"Mexico Business Opportunities
And Legal Framework"



Investment - General Considerations

POLITICAL SYSTEM

Mexico is a constitutional democracy under a federal system of government with separation of powers between the executive, legislative and judicial branches. The national territory is divided into 31 states and the Federal District. Each state has its own constitution, governor and legislative chamber. The chief governing official of the Federal District is appointed by the President.

The chief executive of the Federal Government is the President, who is elected for a six-year term. Under Mexico's Constitution, the President may not run for reelection.

The federal legislative branch is comprised of two chambers, the Chamber of Representatives and the Senate, with 500 and 128 members, respectively. The Representatives are elected for 3 year terms coinciding with the Presidential election and his mid-term. The Senators are elected for 6 year terms, one half coinciding with the Presidential election and the other half also at his mid-term.

The states have a Chamber of Representatives. Governors are elected for six years. The judicial system is composed of federal and local courts, each with its own jurisdiction.

On the political side, Mexico surprised the world by having the most transparent elections in its history in August, 1994, with the participation of 77.7% of the voting population. The PRI party (Partido Revolucionario Institucional) once again, after 65 years of continuous dominance, won the Presidency and 95 out of 128 senatorships, and 300 out of 500 representatives. The PRI candidate, Ernesto Zedillo, received 51% of the votes, comfortably outdistancing his closest rival, Diego Fernández of the PAN party (Partido de Acción Nacional) receiving 32% of the votes, and Cuauhtémoc Cárdenas of the PRD party (Partido de la Revolución Democrática) receiving 11% of the vote. For the first time the candidates held TV debates, outside observers participated in the election process, and an Electoral Commission was appointed composed of non-partisan citizens.

Further political reform is foreseen as a result of the greater participation of various civic organizations, and the population in general, demanding a separation between the dominant PRI party and the government, greater democratic selection of candidates including the presidential candidate, perfection of the electoral process, reform of campaign funding, equitable access to media and an independent relationship between Congress and the President. In conclusion, a full reform of the Mexican political system.




LEGAL SYSTEM

Mexico's legal system is based on the civil law system, originating in Roman Law, as further developed and evolved in continental Europe, and more recently influenced by Anglo Saxon law. The civil law system is based on "written law," that is, the codes or statutes that present the general principles governing broad areas of law. The judiciary in civil law countries such as Mexico, therefore, do not play the central role in interpreting and "making" the law as it does in common law jurisdictions.

All laws regulating commerce, investment and trade in Mexico are federal in nature and apply throughout the country to entities operating therein. The statutes or codes most relevant to firms doing business in Mexico are the Companies Law, the Civil Code, the Banking Law, the Competition Law, the Foreign Investment Law, the Labor Law, the Commercial Code, and tax laws, mainly the Income Tax Law and the Value Added Tax Law.




ECONOMIC SYSTEM

The Mexican Constitution governs many aspects of the country's regulatory regime for economic development and foreign investment. Constitutional authority for the enactment and implementation of economic policy is shared between the Congress and the President. Article 73 of the Constitution authorizes the Congress to enact laws to encourage the promotion of Mexican investment and the regulation of foreign investment. Under Article 89, the President must ensure that the laws passed by Congress are faithfully executed.

The State is in charge of guiding national development and has the authority to plan and coordinate national economic activity. The Constitution provides that the public, private and social sectors will participate in the national economic development.

The Federal Congress is authorized to legislate on the national plan for economic and social development and the President is authorized to enforce laws and to establish the procedures of participation and consultation in national planning.

In past decades, the Mexican Government pursued an inward-looking, statist model of development characterized by pervasive import restrictions, strict regulation of foreign investment and a national economy dominated by government-owned or -operated enterprises with highly regulated private Mexican investments. By the mid-1980's, however, Mexico decided to change its economic model through a transformation of the existing a