The Weekly Brief: Mexico


June 25, 2018 edition—Pemex’s 20 farmouts; Oaxaca’s wind; and NAFTA’s summer plans.




Last Week in a Minute or Less


Renewables & Electricity. Mexico’s wind capacity is expected to triple by 2022; Acciona cut the ribbon on Tamaulipas’ wind park; and a judge cancelled tariffs on solar panels.


Natural Gas & Liquid Fuels. Pemex reached an agreement with Vitol on ethane supply; and the CFE has opened 14 pipelines and has 11 under construction.


Oil & Gas Upstream. Pemex will pursue 20 farmouts; and the CRE shortened its decision-making.


Money & Power. NAFTA negotiations will continue over the summer; investors fear Mexico’s election and NAFTA risks; and the IMF worried about Mexico’s remittances.


Déjà vu all over again. Last week’s readers were particularly interested in NAFTA’s failure (Bloomberg – English); the call to presidential candidates on clean energies (El Economista – Spanish); and Baja California’s hydrocarbons terminal (El Economista – Spanish).



NAFTA Negotiation


NAFTA negotiations will continue all summer long. Canada’s Foreign Minister Chrystia Freeland met with US Trade Representative Robert Lighthizer to push the NAFTA negotiations over the summer (Bloomberg – English) (El Economista – Spanish). The next meeting between the ministers will be after the Mexican presidential elections (El Financiero – Spanish).


Mexico considers tariffs on US corn and soy. If President Donald Trump escalates the trade war with new tariffs, Mexican officials are studying how to reduce the blow by striking at US$4bn in annual imports of US corn and soybeans (Reuters – English) (El Financiero – Spanish).


Trump said NAFTA talks are “getting there.” US President Donald Trump said progress had been made in the NAFTA negotiations between Canada, Mexico, and the US, although he maintains the prospect of bilateral pacts (Reuters – English). The Canadian government still believes a deal to update NAFTA is possible (Reuters – English).


Trump’s border policy could affect the NAFTA renegotiation. The Foreign Relations Minister said the zero tolerance policy implemented by President Trump separating children from migrant parents is an important factor in the NAFTA renegotiation (El Financiero – Spanish). The minister said the NAFTA negotiation is just at a technical level.



The Road to Reform


Pemex will pursue 20 farmouts. The state-owned company will tender 20 farmouts this year for projects awarded in 2014 (El Financiero – Spanish) by the Energy Ministry. The winning bids will be the ones that offer the minimum additional royalty payment ranging from 2.5% to 5% and the maximum additional royalty between 25% and 40% (Reuters – English) (El Economista – Spanish).


Global companies go after Mexico’s transmission lines. The auction for the Baja California and the Oaxaca lines attracted 22 and 28 participants, respectively, including leading companies such as Iberdrola, Siemens, and Sinohydro (El Economista – Spanish). The Baja California line, with an approximate cost of US$1.7bn, will be awarded on December 14.


A judge cancelled tariffs on solar panels. The Mexican Association of Solar Energy (Asolmex) won the lawsuit against the resolution to impose a 15% tariff on imported solar panels (El Financiero – Spanish). The decision will allow an increase in the installation of solar panels.


The CRE tightened up its decision times. The Energy Regulatory Commission (CRE) published a modification on the maximum time to resolve processes (DOF – Spanish). A request for permission to distribute and commercialize LP gas will now take 78 days instead of 90.


The Cofece pursues LP gas monopolization. The Cofece demanded the Energy Regulatory Commission (CRE) sanction companies fight anti-competitive practices in the distribution and commercialization of LP gas (El Financiero – Spanish). From 2016 to 2017, the LP gas market share held by the top five economic groups increased from 48% to 53% (El Financiero – Spanish).



Political Economy


The CEESP asked the candidates to show them the money. The Center of Economic Studies of the Private Sector (CEESP) said candidates should define from where they would obtain the resources to fulfill their campaign promises (El Economista – Spanish). Citibanamex said it is necessary to have detailed information on AMLO’s plans for public finances (El Economista – Spanish).


The IMF worried about Mexico’s remittances. The International Monetary Fund said remittances in Mexico have helped reduce inequality and provide savings for recipient households (El Economista – Spanish). Without remittances, the inequality that dominates Mexico’s income distribution would be much higher.


One presidential candidate suggests energy reform continuity, two suggest cutting taxes and dependency. Meade bets on continuing the reform, strengthening a competitive market. Anaya criticizes the tax structure elevating fuel prices, while AMLO proposes to reduce Mexico’s energy dependency on the US (El Economista – Spanish).


The CFE got busy with pipelines, renewables, and blackouts. The state-owned company plans to increase renewables by 39%, building 65 new clean generation plants (El Economista – Spanish). The CFE has opened 14 pipelines and 11 are under construction (El Financiero – Spanish). It also has a 10% capacity reserve for blackouts (El Universal – Spanish).



Market Trends


The Fibra E market is ever growing. After three years, the Energy and Infrastructure Investment Trust has delivered four issuances and two offers are waiting to be launched (El Economista – Spanish) in the Mexican stock market. The four issuances have amounted to a total of MXN64.3bn from investors.


Mexico’s country risk went down. Mexico’s country risk remained at 224 basis points, a small drop of two units from two weeks ago (El Economista – Spanish). This indicator reflects the possibility that a country may not fulfill its agreed upon debt payment terms.


Despite NAFTA, businesses trust Mexico. The country reached its best moment of business trust for foreign companies, who plan to develop 100 mergers and/or acquisitions worth US$10bn in the next 12 months (El Economista – Spanish), despite the NAFTA uncertainty. Businessmen’s interest in developing deals in Mexico increased by 30%.


Investors fear Mexico’s election and NAFTA risks. Analysts polled in June were expecting a rebound in the peso by the end of the year, but the result can be changed if AMLO wins the presidency and a congressional majority, moving toward radical economic changes (Reuters – English).


Banxico increased the interest rate. Mexico’s central bank raised its interest rate 25 basis points to 7.75% (Reuters – English). Analysts do not discard other increases if new conditions affect inflation (El Financiero – Spanish).



Strategy & Operations


Acciona cut the ribbon on Tamaulipas’ wind park. The Spanish company opened the El Cortijo wind park, located in Tamaulipas, with a 183MW capacity and an investment of US$235m. The park will meet a contract from the first power auction for 585.5 GWh of power and clean energy certificates (El Financiero – Spanish).


Wind energy blows fierce in Mexico. Wind energy has grown by 600% in Oaxaca, where the state and the Energy Minister signed an agreement to simplify administrative procedures (El Financiero – Spanish). Wind capacity is expected to triple by 2022, reaching 12,000MW (El Economista – Spanish) with an investment of US$12bn (El Financiero – Spanish).


SABIC is out and Vitol is in Pemex’s ethane agreement. Pemex awarded a long-term ethane tender to Vitol after the agreement with SABIC fell through during negotiations (Platts – English). The contract includes the delivery of 240,000 mt in 2018 and 288,000 mt/year in 2019 and 2020 with 94% purity.


Nuevo León bets on energy. The Energy Regulatory Commission (CRE) gave approval to Bulkmatic to store fuels in the Nuevo León Logistic Center with an MXN1bn investment (Zocalo – Spanish). Farmers have included new technologies in their farming and propelled clean energy generation (El Economista – Spanish).


Engie will bet on El Bajío’s gas network. Engie will invest MXN600m in the next five years (El Financiero – Spanish) to improve the natural gas distribution network and add at least 30,000 new users. El Bajío becomes the seventh region in which Engie offers natural gas distribution service.



Old School Social


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


The Mexico Oil & Gas Summit will be held July 18-19 at the Sheraton María Isabel in Mexico City.


Expo Energía is scheduled for August 14-16 in Puebla, Mexico.



Lateral Thinking


A new dinosaur was found in Mexico. Paleontologists discovered the remains of a new dinosaur species that inhabited Mexico’s coast 85 million years ago, becoming the oldest found in the region (Washington Post – English). The dinosaur, called Acantholipan gonzalezi, was 11.4 feet long and weighed more than half a ton.



Quote of the Week


“Nunca hay nada excesivo cuando se trata de servir bien a su país.”


“There is never something excessive when it is about serving the country well.”



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


We hope you have a productive week. Please send any news, comments, or new dinosaurs 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]