Mexico

For much of the past two decades, Brazil and Mexico seemed at times to be on a collision course. Diplomats from Latin America’s two largest nations were often preoccupied, if not obsessed, with a competition for an elusive role as regional leaders and players in the post-Cold War shifting global scene. The 2013 battle for the post of director general at the World Trade Organization, won by Brazilian diplomat Roberto Azevêdo over Mexican Herminio Blanco, a former trade minister, left plenty of hurt feelings. Ironically, the dispute for influence also led to convergence. The 2011 creation of the Community of Latin American and Caribbean Nations (CELAC), proposed by Mexico to affirm its Latin American identity and counter a perceived Brazilian effort to separate it from the region, was warmly embraced in Brasília as a way project leadership by promoting formats that excluded the US. Read more

On June 7, Mexican voters will go to the ballot box in mid-term elections that will be viewed as a test of the Enrique Pena Nieto presidency and of the ruling PRI party. Despite the many challenges facing the government, it is likely that the president and his party will pass that test by winning a majority in the national Chamber of Deputies, as well as a number of gubernatorial races across the country.

However, a few weeks after the electorate takes to the polls, the government faces another, more demanding examination of its most important achievement thus far: the opening of the nation´s hydrocarbons industry to private and foreign investment, when companies submit bids on the first batch of contracts under Round One. The outcome of that test is far from certain, and there endure substantial concerns in the oil industry over the contract terms that have been issued by the government to date. In fact, there is a growing sense that, unless the government makes major changes to the contract terms, few foreign companies will choose to participate on this occasion. Read more

A Pemex oil rig ©Getty

International oil companies are “polygamous” by nature, says Iván Sandrea, chief executive of Sierra Oil & Gas, the first Mexican exploration company to be formed since the country’s sweeping reform of the sector to open it to private investment.

So one thing the former Statoil executive is not happy about is the government’s insistence that bidders in the two tenders so far launched can belong to only one consortium. “I’ve never seen this in other countries,” he says. Read more

By Paul Shortell

Mexico’s electricity industry appears poised to outperform oil and gas in 2015. Ambitious plans to boost investment and increase production in the hydrocarbons sector, widely consider the poster child for President Enrique Peña Nieto’s wide-ranging economic reforms, have been complicated by the collapse of crude oil prices. State oil company Pemex recently reduced its estimate of investment this year by the oil and gas sector from $35bn to $25bn and may be forced to delay licensing of certain unconventional and offshore blocks. In January, more than 10,000 workers contracted by Pemex lost their jobs as the indebted company undertook new austerity measures.

Though not without its own challenges, the power sector shines by comparison. Read more

What’s the one good thing about Mexico’s consumer confidence being poor? It should help prevent the country’s weakening peso from fuelling inflation.

All eyes are on the peso at the moment, after monetary authorities launched a new intervention programme on Wednesday to try to calm volatility and ensure liquidity as the dollar goes from strength to strength. Read more

By Eduardo Bolio and Jaana Remes, McKinsey

Since the 1980s, both national and international observers have predicted time and again that economic growth in Mexico is just about to take off. But it hasn’t, and others have quickly gained ground and overtaken Mexico. In 1980, for instance, Mexico’s GDP per capita was almost double South Korea’s and 30 per cent higher than Taiwan’s. Today, South Korean per capita GDP is twice Mexico’s and Taiwan’s is almost three times as much. China, which had one-twelfth of Mexico’s GDP per capita in 1980 could surpass Mexico by 2018.

The important factors that stoke rapid growth in emerging economies exist in Mexico: a young and growing labor force, abundant natural resources, and access to export markets (in Mexico’s case a strategic location next to the United States and membership in NAFTA provide uniquely privileged access). In addition, Mexico has opened up its economy to trade and foreign investment, installed extensive reforms. Since 2000, it has also been able to boast sustained macroeconomic and fiscal stability. Read more

Mexico’s oil liberalisation is now well under way, with the tender of a second lot of oil assets – nine fields grouped into five blocks – now set to join the 14 that have already been announced. But do the country’s projections for future oil recovery add up?

The government is hoping that private investment in a sector closed for nearly 80 years under the monopoly of state oil company Pemex will succeed in turning around a decade of inexorable decline in Mexico’s oil output. Indeed, it has talked of adding 500,000 barrels per day (bpd) by 2018, when the government’s term is up. Read more

Good news: After weeks of political gridlock, Mexico’s three main parties have agreed a framework for a new anti-corruption system. It should be put to a vote in the lower house of Congress this week.

But the devil is in the details. Does it go far enough? Will it get watered down before it comes to a vote? And, the biggest question of all, will it stop corruption?

The jury is out. But before taking a look about what’s good and what should be better, it is worth remembering why Mexico so urgently needs a serious anti-corruption strategy. Corruption has long been an accepted part of life in Mexico. If you start digging, you will find it, says one political analyst – much like how the missing bodies of 43 students in the state of Guerrero has turned up other undiscovered mass graves. Read more

Director Alejandro González Iñárritu

Electricity market regulations may sound dry and complex. But for César Hernández, Mexico’s electricity undersecretary, these regulations will “move us to the type of institutions our country deserves to have”.

The unspoken message: Take that, Alejandro González Iñárritu!

The Mexican director created a domestic storm with his Oscar acceptance speech on Sunday night, in which he said: “I pray that we can build the government we deserve.”

The comment generated a much lampooned response from the ruling PRI party (the tone was “but we already ARE, haven’t you noticed?”) and sparked much Twitter discussion about what Mexico needed and deserved from an unpopular government under fire from conflict-of-interest scandals. Read more

Oil is popularly known as black gold. Now the world’s biggest miner of another shiny precious metal is jumping on Mexico’s ambitious energy reforms to get in on the dirty black stuff.

Alberto Baillères, head of Grupo Bal, which counts silver producer Peñoles y Fresnillo among its companies (as well as upscale department store the Palacio de Hierro), has launched a new oil company, called Petrobal. Read more

Just over a month to go, and Mexican car exports to Argentina and Brazil (which Mexico has overtaken as No. 1 Latin American car maker) should be back on track after a three year system of quotas. That’s the plan, at least.

Or rather, that’s the deal the three countries signed: March 15, 2015 would spell a return to free auto trade. Read more

By Joy K Gallup of Paul Hastings

The transformation of Mexico’s telecoms sector has begun. Reforms enacted in 2013 promise to transform the investment opportunities and market dynamics of the sector and have already had a major influence, managing the current market dominance of América Móvil through the regulatory actions of IFETEL and opening the sector to foreign investment. In the past few months we have seen fines and other regulatory decisions taken against the dominant players, including América Móvil’s subsidiaries Telmex (which controls 80 per cent of Mexico’s fixed-line telephone market) and Telcel (which controls 70 per cent of its mobile phone market). In recent days, AT&T completed the purchase of Mexico’s third-largest wireless company Iusacell for $2.5bn from Grupo Salinas, and announced an agreement to buy Nextel Mexico from NII Holdings for $1.8 bn (expected to close mid-year). So, what do these reforms mean for the future of the smaller telco companies in Mexico, such as Axtel, Alestra and Maxcom? Read more

Mayors fronting drug cartels, a union leader splurging thousands on cosmetic surgery, and a multi-million-dollar mansion reportedly gifted to the president by a federal contractor. Enrique Peña Nieto’s first two years in charge have not been short of scandals.

Peña Nieto was pitched by many as Mexico’s great reformer. Since taking office in December 2012, the Institutional Revolutionary Party (PRI) politician has achieved the seemingly impossible, ushering through a string of key economic reforms with a view to boosting investment, competitiveness, and growth. Read more

Pemex, the Mexican state oil company, is being forced to sharpen up its act.

Not only are costs under pressure, so is its reputation. Read more

By Joy K Gallup of Paul Hastings

A year ago, the reforms of Mexico’s restructuring law for financially distressed companies were just taking effect. Most practitioners felt the changes addressed many of the flaws in the existing bankruptcy or concurso process. One year later, the new restructuring law is again in the spotlight, as the three largest bankruptcies currently before the courts are proving terrible test cases for the revised law and highlighting where further improvements are needed. Read more

Bye-bye “primitive” internet banking. Hello smart banking straight from your smartphone. That, at least, is the pitch from Mexico’s Grupo Azteca, part of businessman Ricardo Salinas’s finance, retail and TV empire. Read more

Mexico’s traffic pollution is legendary. So how about a clean, green – and for now, at least, free – solution?

The CFE, the state electricity company, has inaugurated four “electrostations” – recharging stations for electric or hybrid cars – in a partnership with retailer Walmart, carmaker BMW and Schneider Electric, an electricity distribution and management company which has developed (in Mexico) the all-car compatible “plug”. Read more

It might just be total speculation, but persistent rumours that Citigroup wants to dump Banamex, the former star unit that landed it in a sticky fraud last year, seem to have increased a notch.

The latest log on the fire comes from Darío Celis, a columnist at newspaper Excelsior. Nothing has been confirmed by anyone yet, but it’s tempting to linger over his article for a moment.

He reckons five groups are interested in Banamex, Mexico’s second biggest bank – including two prominent – and now out-work, or soon to be so – senior Mexican bankers. Read more

A new year, a newly opening Mexican oil sector … but things are off to a mixed start.

On the less than rosy side, little more than a week into what is supposed to be a year heralding an unprecedented energy investment boom, Pemex, the state oil company, has taken the step of not renewing a host of contracts for oil service workers. Read more

Pemex refinery in Tula, Hidalog stateBy Michael Fitzgerald and Arturo Carrillo, Paul Hastings

Mexico’s government recently passed reforms repealing important limitations on oil and gas ownership introduced in 1938.While these reforms will reshape Mexico’s energy industry over the next few years, they will also bring about investment opportunities in the energy industry throughout the rest of Latin America.

The proposed privatization of Pemex, the state oil company, would open up 17 per cent of currently producing oil fields to foreign exploitation and allow foreign companies to bid for development rights to 79 per cent of Mexico’s reserve fields. In addition, the state-owned Federal Electricity Commission (CFE) is set to face competitors. Mexico’s energy industry, which was in decline due to the dire need for improved technology, investment and reserve management, is now gushing with investment opportunity that will be principally supported by investors from the US and Canada. However, there will also likely be great interest from investors worldwide. Read more