Eduardo Canales Participates in Q&A on Mexico’s Fibra E Investment Structure

Eduardo Canales, an associate in Akin Gump’s oil and gas practice, has participated in the Q&A column “Can Fibra E Spur Investment in Mexican Energy?” for Latin America Energy Advisor on the new Fibra E investment structure, an investment vehicle in Mexico known that is similar to a master limited partnership.

The column notes that the Fibra E, like the MLP, provides tax incentives for investing in the energy or infrastructure sectors through that specific investment vehicle. Canales was asked if he thinks Fibra E will spur investment and growth in Mexico’s energy sector and whether there are any potential drawbacks to participating in a Fibra E investment vehicle. He was also asked how the new structure might affect Mexico’s investment climate and economy more broadly.

Speaking first about Mexico’s industrial transformation, Canales said two main factors have arisen that are preventing it from taking place. First, he said, there has been a “lower-than-expected demand from global consumers like China and United States, paired with the global oversupply of hydrocarbons,” which has prompted a steep decline in commodities prices. Second, he noted that “critical underinvestment in Mexico’s hydrocarbon exploration, production, transportation and treatment assets has produced a severe lag in the energy supply chain.”

Canales said, “This new investment vehicle will allure investors who have never been able to access the Mexican energy market. The main drawbacks of the Fibra E,” he continued, “come from its origin. Since this investment vehicle is an adaptation of the Mexican REIT, some of the operational and corporate governance flexibility seen in American MLPs will be lost in translation.”

Finally, Canales said he thinks the Mexican government “has done an impressive job in designing and enacting laws and regulations that will promote the development of its energy industry.” He added, “Mexico has created a solid fundamental legal framework that shall impel the sustainable development of its energy industry.”