MEXICO Law and Practice Contributed by: Alejandro Stamoglou, Jesús Pérez Alcántar and Julio Jiménez Manrique, Bello, Gallardo, Bonequi y García, S.C.
the fund’s risk and return criteria, as well as diversifi - cation and regulatory requirements imposed by insti - tutional investors such as Afores . Addressing these challenges requires significant efforts in origination, credit analysis and structuring, particularly in an envi - ronment where financial transparency and standard - ised reporting practices are still evolving. 1.8 Impending Regulation and Reform As outlined above, given the significant role that Afores play in Mexico’s private credit market, the reg - ulator, the National Commission for the Retirement Savings System (CONSAR), has increasingly focused on transactions involving these institutional investors, requiring strict compliance with regulatory standards. Recent regulatory updates have already raised the cap on structured instruments from 20% to 30% of the portfolio managed by pension funds, signalling a clear intent to promote greater participation in alter - native assets. At the same time, these reforms aim to ensure that these vehicles allocate a substantial por - tion of their capital to projects within Mexico, adding governance and transparency requirements. Overall, these measures could make lending into Mex - ico more attractive for foreign private credit provid - ers, provided they structure their investments through vehicles that comply with local regulations, while also introducing additional operational and reporting obli - gations that may increase complexity. 2. Regulatory Environment 2.1 Licensing and Regulatory Approval Under Mexican law, the granting of loans may be carried out on a regular and professional basis by any person without the need to obtain governmen - tal authorisation. However, it is important to note that no individual or company, other than duly authorised financial institutions (such as banks and fintech enti - ties), may directly or indirectly raise funds from the public within Mexican territory through deposit-taking, lending, credit, loan agreements or any other transac - tions that create direct or contingent liabilities.
In respect of taking the benefit of security over assets located in Mexico, lenders and foreign lenders do not require a licence or regulatory approval. 2.2 Regulators of Private Credit Funds As noted in 1.8 Impending Regulation and Reform , CONSAR is one of the primary regulators in the pri - vate credit space, given the increasing participation of pension funds ( Afores ) in this market. Considering recent increases in investment limits for structured instruments, CONSAR is expected to exercise stricter oversight to ensure compliance with applicable limits and regulatory requirements. It is important to note that such supervision directly applies to Afores and not to private funds themselves. Additionally, non-bank financial institutions such as SOFOMES play a significant role in private credit. As such their activities are primarily regulated by the National Banking and Securities Commission (CNBV), particularly in matters related to anti-money launder - ing and compliance obligations. Additionally, CON - DUSEF oversees transparency and consumer pro - tection requirements, specifically for SOFOMEs ENR (non-bank affiliated entities). 2.3 Restrictions on Foreign Investments There are no specific restrictions on foreign invest - ment in private credit funds in Mexico. The Mexican legal framework generally allows unrestricted foreign participation in investment funds and private credit vehicles. However, certain underlying investments may be subject to ownership limitations under Mexi - can foreign investment laws, particularly in regulated or strategic sectors such as transportation, integrated port administration, telecommunications and hydro - carbons. 2.4 Compliance and Reporting Requirements According to Mexican anti-money laundering law, the granting of loans on a regular and professional basis, with or without collateral, by parties other than finan - cial institutions constitutes a vulnerable activity. In this regard, those engaging in a vulnerable activity are subject to a series of obligations, including: (i) the direct identification of clients or users, as well as the ultimate beneficial owner involved in such transac -
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