Gabino Fraga
Managing Partner
Grupo GAP
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View from the Top

Social Integration for Project Viability

Wed, 02/21/2018 - 15:32

Q: What makes Grupo GAP the best option to work on the social aspect of projects?

A: Grupo GAP is a strong partner in the area of land management for the development of infrastructure projects. The added value we offer is our 27 years of experience providing legal certainty to land access matters, therefore ensuring that the projects can find implementation and conclusion. This is important in a country where several infrastructure projects had to be stopped because social conditions were not properly handled, resulting in a legal disagreement between the landowners and the companies interested in developing the project. We are open to work on any kind of project. As a matter of fact, our goal is to work on projects where we can be the most useful and offer the highest added value. I believe that we can be the most useful tool for projects that have backgrounds of nonconformity or where there is no proper legal certainty on whether the project can be developed. We want to support the development of a safe industry for investments.

Q: Where do you see social problems occurring the most in energy projects in Mexico?

A: Sometimes, it might be surprising how simple problems lead to very complicated situations, ultimately stopping a project. Confusion over ownership of a property is one example. A company looking to develop a project might have talked with the leader of a community or ejido, but that person is the representative of the group, not the owner. The land is owned by a collective entity, meaning that the leader has no true ownership of it. Such a simple mistake in dealing with a situation like this could jeopardize an entire project, because it means that the company did not obtain the land rights when negotiating with the leader. This means also that in any court the legal owner of the land can nullify any agreement made with another party and ask for almost anything, as the whole project viability depends on his decision.

The party that should be the most interested in communicating to the community what the project is about is the very owner of the project. It is that party who should make sure that the information is properly transmitted, with words that match the reality of the community and that allow the people who live there to fully understand all the implications of the project, both the negative and the positive. They should be informed of the rights they have over the land, and also the way those rights will be compensated in a fair and secure way. Leaving anything to interpretation is extremely dangerous, as it creates different expectations that, when left unfulfilled, lead to complaints and legal problems.

Q: How does Grupo GAP excel at solving social issues for energy projects?

A: On one hand, the company developing the project may have a strong financial profile and knowledge, and it might even have worked in other parts of the world with much more complicated social environments, but it might lack the knowledge of the social reality of the community where it is expecting to work. On the other hand, the community is the one that faces the daily reality of where the project is going to be developed. It is those people that have always lived there, and it is they who will continue living there. The language of the community is not simpler or more complex, it is just different to the one that the company uses, and this simple fact can lead to misunderstandings that are dangerous for the secure development of the project. Grupo GAP excels at being an interlocutor between all the players involved in the project, communicating with them in their own language and making sure that the discussion leads to a proper and clear negotiation that finally offers the project legal certainty.

We have managed to solve several social issues that had a project stopped, be it for airports, maritime ports, mining or energy. In the energy area, we have solved social issues for the development of mature fields in Veracruz, and managed similar issues for wind projects in Tamaulipas. Our expertise does not only include short-term projects but also those that cover wide areas such as the development of transmission lines and pipelines for the transportation of fuel.

Q: Why is it important to have possible social issues considered from the beginning of a project?

A: Sometimes issues cannot be solved because of external factors, such as a landowner that obeys political or private interests, or the presence of organized crime, leading to the impossibility of developing the project the way it was expected. Knowing this before the project starts is extremely important, as it could avoid major expenditures and time lost from changing the project. This highlights the importance of recruiting law firms like Grupo GAP from a project's inception.

Sometimes the project is jeopardized by much simpler aspects. While studying one pipeline project, we discovered that the pipe was going to pass right next to a graveyard’s border. The company did not see the significance of the problem, and was not happy with our recommendation of changing the layout of the project. After thorough discussion, the company understood that anywhere in the world, and especially in Mexico, making modifications to a graveyard would be impossible and the risk of major capital losses was too high. The result of the discussion led to a different layout of the pipeline, which ended up being a successful project.

Q: What is the danger of stopping projects like La Ventosa?

A: The project in La Ventosa left a damaged image of the country. It was poorly managed in both the social and public spheres from the very beginning. This gave the world the signal that investments were not secure in Mexico. As Mexicans, we cannot afford to keep sending these kinds of signals. The theme of land ownership is often minimized, and companies believe that because they will create jobs and bring investment they will be received with arms wide open, but the community where the project will take place may actually see them as dangerous. Under a scheme like this, where no proper communication channel is constructed, the legal certainty of the project is at risk.

Q: What challenges can private companies find due to PEMEX and CFE’s previous presence?

A: Mexico needs to improve its social environment so companies see it as a safe place to invest. Unfortunately, CFE and PEMEX left a negative footprint in some communities they worked in. Previously, these companies reached toxic agreements where only money was involved for some individual players. Now, we must work to make communities understand that the market has changed and that international companies need to work to create a profit both for themselves and for the country. When a company buys the rights to work in what used to be a PEMEX field it is vital to understand the previous agreement PEMEX had with the landowners, so the new contract, which cannot be done under a simple rights transfer, can be carried out under the best terms for both the landowner and the company looking to use the property. We also need to make sure that PEMEX is leaving no environmental or social impact in the community, and that the newcomer will not have to pay for any damage left.