According to data from Bank of Mexico, by the end of the third quarter of 2025, total financing to Mexico’s private sector reached MXN11.26 trillion, of which 62.2% came from the non-banking sector, including private credit provided by non-bank financial intermediaries and alternative sources. Compared to the last quarter of 2024, the structure remains broadly unchanged: total financing declined by 1.8%, driven by a slight increase in bank credit (+1.3%) and a contraction in non-bank credit (-3.6%).

From a sectoral perspective, services and commerce stand out, along with food products, beverages and tobacco, as well as the “other activities” category, all of which exhibit a high share of non-bank financing. This underscores the importance of alternative sources in key areas of the economy, largely driven by the challenges small and medium-sized enterprises (Pymes) face in accessing traditional bank credit, which fosters demand for more flexible solutions.

On the political front, recent legal reforms have introduced greater regulatory and institutional uncertainty. For instance, in September 2024, a judicial reform was enacted that modified the mechanism for appointing judges, magistrates and Supreme Court justices. These officials are now elected through popular vote; a change that has drawn the attention of various international organisations, not only in the field of human rights but also in areas specialising in law, trade and investment, due to the risks posed by political influence in judicial functions.

These developments may influence investment decisions and the structure of corporate financing in the medium term. In summary, private credit continues to play a predominant role in Mexico’s overall financing landscape, particularly in segments where flexibility, speed of execution and tailored solutions are valued.

In recent months, Mexico’s public debt market has maintained steady activity, confirming its coexistence with the private credit market. However, access to public markets for Pymes historically has been limited due to high costs and regulatory requirements, which drives these companies to seek alternative financing structures such as private credit. Although the simplified issuance framework introduced by the Mexican government in 2023 aims to reduce these barriers, its adoption has been gradual and has not yet produced a significant shift.

Regarding syndicated loans, while they are common in Mexico, they are typically associated with large corporations that have access to sophisticated financing sources offered by domestic and international financial institutions. Consequently, private credit continues to serve as a key financing alternative for Pymes. In this context, there has been no material evidence of significant refinancing of private credit into public debt instruments over the past six months.

Therefore, the private credit market represents an attractive opportunity for fund managers, companies seeking financing, and institutional investors, aligning with global trends that favour more flexible structures over highly regulated public markets.

According to the Quarterly Survey on Credit Market Conditions conducted by the Bank of Mexico (July–September 2025), Mexican companies primarily relied on supplier financing (56.4%) and commercial bank credit (25.3%) for their general financing needs, while other sources such as intra-group financing, development banks, foreign banks and debt issuance represented smaller shares. This indicates that, for day-to-day operational purposes, private credit is not the most frequently reported source.

However, as outlined in 1.1 Private Credit Market, aggregate data on private sector indebtedness shows that non-bank financing, which includes private credit, accounts for 62.2% of total financing, confirming its structural importance in the Mexican market. Therefore, while it is not the dominant source for routine operational needs, private credit remains a highly relevant option in the overall financing mix and continues to be preferred in specialised corporate transactions, thanks to advantages such as flexibility, speed of execution and bespoke structuring.

The Mexican economy, like other jurisdictions, has been affected by extraordinary political, economic and geopolitical events that have partially constrained growth. Although a rebound was anticipated, largely driven by the nearshoring trend, recent trade policies implemented by the current US administration have prompted a reassessment of this outlook, which initially suggested a significant boost for Mexico’s economy.

Moreover, domestic factors such as the recent judicial reform, substantially altering Mexico’s justice system, and the dissolution of several regulatory bodies in key sectors, including antitrust and telecommunications, may negatively impact investor confidence and, consequently, the performance of the economy. These developments represent structural challenges that could slow the expansion of the private credit market in the short to medium term.

On the other hand, in recent years we have observed an increasingly active participation of pension funds (Afores) in the private credit market, driven by the significant resources they manage and their interest in alternative investment schemes that offer higher returns. This trend has created meaningful opportunities for global private capital managers.

In this context, a key challenge will be the design of tailored investment vehicles that, on one hand, comply with the regulatory limits and requirements applicable to Afores and, on the other, efficiently channel these resources into strategies that deliver superior returns compared to other asset classes.

Private credit providers in Mexico primarily focus on private equity sponsors and their portfolio companies, particularly Pymes. However, the origination activity remains concentrated, with a relatively narrow pipeline of transactions, which in practice has involved a limited number of deals (estimated at around 50 to 60 Pymes) highlighting the early stage of development of this segment compared to more mature markets.

In Mexico, private credit providers have demonstrated significant activity in recent years. In addition to multiple-purpose financial institutions (SOFOMES), there has been an increasingly frequent presence of private equity fund managers, both international and local, who have identified opportunities to offer flexible and tailored financing solutions. This trend reflects a growing demand for alternatives to traditional channels, driven by factors such as speed of execution, bespoke structuring and strong investor appetite for assets that deliver attractive returns.

In Mexico, private credit funds typically range in size from USD70 million to USD100 million, reflecting the scale of the local market and the appetite of institutional investors. Fundraising challenges often relate to building a robust pipeline of borrowers that meet the fund’s risk and return criteria, as well as diversification and regulatory requirements imposed by institutional investors such as Afores. Addressing these challenges requires significant efforts in origination, credit analysis and structuring, particularly in an environment where financial transparency and standardised reporting practices are still evolving.

As outlined above, given the significant role that Afores play in Mexico’s private credit market, the regulator, the National Commission for the Retirement Savings System (CONSAR), has increasingly focused on transactions involving these institutional investors, requiring strict compliance with regulatory standards. Recent regulatory updates have already raised the cap on structured instruments from 20% to 30% of the portfolio managed by pension funds, signalling a clear intent to promote greater participation in alternative assets. At the same time, these reforms aim to ensure that these vehicles allocate a substantial portion of their capital to projects within Mexico, adding governance and transparency requirements.

Overall, these measures could make lending into Mexico more attractive for foreign private credit providers, provided they structure their investments through vehicles that comply with local regulations, while also introducing additional operational and reporting obligations that may increase complexity.

Under Mexican law, the granting of loans may be carried out on a regular and professional basis by any person without the need to obtain governmental authorisation. However, it is important to note that no individual or company, other than duly authorised financial institutions (such as banks and fintech entities), may directly or indirectly raise funds from the public within Mexican territory through deposit-taking, lending, credit, loan agreements or any other transactions that create direct or contingent liabilities.

In respect of taking the benefit of security over assets located in Mexico, lenders and foreign lenders do not require a licence or regulatory approval.

As noted in 1.8 Impending Regulation and Reform, CONSAR is one of the primary regulators in the private credit space, given the increasing participation of pension funds (Afores) in this market. Considering recent increases in investment limits for structured instruments, CONSAR is expected to exercise stricter oversight to ensure compliance with applicable limits and regulatory requirements. It is important to note that such supervision directly applies to Afores and not to private funds themselves.

Additionally, non-bank financial institutions such as SOFOMES play a significant role in private credit. As such their activities are primarily regulated by the National Banking and Securities Commission (CNBV), particularly in matters related to anti-money laundering and compliance obligations. Additionally, CONDUSEF oversees transparency and consumer protection requirements, specifically for SOFOMEs ENR (non-bank affiliated entities).

There are no specific restrictions on foreign investment in private credit funds in Mexico. The Mexican legal framework generally allows unrestricted foreign participation in investment funds and private credit vehicles. However, certain underlying investments may be subject to ownership limitations under Mexican foreign investment laws, particularly in regulated or strategic sectors such as transportation, integrated port administration, telecommunications and hydrocarbons.

According to Mexican anti-money laundering law, the granting of loans on a regular and professional basis, with or without collateral, by parties other than financial institutions constitutes a vulnerable activity.

In this regard, those engaging in a vulnerable activity are subject to a series of obligations, including: (i) the direct identification of clients or users, as well as the ultimate beneficial owner involved in such transactions; (ii) the submission of notices and reports to the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), through the SAT (Servicio de Administración Tributaria – the Mexican tax authority) portal; (iii) registration in the official registry of vulnerable activities; (iv) conducting risk-based assessments that allow them to identify, analyse, understand, and mitigate such risks, as well as those related to the individuals with whom they carry out transactions or acts; (v) drafting and implementing internal policy manuals that include criteria, measures and procedures to identify and monitor these transactions; (vi) the custody, protection and preservation of information and documentation related to the vulnerable activity for the legally applicable period (ten years).

On the other hand, private credit fund managers should note, as outlined above, that given the increasing participation of Afores in the private credit market through investment vehicles known as Cerpis, such pension funds are required by the regulator to provide, among other things, quarterly financial statements and reports that comply with Institutional Limited Partners Association (ILPA) standards, as well as certain valuation standards.

Private credit providers electing to structure their investment vehicles as trusts issuing securities (CERPIs or CKDs) must also comply with reporting obligations to the securities regulator.

As it is common in other jurisdictions, private credit providers participating in syndicated loans typically negotiate the terms and conditions governing the exercise of their voting rights on material matters, including substantial amendments to key provisions such as interest rates and maturities.

To date, we have not observed a particular focus by the competition authority on the private credit sector.

In Mexico, private credit transactions commonly use structures such as trusts (fideicomisos) specifically created for the purpose of granting loans to companies. Additionally, depending on the volume of lending and several considerations related to the origin of the money, it is also typical to introduce a SOFOM in the structure, as they might have tax-related benefits.

Following global trends, credit providers in Mexico are generally willing to offer a variety of facilities, including revolving facilities and delayed draw facilities, tailored to the specific needs of borrowers.

Regarding external factors influencing deal structuring, the authors believe that macroeconomic conditions, such as volatility in reference interest rates and inflationary pressures, will continue to shape the industry. Additionally, increasingly stringent anti-money laundering regulations and enhanced supervisory measures by financial authorities, including potential sanctions for non-compliance, are expected to play a significant role in determining future structuring practices.

The key documentation for private credit transactions in Mexico typically includes credit agreements (covering term loans and revolving lines), as well as security documents such as trust agreements, non-possessory pledge agreements and share pledge agreements. This set of agreements is generally negotiated by the lenders and the borrower, often with the involvement of legal counsel on both sides.

While intercreditor agreements can be negotiated separately, in Mexico there is a tendency for the specific terms and conditions of the transaction to be reflected in the credit agreement itself.

“First out – last out” transactions are not standard in the Mexican market; however, when they do occur, the relevant terms and conditions are typically included in the credit agreement rather than in separate agreements among lenders.

Finally, regarding external factors causing changes, the reform of the judiciary is worth mentioning, which is making lenders strengthen their execution processes by requesting some additional steps in contracts, as well as hedging agreements due to some uncertainties about the local currency and its future behaviour.

Foreign lenders are not restricted from providing private credit or taking security in Mexico. However, when foreign lenders engage in private credit on a regular and professional basis, they must comply with increasingly stringent anti-money laundering regulations, which impose obligations related to reporting, client identification and registration of such transactions.

Regarding security interests, while there is no prohibition for foreign lenders to take collateral, it is important to note that certain types of security may require registration with public registries.

In general, as in international practice, credit agreements in Mexico typically include provisions regarding the permitted use of proceeds, which borrowers must strictly observe. To ensure compliance, lenders often establish monitoring rights, such as the ability to inspect accounting records or visit the borrower’s premises to verify that the funds are being applied for the agreed purposes.

Regarding local practical challenges for private credit providers in take-private transactions and other acquisition financings, these may include obtaining authorisation from competition and securities regulatory authorities, as well as complexities related to collateral arrangements when multiple jurisdictions are involved, and the registration process with the relevant public registries.

While debt buybacks are not prohibited under Mexican law, they are not a common practice in private credit transactions. In line with international practice, Mexican loan documentation generally allows borrowers to voluntarily prepay their debt, which in effect achieves similar economic results to a buyback.

In 2025, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued orders identifying three Mexico-based financial institutions as being of primary money laundering concern. As a result, during the past semester, Mexican financial institutions have significantly strengthened measures to identify, track and monitor financial transactions. This development is particularly relevant because trusts, as noted in 3.1 Common Structures, are commonly used by private credit providers to implement their structures. The authors anticipate these events will continue to influence and shape legal documentation going forward. Consequently, documentation now includes enhanced AML provisions, stricter KYC requirements and contractual obligations for ongoing monitoring and reporting.

In addition, following global trends, ESG factors have been incorporated into legal documentation. Credit providers now include specific covenants requiring borrowers to meet sustainability-related obligations. This trend reflects the growing demand from institutional investors in the private credit industry for responsible investment practices.

In Mexico, junior or hybrid capital is commonly provided in the form of subordinated debt and is designed to offer flexible financing solutions where borrowers seek additional leverage without immediate equity dilution.

Typically, this debt is used as bridge financing, and once the principal debt facility closes, its proceeds are applied to fully repay the subordinated debt. In other cases, the documentation for the principal debt expressly acknowledges the existence of the subordinated facility and incorporates it into the payment waterfall.

Documentation for this type of capital is highly bespoke and tailored to the borrower’s specific needs. It often includes intercreditor provisions and contemplates different forms of security, such as pledges over shares and assignments of receivables.

Regarding HoldCo financings, these are common in Mexico and are typically secured through a customary collateral package that includes a pledge of shares in operating subsidiaries, upstream guarantees, and, in some cases, assignments of cash flows or project rights.

The authors believe that payment in kind is not a common practice in Mexico, as prevailing market standards require cash-pay interest to maintain liquidity discipline and reduce credit risk.

Regarding amortisation, private credit providers typically require scheduled principal repayments rather than pure bullet structures, although bullet arrangements may occur in exceptional circumstances.

In Mexico, private credit providers typically require call protection to safeguard their expected returns against early prepayment. The most common mechanism is a prepayment fee, applied when the borrower repays the loan before maturity. These fees are generally structured based on the timing of the prepayment. For instance, if prepayment occurs within the first year, the fee is fixed; in later years, it often decreases gradually. In senior secured loans, it is also common for parties to negotiate voluntary prepayment without penalty after a short initial period.

In Mexico, payments of principal are not subject to withholding tax. However, interest and other amounts that are treated as interest under Mexican tax law, such as discounts, premiums, commissions for granting credit, are subject to withholding when paid to non-residents. The withholding rate can be up to 35%, although reduced rates may apply for certain beneficiaries that meet the applicable legal requirements; for example, a 4.9% rate for banks and other qualifying financial institutions. These reductions are generally available under Mexican tax law or applicable double taxation treaties, provided the beneficiary complies with the relevant conditions.

Typical structures used to mitigate these tax burdens include, among others, the creation of specific vehicles such as SOFOMEs, which for tax purposes are considered part of the Mexican financial system and may benefit from preferential withholding rates.

In addition to withholding tax on interest, lenders should consider value-added tax (VAT) on interest payments, which generally applies to transactions between Mexican residents. However, the Mexican VAT Law provides exemptions in certain cases, particularly when interest is paid to or received by entities that are part of the Mexican financial system, such as SOFOMEs.

Foreign lenders should consider that interest payments may be subject to withholding tax and value-added tax. Accordingly, it is advisable to include gross-up clauses in the relevant credit agreements to ensure that the lender receives the full amount of the payments without any deductions for taxes.

Additional risks include the potential creation of a permanent establishment if the lender carries out activities deemed habitual in Mexico, and limitations on treaty benefits if the lender cannot demonstrate beneficial ownership or sufficient economic substance.

These risks can be mitigated through proper structuring, including treaty-based planning, use of regulated local vehicles such as SOFOMEs, and ensuring compliance with substance and anti-abuse requirements.

In the Mexican market, private credit transactions commonly involve the creation of security interests over a broad spectrum of assets. Typical collateral includes: (i) shares representing the borrower’s equity interest; (ii) machinery and industrial equipment; (iii) accounts receivable; (iv) rights to collect receivables; (v) rights arising under material agreements; (vi) rights to insurance proceeds; and (vii) real estate. Such security interests are generally perfected in accordance with applicable Mexican law, which may require registration with the Public Registry of Commerce or other relevant registries, depending on the nature of the asset.

The form of security generally depends on the nature of the asset, but commonly these forms include share pledge agreements, non-possessory pledge agreements, security trusts to which receivables are assigned and that serve as a source of payment, and mortgages over real estate.

Additional mechanisms to secure payment obligations under credit agreements include the issuance of promissory notes by the borrower in favour of the lender, which may be guaranteed by a third party (aval), as well as the granting of joint and several obligations, typically assumed by entities affiliated with the borrower.

Regarding formalities and perfection requirements, the following applies.

• Share pledge agreements must be executed in writing between the borrower’s shareholders, as pledgors, and the lender, as pledgee, with the borrower also appearing. To perfect the pledge over shares, endorsement and delivery of the share certificates to the pledgee is required, together with registration of the pledge in the borrower’s share registry book.
• Non-possessory pledge agreements must be executed and ratified before a notary public or a commercial broker (corredor público) by the borrower, as pledgor, and the lender, as pledgee. In addition, to be effective against third parties, the pledge must be registered with the Sole Registry of Movable Guarantees (RUG).
• Security trusts must also be ratified before a notary public or a commercial broker (corredor público) (and, in the case of trusts including real estate, ratification must be before a notary public) and registered in the RUG; if the trust includes real estate, it must also be registered with the Public Registry of Property of the location where such real estate is situated.
• Assignments of receivables or other rights generally require written notice to the underlying obligor of the assignment. Such assignments become enforceable against third parties on the date they are registered in the RUG.

Additionally, it is common practice to review the borrower’s bylaws, as well as those of any entities granting guarantees, to verify their corporate purpose and confirm their capacity to enter into the relevant agreements. This review also serves to determine whether any corporate authorisations are required for such acts. Even when it is concluded that no such authorisations are legally necessary, lenders typically request them as a matter of practice.

Registration fees and notarial fees should be considered by the parties; however, market practice dictates that these costs are typically borne by the borrower.

Mexican law does not recognise the concept of a “floating charge” as understood in common law jurisdictions. However, there are security mechanisms that can effectively cover substantially all of a borrower’s present and future assets.

The most common structure is the non-possessory pledge, under which the borrower grants a pledge over all of its movable assets (such as equipment, machinery, accounts and other property) without transferring possession. This arrangement is designed to allow the borrower to continue operating its business in the ordinary course, thereby generating the cash flows necessary to service the debt. Such pledges may be structured as general pledges over all assets or limited to specific categories.

Additionally, it is common practice to establish security trusts (fideicomisos de administración y fuente de pago), to which assets are transferred and which serve as the source of payment for the borrower’s obligations. Typically, these assets consist of rights to collect receivables arising from underlying credits held by the borrower, and the cash flows generated from such receivables are applied to repay the credit granted by private credit lenders.

Under Mexican law, it is generally permissible for entities to provide downstream, upstream and cross-stream guarantees. There are no statutory restrictions requiring the guarantor to demonstrate corporate benefit or prohibiting financial assistance. The main considerations are corporate capacity and proper corporate authorisations, which are typically addressed through resolutions of the relevant corporate bodies. Market practice does not impose quantitative limitations on the amount guaranteed, nor are such limitations measured at the time of granting or enforcement.

With respect to the allocation of proceeds among different tranches of debt, this is typically addressed in the credit agreements.

Under Mexican law, there is no statutory prohibition on a target company granting guarantees, security interests or financial assistance in connection with the acquisition of its own shares. Unlike certain jurisdictions that impose financial assistance restrictions or require evidence of corporate benefit, Mexican legislation does not contain such limitations.

The primary considerations are, as outlined above, corporate capacity and proper authorisations. It is standard practice to review the target’s by-laws to confirm that its corporate purpose allows the granting of guarantees and to obtain the necessary corporate approvals (eg, board or shareholder resolutions). Even when such authorisations are not strictly required by law, lenders typically request them as a matter of practice.

As explained in 5.1 Assets and Forms of Security, in Mexico, it is common practice to review the corporate documents of the borrower and any guarantor entities to confirm their capacity and identify the competent corporate bodies that must approve the granting of security or guarantees. There are generally no requirements for works council or similar consents.

Costs associated with security or guarantees typically include notarial and registration fees, and, in the case of security trusts, trustee fees.

In addition, under Mexican law, there is a “hardening period” (fecha de retroacción) that is a retroactive period, generally covering 270 calendar days immediately preceding the date of the insolvency judgment, during which acts carried out by the obligor, including the granting or increase of security interests, may be deemed fraudulent in respect of creditors and therefore subject to be declared null or invalid.

Retention of title (reserva de dominio) is recognised under Mexican law and can be contractually agreed, although, in this context, it is not widely used in practice.

Finally, under Mexican law, any creditor may generally assign its rights without the debtor’s consent unless such assignment is prohibited by law, expressly restricted by the parties, or impossible due to the nature of the right. Assignments of receivables or other rights typically require written notice to the underlying obligor, and such assignments become enforceable against third parties on the date they are registered in the RUG. Anti-assignment provisions agreed by the parties are generally enforceable.

In general terms, once the secured obligations have been fully satisfied, the parties execute the corresponding release agreements acknowledging such compliance. Subsequently, the relevant security interests are cancelled in the applicable public registries, such as the Public Registry of Property or the RUG, as appropriate.

Mexican law permits multiple liens over the same asset, provided that the obligor has the capacity to grant them and the relevant formalities are observed. The priority of competing security interests is generally determined by the date of registration in the applicable public registry.

Mexican law recognises contractual subordination, which is typically achieved through intercreditor agreements or subordination clauses in loan documentation. Such provisions are generally enforceable and allow the priority among lenders to be contractually varied.

Contractual subordination provisions usually survive the insolvency of a Mexican borrower, provided they do not contravene mandatory insolvency rules or statutory priorities established by law. Certain creditors, such as those holding labour, tax, or social security claims, will rank ahead of secured creditors in insolvency proceedings.

As explained in 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims, under Mexican law, labour, tax and social security claims will prevail over secured creditors in insolvency proceedings. These statutory claims rank ahead of any registered security interests.

Common intercreditor agreement terms for private second liens include standstill provisions (preventing junior creditors from enforcing until senior debt is satisfied), waterfall provisions governing the distribution of proceeds, and restrictions on enforcement actions by subordinated creditors.

Cash pooling is not common practice in Mexico. Instead, corporate groups typically implement centralised treasury structures, under which one entity manages group liquidity through internal transfers, intercompany loans, risk hedging and foreign exchange operations. These arrangements are documented through internal treasury agreements and aim to optimise cash usage and reduce financing costs, without the automatic balance consolidation that characterises bank-driven cash pooling.

In private credit transactions, secured hedging and cash management obligations are typically addressed by including them within the definition of “Secured Obligations” under the security package. Common practice is to limit secured hedging to bona fide interest rate or foreign exchange hedging related to the credit facility, excluding speculative transactions.

In Mexico, it is common practice in syndicated or multi-lender credit transactions to appoint a security agent, who acts as the holder of the relevant lien on behalf of all lenders. This structure centralises the administration of collateral and avoids the need to amend registrations whenever the lender group changes.

In the event of an assignment of credit rights by a lender, the usual approach is simply to execute the documentation evidencing such assignment, without the need to modify the existing collateral arrangements. This is because the collateral is granted in favour of the security agent, who remains the holder of the lien, thereby ensuring continuity and enforceability of the security against third parties.

In general terms, once the secured obligations have matured, the lender may request the enforcement of the assets given as collateral. Under Mexican law, for non-possessory pledges and security trusts, both judicial and extrajudicial procedures are available, provided that the contractual conditions and legal formalities are met.

The extrajudicial enforcement procedure begins with a formal demand by the trustee or the pledgee to the obligor for the delivery of possession of the assets, made through a notary public or commercial broker (corredor público). Once possession of the assets has been delivered, the sale of such assets will proceed in accordance with the terms agreed in the contract.

The parties may agree that the value of the assets be determined by an appraisal issued by an expert or by a third party other than the creditor, designated by the parties either at the time of executing the agreement or at a later date, or through any other procedure agreed in writing, specifying the basis for such designation. If the parties fail to reach an agreement on the appointment of the expert or the authorised third party for valuation purposes, the competent court will make the appointment. It is important to note that only if expressly agreed in the contract may the trustee or the pledgee obtain possession of the assets subject to the security interest.

If the obligor refuses to deliver possession of the collateral or if the parties fail to agree on the valuation of the assets, judicial enforcement proceedings may be initiated.

To commence judicial enforcement, the credit must be evidenced in a public or private document and must be due and payable either under the agreed terms or pursuant to applicable legal provisions. Once the claim has been filed and admitted, the court will require the obligor to pay the secured obligations, warning that if payment is not made, the obligor must deliver possession of the collateral to the creditor or to a third party designated by the creditor. In the same order in which payment is requested, the court will serve the obligor with process so that, if the obligor fails to pay or deliver possession of the collateral, the obligor may respond to the claim within the applicable statutory period.

If the lender chooses to sell the assets and the sale price exceeds the amount of the debt, the lender must deliver the surplus to the obligor after deducting the amount of the loan, including interest and any expenses incurred in connection with the sale.

The enforcement of security documents and the validity of certain actions may be limited or affected by statutory priorities or provisions established by:

• tax laws imposing federal, state, or municipal taxes, including social security contributions and similar obligations;
• labour laws regarding compensation owed to employees;
• insolvency and restructuring laws, including insolvency, bankruptcy, moratorium, or similar proceedings affecting creditors’ rights.

The choice of a foreign law as the governing law of the contract and the submission to a foreign jurisdiction are generally valid and enforceable in Mexico, provided that such choices do not contravene Mexican public order (orden público), such as due process principles or laws applicable to certain assets, including real property, which is governed by the law of its location.

These provisions must also be expressly agreed upon by the parties in the relevant contracts.

Waivers of sovereign immunity by governmental entities or state-owned enterprises are generally enforceable under Mexican law, provided they are express and unequivocal. However, enforcement may still be subject to constitutional principles and public interest considerations.

A judgment rendered by a foreign court or an arbitral award against a company may be enforceable in Mexico without a retrial of the merits, provided that the requirements set forth in the applicable law are met. These include:

• compliance with the formalities established in international treaties executed by Mexico regarding letters rogatory and recognition of foreign judgments;
• that the foreign court or arbitral tribunal had proper jurisdiction in the original proceedings;
• that the defendant was duly served and granted due process rights;
• that the judgment or award is final and conclusive under the law of its jurisdiction;
• that the matter is not pending before Mexican courts; and
• that the obligation does not contravene Mexican public order (orden público).

Other matters that might impact a lender’s ability to enforce its rights under a loan or security agreement in Mexico include:

• under Mexican law, obligations denominated in foreign currency may be discharged by paying the equivalent amount in Mexican currency at the exchange rate published by Bank of Mexico and in effect on the payment date;
• the payment of compound interest (interest on interest) may be unenforceable under Mexican law;
• claims may become time-barred under applicable statutes of limitation or may be subject to defences, set-off, or counterclaims; and
• service of process by mail does not constitute personal service under Mexican law. Since personal service is considered a fundamental procedural requirement, a foreign judgment based on service by mail would likely not be enforceable by Mexican courts.

A typical enforcement process in Mexico can take several years, as parties have the right to appeal decisions or judgments issued at each stage of the proceedings under applicable law. Although enforcement actions for non-possessory pledges, security trusts, or promissory notes are designed to be expedited through summary proceedings (juicio ejecutivo), it is important to note that such actions are still or may be subject to judicial review, which can significantly extend timelines.

The costs of enforcement may vary depending on the circumstances of each case; however, parties should anticipate expenses related to legal counsel, notary public or commercial broker fees and expert appraisals (peritos).

As mentioned, following the judicial reform approved in 2024, which significantly changed the process for selecting judges and magistrates, parties have anticipated potential uncertainty by including arbitration or mediation clauses in their contracts for dispute resolution. We expect this trend to continue as a way to mitigate risks related to judicial unpredictability.

Other practical considerations and limitations are discussed in 6.4 A Foreign Private Credit Lender’s Ability to Enforce its Rights.

In Mexico, the only judicial insolvency proceeding is known as concurso mercantil, which consists of two successive stages:

• conciliation (conciliación) – restructuring phase aimed at preserving the debtor’s business through an agreement with recognised creditors; and
• bankruptcy (quiebra) – in which if no agreement is achieved, the process moves to liquidation, which involves selling the debtor’s business, its productive units, or its assets to pay recognised creditors.

Regarding the impacts of the commencement of insolvency process, under Mexican law, it is important to note that any provision in credit agreements that seeks to broaden the debtor’s obligations as a result of initiating insolvency proceedings may be deemed null and void.

Upon the debtor’s declaration of insolvency, several legal effects take place, including:

• all outstanding obligations of the debtor are deemed due and payable; and
• secured claims, regardless of whether payment was originally agreed to occur in Mexico or abroad, will remain denominated in their original currency or unit of account and will only accrue the contractual ordinary interest, limited to the value of the assets securing them.

For voting purposes under Mexican insolvency law, secured creditors’ claims are converted into UDIs as of the declaration date. They participate based on this amount, unless they request to be recognised for the collateral’s estimated value and as unsecured creditors for any shortfall.

Regarding the “stay”, Mexican law provides that, from the issuance of the insolvency judgment and until the conclusion of the conciliation stage, all enforcement proceedings against the debtor are suspended, except for labour claims and tax claims. This means creditors cannot initiate or continue individual enforcement actions, including foreclosure of collateral, outside the insolvency process.

Under Mexican insolvency law, control of the process shifts depending on the stage. During the conciliation stage, the debtor remains in possession but under the supervision of a conciliator, who is appointed by the court and oversees negotiations and the debtor’s management. If the process moves to bankruptcy (quiebra), control passes to a trustee (síndico), also appointed by the court, who takes possession of the debtor’s assets and manages liquidation and payment to recognised creditors.

Other participants include the visitor (visitador) (who initially verifies insolvency conditions) and the interventor, who represents creditors’ interests and is typically proposed by them, with court approval.

Under Mexican law, creditors are classified based on the nature of their claims, which determines their priority in payment. As a general rule, labour and tax claims have statutory priority over all other claims.

The law establishes the following ranking:

• singularly privileged creditors – such as funeral expenses and medical expenses related to the debtor’s death;
• secured creditors – including mortgage and pledge holders;
• creditors with special privilege – those granted a statutory privilege or a right of retention;
• unsecured creditors – those not falling under the previous categories; and
• subordinated creditors – those who contractually agreed to subordinate their claims to common creditors.

Under Mexican law, the conciliation stage lasts 185 calendar days, which may be extended once for up to 90 additional days at the request of recognised creditors. If no agreement is reached, the process moves to the bankruptcy stage, whose duration is highly variable and often significantly longer.

In practice, recent judicial reforms have introduced delays in commercial matters, including insolvency proceedings, due to the appointment of new judges who may lack experience in complex insolvency cases. This has raised concerns in the market about longer timelines and procedural uncertainty.

As for recoveries, while the conciliation stage aims to preserve value through restructuring, actual recoveries for creditors often depend on the debtor’s asset quality and the success of negotiations. Labour and tax claims almost always receive priority payment, while unsecured and subordinated creditors typically recover only a fraction of their claims.

In Mexico, out-of-court restructuring processes are common. These typically involve direct negotiations between debtors and creditors aimed at debt restructuring, extension of payment terms, standstill agreements and other contractual arrangements. Such mechanisms are voluntary and lack the legal protections available in formal insolvency proceedings, such as an automatic stay, so their success depends on creditor co-operation and the debtor’s ability to present a viable turnaround plan.

As outlined above, key risk areas for lenders include:

• from the issuance of the insolvency judgment and throughout the conciliation stage, all enforcement actions, including foreclosure of collateral, are suspended, except for labour and tax claims. This limits the lender’s ability to act individually and forces participation in the collective insolvency process;
• labour and tax claims rank ahead of all other creditors, which can significantly reduce recoveries for lenders, even those with secured claims;
• any clause in credit agreements that seeks to broaden obligations upon insolvency may be deemed null and void, limiting contractual protections; and
• judicial delays and procedural complexity often lead to prolonged processes, during which asset values decline, impacting overall recoveries.

Under Mexican law, transactions carried out by the debtor prior to the insolvency declaration may be deemed fraudulent and therefore ineffective if they were intended to defraud creditors and the counterparty was aware of such fraud.

Examples include:

• gratuitous acts;
• transactions where the debtor pays a consideration significantly higher or receives one significantly lower than market value;
• transactions with terms or conditions that materially deviate from prevailing market conditions at the time of execution;
• debt forgiveness by the debtor; and
• payments of obligations not yet due.

Additionally, certain acts are presumed fraudulent if performed during the look-back period (fecha de retroacción) unless the interested party proves good faith, such as:

• granting new security or increasing existing security when the original obligation did not contemplate such changes; and
• payments made in kind when different from the originally agreed form or when the agreed consideration was in cash.

Under Mexican law, as of the date the insolvency judgment is issued, set-off is only permitted in the following cases:

• rights and obligations of the debtor arising from the same transaction, provided such transaction is not interrupted by the insolvency judgment;
• rights and obligations that matured prior to the insolvency judgment and whose set-off is expressly allowed by law;
• rights and obligations arising from derivative financial transactions; and
• tax credits in favour of and against the debtor.

As explained in 7.4 Rescue or Reorganisation Procedures Other Than Insolvency, out-of-court restructurings in Mexico typically involve direct negotiations between debtors and creditors to restructure debt, extend payment terms, or agree on standstill arrangements. These are voluntary mechanisms that lack the legal protections of formal insolvency proceedings (such as an automatic stay), so their success depends on creditor co-operation and the debtor’s ability to present a viable turnaround plan.

Co-operation from existing equity holders may be required when the restructuring involves changes to the capital structure, such as debt-to-equity conversions, new capital injections, or acceptance of dilution. Other constituencies, such as guarantors or related parties, may also need to consent to amendments in contractual obligations.

In contrast, in-court processes provide significant advantages, including the automatic stay that halts enforcement actions, the ability to bind dissenting creditors under a court-approved plan, and the possibility to acquire collateral free and clear of other claims. These proceedings offer greater legal certainty and enforceability, although they are typically more time-consuming and procedurally complex than out-of-court solutions.

Mexican law grants dissenting creditors several rights during insolvency proceedings. They may oppose certain acts declared during the process and appeal judicial decisions, such as the judgment on recognition, ranking, and priority of claims. While there is no out-of-court mechanism to force a non-consensual restructuring, in-court proceedings allow a restructuring plan approved by the required majority to bind dissenting creditors.

In Mexico, there is no formal statutory framework for expedited restructurings such as pre-packaged or pre-arranged plans comparable to those in jurisdictions like the US. However, similar outcomes can be achieved through private agreements negotiated in advance with creditors and then incorporated into an insolvency proceeding.