Mex­ico is one of the most con­nected com­mer­cial play­ers glob­ally, a gate­way to a po­ten­tial mar­ket of more than one bil­lion con­sumers

Business Traveler (USA) - - NORTH AMERICAN TRAVEL -

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

Left: Mounted po­lice in Mex­ico City

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