Mexico not easing ownership rules anytime soon
September 27, 2008
Gail Swainson
REAL ESTATE REPORTER
Restrictive foreign ownership rules in coastal and border areas of Mexico are here to stay – at least for now – says that country's ambassador to Canada.
"Right now, we have a minority (federal) government in Mexico and we need a two-thirds majority to make changes," Emilio Goicoechea Luna said in an interview after a recent meeting with the Toronto Star's editorial board.
"Those changes are on the mind of everybody, but we have to wait for the right time," added Luna, who was appointed to the ambassador's post in March 2007.
Mexico's Consul General in Toronto, Carlos Pujalte, said later that such a major change to foreign ownership rules in the restricted zone won't come easily or quickly.
"The limits to acquire property in Mexico by foreigners are stated in the Political Constitution," and can only be changed through an Act of Congress and ratification by 50 per cent of the local congresses, Pujalte said.
Mexican nationals may currently purchase property in Canada free of restriction. But the rules for foreigners buying property within 100 kilometres of Mexico's borders or 50 kilometres of the coast require ownership to be held in a bank trust.
Although the trust affords all the same property rights and protections enjoyed by landowners in Canada – including the right to use, lease, profit, inherit, sell, and mortgage property – it is not the simple deeded ownership system familiar to Canadians.
Under a trust, called a fideicomiso, foreigners buying in the restricted zones are given clear, lien-free title to the property, which is held in a bank trust. The bank acts as the trustee designating the purchaser as the beneficiary of the trust.
One of the largest banks currently handling trusts in Mexico is Scotiabank Inverlat, the country's seventh-largest bank. It has two wholly-owned operating subsidiaries, both associated with Canada's Bank of Nova Scotia.
While perfectly safe and legal, the trust system has made many potential foreign buyers uneasy, sparking a push for change to the deed on title system used in Mexico.
The number of Canadians purchasing retirement or vacation homes in Mexico is growing every year and that is expected to continue as Baby Boomers hit retirement.
Currently, there are some 250,000 Canadians living in Mexico, according to figures provided by the Mexican Consulate in Toronto.
Many of them are clustered in the popular inland cities of Ajijic on Lake Chapala, Guadalajara, Oaxaca and San Miguel de Allende and the coastal cities of Merida and Cancun, on the Yucatan Peninsula, the consulate said.
HiFX, one of the largest providers of foreign exchange services, says that last year, more than 32 per cent of new homeowners in Mexico were Canadian.
Last year, 1.3 million Canadians visited Mexico, which is now the second-most popular destination for Canadians after the U.S.
In the last years, there has been a 15 to 20 per cent increase in Canadians visiting Mexico, which is ideal for retirees, with its tropical climate, affordable property prices and low cost of living, Luna says.
In fact, Canadians will find their buying power increases by as much as 50 per cent in Mexico.
An important step forward for Canadian retirees would be for Canadian government-sponsored health insurance plans to be accepted in Mexico, Luna said.
Toronto Star