Santamarina y Steta is a Mexican law firm, which has a long standing tradition of being devoted to all areas of law practices, offering comprehensive services for individuals, corporate groups, and institutions, both in the private and public sectors. KITE Invest sat down with Alberto Saavedra the Managing Partner of Santamarina & Steta to discuss Mexico’s reforms and the country’s future relationships with international partners.
KITE Invest: Mexico is experiencing an historic moment of transition due to the structural reforms that will encourage capital inflows to the country. What is your opinion on the process of the reforms and what benefits do you think they will they bring to Mexico?
Alberto Saavedra: The first thing I would like to request is for us to abandon the ideas that are sometimes present in the media about this so-called « Mexican Moment », thinking of Mexico as a place of opportunity. The recent reforms that appear are the natural result of a transformation that has been taking place in the country since 1910 and most recently in the last 30 years during the severe financial crisis that gradually transformed the country through decisive, clear, and precise actions that have now materialized into an impressive picture of structural reforms, which are now what is drawing attention to Mexico. However, this has to be put into context. The context begins in the late 1970s when Mexico had a high dependence on oil, a time when oil prices were very high. This was something that benefited the country, as most of our exports were crude oil, because it generated an important income for the Federal Government. However, shortly afterwards, oil prices collapsed overnight and international interest rates rose sharply. This is where Mexico reached soaring debt levels – $100 billion – which we could not pay, greatly affecting the Central Bank, and of course the Government, which had to perform a series of actions, such as the nationalization of the banking, assume a very tight economic policy, and encourage openness and competition. This raised a fundamental question once this fact was accepted: what actions were going to be carried out in order for Mexico to become a country that exported knowledge, technology, and values of the Mexican nation, and cease to be a nation that only exported oil and people? We realized that the solution was to have a greater integration with the world. That Mexico was part of the world and the world was part of Mexico.
These structural reforms are to be understood in this context, as they facilitated Mexico’s inclusion in the world. The first thing we did was to restructure the debt, liberalize the economy, divest public enterprises, invite foreign investment into areas, such as technology and skills, and begin building the path to reach these goals.
Another important factor was the earthquake that Mexico suffered in 1985, a fact without which « México Moderno » could not be understood. Mexicans discovered that day that the state is not all-powerful and cannot handle everything, and this marked the awakening of civil society to the need to respond and to solve the problems faced at that time. This is part of today’s Mexico, a country that has an active society that is pressing ahead selflessly and pushing towards modernization.
Similarly, Mexico was able to get the United States and Canada to sit at the table to negotiate and create the largest trade agreement in North America. In those years, Mexico was in a different position not only for its culture but also for its liberal processes both political and economic, and from there came the creation of the North American Free Trade Area (NAFTA). This connected Mexico with the most important market, with the world’s leading economy, with a democracy that is a weathervane for other democracies in the world. We were also accepted to the OECD in Paris, to which the organization’s current President is Mexican. These are just some samples of the level of commitment to the world that the country has shown over the last three decades.
As I have mentioned at the beginning, I do not know what is the « Mexican Moment ». But I do know what is Mexico: Mexico is more than 30 years of progress during which we have opened new realities, broken down barriers that we had historically dragged on, and assumed a constant desire to modernize.
Politically speaking, in 2000 Mexico could have taken more liberalizing economic measures or could have had political liberalization in the democratic arena. The Mexican electorate decided we had to move forward politically. This election came with a cost: for the first time in many years we had a President who was not from the traditional party. This president laid the groundwork for tripartism, something that has been repeated since its mandate and is important because of the implications it poses in moving in a democratic process. After 12 years with this system, we returned to the centre party but using the recipe that the Federal government has to work with a Congress made up of three parties.This is admirable if we take the example of President Enrique Peña Nieto, who achieved the consensus and negotiation with the main political forces and achieved an impressive record of reforms, which ended the country’s myths about having access to technology, knowledge, and the opening of the energy sector. This is the magnitude of the current reforms that started to develop during the previous presidency. The reforms address energy, telecommunications and finance, but the queen of the reforms is the education reform, and I emphasize precisely this one because if the UK stands out for something it is for its education system.
The energy reform is essential, and it represents a major transformation. But as I said, the most important reform is in education, because in 20 years we will be able to see the fruits of our labour and these fruits will be the future Mexicans who will be prepared, will have skills, and both a national and a global consciousness.
When someone looks into Mexico, they will understand that these reforms are the result of three decades of domestic work, where the most important player has been the Mexican civil society, since it has been the one to allow these changes to occur. This same civil society is the one that will create the solutions to the problems that Mexico is currently facing, by developing new opportunities.
Our country is forcing that the Government operates like other democracies and be transparent. The great challenge for the Mexican society and the reforms is to build a country that is based on values and morals as well as people that are better prepared and have more skills to face world needs, causing at the same time greater openness of the different economic sectors within the country.
In 1982, we were a lame duck exporting country. Today we are a nation that exports manufactured goods as well as qualified services. This shows the level of openness that Mexico has already experienced, as our main trading partner is the United States. The reform process is a natural process, which is undoubtedly encouraging even more open relations with countries that traditionally have had a good relation with Mexico so that they can participate in various economic sectors such as telecommunications, energy, and others.
Another fact that is making Mexico open up to the world is the signing of a strategic Pacific Alliance agreement, which allows us to take advantage of trade relations with transpacific countries.
In short, the future of Mexico is the result of daily work, and steps that have been taken with intent, seriousness, and in the right direction.
KITE: In the case of the energy reform, it is undoubtedly a very important reform. What is your opinion of the energy reform?
AS: Undoubtedly the energy reform is paramount. If we consider countries such as the UK, it has extensive experience and knowledge in the oil sector. Mexico is a country with a lot of oil and natural resources, but the UK has a greater knowledge in chemical matters. Mexico is one of the last cards to be played: it is the only market remaining and we are more than 120 million people. Economic actors now have to look to Mexico and decide what type of participation they want to have in the industry, especially countries like Great Britain.
Mexico must take advantage of the UK’s knowledge, experience, and technology. With this reform there is a clear opportunity that is presenting competitive advantages for investors.
KITE: This reform will liberate a market that has been stagnant for years due to lack of investment, and will as a result open innumerable opportunities across all economic sectors. Upon completion of the secondary laws and regulations for the implementation of the energy reform, a new era of development and economic growth will begin. What are your analyses of the current market situation and the implications of these profound changes? What does the energy reform imply for the sector, and most importantly, what is your opinion on the legal framework of this reform?
AS: I do not have enough words to explain the degree of transformation that this economic opening will bring to the entire Mexican economy.
Speaking of the energy industry: As a nation we have a terrible history, considering the monopoly that existed for so many decades. We became inefficient. We are now presenting the opportunity to incorporate talent, knowledge, technology, and trained staff, thanks to the opening caused by the reform. The human factor is extremely important.
In terms of gas it is also impressive. You look at the old map of gas pipelines and they did not reach all states; they were not interconnected. Now thanks to the reform all states will be integrated and accounted through a map of pipelines, and a cost efficiency has been created that will make the entire country’s cost of energy fall. North America and Mexico are becoming the region in the world with the best price for energy. Mexico has made reforms that the bipartisan United States Congress hasn’t been able to accomplish in 20 years or the European Union has failed to integrate.
Within the legal framework of this reform, the area in which we are specialists, I guarantee that the regulation will be good. I guarantee that it will be good because the people in charge of the process are capable, know the subject, and are in consultations with all international presidents from the European Union, the OECD, and the United States. This means that we have an important stock of knowledge, and by analysing the times and needs that we have we will create a regulation of the highest standard and international quality.
The regulation will be very good, I think we will have to learn how to implement it, but what is clear is there is a public and private willingness to learn. We need the regulation to be integrated with best international practices, to the greatest potential most suitable for our country. The Government wants there to be a successful opening benefiting the nation and the investors. This reform implies that the investor opens himself to a new market to invest in: Mexico.But this market has to have a suitable regulation to make it attractive to him.
We are making progress within the legal framework, and legal reform will also cause this regulation to be applied in a completely transparent environment.
KITE: One of the things that we found is that the foreign investor has a certain default to mistrust the court proceedings and legal frameworks in emerging economies. In the case of Mexico, regarding costs, safety, etc. law firms are the best legal platform for all investors who want to enter the country. We consider Santamarina & Steta may be the perfect platform for those investors who need that trust and advice, especially taking into consideration the firm’s experience.
AS: Foreign investors must be cautious when it comes to a new jurisdiction, especially if it is an emerging economy and society. I invite them to have the same precaution with Mexico. It is prudence; it is the right attitude.
Fortunately, Mexico has a world-class legal industry. We are sophisticated, due to our proximity and trade relationship with the United States, our free trade agreements, and because wehave accepted international jurisdictions and our financial markets are closely linked to major financial headquarters of the world, like London. These all imply the liberalization of the legal industry, which developed long time ago. We are world-class players. I encourage foreign investors to get legal advice from a well known firm that offers experience, quality skills, knowledge, and values. A firm that can guide them through the process.
We have many important clients in different industries that we have represented for decades. This shows that Mexico has evolved and has been a good place to invest. Our clients are multinational, such as General Motors and Kimberly Clark, and they have remained 10, 60 and even 100 years with the firm. Today there is strong evidence that these companies have done well in Mexico.
The fact that there are 503 British companies in our country means that there is an environment of justice and that Mexico is progressing. I encourage the investor to fulfil his duties of prudence, caution, and research as he approaches a law firm. We have and continue to accompany our clients on their way. The firm was founded in 1947; as of today we are an institution of professionals with unique characteristics and we have strategic alliances with firms and upscale institutions abroad to ensure full coverage. We are an international firm with a clear understanding of Mexico and a high degree of expertise that allows us to operate as a boutique firm providing full services, with the right contacts, the knowledge, and providing the necessary orientation so that the investors can put their capital into Mexico.
So I would say yes, we are an emerging country but with a world-class legal industry, being that our work provides the investor with a sense of confidence, permanence, and investment security in the country.
KITE: Speaking of Santamarina & Steta, what is your specialty?
AS: We are a full service firm specialized in over 30 areas of law practice. We work with multidisciplinary teams to satisfy the needs of our customers in a comprehensive way and from a global business perspective. In Santamarina & Steta you’ll always meet a specialist in your area of need, whether it is labour, intellectual property, corporate, mergers and acquisitions, energy, litigation, regulatory, administrative, to name a few examples.
Another feature that distinguishes us is precisely the value box. A foreign firm founded Santamarina y Steta in 1947, specializing in areas such as mining and energy. That gave us a very Anglo-Saxon DNA to our values. We do not engage in unfair issues and are against corruption. We do not like conflicts of interest, even if we lose business, because we do not want clients of that low quality. We like the long-term client that comes to us and wants to stay. As I mentioned, our clients have been with us for decades and we want them to stay even longer. It is a stable firm at the service of our client. The client comes first, his reputation – we understand the value of reputation. We believe that our clients bring issues of the highest importance to them, and in the client’s case the issues are engraved with their name, and we also put our name next to theirs.This makes us unique and allows us to define ourselves as an institution. Although we are a firm with many years practicing, the average age of our lawyers is roughly 40 years old and they all have between 15 and 45 years of extensive professional experience. In addition to solid professional backgrounds and academic trainings at national and foreign institutions, is the fact that this allows for innovation in versatile solutions and to be proactive thanks to the wide range of specialties integrated various areas of the firm. At Santamarina & Steta we are constantly updating, we believe a lot in this country, we have been involved in many of the country’s most relevant moments and we believe that this nation has a lot to offer the world.
Mexico wants more of the world, but the world also needs more of Mexico in it.
KITE: What are some of the firm’s major international alliances? What benefits does the firm get from these partnerships?
AS: Santamarina & Steta, architecturally, is an open firm and we have developed partnerships with top-tier global offices in more than 60 countries; therefore, it would be hard to highlight them all.
The main benefit of these partnerships is the global knowledge and experience they give us in order for us to provide a global vision to our business. When a client needs support or information from somewhere in the world, we can get it. Our relationships are not paper shuffling. We invest in people. If we are asked to put a client in touch with someone, we can knowingly recommend someone, because Santamarina & Steta takes the time to get to know how their allies operate and even to know them at a personal level. This makes a difference and is absolutely unique. It gives us the ability to pick up the phone and make any kind of consultation anywhere in the world: What are the policies of « X » company? What is the gas distribution contract in the United Kingdom?
Our clients greatly benefit from the global presence our partners give us, especially because our commitment to quality extends beyond our borders, creating alliances with firms and institutions that share our vision and values, and serving the client’s interests with the same safety and care as we do in Mexico.
KITE: Within your career at the firm, what have been your biggest challenge and your greatest achievement?
AS: I joined the firm as a law student when I was 19 years old. Agustin Santamarina was my boss; he was a very intelligent man who had everything to do with the development of corporate law in Mexico. We looked into many important issues; we were asked to participate as advisors when NAFTA was developed, we privatized TELMEX, and we brought many companies to the Stock Exchange. It was a privilege to work with someone so important in the country. Presidents came to the office to speak with him. The Steta family was friends with the Bush family; I even had the opportunity of being present at one of his visits to the office. These experiences are extraordinary. Thanks to this training I was able to serve as an advisor to companies and households, which adds a remarkable human element. What I am sharing is something nice from my professional practice; I have the privilege of working with people whom have placed their trust in me, which in turn requires a lot of responsibility. This was what I like the most, that families have that confidence in my firm and in our people.
KITE: What three concepts do you associate with Santamarina & Steta that you would like to share with our British audience?
AS: This is quite clear: when you think of Santamarina & Steta you have to think about three fundamental ideas: honesty, institutionalism, and efficiency.
Honesty: because our professional practice is based in the ethical principles of trust, loyalty, security and commitment.
Institutionalism: because we are an established law firm with over 60 years of experience.
Efficiency: because we provide timely and innovative solutions to our clients, aimed at protecting their personal or business interests, and with the backing of a law firm made up by people of worldly capacity.