1E9Ct5D

CHAPTER XIFinancing Guarantees1. IntroductionIn Mexico, as in many other parts of the world, various legal instruments are available for thepurpose of securing financing and offering guarantees. The Mexican Civil Code (Código CivilMexicano) basically provides for the surety bond (fianza), the pledge (prenda), and the mortgage(hipoteca) as guarantee contracts. However, another more commonly used instrument isthe trust (fideicomiso), whose flexibility allows it to adapt to multiple commercial situations.In what follows, the essential aspects of each of the above-mentioned legal conceptsare explained.1912. Surety Bond (Fianza)2.1. CharacteristicsThrough the formation of a surety bond contract, a surety institution, which must complywith various requirements and authorizations from the Ministry of Finance andPublic Credit (Secretaría de Hacienda y Crédito Público, SHCP), agrees with a third partyto pay a debtor’s debts in the event the debtor does not do so, in exchange for a feecalled a premium (prima).With the surety bond, the lender of the secured obligation acquires the right to be paidby the surety institution in the event the borrower does not pay its debt. Therefore, thecreditor has the right to demand and receive the payment of the secured obligation directlyfrom the surety institution or from the borrower, or from both, because the suretybond is not extinguished even if the beneficiary refrains from taking legal action againstthe debtor for payment of the principal debt.This type of guarantee is frequently used in legal or administrative matters and, withrespect to the surety bond used to secure financing, the SHCP has issued special rules