The future of the warehouse receipts in Mexico

The General Warehouses of Deposit (AGD) in Mexico are auxiliary credit organizations that issue a warehouse receipt (also known as a certificate of deposit) against a deposit of merchandise. If requested, AGD will issue a pledge bond. The warehouse receipt evidences rights of the depositor in the stored merchandise, and the pledge bond may be used to encumber it to secure the repayment of a loan.


The certificate of deposit has its origin in the deposit contract entered into between the AGD and the depositor, the pledge bond emanates from a credit agreement entered into between the depositor/borrower and its creditor. The certificate of deposit is issued on paper, and must be presented in its original form to, for example, withdraw the goods from an AGD or transfer rights to the merchandise, which is why the certificate, as well as the accompanying pledge bond, require adequate legal scaffolding to provide assurances to market participants, whether lenders or buyers.


Currently, certificates of deposit and pledge bonds are issued and circulate in paper, which presents inefficiencies, complexities and risks, such as i) the high cost of their issuance; ii) fraud as there is no transparent source of information with respect to rights of different parties; iii) no mechanism clarity for a financial institution to notify at AGD the activation of the pledge bond derivate of a pledge credit.


In this regard, it is necessary to modify the Genera Law of Titles and Credit Operations and the Law on Auxiliary Credit Organizations to provide for the issuance of certificates of deposit by electronic means only through an encrypted system, such as blockchain. The system is expected to function without a central (governmental) authority. It will introduce other efficiencies, including to eliminate the dual system of the certificate of deposit and the pledge bond creating a single electronic warehouse receipt, electronic maintenance of records and transfers of electronic receipts.

This will allow for greater legal certainty for financial institutions; enable a greater control over and transparency with respect to stored merchandise for all participants in storage transactions; real time tracking of the rights created over merchandise; an expedited execution upon default of the borrower; the cost of issuing electronic warehouse receipts would be reduced and therefore access to credit would be facilitated.


Elsa Regina Ayala Gómez

President of the Association of General Warehouses of Deposit