Mexico is one of the most connected commercial players globally, a gateway to a potential market of more than one billion consumers
sixth-largest producer of black gold, filling 2.5 million barrels a day, but until now its extensive oil and gas reserves have been tapped exclusively by Pemex, a monopolistic state-operated company.
New legislation passed in December 2013 will see the industry privatized for the first time since 1938, resulting in projected revenues of $10 billion a year in the form of royalties and taxes from outside investors, increased yield and cheaper energy prices.
Mexico’s undersecretary of hydrocarbons, Maria de Lourdes Melgar Palacios, was reported as saying:“We expect these reforms to result in an increase of 1 percent to GDP by 2018 and an added 2.5 percent of GDP by 2025.”Experts have forecast the associated value of direct and indirect investments to amount to $1 trillion.
David Franco, principal analyst for Maplecroft, a risk analytics, research and strategic forecasting company, says: “With the help of private investment, oil production will, as in 2005, reach 3.5 millions of barrels a day in 2018.”
The first contracts are expected to be awarded next year, with firms from China, Singapore, Europe and the Americas already showing an interest. “Energy reform is crucial to the future of Mexico,”O’Neill says. “The Ku-MaloobZaap oil field on its own produces almost 10 percent of what Saudia Arabia can muster.”But he noted that the reforms were “deeply controversial.”
“Resources like oil have often been seen as national treasures, not to be exploited by foreigners or subjected to the open market,”O’Neill observes.“But the flip side of national control is that you end up with a nationalized energy giant like Pemex, unable to benefit from making commercial decisions, infantilized by the state’s parental control.”
He predicts that without energy reform, Mexico’s economy will only grow by 1.7 percent; but with it, it could increase by 5.5 percent. (To date, unfortunately, growth has not been as good as hoped – last year it was just 1.1 percent, and this year, estimates have been disappointingly downgraded from 3.9 per cent to 3 percent.)
The Center of Everything
According to Pro Mexico Trade and Investment (promexico.gob.mx), Mexico is one of the most connected commercial players globally, a gateway to a potential market of more than one billion consumers and 60 percent of the world’s GDP.
Its location means it can easily move exports to both North and South America, giving it another advantage over China. It has 11 free trade agreements with more than 40 countries, including NAFTA, the North American Free Trade Agreement.
The EU is Mexico’s second-largest export market after the US, trading mainly in machinery, electrical goods, transport equipment and mineral products, and a free trade agreement between the two came into play in 2000.“We have had five trade missions in the past four months with about 130 companies,”says John Pearson, head of UK Trade and Investment in Mexico.
Last summer, meanwhile, Mexico shook hands with China, creating what’s become known as the“Tequila Agreement”because of the large volumes of the national drink (and pork as the world’s largest consumer) the Asian nation wants to import.
As Mexico continues to open up, so transport and infrastructure need to cater to demand. Last year, Mexico City’s Benito Juarez International airport experienced