A self-identified friend of a slain Canadian businessman has told Mexican state police that he is responsible for putting Daniel Dion's dead body in a car that was set ablaze.

Dion, of Carleton Place, Ont., made frequent trips to Mexico for his handbag business, which used prisoners to manufacture his goods.

The 51-year-old went missing in October and his body was later found in a burned-out car in Guerrero state.

The state prosecutor of Guerrero told a local news agency that state police have since detained 46-year-old Hector Juan Figueroa, who has provided them with details of Dion's death.

Figueroa told police that he was friends with Dion, and that the two met while Figueroa was serving prison time for murder. Figueroa also claims that he often let Dion stay at an apartment that belonged to his mother.

On the night of Oct. 23, Figueroa said he arrived at the apartment to find Dion had been drinking.

He said Dion began to hit him. In self-defence, Figueroa said he struck his friend in the head, which caused his death.

Figueroa told police he then put Dion's body in a car, drove to a remote area and set it on fire.

Figueroa will remain in detention for 30 days as officials continue their investigation.

A spokesperson with the prosecutor's office said officials sought a warrant for Figueroa's arrest after questioning him about his whereabouts the night Dion disappeared and receiving contradictory information.

Back in Canada, the dead man's nephew Shanny Bolduc, told The Canadian Press that his family had received no information about the arrest from Mexican officials.

Dion's niece, Franceska Dion, told CTV Ottawa that the family believes Figueroa's story is a cover-up of what really happened.

Franceska Dion said they don't believe that Dion instigated a fight, and say they feel Dion was targeted, though they don't know why.

"My uncle was 140 pounds and he wasn't a mean person," Dion said. "This makes no sense for our family."

With files from The Canadian Press and a report from CTV Ottawa's Catherine Lathem