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Mexico City: Lessons learned – and action taken – helps the world’s largest city get back to business after earthquakes

02 October 2017

In this hoganlovells.com interview, Mexico City Managing Partner Juan Francisco Torres-Landa – “Paco” to everyone – talks about how his city is recovering from the earthquakes earlier this month, and how it was spared the worst because it learned from previous natural disasters. He also discusses the major themes in the Mexican legal industry, and how a tumultuous year in American politics has impacted business life south of the border.

Can you tell us a little more about the current situation in Mexico City with regards to the recent earthquakes?

Paco: The city has been slowly recovering and the most important aspect has been the search for survivors. That process is now basically over, and we now need to look at how we recover or rebuild infrastructure that was lost – not just buildings but roads, homes and utilities. That is a much more long-term process that will take a lot of money as well as significant time.

This earthquake struck Mexico City 32 years to the day since the last major earthquake. And yet, terrible thought the death toll is, it is a fraction of what it was last time. Why is that? Were there changes to city regulations that made Mexico City safer and better prepared?

Paco: As a direct result of the 1985 earthquake the construction codes of Mexico City were significantly modified. Those changes made our building codes among the strictest that I know of, anywhere in the world. I don’t disregard that those codes may be tweaked again following this most recent earthquake.

The death toll in 1985 was upwards of 10,000 – and in fact some people claim it was significantly higher because there were so many deaths that an accurate headcount was very difficult. This time, although it is a terrible tragedy for our city and neighboring states, the death toll looks like it will be under 500. Much of that is down due to the improvements in our building codes. 

Upon revising building regulations post-1985 we looked for best practices. We took some standards from Europe but particularly from Japan, and Tokyo specifically. Our government looked for a combination of regulations that improved resilience against earthquakes but that did not stifle development. Regardless of regulations, one cannot ignore how advances in technology help improve cities’ ability to gather data and use it effectively prior to, during and after the events.

You have spoken in the past about Mexico City’s "culture of preparedness." Is that part of daily life and also a part of business life?

Paco: I think that people recognize that we live in an area where earthquakes are not uncommon, and in fact we had a drill on the morning of September 19, just two hours before the latest quake struck. The fact that these things can happen makes us better prepared but also more resilient as a society. When you know that something could happen at any time it makes you more determined and better able to overcome them. 

The evidence was on display this month. If you compare 1985 to 2017, I would say that 85 percent of the people who immediately went out into the streets and into the rescue effort were people who were not even born in 1985. So they were there and were prepared by design not by experience. There has been knowledge passed on and effective training. People helped others without knowing them, without taking into account anything like gender or beliefs. It speaks well of our people and their ability to act quickly. It makes me wonder how much we could achieve if that were part of daily lives everywhere, rather than only a reaction to an emergency.

Taking a look at the broader Mexican legal profession, what are the current themes? What are the busiest sectors?

Paco: The energy sector has been booming for a while. The energy reforms that began in 2013 [the Reforma Energética, which effectively ended state-monopolies on oil production and electricity generation] have had an even more positive impact than most of us dared to hope. Upstream, midstream, downstream, all is very busy. We were fortunate to have invested in the energy sector before the reforms, even though people said that we would be lucky for it to happen in our lifetimes. 

We have also been very busy in antitrust and litigation. We have one of Mexico's most significant teams in this practice area, which has been widely recognized by specialized publications, but more importantly by clients. Perhaps most pertinently right now, in light of recent events, our infrastructure and real estate teams, in Mexico City and in Monterrey, are also very highly regarded and busy.

One of the keys to our success has been the interaction between practice areas and industrial sectors. For example, automotive has been a strong sector for us. Our clients rely on us to do that industry work, so we have to understand the industry itself. Because we do, we are able to provide a genuine full-service to our clients. So many of our practices – corporate, M&A, employment, for example – go hand in hand. That’s the beauty of our approach.

Has there been a noticeable change in Mexican business since the U.S. presidential election of 2016? What does a more nationalistic US mean for Mexico?

Paco: It would be easy to assume that relations are worse now than they were, but that is not the case. Perhaps my answer would have been very different if we had been talking in January or February this year. The reality is that checks and balances in the U.S. system have – so far – done their job and many of the worst campaign threats have not materialized. Were it not for those controls there could have been a much more profound impact on our ability to do business as countries and a region that have learned to benefit from their geographical proximity. 

You just have to look at the exchange rate for confirmation that – at least for now – the market views such threats as unlikely to result in real damage to our economy. The peso has more than recovered from the post-election sell-off, and the currency is even stronger now. A lot is said, but little is done, so we keep on making progress.

The idea that the decisions of one person can have such huge impact – like ending NAFTA – have been proven wrong. Most of these decisions require congressional approval, and as we have seen that is not so easy to get. Judging from what we see, we do not believe that Congress will make such radical changes. Most clients that I speak to – employers and businesses – are not complacent but are carrying on as normal and will continue to seek growth in their business plans. 

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