Latin Lawyer Publishes Dino Barajas Article on New Challenges to Mexico Energy Sector

Latin Lawyer has published Akin Gump global projects and finance partner Dino Barajas’ article “Slowing the juggernaut,” on the successful development of Mexico’s energy sector and on the advent of recent challenges to this success.

Barajas traces Mexico’s history of success since the early 1990s in developing various aspects of its domestic energy market, beginning with its 1992 amendment of power sector laws to allow private sector investment in power generation assets. The effect, Barajas notes, was that Mexico’s power sector converted itself “into one of the most modern and efficient in the world through the installation of new large-scale gas-fired and hydroelectric power plants using the latest technologies available in the international power market.”

He similarly outlines Mexico’s success in innovative promotion of renewable energy and its assumption of “the power development pole position within the Americas” thanks to its attractiveness to European, U.S. and Canadian developers looking for long-term power purchase agreements and a deep available pool of contractable megawatts.

Mexican President Enrique Peña Nieto’s December 2013 enactment of “historic sweeping energy reforms…focused on revolutionizing the oil and gas sector by permitting direct private sector investment in the exploration and exploitation of hydrocarbons for the first time in nearly 80 years” seemed, then, to set the stage for even further growth and maturation of this market.

However, Barajas notes that a recent government announcement of the proposed creation of a wholesale energy market is burdened by systemic complications such as the unavailability of non-recourse project financing as well as by a track record of failure of such markets in the U.S. and “may have unintended negative consequences on the very market [the reforms] are trying to grow.” 

He notes that the “next 12 months will provide greater clarity as to whether the country’s energy policymakers have taken the right steps” and closes with the observation:

The successful market players will be defined as those that have the benefit of existing market knowledge based on the past 20 years of Mexican power project development experience and the foresight to study the lessons learned by their predecessors.

To read the full article, please click here.