Orozco – Associate Director, FTI Consulting, Mexico
FTI Consulting is a multinational professional services firm that covers different sectors ranging from corporate finance, forensic litigation consulting, economic consulting, technology consulting and strategic and financial consulting. What is the scope of your Mexican based services in the energy, oil & gas sector?
The main services FTI provides in Mexico pertaining to the booming energy sector are corporate finance and forensic litigation consulting. Corporate finance focuses on strategic, operational, and financial and the capital needs of businesses when they are going through restructuring processes. Forensic litigation provides multidisciplinary, independent dispute advisory, investigative, data acquisition/analysis and forensic accounting services due to the global business and legal community. We have preventive and reactive services; preventative services allow our clients to have information in order to avoid risky investments. This allows our clients to understand and assess the risks that are associated with third parties, such as the government and Mexican legal entities. On the other hand we have reactive services, which mainly deal with investigation of thefts, robberies and frauds or making forensic audits so companies can decide whether they have any danger regarding their own activities. This also allows companies to decide whether they have areas of concern involving their own employees. Some examples include issues of racketeering and hiring risky contractors and providers. It is our job to help clients detect issues and design processes that are in accordance with the Foreign Corrupt Practices Act and the Mexican legislation to avoid issues of corruption.
How has business at FTI Consulting evolved since the creation of Mexico’s energy reforms?
Previously the oil and gas industry required international clients to win bids and deal exclusively with PEMEX, which has had a long history of corruption. It was then FTI’s job to assess and determine the risks associated in dealing with PEMEX. Now that it no longer has exclusive control of the Mexican oil and gas industry and the country is in a legal transition period, we are helping clients interpret the new legislation and identify where the largest areas of risk exist.
Give us a general overview of the company in Mexico and an understanding of where the office is heading?
FTI has been in Mexico for eight years and typically our corporate finance services in have been the most sought after in the country. Our corporate finance group is currently positioned as one of the most prestigious and well-known in Mexico. Likewise, we have been expanding our glrobal risk and investigation practice over the last three years and we have managed to gain a number of big local and multinational clients with operations in Mexico. We are currently developing business development activities with the Japanese business community in Mexico, which is growing at a very fast pace and requires to be served in a wide variety of fields. We also are seeking to start serving clients in the North of the country, specially in Monterrey. Along with this, we are approaching a number of both local and multinational companies that are investing in the recently opened energy industry in Mexico, which appears to be full of new and interesting opportunities.
What proportion of revenue does Latin America, in particular Mexico, represent for FTI Consulting?
FTI Consulting is a US based company and most of its profit is generated within the United States itself, but Latin America is increasingly becoming more of an area of focus for clients with worldwide operations, specially Mexico, because of its growing economy, young population,vast natural resources, open economy and strong links with the US market. Today, roughly 10% of FTI’s revenue is originated in Latin America.
Oil is one of Mexico’s most prized commodities and adds substantially to Mexico’s economy. Being that oil prices have dropped what does Mexico’s future potential for oil & gas earnings look like from international investors?
This is a great question because of the amount of uneasiness that currently exists in the market. It is my personal opinion that all prices fluctuate and play out in a medium or long-term basis. I believe most international oil companies know this and I do not believe that Mexico will experience a decrease in investment. In fact, the largest oil companies have been doing business in Mexico for quite some time, but due to prior legal stipulations they could not technically own the projects. Additionally, the Mexican Peso’s decrease in value compared to the U.S. Dollar makes it an even more attractive place to do business. In general terms the projects the government anticipated starting this year will likely be deferred a couple of years but I firmly believe that most of the projects will come into fruition within the next few years.
What suggestions and advice do you offer to international clients looking to invest in Mexico’s oil and gas sector that are doubtful of entering the Mexican energy sector due to issues of infrastructure and safety?
Mexico has been doing business with international oil companies for quite some time. The rules of the game have changed but the game has been existent for quite a while. The way that large international companies have been working in Mexico for years is a true testament to the fact that all companies in the energy, oil & gas sectors can do business in Mexico with the right advice. This should give the large companies confidence in their ability to invest in Mexico because of the policies being drawn will help facilitate foreign companies doing business in Mexico.
The publication of Round 0 in November 2014 and Round One late last month is the beginning of oil production by the private sector in Mexico, thus increasing production through better technology, resources and investment. What international companies do you see investing in Mexico’s oil & gas sector?
This can be divided into two main kinds of companies: the large international companies, which are already operating in Mexico and the smaller companies that posses advanced technology. Mexico is a tremendous opportunity for these junior companies to work as subcontractors for the larger companies and PEMEX. There is a very important niche to fill for these smaller companies because they have the capacity to help generate oil.
What makes FTI Consulting the partner of choice over other competitors in Mexico and abroad?
What FTI does best is to provide our clients with in-depth analysis, comprehensive assessments and complex investigation solutions when they operate or want to start operating in markets like Mexico.. This allows our clients to much better know whom they are associating with, working with, under what circumstances thet may operate and what potential risks they may face Based on this information, we help our clients make better business decisions.
Our best advantage is our well-experienced consulting staff. Our people come from the most prestigious schools in Mexico and abroad in some cases and have worked for both private and Government organizations not to mention the broad variety of their academic and professional profiles. Thanks to this, we can provide our clients with a solid knowledge on the local reality, problems and dynamics when it comes to do business in the country.
What successful projects in energy and oil & gas can you share that FTI Consulting Mexico’s offices have participated in?
For issues relating to privacy I cannot release any names, but we have had two clients who are very well known in the oil & gas sector that chose to have a forensic and operational audit because they were going to participate in the bids after the constitutional amendments were made. These companies opened their doors to us and we came up with the facts and figures dealing with their company’s environmental issues, human resources, Foreign Corrupt Practices Act concerns, procurement and judicial issues. We were able to inform these companies about the financial exposures that would cause them economic hardship and even alert them about particular employees that could raise issues of fraud for them in the future. We have the capacity to generate audits that analyze the entire company’s concerns. When companies are dealing with large economic investments it is essential that they understand their portfolio. FTI is pleased to provide detailed information to our clients so they can make the wisest decisions.
Where do you want to see FTI Consulting Mexico in five years time in the energy sector?
You cannot come to Mexico without making security assessments of your company’s installations and facilities. The states with the largest security issues are precisely the ones with highest oil & gas reserves. Every decision and contract you have in Mexico has carries a risk and you need security clearance for your employees. With that said, FTI hopes to be the consulting firm that large international oil companies reach out to when doing business in Mexico. Most companies need the advice and knowledge when investing in a foreign country and with Mexico’s energy future looking as bright as it is we hope to be able to offer our in-depth services to the largest and most important companies around.