Less Bureaucracy, More Legal Certainty for Further InvestmentBy Gabriela Mastache | Thu, 05/21/2020 - 16:26
Q: How relevant is Mexico for Ontier, internationally?
A: Ontier is an international law firm with more than 50 years of experience in the market. In 2011, when the firm started its internationalization process, we knew that having presence in the Americas region was key for our growth. Following this logic, the first office the firm opened outside Spain was in Mexico. The bet on Mexico was clear and obvious, as the historic and current economic relationship between both countries is excellent. On the other hand, many of our Spanish clients were already doing business in Mexico and requesting our help with their business development process in the country, while many others were asking us to help them enter the Latin American market. On top of that, once in Mexico, we saw that the economic and commercial flow was not only from Spain and Europe to Mexico but also from Mexico to Spain and Europe. This allowed us to get involved in several important investments from Mexico in Spain, usually and most commonly coming from very large, well-positioned Mexican companies.
The firm has a well-recognized expertise in the energy sector, both in Spain and now Mexico, which turned out to be extremely useful to help our clients when we first came to Mexico in 2012, right before the Energy Reform and the booming of the energy sector.
Q: Ontier participates in several different areas of law. What is your strongest practice in Mexico and why?
A: Our main area of expertise is energy. Though we also do oil and gas-related work, we are mostly focused on renewable energies. Banking and finance is another big area of expertise, as well as all related areas, with special focus on corporate and M&A. We also participate in areas such as labor and tax and we also contribute in restructuring and litigation.
When we first came to Mexico in 2012, our main clients were Spanish companies operating in Mexico, but after eight years in the market our portfolio has become more diversified with Mexican and other international clients.
Q: What is the most pressing legal concern Ontier’s clients usually face in Mexico?
A: Concerns normally relate to transitions and readjustment periods before, during and after any government change. For example, the current transition period has taken some time and all investors are analyzing the potential repercussions, risks and opportunities from the government’s decisions on their business operations. This is why many investors are right now putting decisions on hold, just waiting and analyzing the landscape and seeing how previous investments unfold.
As counselors to global players with operations in the Mexican market or that want to enter this market, we are seeing two types of attitudes. First, more aggressive clients perceiving the current juncture as the perfect moment to invest and as an opportunity. Second, a more cautious or conservative attitude, where they prefer to delay their investment plans until they perceive more stability or certainty. Fortunately, we have more clients that are analyzing the situation optimistically and are willing to invest in the country. However, we are also seeing Mexican companies that prefer to invest abroad at the moment, rather than in Mexico.
Foreign companies perceive more opportunities than their Mexican counterparts since they see the potential for the development of several economic sectors and they also see the Mexican market as a bridge for later ventures into Latin America and the US. However, when it comes to Mexican investors, they are trying to diversify their investments and their business risks.
Q: What actions could the public administration enforce to boost national and international investment?
A: There are several things that could detonate the Mexican economy. Restarting the public bidding rounds for the infrastructure sector is one of them, as the Mexican private sector has the expertise and financial capabilities to continue working hand by hand with the Mexican government on infrastructure projects.
Another element that could help to attract new investment is certainty regarding regulations and bureaucracy. Right now, long-term investments need to be reviewed by several public administrations before getting the final authorization, sometimes causing considerable delays, which obviously translates to uncertainty for investors. For example, one of Ontier’s investment fund clients that develops and operates energy projects in Mexico has a project in a very advanced stage of development and is just missing one permit to complete the project since several months ago. This client has several million dollars already approved for investing in three additional projects. However, the company will hold future investments until it completes the first project.
If investors see that projects in which they have been participating are coming to fruition, they will continue investing in the country. However, if these investments remain in a limbo and take too long to materialize, most probably few of the investments they had projected are going to materialize.
Something that Mexico did very well when it announced the Energy Reform was creating interest among the largest energy companies around the world. The country was able to create positive expectations for investment and that can be replicated now.