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December 13, 2013


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I think there's a strong difference in the sense that Iraq is or can be very much a protectorate of the US, or in any sense, limited in sovereignity, such that what laws on the book is merely for show.

Mexico, while strongly guided by US wishes, does have much more freedom to retract permission. I think that the chances of something akin to India's conduct with telecom or retail laws are pretty darn good, and I certainly wouldn't book any Mexican resources quite as reserves of US entities. I think Mexicans are very sensitive about their autonomy from the US, and doubly so when it comes to the oil. Thus, I think there is not a minimal chance that a public reaction would eventually coalesce to the point past what pressure US institutions can put on Mexican politicians.

Fondling "The Empire Trap", but Yasheng Huang comes first, though.

U.S. companies can book reserves as long as the SEC says that they can ... and the SEC looks at the economic reality of foreign law, not the phrases used.

Honestly, there is absolutely nothing that Mexican lawmakers can do about it short of complete repeal of the energy reform. They can pick any words they like, write clause after clause, but as long as the substance of the contracts fulfills one of the above criteria, then companies will book ownership of reserves.

The flip side is that this will likely attract little attention in Mexico. Nor is it clear that reserve-booking has substance in-and-of-itself: the companies' property rights are set by the substance of the law and contract.

Is this clearer?

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