whether it's a police officer or a claims processor at cleveland's varo, whether it's a nurse at the community-based outpatient clinic, these employees are on the front line of care. they're the ones helping to administrate veteran's homelessness, trying to prevent suicide, they're the one who is create new ways to receivable our veterans more effectively and efficiently. 6.5 million veterans used the health care system, the v.a. in 2013. 85 million patient visits. for that, we should be proud. we shouldn't castigate those who are innocent. we shouldn't condemn v.a. employees for the wrongs of a few.

>> thank you, representative. as the prouder rep zresentativef the 4h 0,000 veteran who is liv in my district, i want to get this right. congress has promised to take care of our veterans. our veterans and their families have earned and deserve to be taken care of. they have sacrificed for our country and now our country must sacrifice for them. we are here today at a pivotal moment. we must act decisively and fix what must be fixed. as i sit here with my colleagues, both republican and democrat, i know that both of

you care deeply about our veterans and i know you all truly want to fix the problems currently plaguing the v.a. i know what happened in phoenix was intolerable. that the v.a. must undergo a complete cultural and systemic transformation. and that individuals should and must be held accountable. but i also see this as an opportunity to make changes. an opportunity we must seize. an opportunity to show the american people that it not only has the will, but the way forward to make the v.a. better to provide the resources our veterans not only need but earned. to live up to our purpose to serve our constituents, serve our country and to serve those who have served us.

our veterans deserve no less. the american people expect no less. and we can do no less. i look forward to working with all of you in good faith and to put away ideology and partisan ship to seize this moment, this opportunity, this purpose for which we are all here. and that is to help our veterans receive quality care in a timely manner. it is not too much to ask. i yield back the balance of my time. >> thank you, senator mccain. >> i thank you, mr. chairman. i thank you for your kind words and the other members, i'm very appreciative of that. and i would like to thank you for the very vigorous discussions and compromise that we reached. i'd like to thank senator burr for his work, senator coburn.

in fact, literally every member of this committee had a role to play in bringing about this legislation. i think other members have described, i think, in moving ter terms, the dimensions of this scandal and this challenge that we face and our obligation to those who have served this nation. so i won't go into the detail that is we all know. including just today, i believe, or yesterday, we find out again that records of dead veterans were altered to make the times look better. frankly, mr. chairman, i don't think that's the last shoe to drop. i'm afraid that there's more. and i think it gives us great

urgency, a greater sense of urgency to act. i'd like to just, for a second, you know, for a minute, say something about the cbo scoring. i think if anybody looks at that scoring, that it is wildly inaccurate. and i think it's important for all members on both sides of the aisle to really understand how that is a totally unrealistic estimation of the cost involved here. and i think we ought to look for way that is we can pay for these expenses. but i would also argue if there's ever such a thing as an emergency, it is this issue. and i don't know of any other obligation that we have to our citizen that is is greater.

so i appreciate the work that dr. coburn did that's available today. it's a report that he's releasing called friendly fire, death, delay and dismay at the v.a. an in-depth study of some of the additional problems that we must follow. we'll be going out of session here at the end of this week. i hope that we can, at a minimum, lay out the parameters of what needs to be resolved. i don't think this issue can wait. and i appreciate the participation of all members who are here today. and i thank my colleagues. >> thank you, senator mccain. >> thank you. thank you, chairman miller and chairman sanders. at this conference committee, we have an opportunity to enact real solutions at the v.a. the things that we can accomplish here will mean the world to the braver veteran that

is have given so much for our freedom. together, we have to fight for them and help ensure that they have the access to the care they have earned and deserved. as a doctor who served at the v.a. in iron mountain for 20 years, as the father of a veteran, i take this issue personally. our veterans deserve much better than what they've been receiving from this v.a. whatever our differences may be, i believe i'm safe in saying that we all believe that the va must emerge from this process much more responsive to the needs of our veterans. i believe we have two chief responsibleties on this committee. first, we have to give the v.a. the tools it needs to succeed and institute real, lasting accountability.

secondly, we have to provide immediate care. we need to put the v.a. on a path to permanent success. this cannot happen without a detailed look to what went wrong. a strong plan for accountability moving forward. we know that many of the front line care providers are some of the best out there. but much more is yet to be uncovered. a key component of the house bill lays out a detailed independent assessment to be carried out by a private sector contractor. this contractor must have the knowledge of the v.a. system. and, most importantly, a best health care dlif ri practice in the private sector. we should be tapping the best health care minds that we have in this country to go step-by-step through the vha

season and write us a blueprint for the lean, smart, 21st century v.a. that serves our veterans. this reform should be a direct facility to the private sector. there is much we need to know. we need to know why past attempts have failed and why outside the traditional v.a. system emerge, we need to ensure the v.a. will properly collect the resources owed to them. not continue to leave money on the table. i'm just not confident that we will get the information we need

and the goals accomplished if we don't look outside of the v.a. to proven leader ins the health care injury. before we get to planning on the future, immediate steps need to be taken. i believe we can do this in a responsible, effective way. our veterans have been through enough. the language is written to wait 14 days before they're eligible to look for private sector care, then we haven't done our job here. if the authority we grant the v.a. looks really similar to the authority that they already have but choose not to use, then we

could be risking being in this situation all over again. the authority has to be clear. veterans can't be allowed to wait anymore. the v.a. has to be forced to streamline this process. i fully support the accountability proviolations for the house bill and appreciate the senate bill lead in that direction, as well. there are more questions to answer. why are they still getting bo s bonuses if they don't comply. >> thank you, mr. chairman. both of our chairman, i thank you for your leadership and look forward to working with you.

>> as everybody has said, it truly is an honor to be here with you all today. they're upset for all the reasons that was stated here today. one member said improve the v.a., don't tear it down. another said deal with the backlog and deal with the culture. thank you for that. deem with best practices. these should be givens. i think we need to be careful. we're not going to be able to increase recruitment unless we're able to put something on the line.

make no mistake about it, ri cross-suitment is important. we have to figure out how to solve this problem. program arch is a program that senator mccain and i support. it's a project that we need to make it real. i want to talk just a little bit about the 40 mile access rule in the bills. i think we talk about the number of parkts seen in the v.a. versus the private sector. many of these folks have issues that the private sector patients do not have. and they need time. i think if we're running them in and out like cattle through a

shoot, we're going to create a big problem and we're not going to help the health care that veterans get. when it comes to mental health, providers -- i think we have one east of the border. and the private sector doesn't have any, either. we all know that mental health issues are the number one injury coming out of iraq and now afghanistan. and the last thing is to continuely analyze the effectiveness not only for the veterans, but for the taxpayer. there is no ifs, ands or butts about that. if that treatment isn't cig n significantly better, we've got a problem.

my colleagues on the house veterans affairs committee have heard about so many issues that plagued the v.a. the latest report from the office with the additional cover ups are reports of retaliation against whistle blowers are damning and only increase the urgency for this committee to act quick ly. we can address these issues now by agreeing to an expansive reform rather than piecemeal legislation that only addresses some of the problems. sweeping reform of the v.a. can started to. last night, i asked if the v.a. was capable of innovation. they said yes.

we must revamp innovation. mandate transparency and hold v.a. employees accountable by adopting comprehensive reform. we can empower the v.a. to transform itself. our veterans must receive timely, world class care now and in the future. so that we never again face another patient crisis again in the v.a. we can do this in two ways by solving the v.a.'s on access and capacity problems. and by expanding access to v.a. care.

second, the va must have the authorization to lease more facilities. clinics must be fully staffed. third, we must extend access to care. it only works if they live too far away or have waited too long.

we must strengthen the partnership in my district. the senate proposal does just that. it is also less expensive by $16 billion. i highlight only a small part of what the senate's v.a. overhaul will do. i urge all of my colleagues on the committee to champion sweeping reform today. the v.a.'s reforms are good for the veterans in my district. thank you, and i yield back. >> thank you, chairman. i hope we come to an agreement so that veterans do not have to wait for their care. i hope all of us know and have talked about the seriousness of the problems within the v.a. system and the systematic problems.

i want to be very clear that i want to see public trust in the v.a. system. i come from a state that's one fifth of the mass of the united states. 80% of the community is not accessible by roads. we have no v.a. hocht. we have if highest capita of veterans per capita in the nation. as mentioned earlier, they like their doctors, access is the problem. veterans who need to get their

care addressed in home villages. they knew that we needed to take care of veterans all throughout alaska, places that did not have a v.a. or private doctors. we did that by working directly with the travel health providers. they would otherwise travel thousands of miles. alaska v.a. has made great progress in the last four years by extending outreach and just n some cases, just less than a week of wait. in our private facilities, if

they're on the list, they get service the same day. we have a health system called nuca which is designed to provide results. i would like to put forth the model of alaska, hero card. if it works in alaska, it can work anywhere in the country. the alaska v.a. worked with the veteran who is choose to now access and go across the street to a brand new clinic and get their primary care with no wait time.

according to the president's 2015 budget, we request more than 4.1 million patients receiving specialized care. the single greatest need in the work force was for mental health, substance abuse and treatment needs for veterans. ensure that they were bimt on time, within their budget and save taxpayer money. i can talk about that issue for a long peer dwrod of time. but, again, mr. chairman or both chairmans, i want to thank you

for this opportunity. when you look at what we've done in alaska, it's not perfect. there are still great needs. in many cases, we have eve created better access no matter where they live. thank you, mr. chairman. thank you, mr. chairman. i never worked for the veteran's administration, but i fully understand the obligations that this nation has to those who have made having served both in the army and the marine core.

i am proud being on the conference committee, and on this kplit tee, as i've mentioned. a culture of corruption that seems to permeate the leadership of the department of veteran's affairs. i want to say something about the american and women who -- so many of the men and women who i believe are so dedicated to our veder rans who work for the department of veteran's affairs. many of them have had the courage to step forward.

we would not be here today. it is the rank and file who are the front lines of the veteran's administration who, again, have been the whistle blowers that have come forward. they want to honor our nation's exit. commitment to the men and women who, again, have sacrificed so much in defense to our answer. i know that we're defining that by distance from the veteran's facility as well as length of wait times. i think that will not only make the health administration better, but it also will obviously improve access and care to our nation's veterans.

i'm reminded by a sign that was in the barracks door that said leave, follow or get out of the way. i would ask the president, at the end of the day, no matter what we do, if there's not adequate leadership that we will not fundamentally change it. it's got to be lead, follow or get out of the way. thank you, mr. chairman. i appreciate having an opportunity to serve with each of you on this conference committee.

i'm finishing my 16th year in congress. and i've seen this story before. our challenge is to fix the real problems, not the symptoms. 11,000 primary care doctors 12,000 pas. that figures out to 287 uniqewu visitors per provider per year. think about that. double it. when i hear about we need more providers and more money, i just go nuts.

what we need is kmaktly what you said. we need leadership. and we know that we need the ability to control those that manage. if you don't fix the real problems, you'll be back here again and the commitment will be wasted. i'm involved that issue and i'd like a copy of that report to be placed as part of the minutes. it paints a dismal picture of the v.a. and it's not just in health care. if you take the time to read it, you will become incensed. we're better in certain areas than anywhere in the world.

we don't know that it's good, but we don't know that it's bad. you have to make the management have the capability to truly hold the people accountable. if we do that, we'll make a big difference and we'll live up to the commitment. >> thank you. >> rarnging member for holding this opening as far as veter ran's conference report. i've been on the v.a. committee for 22 years.

let me just say that the v.a. is one of the best in the united states as far as health care is concerned. i want to start out with that. i sent wleter too my colleague as to how we can improve the system. i want to be clear that i am not going to be a part of dismantling the system. yes, the system has problems. but i've been on this committee long enough to go that for the first time in a number of years we built any v.a. hospitals. in fact, the va hospitals, when they came back, each one had to prove their elements.

now we opened up the system and we've let them come in. so we certainly have to have accountability to the system. but i am not going to be a part of dismantling the system. the veterans are satisfied with the system. yes, there are problems with the system. but it's not just the va. it could be the va, it could be the department of defense. it could be all of the other stake holders. we haven't built a hospital in 15 years. i've been working to get one built in the orlando area. it's a team effort. and i'm hoping that we can work together to improve the system.

we passed a bill that says in those states marijuana is legal, the doctors cannot write prescriptions. explain that to me. if they have pain and the doctors feel it's necessary, then why can't they write the prescriptions? there are a lot of things we need to do. we work with stake holders. the institutions had to verify that they were a student and that therp registered. now,all of them get transportation, tuition paid, day care.

but it's verified with the university. i repeat,ly not be part of dismantling the system. for many mr. years, the v.a. has not received the funding they needed. and don't tell me it's not like the system in the streets. the system in the streets are not working either. the veterans are satisfied with their care once they get into the system. i asked my colleagues, any inputs? nif comment that is you want to make? how can we work together to do better. i believe god has -- much is skppted.

let's make sure when they come back, where he take care of them. that's my position, and i standby it. thank you, mr. chairman. >> senator rubio? >> thank you, for the work you've done on this legislation. i'm grateful to be a part of this commission. the first is i represent the state of florida which is home to almost 2 million veterans. we have facilities all over the

state. seeing these scandals in florida and around the country have disgusted me as it has disgusted many of you. in this conference committee, i hope will be the final step in a process that starts to make some meaningful reforms to collect a sad state of affair ins the nation's v.a. system. i know that the house has passed that. this bill that we've proposed 1 pretty simple. it says that the v.a. secretary should have the authority to

fire or demote equivalent employees based on their performance. if they're dlib ratly trying to conceal how poorly they're doing, then they need to be fired. it's common sense and praktically every other workplace in america. it sends a terrible message to let competent officials to get away with poor fer r performance. i'm hoping that all the issues we deal with won't become a final sticking point.

in closing, let me just say i hope they know the appreciation that we extend. this is long overdue. unfortunately it took this long to finally wake up and act. our veteran haves waited long enough. thank you. >> thank you to each of my colleagues that are here. you came to congress and chose to serve on in committee and serve veterans. that says much about your character and i'm grateful for that. the tragedy is spelling itself out and there are no adjective

that is can describe what the american public has for this. we need to know what's there. we need to know what's out there and how to get it out. coming from an air veteran, and, myself, my entire life in an adult uniform, restoring the faith to the veterans is critical to what we do here. it matters that we get them back on board. they know this. they've seen this movie before. they've seen the yellow magnet

that is are now faded. and they know lots of folks want to stand in front of vet rarens. let's triage and get the care done right now. we can change the culture. we can change the trajectory. i would put out there that we do need to have the details. there are groonular things that need to be addressed. again, 24 years in uniform rngs why is there no overarching strategy of veterans? we wouldn't accept that in the dod and we accept it here. i would argue that it would put,

where it should be, back to our constitutional authority in congress. when i asked yesterday what our strategy was, they said timely care of veterans. that's a goal. i'm encouraged by the folk that is have shown up here. it's obvious this is serious. we have the american public's attention. now is the time. with that, i yield back. >> thank you very much. senator bloomenthal? >> thank you, mr. chairman. i want to thank you and chairman miller as well as ranking members michelle and burr for your leadership.

and to all of my colleagues here today. i hope it bodes well for how we will work together on the challenges that continue to face us. i've been doing a lot of listening to veterans over the last three and a half years, over the 20 years that i've served as attorney general. the veterans coming back from afghanistan who want to wait 18 days or three weeks for a mental health appointment. many of them are coming to me. we face a crisis that gives new meaning to that word.

time is not on our side. this is a growing, unfolding, burgeoning one. we're learning literally day-by-day about its new dimensions. the office of the medical inspector as not impacting patient health and dismiss iing those concerns. the stories about whistle blowers. for me, as shocking about cooking the books and covering it up is retaliation against our whistle blowers. they are the ones that are telling truth to power.

they are the ones who lose faith in the system. i would invite members of this committee not to have reports of fraud, destruction of documents and justice, but also ri retaliation against whistle blowers. i would predict, mr. chairman, that we're going to see this tragedy continue to unfold. they're more likely to be dumped into the v.a.'s electronic waiting list. only one in four v.a. hospitals

have a full-time gynecologist, one does not. so we're lacking not just in terms of delays, but the quality and availability to health care. to me, one of the most outrageous statistics is the unemployment rate among our young veterans, particularly as compared to our contemporaries who did not serve. i think we have a lot of work ahead of us. i'm very, very encouraged at the way this committee has fought and seriously addressing these issues. we face that emergency and

crisis that truly needs to be addressed and i hope we continue to do it in this seriously thoughtful way. >> congressman? >> thank you, chairman sanders, miller, michelle and mr. burr, as well. and thank you all for being here. as a position of practice for 26 years before coming here last year, served 234 the army, continued to serve in the reserve and i was in iraq for a year to serve in a combat support hospital, '05, '06. i have had the honor of taking care of our troops, not only in theater, but state side. like my docs throughout the united states, i trained at a v.a. i've been able to see the inefficiency that is exist within the v.a. system.

we can't ignore it. there are some issues that i think are treated much better within the walls of the v.a. because they're troop-specific and i think they can be handled better by enlarge. in the va, i know we have tremendous care givers. we do. but what we're lacking in the v.a. is efficiency. and we're lacking, seemingly, administrators that have scruples. and that truly care about their patients. we're seeking to take action because we know because we come from private practice and know the dimpbs. and it took about a year to finally get a meeting and then all of this broke. it's a shame it's taken a lack of virtue from administrators and a disregard from our veterans as patients to really

bring this to the forefront. the inefficiency has been there for a long time. in my own practice to the orthopedic surgeons, they go to the va once or twice a month, and they will tell you, i can do two cases all day. in private practice, i'm doing 8 to 10 of similar patients. our administrators have to know what it means to be a provider. when we have a system -- when a patient becomes a liability to the as musystem, that's a probl. the patient has to be an asset that. 's what we have to create within the v.a. the stakes are too high.

they're too high for those that have sacrificed so much for our country. thooz are people who respond in a moment's notice and say i will go. our work here reflect who we are as a people and who we are as a nation. it's a very important task for all of us. let's go to work and make our nation proud. let's go to work and make our veterans proud. let's go to work and make abraham lincoln proud, who tasked us with the responsibility responsible ty to care for him who shall have worn the battle. thank you, and i yield back. >> thank you. >> thank you to our co-chair, senator sanders and representative miller.

millions of vet veterans are counting on us to get this right. first, we have to directly address the administration. two, ensure that all of our veter rans receive access to the care that they deserve. three, begin the longer term work of restoring veterans trust, not only in the v.a., but in congresses' ability to effectively oversee the v.a. and provide the resources needed to care for our veterans. in listening to my fellow colleagues today, i believe we can come to an agreement on this bill. chairman, senators, you got it exactly right when you said that the situation at the v.a. is an emergency. and senator mccain, today, also described the situation as an emergency. a recent audit of the v.a. in hawaii found that veterans are

waiting over 140 days to receive care. the longest in the country. while progress is being made, that number is still over 100 days. nationwide, nearly 60,000 simpl get an important. of course, that is unacceptable to all of us. the senate agrees this is an emergency and this congress has to act to provide the resources necessary to provide care immediately and i'm hopeful that we can all agree on that point. however, while i hope we all agree that this is an emergency and we will provide the resources necessary as a result, i hope that this committee will not ignore the task of addressing the v.a.'s long-term needs. veterans generally approve of the quality of care they receive from the v.a. when they receive it. i hope we will include provisions in the senate-passed legislation that provide for 26 major medical facility leases

and provide for the resources and authority to expedite hiring of v.a. doctors and nurses. in addition while i agree that accountability is needed, we should avoid politicize iing th nonappointed civil service skpros allow due process for v.a. employees, even as appropriate disciplinary actions are taken. our veterans rely on the services of qualified, committed professionals at v.a. and we should be doing more to attract more of these people. particularly who view service to our veterans as a noble career path and not a stopover on the way to something else. i hope this committee will recognize the long-term benefits of atraktsing a high kwaurlt workforce to v.a. and that we can improve accountability in a carefully balanced way. a quality workforce and quality facilities are long-term investments in our veterans. investments we need to make sure that all veterans have access to

high quality v.a. care. investment in the v.a. is an essential step towards building back the trust of our veterans. i recognize that expanding access to nonv.a. providers is needed to address this emergency and with this expansion we must ensure every veteran in our country can easily get the care they need if the v.a. is not available. for hawaii veterans, that should ip collude being able to get care from community health centers, department of defense facilities or native hawaiian health care system. that doesn't mean getting care outside the system is the long-term solution. i do not support an approach that will lead to atrophy of the v.a. i do not support voucher rising v.a. i support congressional leadership and action that addressing the current emergency and ensures our veterans can access the care that they deserve and lays the groundwork, this is important that we stay

the course so the v.a. can effectively address long-term needs. i thank you. i yield the remainder of my time. >> thank you. congresswoman? >> thank you, mr. chairman. it's an honor for me as well to be here to start the process of finalizing legislation to help our veterans. we owe it to the men and women who served our country to get this right. i'm grateful this has not been a partisan issue. all of this is affected by the negligence and deaths. many have constituents directly impacted. there's a wrongful death case in indiana being investigated. we have to get this right and fix it in a timely manner. it's very rare the failures in the department of veterans affairs are deeply engrained. attempts at reform were met with stories from in here, resistance, deception, retaliation. now we're hearing that in addition to altering wait times, the phoenix v.a. medical center has been altering records of veterans who died waiting for

care. while bad actors in some of these medical centers put their own careers above the health of the veterans, the department turned a blind eye and rewarded with financial incentives and bonuses. this self-protection attitude is at the core of the problem, and it's one of the things that has to change. there will never be an incentive to change if people aren't held accountable for their actions. there's no question we must give veterans the care they deserve. the challenge before us today is to do so in a responsible fashion. i agree with what senator coburn was saying, the need for the legislation is great. however, simply providing a financial boost to an agency that has repeatedly demonstrated awful management practices is not going to solve this problem. there's no point to spending an an additional $50 billion a year if we don't do this right. my commitment we make sure bad

actors can be fired, to make sure we do whatever we need to do to pay for this legislation to make reforms. now is our opportunity to take a first step towards meaningful reform. these problems are multilayered and getting to the bottom of them has been like peeling apart an onion, piece by piece. however, i'm confident that the house and senate reform proposals are positive steps in the right direction. i look forward to working with all of you in both chambers from both sides of the aisle as we hammer out a final version of this legislation that addresses timely access to care and hold bad actors accountable. i thank you for holding this hearing on such an important issue. i yield back my time. >> thank you very much. former member of the house, i do note that members of the house speak more briefly than members of the senate. i thank you for that. there's a vote going on in the senate right now so some of us are going to have to leave, but i want to thank all of the members.

i thought this was a constructive discussion. there's a strong desire to address the serious issues facing the v.a. i know this commitment on the part of every member in this room to doing everything we can to protect those who have protected us. i just want to thank you all. i hope we're going to do it as rapidly as we possibly can. thank you. >> i will say this. i appreciate everybody being here today. i tried to get chairman sanders to go on to the vote. told him the house would be more than willing to put the report together and prepare for his signature, but he denied that opportunity. but thank you very much. we have a lot of work to do and not much time to do it. we cannot fail.

the house veterans affairs committee will hold a hearing tomorrow for those who made claims of improper behavior at v.a. medical facilities. the hearing will look at some of the issues raised by those individuals and the v.a.'s initial response. that's live tomorrow at 7:30 p.m. eastern on c-span 2. now you can keep in touch with current events from the nation's capital using any phone, any time. simply call 202-626-8888 to hear congressional coverage, public affairs forums. and every weekday olympic to a recap of the day's events at 5:00 p.m. eastern on washington today. you can also hear audio of the sunday publics affairs programs sundays at noon eastern. c-span radio on audio now. call 202-626-8888. listening distance or phone

charges may apply. with live coverage of the u.s. house on c-span and the senate on c-span 2, here on c-span 3 we show you the most relevant hearingings and public affairs events and on weekends c-span 3 is the home to ameri n "american history tv," with programs that tell our nation's story including six unique series. the sieve war, visiting battlefields, american artifa s artifacts, touring museums to discover what it reveals about america's past, history book shelf, the presidency looking at pollty zis and legacies of commanders in chief, lectures in history with top college professors, and our new series reel america featuring archival government films from the 1930s through the '70s. c-span 3, created by the cable tv industry and funded by your local cable or satellite provider. watch us in hd and follow us on

twitter. coming up tonight on c-span 3, a look at mexico's oil and gas production. after that, federal reserve chair janet yellen speaking about monetary policy and the economy. and later a hearing on the progress of biomedical innovation and research. the mexican ambassador to the u.s. jut lined the decision to allow private sector companies into the emergency market during a discussion today. he was among several speakers talking about mexico's efforts to increase gas and oil production, which in the last 75 years has only been controllinged by a state-run company. this is an hour and a half. >> okay, everybody.

welcome to csis. happy everybody could get here on such a hot day. this is washington. it's this time of the year, but hopefully the air-conditioning will hold out. delighted to have everyone here. and delighted to have an opportunity to explore this topic. talking with the ambassador just a few minutes ago, he said you used to have a mexico program. we did. and that was back when she was with us. she did a terrific job of creating a mexico program. we have not really caught our balance since then. we are making up for it today by taking pieces of mexico. we need to get together to talk about how we do all of mexico. i'm glad we could do this part. we have all been anxious to hear

how mexico is going to deal with the reform agenda. it is coming. we applaud our timing to let us talk about the details, but we know it's going to be coming. it's an exciting thing for us. as part of this, we want our neighbor to do well. we think energy is a big part of doing well. we're going to listen and talk more about it today about what it could mean for all of us. i'd like to thank all of you for joining us today. welcome the ambassador who is really going to kick this off for you. thank you. [ applause ] >> thank you very much. delighted to be here. it's really important to have csis to restart program. and we were just coming through lunch that we take each other for granted and we shouldn't.

actually mexico is the second largest customer of the u.s. just after canada. you are our number one customers. and there's no accident in this and i'm excited to be here and listen to the experts and understand their points of view on mexico's development on the energy front and where energy in north america is headed. just last month i was invited to a conference in new york organized by goldman sachs on the north america energy summit. and there we had the opportunity to listen to different perspectives on the considerable

economic impact of these revolution. there's a growing consensus that great potential and become an energy self-sufficient region in the next 20 years. but there are very important challenges that we need to address to turn this potential into a reality including infrastructure, regulatory issues and the skilled workers in the industry. we have to start thinking as a region about how we are going to address these challenges together in order to facilitate this transformation, which is within our grasp. as a matter of fact, it is already here because our energy sector is very much integrated already in north america. and one of the beauties of these successful integration in terms

of how we trade with each other and what we produce together is that it's not coming from a political statement, which would have been sort of difficult to manage. but for market realities and it just makes sense and it happens. it gives the basis for companies and business people to actually go after the opportunities and make decisions and make things happen. one of the main conclusions in this conference summit in new york was the importance of having a regulatory framework that is up to date. and at the same time, can be effective in the decades to come. mexico, with a long overdue package of reforms, has dramatically updated its framework with a series of far-reaching and transform mative reforms which will conclude legislative -- well,

congressional terms with the approval of the secondary legislation in energy some time this summer. there is no doubt in our minds that reforms will be approved and, of course, there are many challenges in how these are actually structured in the fine print. these are structural reforms in education, telecommunications, financial services, competition policy, fiscal policy and the energy sector that will transform our economy in the years ahead, provided that implementation is successful. the energy reform in mexico is suddenly important, but even before it takes place, the seng tor remains a central component of u.s./mexico trade. let me give you a couple examples. in 2013 the united states was an estimation of 72% of crude oil

exports from mexico, which arrive via tanker. the value of crude oil export from mexico to the u.s. is more than two times the value of all our exports, which were roughly $18 million. 44% of u.s. exports of gasoline in 2013, 600,000 barrels a day of oil products. mexico is the third largest oil supplier to the u.s. after canada and saudi arabia. we have benefitted from the lower natural gas prices in the u.s. and pipeline exports rose by 6%, a record level. most likely natural gas demand will continue to grow, mainly in industry and power generation. but there's great potential to use it as a transportation fuel. natural gas exports from the u.s. to mexico through pipelines

will continue to increase in the years to come. we are expanding the national gas pipeline network with two main projects now under construction, which will bring natural gas from the u.s. to mexican territory. three more projects are scheduled to be in operation by 2015-2016. geography has placed the north american region with significant energy rezerserves. according to the latest bp energy outlook, north america will be the only region of the world that moves from being a net energy importer to a net exporter. so while china and europe become more dependent on energy imports, north america is becoming self-sufficient. by 2035, north america will be an oil exporter, accounting for 6% of global energy exports. by 2017 the region will become a net exporter of natural gas.

north america has a necessary energy resources to fuel its economic growth for a long time. and reliable and affordable energy will be a key component in ensuring a very competitive north american manufacturing base. at the end, this is the most important component of competitiveness looking towards the future. through energy reform, mexico will redefine its role in the energy sector while the u.s. is adjusting to a new reality as a potential exporter of oil and gas. increasing its energy efficiency, increasing its consumption and developing technology that has opened new frontiers of energy resources. this is an exciting time to discuss the future of mexico and the region. with our reinvigorated economic engagement with the united states, for the most, the bilateral relationship in terms

of trade and investment and shared production and integrated value for the last 20 years has been driven in automatic pilot. now we are now for the first time in many years addressing these from a public policy perspective and these can be transformational. initiatives launched at the north american leaders summit last february, engagement with latin america through the pacific alliance and with asia via the tpp, mexico is already significant in the world economy. energy reform is a critical part of boosting procesperity and alg with the reforms currently underway in mexico and the changes i just mentioned will be the basis for mexico to achieve more rapid and sustainable economic growth over the next few years and coming decades. i am looking forward to hearing your thoughts so i will just conclude by adding that i'm very

optimistic about our region opening a new chapter of our shared vision for this future. mexico has to address the energy reform in a very smart, intelligent way. thank you very much. [ applause ]

>> well, let me add my welcome to john hamrefor coming out and such a good crowd to welcome our visitors today. we're going to talk about the mexican oil and gas reform and we're very pleased that the energy and national security program to co-sponsor this event with america's program and headed by karl meech um. so for those who haven't met, i'm guy caruso, senior adviser to the energy national security program. and the mexican oil and gas reform has been something that i think has been in the works for a number of years and we're going to hear from three of the, i think, most knowledgeable i can think of to talk about that

in the order in which we're going to go, we'll start with jesus reyes, former secretary of energy, former director general of pemex, and now in the private sector. he's going to start and talk a bit about some of the basic elements of the oil and gas reform and he's been right there on the ground as this has developed. we'll start with him and follow by pedro haas. pedro has had extensive experience, first of all, with pemex as a member of the team that was part of the gas marketing, as i recall, back in the day. and then with the private sector and then he had a number of

years in a senior position with mackenzie and company. so he's very deep insights into how the private sector may respond to these reforms, and i think looking he'll talk about some of the reforms and how the private sector might react and what the implications might be. and finally ed morse, who is a senior -- head of commodity research at citi bank. and ed has been one of the most -- i think i would call it most optimistic analyst, most optimistic among those who looked at the north american energy scene and put it into the global context. i think ed may have been the

first person who actually projected that north america would be a net oil and gas exporter. and this was several years ago. so i'm sure we're going to hear even more about how these new mexican oil and gas reforms feed into that kind of analysis and his latest outlook for north america and its integration into global oil and gas markets. we talked a little bit earlier about, you know, how the unconventional oil and gas successes we have had in both u.s. and canada. certainly our part of this story and then now we're going to hear how the mexican oil and gas reform may fit into that north american picture and certainly

we will -- we're going to hear about it from some of the most knowledgeable people i can think of. we're going to start with jesus and then we'll follow right without delay to pedro and then ed. and then we'll have plenty of time for questions and answers from the audience. >> thank you very much. i would try to sort of lay the ground for the discussion that we will have later on. for some of you, some of the things i may present may be your knowledge, but it's basic for all of hem to know the essence of the reform and proceeded into the exchange of points of view. let me see if -- it's this one?

all right, first in terms of this causing energy issues in north america, really it was very difficult and many friends and i did discuss about this or tried to discuss about this for years. it was really basically an empty discussion. it was diplomatic discussion. there was an impossibility to further interaction in energy because interactions do exist and are very significant. any kind of policy for the future because mexico couldn't. it had no space to discuss in a

more market oriented and more from a business perspective the future of energy relationships in north america. however, the constitutional amendments passed by the president only last december are really a game changer in regard to that. now private investment would be allowed in mexico and it would be possible in the change and further in the electricity sector. and this opening of mexico after a long discussion since 1938, it happens when there is a revolution going on in the u.s. also in terms of energy with all the shale hydrocarbons and also when canada is sort of collecting some of the benefits

of the consistent and steady energy policy over the past decade, i would say. so there's a major change now in the north american scenario. now the mexican energy reform has a logic for itself, for the energy sector, but it is more than that. mexico's energy reform is essential for economic policy. mexico has been growing very slowly over the past 10, 15 years, and it's really a paradox or paradigm because you have a country where inflation is low. you have financial stability for so many years, but the country is not growing and this government knows very well that one of the critical factors is to increase investment in mexico

both public and private and both domestic and foreign. and for that to happen, obviously, the energy sector is critical. it is the energy sector who has the capacity to attract a lot of investment. and also for a higher growth to happen in mexico you need a more efficient energy sector because the rest of the economy. so both because it is essential to increase total investment and both because it has efficiency implications, the energy reform is essential for mexico and for the president's administration. now, what is the essence of the reform? it is a very deep and far-reaching reform. it basically it sounds simple,

but it's a complete change historically speaking. sometimes thought probably we could get some reform, but nobody really dream about this. this is really getting as far as possible. it's opening up to the extreme -- the sector. you will have private parties then concurring with the public sector. pemex will not disappear. that is not the purpose. the purpose is basically saying we want to maximize their resources allocated to the hydrocarbon sector. up to now that had been limited because mexico's framework, constitutional framework basically said only one agent will be responsible of exploiting the hydrocarbons in mexico and that agent is pemex.

it was obvious -- even the constitution went further because it was pemex who had the privilege, but you have to do it all by interests and it can do it in a very flexible way. completely flexible way that is really the -- one of the issues that the reform encompasses.

then these change is so radical that it will obviously shake up the pemex and it will transform it and make it really move much faster because now change is a matter of life or death with pemex. in the past it was impossible because the company was so big. the incentives for the cane and the people in the company to move in a different direction were limited. now in my view, there's a caveat in the reform and something i still don't understand why the government did not include that. and that is they kept pemexwithin the budget. some of us had really pushed forward saying one relatively

easy and far-reaching change is to take pemex out. the problem is not the government tape, but all the red tape and. presence of governmental agencies that intervene in day to day decisions within the company. and the government did not do that. i worked in the treasury for eight years some time back, and i know that the people in the mexican treasury are control freaks and they really have an against underscore that they are still the same way they have been for the past since they were born. the reform in my way, the critical issue is there's too much intervention in many of the decisions that should be have left to pemex by itself. the other thing is the reform also reaches the electricity

sector. it allows the participation in generation for third parts. the private sector is already the electricity sector. you have a lot of other activities done, but now you will basically the change allows private parties to get in contact as providers, suppliers of electricity, with the consumers, big consumers, what they call the qualified consumers, which is basically a matter of size. and they would also allow for other companies for the cfe which is a national utility to outsource several of the things that were limited. they had to do it by themselves. they will be able to do private sector will be able to finance, maintain, manage, operate and expanse transmission by means of

contrast with the utility. it sounds like a minor change, but it's a major change because you'll see a significant increase in the efficiency due to the possibility of relying on private parties. these basically gives you a notion of the speed, the base at which the reform will move forward. and i will not go over time here. the constitutional reform was enacted in december last year. pemex, the first was for pemex to request in what areas where pemex is already working or has intention to do so. they would like to stay. pemex did so last march. then the government sent 21 initiatives to congress to change 21 different laws.

to change or even some new laws. you have then in september the areas will be defined, which areas pemex will keep will be the state of the mexican state, and that will be september 17th. it's mandated in the constitution. and then you will have all the things moving like the creation of mexico's energy reform, but the important thing is that the constitution mandates that the national energy regulatory commission has to define the rules of regulations that will apply to the transportation and warehousing of fuels. those will have to be there for january of next year. so this is an area of a huge

need of investments. there are many bottlenecks because pemex was not allowed to invest in the past in expanding its network of fuel pipelines and facilities, so it's really, i would say, almost an emergency that has to be dealt with very quickly and a lot of investment opportunity will emerge for the private sector as part of that. there are other things -- other important changes will come along over the next few years. and you can even see december of 2025, and that is because it is for then that the domestic content of the energy projects will have to reach 25%, which is pemex was -- long-term relationships with a lot of

suppliers because the way the procurement of mexican public sector entities did not allow for pemex to establish a lot of long-term relationships with its suppliers and companies. now there is this 35% which will be defined -- will be enacted for 2025. it will be enacted gradually. so you have 12 reforms and 9 new laws. now in the very, very short-term, the first priority and that is to basically address mexico's gas deficit that increased very speedily since '08. since 2003 there are many u.s. -- there are many bottlenecks in the capacity for

mexico to import from the u.s. now that the u.s. is gradually becoming a net exporter. bef been importing gas from the u.s. for a long time. but this is the most urgent thing. it's going on because the gas sector was open in 1992 and the first investments were done in 1996, '97. so these are the pipelines that are being now under construction and this is where a lot of activities already going on. you can see on the eastern part of mexico, very important one, it's a big pipeline. it goes to the center. it's 850 kill meters and $3.2

billion project under construction. it's very important. and also in the center and in the west, the national utility is building all these pipelines that you can see there in the map. and there are six more coming up, will be announced over the next two weeks, let's say, in the next weeks, which will really create a network of gas pipelines in mexico because now it's not really a network. what it is is a couple of branches that come from the north, importing gas from the skp u.s. and to the center and to the north where the economic activity and industry is that mexico produces mostly in the southeastern part of the country. now this is a simple as

possible. the investment opportunities have emerge d in mexico with th reform. and you can see the complexity of the projects and the complexity is associated with the time it will take for these projects to be -- to materialize, that you can see that things are happening. and you have the amount of investment of the different projects. so you can see, for example, when we were talking about gas pipelines, it's already there. it's happening. it's not a matter of the future. they are expensive. pipelines are not unexpensive project, so you require that, but in mexico, there's no production of that. it will be possible for private par parties to produce that. the day after the legislation

is -- the secondary legislation is passed and it is expected to happen within the next -- within this month. so the day after that, immediately production will emerge. so i will give you the list in a minute, but you can see in the northeastern quadrant of the graph, you can see obviously 17 is up because it will take more time to see the things happening in terms of the resources. but things -- the purpose of this grass is really seeing what has been triggered with the constitutional reform is a process. it's a process that will show up nirs in some activities and in some other difts depending on their complexity and of the legal reforms themselves.

you can see 16 heavy oil exploration and production in shallow waters. it's further -- it's less expensive and it will be sooner. we didn't put the year in each of those, but you could basically think that each of those panels respond to about a year. it's not exact. but you can see let's say one, two, three, the fourth in the southwest panel. what do they mean? it's here. this is the codes of this. so you can see gas pipelines and you'll see fuel stations until 2017. people think it's too far away.

a lot of of congressman want to shorten that period. they already have -- it's quite clear they have reached an agreement on that and will do it earlier than what was the original proposal of the government. oil pipelines starting in january of 2015 of next year and so you can see step by step when that will occur. it's probably easier to see here. you can see how the reform will evolve and you see january 2015 as a critical date because fuels will be opened up. oil pipelines for logistic terminals and then gas production in 2015 also next year in a new regime next year and so you move along over time

and you can see in january 2018, domestic marketing of hydrocarbons. nobody understands very well why the government proposed it to be so far away towards the end of its administration. it ends up in 2018. so this is being amended by the congress to make sooner rather than later. and then if you move to the left, you can see shale gas production, and heavy oil in shallow waters in 2017. it would be feasible as long as the government doesn't leave that for pemex. and this is what ground zero looks like. what is what pemex requested from the government to keep in terms of exploration of production.

you can see it in the top in term os of the research. what pemex has in blue and what the state will be able to in third parties. 29%, 17% and so on. it's more important in terms of the lower -- the total of those is both. in terms of prospective resources, pemex requested 31%. we don't know if they are going to be granted that or less than that. you want this, but you are not going to keep it. and in prospective resources you have 69% for the state that will be able to actually be contracted with private parties.

and in terms of the type of -- let me go to the type of field, you can see the research and the prospective resources that each of those are. the most important one are obviously in shallow waters. deep waters is not bad. that's what is known. and you can see that in terms of on shore, you basically the prospective resources that will be available for the state to grant to private companies is our equivalent to 82% of the noun research. so i'll stop here and then let's see how the conversation evolves. thank you for your attention. >> pedro, thank you very much. i neglected to mention in my

introduction that about a year ago you left mackenzie to join hetco and you're advisory services in new york. >> thank you very much. i'm going to start out by doing something shocking for somebody who spent 14 years at mackenzie and that is that i'm not going to speak off slides. i'm not going to present any slides. so i apologize to my mackenzie educators who spent a lot of time teaching me how to draw slides. i'm not going to use it. i think jesus gave us a very complete, comprehensive overview. i'd like to -- of the mexican energy reform. i'd like to talk very quickly about a few points, and then please stop me if i'm spending too much time.

one is that the energy reform has been , to a large extent, yu know, public attention in mexico and even political attention has been focused on the e and p part of the mexican energy reform. it's entirely natural because it's the most politically contentious part of the reform. it's the part that really required more than any other review of the constitution and that has still to this day gets the juices flowing when you have discussions, political discussions and discussions between analysts. however, the energy reform is quite comprehensive. it spans the entire energy sector.

and there is a very interesting symmetry between the attention that has been spent on exploration and production. i don't want to you to understand by this that the side of this is not difficult, but the rest of the reform is enormously difficult. it has a very large scope. so when you think about domestic fuels, residential fuels like lpg or consumer fuels like gasoline and diesel, you think about the midstream and infrastructu infrastructure. you think about residential power sales and distribution networ networks. all of those things are going to require a very significant overhaul and the creation of

that entire regulatory, legal regulatory and con strak chul fra framework is difficult to fathom. again, i'm not belittling the importance of that side, but just from an execution complexity, the nonenp side is pretty vague. the other issue i'd like to focus on, i think the ambassador mention mentioned it and i think we all agree with him, that the reform is going to happen. yes, it's been slipping by months or weeks and we were told that it was going to be ready at the end of last year and then it slipped into this year and then we were told it was going to be done in june and july and now it's end of july, perhaps the first few days of august. but it's going to happen. i don't think anybody has any doubts about that.

the question is the amount of work that remains to be done in terms o of once the legislation is passed. after that we have to get the regulatory framework in place and we have to get contracts in place. and more importantly than just getting these things done, there's got to be a continuum between the constitutional reform, the secondary legislation, the regulation and the contracts, all of that has to hang together in a way that, you know, kind of makes sense. the fundamental dilemma that i think the government and the regulators are going to find themselves trying to solve once the secondary legislation is passed because i think we're at the point where whatever is

going to be -- if you leave the secondary legislation excessively open and you rely to a large extent on the regulation, which the government can pass without having to go to congress, you are putting a lot of weight on the authority of individual civil servants to take responsibility for decisions. it's going to be hard for them to kind of say, i'm just, you know, executing what the legislation has said. on the other hand, if you create a legislative structure that is excessively detailed, then you know you're not going to get it right because nobody ever does. you're going to have to make revisions. so you don't want to have to go

to congress for that. so there's a practicality and a practicality issue that where you have different -- you have tensions between different kinds of desirable outcomes and it's a difficult balance to find. so this is going to take -- i'm not saying it's not going to be sorted out, but i think it's going to take weeks and months to get this just right. and i know for a fact that even though we have heard that all of those texts are ready, in fact, they are not. thank god they are not because i think they deserve a lot of attention. the other point i want to make is about operating challenges. pemex, and i'm going to focus on

pemex because i spent 14 years so it's what i know so i apologize for not talking about much or not at all about the cfe, but pemex is a self-contained animal, and it's had operating legal regulatory discretionalty. and so it can operate, you know, the assets and it can make decisions to make whatever needs to happen, happen. let me give you an example. if you are producing offshore and you have several assets producing different kinds of crude offshore and you have a pipeline system that is gathering that production and transporting it to shore, whether you shut one pipeline down or open up the valves on one particular field more to compensate for the other that

has to go into scheduled maintenance, all of that can happen instantly and pemex makes it happen to make the production reach 2.5 million barrels a day, which is what it's doing today. the problem is if you take those pipelines and you turn them into open access common carrier pipelines, now you have different producers, you know, that are connecting themselves to those pipelines possibly and then pemex cannot just decide overnight that i have to shut this pipeline down because i need to do unscheduled maintenance on that. all of a sudden that has production consequences on other players. take that example and multiply it across the entire pemex system. they are going to have to transition from a monopoly situation to a situation that is

rule drichb driven. it's not only because it will be competing, but because the authorities, particularly the cna, the two regulatory bodies, are going to create a series of rules. you're not going to be able to have a system where these two regulatory bodies are credible in front of private sector investors when they are able to enforce the rules in front of, you know, enforce the rules for private sector investors and not for pemex. so this is going to create a lot of issues. let me just show an example of this. right now we have an issue, and i have some numbers that i can share as an example. pemex has a plan this year, it's the operating plan, to produce 2.5 million barrels a day. along this production, and i'm

not -- these are public figures, i'm not talking about secret figures of any kind. if you compare production with distribution and distribution means refining plus export, you have differences of anywhere between 100 and 150,000 barrels a day. and that is water. and it's water that comes from the water in several areas of production. in the month of may, that number has reached about 260,000 bathrooms a day. there is a -- it's a net number of about 150,000. and the difference is any significant amount of production that has not been able to be

processed either through separation or tankage and has had to be injected into the salt domes and so that crude is going to be -- the water is going to be eventually -- the water cut is increasing, so i have no idea whether this is a trend that's going to rise or whether it's going to stabilize, but 150,000 barrels a day of water declared as crude is a lot. and apparently pemex is paying taxes on the 150,000 barrels a day of water because it wants to do this in order to consider it crude oil production because it wants to be able to report that it reaches the 2.5 million barrels a day. now this is a number that cannot continue like this. at some point, the government is going to have to recognize that

this is water and not crude and it's going to have to climb down from that number, which is, as i said already, there in the statistics if you care to dig a little bit. so, you know, this in the futur talking about farmout, for example, with psas, if they go ahead with some of these farmouts and some of the lacelines prove not to be correct then the private sector

investor is going to litigate because, obviously, the original data are not correct. so anyway, there's a big issue. all i want to say in this respect is that shifting from a state monopoly to a market solution is a very complex endeavor and the man syria transition in addition to the regulatory transition, the managerial transition is very difficult. and remember some of these issues as was mentioned, the like the budget issue have not been changed and particularly importantly the -- the labor relation ship between pamex and its union has not been changed so i fail to visualize how this transition to a more efficient market driven company is going

to happen i was also asked to mention how the energy reform was visualized by the private sector. let me talk about one thing first which is how it's visualized by the mexican public opinion one key issue is that i think in general the public is not very keen on the energy reform and it's not that it doesn't see the need to modernize pemex, i think the pub slick not stupid and it recognizes that these companies need to improve i think the key problem is that there is a fear of corruption and there is a fear of ineptitude in the

management of this transition and there's a sense that whatever improvement is going to happen is not going to mean anything for me as a citizen. those are the big issues that the government has. this is really important because in my mind the test of the success of the reform is not whether it brings go zillions of dollars flowing into mexico. in fact i disagree with the government vision that this is the thing that is going to bring -- that is going to put the economy into a higher gear but i think the key issue is the durability of the reform and the durability means two things -- first of all, credibility with private sector investors over the long run and secondly

legitimacy in the eyes of the mexican people. and achieving that balance over a long period of time that is what is really complicated. and that's what's, you know, tough to achieve now, the second part of the impact is with private sector investors and there i think you're going to see a wide variety of attitudes. i think deep water offshore companies are pretty comfortable in the sense that they don't have to deal with any of the insecurities on shore. they can -- they understand more or less the geology that goes -- because it's not too distant. particularly at some parts around perdido, et cetera, it's not too december answer the from what they're already looking at on the other side of the border. and so i think the problem there is the actual drafting, the

detail of the legislation and the potential, the long-term potential that these companies can see there. and i think there you're going to have i would guess that unless the regulators -- the regulation and the contractual arrangements are suicidal, i think you're going to see a lot of interest. i think in unconventionals it's going to be very -- it's going to be complicated and depend very much on a company-to-company basis. to me the biggest danger there is that the regulatory -- it's aggression's law kind of problem. it's a situation where the good operators stay away and the not-so-good operators essentially manage the regulatory complexity, the security complexity, the water

issues, et cetera. one of the big problems that we had in previous deregulation like the gas deregulation is the mexican government never really managed to coordinate the federal, the state, and the local level so i can see a situation where you have your federal permit, you've earned your acreage, you show up with a drill rig and the state authorities or the local authorities prevent you from going. and that's a big issue that is going to have to be addressed at some point. there are some mechanisms to do it but i think it's got to be addressed in greater detail. i think the private sector -- there's a little bit of -- and i'll finish on this point. there's a bit of a disconnect. i think there's a disappointment on the part of some people in

the mexican government because they feel that they would have expected a bit more enthusiasm from the private sector and the private sector is now in a wait-and-see attitude. the problem is that if you're the head of business development or exploration for one of these companies, whether small, medium, or large, you have to propose to your investment committee or your executive committee or your board a project that is quantified and that is risk adjusted to the umpteenth level of detail and that level of detail today is not known. so there are people who think that it's going to get done quickly. there's some people who think it's going to take much longer, maybe two or three years to get there. there are some people who are going to be first off the starting line and there are some people who are going to wait to see how it evolves.

so i think it's, you know, the timing is more or less the one that jesus described, but i think the actual implementation and details and translation into investment opportunities and decisions is going to be -- is still to be defined. >> thank you, pedro. [ applause ] >> thank you very much. it's an honor and privilege to be here again with you and thanks for the invitation. i was asked to address the implications for global markets, what might be unfolding in mexico and what's unfolding north of mexico and other parts of north america. and let me first note that so far the unconventional

revolution in the u.s. and canada has not been kind to mexico. it's not as though the u.s. is intentionally or not following a good neighbor policy. it's been a pretty bad neighbor policy in terms of making the gulf of mexico market in the united states extremely competitive and less rewarding financially for pemex and the mexican government where if they were there were a big open global system it could process mexican crude undoubtedly the net back to mexico would be higher if not substantially higher than is currently received on the u.s. government/mexico coast. i will talk about this as i go through the story there. the other thing i might note in terms of timing, and it's the only subject that i plan to raise outside of the implications for the global markets is that timing is pretty exquisite in terms of the potential opening of mexico to

foreign invest ment if you are big international company or more modest sized international company and you're looking far place to invest where there are opportunities for a large-scale reward. they are canada, the united states, the others are russia, iraq, and iran and that doesn't leave much room. so i think given the light of geopolitics recently that companies will find mexico with all of the difficulties of defining on a risk adjustment basis. the opportunities will be moving toward the acceptance of risk for potential reward just in terms of where else one can go. mexican supply is the third leg of a north american energy revolution. i think we can debate and we have to make assumptions on that debate about where mexican output can go, what's used --