Winner: Ritch Mueller
Mexico’s business sector, well before the blunt trauma of the COVID-19 pandemic hit, was feeling the impact of President Andres Manuel Lopez Obrador’s (AMLO) business sector policies that have left many skittish about his true intentions for investment. This was especially the case in the energy sector, says Thomas Mueller, the managing partner at the law firm Ritch Mueller. The Mexico City-based firm has taken for a second straight year the top spot in LatinFinance’s Project & Infrastructure Finance Law Firm of the Year – Mexico award category.
The team worked on the CaKuA1 gas compression unit project, which was the winner of the PIFA – Mexico category.
“The government is trying to push back on private investment in energy,” said Mueller.
“That is not good news unfortunately and may impact new deals because the flow was very strong in private investment and power and upstream. All of that is now up in the air,” he said.
Indeed, AMLO has been criticized for pushing more fossil fuel friendly policies over renewables. The government has spent heavily to support the state-owned energy company, Pemex. Promoting the national champion and a main source of revenue however comes with risks from low oil prices and the rise of renewable energy sources
Ritch Mueller’s work on the $403.9 million syndicated loan facility for the CaKuA1 gas compression unit, closing it during the early days of the pandemic. The unit, located in the Ku-Maloob-Zaap oil field within the Campeche Bay, will help Pemex more efficiently use the field.
Additional work the firm did during the year was concentrated in the energy and power sectors, with many transactions underway well before the pandemic, making the pipeline less certain for the rest of 2020 and perhaps into 2021.
The team worked on the $570 million Contour Global Combined Cycle Power Plants portfolio. In the case of the $280 million El Llano Solar park, closed late last year, that project is now expected to suffer significant losses because this past May the government’s energy grid operator halted the interconnection of nearly 30 solar and wind generating operations.
Because of the tighter business environment and the government’s pandemic policies, which are keeping a firmer grip on the national purse strings, doing business in Mexico over the short-term may result in two things.
First, there could be, Mueller says, more mergers and acquisitions activity in the power sector while in the oil and gas sector, the contracts that have been awarded in the upstream market “will stay where they are.”
Secondly, Mexico is spending the equivalent of just under 1 % of its GDP on the response to the pandemic, according to data from the International Monetary Fund. That compares to the 6.5% Brazil is spending. AMLO’s policies may mean Mexico will not overdue public spending, making the economic hit more acute in the short-term, especially for the small and medium-sized businesses who need government support. However, if that lack of spending means there is less debt burden in the future, the nation’s fiscal position will at least be healthier.
As for private sector business, Mueller is cautious. “New investments and new projects? People are thinking two or three times about putting new money into projects based upon the policies of the government.”