2017 has been something of a whirlwind here in Mexico. From Trump and doubts over the future of NAFTA, to earthquakes which rocked many local businesses and the financial sector, you may wonder why I am still insisting that you should look to Mexico for your next foreign venture.
In over 20 years of heading up the British Chamber of Commerce in Mexico, I have seen my country develop into one of the major global economies, and we are not finished yet! Mexico remains very much open for business, with more Free Trade Agreements (FTA) than any country in the world, including with the European Union. Crucially, a new FTA with the UK is expected post-Brexit. Moreover, despite its rapid growth, Mexico is financially stable and the country has one of the lowest rates of inflation in all of Latin America. It is also important to note that one of the main reasons for the country’s growth is the competitive nature of the labour and manufacturing costs; Mexico is now four percentage points cheaper than China for manufacturing.
More specifically, just as in Aberdeen, the energy sector is obviously very important to Mexico. In my opinion, the country has seen many positive changes since the 2013 reforms ended the Pemex monopoly and opened the sector’s doors to foreign investment. Companies from over 10 different countries have been involved in the first 8 rounds of oil and gas tenders. Round 2.4 of the tenders will take place on January 31 and will see companies bid for deep water oil and gas projects in the Gulf of Mexico. This auction offers 30 new areas, of which 10 are in the highly promising Cordilleras Mexicanas, viewed by the industry as having an extensive untapped potential. It is the first time that this area (which is also home to Pemex’s Lakach natural gas project) has been made open to the bids of international companies. Other exciting news includes Pemex’s recent onshore oil find, its largest for 15 years. It is currently unknown exactly how much oil the discovery may contain, but Pemex said in a statement that the find has ‘great economic value.’ It is also fortunately located reasonably close to existing infrastructure, so could be brought onstream quickly. Furthermore, the opening of petrol stations by both BP and Shell here in Mexico have been so successful that BP plans to open around 1,500 more in the next 5 years, and Shell expects to open between 1 and 2 gas stations each week in 2018.
Despite the opening up of the oil and gas markets, Mexico also desperately wants cleaner power. The 2015 Mexican General Climate Change law aims to reduce greenhouse gas emissions some 30% by 2020. I share the opinion of many that wind energy will surge in the coming years, and estimates suggest that by the end of 2017, Mexico’s installed wind capacity will reach close to 4 GW from operating wind farms in different regions. Projects which are already contracted will increase installed capacity to around 6 GW by 2018, and additional projects in the pipeline will increase this figure to above 12 GW by 2020. This development in wind energy is in line with the national goal of sourcing 35% of the nation’s power from clean technologies by 2024.
So, yes, it may have been an unsettling year here in Mexico, but that should absolutely not deter interest in entering into this exciting and rapidly changing market. This huge country of 125 million people (with an average age of just 27) has so much to offer, and although I have touched mainly on the energy sector, Mexico is diverse and is growing in many others as well. There are many links between your country and mine, and we at the Chamber look forward to answering any questions or providing more information about Mexico, and the potential it holds.