tijuana or a new residential subdivision in Ensenada provides substantially more foreign direct investment to the regional economy. Consequently, Mexican officials have reduced some direct land ownership hurdles for companies or individuals buying real estate in the coastal or border regions.

Perhaps the most important step in purchasing commercial property in Mexico is entering into the convenio (Calvo Clause) with the Secretaria de Relaciones Exteriores (SRE or Secretariat of Foreign Affairs). Stemming from Article 27, Paragraph I of the Mexican Constitution, the convenio requires that the individual or company agree “(1) to be considered as a Mexican national regarding the property in question; (2) [and] not to invoke the protection of his/her government with respect to such property; (3) under penalty of forfeiting to the government of Mexico the property object of the agreement if the agreement is violated.” The convenio remains quite controversial. Specifically, using the convenio for direct land ownership may prevent a foreign national from using his home government to remedy problems resulting from expropriation or title conflicts. Despite any unease this may cause in the investor, using the convenio is an essential element in establishing direct land ownership for non-residential purposes. As with the convenio, certain nuances exist when purchasing property in Mexico for investment purposes. While some of the investment procedures may be unfamiliar, even to the most experienced investor, the above mentioned concern is just one of the critical questions any potential investor should investigate and understand before purchasing real estate in Mexico.