Mexico May Relax Land Restrictions : Property: Laws against foreigners owning real estate near the border or coastal areas may be dropped or modified.

Mexico plans to liberalize restrictions on foreign land ownership in coastal and border areas, government officials have been telling resort and industrial park developers.

Easing the restrictions could remove a significant obstacle to desperately needed infrastructure improvements in the border region. Foreigners have been reluctant to invest in projects because of uncertainty over the long-term security of their investments and the complexity of regulations.

Top government officials have said privately that they will either remove restrictions or at least permit longer leases, said Jose Martinez Guitron, general director of Sidek, a Mexican conglomerate that is developing a major resort with Spanish investors.

Two large border industrial park developments that would be financed by foreign institutional investors are awaiting promised liberalization of ownership restrictions, according to a source close to the deals.

Officially, a presidential aide denied that any effort is underway to change the laws on border and coastal real estate, however.

Currently, foreigners may not directly own land in Mexico within 50 miles of the border or 30 miles of the coast. To use land in the “restricted zone,” they must either lease it 10 years at a time or put the title in a 30-year, renewable trust administered by a Mexican bank.

Mexico’s beach resorts with international hotels were developed under those regulations, but border business people say the rules are inhibiting balanced industrial development, which requires long-term capital commitments.

“The trusts are unwieldy, a lot of paperwork for not much benefit,” said a border industry consultant. “The Mexicans are afraid they will not be able to attract the capital necessary to develop infrastructure along the border under the present law.”

The border has boomed over the past five years as U.S.-Mexico trade doubled. The growth is expected to continue, especially if the proposed North American free trade agreement is signed, removing barriers to commerce among the United States, Mexico and Canada. Construction of roads, bridges, industrial parks and housing has not kept up with the demand created by that growth.

Martinez Guitron said he and his foreign partners received the government’s commitment to liberalize the restrictions in connection with an $80-million resort joint venture planned for San Felipe, on the Sea of Cortez three hours south of Los Angeles.

Because the project is a 50-50 venture, it would be treated as a foreign investment under current rules.

“We were assured that those rules would be changed,” said Martinez Guitron.

“This would be consistent with policies developed by the government in recent years,” said Jorge Bustamante, director of El Colegio de la Frontera Norte, a border think tank based in Tijuana.

Mexico has liberalized foreign investment rules in areas ranging from the stock market to mining over the past three years. Foreign investment is one of the unresolved issues in the free trade talks underway among the United States, Canada and Mexico.

However, foreign ownership of border lands is a politically sensitive issue here, because in the 19th century U.S. settlers in what was then northern Mexico rebelled against the Mexican government to form the Republic of Texas. Mexico eventually lost half its land to the United States.

For that reason, said Arturo Torres, a McAllen, Tex., lawyer who specializes in border issues, longer leases, or less complex trust mechanisms are more likely than an outright lifting of restrictions on foreign ownership of border and coastal lands.