Commercial use of property in Mexico

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The development of property for commercial purposes in Mexico is often viewed negatively by gringos who apply U.S. construction standards for completion and quality of work. Gringos frequently point out that construction projects in Mexico are left abandoned, often for years. The conclusion made by foreigners is that Mexicans are inferior at construction planning and implementation. The factor that most results in construction delays or incompletion is the volatility and exorbitant costs of financing in Mexico; as a result most financing is done “out of pocket”. When the funds run out, construction stops.

Apart from out of pocket financing, major peso devaluations also stop construction by reducing the buying power of the capital for materials and labor. In the last major devaluation, capital reserves were reduced by 50%. This also sends the stock market into a tailspin, drying up even more desperately needed investment capital in Mexico for large development companies that are publicly traded. With devaluation, development loan rates soar. Fixed rate loans and cap limits do not exist in Mexico, therefore, ten to fifteen point loan rate increases are not uncommon after a devaluation, driving developers deeper into debt.

Commercial building in Mexico is quite unlike the “quick return on investment” objective that drives most U.S. construction. The U.S. construction industry enjoys the luxury of a stable currency and interest rates.

In addition to economic factors, commercial real estate development in Mexico is also affected by the cultural traditions mentioned earlier. Most Mexicano’s view real estate development through the lens of property ownership being a legacy rather than a commodity. The view is: if I don’t finish it right away so what? I’m not going anywhere. I’ll pay for progress that I can afford when I can afford it and If I die with the project unfinished my heirs can finish it. The cultural value is that the developer’s heirs will probably continue to live in the same town and run the family business.

Quality of construction in Mexico differs from the U.S. in that it reflects a simpler view of what is functional and an artesan’s standard of quality. The U.S. tradition is one of precision standards administered by building technicians. In Mexico construction work is not judged by how precise it is but by the overall ambiance it creates and its unique character, the builder as artesan.

These differences between the two cultural approaches to construction are exemplified by the titles used to describe builders in each country. In the U.S. builders are called: Engineers, Architects or Contractors. In Mexico the builder, who manages the job site, is most often a non technically trained person called a ” Maestro de Obra“. Just as an artist or teacher is referred to as a “Maestro” so is the construction supervisor.

Maestro de obraObra is the word used to describe a construction project or a work of art: painting, a play or a musical production. An artist doesn’t worry about the precision of his work. The artist’s concern is: does the finished product please the senses? Very often Mexican artesan builders cannot read building plans. As a result, architectural training in Mexico includes the making of scale models (sp. “mecate”). The Maestro de Obras can understand and follow, with incredible accuracy, the dimensions and details of a scale model. U.S. citizens who do not take the time to understand Mexico’s approach to real estate and the development of same will most likely become unhappy with their Mexican real estate investment.

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