A Publication of the Latin American Services Group April 1996 ------------------------------------------------------------------------------------------------

Purchase of Residential Real Estate in Mexico's "Restricted Zone" 
by Rolando Ballesteros
                                        
Mexico's constitution prohibits non-Mexican nationals from outright purchase 
of land 50 kilometers approximately 31 miles)  from the coast and 100 
kilometers (approximately 62 miles) from the country's borders (the "restricted 
zone"), but there are loopholes designed to encourage foreign investment.

The Foreign Investment Act of 1993 states that corporations with 100% foreign 
capital, may acquire the direct ownership of real property located within the 
restricted zone when the property is designated for non-residential purposes, 
after registering said acquisition with the Secretariat of Foreign Affairs.

Foreign individuals and foreign legal entities may acquire land within the 
restricted zone through a bank trust (a "fideicomiso") in which the bank is the 
holder of title (the "trustee"), and the foreign-buyer is entitled to the use and 
development of the property under a 50-year transferable and renewable trust. 
The foreign-buyer "has the rights to the use and enjoyment, including, when 
appropriate, the obtaining of fruits, products and, in general, of any benefit 
resulting from a profit-making operation and exploitation, through third parties 
or through a fiduciary institution".

Closing Documents

A number of documents need to be collected before the closing date to ensure 
the purchase transaction is done properly. The total number of documents may 
differ from state to state, but in all cases the purchaser should obtain a 
certificate of no liens and encumbrances to verify that there is no outstanding 
debt on the property or legal dispute involving the property.  It is also important 
to obtain all paid utility bills because the foreign-buyer becomes responsible for 
all past-due bills, including telephone bills.

The "purchase contract" should always be prepared by a Mexican notary public.  
As explained above, the bank is the holder of title, and the foreign-buyer has 
the rights to the use and enjoyment of the property.  Thus, the purchase 
contract will be done in the form of an "assignment of rights."  The assignor-
seller will communicate to the trustee his intention to assign his rights to the 
assignee-buyer. The trustee will then give instructions to the notary public 
(elected by the assignee-buyer) who will draft the deed evidencing the 
assignment of rights.

As in the United States, closing costs will be paid as agreed to by the parties, 
but customarily the assignee-buyer should pay the notary public fees, appraisal, 
property conveyance tax (2% of appraised value), recording fees (both land 
recorder office and foreign investment recorder office), and trustee fees for 
acceptance of the assignment of rights.

After the purchase is completed, the assignee-buyer will pay (other than 
property taxes) fees to the trustee on an annual or six-month basis that varies 
from $100 to $130, depending on the bank holding the title.

Mexico has a legal system quite different from that of the United States.  As the 
saying goes, "When in Rome, do as the Romans," meaning that, as a foreign 
investor, one should not try to apply principles or ideas during the transaction if 
it is unknown whether they will coincide with Mexico's culture and legal 
system.

For additional information, please contact Rolando Ballesteros in the Tucson 
office of Snell & Wilmer L.L.P. via telephone at (800) 949-0225 or (520) 882-
1252, or via fax at (520) 884-1294.  Mr. Ballesteros is licensed to practice in 
both the U.S. and Mexico.

Foreign Corrupt Practices Act - A Legal Dilemma
by
Jerry Morales


As a practical matter, it is often essential to have a local agent, partner, joint 
venturer or representative to do business in foreign countries.  Frequently, the 
chief assets of such an agent are the connections he or she has with the business 
community, governmental authorities and/or state-owned enterprises.  
     
Because of the breadth and uncertainty of its scope, the Foreign Corrupt 
Practices Act (FCPA) of 1977, 15 U.S.C.    78 dd -1 and 78 dd -2, presents 
very significant legal dilemmas and risks for U.S. firms doing or seeking 
business in foreign countries.  In essence, the purpose of the FCPA is to 
eliminate bribery of foreign officials by American businesses.  While its 
purpose is laudable, compliance with its requirements can be challenging. 

These challenges arise for a variety of reasons which include:  (a) uncertainty 
with respect to the application of the FCPA, which frequently results from the 
ambiguity in the definition of crucial statutory terms; (b) the concept of 
"corruption" differs from society to society and typically is impacted by the 
degree of economic development; (c) there is indeed a degree of "corruption," 
as this term may be defined under the FCPA, in foreign economies; and (d) the 
FCPA is unilateral in nature, i.e., other countries do not have laws which 
impose similar constraints on foreign competitors.

The FCPA prohibits "domestic concerns" and their agents from using the mail 
service or any other means of interstate commerce to directly or indirectly make 
payments to a "foreign official," "foreign political party," "official," or 
"candidate" thereof, "corruptly," for the purpose of obtaining his power or 
influence to help the domestic concern obtain or retain business for itself or any 
other person. The FCPA also requires issuers of securities and "domestic 
concerns" to keep accurate and complete records of all transactions conducted 
in foreign countries.

An issuer of securities is any person who issues or proposes to issue any 
security.  A "domestic concern" is any individual who is a citizen, national, or 
resident of the United States or any corporation, partnership, association, joint 
stock company, business trust, or sole proprietorship which has its principal 
place of business in the United States or which is organized under the laws of a 
state of the United States, or a territory, possession, or commonwealth of the 
United States.  Officers, directors, employees, stockholders, and agents of a 
domestic concern are also covered.

Despite some exceptions and affirmative defenses, the breadth of the FCPA is 
impressive, and the penalties that may be imposed under this statute are very 
significant.  Corporations may be subject to criminal fines of up to $2
million.  Officers, directors, stockholders, employees, and other agents who are 
U.S. citizens, nationals, or residents, or otherwise subject to the jurisdiction of 
the United States are subject to fines of up to $100,000 and  imprisonment of up 
to five years.  Fines imposed on individuals may not be paid by the corporation.  
On the civil side, fines of up to $10,000 may be imposed.

To date, many of the claims and litigation under the FCPA have involved 
questions such as the definition of "corruption,"  "foreign official," "party 
official," or "party candidate."  Most of the claims and cases have also  involved 
the question of "knowledge" of the "corrupt payment" by the domestic concern.  
The standard under the FCPA does not require actual "knowledge." Awareness 
of high probability of the existence of the circumstance is enough to constitute 
"knowledge."  The Department of Justice--the FCPA's chief enforcement 
agency--has emphasized that "unwarranted obliviousness," "conscious 
disregard," "deliberate ignorance," or "willful blindness" would not protect one 
from the Act's prohibition.

U.S. firms seeking or doing business abroad are well-advised to develop written 
internal guidelines and to include provisions in any contract with a "foreign 
agent" which would alert and provide protection from the legal risks imposed 
by the FCPA.

For additional information, please contact Jerry Morales in the Phoenix office 
of Snell & Wilmer L.L.P. via telephone at (800) 322-0430 or (602) 382-6362, 
via fax at (602) 382-6070, via Lexis Counsel Connect at 
jmorales@counsel.com, or via e-mail/Internet at moralej@swlaw.com.

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Options to Manufacture in Mexico
by
Benjamin Aguilera


A U.S. company desiring to manufacture goods in Mexico may do so through 
various options, including a joint venture, a wholly-owned subsidiary, a sub-
contract agreement, or a shelter agreement.

Joint Venture

In general, joint ventures are a good method for becoming involved in a foreign 
jurisdiction, and can be formed for almost any kind of enterprise.  Joint 
ventures are a natural prelude to incorporation in Mexico; however, the joint 
venture option for doing business in Mexico has proven to be the most difficult 
-- not because of the legal framework, but because of the difficulties in 
establishing a suitable partner.

In a joint venture with a Mexican partner, the U.S. company generally 
contributes technology, technical assistance, capital, and an increase in 
business, principally in the form of a contract for the manufacturing of goods. 
Ownership of the technology and equipment should be structured in the joint 
venture agreement to protect the U.S. company's rights to its technology and 
title to its equipment.  In a joint venture, the parties negotiate how to share 
administrative, production, and marketing responsibilities.  In addition, the 
parties agree to a profit/loss sharing ratio from the operations of the joint 
venture.

Wholly-Owned Subsidiary

Business organizations in Mexico are similar to the ones in the Unites States. 
However, the incorporation process for a wholly-owned subsidiary in Mexico is 
longer and more expensive.  To incorporate a business in Mexico, several 
licenses and permits must be obtained from a number of Mexican governmental 
agencies.  First, all businesses are required to obtain a permit to operate in 
Mexico and approval of a name for such entity from the Ministry of Foreign 
Relations. Second, if the U.S. company's operations in Mexico will have an 
impact on the environment, an environmental permit from the Ministry of 
Energy, Mines, Natural Resources and Fisheries is required.  Third, if the U.S. 
company is planning to operate its Mexican subsidiary under the Mexican 
Maquila Program as a "maquiladora," the Mexican subsidiary must secure a 
permit under such program from the Ministry of Commerce and Industrial 
Development.  This permit will afford the U.S. company, through its Mexican 
subsidiary, the advantages of the Maquila Program, which includes, among 
other advantages, duty-free imports of (i) raw material, (ii) unfinished product, 
and (iii) machinery.  Once this first tier of permits is secured, other required 
applications to various governmental agencies can be readily expedited.  The 
wholly-owned subsidiary option enables the U.S. company to maintain 
complete control over the manufacturing process, as well as total ownership of 
the equipment.  Although this is the most expensive and time-consuming 
option at the onset, it could  prove to be the most cost-effective in the long run 
because of the complete control on the operations of the Mexican subsidiary.

Contract Assembly Programs
     
Unlike joint ventures and wholly-owned subsidiaries, this option offers foreign 
companies the greatest flexibility with the least commitment.  These programs 
are formed by a written, binding manufacturing agreement between the parties 
that outlines the responsibilities of a Mexican contractor and the U.S. company.  
The term of this type of agreement is usually one year.  Under these programs, 
all legal and administrative issues in Mexico are handled by the Mexican 
contractor.  In addition, the Mexican contractor assumes responsibility for 
returning all unused materials, scrap, and equipment to the U.S. company when 
the agreement expires or is otherwise terminated. 
Contract assembly programs have a faster start-up period than a joint venture 
or a wholly-owned subsidiary.  Presently, the most popular contract assembly 
programs in Mexico are the manufacturing agreement and the shelter 
agreement.

Sub-Contract Agreement
     
Under a sub-contract agreement, the product is manufactured by a Mexican 
corporation to the U.S. company's specifications at a cost per unit basis, F.O.B. 
the U.S. port of entry.  Generally, in this type of operation, the U.S. company 
provides the specifications and requirements for the product, the materials, 
production schedule, the equipment list, or the equipment itself, necessary to 
manufacture or assemble the product.

Under a sub-contract agreement, the Mexican contractor assumes full 
responsibility for quality and production and, depending upon which party 
supplies the components, the contractor may also be responsible for scheduling  
the material. Thus, a sub-contract agreement allows the U.S. company 
moderate control over the production process without the complexity of dealing 
with a foreign legal and business system.

Shelter Agreement

Under a shelter agreement, the product is manufactured by a Mexican 
corporation operating under the shelter of a maquila permit.  Generally, a 
shelter agreement places responsibility for production, quality control, and 
material functions with the U.S. company.  Accordingly, the U.S. company is 
required to have its own staff at the Mexican facility to perform these functions.  
The shelter agreement fee for the production process is assessed on a per clock-
hour/per employee basis. The Mexican shelter supplies the U.S. company with 
whatever requirements the U.S. company needs to ensure that the staff is 
skilled for the manufacturing process.  Customarily, the Mexican shelter 
handles the administrative, personnel, and custom issues.  Operations under a 
shelter agreement allow the U.S. company almost complete control of the 
production and quality process.

Depending on the level of involvement, experience in the Mexican legal and 
business system, and objectives of the U.S. company, a manufacturing 
operation in Mexico has proven to be not only a viable alternative, but also a 
successful one.  To date approximately 3,000 maquiladora plants in Mexico 
employ about 600,000 people.


For additional information, please contact Benjamin Aguilera in the Phoenix 
office of Snell & Wilmer L.L.P. via telephone at (800) 322-0430 or (602) 382-
6342, or via fax at (602) 382-6070.
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Chile Presents Unique Opportunities to American Companies Interested in 
the Latin American Market
by
Jose P. Ceppi

Chile is a small country in Latin America with a population of approximately 
14 million, but which presents unique opportunities for foreign investors.  
Chile's economy today is one of the most dynamic in the region.  In the past 
five years, it has grown at an average annual rate of 6.5%.  From 1986 to 1995, 
Chile increased its level of  domestic savings from 12% to 27% of GNP.  It also 
has achieved a low level of inflation, confining it to a single digit, and reduced 
unemployment to a level of approximately 5%.

Given the economic success of Chile and its limited internal market, a number 
of Chilean companies have expanded their operations into other countries 
within Latin America.  In fact, during 1994, Chilean companies invested more 
abroad as a percentage of gross domestic product than U.S. or Japanese 
companies.  In Argentina, for instance, Chilean investors control Enersis, the 
electrical utility company which distributes electricity to 5.5 million people in 
Buenos Aires. Chilean companies also have actively moved into key industries 
in Peru, Bolivia, and most recently, Brazil.

Simultaneously with the increase in Chilean investments abroad, foreign 
investment into Chile has similarly continued to increase at a fast pace.  During 
1994, such investment reached $4.6 billion.  During the first six  months of 
1995, foreign investment reached $2.5 billion.  In light of recent Chilean 
legislative developments, this pace is likely to accelerate in 1996.

In August 1995, the Chilean Congress enacted a new investment law which 
makes it easer for foreign investors to participate in government infrastructure 
and public-works projects.  According to the Chilean Public Works Ministry, 
this new law should generate between $2 billion and $4 billion dollars in 
foreign investment in the next two years, particularly in lucrative highway 
projects. These projects yield annual returns between 12% and 15%.

Recent developments in the United States are also likely to increase U.S. 
investments in Chile.  In June 1995, the Export-Import Bank (Eximbank) 
announced it would finance the sale of U.S. equipment and mining services to 
partially government-owned enterprises in Chile.  It then approved a $165 
million loan to the Betchel Corporation to sell mining equipment and supplies 
to one of Chile's large copper mines partially-owned by the Chilean 
government.  Chile is the world's largest copper producer.

Many U.S. companies are opening offices in Chile to efficiently reach the 
markets not only in that country, but also in Argentina, Brazil, Bolivia, Peru, 
Uruguay, and Paraguay.  For example, at a recent seminar in Phoenix, Arizona, 
an executive of Microtest, Inc., a small, leading-edge software company, 
explained his company's strategy for locating its first Latin American office in 
Santiago, Chile, as follows:  "Chile is a very efficient country with a modern 
infrastructure and sophisticated services necessary for a technology company 
like ours.  It also allows us to be in the other major southern cone markets in a 
day or less of travel."

In conclusion, U.S businesses with a focus on Latin America are making Chile 
one of the logical places to first locate. Given Chile's likely inclusion in the 
North American Free Trade Agreement in the next couple of years, such U.S. 
investments in Chile are likely to substantially increase.

For additional information, please contact Jose P. Ceppi in the Phoenix office 
of Snell & Wilmer L.L.P. via telephone at (800) 322-0430 or (603) 382-6275, 
or via fax at (602) 382-6070.

Jose P. Ceppi recently joined Snell & Wilmer L.L.P. as Of Counsel.  Mr. Ceppi 
was born and raised in Santiago, Chile. Previously he served as Assistant 
General Counsel with the Federal Deposit Insurance Corporation in 
Washington, D.C.  His practice at Snell & Wilmer L.L.P. will focus on 
international transactions between the U.S. and Latin America.

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Mexican Foreign Investment Act
by
David K. Armstrong


In December 1993, Mexico adopted a new Foreign Investment Act, designed to 
open up investment opportunities for in-bound investors.  The new legislation 
replaces a foreign investment law which, for many years, made commercial real 
estate ownership by non-Mexicans extremely difficult and hampered 
investment by non-Mexicans in many industries.  Prior to enactment, non-
Mexicans were not permitted to directly own real property (land or buildings) 
within the "restricted zone" -- the area within 100 kilometers (approximately 62 
miles) from any national border and 50 kilometers (approximately 31 miles) 
from the shoreline. The previous law also prohibited direct or indirect foreign 
ownership of more than a minority position (as low as a 25% maximum) in 
Mexican companies engaged in many important industries, and, with respect to 
certain industries, prohibited altogether any foreign ownership of such 
companies or the assets used therein.
     
Among the more important changes brought about by the new law are: 
     
 Direct foreign ownership of commercial real estate within the "restricted 
zone" is now permitted, provided that the acquisition is through a Mexican 
corporation (which can be 100% owned by foreign investors) and is approved 
by the Secretariat of Foreign Affairs.  The law applies only to non-residential 
property. Residential property must still be held through land trusts of which 
Mexican financial institutions typically act as trustee.  Such residential property 
trusts are, however, extended to a 50-year duration (replacing the 30-year term 
under prior law) and are automatically renewable by the foreign beneficiary. 
     
 The new law permits non-Mexican national investors to own up to 30% 
interest in Mexican commercial banking institutions, bank holding companies, 
and securities brokerage firms and up to a 49% interest in Mexican insurance 
institutions, leasing and factoring companies, investment companies, and other 
auxiliary financial and credit institutions.  This supplements provisions of 
NAFTA which permits U.S. and Canadian banks to establish wholly-owned 
Mexican subsidiaries.
     
 Telecommunications, including basic telephone services, and cable television 
services may now be owned up to 49% by foreign investors, as may some rail 
and sea transportation and transportation-supply services.

 Foreign investors may, with the consent of the applicable Mexican federal 
agency, the Foreign Investment Commission, own a majority interest in a 
variety of service-providers, including credit reporting agencies, providers of 
legal services, cellular telephone services, private schools, insurance agencies, 
and oil and gas drillers.

 The new act extends so-called "neutral investment," that is, investment 
through certificates of participation, to Mexican companies not quoted on the 
Mexican stock exchange (the Bolsa Mexicana de Valores). (Previously, only 
quoted companies were open to such investment).
     
Participation in certain industries continues to be restricted to Mexican 
participants only, to the exclusion of any foreign investment.  These industries 
include surface transportation of passengers and freight, retail gasoline sales, 
radio and television broadcasting, and the provision of certain professional and 
technical services. Further, certain essential industries, including petroleum 
and petrochemical production, the generation of electricity and nuclear energy, 
satellite and telegraph communications, and the operation of railroads, as well 
as certain traditionally governmental activities, such as mail service, port and 
airport supervision, and the issuance of currency, are reserved to the Mexican 
government.
     
The new act also restricts the formerly broad authority of the Foreign 
Investment Commission.  Previously, the Commission had discretionary 
authority to prohibit, condition, or exempt foreign investment in a Mexican 
company or asset which exceeded statutorily-set limits.  The role of the 
Commission is now more circumscribed. 
While the Commission consent is still required with respect to certain specific 
investments, the criteria which the Commission is required to examine is 
limited to the investment's impact on jobs, technology transfer, the 
environment, and the general productivity of the company or asset to be 
invested in.  Foreign investors must, however, continue to observe Commission 
regulations, as substantial penalties may be assessed for the failure to obtain 
required consents.

For additional information, please contact David K. Armstrong in the Salt Lake 
office of Snell and Wilmer L.L.P. via telephone at (801) 237-1981 or via fax at 
(801) 237-1950.

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Visiting Attorney

Octavio Novaro Holguin, an associate in the corporate-business section of 
Barera, Siqueiros Y Torres Land, S.C., a prestigious Mexico City law firm, will 
be a visiting attorney in our Phoenix office this summer. A native of Mexico 
City, he is a graduate from the Universidad Nacional Autonoma de Mexico 
(UNAM) School of Law.  Octavio's practice is concentrated in litigation and 
administrative proceedings before Mexico's federal and state agencies.
  
Latin American Legal Services


Snell & Wilmer L.L.P. is a full-service law firm with offices in Phoenix and 
Tucson, Arizona; Irvine, California; and Salt Lake City, Utah.  The Latin 
American Services Group assists U.S. and international individuals and 
companies in exploring, establishing, and fostering investment and business 
opportunities in this hemisphere.

The attorneys in our Latin American Services Group are bilingual, bicultural, 
and represent diverse practice areas. 
Their professional, cultural, and ethnic makeup is particularly well-suited to 
represent clients with ivestment, business activities, or other contacts in Latin 
America.

The U.S.-Latin American Legal Reporter is a publication of Snell & Wilmer 
L.L.P. and is published quarterly. 
Copyright.  All Rights Reserved.  The reproduction of the articles in this 
publication is authorized only when said reproduction is total and without 
modifications, and if the original source is credited in said reproduction.

The purpose of this publication is to deliver a commentary on current topics of 
interest to those interested in doing business in Latin America.  The authors 
who participated in their publication, as well as Snell & Wilmer, are not 
responsible in any form for decisions or actions taken based on the content of 
the articles herein.  The articles can not be considered legal advice, because 
their content may not apply to the specific conditions of a particular case.


For questions or additional copies of this newsletter, please contact Jerry 
Morales in the Phoenix office of Snell & Wilmer L.L.P. via telephone at (800) 
322-0430 or (602) 382-6362, via fax at (602) 382-6070, via Lexis Counsel 
Connect at jmorales@counsel.com, or via e-mail/Internet at moralej@swlaw.

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Services Offered Include:

 Formation of Wholly Subsidiaries and Joint Ventures in Foreign Countries

 Formulation, Development, and Implementation of Business Plans for 
Foreign Activities

 Drafting of Outbound and Inbound Sales, Services, and Distribution 
Agreements

 Foreign Tax Credit Planning

 Structuring of Domestic and Foreign Operations

 Structuring Loan Agreements to Foreign Borrowers and Regulatory 
Counseling

 Advisory Services to Foreign Financial Institutions Doing Business in the 
U.S.

 Advice Regarding the Issuance of Securities and Debt Instruments for 
Foreign Issuers in the U.S.

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Office Locations

Phoenix:
     400 East Van Buren Street
     One Arizona Center
     Phoenix, Arizona 85004-0001
     Tel:  (602) 382-6000
     Fax:  (602) 382-6070

Tucson:
     1500 Norwest Tower
     One South Church Tower
     Tucson, Arizona 85701-1612
     Tel:  (520) 882-1200
     Fax:  (520) 884-1294

Irvine:
     1920 Main Street, Suite 1200
     P.O. Box 57062
     Irvine, California 92619-7062
     Tel:  (714) 253-2700
     Fax:  (714) 955-2507

Salt Lake City:
     Broadway Centre
     111 East Broadway, Suite 900
     Salt Lake City, Utah 84111-1004
     Tel:  (801) 237-1900
     Fax:  (801) 237-1950