Like the United States, Mexico was very quiet in the fourth quarter of 2001. It had already been a difficult year due to U.S. economic woes and recessionary concerns pervading the U.S. economy. Being heavily dependent on trade with its biggest neighbor and business partner to the north, Mexico suffered additional financial loss and national anxiety with the turmoil created by the events of September 11.
Americans quit traveling, deciding to stay within the secure confines of U.S. soil. With the border maquila market already down, employee layoffs in plants increasing, and reductions in product output resulting in diminished trade revenues, Mexico got hit with the brunt of America's "staying home" attitude.
The tourism industry, the lifeblood and a vital part of Mexico's gross domestic product, began to hemorrhage. Mexico's beautiful and popular beaches, the adjacent hotels, stores and shops dependent upon U.S. occupancy and money, were empty. Real estate companies and their agents wondered, then worried about the state of things to come during the latter part of 2001. They asked whether Americans, given all the circumstances and financial uncertainty, would return to Mexico? Would the tremendous real estate investment potential that this great country presents to a foreign buying public continue to lure Canadian and American capital?
The events of 9/11 made the world stop, gaze horrifically at the senseless tragedy done, reflect on the fragility of life and question its everyday uncertainty. As human beings living together on this planet, we did become globally united in a common spirit and one unwavering belief. Terrorism is not acceptable, it will not be tolerated and people cannot live in fear of a "faceless coward." We will go on with our lives, though a little more skeptical and certainly more cautious.
Now in 2002, the prognosis for Mexico is positive and very encouraging. Conditions in the United States have improved, not only with travel and our willingness to venture outside the U.S., but the overall economy and outlook have strengthened. The stock market has rebounded to nearly pre-September 11 levels and investor confidence is a little less pensive, less guarded. Investor 401(k) accounts that took a serious "whack" during September began a gradual rebound during the fourth quarter signaling a strong rally that U.S. recovery was on its way. With 11 interest rate cuts by the Federal Reserve during 2001, the U.S. government has diligently tried to jump-start our sagging economy out of its yearlong doldrums.
This writer will tell you that during the months of November and December, it was business as usual concerning Mexico properties. Phones rang, inquiries and requests for information were steady, and new orders for title insurance policies were placed. As in prior years, many transactions had to be closed before the public registries of Mexico ended their operations for the Christmas holidays.
There are several other areas that should be viewed with open and clear eyes regarding the positive investment potential of Mexican real property.
First, you, the foreign buying public, are a much more educated and savvy buyer today from this writer's perspective. You understand better the issues concerning ownership of land in Mexico and if not, you have certainly been willing to learn and to be armed with the right questions to be asked. Thank goodness for the marvels of the educational opportunity and quality of information provided on the Internet!
Second, Mexico's real estate developers and agents have increasingly become more aware that purchasers do understand the issues. Buyers are concerned with title matters, use of an escrow agreement, subdivision authorizations, recorded deeds and condominium regimes, capital gain tax implications, and property conveyance procedures, to name a few. No longer is this buying public willing to just accept that old adage of "trust me, that's how we do business here in Mexico." The margarita syndrome has lost a considerable amount of its swagger ... or is that stagger ... over the last three years!
Beginning in January 2002, there will be a "new sheriff" in the State of Arizona protecting the rights of Arizonans and other Americans as well, when buying property south of the border, namely in the State of Sonora. Gov. Jane Hull has created the first ever Arizona-Mexico real estate task force that will address real estate laws and practices in Sonora having a negative impact on buyers seeking to purchase property there. Several of the items on the agenda are escrow procedures, enforcement of zoning and other laws, supporting Sonoran legislation on licensing real estate practitioners, drafting "best practice" guidelines, creating a methodology for a consumer protection mechanism on the Mexican side as well as involving the Better Business Bureau in the U.S.
And lastly, Stewart Title Guaranty Company has gained approval and official authorization from Mexico's National Commission of Bonds and Insurance as Mexico's first ever title insurance underwriter. Not only is Stewart Title Guaranty de Mexico, S.A. de C.V. (STGM), a reality with corporate offices in Mexico City, but STGM is the only U.S. title insurance company with an owned Mexican subsidiary that can issue a title policy governed under Mexican law to any acquirer of real estate in Mexico. What does this mean? Mexican banks, financial institutions, developers and Mexican individuals can now get the comfort and security that a property ownership policy can provide with official government certification directly on the policy from the Comision Nacional. This policy should also enhance the prospects of a formalized mortgage lending system with lower interest rates and longer terms of repayment, leading to the creation of a securitization process on Mexican mortgages.
This same Mexico policy will be issued to U.S. buyers of real estate in Mexico, as well. Any foreign purchaser, Canadian, French, American, etc., can obtain the benefit and protection from a contract of indemnity that will protect his/her ownership rights as vested in the public deed and recorded in the public registry of property. U.S. buyers can seek restitution under the STGM policy in Mexico or in the United States.
Moreover, Stewart Title Guaranty de Mexico is the only title insurance underwriter that can establish a network of agents throughout Mexico. In time, with offices in the various markets, STGM will have the ability to enhance the title search function, escrow procedures, closing by the notario publico and recordation of the public deed in the registry. These offices, as agents of Stewart Title Guaranty de Mexico, should help facilitate the real estate conveyance process on Mexico properties and should provide a greater level of coordination and familiarity Americans have grown accustomed to in the United States.
Published in FPG’s March 2002 Issue
