Q: What concerns do investors have regarding the risks of entering the Mexican market?

JG: There are a number of issues that need to be considered prior to participating in any given proposal but the most important advice we give our clients is that no effort should be spared in due diligence on any project they wish to participate in. They must have a clear idea of the project obligations they need to assume if in fact a contract is awarded to them. Usually the main concern in every single project is tax treatment because that can make or break any plan. If the contract involves property rights, easements or rights of way, then Mexico presents interesting challenges in different parts of the country.

BT: The National Infrastructure Plan the federal government has started to implement is extremely ambitious and it is coupled with structural reforms across an array of industries, including energy. Notwithstanding the sharp drop in oil prices and other commodities, this plan is moving ahead and rightly so, despite the other areas the country has to improve on. The development of gas pipelines and other energy infrastructure projects has raised the interest of many players from around the world who want to participate in the various tenders that are being carried out.

Q: How complicated has it become to develop infrastructure projects with the rights of owners and indigenous communities a government priority?

JG: This is an area that requires a great deal of attention since there are a number of rising challenges and difficulties to be addressed. These complications are overseen by different government agencies that have the responsibility of establishing specific regulations or deciding whether Congress needs to change the law. It is very important to acknowledge that Mexico is a different jurisdiction. Foreign players need to realize they are in a different country, with unique laws and regulations, and companies should not take things for granted. Conducting proper research regarding key issues prior to a project acquisition is incredibly important, just as important as conducting proper due diligence of the target.

Q: How do global trends affect Mexico’s dynamism and where are the key opportunities for M&A?

BT: Acquiring existing companies in any given market is a quick and sure way to become involved in the local sector and to identify attractive business opportunities. We are seeing a strong push in the infrastructure arena in Mexico with new entrants investing directly in Mexican established businesses that already have a connection to a project. This is either taking place through joint ventures or outright acquisitions. Nonetheless, hostile takeovers are not common in Mexico even though they can occur. This scarcity can be attributed to the fact that the number of publicly traded companies is not substantial.

JG: Mexico has strong banks and financial institutions but the capital markets are not as developed as they should be. Steps are being taken to generate greater dynamism through new vehicles such as Fibras, CKDs and other financial tools.

Q: Where are the most important sources of FDI coming from?

BT: For Mexico, the capital originating in the US has been the most important source of direct investment and this is mainly due to the geographical proximity. We also are seeing a lot of interest from European countries, particularly UK companies. Japanese players seem to be returning to Mexico and there are new entrants such as the Koreans, particularly in the automotive sector. This sector has shown a significant development and is displaying an extraordinary dynamism in terms of FDI.

Q: How is Baker & McKenzie positioning itself to deal with the new transactions that are going to appear?

JG: We can offer our clients a high level of expertise and not just generic legal knowledge. It is important that our client base is comprised of international companies, local players and Mexican multinationals. We are the largest law firm in Mexico by far and the reason I mention that is because we can offer a level of specialization and expertise to all kind of companies. Right now the energy and automotive sectors are extremely important for us, although telecoms and pharmaceuticals are not far behind.