From the beginning of the 18th century, foreign investments have formed part of the development of the economy of Mexico. Since the revolutionary movement of 1910, the investment of foreign capital has been regulated.

For the last 20 years, Mexico’s economy has undergone a difficult stage due to the fact that the country’s development has been based on the exploitation of its oil resources. To alleviate this dependence, and in the spirit of international cooperation, as of 1988, the Mexican authorities have established an open door trade policy, as well as that of constant participation in international trade forums. It is hoped that these measures will attract foreign capital, which will, in turn, enhance the development of the country.

Currently, the legislation on the subject (Law to Promote Mexican Investment and Regulate Foreign Investment and its respective regulations), limits the activities in which foreign investment is permitted, as well as restricts certain areas that, because of their importance to the country, are reserved for the state, or rather, for exploitation by Mexican nationals. These restrictions exclude the possibility of foreign investment.


There is no specific legislation in Mexico regulating the joint venture system. Nevertheless, in practice, this system has been developed and operates on the basis of the juxtaposition of legal forms.

The establishment, incorporation, functioning, and operation of a joint venture in Mexico basically is regulated by the general laws relating to corporations and contracts.

Based on the above, the mechanism for structuring a joint venture in Mexico may be effected by means of the following:

1. Joint Venture Agreement;

2. Incorporation of a company.

Before initiating a brief study of the foregoing mechanisms, it must be noted that Mexican legislation allows the foreign investor to establish an agency or subsidiary within the Mexican Republic and, theoretically, the investor may operate and engage in trade in Mexico through such an agency or subsidiary. In order to do so, the foreign corporation must meet certain requirements and register with the National Foreign Trade Commission and the Public Registry of Commerce corresponding to the location where the foreign corporation’s principal activities are to be carried out.

In practice, the bureaucratic procedures and steps necessary for the establishment of these agencies or subsidiaries are overly burdensome. The solution adopted by foreign investors to carry out their activities in the Mexican Republic has been to establish Mexican corporations that are 100 percent foreign owned. Generally, the establishment of foreign agencies and subsidiaries with operations in Mexico has been limited to companies with special characteristics, such as airlines.

Having said this, the following are the principal points of each of the aforesaid, mechanisms necessary to establish a joint venture in Mexico.



The General Law of Business Organizations was enacted in the year 1932, and continues in force to this date. It regulates the establishment, operation, functioning, and dissolution of business corporations in Mexico.

This law provides for the existence of different types of corporations under which the parties may organize themselves for conducting business. Such corporations are endowed with their own legal personality, distinct from that of the partners. There are six types of corporations under Mexican law: (1) a general partnership corporation; (2) a limited co-partnership corporation; (3) a joint stock company; (4) a limited liability company; (5) a cooperative corporation; and (6) a stock corporation.

Notwithstanding the diversity of corporations provided for in the aforementioned law, in practice, business enterprises in Mexico and, specifically, joint venture operations, have found the most favorable form to be the stock corporation. The capital stock of a stock corporation may consist of: (1) fixed capital; and (2) variable capital.

The stock corporation affords its partners the advantages of limited liability, whereby, their only obligation consists of complying with the capital contributions to which they have committed.


In order to establish a stock corporation pursuant to the General Law of Business Organizations currently in force in Mexico, the corporation must have at least two founding partners. The partners may be individuals or corporations, of Mexican or foreign nationality, and must strictly adhere at all times to the provisions set forth in the Law to Promote Mexican Investment and Regulate Foreign Investment.

In addition, the General Law of Business Organizations requires a minimum capitalization to constitute 50,000 new pesos, which presently represents approximately U.S. $8,000.

The legislation also requires that at the time of forming the corporation, the total number of shares representing the capital stock must be fully subscribed and at least 20 percent of the shares to be purchased with cash must have been paid. Those shares to be purchased with assets other than cash also must be fully paid.


The General Law of Business Organizations establishes two forms of incorporation for a stock corporation, either by private subscription or by public subscription.

Currently, the form commonly used is incorporation through private subscription, which will be subsequently analyzed. With respect to the system of public subscription, it is important to note that when the General Law of Business Organizations was enacted (1932), all that was required to form a corporation by public subscription was to deposit a copy of the incorporation program at the Public Registry of Commerce. However, due to the great limitations established in the Law to announce the sale of shares of stock corporations to the public, this system of incorporation fell into disuse in about 1940. The simple deposit of the announcement at the Public Registry of Commerce did not provide the necessary publicity to possible subscribers of the shares.

Today, a corporation may offer its shares to the public through its operations or by placing its shares with the Bolsa Mexicana de Valores S.A. de C.V. (the Mexican stock exchange), or with any foreign stock exchange. To make a public offering, a permit and authorization must be obtained from the National Securities Commission.

To establish a stock corporation through private subscription, the founding partners must appear simultaneously before a notary public to execute the articles of incorporation of the corporation.

The procedure to be followed for the incorporation of a stock corporation consists of the following steps:

1. Obtaining a permit from the Ministry of Foreign Affairs of the Republic of Mexico to establish the corporation. The Ministry of Foreign Affairs maintains a record of the names of all corporations and grants the permit as long as no other corporation exists with the same or a similar name. In accordance with the provisions contained in the Regulations of the Law to Promote Mexican Investment and Regulate Foreign Investment, this procedure is simple and allows the applicant to obtain the permit expeditiously, and within a very short period of time.

2. There must be at least two founding partners who must appear before a notary public to request and execute the notarial instrument, which establishes the existence of the corporation. At that time, the partners shall also establish the bylaws of the corporation, and the first administrators and representatives of the corporation must be appointed.

It should be pointed out that the registration system in Mexico is of a declaratory rather than constituent nature. Corporations are required to be registered for the benefit of third parties, with the purpose of making the existence of the corporation known publicly.

The law designates those corporations not registered with the Public Registry of Commerce as “irregular corporations.” They are, nonetheless, valid corporations and have a legal personality distinct from that of their partners when dealing with third parties. However, because they are not registered, sanctions may be imposed under certain conditions, for example, a classification of fraud may occur in the event of bankruptcy. Furthermore, administrators of irregular corporations are held jointly responsible for all acts of the corporation during its irregular status.


Pursuant to the provisions of the General Law for Business Organizations, the stockholders meetings will be the supreme body of the corporation, and the resolutions adopted at stockholders’ meetings in accordance with the law and the bylaws of the corporation are valid for all legal purposes, and binding upon all stockholders, including those who are absent or in disagreement, provided that at the time the resolutions are adopted, the shares necessary to constitute the quorums determined in the corporate bylaws, or Mexican Corporation Law, are fully represented.

Stockholder meetings may be: (1) general, where the shares of the corporation must be represented regardless of the series or class of said shares; or (2) special, where the decisions only affect the holders of a particular series or category of shares.

General meetings may be regular or special (known as Extraordinaries in Mexico); Regular meetings are those held to deal with matters of lesser importance, which may be approved by a small quorum. Special meetings are those called to deal with matters of greater importance and, therefore, approval of such matters requires a larger quorum. The General Law for Business Organizations lists the matters that may be dealt with at a special meeting, but does not limit the agenda. The stockholders may determine in the bylaws of the corporation that other matters considered of sufficient importance also may be dealt with at special stockholder meetings.


Stock corporations in Mexico, as established by law, may be administered by a sole administrator or entrusted to a board of directors. When the corporation is managed only by one individual, this person shall be the sole administrator. When the corporation is administered by two or more persons, they shall constitute a board of directors, which will act jointly at all times, by majority vote. The chairman of the board shall have the deciding vote in the event of a tie.

In accordance with the referenced law, such administrators, in any case, must be individuals who are obliged to discharge their duties personally, and never through a representative.

No limitation exists on the number of administrators who may be appointed in a stock corporation. Nevertheless, pursuant to the Foreign Investments legislation, the number of administrators should be proportionate to the administrators’ share of foreign investment in the capital stock.

Meetings of the board of directors are called by means of a notice, and are considered, legally convened when a majority of the members of the board of directors is present. Resolutions are only valid when adopted by a majority of the voters present.

Administrators are appointed at the regular general meeting of the stockholders. Minority shareholders that represent at least 25 percent of the capital stock shall have the right to appoint at least one member of the board of directors. When a stock corporation is public, this percentage decreases to 10 percent.

With respect to the administration of the joint venture corporation, it is common to incorporate super majority voting rights for protection of the minority stockholders. If the foreign investor represents the minority, or pursuant to the law on the subject, the activity is such that foreigners may not hold a majority interest, foreign investors or minority shareholders will be assured of equal protection of their interests.


The law establishes another necessary person involved in the operation of the stock corporation: one, or several, statutory auditors, who are entrusted with the financial surveillance of the corporation.

The statutory auditor of the corporation is appointed at the general meeting of stockholders. The minority stockholders, representing 25 percent of the capital stock, or 10 percent in the case of public corporations, have the right to appoint at least one statutory auditor.

The duties of the statutory auditor are to monitor the functions of the administrative body of the corporation. The statutory auditor has access to all company documents and submits a report at least once per year to the meeting of the stockholders with regard to the performance of the administrators and the veracity and sufficiency of the information presented by the administrators to the shareholders.


It is one of the responsibilities of the administrators of the corporation to prepare a report to the stockholders at least once per year containing the following information: the progress of the corporation; the policies being followed by the administrators; principal accounting policies and criteria; and a statement summarizing the corporation’s financial situation. This report must be submitted to the stockholders for consideration at the general meeting, which should be held at least once per year, within four months following the closing date of the fiscal year. It should be noted that the fiscal year of companies in Mexico begins on the first day of January, and concludes on the 31st day of December.

Medium-and large-sized companies are required to have audited financial statements performed once a year by the authorized public accountants of the corporation.


As noted previously, in Mexico, the law establishes the amount of 50,000 pesos as the minimum capital for the organization of a stock corporation. Corporate capital is represented by ownership of shares (shares need to be “nominative shares” as opposed to “bearer shares”), which serve to evidence the percentage of ownership of the partners. The legal nature of a share of stock is that of a credit instrument.

Every share of stock, except in special cases such as preferred stock, gives to their holders equal rights and obligations. Each of the shares confers one vote at the general stockholder meeting or at special meetings (called on a particular series).

There is no existing regulation to determine the par value of shares. The corporation may determine the value in relation to the total amount of capital. In calculating the par value of the shares for subsequent issues, the par value may not be less than that previously established. Also, the shares may be divided into different series, so as to specify the rights of the holders. In addition, the shares may be identified by classes, so as to identify shares being held by Mexican nationals from shares being held by foreign investors.


In Mexico, as in other countries, various means are available to obtain corporate funds. Set forth below is a brief description of those options, which to date can be considered the options most frequently used.

1. Capital Stock Increase. The contribution of additional funds by the stockholders. New shares may be issued to evidence the increase, in accordance with the provisions established in the bylaws of the corporation. In the event of an increase in the shares of capital stock, the stockholders have the right of first refusal to subscribe the new shares, in proportion to the stock already held.

2. Private issuance of shares. The corporation may declare a capital stock increase so that the shares issued may be placed with new shareholders privately, who may pay for them at par value or at an additional premium on the par value.

3. Public Sale of Stock. The corporation may obtain funds through the listing and sale in the stock exchange of shares issued as a result of a capital stock increase. For this purpose, the corporation must satisfy and comply with certain requirements, including obtaining the authorization of the National Securities Commission in order to make the public offering.

4. Public or Private Sale of Preferred Stock. The corporation may obtain funds by issuing (either publicly or privately) preferred stock with limited voting rights, and with a fixed, minimum dividend or interest guaranteed to its holders.

5. Borrowing with Bonds, Obligations, or other Credit Instruments. Corporations may place bonds, obligations, commercial paper, and other credit instruments on the stock market, on different terms and at varied interest rates, to be acquired by the public with the object of obtaining new funds or “fresh funds”.

6. Loans. Corporations may obtain loans or credits from individuals or other corporations, including banks and financial institutions.

When financing is provided through the participation of foreign investment in corporate capital, (when the foreign investor has a majority share in the capital stock of the corporation), the National Securities Commission has imposed several limitations on the source of the funds that make up the initial investment. The Commission places the obligation on the foreign investor, at least initially, to obtain the necessary funds for the project in a foreign country; in other words, the funds bought into Mexico must originate from abroad.



A non-corporate joint venture may be entered into by the parties in the form of an association in participation (asociaci??n en participaci??n), which is also regulated by the General Law of Business Organizations. It is entered by the parties by the use of a private written agreement. Such association has no legal personality and no corporate or trade name. In such an agreement, a person known as the associate party, or partner, provides the associating party, or co-partner, with goods or services that will enable the latter to engage in a business enterprise, in which the first partner will obtain an equity interest.

Although unusual, some joint ventures entered into in Mexico are organized as a partnership, particularly in those cases where the foreign investor is limited to a specific amount of capital and does not participate in handling and managing the business.

In accordance with the provisions established by law, the associate (asociado) partner has no legal relationship with third parties contracting with the associating partner (asociante).

The advantage of this system is that, from the business organization point of view, no formal organization is required. The agreement, in which the terms and conditions are stipulated, governs the rights and obligations of the parties. However, there must be full compliance with all aspects of the legislation relative to foreign investment.

This type of agreement may be entered into between individuals as well as between companies or corporate entities, in such a manner that the limitation of the liability in the case of said institution will depend on the form and terms under which the contracting parties are organized.


Understanding the Mexican tax system is a difficult and complex task due to the constant changes of the applicable tax codes. One of the major causes of change has been the fluctuation of the economic situation of the country during the last two decades. As a result, the Ministry of the Treasury annually submits bills to Congress for the amendment, addition, or modification of the respective tax codes in order to adapt the tax law to the economic situation of the country.

In accordance with the Political Constitution of the Republic of Mexico, there are areas in which the taxes are considered federal taxes, reserved for the federal government. Nevertheless, there are other taxes levied by each of the 32 states of the Republic. Therefore, in Mexico. there are federal as well as local and state taxes.

Furthermore, there are laws and agreements of fiscal coordination between the federal government and each of the states, so that federal taxes, their collection, administration, and distribution correspond to those of the states. Also, there are tax treaties entered into by Mexico and other countries.

1. Income Tax

Income tax is regulated in accordance with the Income Tax Law, by virtue of which the income earned by individuals or corporations residing in Mexico or non-residents in Mexico, but with a permanent establishment in the country, is taxed. The income earned in Mexico by such persons (both individuals and corporations residing in Mexico) is subject to tax regardless of the location of the source of idle income, such persons being subject to tax on income earned in any part of the world. In case of the non-residents, only the income attributable to the Mexican permanent establishment is taxed in Mexico.

Companies in Mexico must make provisional monthly payments on their income taxes, and submit an annual return for each corresponding fiscal year, on or before the end of March of the following year. In the case of individuals, whether carrying out business activities or not, the annual return for the fiscal year must be submitted on or before the end of April of the following year. The taxable income of companies includes all revenues earned during the fiscal year, either in cash, in goods, in services, in credit or other kind (inflationary gain). The taxpayers must pay taxes even on those earnings not actually collected, except individuals who render services, who pay taxes on income actually collected.

As a result of the inflation indexes that exist in Mexico, income known as “inflationary profit” is also considered revenue, such being earnings resulting from the decreased value of debts due to inflation.

Thus, the base of the tax is determined by subtracting authorized deductions from the gross income obtained by the company, which include expenses as well as the depreciation of investments in fixed assets.

Authorized deductions are not selected or determined freely, but are specifically regulated by law, with limitations. However, the general criteria is that all those deductible expenses must be strictly indispensable for the purpose of achieving the corporate objectives (i.e. no business lunch deductions).

In addition, due to inflation, there are some special rules on the deductions applicable to certain entries, for example, the total amount of stock purchases made during the fiscal year are totally deductible as expenses. Another specific regulation that applies to the subject of interest establishes interest collected as taxable, and interest paid, deductible, up to the limit of the actual rates (by removing the inflationary index occurring during the fiscal year).

Due to the new economic and fiscal policy being followed by the present government, tax rates have been decreased to such an extent that currently the only existing income tax rate is 34 percent, for individuals and corporations engaged in business activities.

With respect to dividends, once the corporation has paid the 34 percent tax, no further tax must be paid when the profits distributed to the stockholders originate from the net profits, that is, from what the law specifies as the “Net Fiscal Profits Account.” When the dividends to be distributed are not derived from the Net Fiscal Profits Account, or from operating profits, but instead originate from other types, basically inflationary earnings, corporations must withhold a 34% percent tax at the time the dividends are distributed.

In the case of foreigners who reside abroad without a permanent establishment in Mexico, the Income Tax Law contains a special chapter covering taxation when the source of income is located within the Mexican Republic. The amount of the tax rate varies and, normally, the income is taxed without any deductions but in some cases if the non-resident has a legal representative in Mexico, deductions are allowed. The tax, with respect to foreigners residing abroad, is withheld by the person or Mexican entity that is making the payment. Thus, for example, in the payment of royalties corresponding to the transfer of technology and the use of patents, the rate is 15 percent; when dealing with royalties for the use of trademarks, the rate is 35 percent; and the rate is 15 percent or 35 percent on interest, depending on whether it is paid to a financial institution or not, respectively.

As we have commented before, there are tax treaties between Mexico and other countries that provide for lower withholding rates.

2. Other Taxes

a. Value-Added Tax

There is an indirect tax in Mexico known as the value-added tax or sales tax. This tax has a general tax rate of 15 percent. However, articles considered basic commodities are subject to a zero percent tax rate (i.e. food or medicines). This tax is paid on a monthly basis-to the tax authorities. Finally, along the border and other specific zones the tax rate is 6 percent where the taxpayer has to transfer the tax he caused and is able to credit the amount of the value-added tax transferred against the VAT paid by its customers.

b. Asset Tax

There is a federal tax of 1.8 percent that companies must pay on total asset value owned during each fiscal year.

The Asset Tax was introduced in Mexico several years ago. Its principal purpose was to obligate all corporations and individuals carrying out business activities to pay a minimum tax, as there are cases where, because of fiscal losses, income tax is not paid.

This tax is paid on a monthly basis to the tax authorities. However, if income tax is being paid, it is credited against this tax in such a way that there is no additional tax burden on those companies, with a tax being calculated on income.

c. Real Estate Tax

In Mexico, there are two types of real estate taxes. The first is a transfer tax on the purchase of real estate, which is a local tax, with a tax rate of 2 percent on the value of the real estate to be acquired. In addition, there is another local tax in each of the states, corresponding to land holdings, known as property tax. The rate varies depending on the place where the real estate is located and the value of the real estate.

d. Manufacturing and Services Tax

This tax is a federal tax, which is applied to the sale and import of certain specific products, such as bottled water, beer, alcoholic beverages, cultivated tobacco products, oil-based products, etc., with a tax rate varying from 0 to 85 percent.


Foreign investment in Mexico traditionally has been regulated by the Mexican Constitution and federal laws. However, there are two main sources of Mexican legislation that compile most of the restrictions on foreign investment; the Foreign Investment Law of 1993 and the Regulations of the Foreign Investment Law of 1989. The main focus of this chapter is to highlight the restrictions currently imposed upon foreign investment by the above-mentioned regulations.

The FIL governs foreign investment in general, providing four categories in which foreigners may be restricted from participating in the capital stock of Mexican corporations. The FIL specifically addresses the ownership, acquisition of assets, and control of corporations engaged in specific activities.

The FIL created the Foreign Investment Commission (FIC), which is an inter-ministerial body in charge of the application of the FIL. Among its powers, the FIC is entitled to grant special authorizations and to set forth criteria for the interpretation of the FIL.

On December 27, 1993, the Mexican government issued a comprehensive revision of the law governing foreign investment in Mexico. The most important elements are set forth below.

Under the FIL, economic activities in Mexico are categorized as follows:

1. Activities reserved exclusively to the state;

2. Activities reserved to Mexicans;

3. Activities specifically identified in which foreign investment can participate only up to 10, 30 or 49 percent of the capital stock.

4. In all other activities not expressly mentioned in the regulations (the vast majority of economic activities) the foreign investor may participate up to 100 percent of the capital stock of Mexican corporations without requiring prior authorization from the FIC.

The Ministry of Commerce may authorize foreign investors to acquire beneficiary rights in trust of shares of corporations owning real estate located within the “restricted zone” (the strip of territory, 100 kilometers wide, that runs along the borders and the 50 kilometer-wide strip that runs along the country’s coast lines). Provided such corporations engage in industrial and/or tourist activities, the trust can be renewed at the expiration of its 50-year term.

Following is a list of the activities listed by the FIL on the acceptance of foreign investment in certain activities (this list has been updated to include the liberalization of some activities by later rules).

1. Activities Reserved to the State.

– extraction of petroleum and natural gas

– extraction and/or benefit of uranium and radioactive materials

– manufacture of basic petrochemical products

– petroleum refining

– treatment of uranium and nuclear fuels

– minting of coins

2. Activities Reserved to Mexican Nationals.

– Retail trade of combustible liquid gas

– Auto transportation of freight and passengers in general (excluding courier services)

– Credit unions

– Development banking

– Broadcasting of radio programs

– Broadcast and repetition of T.V. programs

– Customs agencies

3. Activities with a Specific Regulation that Allows 10% Foreign Ownership.

– Cooperative production associations

4. Activities with a Specific Regulation that Allows 25% Foreign Ownership.

– Air transportation in general

5. Activities with a Specific Regulation that Allows 30% Foreign Ownership.

– Holdings of financial groups

– Banks (non-affiliated entities)

– Investment banking

– Financial advisors, promoters, and commissioners

6. Activities with a Specific Regulation that Allows 49% Foreign Ownership.

– Insurance companies

– Surety companies

– Money exchange houses

– Bonded warehouses

– Financial leasing companies

– Factoring companies

– Limited scope financial corporations

– Shares of stock representing the fixed portion of the capital stock of mutual funds and management companies of mutual funds

– Manufacture and sale of explosives, firearms, cartridges, ammunition and fireworks, except for the purchase and use of explosives for industrial and mining and drilling activities, and manufacture of explosive mixtures for such activities

– Printing and publication of newspapers for circulation only within the country

– Series “T” shares of corporations or partnerships owning land for agricultural, cattle raising and forestry purposes

– Cable television

– Basic telephone services

– Fishing in fresh waters, coasts and in the exclusive economic zone, except for aquaculture

– Comprehensive port management services

– Port piloting services for vessels in inland navigation, as provided by the relevant statues

– Shipping companies engaged in the commercial exploitation of inland and coastal sailing (cabbotage) vessels, except for cruises, dredges and marine devices for port construction, preservation and operation

– Supplementary railroad services consisting of services for passengers, track maintenance and rehabilitation, sidetracking, repair shops for hauling and towing equipment, organization and marketing of unit trains, operation of cargo terminals and railroad telecommunications

– Supply of fuels and oils for vessels, aircraft and railroad equipment

7. Activities that Require Prior Authorization from the National Commission of Foreign Investments to exceed the 49% percentage of the Foreign Participation in Their Capital Stock

– Port services for vessels in inland navigation activities, such as towing, anchoring and lighterage

– Shipping corporations engaged in the exploitation of vessels for navigation in the high seas

– Management of air terminals

– Private services for kindergarten, elementary, secondary and high school education, colleges and combined services

– Legal services

– Credit information corporations

– Securities rating institutions

– Insurance brokers

– Cellular telephone services

– Oil and oil derivatives pipeline construction

– Oil and gas well drilling

The Regulation of the FIL also establishes that investments made by International Development entities will not be considered foreign investment, if the following conditions are met:

1. The financing entities must undertake before the Ministry of Commerce the obligation to dispose of the shares they acquire in corporations within a term not exceeding 20 years, from the date of acquisition; and

2. The entities must refrain from subordinating the acquisition of shares of corporations to an agreement or execution by the latter of restrictive agreements or clauses of any nature.

The Regulation of the FIL also provides that the Ministry of Commerce may authorize foreign investors to acquire ordinary certificates of participation issued by trust institutions in trusts when the equity is formed by shares representing the capital stock of corporations listed on the Mexican Stock Exchange, provided the shares under trust are “neutral” or “N” shares “neutral” or “N” shares entitle the holders to dividends but they are limited for voting or decision-making purposes).

Foreign negotiable instruments may be converted into or exchanged for series “N” or “neutral” shares with a special authorization from the Ministry of Commerce.


Industrial Property rights are ruled by the provisions of the current Law of Industrial Property. The law became effective as of June 28, 1991 when it was enacted under its former title, “Law to Promote and Protect Industrial Property”. This law was modified and reformed on October 1, 1994 under its current title, “Law of Industrial Property”.

One of the main objects of the law is to protect industrial property through the regulation and granting of patents of invention; registration of utility models, industrial designs, trademarks and commercial ads or slogans; publication of tradenames; declaration of protection to terms of origin; regulation of industrial secrets and the prevention of acts against industrial property or that constitute unfair competition, and to establish sanctions and penalties for such acts.

The administrative application and enforcement of the Law of Industrial Property is a part of the Executive Power executed through the Mexican Institute of Industrial Property, a decentralized entity with a legal personality and its own budget.

The Institute is administrated by its Governing Board and Director General. The Governing Board is presided over by the Secretary of Commerce and Industrial Development and consists of one designated member of said Secretariat; two designated representatives of the Secretary of Finance, and representatives of the Secretary of Foreign Affairs, Agriculture, Public Education and Health, as well as the National Council of Science and Technology and the National Center of Weights and Measures.

The General Director is the legal representative of the Institute and is nominated by the Federal Executive through the Secretary of Commerce and Industrial Development and appointed by the Governing Board.


Invention is deemed to be all human creation that permits transformation of matter or energy existing in nature for the advantage of humankind and to satisfy its concrete necessities.

Any individual (or his assignee) who formulates an invention has the exclusive right of exploiting it for his benefit, either by himself or by authorized third parties. Such exclusive right is granted by means of a patent.

Patents of invention are granted for a non-extendable twenty-year term, counted from the date of application.

Inventions that are new, the result of an inventive activity and susceptible of industrial application are patentable, except for:

a) Essentially biological processes for the production, reproduction and propagation of plants and animals.

b) Biologic and genetic material as found in nature.

c) Animal breeds.

d) The human body and the living parts that form it.

e) Vegetable species.

On the other hand, for the purpose of the Law of Industrial Property, the following are not considered inventions:

a) Scientific or theoretical principles.

b) Discoveries consisting of revealing or disclosing something that already existed in nature, even if previously unknown to man.

c) Schemes, plans, rules and methods to perform mental feats, games or businesses and mathematical methods.

d) Computer programs or software.

e) Forms of presentation of information.

f) Aesthetic creations and artistic or literary works.

g) The methods of surgical or therapeutic treatment or diagnosis applicable to the human body and those relating to animals.

h) The juxtaposition of known inventions or mixtures of known products, their variation of use, form, dimension or materials, unless there is actually a combination of such type that cannot function separately.

An invention will be deemed novel notwithstanding its disclosure, if the corresponding patent application is filed with the Mexican Institute of Industrial Property within the twelve months following such disclosure.


Utility models are considered goods, utensils, apparatuses or tools which, as a result of a modification of their disposition, configuration, structure or form, perform a different function with respect to the parts that compose them or present advantages as to their utility.

As in the case of inventions, any individual who formulates a utility model will have the exclusive right of exploiting it to his benefit, either by himself or by uthorized third parties. Such exclusive right will be granted by means of a registration.

Utility models are granted for a non-extendable ten-year term counted from the date of application.


Industrial designs are i) industrial drawings, which are all combination of figures, lines or colors that are incorporated in an industrial product for ornamental purposes and that give it a special aspect of its own; and ii) industrial models, constituted by every tri-dimensional form that serves as a sample or pattern for the manufacture of an industrial product, which give it a special appearance, insofar as it does not have technical effects.

The protection of the exclusive right of an industrial design is granted by means of a registration. Such registration is granted for a non-extendable fifteen-year term counted from the date of application.

As in the case of utility models, the prosecution of applications to register industrial designs is the same as that for patents of invention and will be subject to examination into novelty.


As of October 1, 1994, evidence of payment of the corresponding Government Fees for a patent, utility model registration, or industrial design registration must be provided with the application. According to the anticipated Tariff of Fees to be adopted by the Mexican Institute of Industrial Property, such payment will include a fee for the study of the application and the administrative and novelty examination thereof.


The Law of Industrial Property confirms the notion that in matters related to patents, parallel imports of patented products will not be accepted.

The Law of Industrial Property establishes that the exclusive right to exploit a patented invention grants to its titleholder the following prerogatives:

1. If the subject matter of the patent is a product, the right to stop other parties from the manufacture, use, sale, offer or import of the patented product, without consent; and

2. If the subject matter of the patent is a process, the right to prevent other parties from utilizing, offering, etc., such process without consent.


A mark is a visible sign that distinguishes a product or a service from others of the same kind or class in the market.

Visible names andlor figures, tri-dimensional forms, an individual’s own name, trade names and corporate names may constitute a mark.

The registration of a trademark grants the exclusive right of use to its titleholder in Mexico. Nevertheless, to commercialize a product or render a service, its registration is not obligatory.

The following cannot be registered as trademarks:

– Animated or changing denominations, figures or tri-dimensional forms expressed dynamically.

– Technical or commonly used names of products or services intended to be protected by a mark.

– Tri-dimensional forms of public domain.

– Marks that are descriptive of the products or services they distinguish.

– Isolated letters, numbers or colors.

– The translation into other languages, the capricious spelling variation or the artificial construction of unregistrable words.

– Heralds, flags or emblems of any country.

– Geographic denominations when they indicate the origin of products or services.

– Names, pseudonyms, signatures and pictures of persons without the consent of the interested parties.

– Titles of intellectual or artistic works.

– A mark that is identical or confusingly similar to another one already registered or in process of registration, applied to the same or similar products or services. NOTE: It may, however, be registered if the applicant is the same titleholder or applicant, or by consent of the holder.

– A mark that the Mexican Institute of Industrial Property considers a notoriously known mark in Mexico.

Trademarks are registered for ten-year periods counted from the date of application and renewable for additional ten-year periods.

The classification of goods and services in which trademarks are catalogued follows the Intemational Classification. Trade and service mark registrations will be granted for specific goods or services within the classes of such accepted classification.

Government fees to be paid with the pertinent trademark application will cover study of the application, registration and issuance of the corresponding title or certificate of registration. If registration is denied, no fees will be refunded.

Trademark applications claiming priority on the basis of a foreign application need not to prove reciprocal treatment in the country of ongin.

Trademark applications in process may be examined by any person and are no longer considered confidential matter.


The provisions that apply to trademarks are also applicable to commercial ads or slogans and trade names. Trade names are protected without the need for registration. The Mexican Law of Industrial Property recommends that trade names be published in the Gazette of Inventions and Trademarks.

Protection gained by publication of trade names will be for ten years from date of application and are renewable for ten-year periods.

Registration for commercial ads or slogans is granted for ten years from the date of application and renewable for ten-year periods.


The Mexican Law of Industrial Property regulates Industrial Secrets. The concept of Industrial Secrets in the Law of Industrial Property includes commercial application.

An industrial secret is all information having industrial application kept confidential by an individual or co~orate entity, which means obtaining or keeping a competitive or economic advantage over third parties in the course of economic activities.

Information will not be considered to be an industrial secret if the information is of public domain, with results obvious to a person with technical knowledge in the field, or which has to be disclosed under a legal provision or by court order.


Understood as an appellation of origin is the name of a geographic region of the country which is used to designate a product that originates there, and the quality or characteristics which are due exclusively to the geographic medium, which includes natural and human factors.

The protection granted to appellations of origin begins with a declaration issued by the Mexican Institute of Industrial Property for such purpose. The declaration of protection of an appellation of origin is made ex officio or at the request of a party shown to have a legal interest therein.


One important innovation in the Law of Industrial Property is the depenalization of certain actions formerly considered to be crimes in the area of patents, utility models, industrial designs, ads or slogans, commercial names, trademarks (except for the intentional counterfeiting thereof) and appellations of origin.

The law includes a catalogue or list of what constitutes administrative infringements, which covers violations against trademarks, patents, industrial designs, utility models, slogans and commercial names as well as acts of unfair competition.

Fines for administrative infringements are no less than 40% of the sales price to the public of each product or service that is deemed to be an administrative infringement.

The Law of Industrial Property considers to be criminal acts, the:

– Repeat of a conduct established to be an administrative infringement once the first sanction imposed for such conduct has become final.

– Falsification of trademarks intentionally and on a commercial scale.

– Revealing to a third party an industrial secret known by reason of work, position, post, professional activity, business relation or by virtue of the grant of a license for its use, without the consent of the person owning the industrial secret.

– Acquiring or obtaining an industrial secret without any right or consent from the person owning such industrial secret or its authorized user.

– Use of the information contained in an industrial secret, known by virtue of work, position, post, professional activity or business relation without the consent of the owner of the industrial secret or his authorized user.

The above criminal actions will be prosecuted pursuant to charges filed by the offended or affected party.

Repeat of actions deemed to be administrative infringements constitute a crime.

Repeat acts are considered to be each act of subsequent infringement of the same type camed out within the two years following the date on which the resolution declanng the existence of such infringement has been issued.


The reconsideration of an administrative resolution is only adopted in the case of resolutions that deny a patent of invention, utility model or industrial design


Intellectual Property rights or copyrights are ruled by provisions of the current Federal Law of Copyrights. This law has been in effect since December 31, 1956. Its main object is to protect authors’ rights with respect to their intellectual or artistic works and to safeguard Mexico’s culture.

The rights that the Copyright Law recognizes and protects in favor of authors with regard to their works are:

1. The right to be recognized as authors.

2. The right to oppose any deformation, mutilation or modification made to their works without their authorization, as well as any action that affects their reputation or their works.

3. The right to use or exploit their works by themselves or by authorized parties.

The nghts described in sections 1 and 2 are known as “moral” rights; they are perpetual, inalienable, imprescriptible and unrenouncable.

Patrimonial rights described in section 3 include the publication, reproduction, execution, representation, exhibition, adaption or any other public use of a work in benefit of its author. The duration of patrimonial rights are in force through the author’s life plus seventy five years and can be transferred by any legal means.

Copyright protection is granted to authors with respect to their works which characteristics may correspond to any of the following branches:

– Literary

– Scientific. technical or legal

– Pedagogical and didactical

– Musical

– Choreographical

– Pictorial or of drawing

– Sculptural

– Architectural

– Photographical, cinematographical, of radio and television

– Computer software

Copyright works obtain their protection automatically when they are created and materialized, without the need of registration.

Intellectual Property rights do not include the industrial utility of ideas contained in works; the employment of a work by its reproduction or representation in an actual event, only if it is employed without lucrative purposes; the publication of art or architectural works if they can be seen from a public place; the translation or reproduction of fragments of works with didactic or scientific ends; the photostatic, manuscript or photographic copy of a work for personal use; and the copy of computer software used as a backup.

The application and enforcement of the Federal Law of Copyrights is under the Executive Power and administrated by the General Directorship of Copyrights. Such office is in charge of the Public Register of Copyrights in which all kinds of artistic and intellectual works, including computer programs, are inscribed or registered.

The general public has free access to the documents inscribed in the Public Register of Copyrights, except for computer programs which access is only permitted with the authorization of the copyright holder or by judicial order.

Violations of most of the provisions described in the Copyright Law constitute a crime and give rise to economic sanctions.


The Federal Law of Copyrights grants protection to derivative works, such as adaptions, interpretations, translations, executions, etc., only to that part or parts which are original.



In joint venture agreements, the Mexican partner is generally the one responsible for arranging the use of labor in Mexico as part of its obligations under the agreement. Certain provisions are customarily negotiated into the agreement to shield the foreign partner from liability arising from labor laws.

Although the Mexican partner may be more familiar in dealing with the organization, management, and supervision of workers, whether unionized or in their individual capacity, the foreign partner may find it useful to understand the basic rights and obligations contemplated in the labor statutes.

A summary follows that will enable prospective investors to become acquainted with the labor environment in Mexico, potential liability, and an overall better assessment of the venture. Furthermore, since labor entails economic value, the partners need to make a valuation of the labor, in that it may be contributed to the joint venture. Also, correct management and organization of the employer-employee relationship will make the difference where labor is one of the driving forces in seeking a joint venture with a Mexican partner.

Finally, the lack of understanding as to compliance with workers’ regulation eventually may translate into tension between partners or legal problems with workers or government, which may hinder the prospects for a successful business relationship.


Workers may organize themselves into unions and federations of unions to protect their rights and obtain benefits from collective bargaining. A minimum of 20 workers is needed to form a union, provided that simple registration requirements have been met. Workers fired within 30 days prior to registration are counted for voting purposes. Employers’ recognition is irrelevant once the union has been organized. Workers’ affiliation with a union can neither be compelled nor prevented by employers.

Unions have, among others, the rights to (1) bargain collectively with the employer; (2) strike; (3) object to the tax return ~lled by the employer (for purposes of sharing in the profits); (4) monitor training; (5) demand enforcement of safety and occupational health standards; (6) agree with the employer on the internal working regulations; and (7) demand increase in wages should the workers believe the economic conditions have deteriorated.

A union may resort to strikes in order to (1) enforce, revise, or negotiate a, collective bargaining agreement, (2) bring support to an existing strike that has been declared legal; and (3) to enforce the employer’s obligation to share the profits with the workers.

The workers’ right to negotiate a collective bargaining agreement with the employers may be exercised by no less than three unionized workers. Therefore, where no collective bargaining agreement exists, at least three unionized workers may call for a strike.

The right to strike held by unionized workers entails not only suspension of virtually all labor activities, and the prohibition to employ replacement workers, but may even block access to the work place.

When a strike called by the workers is rendered legal by the courts, the employer must provide the strikers with back pay from the day the workers effectively went on strike until the day the strike is called off.

When the workers go on strike, any sale, assignment, or disposition of any assets by the employer could be voided by the courts. The employer is charged with a duty of care as trustee of the assets.

Any benefits obtained by the union through the negotiation of a collective bargaining agreement are applied to all non-unionized workers under the same employer.

When jobs are cut down due to adoption of new working systems or machinery, the employer must compensate the worker with three months’ worth of salary plus 20 days for each year that the employee has worked for the employer.


Individual workers have basic rights contemplated in the Ley Federal del Trabajo (Labor Statute). These rights have been provided as a floor to every Mexican worker and are granted by operation of law.

Organized labor, in their collective bargaining efforts with employers, have agreed upon the ceiling to workers’ rights and benefits above those already set forth by the law.

1. Minimum Wage

The minimum wage is the amount in cash that a worker is entitled to receive, generally on a weekly basis, as compensation for the work perforrned during a 40-hour work week. The minimum wage may be fixed generally, depending on various geographic zones comprising one or more states, or in accordance with economic activities or professional specialization. The minimum wage is not subject to discount, reductions, or the like and is exempted from any liens except for child support. Furtherrnore, rent payments up to 10 percent of the minimum wage, or installments payable to the trust of worker housing up to 20 percent, may be subject to discount with the worker’s previous consent.

Employers are subject to criminal prosecution if they pay workers less than the minimum wage.

2. Salaries

Salaries must be paid in cash or in a combination in kind and cash. The cash component could never be less than the minimum wage and is to be paid in legal tender. Payment must be made directly to the worker at the workplace. Any debts incurred by workers with employers are interest free.

Accrued wages, severance pay, and other compensation due to workers are preferential to any liability incurred by the employers. Moreover, all the assets of the employer, including personal property in some cases, are subject to liens in order to secure payments to workers. Furtherrnore, workers need not intervene in procedures where employers’ bankruptcy, insolvency, or succession is at stake. The labor courts are empowered to attach and sell the assets.

On the other hand, wages are not subject to liens or assessment other than liens levied by legal authority or deductions contemplated by law.

No fines, set-offs, or counterclaims may be assessed by the employer against the employee.

3. Hours of Work

Worker and employer may agree upon the hours to be worked during the week. A worker may not be required to work more than a maximum of 48 hours a week. Moreover, it is common to have a 40-hour work week in a number of business and industries, resulting from collective bargaining agreements or fixed voluntary concessions by employers. The CTM (Federation of Unions) has been pushing for a 40-hour work week. In practice, the work week averages from 42-43 hours and, generally, in the maquiladora, from 44-48 hours.

Employers cannot ask workers to work in excess of eight hours a day. Also, work at night cannot exceed seven hours, and both daytime and nighttime work together cannot exceed seven-and-a-half hours a day. In the case of hazardous jobs, the labor courts may reduce the number of working hours during the day.

4. Mandatory Rest and Overtime

Workers have a rest period of 30 minutes during the daily shift. Workers have at least one day of rest fully paid each week. Since a 40-hour work week is applicable to an increasing number of workers, they enjoy two days of rest with full pay during the week.

Overtime up to nine hours a week is paid at double-time; any time worked beyond this is paid at triple-time, including holidays and rest days.

5. Vacation

Seven paid official holidays plus one more every six years is the standard; six days of vacation after one year of work, eight days after two years; ten days after three years; 12 days after four years and so forth. Vacation days must be paid in full plus a 25 percent bonus. Workers must receive at least six continuous days of vacation.

6. Christmas Bonus

Every year during December, workers must be paid an amount equivalent to 15 work days on or before December 15.

7. Worker Participation in Gross Profits

Every year, workers are entitled to 10 percent of the gross profits (before taxes) of the business, but they are not required to contribute to any losses thereof. Half of the profits shared in by the employees are distributed among them according to the number of days effectively worked by each employee, and the other half pro-rata to their wages. Management is excluded from sharing in such profits.

8. Duration of Employer-Employee Relationship

Labor laws are broad enough to construe any relationship by which an individual personally renders a subordinated service to another for payment thereof as an employment relationship with inherent rights and obligations.

Labor laws warrant an indefinite duration of employment. Once the workers have been hired, they may hold on to their jobs indefinitely, provided they are not otherwise incapable of performing their jobs. The labor courts stringently construe exceptions to an indefinite term of employment in cases where specific types of jobs require temporary performance.

Employers may not terminate workers without a showing of good cause, specially contemplated in tlhe statutes. Furthermore, if the employer does not provide the worker with a 30-day termination notice stating the cause, the worker may sue the employer for unlawful termination of employment.

Unlawfully tenninated workers may choose reinstatement or, alternatively, severance pay of three months’ salary plus the equivalent amount of 20 workdays for each year of employment, regardless of any benefits already accrued. In either case, the workers are entitled to back pay from the date of termination to the date of reinstatement or adjustment.

Workers cannot be constrained by their employers to work for a fixed period of time. They also may terminate employment if the employer does not live up to the duties and obligations imposed by the law. Discrimination against workers is prohibited by law.

9. Special Obligations of the Employer

Employers are obliged to promote sport and cultural programs for workers, providing them with the necessary equipment and recreational facilities.

Employers must undertake the education expenses of at least three workers, if they have more than a thousand employees, or of one if they have less than a thousand employees.

Employers are required to provide training and specialization to the workers under the govemment’s inspection and supervision in accordance with the terms and conditions agreed upon between the employer and the workers.

Employers are required to comply with the regulations on health and safety standards in accordance with the nature of the jobs.

10. Housing

Employers must contribute to the provision of adequate housing for their employees. They are required to pay the equivalent amount of 5 percent of the total wages paid to their employees to the Workers’ Housing Trust Fund (Infonavit).

11. Pension Funds.

Employers must contribute to pension fund (Sistema de Ahorro para el Retiro) on behalf of each employee. Such contribution is calculated on the basis of 2% of the daily wage of the employee and must be deposited by the employer in individual banking accounts of each employee. The employee may withdraw such amount in the event of retirement or by his heirs in the event of death.

12. Work of Women

Women have the same rights and obligations as men except for special protection during pregnancy. Pregnant women can neither be required to work in jobs that otherwise may be unhealthy or hazardous to their condition, nor later than 10:00 p.m. Women have two six-week fully-paid maternity leave periods, each before and after birth. Women are given two half-hour periods to feed their babies, but in practice, employers tend to reduce by one hour the time worked by women.

Special regulations providing for adequate protection apply to certam types of jobs such as domestic service, federal public service, family workshops, hotels, restaurants and bars, actors, musicians, ship and airline crews, agricultural workers, railroad and motor transportation workers, confidential employees, salesmen, professional sportsmen, resident physicians, and workers employed by universities and colleges.

13. Labor Dispute Resolution

Unions, individual workers, and employers may resort to the labor courts when conflicts or disputes arise among them. The procedure applied by the courts is oral, gratuitous, and expedient.

At the preliminary stage of the jurisdictional labor proceeding, the court officials are required by law to encourage concealment among the parties involved in the dispute. Settlement is actively pursued as the best means of resolving a controversy.

Workers may represent themselves and need not be represented by counsel. However, the courts will broadly construe the complaints filed by workers or unions in contrast to that of the employer’s, which will be narrowly construed. Moreover, the court will fill in the information pertaining not only to the facts asserted in the workers’ complaint, but related to any matters of law or equity.

The employer always has the burden of proof, except for those assertions based on negative facts.

Note: The article above may not contain up-to-date information.

See also…

International Law Issues