The Constitutional Rationale Behind the Energy Reform

Q: One of the strongest areas for Cuatrecasas in Mexico is energy. How does the company provide value to its customers?

A: Cuatrecasas opened its office in Mexico with the goal of becoming a leading firm in the energy sector providing a unique multinational value based on our experience, which is unparalleled among our competition. We are an international firm and our goal is to provide our clients with a complete service in legal areas, including infrastructure, oil and gas and renewable energy. Cuatrecasas incorporates the experience of more than 100 years of service in Spain and the experience of our Mexican specialists.

Q: How can Cuatrecasas help to strengthen the competitiveness of its national and international customers in Mexico?

A: Thanks to the current legal framework governing energy matters, Mexico closed 2018 with 111 signed exploration and extraction contracts with approximately 75 companies from 25 countries. These numbers show the legal framework’s stability, which will continue to support the industry. Cuatrecasas provides complete legal assessment in constitutional and energy matters, according to the specific needs of our clients. We provide them with legal options to resolve any issue that may arise regarding energy-related matters, among others.

We trust the legal framework because it guarantees a space for fair competition and an opening to the downstream and midstream sectors without compromising the ownership of Mexico’s resources. Our experience allows us to generate complete and integrated analysis regarding specific activities and legal frameworks that measure or estimate possible risks in the energy and infrastructure sectors. We are especially proficient in reviewing different procedures and advising on overcoming legal and contractual obstacles related to our clients’ projects. Additionally, Cuatrecasas collaborates with the authorities to communicate the needs of the private sector and provide opportunities for cooperation, allowing both authorities and clients to understand the needs and specific interests of the other and reduce risks.

Q: One objective of the ZEEs is to improve the economies of southern states. What should be the government’s main considerations for this project to be successful?

A: Given our experience, we believe the government should create business incentives for companies interested in developing projects in southern Mexico through, among others, simplifying legal procedures and providing legal certainty to long-term investments. Cuatrecasas has collaborated with some local governments to create tax incentives to increase private investments, consequently benefiting investors and local governments.

As established, governments should simplify procedures, making them more efficient and “user-friendly.” Additionally, public registry platforms and services should be updated and provide complete and timely information. It would be a great idea to incorporate municipal, state and federal registrations. Through simpler and more efficient administrative procedures, expenses for both the government and companies can be reduced, generating a more attractive and certain investment.

Q: Does Mexico have the appropriate legal framework to ensure economic and social development?

A: Mexico has a multicultural and diverse population, so legal frameworks must address scenarios that are in constant change and development. The country also incorporates a complete and extensive legal framework to create a prosperous economic and social environment. In our opinion, one of the main problems regarding the legal framework lies in its application. Instead of focusing on improving its legal frameworks, Mexico should focus on strengthening rule of law. This change in Mexico would not only improve the life quality of its people but could also change the sometimes negative perception that national and international companies have of the country and its business environment. Law firms like Cuatrecasas have a responsibility to aid the government, private entities and foreign investors in creating a working communication through which real problems are considered and workable solutions are proposed.

Q: What is more demanding for Cuatrecasas: providing services to Mexican companies with national operations or providing services to foreign companies in Mexico?

A: As an international law firm, we have both types of clients and legal experts capable of addressing the specific requirements of each. Generally, it can be more demanding to help foreign companies wanting to invest in Mexico mainly because they are not familiar with specific regulations or applications that in Mexico may vary from international standards. As an example, oil and gas biddings follow a national procedure, whereas international conditions have been and are currently being implemented in other countries.

Cuatrecasas has outstanding experience in providing international legal assessments to different types of clients. We have introduced this experience to Mexico, taking advantage of over 100 years of knowledge and experience in European legislation and incorporating it into our assessment of legal Mexican frameworks through our local legal experts.

Q: What measures should be implemented to strengthen Mexico’s energy sector?

A: The new administration could review the constitutional and legal scope of the energy legal framework based on international trends and analyze business strategies for the development of public companies, private companies and Mexico’s best interests. It is necessary to review an energy model beyond the current legal framework that allows growth for private entities and the Mexican economy. There has been much discussion about investments and capital inflows in the energy sector but little has been said about the management, planning and allocation of those resources.

The new administration should propose strategies to strengthen the legal and constitutional framework to improve the development of the oil and gas industry and renewable energies. Additionally, it could strengthen its productive state companies (PEMEX and CFE), while allowing the development of clean and renewables projects.

Our wish regarding the new administration includes strengthening the energy sector through both productive state companies and private investment opportunities, providing legal certainty and generating incentives for the development of Mexico’s energy and infrastructure industry. This administration should target win-win scenarios in which economic and legal benefits are provided to the industry to promote social and economic growth in Mexico.