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Analysis

SMEs Hold the Key to Industry Transformation

Wed, 01/22/2014 - 13:24

Back at the beginning of the 2000s, Erik Legorreta, President of AMIPE, noticed that the opportunities in the oil industry were not well known among businesspeople in other sectors, given the high commercial and technical specialization it entails. This situation led to him organizing several informal gatherings, where different entrepreneurs and company executives would meet and talk about common interests and concerns regarding the oil industry. “Pushed by several companies that wanted to enforce clearly defined objectives for the country’s energy future, AMIPE was created four years ago to contribute to the development of the oil industry by advising and supporting players in the sector,” says Legorreta. “Our objectives also include technological development, creating quality standards outside of PEMEX, and social responsibility. Many companies that belong to the association have a positive impact in the cities and municipalities where they operate, some of which depend on these enterprises for their livelihood.”

The Energy Reform’s benefits have been widely discussed in terms of increasing hydrocarbon production, lowering energy costs, and the creation of additional infrastructure, with large oil companies being the ones profiting the most from the reform’s resolutions. However, Legorreta points out that nobody really discusses the opportunities it will bring to service providers. “There are more than 50,000 companies involved in the oil industry, including SMEs, which create over a million jobs. Yet, they go largely unnoticed,” states Legorreta. “While everybody looks at the large players, it is SMEs which hold the key to the industry’s transformation.” AMIPE welcomed the Energy Reform because of its end goal to open the sector and expand opportunities, but calls for attention to its impact on local companies. “We are proposing for the secondary legislation to include a meaningful national content requirement, which may embrace nationally established foreign firms.” The association is promoting a mechanism to ensure that the maximum level of foreign participation stays at 70%, with national content representing at least 30%. “We plan on welcoming foreign players and assisting them with knowledge of the local market, always looking to foster alliances,” says Legorreta. “I would like AMIPE to plant the idea that being a business partner is better than being a contractor or an employee. I want to see foreign companies collaborating with Mexican firms, not simply hiring them. We want to prevent Mexican companies from becoming complacent with the idea of becoming outsourced contractors, relegated to the background in a thriving market. In our view, Mexican firms have to be promoted as partners and turn the same profits as their foreign counterparts. Legislators might fear that insufficient availability might result in project delay, but these policies exist in many countries, including highly touted models in Brazil and Norway.”

AMIPE’s goal is to be an agent of the promotion of technology and knowledge spillover. “Governments help promote industries, but there is only so much they can do. We cannot delegate technology promotion to the government because it will eventually be accused of favoritism. The organisms in charge should be private entities comprised of companies and academic players that work hand in hand with the federal government. To aid the spillover, AMIPE is creating events in which PEMEX participates and hears out what companies have to say. The idea is that companies can attend to showcase their products in an institutionalized way,” Legorreta explains. “I would like Mexico to have four or five important events a year that bring the private and public sectors together, giving companies the chance to introduce themselves to PEMEX.” On the other hand, Legorreta believes that PEMEX should give industrial associations the chance to undertake these networking projects. “PEMEX now has to change its views on the industry, open up its processes, let other actors participate, and become more transparent.”