In Mexico, the COPARMEX (the Management Confederation of Mexico) teamed up with consultants to produce a list of Mexican States based on their scores according to this Democracy Index. As you can see below, our fair state of Yucatan scored the highest out of Mexico’s 31 states, which we consider quite a distinction. Out of a total possible points of 10,000, Yucatan State scored 10,000… a perfect score. Hard to believe, but there it is in black and white.

Here’s the link to the entire listing: mexicovoices.blogspot.mx/2014/06/mexicos-states-ranked-by-level-of.html

By the way, you might want to bookmark this website. The website serves up daily translated articles from some of Mexico’s most respected magazines and newspapers, all on the subject of Mexican politics and economics. As expatriates living as guests in this country, most of us cannot get involved in the politics of Mexico. But because it IS now our country in many ways, it isn’t a bad idea to stay up on the latest events and trends. Unless you are very comfortable reading Spanish, this website can be helpful in that regard.

Back to Yucatan, the top of the list. We couldn’t be happier to see Yucatan at the top of this list, as it portends a continuing stable economic future for this part of the world. As always, Yucatan continues to be a good investment!

Until proposed amendments are ratified, we still have to set up the bank trust. But once the law changes, as a foreigner, you will be able to simply close down your existing fideicomiso and will no longer have any annual fee.

Here is a translation of an article published recently in the Diario de Yucatan:

* * * * *
On April 23, the full House of Representatives approved an initiative to reform Section I of Article 27 of the Constitution, which allows foreigners to purchase land housing exclusively for non-commercial purposes in a zone of one hundred kilometers along borders and fifty along the beaches.

PAN deputy from Yucatan, Raul Paz Alonzo, author of the initiative, together with the coordinator of the PRI representatives in the House, Manlio Fabio Beltrones, says that the document was referred to the Senate, which could approve it in brief, and now needs the approval of at least 17 state legislatures.

With these changes, says Paz Alonzo, foreigners (who he says are mainly retirees) will have legal certainty, allowing them to apply for mortgage loans in their home countries in order to acquire a second home in Mexico.

The American retiree market alone is worth $2,500 million pesos, says Paz Alonzo. He believes that Yucatan state will attract some of that market, leveraging the features of the Yucatan, such as climate, security, medical services and facilities such as golf courses, all of which are of great interest to retirees.

Also, explained the deputy, many of the Canadians who come to the Yucatan coast in winter will now be able to buy houses directly with bank loans in their own country. The same will be true for those who plan to open homes for the elderly on the Yucatan Peninsula or those who already have housing developments near the coast or within one hundred miles of the borders.

Under the new law, adds Paz Alonzo, selling Mexican properties in the United States will be easier and will put Yucatan on a par with Florida, increasing the Yucatan’s share with that large market of retirees.

Trusts At a Glance

Until these changes are made, foreigners are not allowed to own land in the “zone”; they can however buy the land through a fideicomiso. In this trust, the banks are listed as “owners” of the property purchased by foreigners.

High Costs

This situation has led to non-Mexicans, in their capacity as trustees, dealing with high costs of setting up trusts and paying registration fees, as well as fees for paperwork, appraisals, taxes, permits and more.

Objectives

Therefore, one of the objectives of the initiative is to eliminate the middleman, in this case real estate companies and banks.

According to the United Nations Conference on Trade and Development, UNCTAD, the total foreign investment in Mexico in 2010 reached a total of $19 billion dollars (USD). This placed Mexico at Number Six in the list of countries receiving direct foreign investment, ahead of places like Germany and the United Kingdom.

Canada, as it turns out, is one of the leading investors in Mexico. From the year 2000 until 2010, Canada accumulated a combined investment of $9.125 billion USD in Mexico. The leading Canadian corporation investing in Mexico is the mining company, Gold Corp, which invests in real estate for reasons different from most of our clients. Last year, Gold Corp was the leading foreign investment entity in Mexico, with a total 2010 investment of $1.5 billion USD.

Other Canadian companies that heavily invested in Mexico last year include Bombadier, which will be building its Learjet 85 near Queretaro and auto part maker Magna International, which is building a new plant in the state of San Luis Potosí.

According to the State Department website, Mexico’s total foreign investment in 2009 was $14.4 billion USD, showing us what effect the economic downturn has had on Mexico in terms of foreign investment (FDI was $24.7 billion in 2001). The United States was (and still is) the largest foreign investor in Mexico, with a 2009 figure set at $6.4 billion USD.  The Netherlands and Spain are also large investors, with the Netherlands investing $7 billion USD in the first half of 2009.

Of course, Foreign Direct Investment (FDI) in Mexico has increased dramatically since the North American Free Trade Agreement (NAFTA) started, bringing with it many questions about its effect on the Mexican economy and culture. What isn’t in question, however, is that the Mexican economy presents many opportunities for investment and for realizing substantial returns on that investment.

How does this apply to the individual looking to buy real estate in Mexico? Certainly, the more foreign corporations that invest in Mexico, the more there will be an influx of foreigners coming to look after those investments. In addition, the large corporate investments here speak to the inherent growth of Mexico as an economy. Mexico is a country full of young, upwardly mobile and acquisitive citizens… many of them getting degrees, good jobs, houses and cars that were not in the picture for their parents or grandparents. Anyone who lives here can attest to the consistent building and development that has been continuing, despite a slowdown that occurred from the worldwide economic downturn and from the swine flu scare.

The swine flu scare is now a thing of the past. The increasingly negative press coverage of violence in Mexico fails to discriminate or make comparisons to levels of violence in other countries, but truthfully that violence affects a very tiny percentage of areas and people in Mexico. And the economic downturn’s effects are definitely diminishing. The Mexican population and the attractiveness of Mexico as a tourist and retirement destination continues to grow and flourish… we think that means investing in Mexico is a good idea, now more than ever.

Latin America is quickly becoming the darling of investors of all kinds, as they cast their eyes around the planet, looking for the next area of rapid growth. The Economist magazine reports that the region has 15% of the world’s oil reserves, some of the largest stocks of minerals, 25% of the world’s arable land, much of it untilled, and 30% of its fresh water (from this article on a hotel industry website).

The article goes on to say that many Latin American countries are actively embracing globalization, led by Brazil and Mexico… those two countries alone account for 65% of Latin America’s GDP. The hotel industry article points out that Mexico alone has over 110 new large hotel projects breaking ground in 2011.

A trio of real estate investment researchers from Price Waterhouse Cooper (PwC) in New York and London also report that Brazil and Mexico are two emerging real estate markets with enormous potential. “Where the US has gone boom-bust and Canada offers only modest growth, Latin America’s story centres on the enormous potential of two emerging markets – Brazil and Mexico. Together they account for two-thirds of the region’s population and most of its growth dynamics.”

While acknowledging that investors have concerns about the violence associated with the Drug War in Mexico and the corruption associated with the politicians there as well, the triple benefits of a hard-working population, a growing middle class and an increasing demand for homes and consumer goods bodes well for the future of real estate in the country. Mexicans have not over-borrowed or over-built, like their American counterparts, so there is still a demand for capital and for development.

The violence issue is always painted with a large brush in the US and International media, but as we know and as has been acknowledged publicly, the Yucatan is one of the safest places to be in Mexico. Not only that, a recent article in USA Today states that the safety record of the Yucatan compares its 2009 murder rate with that of Wyoming and Montana:

“The state with the lowest murder rate is Yucatán, the Gulf of Mexico state known for its beaches and Mayan ruins. Its murder rate of 2 per 100,000 was comparable to Wyoming and Montana.”

The Price Waterhouse Cooper analysts quote a survey of more than 1,000 leading real estate experts, including investors, developers, property company representatives, lenders, brokers and consultants.

“There’s a large hole to fill, especially for construction loans. New laws allow domestic pension funds to invest in real estate and infrastructure, which could increase property market liquidity and demand for product. We’re seeing the chequebook at the end of the tunnel.”

Even though the downturn in the US economy has definitely hurt Mexico, there are some ways that it has helped as well. More US manufacturers have relocated to Mexico recently, helped by the downturn in the Mexican peso. Retail is definitely on the rise here, as members of that growing middle class strive to live just like their American counterparts (the ecological impact of this phenomenon is another discussion…). There is a huge population of Mexicans with disposable income who don’t have a TV in every room or a car for every driver, so the potential is tremendous. And of course a growing economy also means a growing demand for real estate.

In a recent interview, Carlos Slim, the richest man in the world, told the reporter that he will be focusing on two aspects of his holdings in the year to come: mining and real estate. Mexico’s stock market hit an all time high early in December of this year. These signs and more point to a growing real estate market in the next year, even if the United States’ economy does not significantly improve.