The proposed amendment would subject certain acquisitions by foreign investors in Mexican companies to prior authorization when they may pose a risk or threat to national security.
The President of Mexico submitted to the Senate a proposed amendment to the Foreign Investment Law (the “FIL”) that would subject certain acquisitions by foreign investors in Mexican companies to prior authorization when such transactions may pose a risk or threat to national security. The initiative remains a legislative proposal and must still be discussed and approved by Congress.
If approved without substantial changes, an acquisition would require a favorable resolution from the National Foreign Investment Commission (the “CNIE”) when three conditions are met: (i) as a result of the transaction, foreign investment would seek to participate, directly or indirectly, in more than 49% of the capital stock of a Mexican company; (ii) the company’s total asset value exceeds the threshold to be established by the CNIE through a general resolution; and (iii) the company operates in one of the sectors subject to the new mechanism. If the 49% threshold is exceeded without exceeding the monetary threshold, the authorization request would be voluntary.
This new procedure would be independent from the authorizations currently contemplated under Articles 8 and 9 of the FIL, whose potential application would need to be analyzed separately.
The application would be jointly submitted by the Mexican target company and the foreign investor to the CNIE’s Technical Secretariat. The Commission could determine that the transaction is viable, authorize it subject to modifications or mitigation measures —including periodic reporting and verification mechanisms— or prevent it on national security grounds.
The initiative would also modify the composition of the CNIE. The heads of the Ministries of National Defense, Navy, and Security and Citizen Protection would become members. In addition, when national security matters are discussed, the heads of the Office of the Attorney General, the National Intelligence Center, the Tax Administration Service and the Financial Intelligence Unit would participate as permanent invitees, with the right to speak but not to vote.
The mechanism would apply when the Mexican company operates in one or more of the following economic sectors:
• Strategic physical or virtual infrastructure, including energy, transportation, healthcare, communications, mining, data processing or storage, digital systems, aerospace and defense activities, sensitive facilities and real estate indispensable to such infrastructure.
• Critical technologies and dual-use products, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace and defense technologies, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies.
• Supply of essential inputs, including energy, raw materials and food security.
• Access to or control of sensitive information, particularly personal data.
• Analogous sectors that the CNIE may determine through a general resolution.
The CNIE would have 60 business days from the filing of the application to issue its resolution, which could be extended once for up to 30 additional business days when justified by the complexity of the matter. During the first 20 business days, the Commission could request additional information, and applicants would have between five and 30 business days to respond. The review period would be suspended once and, if the request is not addressed, the filing would be dismissed. If the applicable period expires without a resolution, the application would be deemed denied; in other words, there would be no deemed approval.
The decree would enter into force on the day following its publication in the Federal Official Gazette, and the CNIE would have 180 calendar days to issue the general resolution establishing the applicable asset threshold.
The initiative would also amend the FIL’s sanctions regime by replacing references to “minimum wages” with multiples of the daily value of the Unit of Measurement and Update (“UMA”). The proposed sanctions would include:
• Acts or acquisitions requiring authorization carried out without obtaining it: 1,000 to 5,000 UMAs, equivalent to approximately MXN $117,310 to MXN $586,550.
• Foreign legal entities that regularly conduct commercial activities without authorization from the Ministry: 500 to 1,000 UMAs, equivalent to approximately MXN $58,655 to MXN $117,310.
• Neutral investment carried out in violation of the law: 100 to 300 UMAs, equivalent to approximately MXN $11,731 to MXN $35,193.
• Omissions, late filings or incomplete or inaccurate information in registrations, reports or notices to the Registry: 30 to 100 UMAs, equivalent to approximately MXN $3,519.30 to MXN $11,731.
• Simulation relating to the use or disposition of real estate in the restricted zone: up to the amount of the transaction.
• Transfer of equity interests despite a denial or without a prior favorable resolution: 5,000 to 200,000 UMAs, equivalent to approximately MXN $586,550 to MXN $23,462,000.
• Failure to comply with mitigation measures: 5,000 to 200,000 UMAs, equivalent to approximately MXN $586,550 to MXN $23,462,000.
• Other violations of the law: 100 to 1,000 UMAs, equivalent to approximately MXN $11,731 to MXN $117,310.
These approximate amounts were calculated using a daily UMA value of MXN $117.31 and are illustrative only, as the UMA value is updated annually based on the amount published by INEGI.
In addition to fines, the CNIE could prevent an acquisition or authorize it subject to ongoing reporting and verification obligations. Administrative sanctions would apply without prejudice to any civil or criminal liability that may arise, with potential criminal conduct referred to the competent authorities.
The initiative does not expressly provide for imprisonment, automatic nullity or mandatory divestment. However, its reference to civil or criminal liability that “may apply” leaves open the possibility of consequences under other applicable provisions, including, among others, simulation of legal acts, fraud or false statements made before an authority other than a judicial authority.
The breadth of concepts such as “risks or threats” to national security, “sensitive facilities” or the possibility of adding “analogous” sectors through a general resolution would give the CNIE broad discretion that may prove subjective and unpredictable. In practice, the invocation of national security could operate as a barrier to entry for legitimate investments.
In addition, the asset threshold remains to be determined, and administrative silence would result in a denial of the application. Accordingly, an administrative delay could block a transaction without a substantive decision. The initiative does not establish specific review or appeal mechanisms to ensure proportionality in the event of an adverse resolution beyond generally available remedies, which may add conditions precedent and regulatory uncertainty to transaction timelines and viability.
If approved, foreign investors and the Mexican companies involved would need to analyze, from the early stages of a transaction, the sector in which the target company operates, the percentage interest to be acquired and the value of its assets. CNIE authorization would need to be considered as a condition precedent to closing, with long-stop dates reflecting review periods of up to 90 business days —60 days plus a potential 30-day extension— as well as any suspensions resulting from requests for information.
Von Wobeser y Sierra will continue to monitor the progress of this initiative and is available to assess its potential impact on investments and transactions in Mexico, as well as to design compliance and risk-mitigation strategies.
