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Mexico’s Energy Reform
Law of the Mexican Oil Stabilization
and Development Fund
On August 11th 2014, a Decree containing the Law of the
Mexican Oil Stabilization and Development Fund (the “Oil Fund
Law”) was published in the Official Federal Gazette, entering
into force on August 12th 2014.
According to the Constitution (amended in December 2013), the
Mexican Oil Fund (the “Fund”) will serve to receive, manage and
distribute revenue derived from the exploration and exploitation
of hydrocarbons, resulting from agreements entered by the
Mexican State with third parties or by direct awards granted by
PEMEX, establishing for such purpose a trust, to be created by
the Ministry of Finance and Public Credit and the Bank of
Mexico, in accordance with the Oil Fund Law.
The purpose of the trust will be to receive, manage, invest and
distribute revenue received by agreements entered into by the
Mexican State with third parties or by a direct award by PEMEX.
The general aspects of the operation of the Fund are the
1. Revenue to be collected by the Fund may come from
the following activities or sources:
a. Revenue of the Mexican State from agreements
entered with private parties as well as direct
awards of PEMEX for the exploration and
exploitation of hydrocarbons;
b. Revenue resulting from investments made by
the Fund (with funds allocated to a Federal
c. Donations or any other type of contribution
made by individuals or corporations (which will
not be deemed a trustee or beneficiary of the
trust or granted any interest over the patrimony
of the trust).
2.Funds from the Fund will be allocated as follows:
a.The Bank of Mexico will make payments to thirdparties and PEMEX, derived from agreementsor awards, by no later than five business daysfollowing to an authorization from the ExecutiveCoordinator1;
b.The Bank of Mexico will wire transfer funds inthe following order:
i.To the fund for the Stabilization of theBudgetary Revenue;
ii.To the Fund for the Stabilization of theState Revenue;
iii.To the Fund for HydrocarbonExploitation;
iv.To a Sectorial Fund of Hydrocarbonsfrom the Ministry of Energy with theNational Council of Science andTechnology (“CONACYT”), includingthe funds dedicated to research, as well as science and development oftechnologies by institutes ofinvestigation on hydrocarbon issues;
v.To the Sectorial Fund of EnergySustainability of the Ministry of Energyand CONACYT;
vi.To the Federal Treasury to guaranteethat oil and hydrocarbon revenue of theFederal Government to cover thefederal budget, will be maintained at4.7% of the Gross Domestic Product.
3.In the case of funds remaining from the wire transfer,the Bank of Mexico will manage them through a reservefund to generate long-term savings for the FederalGovernment.
4.Any resources of the Federal Reserve Found might betransferred to the Federal Treasury in an extraordinarysituation to cover the needs of the federal budget.
The Fund trust will have the following general characteristics, among other:
1 Please note that even though the Oil Fund Trust will have a specific term to make the payments to contractors or to PEMEX, the Oil Fund Trust is silent with respect to the term within which the Executive Coordinator shall reach a decision on whether or not to authorize a payment to contractors or to PEMEX. This shall be clearly regulated in the terms and conditions for the incorporation and establishment of the Oil Fund Trust.
1.It must be open ended and non-revocable;
2.Must have a technical committee of seven members ,as follows:
a.Three members of the Federal Government :(i)Minister of the Finance and Public Credit; (ii)Minister of Energy;(iii) Governor of the Bank ofMexico
b.Four independent individuals with no less than10 years of experience related to the functionsof the technical committee of the Oil FundTrust. The experience requirement must berelated to the academic, professional orinvestigation fields. It should be noted that theindependent members of the technicalcommittee are to be nominated by thePresident of Mexico and ratified by the MexicanSenate. A requirement for the independentmembers is that they should not have been animportant advisor of PEMEX or any contractorfor the exploration or exploitation ofhydrocarbons within the previous two yearsfrom the nomination date.
3.The technical committee of the Fund trust will have thefollowing attributions, among others:
a.Provide the policy for the investment in financialassets for long-term savings of the Fund trust,including a broad range of instruments to beselected in order to increase the return andprotect the federal reserve of the Fund trust
b.Determine the rules of operation of the technicalcommittee including those of the President,Secretary and Assistant Secretary(Prosecretario in Spanish language);
c.Appoint an Executive Coordinator to beproposed by the Governor of the Bank ofMexico2;
d.Instruct the Bank of Mexico to carry out wiretransfer of funds to cover audit cost onhydrocarbon matters, as well as to undertakewire transfer of funds to counties adjacent to orin the border or coast trough whichhydrocarbons are materially exported;
e.Set the policy and guidelines for the accountsrequired to receive, manage and distribute the
2 The Executive Coordinator will work on a full-time basis and shall coordinate the day-to-day operation of the Oil Fund Trust. For such purpose, it will have proper support and administrative staff.
revenue of the Fund;
f.If the Fund’s reserve exceeds 3% of the GrossDomestic Product of the immediately precedingyear, a recommendation may be issued to theLower House of Congress to:(i) fund theuniversal pension system; (ii) financeinvestment projects in the area of science,technology, innovation and renewable energies;(iii) fund vehicles for specialized investment inoil projects and in infrastructure for nationaldevelopment; (iv) establish scholarships for thedevelopment of human capital of universitiesand college programs; (v) fund projects toimprove connectivity; and, (vi) invest in theregional development of the industry.
g.Review information concerning expectedpayment flows from private agreements andfrom direct awards of PEMEX on explorationand extraction of hydrocarbons;
h.Approve audited financial reports from externalauditors;
The Fund including its technical committee, the Bank of Mexico and their members will be subject to the following:
1.The Bank of Mexico must comply the with specifictransparency requirements to inform the public on theoperations of the Fund including the following:
a.Activities and main financial results;
b.Financial statements demonstrating the statusof the Fund trust and its variations with thecorresponding explanations;
c.Amount of funds transferred to the FederalTreasury as well as to any other public fund asdiscussed above;
d.Fees paid by the Trust to the Bank of Mexico;
e.Fees paid to the trader to be appointed for theTrust as referred to in the HydrocarbonRevenue Law;
2.The members of the technical committee, of the Bank ofMexico, and any invited person participating in ameeting of the technical committee of the Fund trust,will be treated as confidential and withheld: (i) if itsdisclosure would generate an unfavorable situation oran undue benefit for a third party with respect tofinancial investments and operations,(ii) if it is related tothe analysis and evaluation of investments;(iii) if theinformation relates to market projections of economic
indicators that are not of general public domain or knowledge; (iv) with respect to analytical or investigation methodologies used for the decision-making process for investments.
3.The members of the Fund trust and its technicalcommittee will be coordinated with the NationalHydrocarbon Commission with respect to the technicaloperative information necessary for the propercompliance with the purpose of the Fund trust.
4.The members of the technical committee will beresponsible for their functions whenever they casedamages or harm that maybe assessed in monetizedterms.
We will be happy to answer any questions regarding the Oil Fund Law.
ContactsBenjamin Torres Barron firstname.lastname@example.org Jorge Guadarrama Yañez email@example.com Luis Carbajo Martinez firstname.lastname@example.org Carlos Alberto Linares-Garcia email@example.com Hector Reyes Freaner firstname.lastname@example.org Jose M. Larroque email@example.com Federico Ruanova Guinea firstname.lastname@example.org Juan Carlos Valles Zavala email@example.com Eduardo Romero Ramos firstname.lastname@example.org Alejandro Sepulveda email@example.com Gaspar Gutierrez Centeno firstname.lastname@example.org Juan Bernardo Garcia Garza email@example.com
Jorge L. Ruiz firstname.lastname@example.org Fabian Monsalve Agraz email@example.com Reynaldo Vizcarra Mendez firstname.lastname@example.org Edmundo Elias Fernandez email@example.com Manuel Padron Castillo firstname.lastname@example.org
Adriana Ibarra Fernandez email@example.com
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