In brief
President Claudia Sheinbaum has submitted to the Senate a bill to reform Mexico's Foreign Investment Law, introducing a national security review mechanism for foreign acquisitions in strategic sectors. The proposal expressly repeals the existing Article 30 of the Foreign Investment Law and replaces it by adding a new Title Six Bis, "National Security in Foreign Investments", addressing the current framework's shortcomings, as the existing Article 30 allowed the National Foreign Investment Commission ("Commission") to block acquisitions on national security grounds but without establishing the parameters and guidelines for doing so. This is a preliminary initiative, and its content is subject to review and modification by Congress before any reform becomes law.
Key takeaways
If enacted, this reform would introduce the following significant changes to Mexico's foreign investment framework:
- A new mandatory authorization requirement: Foreign investors seeking to acquire more than 49% of the share capital of a Mexican company operating in strategic sectors would require prior favorable resolution from the Commission, provided the company exceeds an asset threshold to be defined by the Commission.
- A broad definition of strategic activities: The reform would subject to scrutiny investments in companies whose activities involve, among other activities, strategic infrastructures — whether physical or virtual — linked to sectors such as energy, transportation, healthcare, communications, mining, aerospace, and defense, as well as critical technologies such as artificial intelligence, semiconductors, and biotechnology.
- Consequences for non-compliance: Completing an acquisition without the required authorization could result in new fines ranging from 1,000 to 200,000 times the daily value of the UMA (currently approximately MXN $117.31), depending on the nature of the violation and despite other applicable sanctions under the Foreign Investment Law.
In more detail
Authorization threshold
The bill requires prior favorable resolution from the Commission for any foreign investment seeking to acquire, directly or indirectly, more than 49% of the share capital of a Mexican company operating in a strategic economic activity, provided the company's total assets exceed a threshold to be determined by the Commission. Where that threshold is not met, submission of a request remains voluntary.
Sectors and technologies under review
The bill subjects to national security scrutiny foreign investments exceeding 49% in companies whose activities fall within any of the following five categories: (i) strategic infrastructures (physical or virtual), including those linked to energy, transportation, healthcare, communications, mining, data processing or data storing, digital systems, aerospace and defense, and sensitive installations, as well as land and real estate that are indispensable for the use of such infrastructures; (ii) critical technologies and dual-use products, such as artificial intelligence, robotics, semiconductors, cybersecurity, aerospace and defense technologies, energy storage technologies, quantum and nuclear technologies, as well as nanotechnologies and biotechnologies; (iii) supply of fundamental inputs, including energy, raw materials, and food security; (iv) access to sensitive information, particularly personal data or the ability to control such information; and (v) other analogous activities as determined by the Commission.
Expanded composition of the Commission
The bill incorporates three new full voting members — the Ministry of National Defense, Navy, and Security and Citizen Protection — bringing the total to thirteen. Four additional entities will participate as permanent guests with voice but no vote in national security sessions: the Attorney General's Office, the National Intelligence Center, the Tax Administration Service, and the Financial Intelligence Unit.
Review procedure and timelines
The application must be submitted jointly by the Mexican company and the foreign investor. The Commission will have 60 business days to resolve and notify its decision, subject to two mechanisms: (i) a one-time suspension if the Commission requests additional information within the first 20 business days, with parties required to respond within five to 30 business days; and (ii) a one-time extension of up to 30 additional business days where the complexity of the matter so justifies. If all deadlines lapse without a resolution, the application will be deemed denied. The Commission may resolve by: declaring the acquisition viable, conditioning it on risk mitigation measures, or blocking it on national security grounds.
Sanctions
Completing an acquisition without the required prior authorization carries new fines of 1,000 to 200,000 times the daily value of the UMA (currently approximately MXN $117.31), depending on the nature of the violation and despite other applicable sanctions under the Foreign Investment Law.
Call to action
Companies and investors with a presence or potential interest in such strategic sectors should closely monitor the legislative process of this bill and, as applicable, the terms under which it may ultimately be enacted. For advice on how this initiative may affect your operations, please contact the authors listed above.