MEXICO Law and Practice Contributed by: Julián J. Garza Castañeda and Paulina Bracamontes Belmonte, Nader Hayaux & Goebel
7.5 Risk Areas for Lenders Lenders should always make sure that they observe all the requirements applicable to the perfection of security interests over assets. Provided that all the formal requirements have been met when issuing a guarantee or a security by a third party, a risk area for lenders is that guarantees and securities may be at risk of being set aside if they were granted by an entity within a certain period prior to the onset of the insolvency. This is known as fraudulent conveyance, and would take place if: • the securing entity received considerably less con- sideration than that of a fair market standard; or • the guarantee was created within the statutory criterion of 270 days before the date on which the guarantor is found to be insolvent by a Mexican court. Therefore, upstream guarantees may be problematic under the Mexican Insolvency Law, unless the Mexi- can guarantor receives a corporate benefit from the financing that serves as legitimate consideration for the grant of the guarantee or collateral. Project finance in Mexico has existed for many dec- ades. Thirty years ago, infrastructure projects were primarily funded through government spending and through international governmental agencies, such as the Export-Import Bank of the United States. More recently, public-private partnership (PPP) structures have diversified project finance alternatives. Banks and private investors are also more willing to absorb the risks associated with project finance, given the confidence they have gained with regard to collateral structures and the viability of certain projects. Project finance remains a key element for Mexico’s development. The current administration in Mexico has focused its National Development Plan 2025-2030 on strategic infrastructure-related projects, which require adequate and innovative financing structures. Key commitments of the NDP include: 8. Project Finance 8.1 Recent Project Finance Activity
• connectivity and mobility, including expanding and modernising federal highways and rural roads; • rail infrastructure, including the construction of new railway lines for freight and passenger trains; • energy infrastructure, with projects ranging from clean and renewable energy to rural electrification
and distribution capacity; • water infrastructure; and • port and airport infrastructure.
8.2 Public-Private Partnership Transactions Federal PPPs in Mexico are, among other statutes, regulated by: • the Public-Private Partnerships Law (the “PPP Law”); • the Regulations of the Public-Private Partnership Law (the “PPP Regulations”); and • the guidelines that establish criteria for determining the feasibility of executing a project under a PPP scheme. PPPs might also be impacted by provisions contained in: • the Mexican Constitution; • the Public Sector Acquisitions, Leasing and Ser- vices Law; • the Code of Commerce; • the Federal Civil Code; • the Federal Law of Administrative Procedure; • the Federal Code of Civil Procedure; and • the National Code of Civil and Familiar Procedure. In accordance with the PPP Law, PPP projects can only apply to sectors in which private individuals or entities can participate according to the applicable laws of each sector. Also, the PPP Regulations may prohibit state productive enterprises from executing PPP contracts with developers for activities related to the exploration and exploitation of hydrocarbons. There are many other requirements and restrictions applicable to PPP projects. Please note that in recent years there have been alter- native projects to enact regulations that permit “asso- ciations” between public agencies and private parties
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