By Baker & McKenzie Corporate

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Currently , the Foreign Investment Law ("FIL") characterizes neutral investment as the investment made in Mexican companies or in trusts authorized by the Ministry of Economy that participate in economic activities in which foreign investment participation is prohib ited or limited to certain level. Neutral investment is not accounted to determine the percentage of foreign investment in the capital of Mexican entities, and grants to foreign investors pecuniary rights over its investment and, in some cases, limited corporate rights, without granting voting rights in general ordinary meetings.

• National land transportation of passengers, tourism and cargo.
  
• Credit unions.
  
• Production cooperative companies.
  
• Specialized air transportation.
  
• Exchange houses.
  
• Factoring companies.
  
• Production and sale of explosives, firearms, cartridges, ammunition and fireworks, excluding the purchase and use of explos ives for industrial and extractive purposes.
  
• Fresh water and coastal fishing and fishing in the exclusive economic zone, excluding aquaculture.
  
• Maritime shipping companies that operate commercial vessels for navigation in interior waterways and between domestic ports, excluding tourist ferries and the exploitation of dredges and naval devices for port construction, maintenance and operation.
  
• Port services to vessels engaged in interior navigation, such as towing and mooring and launching.
  
• Private schools, at preschool, primary, secondary, preparatory and higher education levels.
  
• Securities rating institutions.
  
• Construction of petroleum and petroleum derivates pipelines.
  
• Gasoline retail and distribution of liquefied petroleum gas.
  
• Development banks.
  
• Domestic air transportation.
  
• Insurance companies.
  
• General deposit warehouses.
  
• Limited purpose investment companies (Non-bank banks).
  
• Printing and publication of newspapers for exclusive distribution within Mexico.
  
• Comprehensive port management.
  
• Supply of lubricants for ships, trains and railroad equipment.
  
• Overseas shipping companies engaged in the exploitation of vessels exclusively in deep sea traffic.
  
• Legal services.
  
• Insurance agents.
  
• Drilling of petroleum and gas wells.
  
• Radio and television services other than cable television.
  
• Technical and professional services expressly indicated by law.
  
• Air taxi transportation.
  
• Bonding companies.
  
• Financial leasing companies.
  
• Pension funds.
  
• Series "T" shares of companies owning agricultural, cattle -raising and forest lands.
  
• Port piloting services to vessels engaged in interior navigation activities.
  
• Companies regulated by articles 11 and 12 of the Federal Telecommunications Law.
  
• Companies authorized to operate public airdromes though permits or concessions.
  
• Credit bureaus.
  
• Cellular telephony.
  
• Construction, operation and exploitation of public railways and public railroad transportation services.
  
  

In our opinion, the Mexican entities that currently have neutral investment contributed by foreign individuals and entities shall not be affected by the possible transformation of the Bill into Law, since it would only be applicable to investments occurring after the amendment is enacted.

Moreover, the Bill proposes to extend the periods granted to the Ministry of Economy for the approval of permits in connection with the admission of Foreign Investment, as well as the terms for the authorization by the Ministry of Foreign Affairs: (i) for the use of corporate name for the incorporation or amendment of entities, and (ii) to resolve in connection with the permits for real estate trusts in the restricted zone.

Baker & McKenzie has services available (including governmental relations consulting services) for all investors that may be affected in their interests or plans in case the Camara de Diputados passes the Bill. Through coordinated efforts, the Bill could be rejected by the Camara de Diputados said part of the Congress in order to impede its becoming Law.

IMPORTANT DISCLAIMER: This document has been prepared by the Labor Practice Group of the Mexico offices of Baker & McKenzie for our clients and professional associates. This document only refers to Mexican law. While every effort has been made to ensure accuracy, no responsibility can be accepted for errors or omissions, however caused. The information contained in this document should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. No responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this document is accepted by the authors or Baker & McKenzie. If advice concerning individual problems or other expert assistance is required, we would be pleased to oblige. Baker & McKenzie authorizes you to forward, reproduce, copy, archive and distribute this document without any changes and as long as you include the copyright notice below. The distortion, mutilation, modification or edition of this document is prohibited without the author's prior consent. All Rights Reserved © Baker & McKenzie Abogados, S.C. Mexico 2006
All Rights Reserved © Baker & McKenzie Abogados, S.C. Mexico 2005