Jorge Sandoval
Associate
Goodrich, Riquelme Y Asociados
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View from the Top

Financial Market Stability Amid Uncertainty

Mon, 02/25/2019 - 13:58

Q: What makes Goodrich, Riquelme y Asociados (GRA) the best partner to capitalize on Mexico's energy prospects?
A: GRA's expertise spans 84 years in Mexico. All our practice areas are focused on legal advisory and support for foreign investors doing business in Mexico, either directly or through local partners. We are a full-service firm, meaning we can provide integral legal support in all aspects to increase our clients’ business activities. This includes fiscal planning, corporate structures, government relations, administrative law, litigations and controversies. Our long-standing presence in the energy industry has allowed us to witness the country’s major shifts, assisting our clients to adapt to its deep structural changes, challenges and new commercial reality, especially from a permitting standpoint.
Q: Can Mexico’s energy infrastructure absorb the soon-to-be-installed clean energy capacity?
A: Mexico’s energy infrastructure capacity is close to saturation. Its extension and optimization are critical. In terms of structural transformation, investment and management are essential. Based on market optics, there are doubts about PRODESEN’s continuity as the new presidential administration takes over. However, expert market analysts are forecasting stability in Mexico’s financial markets despite the handover process. Investors are echoing this positive scenario, outlining which strategic plans of the Mexican government must remain active and move forward.
Q: What is your assessment of CRE taking over the process of any upcoming electricity auctions?
A: Decentralizing the responsibility of the long-term electricity auctions is a positive step forward, comparable to oil and gas’ licensing rounds being carried out by CNH rather than by the Ministry of Energy, even when their unfolding is part of the country’s energy policy. This precedent paved the way for CRE to follow in CNH’s footsteps, demonstrating a regulatory body can successfully undertake a process of this magnitude.
Q: How does GRA navigate the industry’s recent technological changes to improve its legal services?
A: Parallel to being legal advisers, our proximity to the energy market developed and strengthened our commercial analytical capacity, not as business developers or commercial brokers, but in searching for dialogue with different industry players. Along the way, we found companies offering specific products or new technologies and players interested in acquiring or implementing them to solidify their business strategies. Technological dynamism provides openness in the energy industry. The close link between technology and large-scale renewable energy players fosters different types of companies coming together in a way not initially thought possible. Technology suppliers with a core business different from renewables, such as telecommunications or mechanics, are now looking toward renewable energy projects, turning Mexico into a potential investment opportunity.
Q: What is your assessment of CELs’ first steps in the energy market?
A: CELs’ objectives and implementation are on course. What remains to be gauged is how the market responds to the progressive increase of the required CELs percentages demanded by Mexico’s authorities. CELs regulations stipulate a 5 percent requirement over total energy consumption must be covered by CELs, increasing to 10.9 percent by 2021. While this objective seems rather aggressive, the inner mechanisms of this instrument are properly designed and not unique to Mexico’s market.
Q: Where is GRA's room for growth in Mexico’s energy sector?
A: To remain active in any sector, there is a need for transformation and adaptation. This includes continuous training, inner restructuring, rejuvenating the workforce and balancing the generational gap to make the most of the experience of one spectrum and the new ideas and academic formation of the other.