| December 1998 |
Vol. 5, No. 9
|
On October 19th, in Hermosillo, Mexico, the National Law Center for Inter-American Free Trade (NLCIFT) and the Public Registry of Property of the State of Sonora (ICRESON) sponsored a second conference to discuss the securitization mechanism as a legal device for financing real estate development. U.S. and Mexican lawyers working with the NLCIFT prepared a legal feasibility study on securitizing Mexican real estate in the U.S market. First and foremost, securitization could provide capital liquidity for Mexican companies. It is also a mechanism to gain greater access to commercial banks, whose credit to Mexico is presently limited. The meeting was chaired by Dr. Boris Kozolchyk, President and Director of the NLCIFT; Lic. Alfonso Molina Rivas, Coordinator of Advisors for the Sonora-Arizona Commission; and Lic. Hector Franco Rey-Vocal of ICRESON.
The securitization structure proposed at the Hermosillo meeting would operate in the following manner: a developer in Sonora sells Mexican real estate property to buyers who make periodic payments in U.S. dollars towards the total price of the property. In order to obtain funding for ongoing operations and future expansion, the Sonoran developer then sells its right to receive payments to a trust or special purpose entity established in Arizona. The price is based on U.S. interest rates, among other factors. The special purpose entity issues securities backed by the Sonoran real estate; those securities will entitle the holders to receive a pro rata share of the payments from the purchasers of the Mexican property who would now pay the Arizona trust in lieu of the Sonora developer. The transaction is structured in order to provide the securities with a high credit rating, eliminating the risk, inherent in conventional transactions, of the original payee’s insolvency. The financiers invest in prime “AA” securities and have their payment of principal and interest assured, while the real estate developer obtains financing otherwise unavailable or prohibitively expensive in today’s Mexican economy. Purchasers of the Mexican real property encumbered by debt obligations have the assurance of payment for their Mexican properties through a regulated U.S. trust.
The Governors of Sonora and Arizona have made the securitization project a high priority in their joint agenda to provide both states with a competitive edge in the international financial marketplace. The generation of financing sources through securitization could ultimately bring a higher standard of living to the citizens of Sonora and Arizona.
Dr. Boris Kozolchyk, Director and President of the National Law Center for Inter-American Free Trade, has been appointed as a U.S. Delegate to the Organization of American States (OAS) CIDIP-VI Group of Experts Meeting to be held at OAS headquarters in Washington, D.C. on December 3-4, 1998. The National Law Center will also participate as an observer at this meeting.
The Group of Experts will consider the adoption of treaties or model laws that will have profound economic significance for the entire Western Hemisphere. Among the topics to be considered are cross-border private loan agreements, particularly secured financing for small and medium-sized companies, and the facilitation of surface transportation throughout the hemisphere.
The availability of commercial credit, stimulated by secured financing reform, could provide Latin American countries with a 20-30% boost in GDP. The OAS will be considering, as a working document, the National Law Center’s Model Law for Inter-American Secured Transactions.
The new British Consul General in Los Angeles, Paul Dimond, visited the Center on November 2. Dimond is responsible for all United Kingdom interests in the Western U.S., with particular emphasis on the promotion of trade and investment. His experience as a diplomat includes posts in Japan and Sweden, his last post as Deputy to the British Ambassador at The Hague in the Netherlands. Mr. Dimond spent time at the Center learning about its work and confirming the interest of the UK in all measures to facilitate the growth of trade and investment throughout the Americas.
Launched in June of 1998, the National Law Center for Inter-American Free Trade’s $2.5 million capital campaign to build a permanent facility in Tucson is making considerable progress. At this point, the Center has received four substantial gifts:
1) the City of Tucson’s donation of 3 acres of land upon which to build our permanent facility;
2) the Murphey Foundation’s contribution of land, worth approximately $500,000, which the Center will sell and thereby use toward the cost of the building;
3) the Marshall Foundation’s commitment of support in the amount of $200,000;
4) Offshore International Inc.’s pledge of support in the amount of $25,000.The Center has received several additional donations and pledges.
The $2.5 million campaign will enable the Center to construct a state-of-the-art 13,000 square foot facility. This facility will house the Center’s professional staff of international lawyers, researchers and consultants, as well as its administrative staff. The facility will also accommodate the Center’s many trainees from the Master of Laws (LL.M.) program at the University of Arizona, as well as student interns from Pima Community College and visiting foreign scholars. The campaign will also enable the Center to adequately furnish and equip the facility with state-of-the-art technology required for its work, including computers and teleconferencing and legal translation equipment.
The Center welcomes three new Regular Members:
1) Edward Knoblauch of Markel Insurance Co. in Toronto;
2) William A. Robert, President of Fifth Third Bank in Scottsdale, Arizona;
3) Alejandro Pérez Serrano of Baker & McKenzie in Chicago.We thank all of our members for their continued interest in and support of the Center and its activities.
For information regarding membership with the Center, please contact Kevin J. O’Shea, Esq.,
The Center’s Development Director, at kjoshea@natlaw.com.
The National Law Center has just released a study covering: Legal Aspects of US-Mexico Border Health Issues. The study discusses issues involving medical care of foreigners along the Mexican border region including reimbursement to U.S. hospitals for costs incurred treating patients. It also offers a bi-national approach to resolving these issues. It is available now for $75. Calling Dan Martin at 520.622.1200 for more information.
A former Professor of Law in Colombia, and a former Senior Legal Officer at UNCITRAL, Ramiro Rengifo will be coordinating the Sovereign Debt Project as well as working on other ongoing projects at the NLCIFT. He is the author of several distinguished publications, some of which currently serve as standard textbooks in law schools throughout Latin America. The Center welcomes Ramiro and his expertise and experience.
Development Director Kevin J. O’Shea, Esq., attended the 7th Annual Conference of the United States-Mexico Law Institute, Inc. in Santa Fe, New Mexico, October 1-3, 1998. The conference focused on the restructuring of banking and financial services in Mexico, cross-border movement of goods, including developments in U.S.-Mexico customs procedures, and the Mexican maquiladora program.
Deputy Director Jay S. Kittle and Board Secretary John F. Molloy represented the Center at meetings of the Arizona-Mexico Commission held in San Carlos, Sonora, Mexico, on November 12, 1998. The two attended the joint meeting of the Legal Advisory Committee and the Financial Services Committee, and reported on the Arizona Sonora Securitization Project.
Thursday, November 5 - Dr. Boris Kozolchyk served as a panel speaker for the Third Quarter Meeting of the Pima County Real Estate Research Council. He spoke on issues regarding cross-border trade with NAFTA and its impact on the Western Hemisphere.
Tuesday, November 17 - Dr. Kozolchyk flew to Panama City, Panama to attend a meeting of the General Directors of the Latin American Federation of Banks (FELABAN) held on November 18.
During the week of November 30 - December 4, Deputy Director Jay Kittle, Development Director Kevin O’Shea and Dr. Kozolchyk will be in Washington, D.C. to meet with legislative contacts. On December 3 and 4, Dr. Kozolchyk will be a delegate to an OAS Meeting discussing the upcoming CIDIP-VI Agenda.
Argentina
Ley 17.319 Ley De Hidrocarburos. (Law of Hydrocarbons) Brazil
Lei 9.648 Regulamentada pelo Decreto nº 2.655, 03/07/1998, em vigor desde a publicação. Lei 9.635 Altera procedimentos relativos ao Programa Nacional de Desestatização de que trata a Lei nº 9.491, de 9 de setembro de 1997, e dá outras providências. Decreto 2.594 Regulamenta a Lei nº 9.491, que dispõe sobre o Programa Nacional de Desestatização e dá outras providências. 18-V-1998. Decreto 2.624 Altera a Nomenclatura Comum do MERCOSUL (NCM) e as alíquotas do Imposto de Importação dos produtos que menciona, e dá outras providências. 15-VI-1998. Decreto 2.637 Regulamenta a cobrança do Imposto sobre Produtos Industrializados - IPI. Lei 9.692 Dispõe sobre as diretrizes para a elaboração da lei orçamentária de 1999 Mexico
Decreto que reforma al diverso que establece Programas de Importación Temporal para Producir Artículos de Exportación. 13-XI-1998. (Decree reforming the previous decree establishing the PITEX program) Decreto que reforma al diverso para el Fomento y Operación de la Industria Maquiladora de Exportación. 13-XI-1998. (Decree reforming the previous decree for the Development and Operation of the Export Maquiladora Industry) Reglamento de la Ley de Navegación. 16-XI-1998. (Regulations of the Navigation Law) Perú
Ley 26702 General del Sistema Financiero y del Sistema de Seguros y Orgánica de la Superintendencia de Banca y Seguros. 06-XII-1996. (General Law of the Financial System and of the Securities System and Organic Law of the Department of Banking and Securities) Venezuela
Ley sobre Prácticas Desleales del Comercio Internacional. 18-VI-1992. (Law on Unfair Practices in International Business)
Peru
"New Corporations Law in Peru" by Moises Castro-Toro.Ecuador
“Update on Ecuador” by Pérez Bustamente y Pérez.Chile
"Chilean Joint Ventures with Foreign Partners," by Antonio Ortúzar Solar, Barbára Viduaduarre Millen and Jaime Munro Cabezas.
At the Pima County Real Estate Research Council’s quarterly meeting held on November 5th, Dr. Boris Kozolchyk gave a presentation on the securitization of dollar-based mortgages in Sonora, Mexico. Dr. Kozolchyk spoke of the need to find a secure but profitable return for the billions of dollars that daily travel the world looking to maximize the risk/reward formula and explained how the Center’s securitization project (see cover story on securitization meeting) proposes a good option for some of that investment money. A Special Purpose Vehicle (SPV) will be created for the purpose of buying dollar-based Sonoran mortgages and repackaging them in a securitized form. As a result, developers will have greater access to financing for Mexican construction projects, and investors will profit from the growth of the tourist and construction industries in Sonora. Mortgages will also be rendered more affordable to homebuyers in Sonora. Dr. Kozolchyk’s talk was well received, and many attendees requested additional information regarding the creation of this SPV in Tucson. Mr. Stanley Abrams, a Center Board Member, is organizing the SPV. To contact Mr. Abrams, please call the Center at 520-622-1200.
A publication distributed at the Center's recent Banking Conference, the Working Document of a Model Inter-American Law on Secured Transactions, is available for $75. For more information or to place an order, please call 520-622-1200, order #SF-911.