The Weekly Brief: Mexico


October 11, 2021 edition—Opposition to AMLO’s power reform; LPG market; and Mexico’s growth.




Last Week in a Minute or Less


Electric Power & Renewables.

AMLO left solar in limbo; CFE invested less in its infrastructure; and the power reform menaces US$44bn in private investments.


Liquid Fuels Mid-Downstream. US propane prices hit Mexico’s LPG market; the Finance Ministry helped drivers with a subsidy; and an LP gas pipeline leak hit the México-Querétaro highway.


Oil & Gas Upstream. Pemex’s union got better salary and benefits; and AMLO plans to make the CNH and CRE go away.


Government & NGO. The World Bank has high expectations for Mexico’s economy; the USMCA does not allow AMLO’s power reform; and analysts expect a 6.2% GDP growth.


Déjà vu all over again. Last week’s readers were particularly interested in CFE’s natural gas (El Financiero – Spanish); AMLO’s investment in refineries (El Economista – Spanish); and Braskem Idesa’s contract (Platts – English).



Geopolitics & Trade                            


Mexico’s exports tumble in August. Mexico’s exports fell 4.58% in August due to the COVID-19 third wave and the lack of chips for auto production despite strong US demand (El Financiero – Spanish). Fuel exports were hit by Pemex’s platform fire.


The USMCA does not allow the power reform. The energy counter-reform as it is written would break with international agreements and could provoke international arbitrations (El Economista – Spanish). According to the Business Coordinator Board (CCE), the reform could be left as “dead letter” due to the numerous writs of amparo and international mediations (El Economista – Spanish).


Mexico asks the US for reciprocity on security. Mexico’s foreign minister Marcelo Ebrard asked to ensure “reciprocity” from the US on arms trafficking and extraditions (Reuters – English). Ebrard mentioned 10 priorities for reducing violence to be discussed during high-level security talks.



Political Economy


Moody’s does not trust the power reform. According to the international rating agency, the power reform proposed by the government will affect investments and delay Mexico’s energy transition (El Economista – Spanish). Moody’s expects less transparency in the costs and operations in the sector with the elimination of the energy regulators.


Tax income increased 2.5%. Tax income reached MXN2.7bn by the end of September, a 2.5% increase compared to the same period in 2020. Of the total amount, MXN735.243 million came from customs duties, thanks to the fight against corruption at the border (El Economista – Spanish).


Analysts expect 6.2% GDP growth. According to Citibanamex’s survey, Mexico’s GDP will increase by 6.2% in 2021, a 0.1% increase compared to the previous prediction (El Financiero – Spanish). Inflation is expected to reach 6.2% and 6.1% in 2021 and 2022, respectively.


The World Bank has high expectations for Mexico’s economy. The World Bank forecasts 5.7% GDP growth in 2021. However, considering the lack of strategies to speed up growth, the institution predicts 3% growth for 2022 and 2% for 2023 (El Economista – Spanish).



Legal & Regulatory


AMLO cannot count on all the opposition votes. The opposition party PRI asked to discuss the reform publicly while assuring there is no division with its partners PAN and PRD, which have already rejected said reform (El Economista – Spanish). The goal is to review the proposal in detail to make an informed decision.


Businessmen oppose the reform, and Nahle promises to purchase their power. Companies are concerned with the loss of competition from being forced to buy power from the CFE at higher costs (Forbes – Spanish). Energy Minister Rocío Nahle offered to purchase private companies’ power production (El Financiero – Spanish).


AMLO plans to make the CNH and CRE go away. The power reform proposal includes the disappearance of the National Hydrocarbons Commission (CNH) and the Energy Regulatory Commission (CRE). The proposal suggests the National Center of Energy Control will be assimilated into the CFE (El Financiero – Spanish).


AMLO expects a quick pass for the power reform. The House of Representatives expects to pass the power reform between November 12 and December 15 (El Economista – Spanish). The opposition warned that the reform will not be approved by the Senate (El Economista – Spanish).



Market Trends


US propane prices hit Mexico’s LPG market. Propane prices at the US natural gas liquids hub reached their highest level in more than seven years (Natural Gas Intel – English). Propane exports to Mexico averaged 110,000 b/d in June and imports accounted for 56% of Mexico’s LPG.


The Finance Ministry helped drivers with a subsidy. From January to September, the Finance Ministry spent MXN38.5bn on subsidies for fuel imports, MXN36.1bn more than in the same period in 2020 (El Financiero – Spanish). The fiscal income from the special tax on gasoline was MXN316.8bn, a 12.2% fall compared to the same period last year.


S&P trusts Braskem-Idesa and Pemex’s deal. The international rating agency raised Braskem-Idesa’s credit rating from “B” to “B+” after the firm and the state-owned company Pemex reached an agreement over ethane gas supply (Reuters – English). The deal ends a conflict between the companies and “lessened previous operational and financial concerns.”



Strategy & Operations


Greenpeace disapproves of the power reform too. The environmental organization believes the reform could cancel the continuation of community generation projects and the installation of solar roofs for self-generation in Mexican homes (El Economista – Spanish). Greenpeace pointed out that in the text, renewables are described as “intermittent” and not trustworthy.


The power reform menaces US$44bn in private investments. According to the Business Coordinator Board (CCE), the power reform could affect US$44bn in investments in the sector, developed or under execution (El Economista – Spanish). Businessmen asked lawmakers to consider the effect of the reform before approving it with a 46% private generation limit.


CFE invested less in its infrastructure. Between January and August, the state-owned company spent MXN13.9m in new infrastructure and maintenance, 4.4% of its expense (El Economista – Spanish). In comparison, CFE has paid MXN29.5m in pensions, and the total budget for infrastructure investment for the year is MXN54.4m.


Pemex’s union got better salary and benefits. The state-owned company and its union reached an agreement over salary and benefits: a 3.40% salary increase and a 1.75% increase in benefits (Forbes – Spanish). The agreement puts an end to the 2021-2023 collective contract review.


AMLO left solar in limbo. The Mexican Association of Wind Energy and the Mexican Association of Solar Energy warned that power reform will make the renewables industry disappear (Forbes – Spanish). Experts believe the proposal is full of contradictions when referring to distributed generation (El Financiero – Spanish).


An LP gas pipeline leak hit the México-Querétaro highway. At least 40 people were evacuated after a leak on an LP gas pipeline affected the México-Querétaro highway in the Santa María Atzcapotzaltongo community (López Dóriga – Spanish). The highway was closed to traffic.



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 Future of Energy Virtual Conference will be held October 12-14.


Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.


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



Lateral Thinking


A mangrove forest may provide clues on climate change. A mangrove forest was found more than 200km from the nearest ocean, in the Yucatán Península (UCSD News – English). The study highlights the extensive landscape impacts of past climate change on the coastlines and offers opportunities to better understand future scenarios.



Quote of the Week


“El que primero dispara, primero mata. Pues bien, la política de México, política de pistola, sólo conjuga un verbo: madrugar.”


“The one that shoots first, kills first. Well, Mexico’s politics, pistol politics, only conjugates one verb: rise early.”



– Martín Luis Guzmán (1887-1976), Mexican novelist and journalist.




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