Insights

For most of the post-Cold War period, foreign direct investment was largely viewed as an economic benefit. Governments competed to attract foreign capital, reduce barriers to entry, and integrate into global value chains. Security-related restrictions on foreign investment generally remained limited to defense industries, weapons manufacturing, and other constitutionally protected activities, such as energy and telecommunications.¹

Mexico's current investment legal framework is based on investment promotion and introduces a “negative list” approach, prohibiting or restricting foreign investment participation in certain activities. However, it does not include a screening mechanism for national security purposes. This is about to change: Mexico is on the verge of discussing a bill that amends its foreign investment regime.

Mexico’s legal overhaul should not come as a surprise. Geopolitical competition between the USA and China is the main driver behind this reform. The emergence of China as a major technological and economic power prompted many governments to reconsider whether foreign acquisitions could enable competitors to obtain strategic technologies, intellectual property, or critical infrastructure assets. The U.S. concern extends to foreign investment in allied countries, including Mexico. Since the Biden administration, U.S. officials have repeatedly encouraged Mexico to strengthen its capacity to review foreign investments on national-security grounds.² In December 2023, U.S. Treasury Secretary Janet Yellen and Mexico’s Secretary of Finance announced the creation of a bilateral working group on foreign investment review. More recently, U.S. Trade Representative Jamieson Greer emphasized the importance of strengthening North American economic security and supply-chain resilience. Washington increasingly views investment screening as a regional issue, and Mexico must take steps to address it if the USMCA is to be extended.

The USMCA extension is the carrot; the threat of non-renewal, the stick. Against this backdrop, one must read the draft bill on Mexico’s foreign investment screening. The proposed reform raises several questions: does Mexico model its screening mechanism on the U.S. approach? Is there a “national security” risk-assessment test defined in the statute? What foreign investments will trigger the mechanism, and who will review the applications? This article seeks to answer these questions.

2. Foreign Investment Screening in the USA: CFIUS review.

The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee chaired by the Secretary of the Treasury. Originally established in 1975, CFIUS assumed its modern form through the Foreign Investment Risk Review Modernization Act (FIRRMA) of 2018, which significantly expanded its jurisdiction to cover certain non-controlling investments involving critical technologies, critical infrastructure, or sensitive personal data. As a result, minority investments may now trigger review where foreign investors obtain governance rights, board representation, or access to sensitive technologies.

The filing regime includes both voluntary and mandatory submissions of written notices and declarations. Written notices are comprehensive filings containing detailed information about the transaction and the parties involved. In contrast, declarations are abbreviated filings that provide CFIUS with basic information to assess whether further review, a written notice, or another action permitted under the Act is needed.

Mandatory filing requirements apply under two primary circumstances. First, they apply to certain covered transactions involving foreign government interests, where a foreign government has a substantial interest in a foreign person and that foreign person acquires a substantial interest in a U.S. business involving critical technology, critical infrastructure, or sensitive personal data. Second, mandatory filing requirements apply to certain covered transactions involving critical technologies, where a foreign person makes a covered investment in a U.S. business that produces, designs, tests, manufactures, fabricates, or develops critical technologies, and a U.S. regulatory authorization, such as an export license, would be required to export, reexport, or transfer that technology to a direct or indirect party to the transaction.³ In either circumstance, parties may file a full written notice instead of a declaration.⁴

CFIUS conducts its national-security review through a risk-based process centered on three interrelated elements. The threat analysis examines the foreign investor’s ownership structure, government links, compliance history, and capability to act contrary to U.S. interests.⁵ The vulnerability analysis assesses whether the target business possesses assets, technologies, or data that could be exploited to harm national security, with particular attention to critical technologies, defense-related production, telecommunications, energy systems, and strategically important supply chains. The consequence analysis evaluates the potential impact of such exploitation on military readiness, cybersecurity, technological leadership, critical infrastructure resilience, and supply-chain security.

CFIUS does not operate solely through approval or rejection. Rather than requiring the abandonment of a transaction, mitigation agreements allow CFIUS to clear transactions while addressing specific national-security risks. CFIUS mitigation measures include restrictions on access to technology or sensitive information, requirements to segregate computer networks, data or information transfer restrictions, personnel restrictions, the establishment of corporate security committees, and requirements that certain facilities, equipment, or operations remain in the United States.⁶ Parties must disclose ownership structures, ultimate beneficial owners, sources of financing, and governance arrangements, often extending well beyond ordinary corporate disclosure requirements.⁷

The Nippon Steel–U.S. Steel transaction illustrates these dynamics. Although the investor originated from Japan, a close U.S. ally, the transaction raised national-security concerns because the steel industry is considered a strategic sector critical to supply chains; the U.S. had already imposed tariffs on steel and aluminum under Section 232 of the Trade Expansion Act of 1962 after a “national security” investigation. The debate focused less on the investor’s nationality and more on economic resilience, domestic production capacity, and the long-term availability of steel for defense-related purposes. After CFIUS review, President Biden initially blocked the acquisition in January 2025. Nippon Steel and U.S. Steel then sued President Joe Biden, alleging he violated the companies' right to a fair review by barring CFIUS staff from negotiating a mitigation agreement and manipulating the review process toward a predetermined decision to block the transaction and "curry favor with the USW [United Steelworkers] leadership in Pennsylvania in his bid for reelection.”⁸ The deal was subsequently restructured under President Trump: Nippon Steel would acquire up to 49% of U.S. Steel, with U.S. Steel remaining under American control. The restructured deal included mitigation measures such as maintaining U.S. Steel’s headquarters in Pittsburgh, minimum capital investment commitments, and production guarantees. The case demonstrates that investment reviews often operate at the intersection of security, economics, and politics.

3. Mexico's Proposed Reform of the Foreign Investment Law

Currently, a foreign investment screening mechanism does exist in Mexico, but it is not a national security review. This mechanism is triggered only when the assets involved exceed an extremely high value threshold that few foreign investments have triggered in Mexico, for instance the ABINV acquisition of Grupo Modelo. Foreign Investors are required to disclose the acquisition and obtain the approval of the National Foreign Investment Commission (CNIE), but it does not entail a thorough national security review. Needless to say, Mexico’s Foreign Investment Law does provide that the CNIE has the authority to interfere in an acquisition on behalf of a foreign investment when it poses a risk to national security.⁹ In other words, CNIE’s powers are ex-post.

Hence, Mexico's proposed reform seeks to build-upon this national-security authority and introduces a new chapter called “National Security in Foreign Investments.” Rather than relying on a broad and largely undefined ex-post national-security power, the reform establishes an ex-ante structured review mechanism applicable to certain foreign acquisitions in strategically sensitive sectors. The CNIE will be responsible of its implementation. The initiative, therefore, represents a significant substantive and institutional development in Mexico's approach to foreign investment review.

Notably, the initiative's Exposición de Motivos (Statement of Purpose) explicitly states that the reform was developed in consideration of the principles established by the Organisation for Economic Co-operation and Development (OECD) for investment screening mechanisms: non-discrimination, transparency, predictability, proportionality, and accountability. This acknowledgment is significant because these principles closely mirror the substantive protections commonly found in Bilateral Investment Treaties (BITs), such as non-discrimination (national treatment and most-favored-nation treatment), transparency, proportionality, and due process. The express reference to OECD standards suggests that Mexico is aware of the international obligations against which its screening mechanism will be measured. As currently drafted, the mechanism appears de jure consistent, however, its applications remains an open question, particularly in light of the broad definition of covered sectors, screening procedure mechanism, and the significant discretion afforded to the CNIE.

1. CNIE’s Institutional Reform

In addition to its current functions under the Foreign Investment Law, the CNIE will be responsible for assessing whether foreign acquisitions may present risks or threats to national security.¹⁰ To do so, the initiative is considering an institutional transformation.

The Commission is currently composed of representatives from the Ministries of the Interior (SEGOB), Foreign Affairs (SRE), Finance (SHCP), Welfare, Environment, Energy, Economy, Infrastructure, Labor, and Tourism. The proposal expands that composition by incorporating representatives from the Ministries of Defense (SEDENA), Navy (SEMAR), and Security and Citizen Protection (SSPC). All members of the Commission must issue a vote, either positive or negative, when the meeting entails a discussion regarding a foreign investment that touches upon national security concerns.¹¹ And, the decision will be taken by a majority.

In addition, the National Intelligence Center (CNI, a security agency), the Financial Intelligence Unit (UIF), the Tax Administration Service (SAT), and the Attorney General's Office (FGR) will participate as permanent non-voting invitees whenever national-security matters are under consideration.¹²

The reform alters the institutional character of CNIE. Historically, the Commission has operated primarily as a body concerned with foreign investment promotion policy and economic development. The participation of defense, intelligence, financial-investigative, and law-enforcement authorities reflects an effort to equip the Commission with different expertise that may be considered necessary to conduct national-security reviews.¹³ For instance, UIF and SAT are involved with the “beneficial owner” policy from an Anti-Money Laundering (AML) and tax perspective, respectively. However, the involvement of authorities like SAT may backfire with hyper-formalistic information requirements for “covered investments” increase compliance burdens for foreign investors, including those from allied countries.

2. Covered Investment and Scope of Review

The initiative provides that the CNIE must issue a favorable decision to allow (i) “foreign investment” to participate, directly or indirectly, in more than 49% of the equity of a Mexican company, when (ii) the total value of its assets exceed a threshold amount and (iii) engages in strategic or sensitive activities. One may argue that this provision reveals whether greenfield investment is covered or not within the scope of a mandatory favorable decision because it introduces three cumulative conditions.

The first condition is quite straight forward. “Foreign investment” is already defined by law and it entails the participation of foreign investors, in whichever proportion, in the equity of Mexican companies.¹⁴ Therefore, if one or more foreign investors cumulatively participate in more than 49% of the company’s equity, it meets the first condition. If the “foreign investors” participate in less than 49% of the company’s equity, a favorable decision is no longer mandatory.

The proposal resembles certain European screening regimes, such as those of Germany and France, which also establish ownership thresholds to identify reviewable transactions. However, Mexico’s 49% equity threshold is considerably higher than the 10% or 15% established in several European jurisdictions. The 49% figure is likely explained by historical reasons: it is one of the most common foreign investment restrictions in Mexican law, applicable to activities such as manufacturing of explosives, management of ports, and air transport under article 7(III). Notably, a 49% equity participation may not grant majority control, as illustrated by the U.S. Steel–Nippon Steel restructuring.

The company’s assets must also exceed a threshold to be established in CNIE’s general resolution. One may reasonably assume that this threshold will be lower than that of the current screening mechanism. Since a newly incorporated company will have virtually no assets, the initiative appears designed to exclude greenfield investments from the mandatory screening.

Finally, and assuming that the equity participation and asset-threshold conditions are met, CNIE’s approval will be required if the Mexican company engages in the following strategic or sensitive activities:¹⁵

1. strategic infrastructure, either physical or virtual, which encompass infrastructure linked to energy, health, transportation, communications, mining, data storage and processing, digital systems, aerospace, defense industries and “sensitive facilities,” as well as land and buildings that are necessary for the use of said infrastructure.

2. critical technologies and dual-use products, including, artificial intelligence, robotics, semiconductors, cybersecurity, aerospace technology, defense technology, energy-storage technologies (quantum and nuclear), as well as nanotechnology and biotechnology, and;

3. the supply of essential inputs, including energy, “raw materials,” and food security;

4. access to or control of “sensitive information,” in particular, personal data, or the capacity to control such information; and

5. other analogous sectors that may be designated by the CNIE through general resolutions.

From the above, one must recognize that the list is very broad. For instance, it is unclear what “strategic infrastructure linked to… sensitive facilities” may entail or mean. The same occurs with what “raw materials” may be considered as an “essential input.” Also, the provision uses the term “including” (e.g. incluidas o incluyen in Spanish) when listing the activities, and, thus, it entails an open list.

One final remark is that the bill appears not to include acquisition of land that may be near to sensitive facilities used by defense authorities. In the United States, CFIUS’s jurisdiction may extend to certain real-estate transactions involving foreign persons located near designated military installations and other sensitive facilities.¹⁶ The Mexican initiative adopts a more targeted approach focused on acquisitions, thereby leaving unresolved whether certain greenfield investments in strategically sensitive sectors should also be subject to national-security review in the future.

In a nutshell, the initiative is designed to address “economic concerns,” rather than national security in its purest terms. The Mexican initiative shares a threshold-based logic that characterizes European screening mechanisms rather than the broader jurisdiction exercised by CFIUS over certain non-controlling investments. These thresholds may significantly limit the number of occasions the mechanism is triggered since one or more foreign investors may seek to avoid having more than 49% of the equity participation of companies operating in these strategic sectors. It is clear that this mechanism is designed towards acquisitions involving significant ownership interests in companies operating in strategically sensitive sectors.

3. Voluntary Reporting

The initiative also envisions the possibility of a “voluntary submission” or reporting before the Commission. A submission before the Commission is voluntary whenever the assets of the Mexican company do not meet the asset value threshold, but foreign investment exceeds the 49% equity participation threshold.¹⁷ Per the context, one should understand that the Mexican company must be involved in strategic or sensitive activities. Now, the law uses the term “voluntaria,” which clearly means that it is not mandatory and, thus, has important implications as discussed in the enforcement mechanism.

4. CNIE's Powers and Procedure

The initiative establishes a formal authorization procedure under which applications must be submitted jointly by the foreign investor and the Mexican target company.¹⁸ If one still doubted whether greenfield investment may be included in the screening mechanism, the fact that the Mexican target company must participate in the submission authorization procedure automatically means that greenfield investments are ruled out from the scope of the initiative. The later because a non-existing target company cannot participate in such filings per Mexican law and practice.

The CNIE must issue a decision within sixty business days (about three months) of the submission, subject to limited suspensions and extensions.¹⁹ If CNIE is “silent” and a decision is not informed within the legal timeframe, one must deem that the application was rejected.²⁰ Under Mexican law and doctrine, these government decisions are called negativa ficta in Spanish. In theory, the CNIE should reach an express decision because its members may not abstain from voting on national security matters and must vote either in favor or against. However, the initiative still expressly contemplates the possibility that no decision will be issued within the statutory period, in which case the application is deemed denied. Nevertheless, CNIE may still issue a valid decision, even after the expiry of the deadline, per Mexican administrative law.

The initiative takes a risky approach by including the negativa ficta approach, because it may create legal uncertainty for foreign investors regardless of their country of origin. In the last couple of years, trade authorities have had the “common practice” to not issue a government decision or authorization, leaving economic operators with the legal uncertainty as to their operations and whether or not to “challenge” the silence. Foreign investors may face a similar situation of legal uncertainty in the national security screening mechanism.

If a decision is issued, the Commission has three paths.²¹ First, it may determine that no national-security risk or threats exists and authorize the acquisition. Second, the Commission approves the transaction subject to modifications or mitigation measures. Third, the Commission may prohibit the acquisition on national-security grounds. The proposal therefore creates a spectrum of outcomes between unconditional approval and outright prohibition. Even if an investment is approved, it may still be subject to continuous reporting and compliance obligations designed to monitor any risk mitigation.²²

5. Enforcement and Sanctions

The initiative virtually maintains the enforcement mechanism, except for eliminating the provision that granted CNIE the authority to interfere in an acquisition on behalf of a foreign investment when it poses a risk to national security. However, the new proposed framework, among other provisions, allows CNIE to approve or require modifications to a transaction to mitigate national-security risk.²³ The Ministry of Economy is the authority in charge of applying the enforcement mechanisms. When enforcing the law and applying the penalties, the Ministry must hear the interested party following an administrative procedure and take into account the seriousness of the conduct.²⁴

Following Mexican administrative law, the initiative introduces two new penalties applicable to failing to comply with the national-security review mechanism.²⁵ The bill penalizes a “Mexican company” (not the foreign investment or investor) that proceeds to transfer its stock participation to a “foreign investor” in either of two situations:

1. After the CNIE has expressly denied authorization for the acquisition; or

2. Without having obtained a favorable resolution from the CNIE beforehand (i.e., skipping the mandatory screening altogether).²⁶

The penalty for this conduct is an administrative fine ranging from approximately USD $34,000 to USD $1.36 million. However, one may argue this sanctionable conduct and penalty does not meet constitutional standards for the following two reasons. First, “the Mexican company” will not transmit or transfer its stock participation to “the foreign investor,” rather such actions are performed by the shareholder(s) or partner(s) of the Mexican company. In this sense, the law appears to sanction a legal person who has no say in the transfer (i.e. the company) and ignores the person(s) that actually performed and benefitted from the conduct, e.g. the partners or shareholders of the company. Second, the initiative uses the term “stock participation” (i.e. estructura accionaria), which is only applicable to a stock corporation (e.g. S.A.), so one may argue that transferring a corporate interest of a limited liability company (e.g. S. de R.L.) is not covered. The bill in its current form, indeed, requires legal scrubbing.

Interestingly, foreign investments that carry out activities in Mexico without their mandatory approval face a considerably lighter sanction: an administrative fine ranging from approximately USD $6,804 to USD $34,020. This stands in stark contrast to the penalties applicable to “the Mexican Company” described above, which are up to forty times higher, suggesting that the initiative treats unauthorized equity transfers and breaches of mitigation measures as far more serious violations than the failure of “foreign investments” to obtain prior approval for the underlying business activity.

The initiative also penalizes non-compliance with the risk mitigation measures imposed by the CNIE, which carries a fine ranging from approximately USD $34,000 to USD $1.36 million.²⁷

Notwithstanding the above, two important questions remain. First, can the Ministry of Economy revoke an acquisition involving foreign investment when it poses a risk to national security? Second, can the Commission or the Ministry of Economy conduct an ex-officio investigation regarding acquisitions that did not trigger the mandatory screening mechanism?

Article 37 of the Foreign Investment Law, which is not subject to the proposed amendment, sheds light on these questions. The Ministry of Economy may revoke any authorization granted when the underlying acts contravene the law and may declare void any act, agreement, or corporate resolution it deems contrary to the law. Where the Commission has already approved the acquisition, the Ministry would need to file an acción de lesividad (action for annulment) before the Federal Administrative Court of Justice, since a favorable government decision creates rights for the private party and can only be set aside by a court, in accordance with article 2 of the Federal Law of Administrative Justice.

Conversely, where the acquisition was never submitted to the Commission for review, the Ministry would need to initiate an administrative procedure to declare the relevant private agreements void, pursuant to the Federal Administrative Procedure Law. It thus appears legally possible for the Ministry to invalidate an acquisition on national-security grounds even if the transaction did not trigger the mandatory screening. In either scenario, the practical consequence would be that the former shareholders or partners regain title to, and control over, the Mexican company—though significant questions remain where the ownership structure involves multi-layered holding entities, cross-border intermediaries, or assets that have since been transferred to third parties.

4. Conclusion: A Screening Mechanism Born from Trade Politics, Not National Security Doctrine

Mexico's proposed foreign investment screening mechanism is, at its core, a product of trade politics rather than an organic policy concern. The initiative was not prompted by an identified security threat within Mexican territory but by the USMCA review and sustained pressure from Washington to align Mexico's investment framework with the new regional security vision. Its passage is widely understood as one of the many conditions for the USMCA extension. That said, investment screening mechanisms serve legitimate purposes, and Mexico’s legal framework is outdated on the intersection between foreign investment and national security. The current Article 30, which the initiative proposes to repeal, granted the CNIE an undefined ex-post power to “impede” acquisitions without establishing criteria, procedures, or safeguards. The reform replaces that blank check with a structured, ex-ante mechanism—in principle, an improvement.

Yet the initiative's design reveals an internal tension that could backfire towards its allies and Mexico itself. Mexico is advancing towards a sophisticated foreign investment mechanism, but it is also leaving several critical questions and legal gaps. The screening mechanism may not be triggered if the foreign investment does not meet the asset value threshold or the 49% equity participation and, therefore, defeating the purpose of the law. The criteria for evaluating national-security risks are not defined in the statute; they will presumably be developed through secondary regulations or administrative practice, and the initiative does not even address the transparency of government decisions. The CNIE may develop burdensome and unreasonable information requests to foreign investors, who may withdraw their interest and deter potential investments. The initiative neither prescribes procedures to investigate acquisitions that are not subject to mandatory reporting, nor sanctions if national security has been impaired by such acquisitions. And, most importantly, the negativa ficta mechanism simply adds more uncertainty to the mix.

Perhaps the most significant unexamined dimension of the reform is its interaction with Mexico's extensive network of Bilateral Investment Treaties (BITs). Mexico is a party to more than thirty BITs currently in force, in addition to investment chapters in multilateral trade agreements. Although the initiative is drafted in nationality-neutral terms, its practical operation may raise non-discrimination concerns since the screening mechanism is clearly designed to address investments linked to geopolitical competitors.

Whether this initiative will achieve its stated objectives depends on factors that extend well beyond its text. If the CNIE applies the mechanism transparently, proportionately, and in good faith, it could become a credible instrument for addressing genuine security risks without discouraging productive investment. If, on the other hand, it becomes a tool for administrative discretion, political signaling, or quiet protectionism, it will damage Mexico's reputation as an investment destination at precisely the moment when nearshoring opportunities demand legal certainty. Perhaps the objective is simply to pursue the USMCA renewal, as President Trump’s 2026 Trade Policy Agenda stated that “the USMCA must address certain urgent challenges, including a surge in investment from companies domiciled in non-market economies in the region,” and that “[t]he Western Hemisphere is of unique importance to the economic and national security of the United States, and that begins with Mexico…”²⁸

This possibility is further supported by a broader U.S. trend toward incorporating economic-security cooperation, including investment screening and national-security measures, into its trade relationships. The 2025 U.S.-EU framework and the 2026 U.S.-India framework both contemplate cooperation on inbound and outbound investment reviews, while the 2026 U.S.-Jordan reciprocal trade agreement includes Jordan’s commitment to explore establishing an inbound investment review mechanism for national-security risks.²⁹

Undeniably, foreign investors will need to navigate this new environment. Mexico will adopt a screening mechanism not because it has identified that its “nanotechnology industry” is at risk, but because its most important trading partner seeks to establish a North American fortress. That is not, by itself, a reason to oppose the reform. But it is a reason to scrutinize it closely, recognize the existing budget and personnel constraints, and insist on safeguards so that this new sophisticated system is governed by the rule of law that prevents CNIE and its members from deterring new investments.

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