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
By Grace Fan, Trusted Sources
One-third of the way through his six-year term, Mexican President Enrique Peña Nieto has dazzled investors with his ambitious reform record, the cornerstone of his administration’s broader development programme to revitalize the sluggish Mexican economy. But the telegenic 48-year-old leader with a reputation for results-oriented governing has failed to convince his increasingly sceptical domestic constituency that he can deliver the goods.
Tepid GDP growth, devastating security problems, political mis-steps and escalating corruption allegations at the end of the year have embroiled him in the worst political crisis in the two-year history of his administration. Read more
Mexico’s government has bowed to the inevitable and cut its 2014 GDP growth forecast, to between 2.1 and 2.6 per cent this year, despite hailing a pick-up in activity in the third quarter that it said should continue throughout the rest of the year.
No big surprise there – growth has been disappointing all year so the writing has long been on the wall. And indeed owing to a change in methodology (more on this shortly), the government is keeping its options open with a new range-based forecast. For 2015, its estimate is 3.2 to 4.2 per cent. The growth goal for 2015 in the budget was 3.7 per cent.
But is there a silver lining to all these cuts? Read more
For Mexico, which does not produce all the natural gas it needs, the benefits of importing from the US are clear – it’s cheaper, it’s cleaner and it’s going to bring lower tariffs for manufacturers more quickly than continuing to rely on costly fuel oil.
But what about the other side of the bargain? What’s in it for the US? Read more
For months, the word “oil” in Mexico has gone hand-in-hand with “reform”, with the government giddily looking ahead to a rosy future filled with billions of dollars pouring into the sector.
Then oil prices tanked and people started whispering that maybe Mexico’s energy reform was not looking so attractive after all, and maybe Mexico’s fragile economic recovery might be given another knock. Read more
It’s not just about oil. That is, in a nutshell, Mexico’s message to investors. What about halal food? Or ships? Videogames, anyone?
Oil and gas prospects are obviously at the front of Mexico’s investment prospects – the country’s energy reform is expected to attract as much as $50bn in foreign investment in 2020.
But there’s more, the government says. And not just in the increasingly high-tech manufacturing industry that Mexico has embraced – it is the world’s fourth exporter of cars and first of flat-screen TVs, and its aerospace industry has rocketed. Read more
Mexico’s energy reform is all about boosting investment and thus production. But the million dollar question is: just how much investment will flood in, and to what type of resource, when fields are put on the block starting from next year?
Ernesto Marcos, a former CFO of Pemex, the Mexican state company, has hazarded what looks like the first comprehensive guess. Read more
Mexico’s 2015 budget may contain a slightly lower growth forecast than originally anticipated, but compared to other heavyweights in Latin America, things are still looking good.
In the 2015 budget presented to Congress, Mexico’s government pencilled in a GDP growth goal for next year of 3.7 per cent. As recently as April, the government had been sticking to a 4.7 per cent forecast. Even though a full point lower than that earlier forecast, it’s still ahead of this year’s goal of 2.7 per cent, which the government has ratified. Read more
Carlos Slim’s telecoms empire may be being chopped down to size in Mexico but his influence in his home country looks anything but on the wane – indeed, it could be set for a brand new take-off in the shape of the Mexico City airport.
It’s all speculation so far but not only is Carso, one of the groups in Slim’s empire, reported to be interested in bidding for the expected $9bn project, but his son-in-law Fernando Romero, in partnership with Britain’s Norman Foster, is believed to have won a contract to design what will be President Enrique Peña Nieto’s crown jewel infrastructure project. Read more
Free-trade champion Mexico is on a reform drive that promises new openness in key sectors of its economy, especially energy. So what is it doing slapping protectionist measures on its shoe industry?
Fighting unfair competition from China, officials say.
The raft of new measures to protect Mexico’s industry – which makes 240m pairs of shoes a year – sounds distinctly off message, especially since President Enrique Peña Nieto has made boosting trade ties with China a priority. (He met his Chinese counterpart three times within six months to forge closer relations.) Read more
Mexico has a brand new police force, the gendarmería tasked with beefing up the country’s crackdown on crime.
But according to the Inter-American Development Bank (IDB), it may have a powerful crime-fighting weapon already: remittances. Read more
More glum news for Mexico’s economy, which has been growing at turtle speed this year. Growth in May came in below expectations – again.
According to the state statistics office, growth in May was a disappointing 1.4 per cent, below market forecasts for nearer 2 per cent. Read more
Investment in Mexico: it’s the real thing. Coca-Cola’s announcement that it will pour $1bn into the country every year until 2020 is just the latest in a string of recent big-ticket spends in a country where manufacturing is leading the country out of an untimely economic slump.
The US beverage maker, whose operations in Mexico include eight bottling groups in Mexico, juices and dairy as well as sodas and water, said it would invest more than $8.4bn from 2014-2020, bringing the total invested in Mexico during the decade to $12.4bn. Read more
In the run-up to his election victory in 2012, Enrique Peña Nieto pledged to create a new 40,000-strong paramilitary gendarmerie for Mexico to help combat security problems stemming from the country’s war on drugs.
Plans for the force were whittled back to 10,000, and seemed to be eternally delayed. But next month Mexico’s new police force is finally ready for launch, albeit with a more slimmed-down starting line-up of 5,000 new officers. Read more
Mexico’s historic energy reform has understandably whetted the appetites of oil companies worldwide. But, concerns are growing that Mexico’s tax terms might turn out a little too tough – potentially scaring off, rather than attracting, investors.
How so? Let’s recap: Mexico expects to offer a range of licences and profit – or production – sharing contracts to private investors in a tender next year, the terms of which may become known in late in 2014. Read more
A glimmer of light at the end of a (long) tunnel? Mexico’s industrial production tip-toed up 0.6 per cent in April compared with March.
Now, it wasn’t a very big increase, but it was some welcome good news to an economy where the central bank, cutting interest rates in a shock move last week, cautioned that even the disappointing new expectations of growth for this year (the bank is predicting 2.2-3.3 per cent; the government 2.7) are unlikely to be met. Read more
It’s a good job discipline is an integral part of the Mexican ruling party ethos.
Lawmakers of all shades will need it next month when it comes to debating legislation to implement Mexico’s keynote reform – opening up the energy sector after nearly eight decades under state control: key debates will clash with the World Cup – something opposition lawmakers fought hard to avoid. Read more
So, Mexico, Aztec tiger, implementing far-sighted structural reforms that will ramp up economic growth, right?
Well, yes, but prepare to be patient. The central bank, Banxico, has just delivered a reality check: growth this year will be in the 2.3 to 3.3 per cent range, not the 3 to 4 per cent previously forecast. Read more
Carlos Slim’s foray into Europe is not so much a case of “once bitten, twice shy” as “try, try and try again”. Having failed last year to buy Dutch telecoms operator KPN, the Mexican tycoon has launched a takeover bid for Telekom Austria. Total cost to Slim’s América Móvil? Not including its current 27 per cent stake, about €2.1bn.
That includes the €1.4bn cost of buying the 45 per cent of Telekom Austria that is publicly traded. In addition, there will be América Móvil’s pro-rated €700m share of a subsequent capital increase, which will help shrink Telekom Austria’s chunky leverage (the group has almost €5bn of debt). Read more