Banking & Finance 2022 Comparisons

The recession that the COVID-19 pandemic brought about during 2021 certainly impacted the loan market in Mexico and in most other jurisdictions. Needless to say, economic conditions changed dramatically, as did the need for – and availability of ‒ financing funds.

The impact of the pandemic was also felt in an increase in defaults on existing loans. The risk for many companies of being unable to comply with their debt obligations, as well as the potential risk for Mexican banks to face serious capitalisation and reserves issues as a result, prompted Mexican banking authorities to enable transitory regulations that eased the technical and regulatory requirements that apply to Mexican banks, in an effort to facilitate their navigation through the crisis.

2022 has seen renewed expectations in terms of growth for specific markets; however, global economic conditions resulting from the pandemic and the effects on supply chains constitute a significant challenge.

Markets in Mexico are fairly liquid and loans are flowing in a variety of forms, including in Mexico and across the border. The Mexican banking system is solid and foreign lenders’ appetites remain strong to lend into Mexico.  Nevertheless, 2022 has seen an increase in loan defaults, prompting restructuring and workouts in a variety of sectors.

As previously mentioned, COVID-19 had a serious impact on the loan market. Regulations were successfully enacted to reduce the impact in the banking industry during a transitional period. Nevertheless, efforts to reactivate the economy fell short and no significant funds were injected into the commercial business market, which has delayed the recovery of many companies and businesses, and their access to financings.

Please also see 1.1 Impact of Regulatory Environment and Economic Cycles.

High-yield transactions will always offer structuring challenges and complex collateral structures, particularly with regard to project finance transactions, where structuring and risk assessment is so dependent on prospect valuations and a number of additional considerations, including ratings from rating agencies.

More often than not, innovation helps to establish adequate legal and financing structures that may accommodate market needs.

The lenders market has again been diversified in Mexico. Non-bank institutions are once again taking a leading role in financing sectors of the economy that are not necessary fully served by the traditional banking industry. Sociedades financieras de objeto múltiple, sociedades financieras poulares and a large number of new fintech-related lenders are currently very active in the market; many of them receive funding from traditional banking sources. Nevertheless, during 2021 and 2022 some non-bank institutions have failed to comply with debt obligations, which has created concerns about the market's strength and has derived on several restructurings and workouts.

Fintechs in the consumer lending business represent approximately a third of the Mexican fintech market. An industry that was born without an adequate regulatory framework is now subject to specific rules aimed at creating confidence in the customer.

The main influence of fintechs in the lending market is the use of technology and new business models in the sector, particularly with regard to their role in processes to:

• accept or disregard prospective clients;
• implement compliance measures (especially in relation to Know Your Customer);
• measure risk;
• disburse funds; and
• determine rates and payment terms and conditions.

As disruptive as they can be, fintechs in the lending market bring about a new playground for potential borrowers who are eager to fund digital products and services.

As mentioned in 1.4 Alternative Credit Providers, banking and finance techniques are primarily adjusting to technological means that permit transactions to occur in a faster and safe manner.

There are no new tax-related initiatives or other recent developments that may negatively impact the loan market in Mexico.

Please note that interest payments to non-residents are generally subject to withholding tax rates ranging from 4.9% to 40%, depending on the beneficial owner of the interest. Lower withholding tax rates may be available to tax residents in countries with which Mexico has entered into a tax treaty to avoid double taxation. Interest payments to export‒import banks may not be subject to any withholding, provided that the conditions set forth by the relevant tax treaty are complied with.

Please see 3. Structuring and Documentation Considerations for further details.

ESG lending is certainly taking a predominant role in the Mexican lending market. Banks are prioritising loans that contemplate ESG elements and striving to comply with all the requirements related thereto. At the same time, the bond market is also growing extensively in respect of green or sustainable bonds. Throughout the past year, the number of ESG-related transactions has grown significantly.

As an example, the disclosure of ESG information and adherence to the recommendations of multiple agencies, such as the Task Force on Climate-related Financial Disclosures and the Sustainability Accounting Standards Board, have been broadly promoted. In most cases, though, compliance with such recommendations remains optional.

Lending is not a regulated activity in itself in Mexico. In other words, a regulatory licence is not necessarily mandatory to conduct lending activities. However, to the extent that such lending activities constitute the main purpose of a given company, it will more than likely be required to operate as a financial regulated entity.

Requirements to operate as a lending regulated entity vary significantly depending on the type of financial entity involved. As a general rule, authorisation from the Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or CNBV) is required to operate as a regulated financial entity.

Mexican banks, for example, need to file an authorisation request with the CNBV, which shall include:

• information and corporate documents about the bank and its direct and indirect equity holders;
• corporate documents of the stockholders;
• information regarding proposed operations of the Mexican bank;
• multiple additional documents required by the CNBV;
• corporate structure information about the bank;
• information relating to the capitalisation of the bank; and
• information about officers and directors of the bank.

Licences are generally granted by the CNBV on a discretionary basis.

Foreign lenders are not restricted from granting loans to Mexican borrowers, nor from obtaining a security interest over assets owned by Mexican counterparts or located in Mexican territory to secure their financings.

Foreign lenders are not required to be specifically registered with, or approved by, governmental authorities in order to conduct lending activities in Mexico.

Lending activities of both foreign and local lenders in Mexico may be conducted through multiple structures, including unsecured lending, secured financing, club deals, syndication, structured finance, securitisation transactions, capital and operation leasing, bond offerings and factoring. Both Mexican and foreign banks are subject to specific regulations and limitations.

Subject to certain exceptions, to achieve a 4.9% withholding tax rate on interest payments of debt securities issued by a Mexican issuer and placed with foreign holders, the following conditions apply:

• the securities should be placed through bank or broker dealers in a country with which Mexico maintains a tax treaty for the avoidance of double taxation; and
• filings with the CNBV and the tax administration must be completed.

Foreign lenders may secure their loans with Mexican assets. Also, Mexican entities may guarantee the payment of loans or foreign lenders. In doing so, it is important to consider Mexican laws regarding the granting of personal guarantees such as fianzas, obligaciones solidarias and avales. Statutory laws concerning fianzas, in particular, can limit the liability of the guarantor under a number of circumstances. Therefore, it is necessary to assess waiving multiple rights afforded to the guarantor under Mexican law.

In the case of avales, which apply to Mexican pagarés (promissory notes), it is necessary to comply with Mexican laws applicable to negotiable instruments. Among other things, these laws afford the benefit of being entitled to file claims through executive proceedings. Avales shall comply with the formalities set forth by Mexican law to be enforceable.

Other than tax reporting obligations that may apply to the borrower, there are no governmental registrations or approvals required for a Mexican borrower to contract debt obligations in a foreign currency or to remit funds abroad.

There are generally no restrictions on the borrower's use of proceeds from loans or debt securities, except for limitations in certain regulated industries and as otherwise contractually agreed to.

Agency and trust concepts are recognised in Mexico.

Please see 5. Guarantees and Security, 6. Enforcement and 8. Project Finance for information regarding Mexican trusts.

Loans and security interests can both be transferred in Mexico through the respective assignment and amendment mechanisms. Please note that the transfer of security packages may require the authorisation of third parties or from the entity granting the respective collateral, as well as conducting additional activities, such as filings with regulatory and registration authorities.

The transfer of account receivables does not require the authorisation of the debtor, unless otherwise contractually stipulated.

A debt buy-back by a related party is not expressly prohibited; however, it is not necessarily a common practice in the commercial lending industry. Alternative mechanisms may be implemented to achieve a similar result.

No information on this topic has been provided in this jurisdiction.

As previously indicated, in the case of interest payments to non-residents, withholding tax rates tend to range from 4.9% to 40%, depending on the beneficial owner of the interest and the existence or not of a tax treaty to avoid double taxation with the country of residence of the lender.

Please note that Mexico has enacted more than 40 double tax treaties and is in the process of negotiating more. As mentioned earlier, such tax treaties may reduce the withholding tax applicable in accordance with the Mexican domestic tax legislation. Under a number of those treaties, a preferential 4.9% withholding tax rate applies to interest paid to financial institutions resident for tax purposes in a treaty country.

Please note that interest payments made to export‒import banks granting or guaranteeing loans may not be subject to any withholding tax, provided that the conditions set forth by the relevant tax treaty are complied with.

Also, favourable tax treatment can be granted in a variety of cases, including the following:

• interest derived from securities issued by the federal government or the central bank, provided that the beneficial owner of the interest is a non-resident for tax purposes;
• interest derived from loans granted to the federal government, the central bank or derived from bonds issued by them; and
• interest derived from loans granted under preferential conditions, payable to foreign development financial institutions.

There are generally no different taxes applicable to loans payable to lenders in Mexico and loans payable to lenders in a foreign jurisdiction. In both cases, income tax is the only tax levied on interest payments. As noted above, interest payments may be subject to different withholding tax rates depending on the tax residency of the beneficial owner.

VAT may apply to interest payments, subject to certain exceptions. Exceptions include interest payments made to Mexican financial institutions that may be exempt from such tax in certain instances.

There are general usury statutes. Although there are no specific limitations in terms of the amount of interest that may be charged to a borrower, there may be limitations stemming from such usury statutes in the case of abuse from the lender, generally as assessed by a judicial competent authority. Also, existing judicial precedents and market conditions may limit the amount of the applicable rate.

Please also note that, in respect of transactions among related parties, there may be tax-related limitations to prevent an interest rate that is not standard in the market. Such transactions may prompt the use of market studies to sustain the application of a rate or other price-related considerations.

Assets typically available as collateral include real estate, machinery and equipment, stock or equity interests, receivables and collection rights, among many others. There are generally no restrictions with respect to creating security interests over any sort of movable assets that can be transferred, including rights.

Collateral instruments include:

• the traditional pledge, where the collateral is (in principle) delivered to the secured party or a depositary;
• the pledge with the DIP (prenda sin transmission de posesión), which permits the borrower to maintain custody and use of the pledged assets; and
• the guaranty trust (fideicomiso de garantía), where the collateral is actually transferred to a Mexican trustee (ie, a Mexican banking institution).

Pursuant to a guaranty trust, a borrower may transfer to a trustee ownership of certain assets. The trustee will hold ownership of such assets as collateral for the primary benefit of the corresponding lender, who will be appointed as a beneficiary (fideicomisario) of the guaranty trust. The guaranty trust permits:

• borrowers to continue to use and manage the collateral and maintain regular business activities; and
• parties to the guaranty trust to contractually establish their own tailor-made rules of extrajudicial foreclosure (within reasonable due process and other requirements).

Such foreclosure procedure permits the transfer of collateral to a lender, subject to compliance with the applicable legal requirements. Similar benefits may be attained through a prenda sin transmission de posesión, with respect to the use of collateral and business activities of the borrower.

The pledge with debtor in possession and the guaranty trust are the most common forms of granting and perfecting a security interest in receivables and accounts. The pledge with debtor in possession and the guaranty trust shall be registered with the Movable Property Registry for effectiveness vis-à-vis third parties. A guaranty trust over real estate property shall also be registered with the corresponding local Public Registry of Property.

Also, the most common form of granting a security interest over real estate is through a mortgage, which shall be registered with the Public Registry of Property that has jurisdiction over the place where the real estate is located.

Please see 6.1 Enforcement of Collateral by Secured Lenders for further information regarding formalities and perfection requirements.

Mexican law permits a security interest over all present and future assets of a company, primarily through a prenda sin transmisión de propiedad or a fideicomiso de garantía.

It is possible for entities in Mexico to give downstream, upstream and cross-stream guarantees. There are typically no associated limitations; however, the guarantee shall generally create a benefit for the guarantor to avoid the risk of being considered null in a bankruptcy scenario.

There are no particular restrictions.

There are a number of additional Mexican legal considerations in connection with loans to borrowers and the granting of security interests or guarantees. Please refer to the responses throughout this chapter in this respect.

Each transaction must be assessed considering a variety of factors, including tax treatment, the regulatory framework, bankruptcy scenarios, the parties involved and the nature of collateral. Also, costs associated thereto. Implementing collateral structures involving trustees or real estate assets may be more costly, as they require the involvement of third parties, including notaries, and registrations with public registries.

Typical forms of security are released through amendment, termination and/or release instruments. Collateral instruments – such as mortgages, pledges and security trusts – that have been registered in public registries require the filing of such termination or release documents in the respective registries in order for the release to be effective vis-à-vis third parties. Additional filings may be required when dealing with regulated entities.

As a general rule, secured lenders have priority over the assets granted to them as collateral in the event of foreclosure and in an insolvency scenario, although subject to a variety of exceptions.

Since the 2014 amendment to the Mexican Insolvency Law, contractual subordination is expressly recognised in the case of an insolvent entity. Mexican courts would recognise the subordination of contractually subordinated claims with respect to other secured or unsecured claims of creditors of an insolvent entity.

Also, intercreditor agreements are commonly used in Mexico. They constitute the framework that regulates the relationship among lenders in a syndicated facility, or among lenders under several financings. It is common to appoint an administrative agent (also known as a collateral agent).

The most common vehicle to achieve structural subordination consists of the implementation of a trust containing a payment waterfall with subordinated payments.

A secured lender who has a perfected security interest over its collateral has, in principle, no limitations to enforce its rights in a court of law, subject to bankruptcy and insolvency rules. Enforcement of security in Mexico is generally conducted through Mexican courts.

Loan and collateral documents must comply with the Mexican legal formalities required for their enforceability and perfection in Mexico. Enforceability of obligations before a Mexican court may often be contingent on:

• the valid existence of the borrower;
• the authority of the borrower and its representatives to assume such obligations pursuant to any provisions of relevant by-laws;
• corporate authorisations and powers of attorney; and
• the absence of conflicts with applicable law and third-party obligations or contractual arrangements.

A number of formalities concerning loan documentation must be met to avoid difficulties in the enforcement process.

Loan obligations are usually documented in pagarés. The documentary formalities applicable to pagarés are very strict and failure to meet them may lead a court to disregard such instruments’ procedural advantages. A pagaré will entitle the holder thereof (either a Mexican or foreign lender) to claim a judicial “executive action”, which carries certain procedural advantages, including the right to attach assets of the debtor upon service of process being made. Note that Mexican banks and certain other financial entities also have executive actions through other types of documents, including certified account statements and loan agreements.

With regard to collateral documents, certain security instruments – including mortgages, pledgor-in-possession pledge agreements and guaranty trusts on real estate assets – are required to be formalised before a Mexican notary public and registered with the corresponding Mexican public registry (ie, the local Public Registry of Property or the Federal Registry of Movable Property). A lien on other assets may require additional formalities – for example, registration with IP registries if such lien is created on certain IP rights.

As previously mentioned, a guaranty trust permits a borrower and a lender to agree on the terms and conditions to conduct an out-of-court foreclosure procedure, which may consist of a sale process to third parties or a direct transfer of collateral to a lender. Any agreed-upon out of-court foreclosure procedure must comply with very specific rules and may be subject to challenges in a Mexican court.

Challenges in enforcing a security may include, in some circumstances, gaining possession over the collateral to be realised either because of statutory restrictions or given that the collateral is in the possession of a third party.

The choice of foreign law should be recognised and enforced, provided that security documents should not otherwise be subject to Mexican law. Collateral instruments that create a security interest over assets located in Mexican territory, for example, shall be generally subject to Mexican law.

With respect to the submission to a foreign jurisdiction, there are also no specific limitations for Mexican parties to do so (except with respect to collateral instruments that should be subject to Mexican jurisdiction, as mentioned in the previous paragraph).

A judgment rendered by a foreign court, pursuant to a legal action instituted before such court in connection with an outstanding loan, would be enforceable against the borrower in the competent courts of Mexico, provided that:

• such judgment is obtained in compliance with:
1. the legal requirements of the jurisdiction of the court rendering such judgment; and
2. all legal requirements of the respective transaction documents;
• such judgment is strictly for the payment of a certain sum of money, based on an in personam (as opposed to an in rem) action;
• the judge or court rendering the judgment was competent to hear and judge on the subject matter of the case in accordance with accepted principles of international law that are compatible with Mexican law;
• service of process is made personally on the defendant or on its duly appointed process agent – please note that service of process by mail does not constitute personal service of process under Mexican law and, given that such service of process is considered to be a basic procedural requirement, a final judgment based on such process would not be enforced by the courts of Mexico;
• such judgment does not contravene Mexican law, public policy of Mexico, international treaties or agreements binding upon Mexico, or generally accepted principles of international law;
• the applicable procedure under the laws of Mexico is complied with when enforcing foreign judgments, including:
1. the issuance of a letter rogatory by the competent authority of such jurisdiction requesting enforcement of such judgment; and
2. the certification of such judgment as authentic by the corresponding authorities of such jurisdiction in accordance with the laws thereof;
• the action in respect of which such judgment is rendered is not the subject matter of a lawsuit among the same parties that is already pending before a Mexican court;
• such judgment is final in the jurisdiction where it is obtained;
• the judgment fulfils the necessary requirements to be considered authentic; and
• the courts of such jurisdiction recognise the principles of reciprocity in connection with the enforcement of Mexican judgments in such jurisdiction.

Please see 6.2 Foreign Law and Jurisdiction regarding enforcement of a foreign court judgment.

The following additional matters might impact a foreign lender's ability to enforce its rights under a loan or security agreement.

• In the event that proceedings are brought in Mexico seeking performance of the obligations of the borrower in Mexico, pursuant to the Mexican Monetary Law, the borrower may discharge its respective obligations by paying any sums due in a currency other than Mexican currency in Mexican currency at the rate of exchange prevailing in Mexico and fixed and published by the Banco de México in the Official Gazette of the Federation of Mexico on the date preceding the date of payment.
• In the event that any legal proceedings are brought in the courts of Mexico concerning transaction documents prepared in English, a Spanish translation of such documents required in such proceedings prepared by a court-approved translator would have to be approved by the court after the defendant had been heard with respect to the accuracy of the translation. Proceedings would thereafter be based upon the translated documents.
• The enforceability of the terms of certain financing and collateral documents may, for example, be limited by bankruptcy, insolvency, concurso mercantil or other laws relating to creditors’ rights generally.
• When evaluating available enforcement options, it must be considered that remedies may not be cumulative or exercised concurrently.

Other than the concurso mercantil (insolvency) proceeding, there are no other statutory rescue or reorganisation procedures in Mexico.

As a general rule, the enforceability of the terms of certain financing and collateral obligations may be limited by bankruptcy, insolvency, concurso mercantil or other laws relating to creditors’ rights generally.

Provided prior authorisation of the Insolvency Court is obtained and subject to its supervision, secured creditors under a mortgage or a pledge may foreclose on their collateral.

According to the Mexican Insolvency Law, trust assets are excluded in principle from the estate of the insolvent entity, to the extent that they have been validly conveyed to the security trust. Therefore, if the collateral is subject to a security trust, the first beneficiary (lender) under the trust agreement may commence an extrajudicial foreclosure procedure outside the insolvency proceeding. Such rule, however, may be subject to exceptions and the final determination of the Insolvency Court.

Provided there is an insolvency judgment in place, the following effects will arise:

• the insolvent entity's unsecured obligations in Mexican pesos will be converted into Unidades de Inversión (UDIs), which consist of an inflation-pegged accounting unit, and interests will stop accruing;
• any unsecured obligations contracted in foreign currency will be converted into pesos and then into UDIs; and
• secured obligations will be kept under the currency they were contracted in, and may continue to yield ordinary interests up to the amount of the respective collateral.

The insolvent entity's obligations will then become due. However, their payment is subject to:

• entering into a reorganisation agreement between the insolvent entity and its court-approved creditors; or
• the bankruptcy declaration of the insolvent entity, containing the sale of its assets under a court-supervised liquidation.

According to Mexican law, proceeds obtained from the liquidation of an insolvent entity's assets will be applied for creditors’ payment as follows:

• first, to labour claims for salaries and severance corresponding to the immediate calendar year preceding the insolvency judgment;
• second, to claims arising from financing incurred for the management of the estate of the insolvent entity or financing that is essential to maintain the ordinary operations of the company and the necessary liquidity during the insolvency proceeding – in each case, as approved by the mediator or by the Insolvency Court;
• third, to liabilities and obligations of the estate of the insolvent entity;
• fourth, to costs and expenses incurred as a consequence of the judicial and extrajudicial proceedings for the benefit of the insolvency estate;
• fifth, to amounts paid to the secured creditors;
• sixth, to labour claims different from those described in the first paragraph;
• seventh, to claims of “preferred” creditors under the Mexican commercial laws only to the extent of the value of their respective privilege;
• eighth, to claims of unsecured creditors; and
• ninth, to claims of (i) subordinated creditors and (ii) creditors qualifying as related parties of the insolvent entity.

Notwithstanding the above, claims of secured creditors would be paid on a supra-priority basis up to the amount of the respective collateral. However, this is contingent on the following claims having priority over the amount of such collateral in the order that follows:

• labour claims for salaries and severance for the calendar year preceding the issuance of the insolvency judgment;
• litigation expenses related to the defence or recovery of secured assets; and
• expenses necessary for the maintenance, disposition and repair of the secured assets.

Under Mexican law, a creditor’s claim cannot be subordinated by a court. However, if a creditor's conduct has injured other creditors, there may be other possible remedies available under Mexican laws.

Mexican law recognises subordination in terms of 7.3 The Order Creditors Are Paid on Insolvency. In general terms, creditors must be paid in full prior to any distribution to shareholders.

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 consideration 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 guaranties may be problematic under the Mexican Insolvency Law, unless the Mexican 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 decades. 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, 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.

Please refer to 8.2 Overview of Public–Private Partnership Transactions regarding PPPs.

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 provisions to determine the convenience of carrying out a project under a PPP scheme.

PPPs might also be impacted by provisions contained in:

• the Mexican Constitution;
• the Public Sector Acquisitions, Leasing and Services Law;
• the Code of Commerce;
• the Federal Civil Code;
• the Federal Law of Administrative Procedure; and
• the Federal Code of Civil 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.

The need to obtain government approvals or pay taxes, fees or other charges depends on the project and industry involved. Many project finance transactions may require government approvals or be linked to the terms of specific licences, concessions or authorisations, and may be required to comply with obligations and requirements thereunder.

The responsible government bodies with respect to the oil and gas, power and mining sectors are:

• the Ministry of Energy (Secretaría de Energía);
• the Ministry of Economy (Secretaría de Economía);
• the National Hydrocarbon Commission (Comisión Nacional de Hidrocarburos); and
• the Energy Regulatory Commission (Comisión Reguladora de Energía).

The primary laws and regulations with respect to the oil and gas, power and mining sectors are:

• the Hydrocarbons Law and its regulations;
• the Electricity Industry Law and its regulations; and
• the Mexican Mining Law and its regulations.

The main issues include:

• construction and operational risk;
• prospect valuations;
• deployment of funds and contractors' performance;
• rating agencies' assessment of the transaction;
• debt servicing structures and waterfalls;
• perimeter of entities involved in the transaction;
• collateral package and flow of funds; and
• specific regulations applicable to the project entities, and permits and licensing.

Foreign investment restrictions in Mexico may apply to a few industries.

As previously mentioned, lending activities of both foreign and local lenders in Mexico may be conducted through multiple structures, including secured lending, club deals, syndication, structured finance, securitisation transactions and bond offerings.

There are no specific restrictions applicable to the structuring of project financings. Two common sources of funding available are project bond offerings (both public and private) and bank syndicated loans, including those with the participation of export credit agencies (which are generally subject to a beneficial tax treatment).

As occurs with every project financing, the structure can be as complex as the project itself, depending on a variety of factors, including construction, operational and management risks. Project finance structures tend to be heavily collateralised. Collateral usually includes:

• pledges over the equity of the borrowers;
• specific liens on the project assets, achieved through security trust, pledge and mortgage collateral instruments; and
• assignment mechanisms of receivables stemming from the operation of the respective projects.

Most recently, project financings in Mexico have taken place in the infrastructure and real estate industries. In both cases, financings have occurred through bank lending and bond offerings (both private and public) via the issuance of securities in local and foreign markets. In the infrastructure market, for example, it has been possible to securitise payments under PPP agreements for the development or improvement of toll roads through complex structures that have been well received in the marketplace.

As previously mentioned, there are generally no restrictions with regard to foreign lenders implementing security structures with Mexican parties or with assets located in Mexican territory. Mexican law is innovative and sophisticated to permit the perfection of security liens over both movable and real estate assets.

No information has been provided in this jurisdiction.

The main environmental, health and safety laws that apply are:

• the Ecological Balance and Environmental Protection General Law and its regulations;
• the Environmental Liability Federal Law;
• the Law of the National Agency for Industrial Security and Environmental Protection for the Hydrocarbon Sector;
• the National Waters Law; and
• the Prevention and Comprehensive Management of Residues Law.

The main regulatory bodies include:

• the Ministry of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales);
• the Federal Attorney Office for Protection of the Environment (Procuraduría Federal de Protección al Medio Ambiente); and
• the National Water Commission (Comisión Nacional del Agua).