Academic journal article Houston Journal of International Law

Secured Transaction Reforms in Mexico: In Pursuit of a Uniform System

Academic journal article Houston Journal of International Law

Secured Transaction Reforms in Mexico: In Pursuit of a Uniform System

Article excerpt

 I.  PROLOGUE
 II. INTRODUCTION
III. HISTORICAL BACKGROUND
 IV. THE BASICS OF MEXICAN SECURED
     TRANSACTION LAW
     A. Guarantee Trust (fideicomiso)
     B. Industrial Mortgage (hipoteca industrial)
     C. Pledge (prenda)
     D. Equipment Credit (credito refaccionario)
     E. Operating Credit (el credito de habilitacion o avio)
     F. Warehousing (bono de prenda)
     G. Accounts Receivable Assignment (cession de
     creditos)
V.   EVOLUTION OF APPLICABLE LAWS
     A. The 2000 Amendments
     B. The 2003 Amendments
     C. The 2009 Amendments
VI.  ANALYSIS OF MEXICO'S SECURED
     TRANSACTION SYSTEM
     A. A "Simple" Security System
     B. Future Collateral and Future Debt
     C. Purchase Money Security Interests
     D. Buyers in the "Ordinary Course"
     E. Registration
     F. Enforcement Against the Collateral
VII. CONCLUSION

I. PROLOGUE

The strength of a country's financial system is critical to its economic stability, and the ability of credit institutions to move capital through the market effectively and efficiently is crucial to the country's political and economic growth and development. In the case of Mexico, the rise and fall of its banking industry during the 1990s has played a crucial role in the availability of credit to Mexico's commercial sector and has led to multiple legislative reforms designed to address the shortcomings of the financial infrastructure. In analyzing the causes for the 1995 crash of its banking industry, followed by the effects of deregulation of foreign bank investment, Mexico has isolated a number of areas requiring reform if it is to foster greater lending and economic growth. One such area has been its secured transaction system and its related registry process. Since 2000, Mexico has enacted several legislative changes, all designed to garner greater creditor confidence and encourage lending.

On September 23, 2010, Mexico published its newest set of regulations for the establishment of a centralized electronic single registry system for security interests. This system, known as the Registro Unico de Garantias Mobiliarias (the "RUG"), has been designed to add greater transparency to a secured transaction system that has been fraught historically with contradictions, inconsistencies and confusion. The success of the new filing system in achieving its goals remains to be seen. Will Mexico's secured transaction system finally achieve a level of ease, consistency and transparency, or will the shortfalls of its system continue to be swept under the RUG?

II. INTRODUCTION

In the United States, lawyers and bankers tend to take for granted the ease with which security interests may be created, filed and subsequently monitored. We forget that Article 9 of the Uniform Commercial Code is the product of an evolution that began in this country in the 1950s, a process that involved several different iterations of the first presentation and then several "official" amendments to that model. (1) Even more significantly, Americans seldom recognize the importance of this body of rules to the economic growth and development of our private sector. The ease with which businesses can leverage their assets and creditors can realize upon those assets in the event of default has enabled America's private sector to access credit more readily and at relatively low costs. (2) One has only to look at emerging markets (3) where the concept of collateralizing personal property has been virtually nonexistent to appreciate the value of an "Article 9-type system" to the development of an economy.

This limitation on the uses of collateral has affected the ability of many businesses and entrepreneurs, in particular small and medium enterprises (referred to as SMEs), in emerging markets to access credit and thereby reach their economic potential. (4) The International Finance Corporation reports that "constrained access to finance remains among the top three limitations on private sector growth in the developing world. …

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