Sergio Beristain Souza
Beristain + Asociados Abogados
View from the Top

Legal Opportunities of New Legal Framework

Wed, 02/19/2014 - 14:54

Q: Did the Energy Reform live up to your expectations?

A: The changes made to the Constitution were better than expected. The first issue is that we are experiencing the first real transition away from the monopoly position of PEMEX. But we still need to define what the private sector and the energy authorities can now do and what their obligations are in legal terms. First, the electricity sector will attract important investment in transmission and distribution, as well as in large-scale generation schemes. CFE will start to reduce its participation in power generation, transmission and distribution in the coming years. Foreign investment will be more protected and the reform ensures better legal tools that guarantee this protection. New ways will be developed to do business very efficiently and in a way that offers legal certainty.

Q: What are the main opportunities that the industry may not be aware of?

A: The industry still does not know how to build new schemes and start new businesses such as gasoline imports, the commercialization of diesel, new power generation schemes, how to move from being an IPP to transmission and distribution activities, or to participate in pipeline projects. Engineers and lawyers must work together to create new schemes that will allow projects to be technically viable and have the required legal support to guarantee their success. However, it is important to first convince the authorities to support these areas of activity and, should legal barriers stop them, the private sector must fight for these to be changed.

Q: Which authorities will be involved in defining the secondary laws?

A: In my opinion, the main participant will be the Ministry of Economy as it has to start creating a general awareness of the way the energy sector can impact the country’s economic development. It will have to sign off on all the energy projects that positively impact the country and the economy. It has to promote natural gas import schemes that are VAT-free and pay taxes later. At the end, the Ministry of Economy has the opportunity to support the creation of these different models and make them very efficient. The rapid and efficient development of the energy sector will depend mostly on the ability of the Ministry of Economy and the Ministry of Finance and Public Credit to cooperate and support the industry. We have to remove all the deficiencies within CRE, SENER, PEMEX and CFE and allow them to become efficient regulators, policy makers and operators.

Q: How will the targets set in the General Climate Change Law influence the creation of the secondary laws?

A: The generation of clean energy is still a complicated issue in Mexico since there are no fiscal incentives. It is difficult to believe that the government did not grant these important benefits for clean energy, and this will be an important challenge. It is crucial to determine the best strategy to convert a conventional energy user into a clean energy user without tax incentives.

Q: How do you think the Energy Reform and the increasing interest of doing business in Mexico will change the market for law firms?

A: Incredible times are coming for law firms because the market will grow and, consequently, there will be more cases and more clients. However, very few lawyers are specialized in the energy sector. We are now living under a new and complicated legal framework with new laws resulting from the Fiscal Reform and the Energy Reform. In the end, being a successful lawyer means being aware of the civil, mercantile, criminal, administrative, and the specific energy laws.

Q: Large firms with experience in different areas would then have an advantage over specialized energy firms like yours. How are you going to compete with the big firms?

A: The challenge that the new laws bring is very clear: the old scheme under which law firms worked can no longer be applied. A new and more efficient scheme is needed, which means firms have to increase their dynamism. They have to be constantly training their staff to understand all the new laws and regulations, and be able to apply their knowledge of every area of law into just one document. In the past, one document would only need one lawyer but now, it will be necessary to create teams that are able to cooperate very efficiently to cover all the areas related to a specific case. Providing legal services will become much more complex for law firms, but it also represents a very interesting challenge if you love this profession.