Introduction to how to buy agricultural land in Mexico: The second-largest economy in Latin America is Mexico. Agriculture in Mexico has historically and politically been an important sector of the country’s economy, although it is now a very small part of Mexico’s GDP. About a quarter of Mexico’s 100 million people live in rural areas and rely primarily on agriculture.
Farming accounts for less than one-third of the national average, and agriculture contributes only 5% to the national GDP. In the north and northeast, the fields are mostly large and irrigated, producing a variety of crops, including Wheat, Millet, Oilseeds, and Vegetables. Mexico has attracted international agro-industries that are looking for favorable weather, cheap labor, and a favorable position in the face of major global markets.
Agricultural land has usually long-term returns. In the case of the acquisition of land by the government, the compensation for rural lands is higher than for urban lands. Mexico is a major global producer and exporter of agricultural products, accounting for a significant share of total global exports of Lemons and Melons (31%), Tomatoes (24%), Cucumbers (19%), and tropical fruits (22%) including Pineapple, Mango, Avocado, and Guava.
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The agriculture sector is one of the main engines of Mexico’s rural economy. Mexico is one of the cradles of agriculture where Mesoamericans produce houseplants such as Corn, Beans, Tomatoes, Squash, Cotton, Vanilla, Avocado, Cocoa, a variety of spices, and much more. Historical returns on agricultural investment have nothing to do with the prices of traditional assets and securities such as stocks, bonds, real estate, timber, and even short-term agricultural commodities.
Crops that are key to small homeowners’ economies, such as coffee and seasonal white corn, are often hit by shocks such as weather events or market imperfections. The country is also at risk of climate-related disasters that are exacerbated by unsuitable agricultural practices. About 70% of Mexican agriculture is achieved through manual labor, using basic tools. Since only 1.5 million acres of arable land use includes irrigation technology, there is modest demand from producers who want to ensure that their crops are irrigated by seasonal rains or through mobile water pumps.
Mexico is a major agricultural producer: it is the first global producer of Avocado, Lemon, and Lime. The third and fourth are for Grapes and Corn; 5th for Beans, Coconut Oil, Oranges, and Poultry; and the sixth for Sugar. However, the country is a major importer of basic products such as yellow corn, rice, oilseeds, and pure wheat.
About 50% of Mexico’s farmland is owned by collective farms, called ejidos. The system was established in the early 20th century, when large private lands were redistributed to peasant cooperative groups, to ensure their livelihood and to give peace to the rural areas. Investment in farms was also poor, as collectively held land could not be used as collateral for loans, and this combination of small size and low investment inevitably led to low productivity.
Guide on how to buy agricultural land in Mexico, types of lands, agricultural land policies, restrictions & special rules for buying agricultural land in Mexico
Types of lands in Mexico
Generally, under Mexican law, agricultural land consists of either:
- Private land, whether owned by private companies or individuals, domestic or foreign; or
- Agricultural or ejido land, (i.e., an ejido land, a legal entity consisting of a rural collective).
Mexico ranks 4th among countries for unequal distribution of income. Despite the increase in per capita income, the poverty rate has stagnated in recent years and almost half of the population is living below the national poverty line. More than 60% of Mexico’s poor live in rural areas, and most depend on agriculture. The development in the agricultural sector has been concentrated in commercial farming, and the rural poor have generally not experienced an improvement in agricultural production.
Ejidos (agricultural) lands in Mexico are lands that are or still belong to a community. When buying ejido land should consider the legal status and purchase of the land, otherwise, you run the risk of losing your land ownership. Agricultural land ownership in Mexico is either private or collective, often in ejidos arrangements. Ejidos were created in the first half of the 20th century to give Mexican farmers rights over redistributed land but did not involve leasing or selling. Mexico’s constitution was amended in 1992 to change that arrangement. Generally occupied lands are characterized by small plots run by families that are not profitable nor eligible for financial products such as loans.
Following legislation passed in 1992, a major overhaul of the Mexican land government, which allowed privatization and market transfer of land rights, is now largely complete. Need to follow through assist aged communities to protect lands and protect shared resources; ensuring an up-to-date and reliable land verification and registration process; increasing access to credit, and improving the functioning of the land markets.
Mexico cities have low population densities and, as a result, high urban sprawl. Urban sprawl negatively affects inner-city transportation and limits employment opportunities for the urban poor, who cannot afford the high cost of transportation from peri-urban areas. Mexico must enhance its institutional capacity and strengthen cooperation with all levels of government in planning and developing urban land use.
Mexico’s development is limited by environmental challenges, many of which relate to water resources. In the last 60 years, population growth has reduced the amount of water available per capita, putting Mexico under severe water pressure. The states of northern Mexico are under severe water pressure, and pollution of both surface and groundwater is increasing. Mexico must improve its water management system so as not to limit its further development potential. Perhaps because of its high vulnerability to climate change, Mexico is an international leader in forest management and efforts to reduce and adapt to climate change.
Can foreigners buy agricultural land in Mexico?
A foreign individual may own land directly in Mexico. It is provided for in the Constitution of Mexico. Then, the law allows foreigners to acquire land property in Mexico, as long as it is located outside the this is known as ‘Restricted Zones, which include any land within 50 kilometers of the sea or 100 kilometers of foreign borders as an attempt to prevent foreign invasion.
Acquisition by foreign individuals
Foreigners can acquire land for agricultural purposes, subject to the following size limitations. The first limitation is that the individual agricultural property cannot exceed 100 hectares of irrigated land (247 acres). One hectare of land is equal to 2.4711 acres.
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Land used for cotton production cannot exceed 150 hectares of irrigated land (371 acres) and land used for the production of very few specific crops, such as Coffee, Banana, Cocoa, Fruit Trees, etc., may not exceed 300 hectares of irrigated land that is 741 acres land.
Acquisition by foreign corporations
As a general rule, a foreign company cannot directly own land in Mexico for agricultural purposes. However, there are options for foreign companies to consider having an interest in the land for these purposes;
- Individual shareholders of the foreign company may obtain various parcels of land in their name and then lease the land to the company.
- In Mexico, stock companies own agricultural land of individual landholdings.
Why can’t foreigners buy Ejido property in Mexico?
The reason is simple – By law, foreigners are not allowed to be owners in Mexico. The most important condition for becoming a part of Ejido is that you must be of Mexican nationality. The Ejido property is not privately owned, and cannot be sold to foreigners. It can only be sold to Mexicans. A Mexican citizen who wants to buy Ejido land has the agreement of the whole community who is the “owns” of the agricultural land. The buyer may risk a legal battle if Ejido’s property is sold without the consent of all the owners, which means that in the worst-case scenario the agricultural land will be returned to the original owner.
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The owner has the right to occupy the collective land, but he has no deed, and if he wants to sell it, he needs the approval of the Assembly of Commissary. The commissary will never approve the sale to a foreigner as it would be against the law. The process to buy Ejido land in Mexico is through a privatization process in which the property is transferred to a Mexican citizen by title or deed. Transferring Ejido property to private ownership is a time-consuming process, and there is no guarantee that it will succeed.
Another consideration to keep in mind, since the earth is located in a ” restricted zone”. If a property is within 50 km from the coast and 100 km from the border, a foreigner can buy such land only through a trust. A trustee bank cannot hold property in a trust without a private deed. Be careful, because many foreigners have bought the property in this way, without proper title. They are negotiating and privately assigning rights, which means they are threatened as a communal commissar or the government can reclaim the land at any time.
How much Mexican land is used for farming?
About 55% of land in Mexico is used as agricultural land, and 5.4% of cropland is irrigated. Agricultural productivity in Mexico is low, especially among small farmers who are estimated to be no more than 20% productive like commercial farmers.
Agricultural land policies in Mexico
The mechanisms to be implemented to promote this sector;
- Programs to promote small and medium-scale agriculture.
- Programs to increase coffee and sugar production.
- Guaranteed pricing programs for Corn, Beans, Wheat, Rice, and Milk.
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These mechanisms are present in specific programs administered by the federal government. In addition, a new public entity, Mexican Food Security, has been formed. Its main responsibilities are;
- Procurement of products at guaranteed prices and coordination of product imports when there is a shortage.
- Promoting the production and commercialization of agricultural products and milk.
- Promotion, sale, and import of fertilizers and improved seeds.
Acquisition of ownership under agricultural land in Mexico
Ejido Land Ownership cannot be acquired unless a process of separation is followed under agricultural law (after which ejido land becomes private property). The main laws governing acquisition are;
- Firstly, Civil Codes, either local or federal code (32 different codes that apply to each Mexican state and one federal civil code);
- Agricultural law, the process of separation from ejido and the transfer of separate ejido property;
- Public Registers of Property Laws; and
- Tax laws (property transfer tax).
Restrictions and special rules for buying agricultural land in Mexico
Are there restrictions on the acquisition of agricultural land in Mexico? Under the Mexican constitution, only Mexican individuals or companies can acquire agricultural land in Mexico. However, foreign nationals (individuals or companies) can acquire land if they execute an agreement in which they relinquish the possibility of requesting protection of their government in respect of the acquired property.
Regardless of the buyer’s nationality, there are constitutional restrictions to avoid disproportionate accumulation when acquiring agricultural land, for example, the constitution of Mexico prevents an individual from owning more than 50 hectares of irrigated land.
Do you have any subsidy or other assistance system for agriculture in your jurisdiction?
The federal government, usually through the Ministry of Agriculture and Rural Development (Ministry of Agriculture), organizes various programs to promote agricultural production so that producers, individuals, or organizations are given different amounts of gold incentives. These programs are related to the Promotion of Agriculture. They provide basic support;
- equipment and services
- work capital
- acquisition of equipment and work tools
- increase of production technologies and
- irrigation systems
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Special rules of agricultural lending in your jurisdiction;
The risk assessment determines how loans are secured. An agricultural product can be guaranteed. If the product is considered high risk, financial institutions may seek bail by securing agricultural land, which has become commonplace due to fluctuations in the agricultural sector and specific circumstances.
The most common security interest offered on agricultural land is a mortgage. Mortgages are made through a document that pays interest on the mortgage. This document must be processed as a notary deed and then registered in the relevant public registry of the property. Administrative and notary fees apply.
Land tenure and rights to use agricultural land in Mexico
What are the common rights to use agricultural land?
Ownership of agricultural land in Mexico is either private or in some form collective, often in ejido arrangements. Ejidos were created in the first half of the 20th century to give Mexican farmers rights over redistributed land but did not involve leasing or selling. Mexico’s constitution was amended in 1992 to change that arrangement. However, occupied lands are characterized by small plots operated by families who are neither profitable nor eligible for financial products such as loans.
Sixty-five percent of Mexico’s soil is shallow and has low crop yields. There are eleven major types of soil in Mexico, most of which are determined by climatic patterns. These major types are Central Pacific, North, Center, Northeast, Northwest, Gulf of California, Gulf of Mexico, Balsas-Oaxaca Valley, South Pacific, Southeast, and Yucatan.
Highly capable people cover about 26% of the country and are already heavily exploited. The largest soil type is in the center and the Gulf of Mexico, where the population density is highest. It is estimated that no more than one-fifth of this area can be made cultivable. And, one-fifth of Mexico’s fields are irrigated, vital for commercial production in arid northern and northwestern Mexico. Underground aquifers have been under depletion at rates higher than 1 meter per year in most regions, with the raising of alfalfa one reason.
Use rights are allowed on agricultural land, whether private land or aged land. Private companies or individuals can acquire usage rights through agreements such as leases or use agreements.
Acquisition of usage rights on agricultural land in Mexico
Permission to use rights on agricultural land, whether private or ejido land. Private companies or individuals can acquire usage rights through agreements such as leases or use agreements. The main laws are;
- Federal Civil Code.
- Local Civil Codes (32 different codes, according to each Mexican state and Mexico City).
- Agricultural law.
- Laws or regulations relating to public registries of property.
The Civil Code generally contains rules for the treatment of erosion, falling lands, and fences. Ejido land ownership cannot be acquired unless a process of separation is followed under agricultural law (after which ejido land becomes private property). The main laws governing the acquisition of property are;
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- Civil codes, federal or local.
- Agricultural law, about the transfer of separate ejido property.
- Public Registry of Property Laws.
- Tax laws (property transfer tax).
Forms of agricultural property system in Mexico
There are two forms of property system in agricultural land: agricultural private land and ejido land.
The Federal Civil Code and the Local Civil Codes govern all matters relating to private real property. There are specific provisions regarding the lease of agricultural lands but no maximum lease period is set. The term is agreed upon by the contracting parties.
In Mexico, Agricultural Law sets for any agreement that gives the right to use of Ejido Land. Utilization agreements can also be given. Regardless of the type of land, Ejido, use or exploitation can be restricted in certain circumstances, such as when the land is located in a protected natural area or archeological site.
An Ejido is an area of communal land used for agriculture in which members of the community have the right to use the land, rather than the ownership of the land, which is in Mexico is held by the Mexican state.
The procedure required for the sale of agricultural land in Mexico
Is there any prior approval procedure required for the sale of agricultural land?
The sale of agricultural land (this is government or ejido land) in Mexico follows some process.
To acquire government land, a procedure must be followed, which includes;
- Values from government agencies,
- Separation from a public estate, public bidding, and direct sale.
- Matters of transparency and accountability.
- Publications in the Federal Official Gazette.
In general, these operations involve both the Federal Comptroller’s Bureau and the Institute for Management and Assessment of National Property.
To purchase Ejido agricultural land, a formal procedure under agricultural law must be carried out in advance, so that the land can be separated from the Ejido government and converted into private property. This procedure is needed, among other things;
- A meeting of the ejido members with a special quorum, to allow a change of government on land.
- Waivers of preferential rights.
- Notary public participation.
- The cost of a transfer is based on the valuation of the Institute for Management and Appraisal of National Property, or a banking institution.
The authorities involved in this process are, in general, the National Agrarian Registry, the Agrarian Affairs Enforcement Bureau, and the Public Registries of Property. There is no minimum land sale/purchase price for the purchase of ejido land. Instead, by law, the government, whether federal or local, must sell the property at the best and highest price based on market value, and under the best terms and conditions of payment (public bid or direct sale). The appraisal agencies (the Institute for Management and Appraisal of National Property at the federal level) enforce it under the rules for acquiring government land.
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