February 15, 2020 edition—Mexico’s fossil fuel dependence; wind plant storage; and cheap gasoline.
Last Week in a Minute or Less
Electric Power & Renewables. Juchitán took advantage of its sun; the Coromuel wind park works on storage; and AMLO asked to okay the new power law unchanged.
Natural Gas Mid-Downstream & LNG. US natural gas exports to Mexico continue strong.
Liquid Fuels Mid-Downstream. The government reactivates the fuel subsidy; cheap imports lowered gasoline prices; and Profeco announced the best and worst gas stations.
Oil & Gas Upstream. The Financial Times warned Mexico about its fossil fuel addiction.
Government & NGO. The IMF forecasts a 4.3% GDP growth; the US Chamber criticized Mexico’s power bill; and Fitch Ratings warned about the negative effects of the law.
Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s climate change promises (El Economista – Spanish); the USMCA’s ban on energy monopolies (El Economista – Spanish); and the Paris agreement’s inclusion in USMCA (El Economista – Spanish).
Geopolitics & Trade
The US Chamber criticized Mexico’s power bill. The US Chamber of Commerce described the new power bill as “deeply troubling,” saying it represented a breach of the USMCA (Reuters – English) (El Economista – Spanish). The chamber warned the law will hit foreign investor confidence.
The Cofece warns that Mexico lacks the CELs to fulfill its Paris commitments. In 2024, Mexico will break its commitment to generate 35% of its power from clean sources, as the current Sener’s policies limit the Clean Energy Certificate market and the installation of new power generation plants with zero CO2 emissions (El Economista – Spanish).
China passed Mexico as the main US trade partner. The Chinese market became the main US trade partner with a trade exchange of US$560bn, 14.9% of US commerce (El Financiero – Spanish). Mexico took second place, reaching US$538bn, or 14.3% of the share.
The US, Canada, and Mexico disagree on how legal the new power law is. If the new power law is approved, the US and Canadian governments will use trade reprisals on other relevant sectors (El Financiero – Spanish). President López Obrador defended the new law and denied that the law breaks international agreements (El Economista – Spanish).
Experts improve Mexico’s economic forecast. According to the Citibanamex survey, Mexico’s GDP would increase 3.6% after the 8.6% fall registered in 2020 (El Financiero – Spanish). This represents an improvement compared to the previous forecast of 3.5%.
Inflation sped up in January. Inflation started the year at 3.54%, a significant increase compared to the 3.15% result in December (El Economista – Spanish). Analysts expect it to ease in the coming days, with the rate reaching 3.5%.
The IMF forecasts a 4.3% GDP growth. Thanks to foreign demand and US exports, the Mexican economy will experience a GDP growth of 4.3% (El Financiero – Spanish). The growth forecasts for 2021 in all regions will depend on the vaccine distribution.
Banxico will help out struggling banks. Mexico’s central bank will begin offering credit to banks that have trouble placing cash dollars (Reuters – English). The financing would be on terms and conditions set by the central bank.
Legal & Regulatory
Fitch Ratings warned about the negative effects of the new laws. The international rating agency argued that the approval of the Banxico reform and the power law are negative risk factors for Mexico (El Economista – Spanish). Fitch does not foresee a specific risk for Mexico’s sovereign rating.
The Financial Times warned Mexico about its fossil fuel addiction. The newspaper criticized the energy policy of President López Obrador as “it shows a dangerous addiction to fossil fuels” versus the international tendency toward clean energy (El Financiero – Spanish). The newspaper warned about the damage to private investment when trade agreements are disobeyed.
AMLO asked Congress to okay the new power law unchanged… President López Obrador said the proposed power law does not need to be modified in Congress (El Financiero – Spanish). The ruling party Morena approved the law as it was sent (Forbes – Spanish).
…and the opposition asked to withdraw the law proposal. Lawmakers from PAN, PRD, and Movimiento Ciudadano united behind the US Chamber of Commerce’s call for the government to withdraw the power law proposal (Forbes – Spanish). The proposal was considered a barrier for the private sector.
AMLO said the new law is to kill corruption. President López Obrador accused energy companies of corruption to justify the proposed new power law prioritizing CFE over private producers (El Economista – Spanish). AMLO said private companies were receiving subsidies that increased during the “neoliberal period.”
The government reactivates the fuel subsidy. The Finance Ministry reactivated the tax stimulus for gasoline, avoiding an increase in fuel for customers (El Economista – Spanish). The goal is to protect Mexican families’ economies from an accumulated increase of 8%.
US natural gas exports to Mexico continue strong. While pipeline exports to Canada fell 5% in 2020, the level of gas sent to Mexico grew substantially thanks to the final segments of the pipeline connecting the Permian Basin with Guadalajara and the Samalayuca-Sásabe pipeline (Natural Gas intel – English). The Tula-Villa de Reyes pipeline will be completed later this year.
The CFE okayed the final tariffs. The state-owned company published the agreement approving the calculation and changes of the final tariffs for CFE to provide basic service to regulated consumers (DOF – Spanish).
If the reform is okayed, power prices for the auto industry will skyrocket. The auto industry warned that the country could stop being attractive for new investments if the new power law is approved (El Economista – Spanish). The additional cost of power would affect production costs in Mexico.
Cheap imports lowered gasoline prices. Average prices of fuel during 2020 fell between 7.2% and 9.7% (El Economista – Spanish). US gasoline had an average price 33% lower than in 2019 thanks to the drop in demand during the COVID-19 pandemic and the fight between Russia and Saudi Arabia.
Strategy & Operations
Juchitán took advantage of its sun. The National Institute of Indigenous Populations, the CFE, and the Santa María del Mar authorities of the Juchitán de Zaragoza municipality agreed to put the 450kW solar power plant in operation to provide power for the town’s inhabitants (PV Magazine – Spanish).
Profeco announced the best and worst gas stations. The consumer advocate agency (Profeco) received 200 complaints due to service irregularities (Proceso – Spanish). There were also gas stations that refused to be checked, forcing legal action.
Enel has high hopes for Mexico. The renewable energy company will consolidate its projects in operation in Mexico, broadening the commercial portfolio and group services, and collaborate with the sector’s main actors (PV Magazine – Spanish).
The Coromuel wind park works on storage. The wind plant Coromuel ECO, located in La Paz, Baja California Sur, is installing a 10MW Wärtsilä storage system (PV Magazine – Spanish) (Renewables Now – English). The company will provide a long-term service contract that includes maintenance, repairs, and performance guarantees.
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
2nd Edition of Shallow and Deepwater Mexico was postponed to February 16-18, 2021, at Ciudad del Carmen, Campeche.
The virtual networking roundtable “Natural Gas: Transitioning Mexico from an Oil State to an Industrial Powerhouse” will be held February 17.
Mexico Assembly is rescheduled for May 26-27, 2021, at Hyatt Regency, in Mexico City.
The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.
Mexico City’s organic waste will power up CFE. The Construction and Service Ministry of Mexico City will build a hydrothermal carbonization plant that produces biomass and hydrocarbon pellets to substitute for the mineral coal used to generate power for CFE’s Petacalco thermoelectric plant (Forbes – Spanish).
Quote of the Week
“El aburrimiento es la suprema expresión de la indiferencia.”
“Boredom is the supreme expression of indifference.”
– Anastasio Bustamante (1780-1853), Mexican military general and politician who served as president of Mexico three times.
We hope you have a productive week. Please send any news, comments, or organic waste uses to MexicoWeekly@energynarrative.com.
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