A Comparative Analysis of United States and Mexican Laws Governing Security Interests
By: Miss Katrina T. Mason
April 27, 2010
This article explores how a security agreement reformation in the Mexican secured transaction law can increase access to loans, in turn prompting an economic upturn and decreasing the nation’s povertyrates. The current policy in Mexican law protects the creditor from the risk inherent in lending based on collateral. However, this article argues that if the policy also supported the debtor by broadening the range of collateral accepted for loan security, the number of loans would increase and create a greater flow of capital into the Mexican economy.
This article’s recommendations comefrom a comparison of the United States’ Uniformed Commercial Code with the Mexican Commercial Code and reforms. The United States law allows for a widerange of tangible and intangible collateral to be used for loan security as well as speedy collection rules. Conversely, Mexican law has vague definitions of collateral compounded by very specific requirements for the creation and collection of aloan agreement based on collateral. Consequentially, many types of collateral are either prohibited or considered too risky for creditors due to the ambiguity of the definitions. Therefore, creditors find it less appealing to give out loans to those lacking real assets.
These legal deficiencies put Mexican debtors at a serious economic disadvantage. The majority of the country’s poor(which accounts for 47 percent of the population) work for small to medium sized business. However, only .67 percent of these businesses have access to loans. The creditors limited loaning due to high risk from the ambiguous laws prevents small to medium businesses from making profit, leaving their poor workers to remain in poverty. This article argues that, without reform to the Mexican securedtransaction laws, the country will perpetuate its own poverty and stagnated economy, and decrease the likelihood of national development.
[W]e have moved into an era where we are called upon to raise certain basic questions about the whole society. We are still called upon to give aid to the beggar who finds himself in misery and agony on life's highway. But one day, we mustask the question of whether an edifice which produces beggars must not be restructured and refurbished.
After World War II, countries witnessed the creation of large scale international and interregional organizations, such as the World Bank Group, International Monetary Fund and the United Nations, and an overall movement towards international development, specifically assisting poor anddeveloping nations to achieve social and economic development. Various countries created numerous projects to increase development by improving education, foreign aid, governance, healthcare, gender equality, disaster preparedness, infrastructure, human rights policies, environment, and economic policies. However, the international community overlooked reforms to developing nations’ legalsystems, despite the fact that changes to a nation’s legal system can serve as a plausible basis to create order and sustainability in an unstable nation. For example, instead of offering the usual crutch of lump sum loans to the generally corrupt governments, an improvement to the nation’s secured transaction laws would allow for more self-sufficiency and development.
Mexico, like many otherdeveloping nations, has created edifices of inequality that prevent those who lack property rights (i.e. the underprivileged majority) from ever achieving the status of their wealthy neighbors. The nation’s secured transaction laws, in particular, thwart any aspirations of entrepreneurship and prosperity with ambiguous language and overcomplicated structure. However, if reforms to Mexico’s laws...