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The intricacies of investing in Mexico

More and more Americans are snapping up what they see as bargains in Mexican real estate. While this investment activity often takes the form of a one-week-or-longer time-share acquisition in a resort development, it could also involve the takeover of a major investment property.

Time-sharing has become big business in popular resort areas in Mexico, especially since 1982. One-week time intervals are often priced from $6,000 to $ 8,000. While this form of real-estate development was once frowned upon by the Mexican government, it is now encouraged.

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The temptation to use strong American dollars to acquire Mexican real estate is often too great to resist. There are many opportunities south of the border, but pitfalls and limitations abound, too.

Last February, the Mexican government issued guidelines for the National Commission on Foreign Investment. While the new rules don't actually change Mexico's foreign-investment law, they do clarify certain situations in which the government will allow investments. The hotel industry is receiving special consideration from the government. Within the next three years, about 25,000 new hotel rooms are expected to be built, while many existing hotels will be remodeled.

Potential investors should be aware that only Mexicans may freely acquire real property, although foreigners may acquire real property under specific conditions.

The Mexican Constitution prohibits direct ownership by foreigners of property within 50 kilometers of the seacoast and 100 kilometers of Mexico's international land boundaries. But there is a legal provision that permits a foreigner to buy such property on a trust basis. Under that arrangement a bank is the trustee or actual title holder of the property.

A foreign buyer of this property would be the beneficiary of the trust. As such, he has all rights to use or sell the property, but would not be the owner of record. The bank can hold that title in trust for 30 years, and after that time there must be a transfer of title to a person or entity with the legal capacity to acquire it.

Foreigners may directly buy property in other parts of Mexico if they have immigrant status in the country. First they must obtain authorization from the Ministry of Foreign Affairs in Mexico City.

A condition of that authorization is that the buyer agrees before the ministry to consider himself as a national in respect to the property and not to invoke the protection of his own government in matters relating to the purchased property.

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It is a complex bag of rules and restrictions. If you are interested in buying a property unit or time-share period from a developer in Mexico, first verify the reputation and financial backing of the developer by contacting the Procuradura Federal del Consumidor in Mexico City.

Investing in any foreign country with unfamiliar customs and laws can seriously complicate the problems you may encounter. It's a good idea to consult with a competent real-estate agent and an attorney in that country before you buy.

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