Mexico: The International Comparative Legal Guide To Project Finance 2016 - Mexico

Last Updated: 29 April 2016
Article by Marco Sotomayor and Helena Gutiérrez Moreno

1 Overview

1.1 What are the main trends/significant developments in the project finance market in your jurisdiction?

Project finance is a very common source of financing in Mexico, especially for projects in which the offtake agreements are entered into with governmental companies (or entities) such as the Federal Electricity Commission (CFE) or Petróleos Mexicanos (Pemex). Due to reforms approved recently, the most popular and relevant sectors in recent years have been the energy sector (hydrocarbons and electricity) and telecoms, which have created a lot of expectation among investors. There is a significant trend related to the bidding processes of mature oil fields for E&P, power plants, and pipelines.

We expect that the infrastructure sector will grow exponentially, since the Mexican government is encouraging the participation of the private sector due to the reforms and the laws enacted.

The financing structure is usually provided by the retail banks (mostly from the U.S., Europe, and Japan), national development banks, and from time to time the Export Credit Agencies. Due to the enacted reforms there are many new types of financing sources for infrastructure in Mexico, such as Infrastructure Education Bonds ("Bonos de Infraestructura Educativa"), Fibra "E" (a Mexican hybrid between the Real Estate Investment Trust and the Master Limited Partnerships), and Investment Project Certificates ("Certificados de Proyectos de Inversión"), among others.

1.2 What are the most significant project financings that have taken place in your jurisdiction in recent years?

Several projects have been developed in Mexico in recent years. The energy and road sectors are the most active; we can say that the most relevant project in infrastructure developed through a project finance scheme was that of Ramones Phase II, which consisted in the construction and development of more than 500km of gas pipeline over from the North to the Centre of Mexico City and represented over 2.5 billion dollars.

As for Mexico, we expect to see a lot of activity in the project financing field, due to the reforms recently undertaken across sectors such as telecoms and energy. These reforms will drive a lot of project financing activity and will likely start having a more tangible impact; those two sectors are expected to show a significant increase in activity in 2016 and subsequent years.

Additionally, the Mexican government has shown a big commitment in developing renewable energy projects, and thus will open foreign investment to companies from countries where these energy sources are already developed.

2 Security

2.1 Is it possible to give asset security by means of a general security agreement or is an agreement required in relation to each type of asset? Briefly, what is the procedure?

The type of agreement required depends on the nature of the specific asset that is given as security for the transaction and the regulation that affects such asset. Real property includes land, construction attached thereto, any other property attached to the land that cannot be separated without deteriorating the land, and all rights thereto. Personal property includes assets that can be transported, rights and obligations not considered real property, and shares and interests over companies. A mortgage agreement is the traditional type of security used to secure real property and a pledge agreement is used to secure personal property. In addition, the Banking Institutions Law provides for a special type of mortgage known as an industrial mortgage (hipoteca industrial), which can only be created in favour of credit institutions and may include all assets related to the business unit. The procedures to incorporate such securities are described in detail in the next questions in this section.

Most project financings in Mexico use the figure of the guaranty trust (fideicomiso de garantía) to secure the repayment of the debt by transferring title of the assets to the trust's estate. Under Mexican law, only certain entities are authorised to act as trustees. In project financing, the trustees are credit institutions. The main duties of the trustee are to maintain title of the assets and manage such assets pursuant to the provisions of the trust agreement. One of the advantages of the guaranty trust is the easy extrajudicial foreclosure proceeding that can be agreed by the parties. Also, it is important to mention that assets transferred to the trust are not considered part of the debtor's estate in the event of a bankruptcy proceeding. To create a guaranty trust, the trustor transfers the title of the assets to the trustee, for the exclusive purpose of using such assets for the specific purpose for which the trust was created. The instrument through which a guaranty trust is created must be formalised in a public deed by a Notary Public and, when real property is included in the trust, it must be filed and registered in the Public Registry of Property of the State where such property is located. Finally, security agreements over personal property must be registered on the Movable Guaranties Registry (Registro Único de Garantías Mobiliarias).

2.2 Can security be taken over real property (land), plant, machinery and equipment (e.g. pipeline, whether underground or overground)? Briefly, what is the procedure?

Yes. As mentioned above, real property may be secured through the creation of a mortgage or by transferring the property to a guaranty trust. The mortgage gives the creditor the right to be paid the value of the mortgaged property. The mortgage includes the improvements made by the owner to the mortgaged property and all personal property permanently attached to the mortgaged property. The owner of the real property may create mortgages, either through a unilateral act or declaration or by entering into an agreement with the creditor. In both cases, the mortgage should be formalised in a public deed before a Notary Public, and registered in the Public Registry of Property of the State where the property is located in order to be effective before third parties. Additionally, industrial mortgages must be registered on the Movable Guaranties Registry with respect to the personal property included in such mortgage.

Personal property such as machinery and equipment not attached permanently to the land may be secured through a pledge agreement. Mexican law contemplates two types of pledges – the traditional pledge and the non-possessory pledge. In the traditional pledge the possession of the assets is transferred to the creditor; non-possessory pledge assets allow the pledger to maintain the possession of the assets and to use them in the ordinary course of business. It is always recommended to formalise all types of pledges through public deed granted by a Notary Public, due to the existence of a certain controversy in several States related to the classification of ratified documents as either public or private documents, which may impair the use of the executive judicial proceeding in the event of foreclosure. Both types of pledge must be registered in the Movable Guaranties Registry to be effective against third parties and in order to gain priority over unregistered liens and over liens registered thereafter.

2.3 Can security be taken over receivables where the chargor is free to collect the receivables in the absence of a default and the debtors are not notified of the security? Briefly, what is the procedure?

Receivables can be taken as a security in the form of a pledge without transferring possession. Such form of security would allow the pledger to collect the receivables in the absence of a default. The procedure to create this type of pledge is described in the response to question 2.2 above.

2.4 Can security be taken over cash deposited in bank accounts? Briefly, what is the procedure?

Yes, this can be achieved either through the creation of a pledge – usually a non-possessory pledge – or by transferring the rights of the holder of the bank account to the trustee on behalf of a guaranty trust. Most of the time, trusts are used for this purpose. Also, it is common for the trustee of a guaranty trust securing project financing to open bank accounts which become part of the trust estate to receive all proceeds from the operation of the project. This allows control of how these proceeds are used and allows the creditors to be paid from the pledged cash derived from the collateral to guarantee the financing.

2.5 Can security be taken over shares in companies incorporated in your jurisdiction? Are the shares in certificated form? Briefly, what is the procedure?

Yes, shares are considered personal property; therefore creditors may take security over them through the creation of a pledge or a guaranty trust. Depending on the type of entity, shares may or may not be in certificated form. Corporate authorisations may be required depending on the bylaws of the company or the type of entity. The procedure to create a guaranty trust has been described in the answer to question 2.1 and the procedure to create the pledge is contemplated in the answer to question 2.2 above. Also, depending on the nature of the company and in accordance with its laws, an endorsement of the shares and the registration of the security on the company's registry book may be required. In either case the corporate voting rights and decision-making derived from the shares may be withheld by the owner of the shares, granting only economic rights to the creditors.

2.6 What are the notarisation, registration, stamp duty and other fees (whether related to property value or otherwise) in relation to security over different types of assets (in particular, shares, real estate, receivables and chattels)?

Since the services of the Notary Public are governed by State laws, the notarisation fees depend on the State where the securities are being formalised. Generally, for the formalisation of a security agreement the fees are calculated based on the value of the secured obligations, however most of the time such fees are subject to negotiation. As for registration fees, since State laws also govern transactions over real property, the fees vary considerably depending on the State where the real property is located. Still, most commonly, fees are also linked to the value of the secured obligations. Some registries cap the maximum amount. There are no fees charged for the registration of securities over personal property, such as shares and receivables, in the Movable Guaranties Registry (Registro Único de Garantías Mobiliarias), which is carried out electronically.

2.7 Do the filing, notification or registration requirements in relation to security over different types of assets involve a significant amount of time or expense?

The expenses for registration could become significant when a project involves valuable, or a great amount of, real property and the applicable State laws do not cap the maximum amount to be charged as registration fees. The registration of securities for personal property in the Movable Guaranties Registry (Registro Único de Garantías Mobiliarias) is considered automatically made when it is filed electronically. Usually a Notary Public makes such filing. The Public Registries of Property may take a considerable amount of time to register securities over real property. Even though the applicable laws set a maximum period of time for registration, it usually depends on the workload of the particular Public Registry of the State where the property is located.

2.8 Are any regulatory or similar consents required with respect to the creation of security over real property (land), plant, machinery and equipment (e.g. pipeline, whether underground or overground), etc.?

Yes, it depends if the project involves activities that are regulated; for example, for energy projects, regulatory consents to create securities over real property and other assets are required.

3 Security Trustee

3.1 Regardless of whether your jurisdiction recognises the concept of a "trust", will it recognise the role of a security trustee or agent and allow the security trustee or agent (rather than each lender acting separately) to enforce the security and to apply the proceeds from the security to the claims of all the lenders?

Yes, Mexican law does recognise the appointment of a security agent. An agreement between the creditors and the agent is required, whereby all parties should agree the terms of such agency and how the proceeds obtained should be distributed.

3.2 If a security trust is not recognised in your jurisdiction, is an alternative mechanism available (such as a parallel debt or joint and several creditor status) to achieve the effect referred to above which would allow one party (either the security trustee or the facility agent) to enforce claims on behalf of all the lenders so that individual lenders do not need to enforce their security separately?

The concept of a security trust is recognised in Mexico.

4 Enforcement of Security

4.1 Are there any significant restrictions which may impact the timing and value of enforcement, such as (a) a requirement for a public auction or the availability of court blocking procedures to other creditors/the company (or its trustee in bankruptcy/ liquidator), or (b) (in respect of regulated assets) regulatory consents?

Depending on the type of security, the applicable laws offer different extrajudicial proceedings for the enforcement of a security.

In a guaranty trust, the parties agree on the extrajudicial procedure offered by the General Law of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito) to sell the property transferred to such trust, without the intervention of the courts. This is one of the reasons why the use of a guaranty trust is deemed more practical and efficient.

For a traditional pledge, unless the debtor agrees to transfer the ownership of the pledged assets, a judicial proceeding is required. For a pledge without transferring the possession of the assets, the applicable laws also allow the parties to agree on an extrajudicial procedure, which would not involve the intervention of the courts. However, if the debtor refuses to deliver the possession of the pledged property or to the payment, or the requirements set for such extrajudicial procedure are not covered, then judicial foreclosure is required.

Finally, regulatory consents may be required depending on the activities carried out by the project company.

4.2 Do restrictions apply to foreign investors or creditors in the event of foreclosure on the project and related companies?

The only restriction would be if the title over the assets is transferred to the foreign investors or creditors. In this case, the Mexican Foreign Investment Law (Ley de Inversión Extranjera) imposes restrictions depending on the regulated activity.

5 Bankruptcy and Restructuring Proceedings

5.1 How does a bankruptcy proceeding in respect of the project company affect the ability of a project lender to enforce its rights as a secured party over the security?

The project lender may be affected from the moment a claim of bankruptcy of the project company is admitted. From such moment the judge may order as a protective remedy the stay of foreclosure proceedings. Pursuant to the Mexican Business Reorganization Law (Ley de Concursos Mercantiles), the insolvency proceeding contemplates two stages: a conciliatory stage, whose main objective is to reach an agreement among the recognised creditors to preserve the company; and the bankruptcy stage, which involves the sale of the project company and its assets to repay the recognised creditors. The judicial resolution declaring bankruptcy will contain the order to stay all foreclosure proceedings during the conciliation stage. If an agreement is reached among the recognised creditors, secured parties that did not participate in the agreement may start or continue with their respective foreclosure proceedings, unless such agreement provides for the payment of the indebtedness to the secured lender.

Additionally, during the first 30 days of the bankruptcy stage, the liquidator (síndico) has the ability to avoid separate foreclosure proceedings over secured assets that are associated with the ordinary course of business of the project company when he considers the sale of the project company as a whole to be more valuable. In such event the liquidator will carry out an appraisal over the secured assets. If the appraisal indicates a value higher than the corresponding indebtedness, the liquidator will pay the secured lender the amount of the indebtedness; if it turns out to be lower, he will pay the appraisal value and the secured lender will become a common creditor for such amount.

5.2 Are there any preference periods, clawback rights or other preferential creditors' rights (e.g. tax debts, employees' claims) with respect to the security?

Yes. Tax claims and certain labour claims have priority over secured creditors, as well as litigation expenses for the defence of the collateral, and preservation and maintenance expenses.

5.3 Are there any entities that are excluded from bankruptcy proceedings and, if so, what is the applicable legislation?

Government entities that are not incorporated as business companies are excluded from bankruptcy proceedings. Likewise, insurance, reinsurance and bond companies will be governed by the proceedings set forth in their applicable laws.

5.4 Are there any processes other than court proceedings that are available to a creditor to seize the assets of the project company in an enforcement?

There are certain securities such as the guaranty trust and the pledge without transferring possession, as described in the answer to question 4.1, that would allow extrajudicial proceedings to be agreed on.

5.5 Are there any processes other than formal insolvency proceedings that are available to a project company to achieve a restructuring of its debts and/or cram down of dissenting creditors?

No, only the insolvency proceedings set forth in the Mexican Business Reorganisation Law. Such law allows a debtor that has been deemed to have "widely breached its obligations", as defined therein, together with its creditors representing at least the majority of its indebtedness, to present a restructuring plan. An ordinary insolvency proceeding would follow; however, the agreed plan would only be enforceable if it were judicially approved.

5.6 Please briefly describe the liabilities of directors (if any) for continuing to trade whilst a company is in financial difficulties in your jurisdiction.

Directors could be subject to civil and/or criminal liability.

To continue reading this article, please click here.

Previously published by Global Legal Group

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions