The Weekly Brief: Mexico


November 15, 2021 edition—Mexico’s crude and fuel exports; the Supreme Court’s decision; and the “three amigos” will meet.




Last Week in a Minute or Less


Electric Power & Renewables. Greenlux recommends solar panels to cut the power bill; Enel Green Power fights with landowners; and the Supreme Court killed the Nahle Decree.


Liquid Fuels Mid-Downstream. Mexico will stop exporting crude; Pemex wants to reconquer franchised companies; and the Dos Bocas refinery spent big.


Natural Gas Mid-Downstream & LNG. Mexico expects natural gas prices to increase.


Government & NGO. The IMF advised Mexico to spend more; all expect Banxico to increase the rate; and Biden plans a meeting with AMLO and Trudeau.


Déjà vu all over again. Last week’s readers were particularly interested in Mexico’s concerns regarding natural gas supply (El País – Spanish); the power reform’s costs (El Financiero – Spanish); and North America’s natural gas market (Platts – English).



Geopolitics & Trade                            


US lawmakers accused AMLO of discrimination. Approximately 40 lawmakers asked the Biden administration to double the efforts to pressure the Mexican government to secure a level playing field for US companies in the country (El Economista – Spanish).


US ambassador backed big Mexican companies. The US ambassador in Mexico, Ken Salazar, met with business representatives of the renewable energy sector due to the debate generated by the proposed power reform (El Economista – Spanish). Salazar had previously met government representatives to discuss the reform.


Biden plans a meeting with AMLO and Trudeau… President Joe Biden will host Canadian Prime Minister Justin Trudeau and Mexican President Andrés Manuel López Obrador at the White House on Thursday, Nov. 18 (Politico – English) (Forbes – Spanish). The leaders will discuss health security, climate change, and a regional vision for migration.


…and AMLO may discuss the power reform. President López Obrador said that if Biden asks about the power reform in the next meeting, he would explain what it is (El Economista – Spanish). AMLO accused power companies of stealing from Mexicans.



Political Economy


AmCham and Moody’s doubt Mexico’s growth. The American Chamber of Commerce and Moody’s experts believe Mexico will not reach the 6% growth goal (El Financiero – Spanish). Inflation, the labor gap, and the fall in consumption are the reasons.


The IMF warns of Pemex’s debt. According to the International Monetary Fund (IMF), the state-owned company’s debt is still a pressure factor for the public budget (El Economista – Spanish). Since 2019, Pemex’s debt has increased from US$9bn to US$15bn.


All expect Banxico to increase the rate. According to a survey by Reuters, Mexico’s central bank will increase the interest rate for the fourth time, to 5% (Forbes – Spanish). Inflation levels were double the goal established by Banxico.


The IMF advised Mexico to spend more. The International Monetary Fund (IMF) recommended Mexico increase public expense in 2022 from 1.5% of the GDP to 3% to increase the quality of educational, health, and social programs (El Economista – Spanish).



Legal & Regulatory


CRE will be changed, not killed. According to the Energy Commission of the House of Representatives, the Energy Regulatory Commission (CRE) will neither disappear nor change its function (Forbes – Spanish). The CRE will just change its legal definition.


Young environmentalists protest against the energy reform. Young people from 22 environmental organizations believe the energy reform could halt the energy transition (El Economista – Spanish). The reform blocked citizens who want to install solar panels in their homes.


The Supreme Court killed the Nahle Decree. The Supreme Court declared unconstitutional the policy published in May 2020 to prioritize the power generated by the state-owned company with fossil fuels (El Financiero – Spanish). The court argued the policy could block the development of renewable energy plants.


Bartlett accused businesses of playing the martyr. The head of the state-owned company told the Business Coordinator Board (CCE) that instead of complaining, it should ask its members to pay, helping Mexicans (El Financiero – Spanish). Bartlett accused the board of hiding the truth.


The CIEP said the power reform will hurt the GDP. According to the Economic and Budget Research Center (CIEP), the approval of the power reform could cost the GDP 1% (El Financiero – Spanish). The CIEP considered the compensation that would have to be paid to affected companies.



Market Trends


Mexico will stop exporting crude. President López Obrador promised to extract 2 million barrels of crude oil per day only for the domestic market, ending crude exports (El Financiero – Spanish). Mexico has been exporting crude for the last 40 years.


Mexico expects natural gas prices to increase. Mexico’s natural gas imports dropped in the first days of November (Natural Gas Intel – English). Natural gas buyers in Mexico are nervous about supply and price shocks this winter, similar to what occurred at the height of Winter Storm Uri (Natural Gas Intel – English).


Pemex still plans to end fuel imports. As President López Obrador expects to end fuel imports by 2023, Pemex should compete harder with private importers, increase production, and clarify the role of the Deer Park refinery in the future (Expansión – Spanish).



Strategy & Operations


Enel Green Power fights with landowners. Two wind park representatives sued 10 landowners, who rent out their land, for dispossession (El Universal – Spanish). The owners closed access to both wind parks to ask for an increase in the payment for clean roads, wind rights, and a contribution increase for social work.


Pemex wants to reconquer franchised companies. The state-owned company explained its plan to recover gas station businessmen for its brand, as it has lost 44% of the gas stations (El Economista – Spanish). Pemex will offer help getting permits and flexible credits.


The Dos Bocas refinery spent big. Between January and September, the federal government invested MXN123.1bn more than what was planned in the construction of the state-owned company’s refinery (Reforma – Spanish).


Greenlux recommends solar panels to cut the power bill. Greenlux said solar panels could allow short- and long-term savings to reduce the income tax, the CFE’s power bills, and pollution (El Economista – Spanish). The tariff could go down 98% in 25 years.



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!)


Encuentro Internacional de Energía México is scheduled for November 24-25.


Mexico Assembly will be held in May 2022 in Mexico City.



Lateral Thinking


Green hydrogen will be a hit to Pemex’s refineries. Green hydrogen will gradually substitute gray hydrogen in Pemex’s refineries, and by 2038, the transition will be completed (Forbes – Spanish). The estimation was made by the Hydrogen Council.



Quote of the Week


“Si tienes un hondo penar, piensa en mí.”


“If you have a deep suffering, think of me.”



– Agustín Lara (1897-1970), Mexican composer.




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