Sunday, August 08, 2010

tears on the sand

"Don't invest any more money in coastal Mexican property than you can afford to lose."

That was one of the first pieces of advice I received from a Mexican real estate agent when I began my quest for a place to retire in Mexico.  And good advice it was.

Every expatriate knows the story from 2000.  Punta Banda.  85 American families evicted from their Mexican beach homes.  Charges of fraud.  Ignorance.

And we all know the subsequent web posts -- mainly from the soothing voices of real estate agents.  Nothing like that can happen again.  The law is our friend.

The attitude is -- .  Well not anachronistic.  That merely refers to people of a certain time applying their own experience to past (or future, I suppose) eras.  This is something else.  Attempting to transplant social seedlings in a new land.  I guess ethnocentric is what I am looking for.

Because similar things can still happen.  And one did this past week in a little village -- Tenacatita -- just north of my village.

I will not bore you with the details -- because I do not know them.  Like most local events, the subtext is always more interesting than the text, but text is all we usually see.  If you want the newspaper version, you can find it here.

But let me summarize.  Tenacatita is a Small village on the north side of Tenacatita Bay.  One of the best spots for snorkeling in the area.  A beautiful beach.  Rows of palapa restaurants with simple seafood dishes.  What a lot of people picture when they dream of living in Pacific Mexico.

That picture took on a different look on 4 August when a group of 180 state police in riot gear evicted about 800 people who lived or worked in the village.  Bulldozers and fires soon followed.  Fiddler on the Roof enacted on the beach.

But there is always more.  The eviction was the result of litigation that has gone on for two decades.  A Guadalajara businessman claims ownership of the property.  He has been trying to evict the current residents sine 1991 when he bought 42 hectares from the wife of a former governor of Jalisco.

The local ejido claims to own the land.  And, just as indignantly, claims to have papers to prove it.

It all sounds a bit like the Balliol-Bruce dispute for the Scottish crown.  And there is no Edward I lurking in the wings.

Property ownership in Mexico, like so many other things, is molded by its history.

Prior to the arrival of Hernán Cortés, the local Indians were little concerned with property ownership.  The major Indian empires were hierarchical, with the population working for the aristocracy and the community.

But land was abundant -- to be conquered, not to be titled.

The Spanish had a different notion.  The land belonged to the Spanish crown -- to be doled out as large feudal estates to the king's favorites.  When the colonists in Mexico finally succeeded in getting rid of the Spanish king, they kept most of the Spanish social institutions -- including large landholdings by a new aristocracy.

At several points in its history, Mexico toyed with land reform.  But the power players remained the small group of land owners.  Several times during the 1800s, the tension between the landowners and the reformers broke out in open warfare.

Until Porfirio Díaz came to power.  For almost 35 years, he ruled Mexico, essentially as a dictator.  The country had political stability (at the price of political freedom).  He recognized that Mexico could not be a world power unless it industrialized. 

And industrialize he did.  He brought in foreign investors to assist in building the capital structure.  It worked.  Mexico's economy thrived.

But some of the investors -- Spanish, French, British, American -- represented the very thing that offended many Mexicans.

The dictator overplayed his political hand.  The forces who had effectively been fighting with one another since Mexican independence banded together and ousted the dictator.  Once he was gone, they were free to fight one another with abandon for almost a decade.

What came out of that civil war was the Constitution of 1917 -- still the supreme law in Mexico.  Many of the revolutionaries were Marxists and found comfort in the Russian communist revolution.  But the constitution would not go that far.  It remained true to its Spanish roots where all property rights were derived from the crown.

Article 27 unsubtly stated: "Ownership of the lands and waters within the boundaries of the national territory is vested originally in the Nation, which has had, and has, the right to transmit title thereof to private persons, thereby constituting private property."  The message is clear.  Private property rights exist at the whim of the national government.

The same article divided up the large landholdings and created ejidos to manage tracts of communal land.  In addition, foreigners were greatly restricted in their businesses in Mexico.

And to prevent another foreign invasion, Article 27 provided: "Under no circumstances may foreigners acquire direct ownership of lands or waters within a zone of one hundred kilometers along the frontiers and of fifty kilometers along the shores of the country."

For 75 years, foreigners were prohibited from owning land in the Trekkie-monikered "forbidden zone."  We all know people who tried to get around the law by buying property in the name of a Mexican national -- the infamous presta nombre system.

In 1992 the Mexican government approved a bank trust system where foreigners could buy an interest in forbidden zone property -- for 50 years, renewable for an additional 50 years -- if the property was held in a bank trust.

And that is why some real estate developers keep repeating the mantra that buying property in Mexico is safe.  With an eye toward marketing and a back toward history.

Most of the residents in Tenacatita are Mexican.  Their tale is not one of bank trusts.  It is the uncertainty of ownership that surrounds most land in Mexico.

The government owns the land.  It allowed ejidos to manage some of it.  Ejidos, in turn, can regularize land (through a system that would make most health care reform plans look simple), and sell title as if it had not been ejido land. 
(I will not even touch on the problem of land being sold while families are fighting over it -- often for decades).

The Tenacatita evictions did not surprise me.  What did surprise me is a "call to arms" I received in my email box this morning from an American expatriate in Mexico.

He wrote: 
Please write the Governor through the Gov't de Jalisco website.  Ask him why the people were forcibly moved without their belongings.  Ask him if it's true that the Jalisco State Police are looting stores and homes and drinking someone else's beer.  Ask him if 40 people were beaten in custody of his forces and, if so, why?  Ask him about the shootings and ask him how many years the Governor of Chiapas spent in prison in the 90's for his culpability in the massacre of 30 some woman and children of the Zapatista movement.  Tell him how much time you spend here, what you own here, etc.

I understand his concern.  And his heart may be in the right place.  But he is setting up himself (and other expatriates) for the possibility of immediate deportation.

Article 33 of the constitution provides: "Foreigners may not in any way participate in the political affairs of the country."  Under the same article, the president has the authority to deport any foreigner -- without recourse to legal action.

It is not an idle threat, as a group of college students from Washington discovered when they marched in a Labor day parade opposing the construction of an airport.

Today's lesson?  Be a renter.  If you want to buy, spend only what you can afford to lose.  And, no matter your property status, steer clear of politics in Mexico.


Calypso said...

I think your advice is a little over the top - in the case of Punta Banda and probably this one as well - these people were probably aware of a cloudy title. When one nails down the people of Punta Banda they will admit they knew about problems just didn't think they would materialize.

As a foreigner one can own land in most of Mexico with Title - just not in those areas close to the borders or coastlines.

Mexico gets a lot of bad press from inaccurate or incomplete reports - probably because if people knew just how good it is here in Mexico there would be a mass exodus by those that can afford it or those that are at retirement age.

If it is too good to be true than it probably is. Buy Mexican land with a clear Title; many foreigners have and many will.

I guess in the end I should be happy about these scare tactics - less crowding and land prices won't escalate to the point of insanity and then downfall as shown in much of the U.S.

Anonymous said...

this is waay too long

Jonna said...

I think you are overstating it when you say to only be a renter.

However, my mantra is considered overly cautious by many but I would almost never buy ejido land. The regularization process is byzantine and there are dangerous curves throughout. If I really, really wanted the property AND it had been regularized for more than 25 years and gone through at least two Mexican owners after the regularization... I might consider it. However, I'd be very careful to investigate the title with a respected, uninvolved, Notario. The property in Tenacatita would not have passed any cautious buyer's sniff test.

Just another point, the way you put it, it sounds as if after 100 years you lose the title in a fideicomiso or bank trust. They can be renewed or a new one put in place endlessly and they give you all the same rights of sale, inheritance, transfer, mortgage that a deed gives. They actually have a slightly better inheritance clause than a regular deed.

Steve Cotton said...

Calypso -- I have few fears in life. Buying property on the Pacific Mexico coast is one of them. Almost all of it is or was ejido land. And titles suffer accordingly. I would probably have fewer concerns on your side of the country. Of course, the fact that I have decided to be a gypsy also colors my opinion.

Anonymous -- Too many shiny objects?

Jonna -- Tenacatita was a boil waiting to burst. And there are plenty of similar areas on the Pacific -- including my little village. Thanks, for the clarification on renewals past the 100-yerar point. I had been told differently by a local notario. But he has given me some rather questionable advice in other areas,

Chrissy y Keith said...

Tenacatita has been a boiling point for years. I was there about 16 years ago after the first Bull Dozing happened. The entire area from Boca de Iguana to La Manz is a hot bed. I have reviewed the Title Reports for a lot of the area ( I have retired from the Title Biz after 25 plus years) and there are many issues that should concern fee simple interest regarless of Government allowable ownership.

Anonymous said...

In the end, we're all just renters here, sooner or later to be evicted permanently.


Dan in NC said...

Personally, I quite enjoyed your synopsis of the issues/peril's regarding purchasing property in Mexico. Having purchased homes (18 in the last 43 years in 5 countries) I'd never purchase Mexican ejido land - even inland - let alone in a coastal area. My own philosophy in Mex is similar to yours -RENT - til you have citizenship! By then you should have sufficient experience of the country to decide WHERE you really want to live, and have the full rights of a citizen to back up that purchase.. Patience is a good thing in real estate..
Dan in NC

Calypso said...

The point about renting is good in and of itself by the way. When you can rent per month for less than 0.25 per cent of real value (replacement value) which is the case around here; then it hardly makes sense to buy ;-)

Jane said...

Bravo!!! Excellent synopsis re. some highly complex topics.

NWexican said...

Have been looking at coastal property in Mx for some time and it does appear that most, if not all, is in some way ejido. As a Norte Americano one can only assume that a piece of beach property has a somewhat fictional deed that may actually be ummm, real (or not). Great property to rent though..
And I agree to keep the political chitter chatter on the down low, WAY on the down low. WAY WAY on the down low..

rar5454 said...

Lol...I loved "Anonymous's" true! Steve, been reading your blog for about a year now...thanks for the entertainment/information....lived in Tzucacab, Yucatan for some time in my late 40's and early 50's. Was a wonderful experience..unforgettable. Only eight years ago but feels like a lifetime ago. Aching to get back to Mexico someday...may the Lord bless you and keep you...may the Lord make His face shine upon you and be gracious unto you. Rosalie

rar5454 said...

Great blog - been enjoying it for about a year...I lost a home outside of Cuernavaca eight years ago. Renting would definately be my future choice.

Jane said...

Has anyone seen this in any U.S. news reports?

More and more, I seem to rely on news from authentic bloggers.

Viva la Internet!!!

Steve Cotton said...

Chrissy -- With its mixed history, I am surprised there are not more disputes like this. A title insurance nightmare.

ANM -- Too true.

Dan -- If I buy, it will most likely be in an established city with a strong colonial past. At least the chances for disputes should decrease.

Calypso -- Of course, there is always the problem of high rents -- especially on the Pacific coast. I am probably paying more than I should.

Jane -- Thank you very much.

NWexican -- Political activity by gringos right now is doubly bad.

Rosalie -- Come on down. Mexico is still as inviting as it has been.

Jane -- I have seen nothing in the American press. I heard today, though, that none of the buildings have been bulldozed -- yet.