Edmundo Gamas
Executive Director
IMEXDI
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View from the Top

Expert Views on Vital Legal Frameworks

Tue, 01/21/2020 - 16:16

Q: What is the impact of IMEXDI in the oil and gas industry?

A: IMEXDI is as a nonprofit think tank that renders services in two ways. First, we conduct studies on the macroenvironment of the infrastructure sector, and the segments within this industry, which include oil and gas. These studies are carried out for both private and public entities, and are often focused on the transformation of the legal framework that governs the industry. These studies and their results are used to drive improvement in IMEXDI’s pillars for success in the industry: generating more projects of higher quality and completing them on time and on budget. Second, we work as a project integrator, helping governmental bodies or the private sector articulate major works.

Q: How has the cancellation of NAIM impacted infrastructure plans within oil and gas?

A: The NAIM was likely Latin America’s most important infrastructure project, and was at 35 percent completion when canceled. The project was canceled despite opposition from almost every major non-governmental entity, so the effect on confidence was severe. The suspension of bidding rounds generated further concern for oil and gas players because none of the problems that had hampered projects, including permitting difficulties, insecurity and the simple life cycle of developing wells were the responsibilities of the national and international companies that had already won blocks.

Q: How can the government improve the processes that govern the rights of way in Mexico to avoid ongoing legal disputes around land use?

A: Mexico needs a much speedier legal process to manage rights of way; this a pressing issue for the oil and gas industry in Mexico. Although the country’s constitution allows expropriation so long as land is fairly paid for, governments are extremely reluctant to use this measure due to its unpopularity. Therefore, the only viable alternative is to negotiate with private parties. Under Mexico’s International Labor Organization (ILO) obligations, which mandate consultation of communities by the federal government, communities that are not on the land to be used, but could be affected by its use, can have a legal input. This is all necessary but it makes the legal process extremely long-winded. A legal figure through which the government can mandate rights of way is sorely needed. A legal process that allows owners of land or communities to litigate for monetary settlements and other benefits should be able to take place in parallel with the development of the project, and without halting the project. But Mexico’s use of the amparo means that virtually any group can halt a project at any point. If projects and litigation can progress in parallel, then damaging suspensions can be avoided.

Q: How can the administration focus investment on innovative technologies for the benefit of the oil and gas sector?

A: Mexico tends to adopt technology rather than produce it. Even in the country’s modern industries, tropicalization of foreign technologies is the standard model. Industry 4.0 is the clearest example of this as European, Asian and North American companies, particularly in the automotive and aerospace industries, introduce product and manufacturing technologies into the country. To help Mexican technology flourish, a sustained and coherent national policy must be put in place. Assigning a fixed share of GDP to channel into developing technologies would be a good starting point. Additionally, creating focused and agile links between government, academia and industry is important. There is very little research infrastructure in Mexican universities. This needs to be addressed to develop the swell of knowledge that is present in other countries. Bodies like CONACYT play a vital role in this. Also, the IMP’s development of technology in oil and gas must not be stymied. Whereas the IMP was previously the research arm of PEMEX, it has been encouraged to speak to and learn from the major private companies. Under the new administration, this may be reversed, which will be detrimental to the revisions of Mexico’s outdated technologies.

 

Mexican Institute of Infrastructure Development (IMEXDI) promotes the development of Mexican infrastructure, providing consultancy and expert opinions to private and public bodies on national projects across industries, including oil and gas.