Héctor Moreira
View from the Top

For Reform to Work, Everyone Must Play a Role

Tue, 12/12/2017 - 15:05

Q: What is the biggest challenge for the continued implementation of the Energy Reform?
A: The status quo has lasted for so long it is engraved in people’s minds, making it extremely hard for them to change. We need to make them understand that everyone has a role to play in the new environment, otherwise it will not work. But some people are not prepared to take on those roles. One example is the discovery of oil. Before, when an owner discovered oil on his or her land it meant the state would use the land at a fixed price. Now it means the owner can negotiate directly with the companies that want to extract the oil. People are not aware of this change and neither are the judges who may be asked to adjudicate cases in which a conflict arises because negotiations fail. Even when talking to private companies they sometimes still think the production will be sold directly to PEMEX but that is not the case. The opportunities are far greater. To address this issue, CNH is taking advantage of every opportunity it finds to talk about the Energy Reform and the new rules, conditions and opportunities it brings.
Q: Do you think a new administration taking office after next year's elections could stall or even reverse the reform?
A: Mexico is a nation with very strong institutions. That said, the Energy Reform is now entrenched in the constitution and the only possible way to reverse it is if two-thirds of both chambers of Congress and a majority of state legislatures vote in favor of doing so. The biggest harm a new administration could inflict would be to make it harder for industry players to follow the regulations. Even in such a case, the reform could not be withdrawn. Because of the huge destabilizing impact such a move would have on the country, I do not see a possible scenario in which a new administration could even get close to reversing the Energy Reform by using regulatory frameworks against it. In general, all the different parties have different priorities for the Energy Reform, be it in local content or investment requirements to name some examples, but they all support it.
Q: How would you measure the Energy Reform’s success?
A: The Energy Reform had three main objectives: to attract investment, to attract technology and to create a national industry. With Round One we have attracted much more investment than PEMEX could ever secure on its own and allowed for the use of state-of-the-art technology on Mexican soil. In this regard, we can consider Round One a success. As for the creation of a national industry, we have seen the emergence of 28 different Mexican companies, which is already a small success. Major success will be accomplished by some of those companies when they move to the big leagues and compete against major international companies. For that to happen we need time, and a number of companies will undoubtedly fail along the way. Success must be measured in proper and objective ways, with short-term actions that have long-term implications. When viewed this way, the Energy Reform can be considered a success.