Information collected from media reports over the past month:

• Beverage: Mexican beverage producer Organización Cultiba, exclusive bottler for PepsiCo in Mexico, plans investment of approximately US$157 million in Mexico operations this year.  Resources will be channelled into bottling and distribution operations as well as sugar cane production, the company reported.  (Mexican Business Web, March 6, 2013)
• Telecommunications: Swedish telecommunications giant Ericsson opened a new Global Service Center in the central state of Queretaro.  The US$13 million center is one of four such sites worldwide, and will provide planning, design, implementation and support services to customers in the Americas and Europe , according to the company’s announcement. (TMC News, Ericsson, February 27, 2013)
• Automotive: German auto parts manufacturer Hella will open a new production plant in the central state of Guanajuato this year, the company announced.  The US$100 million project is planned to produce headlamps and rear combination lamps for automotive OEMs in the region. (ProMexico, March 5, 2013)
• Financial services: Spanish-owned bank Bancomer will invest approximately US$3.5 billion over the next four years to expand and upgrade operations in Mexico, the company announced.  Plans include renovating all retail branches in in the country,  upgrading technology platforms for data processing and completing construction of two new operations centers and a corporate office complex in the Mexico City area. (CNN Expansión, March 21, 2013)
• Solar energy: Spanish solar energy developer Isofoton has signed an agreement with the government of the southeastern state of Yucatan to design and build a photovoltaic energy generation site in the state.  The US$360 million facility, planned to begin construction in 2014, is projected to produce 150MW once completed. (NAFTA Works, March 2013)
• Telecommunications: Mexican telecommunications services provider Alestra plans to build a new data center in the central state of Queretaro at a cost of approximately US$61 million.  The new center will provide telecommunications and information technology solutions to corporate clients throughout Mexico through state-of-the-art technology, the company reported. (February 27, 2013)
• Automotive: The state of Queretaro plans to establish a Public Automotive University to provide specialized training specifically to support the central Bajío region’s burgeoning automotive industry.  The project is estimated to require investment of approximately US$63 million.  (Mexican Business Web, March 6, 2013)
• Transport: Rail freight operator Kansas City Southern de Mexico plans investment of US$137 million during the current year, the company announced. Projects include building a rail connection to the Interpuerto Monterrey interior port, adding locomotives and related equipment, and installing new operations management systems. (Milenio, March 13, 2013)
• Retail: Mexican retailer Grupo Sanborns plans investment of approximately US$1.4 billion over the next five years to expand the presence of its sales locations nationwide.  The company operates the Sanborns and Sears department store chains as well as the Mixup music shops. (Mexican Business Web, March 22, 2013)
• Transport: Mexican freight transport and vehicle services provider TIP Mexico will invest US$55 million to support operations this year, the company reported.  Resources will support purchase of new trailers and additional vehicles as well as truck maintenance services. (Mexican Business Web, March 14, 2013)
• Entertainment: Recórcholis, a Mexican-owned operator of family entertainment centers, plans investment of approximately US$11 million this year to open new sites in the cities of Mazatlán, León, Culiacán and Mexico City.  The company operates game and food arcades inside shopping centers in various Mexican cities. (Reforma, March 14, 2013)
• Automotive: Japanese auto parts manufacturer Mitsubishi Electric will open a new manufacturing plant in the central state of Queretaro via investment of approximately US$40 million, the company announced.  The facility is planned to produce alternators and starter motors for the region’s automotive industry. (El Diario, march 19, 2013)
• Food processing: Mexican preserved foods processor Carey will invest US$10 million this year in operational upgrades, the company announced.  The producer of canned chiles, beans and sauces plans to acquire new machinery and equipment to expand their line to include products such as as mushrooms, fruit in syrup and jellies. (Reforma, March 19, 2013)
• Automotive: Japanese auto parts manufacturer Nissin Manufacturing plans to begin construction next month on a new production plant in the northeastern state of San Luis Potosi.  The US$90 million site will produce motor and transmission parts for OEMs such as Honda, Suzuki, Yamaha and kawasaki. (Reforma, March 20, 2013)
• Beverage: Mexican beverage bottler Pascual will establish a new production plant in the western state of Jalisco at an estimated cost of US$5 million, the company announced.  Pascual produces popular fruit flavord soft drinks under brands such as Boing, Lulu and Pato Pascual. (Mexican Business Web, March 21, 2013)
• Automotive: Japanese-owned North American Lighting Mexico plans investment of US$55 million to establish a new production plant in the state of San Luis Potosi, the state government announced.  The facility is planned to produce lights for vehicle OEMs Honda, Nissan and Mazda. (Reforma, March 20, 2013)
• Retail: Mexican pharmacy operator Farmacias Guadalajara plans investment of approximately US$135 million this year to expand its retail presence.  Projects include construction of a regional distribution center in Monterrey and an aggressive pace of new branch openings around the country. (El Financiero, March 20, 2013)
• Automotive: U.S.-based alloy wheel manufacturer Superior Industries is currently seeking a site for a new production plant in Mexico, the company reported.  The planned US$125 million facility is expected to produce over two million aluminum wheels per year. (Rubber News, March 4, 2013)

Information collected from media reports over the past month:

• Automotive: Japanese bearings maker NSK will invest approximately US$70 million to construct a new manufacturing plant in the central Mexican state of Guanajuato, the company announced.  The new facility, to begin production in 2014, is planned to supply the regional automotive industry in the face of rising demand from the NAFTA zone auto market.  (Reforma, February 5, 2013)
• Animal feed: MaltaCleyton, subsidiary of French animal feed maker InVivo, opened a new pet food production plant in the southern state of Morelos.  The US$18 million facility, the company’s tenth in Mexico, will require corn, wheat, sorghum, vitamins, fat, chicken meal and meat, the company reported. (El Financiero, February 21, 2013)
• Biotechnology: Mexico’s CIMMYT Maize and Wheat Improvement Center inaugurated a US$25 million advanced bioscience research center in the central State of Mexico.  The foundations of magnates Bill Gates and Carlos Slim contributed to the project, which will conduct research in support of seed improvement. (CIMMYT, February 13, 2013)
• Transportation: The Mexican government plans to issue tenders this year for construction of two major new passenger rail lines at a total estimated cost of approximately US$3.2 billion, the Transport Ministry (SCT) announced.  The lines would run from Mexico City to the central industrial city of Queretaro and from the Yucatan state capital of Merida to the Riviera Maya region on the Caribbean coast. (El Financiero, January 29, 2013)
• Retail: Coffee shop chain Cielito Querido Cafe, owned by Mexican inter-city passenger bus operator ADO, will invest approximately US$8 million this year to expand operations.  Plans include the opening of 24 new sales locations in the Mexico City metropolitan area. (El Financiero, February 18, 2013)
• Solar power: Mexican solar panel maker Solartec is investing approximately US$63 million to bring equipment and technology from Belgium to Mexico to produce photovoltaic panels in the central state of Guanajuato.  Outlays will cover purchasing the assets of Belgian manufacturer Photovoltech and relocating them in Mexico to create a new firm to be called Solarcell. (Milenio, February 21, 2013)
• Automotive: Japanese automotive component manufacturer Jatco, a subsidiary of Nissan, announced it will establish a new production plant in the western state of Aguascalientes.  The new facility, Jatco’s second in Mexico, is planned to produce transmissions for Nissan’s new vehicle plant under construction in the state.  (Just-Auto, February 7, 2013)
• Biogas: British renewable energy developer ENER-G signed an agreement with the city of Celaya, Guanajuato to build a biogas plant to produce electricity at the municipal landfill, the city government announced.  ENER-G has already opened a US$5.8 million landfill biogas plant in the city of Aguascalientes and is currently developing another such faclity in the northern city of Durango, according to the company’s own media releases. (El Financiero, February 11, 2013; ENER-G, January 28, 2013)
• Aerospace: France-based helicopter manufacturer Eurocopter formally inaugurated its new production plant in the central state of Queretaro.  The US$100 million facility will join the state’s booming aerospace cluster, producing tail booms and cargo and emergency exit doors, the company reported. (Flightglobal, February 14, 2013)
• Automotive: Japanese auto parts manufacturer Nishikawa Cooper inaugurated a new production plant in the central state of Guanajuato.  The US$35 million site will produce rubber seals for Mazda, Honda and Nissan. (El Financiero, January 30, 2013)
• Ports: The Port of Guaymas on the Gulf of California coast of the northwestern state of Sonora will launch major expansion this year to accommodate rapidly increasing demand for cargo handling.  An initial stage including dredging, signage, landfill, roads and utility infrastructure is slated to begin in April at a cost of over US$200 million. (Mexican Business Web, February 8, 2013)
• Automotive: Japanese auto parts manufacturer Tachi-S began construction on a new production plant in the central state of Guanajuato.  The US$30 million facility will produce car seats principally for the Honda vehicle plant in nearby Celaya. (El Financiero, February 11, 2013)
• Steel: South Korean steel processor POSCO initiated construction of a new plant in the central state of Guanajuato, the company reported.  The US$25.4 million facility is planned to provide steel processing and related services to the region’s automotive and appliance manufacturing industries. (El Financiero, February 5, 2013)
• Automotive: Japanese hydraulic pump maker Kayaba Industry Co. (KYB) announced it will build a new manufacturing plant in the central Mexican state of Guanajuato via investment of approximately US$54 million.  The plant is planned to supply pumps to the Nissan-owned Jatco trransmission plant in nearby Aguascalientes state.  (Kayaba Industry Co., February 7, 2013)
• Aerospace: U.S. corporate group General Electric (GE) plans investment of US$20 million this year to expand operations at its Advanced Engineering Center (GEIQ) in the central state of Queretaro.  The center includes a software validation laboratory and carries out test analysis. (El Financiero, February 14, 2013)
• Steel: Transnational steel giant Ternium began initial production testing at its major new complex in the northeastern state of Nuevo León.  The US$1.1 billion facility will produce advanced cold rolled steel sheet and galvanized steel to supply Mexico’s booming automotive industry. (Reforma, February 19, 2013)
• Energy: Sempra Mexico, subsidiary of U.S. energy multinational SempraEnergy, plans investment of US$1.5 billion in Mexico over the next three years, the company revealed.  Upcoming projecs include various gas and ethane pipelines, a gas storage plant and a wind power park on the U.S. border planned to export electricity to California. (El Financiero, February 19, 2013)
• Automotive: Japanese auto parts maker NSK announced it will establish a new plant to manufacture automotive bearings in the central state of Guanajuato.  The US$70 million facility is planned to open in 2014 to meet growing demand from the region’s surging auto industry. (American Machinest, January 17, 2013)
• Beverage: The Coca-Cola Company will invest US$1 billion in Mexico this year, in areas such as infrastructure, technology and refrigeration systems, the company announced.  Coca-Cola’s Mexico operations include 68 bottling plants and 356 distribution centers. (El Financiero, February 20, 2013)

Information collected from media reports over the past month:

• Wind power: Japanese investment group Mitsui & Co. announced plans to take a 50% ownership stake in the Mexican wind power generation facility Bii Stinu, currently under construction by a subsidiary of French energy developer EDF Energies Nouvelles.  Mitsui specified the total cost of the project at approximately US$400 million.  (Mitsui & Co., January 9, 2013)
• Construction: Mexican industrial real estate developer Vesta plans to invest approximately US$90 million to construct industrial buildings for Nissan at the Japanese auto maker’s new production site in the western state of Aguascalientes, the company reported.  (Mexican Business Web, January 14, 2013)
• Retail: Mexican grocery and general merchandise retailer Grupo Chedraui plans investment of approximately US$185 million in Mexico operations this year, the company revealed.  Projects include the opening of 20 new stores in the country. (Mexican Business Web, January 14, 2013)
• Health care: Mexican private hospital operator Grupo Star Médica opened a new hospital in the central state of Queretaro, built at a cost of approximately US$47 million.  The facility includes state-of-the-art technology in areas such as medical imaging and obstetrics and gynecology, among others.  Star Médica currently has three other new hospitals under construction. (El Financiero, January 14, 2013)
• Automotive: German auto maker Volkswagen inaugurated a new production plant in the central Mexican state of Guanajuato following investment of US$500 million.  The plant becomes the company’s 100^th factory worldwide and is projected to produce 330,000 motors annually. (El Economista, January 16, 2013)
• Retail: Mexican grocery and general merchandise retailer Soriana plans investment of approximately US$315 million in expansion and upgrades this year, the company announced.  Projects include the opening of 60 new stores, remodeling and expansion of existing stores, property acquisition and logistics upgrades. (Reforma, January 16, 2013)
• Food processing: Swiss processed foods giant Nestlé will invest approximately US$9 million in research and development in Mexico this year, the company reported.  Nestlé executives also noted the company’s clean energy efforts, ultilizing biodigestors and wind energy to power some of its Mexico operations. (Reforma, January 17, 2013)
• Industrial parks: Mexican industrial real estate developer Finsa plans to invest approximately US$137 million in new industrial parks this year.  Projects include infrastructure development in support of the automotive and aerospace industries in the central and northern zones of the country. (Reforma, January 17, 2013)
• Retail: U.S.-based coffee shop chain Starbucks, operated in Mexico by Alsea, plans to open 45 new stores in Mexico this year via investment of US$40 million.  Alsea also operates franchises including Domino’s Pizza, Burger King, Chili’s, California Pizza Kitchen and P.F. Chang’s in the country. (Reforma, January 18, 2013)
• Steel: Mexican corporate group Industrias Lenox began construction of a new steel producing plant in the northeastern state of Nuevo León, the company announced.  The US$200 million facility is planned to respond to increasing demand from Mexico’s booming automotive industry. (El Financiero, January 20, 2013)
• Telecommunications: Mexican telecom service provider Alestra plans investment of approximately US$132 million across its operations in the country, the company announced.  Resources will be put toward infrastructure expansion and upgrades by the operator of services such as telephony, data processing and integrated IT solutions for business. (Reforma, January 22, 2013)
• Chemicals: Swiss specialty chemicals producer Clariant opened a new production plant in the eastern state of Veracruz, the company reported.  The US$20 million facility is planned to produce chemical components for use in the manufacure of consumer goods such as skin creams, shampoos and home cleaning products. (Reforma, January 24, 2013
• Retail: Mexican commercial real estate developer Grupo Inmobiliario Monterrey (GIM) will begin construction this year on a major new shopping center in the northeastern city of Monterrey.  The complex is planned to include leading retailers such as H&M, Crate & Barrel, Emporio Armani and Forever 21, as well as restaurants The Cheesecake Factory and P.F. Chnag’s, the company reported. (Reforma, January 28, 2013)
• Hotels: Mexican hotel operator Hoteles City plans to open 15 new hotels this year in Mexico and Central America, the company announced.  The new sites are slated for cities including Mexico City, Cabo San Lucas, Oaxaca, Puebla, Toluca and others. (Mexican Business Web, January 29, 2013)
• Agriculture: A group of citrus producers will invest approximately US$16 million to build a large scale juice processing plant in the northeastern state of Nuevo León, the state government reported.  The facility is planned to process 800 tons of oranges daily for juice production for export to the United States. (Reforma, January 30, 2013)
• Food processing: A private investment group is investing approximately US$8 million in Mexican food processor Procesa, based in the southern state of Chiapas.  Resources will be channeled to support the company’s operations for packing tuna in bags rather than cans.  (Reforma, January 30, 2013)

Post by Agathe Vigne for Mexico Business Blog

Petroleos Mexicanos (Pemex) and Mexico’s energy sector in general are bound to evolve in the next six years. That was one of Mexico’s newly elected president Enrique Pena Nieto’s  seven campaign promises.  To embody that  change, EPN is counting on two new leaders at the head of the ministry of Energy (Sener) and Pemex.

The new energy minister, Pedro Joaquin Coldwell, is a 62-year-old seasoned politician. A long-time member of the PRI, Coldwell has occupied a variety of positions inside the party and has served as local and federal deputy and senator for the state of Quintana Roo.

On the other hand, 37-year-old Emilio Lozoya Austin has been at the head of private companies and investment funds, as well as Director for Latin America at the World Economic Forum.  Except for his past stint as analyst at Mexico’s Central Bank, Banco de Mexico, Emilio Lozoya has no real experience in government. However, he is the son of a former energy minister under Carlos Salinas de Gortari, Emilio Lozoya Thalmann.

Though their profiles strongly differ – Coldwell, the experienced politician specialized in tourism and development, and Lozoya, the young financial shark – they  have one thing in common: they are new to the energy sector.  That could be seen as a weakness, as critics already warn of the privatization of Pemex and the uncontrolled selling of national resources to transnational companies.

Nevertheless, their relative independance from the controversial Oil Worker’s Union (STPRM) could also be a strength.  Indeed, the country needs to review its reliance on hydrocarbon resources and ensure the future financial health of Pemex through courageous exploration programmes and a profound internal restructuring.  This will mean making decisions that may be opposed by powerful union officials, some of which are influential members of the PRI.

Changes already announced for Pemex in its 2013-2017 business plan include the gradual opening of  Pemex refining and the modernization of petrochemical plants (particularly regarding ensuring the electricity supply) and transportation operations.

On exploration and production, not much has been said since the discovery of two deepwater fields this year. Though analysts are betting on more associations with the private sector – through joint industry projects, for example –  no constitutional change has been clearly announced yet. However, a modification of article 27 of the Mexican Constitution is necessary for Pemex Exploration and Production (PEP) to create associations with private firms.

Medium-term challenges are not only financial but also technological for PEP and a complete reshaping of the subsidiary is necessary for its long-term survival.  In a previous post, we touched on the financial and technological challenges associated with deepwater exploration and production.

From “Perspectives for the development of shale oil and gas” (“Perspectivas para el desarrollo de gas y aceite de lutitas”), a document published by the Ministry of Energy (SENER), it can be concluded that PEP is also struggling with its 2010-2012 shale gas exploration and exploitation plan.

Actually, according to the author, Mario Gabriel Budebo, the only possibility for Pemex to make substantial gains with shale gas exploitation is to find oil as well in the field, and in sufficient quantities to make it profitable. Furthermore, it would be interesting to add environmental costs to the already high E&P costs, to assess whether shale gas is sustainable as well as commercially viable.

Since the 2010-2012 plan was launched, six wells have been drilled in the north of the country but very little gas was obtained, according to UNAM oil analyst Fabio Barbosa.

In its 2013-2017 business plan (published in November 2012), Pemex announced plans to drill 175 shale gas wells. Nevertheless, only a few weeks after the plan’s publication, Pemex restructured its activities and shifted focus from the north of the country to the Tampico basin region (north of Veracruz), abandoning large territories with shale gas potential.

It is difficult to read Pemex’s (and Mexico’s) policy on this precise point.  While the United States is starting its transition to natural gas and has been exploiting shale gas more intensively in anticipation of the oil peak, Mexico has been unable to develop technological and financial models adapted to the E&P of non-conventional resources.

According to Patricia Espinosa of the Foreign Affairs Ministry (SRE), Mexico holds the world’s fourth largest recoverable shale gas resources.  Will the new directions of SENER and Pemex drive the transition toward shale gas or will they bet on other alternatives?

Email Agathe Vigne at a.vigne@bdp-americas.com

Sources: Reforma, 15-11-2012 y 13-11-2012
Business News Americas 28-11-2012 y 3-12-2012
CNNMéxico 30-11-2012
“Perspectivas para el desarrollo del gas y aceite de lutitas”, Mario Gabriel Budebo, Secretaria de Energia, 1/10/2012

Information collected from media reports over the past month:

• Pharmaceutical: Mexican pharmaceutical group Neolpharma inaugurated a new production plant in Mexico City, the company reported.  The US$20 million facility will produce oral and intravenous solutions as well as providing bottling services to other pharmaceutical manufacturers in the area. (Reforma, October 30, 2012)
• Wind energy: Mexican multinational baking giant Grupo Bimbo inaugurated a new wind power generation plant in the southern state of Oaxaca.  The US$200 million facility boasts installed capacity of 90 Mw and was built by the Mexican subsidiary of Spain’s Renovalia Energy. (CNN Expansión, October 31, 2012)
• Real estate: The Riviera Nayarit region of Mexico’s Pacific coast has approximately US$160 million worth of new hotel development either underway or projected, the Riviera Nayarit Convention and Visitors Office reported.  Projects include new hotels for chains such as Iberostar, Occidental Grand and Palladium in locations such as Nuevo Vallarta, Bahía Banderas and Litubú. (Mexican Business Web, November 5, 2012)
• Solar energy: Mexican airport operator Grupo Aeroportuario Centro Norte (OMA) inaugurated a solar power generating park on the site of its international airport in the northern city of Zacatecas.  The US$1 million installation is projected to supply the airport with 370,000 Kw/h per year, according to OMA. (Grupo Aeroportuario Centro Norte, November 1, 2012)
• Automotive: U.S. auto components manufacturer Johnson Controls will establish a new manufacturing operation in the central state of Queretaro via investment of US$15 million, the state government announced.  (Mexican Business Web, November 7, 2012)
• Manufacturing: U.S. heavy equipment manufacturer Caterpillar plans investment of up to US$500 million in the northeastern state of Nuevo León, the company announced.  An initial US$165 million is earmarked for building and equipping a new plant to produce gear units and components for trucks, excavators and bulldozers for the mining and construction industries. (Reforma, November 9, 2012)
• Ports: Construction is underway on a new container handling facility at the Port of Lázaro Cárdenas in the western state of Michoacán.  The US$900 million greenfield project, developed by APM Terminals, a subsidiary of Danish shipping group Maersk, will include a container yard, extensive quay with two berths, office and warehouse space, gates and rail facilities. (El Economista, November 9, 2012)
• Aviation: Mexican low-cost airline Interjet will order 40 new jets from Airbus via investment in excess of US$3 billion, according to media reports.  The purchase is anticipated to focus on Airbus’ A320 Neo single aisle aircraft. (Morningstar Advisor, November 13, 2012)
• Coatings: U.S. paint and coatings manufacturer Sherwin-Williams announced it reached an agreement to acquire Mexican coatings leader Comex.  The deal to buy Comex, which operates 16 manufacturing plants throughout North America, is estimated at approximately US$2.34 billion. (Wall Street Journal, November 12, 2012)
• Retail: Soriana, Mexico’s second largest grocery and general merchandise retailer, plans investment of approximately US$320 million for 2013, the company revealed.  The 25% increase in investment over 2012 is projected to include the opening of 60 new stores. (Mexican Business Web, November 22, 2012)
• Wind energy: Italian renewable energy developer Enel Green Power will build a wind power generation plant in the southern Mexican state of Oaxaca, the company announced.  The US$130 million facility is projected to produce over 350 GW per year. (CNNexpansión, November 22, 2012)
• Retail: Mexican retailing group Controladora Comercial Mexicana announced plans to invest approximately US$270 million in expansion next year.  Resources will be put toward remodeling existing stores and opening new retail locations under the group’s larger grocery and general merchandise formats such as City Market, Fresko and Mega. (El Financiero, November 26, 2012)

Agathe Vigne returns with some thoughts on recent reports of new deepwater petroleum reserve discoveries in Mexico.

In its last energy security report, the U.S. Chamber of Commerce pointed to Mexico as the most energy-secure country in the OECD.  The writers of the report underscored various factors reinforcing the country’s energy security: the existence of large shale resources in the north of the country, recent deepwater discoveries and low energy expenditures and carbon emissions per capita.

The report highlights the importance of Mexico as the world’s seventh largest oil producer (according to the OECD), and to the country’s efforts to support the development of alternative energies.

The context is very favorable for Mexico’s O&G sector. Indeed, President Felipe Calderon announced the discovery of two new deepwater fields: Trion I (est. 250 – 400 mn barrels) and Supremus I (est. 75 – 175 mn barrels), both drilled in the Perdido fold belt area. In parallel, the exploitation of mature fields and shale gas reserves should help compensate for the declining production of the country’s principal oil field, Cantarell.

Nevertheless, the U.S. Chamber of Commerce’s report is not as positive for Mexico as it might seem.  The report states that “Mexico’s energy security risks…are worsening at a faster rate than for the OECD as a whole.  As a result, Mexico’s advantages are shrinking: From a 1980 score 34% better than the OECD average, Mexico’s score in 2010 was just 14% better.”  Apart from Cantarell’s sharp production decline, the report cites factors threatening Mexico’s energy security, such as the need to import natural gas and coal, political choices favoring thermal power and increased per capita consumption.

This week we are pleased to feature a guest post by our colleague Agathe Vigne, a trade consultant specialized in the oil and gas industry.

The times they are a changin'

Mexico’s national oil and gas company Petroleos Mexicanos (Pemex) has represented a dilemma for Mexican governments over the past decades. Every proposed reform is subject to a large debate throughout society on whether or not to privatize the “national treasure.”

While Vicente Fox sagely compared Pemex to the Virgin of Guadalupe, both “symbols for Mexicans that should be handled with care,” President Felipe Calderon tried a more direct approach with 2008’s energy reform. Debate over the bill came to its peak with the occupation of the national assembly and the subsequent withdrawal of the most controversial aspects of the text.

While on an official visit to Brazil this past September 19, President-elect Enrique Peña Nieto (EPN) has again mentioned the possibility of a reform that would allow for more private investment in the company. “What I am suggesting is Pemex’s modernization,” he said, “It is not about privatization, it is a mechanism that facitilitates private sector participation.”  His idea is to increase the national company’s competitiveness through a gradual partial opening to international stock markets. (El Universal, September 20, 2012)

This declaration follows the opinion expressed by Pemex’s general director  Juan Jose Suarez Coppel on the eve of the Mexican Oil Congress, that took place from September 10 to September 15.  Suarez Coppel brought up three options for Pemex’s future:

-          the “Banxico option,” that consists of removing Pemex from the national budget and giving it financial autonomy. This option wouldn’t change much of the company’s functionning, and the only way for the private sector to intervene in the company would be via incentive-based contracts. These have proved to be insufficient in the case of complex or risky projects such as shale gas or deepwater exploration.

-          the “Saudi Aramco option,” which consists of privatizing the company. This would require a constitutional modification, with a two-thirds majority in Congress and would create an uproar in the population.

-          the “Petrobras option,” which seems to be what EPN has in mind. This would consist of creating a mixed company that would be able to compete and associate with international oil majors.  Such a reform would also require a two-thirds majority in Congress but would be less controversial, given the Brazilian and Colombian success stories. (Business News Americas, September 10, 2012)

These recent announcements show that Pemex has no choice but to evolve quickly. Indeed, the company is confronted by a very high debt due to wrong choices in financing (pidiregas), very high tax rates, pension liabilities up to 800 billion pesos (US$62 billion), technology transfer issues, and general lack of capacities to exploit complex oil and gas fields.

The example of deepwater exploration is striking.  Juan Carlos Zepeda, president of the National Hydrocarbons Commission, underscored that Pemex does not have the equipment, material, personnel, security policies or technology to exploit deepwater fields.  Such projects generally require the association of three to five oil companies, in order to reduce risks and implement the best possible practices.

This year’s Mexican Oil Congress put Chevron in a place of honor with a long conference on its deepwater projects around the world.  Most international oil majors were present in the trade show, almost eclipsing Pemex’s traditional partners — oil services companies such as Schlumberger or Halliburton. The sign of a change towards a Brazilian model?

Agathe VIGNE

Trade Consultant for Oil and Gas

Information collected from media reports over the past month:

• Wind energy: Mexican hydroelectric developer Comexhidro and U.S. investment firm Conduit Capital Partners will team up to develop a 22 Mw wind generation facility in the northeastern Mexican state of Nuevo León.  The plant is planned to use eight General Electric turbines and provide electricity for public lighting in the municipality of Santa Catarina. (El Financiero, July 27, 2012)
• Automotive: Korean auto maker Hyundai Motors began construction on a new manufacturing plant in the northern city of Tijuana, on the Mexican border with California.  The US$131 million facility is planned to produce die cast aluminum parts such as engine blocks, heads and transmission cases. (El Economista, August 28, 2012)
• Research & Development: U.S. corporate group 3M inaugurated a new Innovation Center in Mexico City’s Santa Fe business district.  The center, part of planned 3M investments totaling US$184 million over the next five years, will carry out research and product development in areas such as nanotechnology, specialized materials, biotechnology and electromechanics, the company reported.  (Reforma, August 28, 2012)
• Chemicals: U.S. mixer of custom rubber compounds Preferred Compounding has entered the Mexican market via the acquisition of a 66,000 square foot production facility in the central state of San Luís Potosi, the company announced.  The fully functioning facility will provide custom compounds to customers in industries such as automotive, construction, power generation and roll goods. (Preferred Compounding, July 2012)
• Automotive: U.S. auto maker General Motors announced it will invest US$120 million in its manufacturing plant in the central state of San Luís Potosí to produce its new Chevrolet Trax SUV crossover model, to be unveiled later this year at the Paris Motor Show.  Another US$200 million will be channeled into the GM plant in Guanajuato state to develop and produce a new generation of pickups in 2013, the company revealed. (Reuters, July 19, 2012)
• Logistics: Japanese auto parts logistics specialists began construction on a new logistics center in the central state of Guanajuato.  The US$10 million site is planned to provide transport services to the region’s rapidly growing automotive manufacturing industry. (El Sol del Bajío, August 9, 2012)
• Automotive: Japanese auto parts manufacturer Honda Lock initiated construction on a new production plant in the central state of Guanajuato.  The US$28 million plant will make products such as automotive door locks, rear view mirrors, door handles and wheel sensors, the company reported. (El Financiero, August 27, 2012)
• Mining: Mexican mining group Industrias Peñoles inaugurated a new Central Laboratory in the northern state of Coahuila, the company reported.  The US$14 million facility will provide state-of-the-art analysis of raw materials and finished product from the company’s 20 operating units. (El Universal, August 16, 2012)
• Aviation: U.S. air carrier Delta acquired a US$65 million stake in Aeromexico, Mexico’s largest airline.  The transaction creates a service alliance covering 93 destinations, and the two carriers are developing plans to open a maintenance and overhaul facility in Mexico next year. (NAFTA Works, July-August 2012)
• Tourism: Spanish hotel operator Iberostar will build a 450-room luxury beachfront hotel on the Pacific coast in the state of Nayarit, Mexico’s Tourism Ministry announced.  The US$100 million project is planned to emphasize sustainability and environmental harmony.  (NAFTA Works, July-August 2012)
• Manufacturing: Japanese component manufacturer Yamada launched operations at a new factory in the central state of Guanajuato.  The US$15 million Yamada-Vistamex plant will produce parts for shavers for client Proctor & Gamble. (El Financiero, August 9, 2012)
• Food processing: U.S. confectioner Hershey’s announced US$50 million worth of new investment to expand production at its plant in the northeastern city of Monterrey.  Resources are earmarked for the installation of two new production lines for the manufacture of new products. (El Financiero, August 10, 2012)
• Automotive: U.S. auto parts manufacturer Delphi inaugurated a new manufacturing plant in the northern state of Durango.  The US$23 million facility produces wire harnesses for auto maker General Motors.  (Wall Street Journal, August 15, 2012)
• Food processing: U.S. food flavorings producer McCormick will invest US$0.8 million to create an Innovation Center on the grounds of its existing production plant in the central State of Mexico.  The new center will work with processed food manufacturers to create custom flavorings for new products. (Reforma, August 31, 2012)

Mexico has lagged behind Brazil in the development of renewable energy resources, but progress is being made in a number of areas.  From updated legislation allowing net metering to a veritable boom in wind farms, the country is definitely moving forward despite a public policy environment that is not always favorable.  Here at Mexico Business Blog we’ve touched on various renewable energy topics in recent years, from solar and wind to methane recovery, and we’ve researched liquid bio-fuels and biomass fuels as well.  Along the way, we realized we haven’t heard much about marine energy development in Mexico, despite the country’s nearly 5,800 miles of coastline.  So we decided to take a dip into the murky waters of publicly available information, and here’s what we found:

Mexico has not made large strides in marine energy generation, despite its lengthy coasts on both the Atlantic and Pacific Oceans.  Research apparently is underway, however, and the country may be close to launching its first wave energy generation project.  The Federal Energy Commission (CFE) actually has considered the potential of marine energy for Mexico since 1974, when it undertook its first feasibility study of the exploitation of wave energy for the country.  The topic received relatively little attention as other forms of renewable energy were given higher priority.  In 2008, the CFE announced a plan to build a pilot project to generate electricity using wave energy at a site near Rosarito, in Baja California, approximately 30 miles south of San Diego, California.  The planned installation was intended to utilize Oscillating Water Column (OWC) technology provided by Oceanlinx of Australia for generation capacity of 750 KW.  Despite announcing the project, the CFE did not move forward with implementation, opting to continue evaluating alternative systems.  In May 2012, the CFE issued a new tender for a wave energy plant at the same site.  The contract was awarded to a consortium of Mexican companies and projected to begin construction in July 2012, although the technology to be used has not been revealed.

Despite a burgeoning wind energy industry, Mexico has not heretofore implemented offshore wind power infrastructure.  Local researchers, however, are pursuing other forms of marine power generation.  In addition to developing homegrown Wave Energy Conversion (WEC) technology, scientists at the National Autonomous University (UNAM)’s Institute of Marine Science and Limnology are working to develop a wave powered water pump to distribute seawater to lagoons without the use of electricity.  UNAM’s IMPULSA project for scientific innovation is currently developing two additional marine energy projects, one involving use of heat from underwater hydrothermal vents to create steam for electricity generation, and the other to generate electricity from marine currents via hydroelectric generators.

Interested in the renewable energy market in Mexico?  Drop us a line at info@bdp-americas.com

Information collected from media reports over the past month:

• Plastics: Mexican chemical and plastics maker Alpek will invest approximately US$2 billion over the next four years in petrochemical infrastructure and electricity generation, the company announced.  Mexico’s largest petrochemical group plans to boost output of ethylenglycol and PET plastic, among other projects. (Mexican Business Web, May 9, 2012)
• Automotive: U.S. automotive fiber products manufacturer Janesville Acoustics inaugurated a new production facility in the central Mexican state of Guanajuato.  The US$4.5 million plant will produce fiber products to manage vehicle acoustic performance for the area’s thriving automotive manufacturing industry. (Automotive Business Review, May 15, 2012)
• Retail: Leading Mexican grocery and general merchandise retailer Chedraui will invest approximately US$220 – 260 million this year in expansion and upgrades, the company reported.  Resources are earmarked for the opening of 16 new stores and maintenance systems for existing sites. (El Financiero, May 10, 2012)
• Automotive: German corrugated pipe manufacturer invested US$3.7 million of a planned US$7 million to begin operations at a new production plant in the central state of Guanajuato.  The facility will produce fluid transfer and cable protection systems for automotive and industrial applications. (El Economista, April 25, 2012)
• Energy: Mexican grocery and general merchandise retailer Soriana will begin construction this month on a wind energy plant in the northern state of Tamaulipas.  The US$100 million generating plant will be built in association with wind energy developer Compañía Eólica de Tamaulipas (CETSA).  (Milenio, May 16, 2012)
• Automotive: U.S. automotive components manufacturer American Axle & Manufacturing, Inc. inaugurated a new production plant for its AccuGear division in the central Mexican state of Guanajuato.  The US$30 million facility will reportedly provide gear forming, machining and heat treating services for automotive OEMs including Chrysler, Nissan, General Motors and Volkswagen, the company reported. (El Financiero, May 17, 2012)
• Transport: The western city of Aguascalientes invested approximately US$2.5 million in the purchase of 50 Nissan Leaf electric automobiles for incorporation into the city’s taxi fleet.  The zero-emission vehicles were inaugurated providing free service during the recent San Marcos state fair.  (El Universal, May 14, 2012)
• Automotive: Korean automotive manufacturer Hyundai announced planned investment of US$131 million to build a new production plant in the city of Tijuana, on the Mexico-California border.  The new facility is planned to produce engine blocks, cylinder heads and transmission components.  (El Financiero, May 21, 2012)
• Aerospace: France-based helicopter manufacturer Eurocopter inaugurated two Spanish-language training centers in the central Mexican state of Queretaro, in the framework of a multi-stage US$600 million investment program planned for Mexico.  Training areas will include engine maintenance, mechanics, avionics and pilot training. (El Financiero, May 24, 2012)
• Automotive: Japanese-owned automotive rubber and glass products manufacturer Nishikawa Cooper is preparing to launch operations at a new production plant in the central Mexican state of Guanajuato.  The US$35 million facility will provide components for OEMs such as Honda, Nissan and Mazda. (El Porvenir, April 1, 2012)
• Automotive: Japanese auto parts manufacturer Yutaka Technologies has begun construction of a new production plant in the central state of Guanajuato.  The US$40 million facility will produce exhaust, engine and brake parts for automobiles and motorcycles. (Zona Franca, May 9, 2012)
• Automotive: Japanese auto parts maker Alpha began construction of a new production facility in the western state of Jalisco.  The US$80 million plant, to be the country’s second in Mexico, will provide plating processes for locks and door handles for clients such as Honda, Nissan and General Motors in the country. (Milenio, May 26, 2012)