Mexican Investment Board

México, your partner for growth

Mexican Investment Board

Ecology

Overview

  • Mexico’s territory covers over 197.3 million hectares
  • 72% of the national territory corresponds to forests and rural areas.
  • It has a vast diversity of ecosystems and wildlife
  • It comes fourth amongst countries with the most significant megadiversity.

Advantages for Foreign Investors

Mexico offers unique investment opportunities in natural resources as well as pollution control and prevention for many reasons:

Its trade policy
Free trade agreements with the USA and Canada (NAFTA), as well as with Chile, Colombia and Venezuela (G-3), Bolivia, Costa Rica, Nicaragua and ongoing negotiations with the European Union.

Its modernization process
Regulatory changes that facilitate investment and allow greater private sector participation in the development of infrastructure.

Its geographical location
Mexico’s location has made it a strategic market, forming a cultural bridge between North and South America and neighboring the largest market in the world.

Its richness in natural resources
Favorable climates and geography plus a wide variety of natural resources.

Its global competitiveness
Low production and labor costs

Environmental Authorities

SEMARNAP
Ministry of the Environment, Natural Resources and Fisheries
Its mission is to slow down the deterioration of the environment, ecosystems and natural resources and to lay the foundations for an ecological restoration and recuperation process which will promote sustainable economic and social development in Mexico.

INE
National Ecology Institute
Its main objectives are to formulate an integral ecological policy; determine norms to ensure the conservation and restoration of the ecosystems which are fundamental to the development of hazardous waste management; protected natural areas management; conservation and the promotion of sustainable management of wild flora and fauna; scientific and technological research in order to improve the environmental management of natural resources.
http://www.ine.gob.mx

PROFEPA
Federal Attorney for Environmental Protection
Its mission is to oversee adherence to the norms regarding prevention and control of environmental pollution, natural resources, forests, rural areas, aquatic flora and fauna, the federal onshore coastal zone and protected natural areas. This agency also deals with complaints and accusations from the general public.
http://www.profepa.gob.mx

CNA
National Waters Commission
Its main objectives are to regulate the exploitation and management of water resources as well as distribution and the quality and quantity of the supply in order to achieve sustainable development.

Regulatory Changes

In order to increase economic activity, improve welfare and promote investments, the regulatory framework regarding exploitation of the environment and natural resources use has been modified as follows:

Article 27 of the Constitution
Permits greater security in land tenure
Makes it possible for peasant farmers to own, sell, rent, or mortgage their land,
As the legal owners of their land, peasants are now able to form partnerships with other producers
Allows forestry businesses to reach commercially competitive levels of production

Foreign Investment Law
Foreign investors can acquire real estate in Mexico
Allows free participation of foreign capital in certain activities previously protected
* Up to 49% investment permitted in industry related to forestry, fresh water fishing, coastal investments, exclusive economic zones, and most financial activities; and
* 10% foreign capital permitted in production cooperatives.

Forestry Law (1992)
Defines the property rights over forest resources in order to promote their protection, conservation and the sustainable development of commercial forest plantations
This has reduced red tape within the sector
Gives greater security to producers since procedures, storage and transportation are more strictly regulated.

National Waters Law (1992)

Provides a modern regulatory framework for water management.
Allows greater participation of the private sector in the water industry, mainly through concessions

Metrology and Normalization Law
Defines the process by which laws and regulations are enacted, reducing discretional decisions.

SECTORS

Water

Overview:
Water supplies now reach 84% of the country’s population while 67% has access to sewage facilities
Only 16% of waste water is adequately treated

Investment Opportunities:
Between 1997-2000, investment in the water sector will be close to US$7 billion
42% invested in water services
25% invested in sewage facilities
33% in treatment projects
Other opportunities are found in:

Irrigation projects
Requirements are estimated at US$2.5 billion for the 1997-2000 period; including rehabilitation of 800,000 hectares out of the total surface area of 6.2 million, as well as the integration of 104,000 additional hectares.
Legislation
The National Water Law enacted in December 1992, allows for a greater percentage of private sector participation in the provision and operation of services. The decentralization process has granted municipalities the autonomy to supply water services through local water organizations called water operating organisms.

Examples of private sector participation:

  • In Cancun and Aguascalientes, concessions have been granted to the private sector for the provision of water services
  • In Mexico City, four multi-stage service contracts were granted whereby the city was divided into four zones and concessions were granted to four different groups. These groups comprise joint-ventures between Mexican and foreign companies, which include the following:

* Compagnie Générale des Eaux and Lyonnaise des Eaux Dumez (France)
* Severn Trent and Northwest Water International Ltd. (England)

Water Treatment Plants:
The law requires that majority ownership of a company participating in this sector must be Mexican.
To date, 43 concessions have been granted for water treatment plants, 7 of which are in operation and the others are in various stages of development.

Eco-Tourism

Nature tourism that benefits conservation

Mexico has:

  • More than 10,000 km of coasts
  • More than 45 different ecosystems
  • Almost all existing climates in the world, except for extremes
  • It comes fourth amongst countries with the most significant megadiversity.

Potential
Nature tourism is growing at a rate of 15% compared to the 3% annual growth rate of the travel industry in general.
Eco-Tourism projects have been developed in Natural Protected Areas (ANP) mainly in the state of Quintana Roo, they include:

  • Coba-Punta Lagoon
  • Punta Nizuc
  • Isla Cozumel
  • Isla Contoy
  • Sian Ka´an

Investment Opportunities and Benefits

  • The SINAP (National System for Protected Natural Areas) has 99 Protected Natural Areas that account for over 5.94% of the national land
  • More than 10,000 km of coastline on the Pacific and Atlantic Oceans
  • Properly developed, this sites can support increased levels of visitation, for example, Sian Ka´an, a 1.2 million acre park, currently attracts only 400 visitors per year.

Other benefits from nature tourism include:

  • Cultural exchange
  • The building of a virtuous cycle between conservation and development through employment and income; financing the management of natural areas and working in the interest of the ecosystem´s protection.

Forestry

Overview
Mexico has:

  • 12 million hectares with potential commercial use
  • Forest and rural land totaling 56 million hectares, which represents 25% of the national territory
  • Forest plantations may have internal rates of return of up to 29% (according to a study published by the World Bank*)

Commercial Plantations
In order to achieve the goal of 450,000 hectares of commercial plantations, the estimated investment required is approximately US$500 million.
Some ongoing projects are:

  • Pulsars Forest Development Program in which 1,000 hectares of eucalyptus has been planted in Tabasco.
  • Pimsa has planted 180 hectares in Chihuahua.
  • Since 1995, “Planfosur Simpson”, and American Company, has planted 8,500 hectares of eucalyptus in Tabasco and Veracruz.
  • “Smurfit”, an Irish Company, has planted 350 hectares of Melina in Campeche.

Regulatory and Institutional Framework

  • Ley General del Equilibrio Ecológico y la Protección al Ambiente
    – General Law for Environmental Protection and Ecological Balance – (LEGEEPA)

Forestry Law:

  • Authorities will only grant permits for sustainable forestry exploitation to legal land owners
  • Authorities will promote the creation of corporations for sustainable forest exploitation
  • Commercial forestry requirements:
    * A notification to the authorities for up to 20 hectares of development
    * A forestry report for developments from 20 to 250 hectares
    * A more complex forestry report for developments over 250 hectares
    Additional Programs:
    PRODEPLAN – support program for forest plantations
    PRODEFOR – support program for sustainable exploitation of natural forests
    CEPLAFOR – legal certification for the optimum use of forest plantations

Incentives
In conformity with the World Trade Organization (WTO), the Mexican Government provides the following incentives for the development of commercial plantations:

  • The reimbursement of up to 65% of the initial installation and maintenance costs, including infrastructure
  • A tax reduction of 50% on VAT (value added tax) and on assets tax
  • Accelerated depreciation of 93% on equipment
  • No VAT on expenses for forestry-related activities
  • Transference of tax losses between associate companies, and amortization periods of up to 10 years

Fisheries

Overview
Mexico´s privileged geographical location favors biological diversity in its waters:

  • Mexico has over 3 million sq. km of exclusive economic zones, including 358 thousand sq. km of continental platform, 2.9 million ha of domestic waters including 1.5 million ha of littoral lagoons
  • Mexico´s littoral is approximately 11,500 km long due to its extensive coastlines on the Pacific Ocean, Gulf of Mexico and the Caribbean.

Investment Opportunities
The main opportunities for investments are found in:

  • The development of new fisheries and species, particularly deep-sea fishing.
  • Modernization of the fishing fleet
    Processing plants for fish and seafood products
    Distribution and commercialization of fish and seafood products
    Laboratories specialized in sanitation certification of products.

Legislation
The fisheries legislation is undergoing a revision in order to simplify investment procedures and protect natural resource capital. Presently, fisheries are regulated by Article 27 of the Mexican Constitution, and the Fisheries Law.
Provisions and regulations are oriented towards the conservation and sustainable development of resources and providing security to foreign and national investors.
The main provisions are:

Capture

  • Foreign investors may participate with up to 49% of capital in partnerships or joint ventures
  • Fishing permits are valid for up to 4 years.
  • Concessions are valid for up to 20 years.
  • 100% foreign investment is permitted with regard to storage, processing and commercialization of fish products
  • Concessions are valid for up to 50 years and can be renewed for the same period.

Incentives

  • Reduction on Income Tax (ISR) for individuals, cooperatives and companies devoted exclusively to activities related to aquaculture
  • Reinbursements of the VAT paid on expenses incurred through aquaculture-related activities
  • Accelerated depreciation of up to 62% on the initial investment in infrastructure, and up to 89% on fishing equipment

Industrial Wastes

Overview

  • Only 26% of industrial waste is adequately treated in Mexico.
  • There is currently only one treatment plant operating in the north of the country where 25% of total waste is processed.
  • The central region generates more than 5 million tons of industrial waste a year, (65% of the total) and the nearest treatment center is over 600 miles away.

Investment Opportunities in Industry
The Mexican Ministry of the Environment, Natural Resources and Fisheries through the National Institute of Ecology and in conjunction with the National Program for Minimization and Integral Management of Industrial Waste 1996-2000, invites national and international investors to develop Integral Centers for Industrial Waste Management and Treatment (CIMARI´S). The National Institute of Ecology is in the process of publishing a national guide of where CIMARI´S may be built.
For provisions and requirements, access INE web site: http://www.ine.gob.mx

Legislation
Industrial Waste Legislation in Mexico falls under the jurisdiction of the General Law for Environmental Protection and Ecological Balance (LGEEPA), enacted in March 1988 and reformed in December 1996.
Law enforcement in this respect has increased considerably and should continue to do so; its effectiveness is shown in the percentage of waste adequately treated which has grown from 12% in 1994 to 26% in 1996.