1 Diario Oficial [D.O.], Mar. 9, 1973.

2 National Foreign Investment Commission of Mexico, Guidelines for Foreign Investment and Objectives for its Promotion (1984) [hereinafter cited as 1984 Guidelines]. See infra notes 92–126 and accompanying text. In a recent article, one foreign investment attorney predicted that “the general rule of 51/49 percent for Mexican joint ventures with foreign capital will not be changed,” and that “in certain exceptional cases, a majority foreign capital will be permitted, generally on a temporary basis.” Treviño, , Mexico: The Present Status of Legislation and Governmental Policies on Direct Foreign Investments, 18 Int’l Law. 297, 298 (1984)Google Scholar (emphasis added).

3 See infra notes 64–91 and accompanying text.

4 1984 Guidelines, supra note 2, at 5.

5 Wall St. J., June 12, 1984, at 39, cols. 1–4.

6 Id.

7 See generally infra notes 129–144 and accompanying text.

8 Interviews with members of the Foreign Investment Commission and attorneys, infra note 127; and see infra notes 129–131 and accompanying text. There were, however, inducements to Mexicanize. See infra notes 53–55 and accompanying text.

9 Wall St. J., supra note 5.

10 See infra notes 56–57 and accompanying text.

11 Wright, H., Foreign Enterprise in Mexico, at ix, 95–195 (1971)Google Scholar.

12 Id. at 4–6.

13 Id. at 52. Foreign investment in Mexico, both direct and indirect, in 1911 has been estimated at U.S. $1,700 million, of which between $650 million and $1,045 million was from the United States. Id. at 53. “Whatever the actual figures, it appears that by the end of the Díaz era foreigners probably owned over half of the total wealth of the country and that foreign control dominated every area of productive enterprise except agriculture and the handicraft industries.” Id. (citations omitted).

14 Foreign investment was particularly significant in railroad construction and mining, and, to a lesser degree, in public utilities, real estate, banking, manufacturing and commerce. Id. at 53. Furthermore, “[b]y the end of Díaz’ rule . . . , foreigners probably owned one-fourth of the country’s land area,” id.; and “Mexicans were denied training and opportunity to advance to positions of responsibility,” since foreign companies regarded the Mexican Indian as inferior and preferred foreign skilled workers. Id. at 59.

15 Id. at 59.

16 Id. at 61.

17 Id.

18 Id. at 63. See Constitución de los Est ados mexicanos [Const.] art. 27 (1917).

19 H. Wright, supra note 11, at 16. “Promulgation is the act by which the President gives authenticity to and orders the entry into effect of a law.” Id. The Diario Oficial is the official federal daily journal and the only authorized repository of federal legislation. Id.

20 Const, art 89, § 1. Most statutes are supplemented by regulations. Regulatory provisions may not contradict those of the correlative statute and therefore are subordinate. Promulgation and publication are made in the same manner as statutes, and the enactment of a regulation takes the form of a decree. H. Wright, supra note 11, at 16–17.

21 Congress has delegated to the President the authority to establish by executive decree tariffs and restrictions on imports and exports. H. Wright, supra note 11, at 17–18.

22 Other forms of executive enactment include the circular and the official communication, which are instructions issued within ministries concerning interpretation and application of laws. Official communications “are also sometimes used to notify private persons of administrative actions or decisions. While they are customarily of an internal nature only, they may be given the binding character of a regulation.” Id. at 17.

23 Id. According to Wright, such congressional delegations were “so frequent throughout the latter part of the nineteenth century and until the 1930’s that there was often hardly even a pretense of an independent legislative branch.” Id. See also Ramírez, F., Derecho constitucional mexicano (6th rev. ed. 1963)Google Scholar; Baggett, , The Delegation of Legislative Power to the Executive under the Constitution of Mexico, 8 S. Cal. L. Rev. 114 (1935)Google Scholar. Although Mexico’s political structure is beyond the scope of this article, a few basic principles are essential to an understanding of the legislative process. Mexico has only one primary political party, commonly referred to as the PRI (Partido Revolucionario Institucional). The PRI (or its antecedents) has elected every President, the overwhelming majority of governors and most of the positions in the Congress, as well as state and local governments. Dean Rusk Center for the Nat’l Governor’s Ass’n Comm. on Int’l Trade and Foreign Relations, Comparative Facts on Canada, Mexico and the United States (1980). The PRI represents three organized interest groups, the labor, agrarian and public sectors, and, consequently, the President “must maintain a certain balance . . . . In spite of his theoretical power, the President’s decisions must be made in an atmosphere characterized more by finesse comparable to that needed in a tightrope act than by impetuosity. . . .” Margadant, , Mexico and the United States: The Need for Frankness, 18 Tex. Int’l L.J. 455, 459–60 (1983)Google Scholar.

24 H. Wright, supra note 11, at 17. See Const, art. 49.

25 H. Wright, supra note 11, at 17. Constitutional guarantees were suspended from June to September 1942 following Mexico’s entry into World War II. Most of the decrees issued by the President were “in effect only during the period of the emergency and were repealed by congressional decree terminating the emergency.” Id.

26 “Quantitative restrictions” are those limitations placed upon the percentage of equity that a foreign investor may have in a Mexican enterprise.

27 D.O., July 7, 1944 [hereinafter cited as the Emergency Decree].

28 Hoagland, A., Company Formation in Mexico, at B–2 (1972)Google Scholar. See also H. Wright, supra note 11, at 101–03.

29 “Flight capital” refers to capital from countries “in which investments were considered unsafe.” H. Wright, supra note 11, at 102. Because Mexico’s booming wartime economy was attracting a growing influx of foreign capital, it was feared that existing Mexican investments would be displaced, that certain sectors of the economy would be monopolized and “that a large-scale inflow of capital having no permanent ties to the economic and social interests of the country and its subsequent withdrawal to the country of origin after the war would result in severe damage to the Mexican economy.” Id. The term is also commonly used to refer to capital withdrawn from a country in anticipation or fear of governmental monetary restrictions or of loss in value for any reason.

30 A. Hoagland, supra note 28, at B-2. Also, existing limits on land acquisitions by foreigners were strengthened. Id.

31 Gordon, , The Joint Venture as an Institution for Mexican Development: A Legislative History, 1978 Ariz. St. L.J. 173, 183 Google Scholar. Under the Emergency Decree, permission from the Ministry of Foreign Relations was required for the acquisition of total or controlling ownership of agricultural undertakings, cattle raising, forestry, mining concessions, real estate, and industrial and commercial enterprises. Id.

32 A. Hoagland, supra note 28, at B-2. Although little was done to regulate foreign investment for almost a year after the Emergency Decree was issued, in 1945 the Ministry of Foreign Relations issued a list of activities in which majority Mexican equity was required. Activities on this list included domestic air and highway transportation, fishing, advertising, publishing, radio broadcasting, the film industry and the production of carbonated beverages. H. Wright, supra note 11, at 104. In 1947 the Ministry expanded the restriction on carbonated beverages to include distribution and sale in addition to production, id. at 105; and in 1960 the radio broadcasting industry was completely closed to foreign investment. A. Hoagland, supra, at B-2.

33 D.O., June 23, 1947 [hereinafter referred to as the committee].

34 The Interministerial Committee included representatives from the Ministries of Internal Affairs, Foreign Relations, Economy (now Commerce and Industrial Promotion) and Agriculture when created in 1947. A representative of the Ministry of Communications and Public Works was added by the Decree of Dec. 1, 1949, D.O., Apr. 3, 1950. H. Wright, supra note 11, at 104.

35 H. Wright, supra note 11, at 104.

36 Id. The committee did extend the 51% Mexican equity concept to the bottling industry in 1948 and to the rubber industry in 1953. A. Hoagland, supra note 28, at B-2. In other directives issued by the committee, the following stipulations and decisions were made.

(1) Certain classes of non–Mexican citizens were to be considered Mexican for investment purposes. Gordon, supra note 31, at 185. See generally H. Wright, supra note 11, at 196–217, for a complete discussion of the entry and status of aliens and foreign legal entities.

(2) The Ministry of Foreign Relations had to be notified prior to the transfer of stock in companies on the restricted list. Also, the Ministry’s use of discretion under the Emergency Decree was affirmed “in cases where such a transfer of stock, if restricted to Mexicans, could cause a loss to the Mexican shareholders.” Gordon, supra, at 185–86.

(3) The committee “was to be consulted before the Ministry of Foreign Relations exercised its discretionary powers under Article 3(111) of the 1944 Emergency Decree.” Id. at 186.

(4) Applications before the Ministry relating to the petroleum industry “also were to be submitted to the Ministry of Economy [now Commerce and Industrial Promotion] and to Petroleos Mexicanos for comments and recommendations regarding necessary limitations.” Id.

(5) Conditions of investing were issued for persons seeking to immigrate to Mexico. Id.

(6) The right of companies in existence prior to the Emergency Decree to acquire real property necessary for their business was clarified. Id.

(7) Companies engaged in international shipping were allowed to have majority foreign ownership “if there was not sufficient available Mexican capital.” Id. The committee reaffirmed, however, that “domestic maritime shipping was reserved for Mexican control.” Id.

(8) Mexican-owned majority shares were required to have full voting rights. Id. Directives issued by the committee may be found in Ramos Garza, O., México ante la inversión extranjera (1971)Google Scholar; and Centro de Estudios Económicos del Sector Privado, La Legislación mexicana en materia de inversiones extranjeras (1978).

37 H. Wright, supra note 11, at 104.

38 Id. at 92–93.

39 The Mexican industrialists were organized, with the Camara Nacional de la Industria de Transformatión (CANACINTRA or CNIT) as the principal outlet for their views. Id. at 78.

40 CANACINTRA argued that the effect of extensive foreign investment “is to ‘decapitalize’ the country and thus to add to the balance of payments problems because more capital is taken out of the country annually by foreign firms in the form of profits than is brought in as new investment.” Id.

41 Id. at 78–79.

42 Between 1959 and 1965, the timber industry was reserved to Mexicans; firms producing raw materials or basic products, the telephone system and the emerging petrochemical industry were added to the 51% Mexican equity list; and foreign capital in the mining industry was severely limited. With the Mexicanization of the mining industry, Mexico had brought the four traditional areas of foreign dominance under domestic control: railroads, mining, petroleum and public utilities. The railroads were nationalized in 1937, the petroleum industry in 1938, the utilities in 1960, and mining in 1961. Although the Government did not actually nationalize the mining industry, it made Mexicanization very attractive by halting exporting permits, increasing reserve requirements and offering export, price and tax inducements. Id. at 80–90. Additionally, foreign governments and agencies and “financial entities from abroad, or groups of foreign persons or legal entities” were excluded from banking, insurance, bonding and investment businesses because domestic investment in these activities was considered sufficient.

Id. at 91. In 1982 the Government nationalized the banks. D.O., Sept. 1 and 6, 1982. For an excellent analysis of changes in Mexico’s banking and financial structure over the past 12 years, see Camil, , The Nationalized Banking System and Foreign Debt, 18 Int’l Law. 323 (1984)Google Scholar. Foreign ownership was also limited in the steel, cement, glass, fertilizer, cellulose and aluminum industries pursuant to a decree of 1970. D.O., July 2, 1970. The restriction applied primarily to the establishment of new companies in those industries, and companies existing and in operation as of 1970 were not affected by it unless they decided to acquire or install new facilities. H. Wright, supra note 11, at 91, 149.

43 Gordon, supra note 31, at 197.

44 Industries restricted by law between 1959 and 1963 include mining, television and petrochemicals. H. Wright, supra note 11, at 105.

45 Id. at 105–06. These activities include the preservation and packaging of food products, which “resulted from the rather sudden rush of several United States companies to enter Mexico either by establishing new operations or by acquiring existing ones and the government’s concern over the rapid occupation of the field by foreign companies,” and the manufacture and distribution of fertilizers, insecticides and basic chemical products, which “may have been the outgrowth of the 1959 statutory restriction on foreign investment in the petrochemical industry.” Id. at 106.

46 See generally id. at 50–195.

47 Id. at 83–84.

48 Id. at 83.

49 Id. at 95.

50 Id. at 86.

51 “Mexicanization” refers to the process by which the percentage of Mexican participation in an industry is increased, usually to at least 51%. Id. at 87. See also infra note 70 for those industries where the percentage of Mexican participation had to be increased to more than 51%.

52 See supra notes 41–42 and accompanying text.

53 A. Hoagland, supra note 28, at B-3.

54 Id. These payments typically included royalties, interest, patents, trademarks, technical assistance and technology. Id.

55 H. Wright, supra note 11, at 84.

56 D.O., July 20, 1972. According to Gordon, supra note 31, “[t]he law granted complete or partial tax exemption for qualifying industries, extended it to ten years for basic industries, seven years for semi–basic industries and five years for secondary industries. Only those industries which were at least 51 percent Mexican owned could qualify.” Id. at 198.

In identifying the “basic industries” included under this law, Gordon explains:

Basic industries were those producing raw materials, machines, equipment or vehicles essential for one or more economic activities of fundamental importance to the industrial or agricultural development of the country. They also had to supply at least 20 percent of the Mexican market. Semi-basic industries included those which produced vitally necessary consumer goods, tools, scientific equipment or secondary industrial equipment, and which satisfied at least 15 percent of the market. All other goods–producing industries were classified as secondary.

Id. n.118.

57 Manufacturing businesses in the border zone are commonly known as “in-bond” companies or “maquiladoras,” and are assembly plants that are not subject to the general regulations on foreign investment. As part of Mexico’s Border Industrialization Program, they were “[i]ntended to absorb the border unemployment left by the termination of the ‘bracero’ program.” Grunwald, , Restructuring Industry Offshore: The U.S.-Mexico Connection, Brookings Rev., No. 3, 1983, at 24, 24–25 CrossRefGoogle Scholar. Imports of equipment, machinery and components for processing or assembly within a 20–kilometer strip along the border were allowed duty free so long as all of the products were reexported. The scope of the assembly operations has been expanded, and although most of the plants are located along the border, others are located throughout the country. Direct foreign investment may be, and usually is, 100%, and substantial incentives are offered to investors. Id.

58 H. Wright, supra note 11, at 84–85.

59 Id. at 87.

60 Id.

61 The Law on Control and Registration of the Transfer of Technology and the Use and Exploitation of Patents and Trademarks [hereinafter cited as the Law on the Transfer of Technology] was originally enacted in 1972, D.O., Dec. 30, 1972, and created the National Registry for the Transfer of Technology. It was amended in 1982. D.O., Jan. 11, 1982. In 1976, the Industrial Property Law was revised and is now entitled the Law of Inventions and Trademarks. The revision imposes further limitations on foreign patent and trademark owners. D.O., Feb. 10, 1976. The 1973 Foreign Investment Law, supra note 1, is of primary importance to this article.

62 See supra note 1 and infra notes 63–87 and accompanying text.

63 Today, both the Foreign Investment and Transfer of Technology Registries are contained within the General Bureau of Foreign Investment and Transfer of Technology of the Ministry of Commerce and Industrial Promotion. A. Hoagland, supra note 28, at B-4.

64 Other major sources of Mexican foreign investment legislation include the Constitution, supra note 18; the Regulations of the National Registry of Foreign Investments, D.O., Dec. 11, 1973; see also D.O., Dec. 28, 1979; the General Resolutions of the National Foreign Investment Commission (FIC), infra at text accompanying notes 119–126; the Law on the Transfer of Technology, supra note 61; and the Regulations of the Law on the Transfer of Technology, D.O., Nov. 25, 1982.

65 A. Hoagland, supra note 28, at B-11.

66 See, e.g., the 1961 Mining Law, D.O., Feb. 6, 1961, amended by D.O., Jan. 4, 1966.

67 The list is included in Article 2 of the FIL, supra note 1, with further explanation in Article 6:

Article 2. For the purposes of the provisions hereof, foreign investment shall be that made by:

I. Foreign corporations,

II. Foreign individuals,

III. Non-incorporated foreign enterprises, and

IV. Mexican companies with a majority of foreign capital or those in which foreigners may have, under any title, the power to control the administration of the corporation.

Article 6. For the purposes of this law investments made by foreigners living in the country as permanent residents shall be considered to be Mexican investment, except when the economic activities of said foreigners are subject to centers of economic decisions abroad. This provision shall not be applied to those geographical areas or to those activities reserved exclusively to Mexican individuals or corporations excluding foreign participation, or subject to specific regulations.

The status and activities of immigrants shall be regulated by the provisions of the General Law of Population.

68 Pursuant to Article 4 of the FIL, id., oil and gas, basic petrochemicals, exploitation of radioactive minerals and the production of nuclear energy, mining in the particular cases referred to by the applicable laws, electric power, railroads, telegraphic and radiotelegraphic communications, and other activities and industries set forth by specific statutes are exclusively reserved to the state.

69 Also pursuant to Article 4 of the FIL, id., radio and television, urban and inter-urban transportation and transportation on federal highways, air and maritime transportation, forestry, distribution of gas, and other activities set forth by specific statutes or regulations enacted by the federal Executive are exclusively reserved to Mexican individuals or corporations.

70 Pursuant to Article 5, id., foreign investment will be allowed in the following activities or companies in the proportions specified:

a) Exploitation of minerals. Concessions for exploitation thereof may not be granted or transferred to foreign individuals or corporations. In companies engaged in those activities, foreign investment may participate up to a maximum of 49% in the event of exploitation of minerals subject to ordinary concession, and up to a maximum of 34% in the event of special concessions for the exploitation of natural minerals reserves;

b) By-products of petrochemicals: 40%;

c) Manufacturing of automobile components: 40%; and,

d) Those activities set forth by specific statutes or by regulations published by the Federal Executive.

71 Article 5 further provides:

In the event where the applicable legal provisions, or regulations, do not require a definite percentage, foreign investment may only participate in a proportion not to exceed 49% of the capital stock of a company, provided however, that the foreign investors do not have, under any title, the power to determine the administration of the company.

Id. But see infra note 136 and accompanying text.

72 This is true whether the maximum percentages are acquired “in one or more simultaneous or successive transactions. . . . For the purposes of the [FIL], the leasing of assets essential to the carrying on of an enterprise’s operations constitutes an acquisition.” Treviño, supra note 2, at 303.

73 Id.

74 Under the FIL, all newly created business concerns, both domestic and foreign, must register with the National Registry of Foreign Investment (FIR). Additionally, all foreign concerns existing when the FIL was enacted were required to register. Id. See also infra notes 121–123 and accompanying text; and National Foreign Investment Commission of Mexico, , Foreign Investments, Juridical Framework and its Application 23 (1984)Google Scholar [hereinafter cited as Foreign Investments, Juridical Framework]. In late 1984, the FIC published this booklet with the intent of guiding both domestic and foreign investors. The booklet purports to be a “systematic compilation of those elements that form the legal structure applicable to foreign investment in Mexico.” Id. at 3. While it is a helpful resource, it does not deal with the important issue of taxation.

75 See supra note 1, Arts. 1 and 5; see also Gordon, supra note 31, at 200.

76 As of Jan. 1, 1982, the FIC included representatives from the Ministries of the Interior, Foreign Relations, Public Credit and Finance, Mines and Energetics, Commerce and Industrial Promotion, Labor, and Programming and Budgeting. Treviño, supra note 2, at 304 n.25.

77 See supra note 1, Arts. 5 and 12(1). See also infra note 136.

78 See supra note 1, Art. 12(1).

79 Id., Art. 12(2).

80 Additionally, the FIC is empowered to:

(1) “Be the consulting authority in matters of foreign investment for agencies of the Federal Executive, decentralized agencies, companies with State participation, trustees of trusts settled by the federal government or by the government of the States, as well as for the National Securities Commission.” Id., Art. 12(5).

(2) “Coordinate the activities of agencies from the Federal Executive, decentralized agencies and companies with State participation so that they may adequately comply with its attributions in matters of foreign investment.” Id., Art. 12(7).

(3) “Submit to the consideration of the Federal Executive legislative programs, regulations and administrative measures in matters of foreign investment.” Id., Art. 12(8).

(4) Exercise other powers granted to it under the FIL. Id., Art. 12(9).

81 Treviño, supra note 2, at 305.

82 The negotiation process will result in the imposition of conditions relating to the criteria outlined infra in the text accompanying notes 85–86.

83 See supra note 56 and accompanying text; see also infra note 125 and accompanying text.

84 Treviño, supra note 2, at 307. As noted in the text infra at note 127, interviews were conducted throughout the period from the summer of 1984 through the summer of 1985 with various members of Mexico’s foreign investment legal community; some of these exceptions had been granted to their clients.

85 Federal Chief Executive, National Industrial Development Plan, 1983–88 (1983).

86 Id. See also supra note 1, Art. 13.

87 Treviño, supra note 2, at 299 (footnotes omitted). Policy statements concerning direct foreign investment may also be made by the Secretary of Commerce and Industrial Promotion. Treviño summarizes recent declarations by the Secretary:

Foreign investment will have an important place in the future of the country; in special cases, there may be a majority of foreign capital in Mexican companies, provided it assists in national development and is subject to Mexican interests; direct investment by any country should be directed and oriented in accordance with the priorities of the development strategy of Mexico, and should support the efforts of Mexican enterprises to modernize and consolidate the productive system of the country; and on the basis of the criteria of the respective laws, the [FIC] decides whether the foreign investment is acceptable for the country, and the formalities and requirements to which it should submit are determined.

Id. at 302 (footnotes omitted).

88 Amendments to Articles 16, 24, 26, 27-XIX and -XX, 28, 73 and 29D, E and F were approved on Feb. 2, 1983. D.O., Feb. 3, 1983. See also Treviño, supra note 2, at 298–99.

89 Treviño, supra note 2, at 298–99.

90 Id. at 300.

91 Id. at 301.

92 D.O., Aug. 30, 1984 (General Resolutions of the FIC) (five resolutions published pursuant to the Guidelines; see notes 119–126 infra and accompanying text). See also Foreign Investments, Juridical Framework, supra note 74, at 24:

An active, systematic and selective policy is meant to be implemented within this framework, it is active to promote projects that, besides fitting in the inforced [sic] laws on that matter, fit in the fields of action described in the general development strategy; it is systematic and selective because its corresponding promotion shall be centered on those areas in which technology is the key factor to achieve levels of international competition; promotion of exports whose channels make them useful and in activities needing large investments and import substitution when creating priority productive chains. Criteria for employment creation and territorial decentralization of the economic growth shall be carefully applied as positive factors.

93 1984 Guidelines, supra note 2, at 4–5.

94 Foreign Investments, Juridical Framework, supra note 74, at 12.

95 Id.

96 Id.

97 Id.

98 Id. at 12–13.

99 Id. at 13.

100 Id. at 14. The FIC also has set forth guidelines designed to encourage international multilateral and bilateral economic cooperation. Id. at 16–20.

101 This category includes: agricultural machinery and implements, machinery for woodworking, machinery for food and beverages processing and packaging, machinery for the petroleum and petrochemical industries, numeric control machine tools for metal cutting and forming, textile industry machinery, machinery for plastic extrusion and molding, graphic arts industry machinery, and cranes, pulleys and the like. 1984 Guidelines, supra note 2, at 5–6.

102 This category includes: high-power electric generators and engines, turbines for the processing industry, and high-power turbo-compressors. Id. at 6.

103 This category includes: telecommunications equipment; magnetic tapes and discs for computation; computation equipment, parts and components; processing control and instrumentation equipment; assorted electronic materials, parts and components; engineering and scientific electronic equipment and devices; and household electronics. Id.

104 This category includes: motorcycles and similar vehicles of more than 350 cc, internal combustion engines for boats and locomotives, and the construction and repair of boats. Id.

105 This category includes: high–technology metallurgy, high-precision micro-foundry and specialized tools. Id.

106 This category includes: pharmaceutical raw materials and active substances, synthetic resins and plastics, and specialties. Id.

107 This category includes: precision and measuring devices, medical equipment and instruments, photography equipment and material, and new high-technology materials. Id.

108 The only activity listed within this category is biotechnology. Id.

109 The only activity listed within this category is construction and operation of hotels. Id.

110 Id. at 5.

111 Foreign Investments, Juridical Framework, supra note 74, at 38 (emphasis added). Additionally, the FIC has stated that, “[i]n activities where association with foreign capital be deemed convenient, the policy of promoting foreign investment shall be applied to specific projects. In these cases competition among investors and purveyors of foreign technology will be promoted in order to make a selection among the better.offers.” Id.

112 Id. at 15.

113 1984 Guidelines, supra note 2, at 7–8. The Guidelines contain a condition precedent to the increase of foreign capital in Mexican companies:

[T]he immediate program for economic reordering has designed alternative mechanisms that allow, in the cases where Mexican partners do not have resources for additional capital contributions, for the extension of the number of possible internal sources, be it by promoting the participation of other domestic investors or by means of financement or temporary contribution of risk capital with the development funds, bilateral funds of joint-ventures or by international financial agencies.

Id.

114 Id. at 8. Additionally, the Guidelines state that “special attention” will continue to be given to in-bond industry. Id. at 7. See also supra note 57, and infra note 121 and accompanying text.

115 Interviews with foreign investment attorneys, infra note 127 and accompanying text. See also supra notes 51–55 and accompanying text.

116 Foreign Investments, Juridical Framework, supra note 74, at 12. The FIC has also stated:

Effectiveness of Mexicanization operations will be watched; for national and selective application in those cases that offer sufficient elements to determine the Mexican share that will exercise real control over decisions of the Mexicanized enterprise, so no undesirable effects take place, particularly on policies of purchases, costs of transference and technological decisions.

Id. at 15–16.

117 1984 Guidelines, supra note 2, at 3.

118 Interviews with FIC officials. See infra note 127 and accompanying text.

119 See General Resolutions, supra note 92, “Considering,” para. 2. See also 1984 Guidelines, supra note 2, at 3.

120 See General Resolutions, supra note 92, “Considering,” paras. 2–6, and Gen. Res. No. 1; interview with FIC officials, infra note 127 and accompanying text. See also Address by Treviño, J., American Bar Association Section of International Law and Practice, Winter Meeting (Dec. 1, 1984)Google Scholar (Update on Legal Aspects of Foreign Investments and Technology Transfer, supplementing Treviño, supra note 2) [hereinafter cited as Treviño, Address].

121 See General Resolutions, supra note 92, Gen. Res. No. 2. See also supra notes 57 and 114.

122 See General Resolutions, supra note 92, Gen. Res. Nos. 3 and 5.

123 Id., Gen. Res. No. 9.

124 Id. As noted by Treviño, “the wording of these new Resolutions is complicated and must be studied carefully.” Treviño Address, supra note 120.

125 Interviews with FIC officials and foreign investment attorneys. See infra note 127 and accompanying text. Prior to the issuance of the resolutions, it could take approximately 2 to 4 months for the application to be analyzed by the technical committee and an additional 6 to 12 months to complete the negotiations and arrive at terms and conditions agreeable to both the investor and the FIC. See supra notes 82–86 and accompanying text. See also General Resolutions, supra note 92, Gen. Res. No. 1.

126 See General Resolutions, supra note 92, Gen. Res. No. 1.

127 Almost all the people interviewed requested that their names, and the names of their businesses, firms and banks not be cited, and that their statements not be quoted directly. Consequently, the citations respect these requests for anonymity, yet attempt to identify the type of person in question as closely as possible (e.g., foreign investment attorney, foreign banking official).

128 1984 Guidelines, supra note 2. Interestingly, while the Guidelines were not published, the correlative resolutions were. See supra note 92.

129 See supra note 5 and accompanying text.

130 Interview with foreign investment attorneys, supra note 127. Also, Gordon notes:

[T]here are some suggestions that [the FIL] is to be implemented only prospectively. Article 2 states that foreign investment in the capital of business enterprises, or in the acquisition of properties, and in all other operations to which the law refers, shall be subject to its provisions, suggesting neither a limitation to prospective application nor a permissible retroactive application. The law thus contains none of the fade out provisions characteristic of the Andean Common Market Decision 24.

Gordon, supra note 31, at 199 (footnotes omitted).

131 Gordon, supra note 31, at 187; A. Hoagland, supra note 28, at C-2–3. Corporations and partnerships are permitted to operate with variable capital.

[A]n enterprise established with the right to variable capital has a fixed minimum capital, which has to be subscribed and at least 20 per cent paid up at the outset, and then a variable capital, which may be either fixed or an unlimited amount. Increases and decreases of the variable capital may be carried out by a mere vote of the shareholders, according to procedures established in the charter and by–laws, without amending the charter and without any additional formality, such as government permits, registration or publication. The FIL, however, governs capital structure and requires registration of changes in foreign shareholders and their interests.

Id. But see supra note 122 and accompanying text. See also Sonnenreich, , Protecting the United States Minority Shareholder in Joint International Business Ventures in Latin America, 5 Va. J. Int’l L. 1 (1964)Google Scholar.

132 Gordon, supra note 31, at 187.

133 Interviews with FIC officials, supra note 127.

134 Id. See supra note 5 and accompanying text.

135 See supra notes 27–63 and accompanying text.

136 See supra note 1. Article 12 of the FIL authorizes the FIC to:

Increase or reduce, in terms of Article 5 hereof, the percentage in which foreign investment may participate in the various geographical areas or economic activities of the country, when there are no legal provisions or regulations requiring a definite percentage, establishing the terms and conditions under which said investment will be received.

Id. See supra notes 70–81 and accompanying text.

137 See supra notes 14–17 and accompanying text. See also Treviño Address, supra note 120.

138 Interviews with in-house counsel of Mexican industrial conglomerates, supra note 127. See also Mexico City News, May 3, 1985, at 25, cols. 2–3.

139 See supra note 115 and accompanying text.

140 Foreign Investments, Juridical Framework, supra note 74, at 12, 15–16.

141 See text at note 74 supra.

142 Interview with foreign banking official, supra note 127. It was also suggested that control could still be retained, practically speaking, by later selling 51% on the stock market since the ownership of the 51% would then be diluted. Although this has happened in the past, governmental officials have admonished that it may not be an acceptable method of Mexicanization. Interview with foreign investment attorney, supra note 127.

143 Interview with foreign banking official, supra note 127.

144 Interview with foreign banking official, id.

145 Interviews with FIC officials, id.

146 As of May 3, 1985, there were 6,684 Mexican enterprises with foreign equity: approximately 2,780 have majority foreign equity, 3,349 have between 25% and 49% foreign equity, and the remaining 555 have less than 24.9% foreign equity. Mexico City News, supra note 138, at 25, col. 3. “Last year, Combustion Engineering, Ford Motor Co., S.A. de C.V., Pricsa, Agromak and Black and Decker were among the principal projects requesting permission from the National Commission of Foreign Investments to operate with 100 percent foreign capital.” Id.

International Business Machines Corp. (IBM) recently received approval for a 100% foreign equity project. The opinion page of the Mexico City News reported as follows:

The company’s second proposal—called “substantially modified” by IBM itself—didn’t budge on the issue of complete ownership but included enough compromises to make it acceptable to the Mexican government. The result will be a boon to Mexico’s high-tech industry, to the nation’s export income, and to the country’s reputation for receptivity to investment from abroad.

The negotiations with IBM have been a test for both the De la Madrid administration and the company. IBM wanted to expand its Jalisco plant to include microcomputer production, but was determined to make its policy of full ownership of its overseas operations stick.

. . . .

The end product of the tough bargaining process has enough to please everyone: IBM will invest more than 91 million dollars in capital equipment for the Jalisco plant over the next five years, a nearly 14–fold increase from the original offer of 6.6 million dollars. More than 90 percent of the plant’s microcomputer production will be exported, at a company-estimated value of 620 million dollars in the next half-decade. Other provisions arrange for the employing and training of Mexican personnel and the inclusion of Mexican manufacturers and suppliers in the production process. In all, a fair agreement—one worth waiting for.

Id., July 25, 1985, at 14, col. 1. In addition, the Government has eased restrictions on import licenses in hopes that “an increase in imports will force domestic manufacturers to improve the quality of their products and make Mexican goods more competitive on the world market.” Id., Aug. 27, 1985, at 7, col. 1.