CETES: An Easy (and Safe) Way To Earn Passive Income in Mexico

For expat residents as well as Mexican citizens, the cost of living has been rising rapidly enough that some of you may be looking for new ways to earn passive income and stay one step ahead of inflation.

Short of finding a remote position with a foreign company, what can an expat do to legally boost their cash flow while living in Mexico?

Before we dive in, let’s clarify a few rules for expats.

Those living in Mexico on a Temporary Residency Visa (TR) are not eligible to work for local companies unless they apply for a separate work permit at INM (Mexican immigration). If this is your situation, you can get more information on how to apply for a permit here.

Expats with Permanent Residency Visas (PR) may work in Mexico without obtaining a separate permit from immigration. These residents receive the same rights as citizens, with the exception of voting.

Now, let’s look at one of the simplest, low-risk options for resident expats to earn passive income while living in Mexico.


Investing in Mexican Government Bonds

For expats living in Mexico on modest or fixed incomes, limiting investment risk and volatility is key to ensuring that funds needed for basic living expenses aren’t jeopardized.

For those in this camp (and risk-averse investors in general), government bonds are an excellent option.


CETES, or Certificados de la Tesorería de la Federación in Spanish, are Mexican federal treasury certificates, and the equivalent of U.S. Treasury securities.

CETES are typically auctioned by the Bank of Mexico every Tuesday, and available in a range of maturities, including one, three, six, and twelve months.

Known as “zero coupon” bonds, these securities are sold at a discount, with investors receiving the full face value at maturity, just like a U.S. T-bill. For this reason, you receive no interest payments on CETES until the bond matures, so holding them for the full term is essential to making money.

Why bother with CETES? The most obvious benefit of investing in CETES is to help insulate your savings from inflation, which is currently trending at around 5% in Mexico.

In addition, if you no longer have a U.S. bank account, they’re an excellent substitute for U.S. treasuries. Plus, CETES are currently leaving T-bills in the dust when it comes to yields.


What’s the Return on a CETES Bond?

Because Mexico’s central bank has taken a far more aggressive approach to stamping out inflation than the U.S. Federal Reserve, interest rates in Mexico are currently sky-high at 11.25%.

This means that investors in CETES can earn roughly double the yield of U.S. treasuries (currently yielding ~ 5.4%).

CETES yields vary based on the holding period, with a bond maturing in six months currently yielding 11.28%, while a bond with a one-month maturity is only slightly lower at 11.0%.

And as you can see from the chart below, CETES have never been more lucrative over the past decade than right now.

History of Returns on CETES 1-Month Bonds from 2010 – January 2023

earn passive income in Mexico with CETES

It’s important to know that all bond yields are stated in annual terms. In other words, if your holding period is one month and the yield is 11%, you must divide 11% by 12 to see how much you will earn on the investment (0.917%).

How long the huge advantage for Mexican bonds relative to U.S. treasuries will last is anyone’s guess.


Are CETES a Safe Investment?

CETES are considered the safest investment in Mexico. These bonds are fully secured by the federal government, which has never defaulted on CETES interest payments.

Of course, savvy investors know there’s a first time for everything — even housing prices can implode! But given the strength of Mexico’s economy lately, the odds of a government default on CETES are very, very low.

The only way someone could realistically lose money investing in CETES in the current environment would be to sell the bonds prior to maturity on the open market. The price an investor receives when selling these bonds in the aftermarket depends on the environment at the time. Consequently, it’s possible to receive more or less than what you paid for the original bond.

This is why it’s a bad idea to put money into bonds you may need back prior the maturity date. Doing that adds more risk to the investment than is warranted.

Now, that doesn’t mean it’s a bad idea to trade these bonds if your purchase was timed well and their value has appreciated from your original price. But that’s not something a novice investor should be contemplating…

For anyone still concerned about default risk, the shorter your investment period the lower your risk.


Who Is Eligible to Buy CETES?

These bonds are intended as an investment vehicle for Mexican citizens and legal foreign residents. As such, CETES cannot be purchased by tourists or those living outside of the country.

Besides these basic criteria, you must also meet the following requirements:

    • Be over 18 years of age
    • Be able to show proof of legal residency if you are a foreigner, (e.g. have Permanent or Temporary residency visas, also known as FM2 or FM3)
    • Possess a bank debit card or CLABE number for a Mexican bank account in which you are the owner. (foreign accounts cannot be linked)


Aside from the basic requirements, CETES bonds are ideal for those who plan to use the proceeds for living expenses in Mexico.

This way you eliminate any exchange rate risk, as you won’t be converting the proceeds into other currencies that may have appreciated during the holding period, thereby reducing your gains.


Where Can You Buy CETES Bonds?

Since 2010, the Mexican government has operated a website to sell CETES directly to the public. The website is www.cetesdirecto.com.

CetesDirecto website homepage

In brief, the CetesDirecto website allows users to:

    • Research government bond yields
    • Buy bonds (manually or on an automated schedule)
    • Sell bonds
    • Reinvest interest & capital
    • Transfer income back to linked bank accounts


In my opinion, this website is the best way to buy government bonds. By using CetesDirecto you avoid the commissions and fees charged by banks and brokerage firms selling CETES to their private clients.

How It Works

The first step to buying the bonds through CetesDirecto is to open an account on their website (it’s free). Next, you will need to link a bank account to your new CetesDirecto account as a means to provide the source funds for your investment.

Whatever your investment horizon, you are locked into that yield for the entire holding period, regardless of what Mexico’s central bank does with interest rates during that time.

international money transfer with wise

In my opinion, security on the CetesDirecto website is solid, as users must configure multiple security questions on top of the standard login credentials to access their accounts.

And for anyone who’s experienced treasurydirect.gov over the years (a painfully antiquated website recently overhauled), I think you will find CetesDirecto superior from a usability standpoint.

For those interested in learning more about buying CETES through the government’s website, I recommend watching this YouTube video by Andres Garza for a thorough visual tutorial (Spanish only).


How Much Money Can You Invest in CETES?

These bonds are meant to be a savings and investment vehicle for “regular people”, i.e. they can be bought in small to medium-sized increments.

Investors may deposit up to $23,000 pesos (about $1,350 USD) into CetesDirecto accounts per month, up to a maximum total investment of $10,000,000 pesos (about $587,000 USD).

The minimum investment in CETES is just $100 pesos, making these bonds accessible to basically anyone with a little money on hand to invest.


Are Investment Gains from CETES Taxable?

In a word, YES!

The interest you generate from CETES is taxed and payable on your tax return the following year. Taxes on interest from CETES are typically around 1%, making this investment incredibly attractive at current yields.

With the following handy little tool, you can calculate the actual yield on a potential CETES investment net of taxes. All you have to do is enter your desired investment amount and holding period.

Note that if you invest directly via the CetesDirecto website, the taxes due on your interest income are withheld automatically.

Interestingly, if your yield falls below the inflation rate during your holding period, the funds withheld get refunded to you, whereas if the yield is greater than inflation you must pay the tax. This means your CETES investment can’t have a negative real rate of return.

To wrap this up, CETES may not make you rich but can be a nice addition to a diversified investment portfolio. By staggering the maturity dates on your purchases, you can create a stable and consistent revenue stream for yourself, stay a few steps ahead of inflation, and sleep well at night!

international money transfers with wise

About Live Well Mexico

My name is Dawn Stoner. In 2022, my family sold our house and half of our possessions, then relocated to Guadalajara, Mexico. We now live here full-time.

Since then, we’ve learned how to navigate the real estate market, deal with the Mexican bureaucracy, and manage our finances as expats… all while having a pretty fine time!

I created this blog to help newcomers solve the everyday challenges of living in Mexico, because it isn’t easy figuring all this out for yourself.

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