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Mexico: a major boom is in progess
MEXICO: A MAJOR BOOM IS IN PROGRESS
If the forces of migration and demography create
pockets of real estate opportunity in the United States
-- where property prices are in an overall decline --
imagine what they can do in other countries where the
overall economic outlook is far more favorable. One of
the areas of the world where this is the case is Latin
America.
Mexico has been called the South Korea of Latin
America. President Salinas' free-market reforms have
transformed the country from an economist's nightmare
into an economic powerhouse within a matter of years.
As a result of deregulation, privatization, and
tax-rate reduction, Mexican inflation and interest
rates have been falling steadily. For example, the
consumer price index inflation rate has fallen from 30%
in December 1990 to 17.3%. And in the midst of North
American recession in 1991-1992, real GDP growth still
pegged 3.8%.
The favorable economic climate and the pioneer
spirit of the new Mexico have attracted foreign
investors like never before. In 1991 alone, Mexico
enjoyed a foreign capital inflow of more than US$15
billion.
For real estate investors, Mexico not only offers
an unspoiled environment with thousands of miles of
beautiful beaches and tropical vegetation but also
boasts a cost of living that is substantially below
that of any Western industrialized country.
Many Mexicans who have been living in the U.S. for
decades are now investing their money in Mexican
properties and businesses. Investors also are moving
to Mexico, anticipating a real estate boom of epic
proportions. This boom will be fueled by two
demographic developments.
One involves new internal patterns of migration.
The majority of Mexico's middle class lost most of
their wealth during the early 1980s. This means that
today the workplace and the availability of work is the
determining factor of where a family will live or move.
Mexico's industry is still concentrated in densely
populated (and notoriously polluted) metropolitan
areas, such as Mexico City. However, President
Salinas' policy of economic decentralization and the
electronic revolution in the workplace are powerful
arguments for a new demographic trend whose force has
only begun to appear.
In the next 10 to 15 years, a migrational pattern
will unfold that will be very much like the U.S.
migration from the cities into the suburbs in the 1950s
and 1960s.
Young, prosperous Mexicans (like North America's
so-called yuppies) who are now employed in the cities,
will increasingly move to the surrounding rural areas.
This movement will follow the large traffic
arteries, such as the new highways currently being
constructed. An example of this trend will be the new
route between Mexico City and Acapulco.
Centers of suburban development will include areas
around Monterrey, Nuevo Leon, particularly in scenic
Ciudad Mt. Aleman. Cities in the vicinity of Mexico
City, such as Puebla, Jalapa, or Veracruz, will also
become focal points of the new trend.
Additional demand for Mexican real estate will
come from north of the border, as prosperous members of
the U.S. baby boom generation reach retirement age.
But not only foreign retirees will drive up
property values in scenic Mexico. Increasingly,
professionals will take advantage of the "electronic
commute" option. This implies relocating to a low-
cost, semirural environment while connecting to a
remote office through modems, interactive television
environments, and computers.
Westerners will head for unspoiled regions in Baja
California, where they will increasingly encounter
young Mexicans engaged in trade and commerce along the
California border. Particularly La Paz, currently a
small town of 20,000, will attract Mexican yuppies and
retiring boomers alike. The town has all the trappings
of a coming property magnet, including an excellent
hospital, a university, and unlimited access to the
maritime paradise of the Sea of Cortez.
Other ideal locations will be in the state of
Jalisco, near Lake Chapala, the country's largest lake.
Guadalajara and Ajijic in particular will attract sun-
hungry Americans with a taste for rural living with
quick access to modern amenities and entertainment. On
the Mexican High Plateau, San Miguel de Allende
provides a haven for seekers of arts and culture.
Article 27 of the 1917 Mexican Constitution
decrees that no foreigner may be registered as the
owner of real estate within the "forbidden zone." This
zone consists of a 30-mile-wide strip of land along the
Mexican coastlines and 50 miles along the U.S. and
Guatemala/Belize borders. Unfortunately, it includes
the favorite beach cities of North American and
European holiday takers, such as Puerto Vallerta,
Ixtapa, Acapulco, Cancun, and the entire Baja Peninsula.
From 1917 to 1972, the only way to hold property
in this zone was to put it in the name of a Mexican
citizen. This was risky business, as the gringo
investor was dependent entirely on the good will and
honesty of his Mexican business partner -- who could
take over the property legally at any time and kick his
ex- partner out of the country.
But U.S. tourist dollars soon became too important
for the Mexican economy. Mexico no longer could afford
scaring off potential real estate investors and
retirees by the prospects of fraud and legal hassles.
In 1972, The Ley de Fideicomiso, or Trust Law, was
established. The title to the land could now be held
by a Mexican bank for a foreign buyer who was then
named beneficiary under the trust.
Under this trust agreement, the beneficiary has
full control of the property for 30 years. Subject
only to local zoning laws, the foreign owner can build
on his property, modify it, and develop it. Commercial
use includes subdividing, renting, leasing, and even
selling at any time. This situation is nearly as good
as having direct ownership.
A variety of business opportunities are also
available in Mexico, and Mexican law has recently been
changed to allow foreign franchises to open. A number
of major shopping malls are under construction, so this
type of retailing is expected to boom. Tourism-related
franchises, in such fields as hotels and car rentals
are particularly likely to succeed, since this will be
the first time that names with world recognition can be
used in Mexico. A good starting point for information
on business opportunities and franchising in Mexico is
The Mexican Opportunities Report, available for $18
postpaid from Eden Press, P. O. Box 8410, Fountain
Valley CA 92728, or request their free catalog. The
report covers the nature of the Mexican market, foreign
investment regulations, tourism, franchise
opportunities, the maquiladora program, and specifics
about NAFTA.
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