The Weekly Brief: Mexico

August 7, 2017 edition— Autlán bets on Coahuila; Cenegas will hold three tenders; and secrets will surround Pemex’s farmouts.






Editorial Interlude


NAFTA renegotiation talks will start later this month, with anyone’s guess as to the final outcome. Throughout the process The Weekly Brief: Mexico will include a special section of related news coverage, starting with today’s edition.  This temporary section will last as long as the negotiations do — we hope you enjoy it!



Last Week in a Minute or Less


Renewables & Electricity. Autlán will develop a wind farm in Coahuila; Laguna Verde may be expanded; and the CFE has not advanced its projects.


Natural Gas & Liquid Fuels. Cenagas will hold three tenders by December; the Guaymas-El Oro pipeline was put on hold; and diesel imports are going private.


Oil & Gas Upstream. The CNH will not make public the companies’ bets on Pemex’s farmouts and the CRE and the CNH lost their legal protection against writs of amparo.


Money & Power. The NAFTA battle could affect relations between Mexico and Canada; Pemex had a good semester; and Mexico cut expenses.


Déjà vu all over again. Last week’s readers were particularly interested in the potential for North America to become a big energy giant (Spanish); the discovery of a new, rich field (Spanish); and the Baker McKenzie opinion on the NAFTA objectives (English).



NAFTA Negotiation


A veteran negotiator will represent Mexico in the NAFTA negotiation… Kenneth Smith was named chief negotiator for the NAFTA talks. Smith is a trade policy expert and serves as director of the Trade and North American Free Trade Agreement (NAFTA) Office at the Mexican embassy in Washington (English).


…and Canada pulls out big guns, too. Canada is reinforcing its team in the US to defend Canada’s interests in the renegotiation of the NAFTA. The government named a top trade expert, Kirsten Hillman, to a newly created post as deputy ambassador to the US (English).



Mexico’s goals for NAFTA are out. Mexico will fight for a speedy negotiation that maintains access in the region for goods and services, promotes labor market integration and incorporates the energy sector and strengthening energy security (English). Mexico will also seek stronger dispute resolution mechanisms.


The NAFTA battle could deepen the Mexico-Canada relationship. Canada and Mexico could partner up and join forces or struggle against each other point by point (Spanish). Mexico could back Canada in agriculture, while Canada is expected to push for labor and environmental reforms in Mexico (English) (Spanish).



The Road to Reform


The CNH will keep Pemex’s farmouts quiet. The National Hydrocarbons Commission (CNH) announced that it will not disclose which companies are interested in bidding for which of its three farmouts to protect “the competition” (Spanish). The announcement of companies seeking the contracts will be announced on the day of the tender.


Cenagas will be busy at year-end. The National Center of Gas Control (Cenagas) will launch three tenders before the end of 2017 to assign border pipelines capacity, operation, and maintenance services, and a third to regularize all rights of way (Spanish). Two tenders will be launched on August 9 and 10.


The CRE and the CNH lost their protection against amparos. The National Hydrocarbons Commission and the Energy Regulatory Commission lost their legal protection from amparos (injunctions) granted by court resolutions of appeals from energy companies (Spanish). Now, energy companies can win filings to suspend the regulators’ actions.


The CFE has faith in Laguna Verde. The state-owned company is considering an increase in the nuclear power plant’s capacity as a means to expand domestic generation capacity (Spanish). The CFE chief participated in the World Association of Nuclear Operators (WANO) meeting where better security practices and technological advances were discussed.



Political Economy


Pemex debt repayments will pile up over the next three years. The state-owned company will have to repay US$22bn of debt, 23.5% of its total debt, in the next three years (Spanish). Pemex published a report warning investors the level of debt could increase in the short and medium terms.


The CFE’s profits fell off a cliff. The profits of the state-owned company fell 91% in a year, settling at MXN9bn due to a 56% rise in operating costs caused by higher fuel prices (Spanish). Income from power sales increased by 38.1% from June 2016 to now.


Mexico cut expenses and tightened its belt. The government reduced its spending by 2.7% compared to the previous semester, the highest cut so far during the Peña Nieto term (Spanish). Cabinet ministries presented the largest spending reductions with cuts of 17.2%.


The US Congress passed funding for the border wall. The House approved a US$788bn spending bill cutting clean-energy programs and funding the construction of the US-Mexico border wall (English). The bill is expected to fail in the Senate without support from the Democrats.



Market Trends


Pemex enjoyed the best quarter in 14 years. The state-owned company experienced the best quarter in more than 14 years, obtaining net profits of US$1.8bn from January to June 2017 (Spanish) (English). Pemex posted positive financial results during three consecutive quarters, but oil production dropped 7.5%, falling to 2 million 13 thousand barrels per day.


Industrial electricity tariffs shot up. Electrical tariffs for industry increased by 31% in August compared to the same month in 2016 (Spanish). In August, industrial consumers will pay 0.90 pesos per kilowatt, while in 2016 in the same period they paid 0.68 pesos.


Analysts think inflation will reach 6.05% by the end of 2017. Analysts forecast inflation to be 6.05% by the end of 2017 and increased to 1.99% the estimate for economic growth this year (Spanish). With this adjustment, inflation estimates double the central bank target of 3%.


Mexico grew the fastest since 2014. Mexico’s economy grew 3% in the second quarter, the biggest quarterly expansion since 2014 (Spanish). Goldman Sachs, Grupo Financiero Banorte, and Invex analysts consider the growth proves the economy performed better than expected despite uncertainty generated by the new US administration.



Strategy & Operations


A court stopped the Guaymas-El Oro pipeline. A federal court ordered the Energy Ministry, the Energy Regulatory Commission, the Sonora government and the Guaymas, Cajeme, and Bácum municipalities to stop the construction of the Guaymas-El Oro pipeline (Spanish). The pipeline crosses eight Yaqui municipalities that argue they were not consulted on the project.


Private companies are on a diesel import rampage. Private suppliers and transport companies’ diesel imports have skyrocketed with 10,000% growth, rising from 5,000 barrels in June 2016 to 512,000 barrels in the same month in 2017 (Spanish). Private companies now control a 6.55% share of total diesel imports.


CFE transmission projects are up in the air. The state-owned company announced different transmission grid projects but has not progressed on them, according to sector analysts (Spanish). The delays affect the National Electricity System Development Program and the work of private companies.


Salina Cruz cannot get a break. A Pemex firetruck fell off a cliff near the maritime terminal of Salina Cruz, killing a worker (Spanish). Pemex plans to restart operations in the Salina Cruz refinery in a gradual way to reach its capacity in the short term, starting with propylene production (English) (Spanish).


Autlán will approach energy in Coahuila. The mining company will develop a wind energy project in Coahuila following a new investment and growth strategy in its energy division. Through the GFM Energy subsidiary, an agreement was reached with BAS Projects Corporation to develop, construct, and launch the 50MW wind project (Spanish).



Old School Social


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


The US-Mex Natural Gas Forum is August 14-16 at the Hyatt Regency Riverwalk, San Antonio, Texas.


The Expo Energía is August 15-17 at the Centro de Convenciones Puebla, in Puebla.


The AEM Luncheon “Energy: a connecting sector between Texas and Mexico” is August 21 in San Antonio.



Lateral Thinking


Mexico’s scientists look abroad. Mexican scientists seek employment abroad to escape the lack of infrastructure and resources and government corruption that inhibits their advancement (English). An estimated 11,000 Mexicans holding PhDs—one third of all Mexicans with doctorates–live and work in the United States, avoiding government bureaucracy and corruption in allocation of scholarships.



Quote of the Week


“Devuelve a la desnuda rama, nocturna mariposa, las hojas secas de tus alas.”


“Return to the naked branch, nocturnal butterfly, the dry leaves of your wings.”


-José Juan Tablada (1871-1945), Mexican diplomat, journalist, and poet


We hope you have a productive week. Please send any news, comments, or new strategies to avoid brain drain to


Tell your friends and colleagues about the Weekly Brief! They can sign up for a free one-month trial  here.