Q: How has COVID-19 changed the demand for MCM’s services?
A: MCM Abogados has seen a significant change in the services we are providing as a result of the COVID-19 pandemic and the economic impact it has generated. A few years ago, most of our activity was focused on business development – different entities trying to understand and become involved in the Mexican market and those already present here trying to increase their market share. These were the main focuses.
As a result of the pandemic, the oil price crisis and the political environment in Mexico, we are noticing a different perspective from our clients. Our services are being requested for risk mitigation, the defense of projects, securing critical permits and trying to prepare the field for survival and the midterm.
Another trend is that clients are attempting to navigate the complexities of new government processes backed by new officials who are not so technically-oriented. They have different views on the interpretation of law and this entails new challenges for everyone. A large part of our activity has been focused here.
We have also seen activity in the secondary market regarding searches for partnerships and finances or the diversification of portfolios.
Q: Where do the majority of the firm’s clients sit on the value chain?
A: As a boutique firm working only on energy matters, we are completely diversified along the supply chain. Most of our clients are upstream operators working alone, in JVs or in farmouts. We also have a big presence in matters relating to fuels and terminals – the handling, storing and distribution or commercialization of refined products. We also have a large client base of service companies that provide technologies, personnel and equipment to operators, including PEMEX.
Q: How has the demand for conflict resolution services grown?
A: This service has undoubtedly grown. Our involvement is mostly supporting litigation teams to understand an industry that is incredibly complex and detailed and presents problems for teams jumping in quickly without prior experience. The legal framework is so extensive that a nonspecialized team cannot immediately understand the substance of the law. This is where we provide an added value. Offering the strategic and regulatory support they need helps a company channel litigation vehicles properly. There are a lot of amparos and arbitration cases happening at the moment.
Aside from this, companies are also preparing themselves with investment protection treaties and legal actions. They are also wanting to understand, from a legal perspective, if and how the Mexican government is infringing on trade agreements. Companies are being more proactive in preparing themselves.
Q: Has MCM’s involvement in guidance on regulation continued under the current government?
A: MCM remains involved in supporting the authorities and regulators because we are involved with so many regulated entities. Discussions continue and we have a direct communication channel to address questions. We can help teams come to a conclusion that is beneficial for the entire industry and they know we are always aware of their actions and decisions. For example, sometimes government agencies or industry bodies will propose new regulations via CONOMER and we can comment and make suggestions.
Q: How have clients reacted to SENER and the Ministry of Economy’s changes regarding permitting of gasoline importation and exportation?
A: First of all, we believe the regulation installs obstacles to competitivity that will mostly benefit PEMEX. This happened in a market that has rules established by a treaty, a Constitution and the law. Companies are still trying to get the permits and, in many cases, we are not talking about speculative business. These are companies that have worked and will be working in Mexico for many years. They will likely seek to defend their position, which may result in litigation, partly because of the new rules and unequal treatment that favors PEMEX and other private companies that appear favored by the administration in some way. There does not appear to be a level playing field.
Companies are reaching out to us to voice these concerns. No companies come to us delighted by the clarity of regulations or rules governing the industry. They do not know if they will obtain permits even if they comply with all the requirements. The permits could be revoked for reasons that remain opaque. Everybody has questions.
Q: What are the positive legal aspects for the industry over the last year?
A: The positives we see are that companies are trying to become involved in the industry’s processes. They are attempting to reverse decisions and show why the permitting bill, for example, is a bad move. They are organizing themselves to oppose, in appropriate ways, the actions that are being taken to reduce competitivity. In this sense, the positives I see come from the private market rather than from the government.
Q: What are MCM’s goals for next year?
A: We intend to provide our clients with our understanding of the applicable regulations, how to navigate these regulations and adapt to the new environment. We have been successful in this so far and want to continue with this trajectory. Finding appropriate solutions is required, given the complex environment that the industry faces. A law firm like ours is fundamental to the growth or preservation of our client’s businesses.
Q: How does the industry’s situation today differ to the expectations you had when the Energy Reform was enacted?
A: It is important to emphasize the political change that has happened between the opening of the Energy Reform and today. This dramatic change in Mexico´s political position could not have been foreseen. This is a central element of the current industry picture and has undoubtedly changed the game for all stakeholders. The quick progress the country could have made has been slowed. The clear, stable environment that included strong regulators, a sound legal framework, and, as a result, growing investment, has changed. Today, the country’s position is difficult to read and uncertainty abounds.
MCM Abogados is a boutique law firm focused on providing comprehensive legal services for the development of energy and infrastructure projects in Mexico. It provides advice to domestic and foreign clients, as well as different government entities on bidding, direct awards and other procurement procedures, regulatory aspects and project finance.