The Weekly Brief: Mexico


June 21, 2020 edition—Power constitutional reform; Asab-1 killed; and midstream’s growth.




Last Week in a Minute or Less


Electric Power & Renewables. AMLO suggested a constitutional amendment for the power sector; analysts recommend strengthening the power market rather than CFE; and Coahuila and CFE blame each other over a mine’s collapse.


Natural Gas Mid-Downstream & LNG. The CRE granted New Fortress Energy’s permits; and Mexico’s southeast needs more natural gas.


Liquid Fuels Mid-Downstream. Midstream will be powered by the COVID-19 recovery; the CRE celebrates the permits handed out — despite the drop; and private oil imports got complicated.


Oil & Gas Upstream. Pemex abandoned its Asab-1 plans in Zama.


Government & NGO. IMEF improved Mexico’s economic outlook; Moody’s still trusts Mexico’s economy; and Thompson Knight believes legal certainty could secure investments.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s natural gas capacity allocations (Natural Gas Intel – English); natural gas infrastructure (Houston Chronicle – English); and CRE’s new rules for a safe grid (DOF – Spanish).



Geopolitics & Trade


The US launched a second labor complaint under USMCA… US Trade Representative Katherine Tai and Labor Secretary Marty Walsh announced a request for Mexico to check the rights of free association and collective negotiation of the workers at the Tridonex plant in Tamaulipas (El Financiero – Spanish).


…and more are expected to come. Experts wait for a cascade of complaints in the textile sector. There was corruption and conspiracy between local authorities, companies, and union leaders affecting the real application of labor reform in Mexico (El Economista – Spanish).


Trudeau and Biden discussed border restrictions. Canadian Prime Minister Justin Trudeau spoke with President Joe Biden about how to end COVID-19 border restrictions between the two countries, but no decision was taken (Reuters – English).


Ken Salazar was chosen as Mexican ambassador. President Joe Biden named Ken Salazar as Mexican ambassador (El Financiero – Spanish). Salazar was elected Colorado senator in 2004. Biden has announced his choices for 18 ambassador positions.



Political Economy


IMEF improved Mexico’s economic outlook. The Mexican Institute of Finance Executives (IMEF) increased its economic growth outlook from 4.8% to 5.5% for 2021 and inflation from 4.70% to 5% (El Financiero – Spanish). The IMEF expects a GDP growth of 2.70% in 2022.


AMLO pledged businessmen no tax increase. President López Obrador met with businessmen to promote private investment and the third infrastructure project package with private and public investment (El Economista – Spanish). AMLO communicated the decision of not increasing taxes and the intention not to affect businessmen.


Moody’s still trusts Mexico’s economy… After the results of the midterm elections, the international rating agency expects Mexico’s macroeconomic and fiscal policies to remain in the same direction (Excelsior – Spanish). Moody’s left Mexico’s rating at Baa1 with a negative outlook.


…and S&P maintained Mexico’s rating. The international rating agency ratified Mexico’s rating as BBB with a negative outlook, considering the careful management of the macroeconomy and keeping debt stable at around 48% of the GDP (El Economista – Spanish). The negative outlook may mean a cut in the rating next year.



Legal & Regulatory


Thompson Knight believes legal certainty could secure investments. Thompson Knight expects 2022 to be the year when the writs of amparos issued against the reforms will be resolved (El Economista – Spanish). Uncertainty in the sector remains as analysts do not expect investors in the energy sector to return after the last reform suggestions.


The CRE celebrates the permits handed out — despite the drop. The Energy Regulatory Commission (CRE) cut the number of permits granted for all the activities it regulates by 39%, issuing 671 permits. There were 1,099 permits issued in 2019 (El Economista – Spanish). The CRE pointed to the restrictions in mobility and administrative activities as the reason for the decrease.


AMLO suggested a constitutional amendment for the power sector. The federal government will present a proposal to Congress to modify the constitution to restrict participation of private companies in the electricity market (Platts – English) (Proceso – Spanish). The PRI party said it will not approve the proposed new power reform (El Financiero – Spanish).



Market Trends


Midstream will be powered by the COVID-19 recovery. According to the Mexico COVID-19 Response Report, Mexico’s hydrocarbons infrastructure sector continues to grow thanks to the increase in national and international demand (El Economista – Spanish). The report explores the evolution of the midstream sector during the pandemic.


Mexico’s southeast needs more natural gas. Up until June 6, the southeast region received 1,446 million cubic feet per day (MMcfd), a drop compared to the same period in the previous year with 1,396 MMcfd (Luces del Siglo – Spanish). In 2018, the region received 2,172 MMcfd in the same period.


Private oil imports got complicated. The Finance Ministry decided that private companies could only import fuels through one specific authorized point, and state-owned companies do not face those restrictions (El Diario de Chihuahua – Spanish). Analysts said it is discriminatory treatment that could hit private competitiveness.


Analysts recommend strengthening the power market rather than CFE. According to experts, the constitutional reform to strengthen the state-owned company will not help its finances or the economy of Mexican consumers (El Economista – Spanish). Analysts recommend letting the market mature, and that takes time.



Strategy & Operations


Pemex offered no info on Dos Bocas’ financial report. The state-owned company did not provide details on the financial progress of the Dos Bocas refinery. Pemex just said that the refinery will require a total investment of MXN269m, to be finished by November 2022 (El Financiero – Spanish).


Coahuila and CFE blame each other over a mine’s collapse. The head of the CFE accused the governor of not improving work conditions in the mine. The governor of the northern state accused the state-owned company of awarding no-bid contracts to friends (El Financiero – Spanish).


Pemex abandoned its Asab-1 plans in Zama. The state-owned company will no longer drill an appraisal well delineating the Zama shallow water oil deposit between Pemex’s and Talos’ blocks (Natural Gas Intel – English). The CNH approved a modification of Pemex’s exploration plan for the block, which included scrapping the Asab-1 well.


The CRE handed out New Fortress Energy’s permits. The Energy Regulatory Commission (CRE) granted the permits for regasification, storage, and distribution of liquified natural gas for its Pichilingue LNG facility near La Paz (BN Americas – English). It will allow the company to distribute compressed natural gas via road tankers.



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!)


The Mexican Petroleum Congress is rescheduled for June 23-26, 2021, in Monterrey.



Lateral Thinking


Rabbit bones in a Mexican cave changed America’s history. Humans may have inhabited a Coxcatlan cave in southern Mexico between 33,448 and 28,279 years ago, more than 10,000 years before previously thought (Science News – English). Radiocarbon analyzed six rabbit bones from the cave’s deepest sediment.



Quote of the Week


“Toda restricción a la manifestación de las ideas es inadmisible y contraria a la soberanía del pueblo.”


“Every restriction to the manifestation of ideas is inadmissible and contrary to people’s sovereignty.”


– Ignacio Ramírez “El Nigromante” (1818-1879), Mexican writer, poet, journalist, and lawyer.




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