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Ejido Land (Farm Cooperative) and How to Buy it Safely

by Jose Perez - September 2006

Ejido LandIn the late 1980’s, President Salinas De Gortari transformed Mexico from a socialist autocracy with an isolationist economic policy to a privatized, globally competitive nation.  Prior to Salinas, astronomical import tariffs eliminated any real competition from foreign producers of goods and services.  In addition, banks, airlines, the telephone company and major manufacturing were all state owned.  Privatization was complete within the six year term of Salinas’ presidency. Only the electric company and Pemex petroleum were left in the hands of the state.

Perhaps the most controversial privatization was that of ejido lands.  Ejidos are an institution dating back to the revolution.  Pancho Villa and Emiliano Zapata recruited peasants to fight in exchange for land. When it was time to disperse the spoils of war the farming cooperative or ejido was born.  The beneficiaries of the land were given personal use parcels that would stay in their families in perpetuity.  In addition each ejido has communal land for exploitation as a collective. Until the privatization reforms of the 80’s, ejido members, either individually or collectively, could not sell, trade or encumber these lands in any way.

There is more ejido land in Mexico than the sum total of  all properties held privately or publicly. And now, thanks to former president Carlos Salinas de Gotari, U.S. investors are buying large parcels of ejido land in Baja for tourist development.  Ejidos were intended to be farm or fishing cooperatives, but most of the land in Baja is not suitable for either one.  An example is the property now owned by El Dorado Ranch in San Felipe.  It once belonged to Mexico’s largest ejido-Plan National Agraria.  Hundreds of thousands of desert acreage, unsuitable for planting, was owned in common by 216 ejidatarios (ejido members).  

Pat Butler, the developer of El Dorado, bought more than 60,000 acres to create Baja California’s largest subdivision for retirees and vacationers.  Butler accomplished what everyone, including this author, thought impossible: to negotiate and gain agreement from 216 ejido families.  Folks who generally have enormous difficulty reaching agreement amongst each other, let alone accepting the offer of an outsider and a foreigner to boot. 

The opportunity Mr. Butler pioneered has motivated other U.S. developers, large and small, to follow suit.  The process for buying ejido land as a non ejido member or foreigner can be time consuming and must be pursued with diligence, patience and expertise.  The “DERECHO DE TANTO” is the terminology used for making a purchase offer to a “parcelario” (individual ejido parcel owner).  These individual parcels can be quite large – often hundreds of acres. 

Derecho de tantoThe first step in the “derecho de tanto” is to make a written offer in which the spouse and or heirs of the ejiditario have the first right of refusal to purchase at the offering price.  .  Once the family has accepted the offer, the second right of refusal is held by the ejido membership.  They must approve the offer by a 75% majority vote in their regularly held meetings (“asambleas).  If they vote to accept the purchase option, the written offer is posted for 30 days in the ejido office.  During these 30 days, any ejido member can exercise their “second right” of purchasing the property at the proposed price.  If no one, within the ejido, exercises the option to purchase, the offer is then posted for the surrounding neighbors who have the third right of refusal.

Buying a parcel can be difficult enough but purchasing the entire ejido requires “mucho” effort, time and money.  It requires the ejido to proceed with a lengthy privatization process that culminates in an “Asamblea Dura” in which 75% agree to privatize the ejido.  Whether an individual parcel or the privatization of the entire ejido, a government survey team from “Reforma Agraria” is necessary to assure and certify boundaries and subsurface areas.  In addition the “comisariado”, a legal watchdog for the ejido must sign the approval for sale on behalf of the ejido and that approval must be registered with Reforma Agraria.

As a foreigner, wishing to venture into an ejido investment, you must be prepared for cultural idiosyncrasies along the way.  First, getting an ejido quorum together to vote on your offer can be difficult to accomplish.  It may require a monetary incentive paid to the ejido president for rallying the troops.  Also, you will be expected to pay “fees” to the lawyers from Reforma Agraria who can expedite the sales process.  Often the process can be accomplished in months, but sometimes it can take several years.

For experience and expertise in buying ejido land you can contact us for a no cost initial consultation and review of the property being offered.

 

www.mexicomatters.net  Has been serving the foreign investor since 1984  Call us to help you buy securely  with First American Title insuring a safe investment-619 819 9369


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