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Prohibited and Restricted Economic Sectors for Foreign Investment in Mexico

From a practical standpoint of view, the Foreign Investment Law (FIL) expressly prohibits foreign investment in “ten” general economic sectors that are classified as “activities reserved to the Mexican State” or “activities reserved to Mexicans”.

Activities Reserved to the Mexican Government

Foreign investment cannot participate, directly or indirectly, in these economic sectors and, thus, foreign investors cannot hold ownership interests in an enterprise in these economic sectors or activities.

1. Nuclear power generation.
2. Radioactive minerals.
3. Telegraph and radiotelegraph services.
4. Postal service.
5. Banknotes issuance.
6. Coin issuance.
7. Control, supervision, and surveillance of ports, airports, and heliports.

Needless to say, the FIL also provides that exploration and extraction of oil (and other hydrocarbons), as well as the transmission and distribution of electricity, are reserved to the Mexican Government per the Constitution. However, foreign investment may participate in said economic sectors or activities provided that the relevant energy authority grants an authorization.

Activities Reserved to Mexicans:

Likewise, foreign investment cannot participate directly in the following economic sectors:

8. Domestic land transportation of passengers, tourists, and freight transport, while courier or packaging services are excluded.

9. Development banks.

10. Professional and technical services, such as public brokers, customs broker, pesticide services, medical services to Mexican enterprises, restrictions may also apply based on international reciprocity, among others.

Economic Sectors with Foreign Investment Restrictions in Mexico.

The FIL provides the following ownership interests limitations or caps to foreign investors in Mexican enterprises that may not be exceeded directly or indirectly in the following regulated activities:

Up to 10% participation limit or cap:

1.  Cooperative Production Enterprises.

Up to 49% participation limit or cap:

1. Manufacture and commercialization of explosives, firearms, cartridges, munitions, and fireworks, excluding the preparation of explosive mixtures for industrial and extractive activities.
2. Printing or publication of daily newspapers written primarily for a Mexican audience and distributed in the territory of Mexico.
3. Ownership of land shares of agricultural, livestock, or forestry purposes enterprises.
4. Coastal fishing, freshwater fishing, and fishing in the Exclusive Economic Zone, excluding aquaculture.
5. Mexican enterprise authorized to act as an integral port administrator.
6. Mexican enterprises engaged in the supply of piloting port services to vessels operating in inland navigation.
7. Mexican shipping enterprise or Mexican vessels which are engaged in the commercial exploitation of vessels for inland and cabotage navigation, excluding tourism cruises and exploitation of dredges and maritime devices for the construction, preservation, and operation of ports.
8. Supplying of fuel and lubricants to vessels, airplanes, and railway equipment.
9. Broadcasting (radio and free to air television). The 49% interest ownership cap shall apply according to the reciprocity existent with the country in which the investor or trader who ultimately controls the enterprise, directly or indirectly, is constituted.
10. Telecommunications concessionaire companies as provided by Articles 11 and 12 of the Federal Telecommunications law.
11. Enterprises that supplies a scheduled and non-scheduled domestic air transport service, a non-scheduled international air transport service in the modality of air taxi, or a specialty air service.

Regulated Activities that require a favorable resolution to have more than 49% ownership interests:

1. Supplying port services to vessels for inland navigation such as towing, mooring, and lighterage (or tendering).
2. Mexican enterprise engaged in high-seas navigation services and port towing services
3. Mexican enterprise that is a concessionaire or permissionaire of airfields for public service.
4. Pre-school, primary, secondary, high school, higher, and combined private educational services.
5. Legal Services
6. construction, operation, and exploitation of railroads deemed general means of communication, or in the supply of railway transportation public service.