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| Financing in Mexico |
Baker Law Group helps companies doing business in Mexico find financing for their business needs. Although Mexico has made incredible strides since 1994 in inproving its economy, financing in Mexico is still difficult to find. If it is available from Mexican lenders, Mexican lenders often charge about 30% interest per year.
There are a few U.S. lenders willing to lend into Mexico at rates far below that. Baker Law Group helps companies arrange financing with those lenders.
The laws in Mexico are different from the laws in the United States. Not that one set of laws is better than the other; they are just different. One thing that keeps lenders from making more loans in Mexico is the difficulty of foreclosing on collateral if there is a default. Unlike the United States and Canada, Mexico does not have the equivalent of a filing system. That means that there is no way to reliably look at records to see whether a borrower's equipment or other personal property is already serving as collateral for someone else's loan. Likewise, there is no way for a lender to file a notice that would show the world that the lender had taken a security interest in certain equipment or other personal property. Finally, it is difficult in Mexico for a lender to repossess the equipment or other personal property in the event of the borrower stops paying on the loan.
That is not to say that companies doing business in Mexico are poor risks, that the default rate is any higher than the United States or that there are not other means to bring a loan in default into compliance. One lender reports only a 1% to 2% default rate on equipment leases in Mexico, which is a very good rate by anyone's standards.
In most states in Mexico, it is also very difficult to foreclose on real estate. In other words, if real estate is used as collateral to assure the repayment of a loan, and the loan goes into default, it can be very difficult for the lender to take back the real estate or force its sale in order to pay down the loan. The one exception is the state of Baja California, which includes the cities of Mexicali, Tecate, Tijuana and Ensenada. Within the last few years, Baja California enacted a more creditor friendly foreclosure law. This should make it easier for creditors to foreclose on real estate in the state of Baja California. Accordingly, it should make lenders more willing to lend against real estate in Baja California.
If you are a company doing business in Mexico that is interested in borrowing money, please contact us at FinMex@bakerlawgroup.com.
