North American Cross-Border Insolvency 

April, 2002 - Charles A Beckham Jr

Introduction A trip across the Mexican border is often a pleasurable experience. The ability to do business in Mexico has also become a profitable experience for many businesses. Increasingly, however, many United States and Canadian businesses doing business in Mexico are finding their venture into Mexico to be less a bus ride to a sunny beach and more a trip on a windy mountain road. They are finding the pit-falls of cross-border insolvency have created a bridge they did not want to cross. In the 1990's, the United States, Canada and Mexico adopted the North American Free Trade Agreement (“NAFTA”). As a result many United States and Canadian businesses have embraced NAFTA and expanded business into Mexico. Just like any other business, a business taking advantage of the expanding NAFTA market may suffer financial problems. When companies doing business in each of the NAFTA countries have financial problems, their creditors in the United States, Canada or Mexico may encounter not only the exigencies of ordinary insolvency and bankruptcy, including when and how much will they get paid, but also cross-border issues that the United States, Canada and Mexico are far from considering or solving. With an emphasis on Mexico and business going south, this article will attempt to identify some of the most common problems encountered in NAFTA cross-border insolvencies. This article will also explain how two recently enacted Mexican financial reforms, the Law on Commercial Insolvency and the Miscellany of Secured Lending, may help alleviate some of those problems.



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