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October 25, 2021 edition—Hydroelectric power as priority; Kansas City Southern’s forecast; and a modified power reform.
Last Week in a Minute or Less
Electric Power & Renewables. Lawmakers agreed to soften the power reform; Kerry pushed for clean energy goals, AMLO offered hydroelectric power; and the CFE, AFD, and EDF will boost clean energy generation.
Liquid Fuels Mid-Downstream. Kansas City Southern trusts Mexico’s fuel import market; Nahle trusts Dos Bocas will be done soon; and the chemical industry may suffer from the import permit ban.
Natural Gas Mid-Downstream & LNG. Mexico favors Texan natural gas over the Southwest’s.
Government & NGO. IMEF forecasted 6.3% inflation; Mexico grew by 5% in September; and the Finance Minister promised a budget for recovery in 2022.
Déjà vu all over again. Last week’s readers were particularly interested in IMF’s growth forecast (El Financiero – Spanish); the power reform’s threat to private contracts (El Financiero – Spanish); and hydroelectric generation (El Financiero – Spanish).
Geopolitics & Trade
US lawmakers stood against the power reform. US lawmakers wrote to the US ambassador in Mexico to explain their concerns and those of US companies before President López Obrador’s administration (El Financiero – Spanish). Approximately 20 lawmakers argued that actions included in the reform’s proposal will damage trade relations between the US and Mexico.
The US will reactivate the “Stay in Mexico” policy. The US plans to reactivate in November President Trump’s policy “Stay in Mexico,” forcing asylum applicants to wait in Mexico for their trial and resolution (El Economista – Spanish). President Joe Biden killed the program in June but a federal court ordered its reactivation.
US companies are against the power reform. The American Chamber of Commerce of Mexico said the power reform raised questions regarding power supply for companies in Mexico (El Financiero – Spanish). Experts believe the reform could create a trade confrontation between Mexico and the US (El Financiero – Spanish).
Political Economy
IMEF forecasted 6.3% inflation. The Mexican Institute of Finance Executives (IMEF) increased the inflation forecast for the end of the year from 6% to 6.3% (El Economista – Spanish). The main concern is disruptions in the supply chain and high energy prices.
Mexico grew by 5% in September. According to Inegi, Mexico’s economy grew 5% in September compared to the same month in the previous year (Forbes – Spanish). The data showed a deceleration compared to an expansion of 6.8% in the previous month.
The Finance Minister promised a budget for recovery in 2022. Finance Minister Rogelio Ramírez de la O said 15.1% of expenditures will be devoted to economic recovery in 2022, on top of an almost 18% increase in investment in regional projects to boost development (El Economista – Spanish).
Interest rates are up for debate. The deputy governor of Mexico’s central bank said the last interest rate increase was ineffective and inefficient (El Financiero – Spanish). The deputy governor said the increase in the reference rate could affect consumption and investment.
Legal & Regulatory
Lawmakers agreed to soften the power reform… Lawmakers from the ruling party said the power reform should be modified to avoid long international trials (El Economista – Spanish). The president of the Energy Commission of the House of Representatives assured current wind and solar contracts with private companies will continue (El Financiero – Spanish).
…but not all actors are convinced. According to the Mexican Association of Solar Energy and the Mexican Association of Wind Energy, even with modifications, the reform could harm private investment (El Economista – Spanish). The American Chamber of Mexico warned the power reform could impact the region’s prosperity (El Economista – Spanish).
The opposition parties remained against the reform. The opposition block of PAN, PRI, and PRD agreed that the power reform is so important that it cannot be approved in fast track (El Economista – Spanish). PAN may cut ties with PRI if the party supports the energy reform (El Economista – Spanish).
Construction companies fear the power reform. Representatives of the construction sector believe the power reform could scare off investors on big infrastructure and clean energy projects (El Financiero – Spanish). The lack of investment could affect the work of companies such as Cemex and Cruz Azul, among others.
The mining industry is concerned with the power reform. The Mining Chamber of Mexico said the cancellation of power permits due to the proposed power reform would prevent mining operations to power up with clean energies (El Economista – Spanish). According to Torex Gold Resources, Mexico will lose future investments if the certainty level for the mining industry does not grow (El Economista – Spanish).
Market Trends
The private sector won more of the gasoline market. Between January and August, one out of four gasoline liters sold were imported by private companies (El Economista – Spanish). Private gasoline imports increased 62.6%, reaching 24% of the total supply.
Mexico favors Texan natural gas over the Southwest’s. Gas exports to Mexico from the US Southwest — excluding West Texas — have averaged 570 MMcf/d in October, down by about 200 MMcf/d from September. Exports from Texas increased 170 MMcf/d from last month thanks to the expanded pipeline connectivity (Platts – English).
LP gas prices skyrocketed. The highest price set by the Energy Regulatory Commission (CRE) was 26.73 pesos per kilogram (El Economista – Spanish). Prices are expected to increase during the winter.
Strategy & Operations
Kerry pushed for clean energy goals, and AMLO offered hydroelectric power. John Kerry visited Mexico and insisted on transitioning to clean energies, and President López Obrador promised to comply with the environmental goals with hydroelectric plants (Forbes – Spanish). Mexico pledged to reduce greenhouse gas emissions by 22% (Forbes – Spanish).
Kansas City Southern trusts Mexico’s fuel import market. Kansas City Southern finds short-term uncertainty in Mexico’s fuel import market, although the company believes there are long-term opportunities in the country (Platts – English). The regulation may make smaller importers leave the market.
LP gas companies went back to work. The National Gas Association restarted activities of more than 6,000 units that distribute LP gas in Mexico City and the valley of Mexico (El Financiero – Spanish). The decision was taken as a sign of solidarity.
Querétaro will work to guarantee power supply. The state will work with the Federation to create alternatives to offset demand (El Economista – Spanish). A reliable power supply is necessary to secure investments.
The CFE, AFD, and EDF will boost clean energy generation. The state-owned company signed two agreements with the French Agency of Development (AFD) and Électricité de France (EDF) to strengthen the generation capacity of clean and stable sources (El Financiero – Spanish). CFE’s goal is to reduce greenhouse gases.
Nahle trusts Dos Bocas will be done soon. Energy Minister Rocío Nahle claimed the support of the Dos Bocas refinery workers and assured the construction will be done in the set timetable (Forbes – Spanish). The refinery will be called Olmeca (El Economista – Spanish).
The chemical industry may suffer the import permit ban. The chemical industry is concerned with the ban imposed by the government to renew import permits as it could create an economic impact for the industry of US$3.6bn (El Financiero – Spanish).
Tamaulipas pushed for energy policies. Tamaulipas invested more than US$4bn to boost clean and renewable energies in the last five years (El Economista – Spanish). Energy policies have attracted foreign investments in the sector.
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!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May 2022 in Mexico City.
Lateral Thinking
The Concanaco supports renewables in Mexico. The Confederation of National Chambers of Trade, Services, and Tourism (Concanaco-Servytur) asked lawmakers to consider future needs of the tourism sector, including sustainable energy, when discussing the power reform (El Economista – Spanish).
Quote of the Week
“Si quieren la silla presidencial, fórmense.”
“If you want the presidential chair, get in line.”
– Plutarco Elías Calles (1877-1945), Mexican politician and military.
We hope you have a productive week. Please send any news, comments, or sustainable tourism recommendations to MexicoWeekly@energynarrative.com.
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