Key perspective and strategies into permitting and legal process owners need to navigate in Mexico

By Erick Kuri 

Today, industry leaders continue to expand into different parts of the world.  Through the continued globalization of manufacturing, stakeholders expand into unfamiliar geographies.  Every region and country of the world has unique, challenging requirements and local conditions that leaders need to effectively navigate to realize success with their expansion.

Many industry leaders from other countries want to establish operations in or transfer them to Mexico. As part of this process, it is imperative that they understand the complex process of obtaining permits and other legal aspects. These may vary from one region to another but are equally complex nationwide. One of the biggest challenges companies face is the time it takes to navigate legal and permitting requirements, which is often not built into the project schedule.

Schedule.  Local owners are especially sensitive to the challenges of coordinating schedules, and it can take months or years for design and approval from jurisdictions with a wide range of differing requirements, making permits and other legal requirements a bottleneck and negatively impacting the construction schedule. By the time they get through the planning phase and are ready to build, the project can already be behind schedule.

Leaders from other countries anticipate the extra time it will take to work in unfamiliar territory and allow more time in their schedules; however, they lack insight into the laws and protocols in Mexico and often the buffers they added to their schedules fall short. The country has a complex legal and permitting requirements that vary based on state or region. Foreign leaders look for advisors inside the country who are familiar with the legal hurdles.

Protocols.  In Mexico, protocol requires a licensed government designee to evaluate design and construction projects, render an approval, and sign off before construction can begin. This person is usually titled the Director Responsible de Obra (DRO) or Perito. The DRO or Perito reviews the engineering package including structural integrity, fire protection, and egress routes among other information. Signing off on the project makes the DRO the legal representative and key person requesting permits. Involving the DRO/Perito at the beginning of the design process, or as early as possible, can help to identify and mitigate risk beforehand, plan accurate durations for things like permitting lead times, and understand the nuances of the region where construction will take place. While any DRO can consult as a technical advisor, a thorough understanding of the unique laws of that state is critical due to the variance from one region to another.

For example, Guanajuato is an state where the local government will ask for an environmental soil exploration in order to issue a permit. Someone from another part of the country would not expect the additional requirement. Other places require some soil testing, but it is less complex than the environmental impact report that Guanajuato requires. It can be challenging enough for someone who is familiar with Mexican laws, but for a foreign national—especially someone who doesn’t speak Spanish—the codes, regulations, and requirements can be hard to navigate.

Site Selection, Regulations, and Zoning.  Some industry leaders come to Mexico looking for a specific site with desirable geography and soil. They can buy land outside of a commercial area, which may be zoned for agricultural use. Before they can break ground, the land would have to be re-zoned from agricultural to industrial use. That simple transfer can take six months or sometimes more. Stakeholders can save a lot of time by choosing a site in an industrial park that is already zoned as needed, but someone who is unfamiliar with the country and its laws would not be aware of this local nuance and the quickest workaround. Consulting with a local expert can help industry leaders avoid these costly zoning issues.

Site selection is an important part of any new design and construction project. While seeking the best location, many stakeholders, especially those familiar with local customs, evaluate details about each aspect of the land, from taxational regulations to soil conditions, local permitting requirements, and the availability of utility connections. When selecting an industrial site, a local consultant is critical to evaluating all angles of the site conditions—both physical and legal. However, owners sometimes select a site on their own, pay for the land, and then get stymied because they don’t have the required permits and zoning, nor do they understand how to get utilities connected to the site. Engaging consulting assistance as early as possible can help avoid pitfalls or recover a stalled project and bring it to fruition.

Consider a case scenario: a German owner engaged a local consultant to assist with site evaluations in five states in Mexico, which provided an opportunity to compare and contrast the various regions. The team found the best sites were those located in existing industrial parks and properly zoned and also sites located in areas where the government was more engaged in the process and responsive to requests.

Consider an alternative scenario: Stakeholders are planning to build a large distribution center in a specific region of the country, where an early government evaluation of the site showed the land to be a good option for building a large building. After purchasing the site, and engaging an engineering consultant, it was evident that the site was on top of a natural water absorption zone, making very complex to obtain approvals. As a result, the stakeholders had to start a  legal due diligence to obtain construction permits, delaying the schedule for about eight months.

The Critical Role of the DRO/Perito.  In addition to the diversity of regulations from one state to the next, the requirements change often. Experienced consultants will advise leaders to select the location carefully and check the requirements in place at purchase to ensure they are following the most recent set of rules. Having a local liaison to assist is absolutely critical for investors from other countries—not only due to complex local ordinances but also because of the importance of relationships in Mexican business culture. Having the right partner—a good DRO/Perito—can make all the difference in selecting the best site and expediting construction.

Involve government authorities early.  Depending on the investment range and its impact in terms of development and local job creation, governmental authorities might help expedite the permitting process, and someone who is acquainted with the local landscape can help navigate that process. The earlier governmental authorities are involved, the more support they can provide. In certain states, such as Guanajuato, San Luis Potosi, Aguascalientes, and Puebla (just to name a few), the local government has systems in place to support new industrial / manufacturing investors who add value to the local economy. Engaging them as early as possible can be beneficial to the budget and schedule alike.

Ultimately, Mexico offers great advantages for welcoming foreign investments, such as talented skilled labor, low-cost resources, natural goods, great people, and lots of industrialized lands available for use just to name a few. No matter the project’s goal, navigating the complexities of the legal permitting side shall not be underway and requires knowledge for gaining as much familiarity as possible with local ordinances, business culture, and other nuances provides a substantial benefit toward a successful project outcome.

Ing. Erick Kuri is the Mexico Business Leader at SSOE Group (www.ssoe.com), an internationally ranked architecture and engineering firm. With more than two decades of in-country experience as a manager and engineer, Erick has extensive project knowledge with automotive / manufacturing facilities and distribution centers in dozens of cities throughout the Mexican industrial corridor. In addition to having local resources and knowledge of the Mexican construction market, Erick is able to execute projects more quickly and cost-effectively for SSOE’s clients. He can be reached at 52.477.391.0420 or by email at erick.kuri@ssoe.com.