Legal Summary: Fideicomiso is a commercial/credit operation carried out between three parties, one of whom must be a bank/credit institution. The other two parties are the original owner and the beneficiary. Through the fideicomiso, the original owner (fideicomitente) hands over the title/property rights to the bank (fiduciario) for the beneficiary (fideicomisario) to enjoy property rights over the object of the fideicomiso.
Plain English: Fideicomisos dealing with real estate property are contracts by which the seller transfers all rights over the land/property to the bank, which in exchange holds title of the property for the buyer to use, rent, sell or enjoy in whichever way established in the contract.
So why does the Mexican Government make foreigners go through such a merry-go-round when trying to purchase property for "residential" purposes? There are historical and political reasons why foreigners are limited in acquiring ownership of lands on the border and beaches. The historical factor dates back to WWII, when a German war ship was discovered approaching the Gulf of Mexico. Such was the fear of dominance by a foreign power that Mexico entered the war and modified the Constitution to prevent foreigners from acquiring ownership of borders and beaches. I imagine Mexican politicians believed this would prevent a foreign nation from taking over Mexico (doesn't make much sense now, as if the US would even allow that, but could the fear been of the US to begin with?)
However in the 1990's with the new Mexican policies of openness, liberalization of government property, free trade, NAFTA, etc., Mexico wanted to promote foreign investment in Mexican beaches and resort areas. Cancun was the creation of a Mexican president in the 1980's but it didn't become what it is now until commercial foreign investment entered the country. Bottom line Mexico wants foreign corporations to develop tourist areas because tourism is a significant source of the country's GNP.
So then why not also open foreign investment to private individuals who may want to retire in Mexico and purchase residential property on the beach? Here's where I feel politics plays a key role. The historical reason of limiting foreign ownership is all but null. Mexico is not going to be taken over by some foreign power, neither Mexico nor it's big neighbor (USA) would allow such a thing. So who stands to benefit from this? The Mexican banks, lawyers and government. Politics. The Bank and Government stand to gain anywhere between 5-10% of the sale price of the property, in addition to the Bank's annual administrative fees that may range from $400-$2000 USD per year. From the 5-10% surcharge I mentioned the bank gets it's cut and the local/state government receives a nice sum in the payment of the property taxes. And because you need a Notario Publico (will explain the role of a Notario in next blog) whom in essence is a glorified lawyer there will be additional fees.
Still when you consider that beautiful beach front property and the fact that you would never in a million years be able to afford such a place in the US, it may justify the merry-go-round. Who knows maybe at some point a Mexican president will come into power that decides to amend the Constitution or modify the Law of Foreign Investment to allow for foreigners to own beach front property for residential purposes. We can always dream...