The Weekly Brief: Mexico


April 15, 2019 edition—Engie and Tokyo Gas’s renewables; Kinder Morgan’s pipeline; and USMCA doubts.




Last Week in a Minute or Less


Renewables & Electricity. Engie and Tokyo Gas will bet on Mexico’s renewables; CFE awarded 12 contracts to Glencore; and Yucatán was left in the dark due to gas shortages.


Natural Gas & Liquid Fuels. Kinder Morgan may expand its gas pipeline to Mexico; Mexico may open its own gas stations with “fair prices”; and the IMCO finds trouble in the Dos Bocas refinery investment.


Oil & Gas Upstream. AMLO proposed three for the Pemex board; and the energy sector scored more than half of the government’s investment.


Money & Power. The IMF lowered Mexico’s growth outlook; the WB cut Mexico’s GDP for 2019 and 2020; and the USMCA ratification is in doubt.


Déjà vu all over again. Last week’s readers were particularly interested in Yucatán’s natural gas supply (El Financiero – Spanish); the first power auction’s operating projects (El Financiero – Spanish); and high power tariffs (El Financiero – Spanish).



NAFTA Negotiation


The USMCA ratification is in doubt. Six months after the agreement on a new NAFTA deal, the chances of a quick ratification are slipping (Reuters – English). If the USMCA’s ratification is postponed, it will become part of electoral politics in the US and Canada (with federal elections in October).


Trump considers a 25% tariff on Mexico’s cars. US President Donald Trump announced that if tariffs are applied on car imports from Mexico, the rate would be established at 25% (Reuters – English). Trump threatened to set tariffs unless Mexico did more to stop drug trafficking.


AMLO wants a new labor law following Pelosi’s warning. After US Democrat congressmen threatened to block the USMCA, President López Obrador said Mexico’s lawmakers should pass a bill protecting worker rights agreed upon during negotiations of the USMCA (Reuters – English) (Bloomberg – English).


The auto industry is concerned with border delays. The Mexican Auto Industry Association (AMIA) noticed “very serious” delays in exporting goods across the US-Mexico border that are affecting the auto industry. The decision to move 750 border agents from commercial to immigration duties is producing long delays for cross-border traffic (Reuters – English).



The Road to Reform


The CRE came back to work. The Energy Regulatory Commission (CRE) published the rule limits for oil and petrochemical storage activities (DOF – Spanish). The CRE also ruled on the measures applicable to the transportation of hydrocarbons, fuels, and petrochemicals (DOF – Spanish).


AMLO proposed three for Pemex’s board. President López Obrador announced his nominees to become Pemex’s advisors: Edmundo Sánchez Aguilar, Juan José Paullada, and José Eduardo Beltrán (Reuters – English) and the Senate ratified two (El Financiero – Spanish). The position is to become an advisor for the state-owned company (El Financiero – Spanish).


New rules for radioactive materials were published. The National Committee of Normalization Nuclear Security and Safeguards published the transportation index for radioactive materials and the security index to transport radioactive substances (DOF – Spanish). The same institution published the categories of containers and packages (DOF – Spanish).


Mexico may open its own gas stations with “fair prices.” President López Obrador said the government may consider the creation of a gas station chain to ensure “fair prices” (Platts – English) (El Financiero – Spanish). The concern is that gas station operators don’t cooperate to control prices.



Political Economy


The WB cut Mexico’s GDP for 2019 and 2020. The World Bank cut Mexico’s growth forecast due to the uncertainty surrounding the ratification of the USMCA (El Economista – Spanish). The GDP will grow by 1.7%, below the 2% rate predicted in January.


The CEESP doubts Mexico’s public finances in 2020. The Center of Economic Studies of the Private Sector (CEESP) trusts public finances are on the right track, but will suffer in 2020, pressured by a cut in income due to lower oil production (El Economista – Spanish).


The energy sector got lucky with more than half of the government’s investment. During the first two-month period, more than 60% of the government’s physical investment was directed into the energy sector, receiving MXN59.8bn (El Economista – Spanish). The amount represents a 27.2% increase compared to the same period in the previous year.


IMCO finds trouble in the Dos Bocas refinery project. The Mexican Institute of Competitiveness (IMCO) concluded that investing in the Dos Bocas refinery only has a 2% chance of success and recommends the cancellation of the project (El Financiero – Spanish). In 98% of the scenarios, the project will generate more costs than benefits.


The Navy secured 2,500 liters of smuggled fuel in Guerrero. The Navy secured three boats carrying 2,500 liters of fuel, whose origin was not proven in Guerrero (El Financiero – Spanish). Ten people were detained, and the fuel was presumably used to supply ships doing illegal acts.



Market Trends


Moody’s fears the consequences of slower growth. The international rating agency estimates that the changes to Mexico’s growth forecast published by the Finance Ministry will have a negative credit impact on the states and municipalities that will receive lower transfers (El Economista – Spanish).


The IMF lowered Mexico’s growth outlook. The International Monetary Fund (IMF) reduced Mexico’s economic growth outlook for 2019 to 1.6% and for 2020 to 1.9% from 2.2%, due to changes in perception about policy under the new administration (Reuters – English) (El Financiero – Spanish). The IMF said Mexico will maintain a fiscal surplus during the administration.


Inflation hit the gas in March. Mexico’s annual inflation increased in March due to a rise in gasoline prices (Reuters – English) (El Financiero – Spanish). Mexican consumer prices rose 4% in March compared to the same month in the previous year.


Barclays is happy with the Mexican government’s tax discipline. Barclays has high hopes for Mexico’s macroeconomy for 2019 and 2020 after the Finance Ministry published the “pre-criteria” (El Economista – Spanish). Barclays expects a 1.3% GDP surplus, which will push public debt down.



Strategy & Operations


Engie and Tokyo Gas will bet on Mexico’s renewables. The French and Japanese companies will invest in the Mexican company Heolios EnTG to develop renewable energy projects in Mexico. The goal is to develop, finance, build, and maintain a portfolio of six renewable energy projects in Mexico (El Financiero – Spanish).


CFE awarded 12 contracts to Glencore for coal. The state-owned company will purchase 4.94 million tons of coal from Glencore International, as the company was awarded 12 contracts (El Economista – Spanish) (Reuters – English). The coal will be supplied to the Plutarco Elías Calle thermoelectric plant in Guerrero.


La Laguna will get investment for the auto and energy industries. In the Laguna region, an investment of US$50m and the creation of 2,000 jobs is expected for the auto and energy sectors (El Economista – Spanish). The unstable relationship with the US and the threat of a possible closure of the border could harm the industry.


Kinder Morgan may expand its gas pipeline to Mexico. Federal regulators authorized Kinder Morgan to construct its Sierrita Compressor Expansion (Platts – English). The project could speed up Permian gas in Northwest Mexico and could be in service by April 2020.


Braskem Idesa asked to ease import conditions. Braskem Idesa suggested the federal government develop infrastructure focused on the supply of imports for the energy sector (El Financiero – Spanish). The company is looking for options to import supplies as it is operating at 80% of its capacity.


Yucatán was left in the dark due to gas shortages. The Yucatán Peninsula suffered a blackout for the second time in a month (El Financiero – Spanish) (Reuters – English). Further blackouts are expected in April and May due to the increase in energy demand and the shortages of natural gas in the region (El Financiero – Spanish).



Old School Social


Events in the world beyond your screen—go see and be seen!



MIREC Week is scheduled for May 20-22 at the World Trade Center in Mexico City.


XXVIII La Jolla Energy Conference will be held May 22-23 in La Jolla, California.


The 5th Mexico Gas Summit is scheduled for May 29-30 at the Marriott Riverwalk in San Antonio, Texas.



Lateral Thinking


Mexico’s coast was visited by a white whale. In Baja California, a whale-watching guide saw a rare, albino gray whale off the west coast (Live Science – English). The last time a white whale was seen was in 2008 and again in 2016.



Quote of the Week


“…adoptar aquello que permitiera colocar a la nación por encima de intereses y modos de pensar, aquello que permitiera que la nación no estuviera expuesta a perecer por ideologías, credos o intereses.”


“…to adopt those ideas that allow placing the nation over particular interests and ways of thinking, ideas that allow the nation not to be exposed to death due to ideologies, beliefs or interests.”


– Jesús Reyes Heroles (1921-1985), politician, historian, and academic. Quote from “The Strength of Politics”.



We hope you have a productive week. Please send any news, comments, or white whale sightings to


Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial here.[/vc_column_text][/vc_column][/vc_row]