1. Local Content and Energy Reform In Mexico
Dr. Tony Payan

2. Purposes of national content policies
Extending the benefits of opening the energy sector to more Mexican companies and citizens
Stimulating national economic growth
Help small and medium size companies grow
Achieve technology transfers
Policy by law
25% of assets (2015) going up later to 35% of assets (2025)

3. Flexibilization of what counts as national content
Preliminary Issues
Flexibilization of what counts as national content
How serious is Mexico on this?
What is the ratio of local content or local participation?
There are signals that there is a willingness to look the other way
From zero where there is little national expertise (deep-water) to higher in off- and onshore project
Unclear whether there will be credits for national content from venture to venture, particularly in large integrated projects
Exceptions and postponements (later projects at higher rates) can be made?
Will higher percentages upstream count for downstream investments?

4. Preliminary Issues
It is not clear what will count as national, given the integration of supply chains
Local registration
Local ownership
Local workforce
Local value added
Joint venture

5. Presumably, 50,000 Mexican companies that can participate, but not all along the value chain
Goods
Services
Expertise
But there the industry is not well integrated and it will take a long time to read each other’s signals

6. Corruption (business by politicians) is a real danger
Of these 50,000 companies, it is not clear that the Mexican government knows who is who and who does what
Corruption (business by politicians) is a real danger
Politicians will offer themselves to do business
It is not clear how this will operate in joint ventures with PEMEX
Easier to meet, however
It is not clear how this data will be collected, although SE can develop formulas for it

7. Do national content rules violate FTAs? Are they discriminatory?
The North American Free Trade Agreement clearly states that none of the signatories can “impose or enforce requirements or enforce commitments or undertakings in relation to the establishment, acquisition, expansion, management, conduct or operation of an intervention by an investor or by a party or a country not part of its territory to [...] reach a given level or percentage of national content.”

8. It is not clear how violators will be sanctioned or appeals be made
Many supply chains in Mexico are obscured
Exported goods contain 40% American content