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Who Is Prepared For Opportunities In Mexico’s Energy Sector?

Mexico’s dream of bridging the income gap between rich and poor has been elusive over the years. Recent structural reforms in the energy sector have the aim of increasing investment to modernize energy production and increase economic development.

A quick review of the Mexican economy reveals strong current and forecasted growth in many sectors. To sustain that growth will require abundant and reliable energy for transportation; industrial production; automotive manufacturing (highest automobile production in North America with billions of dollars currently invested in new plant construction); electronics manufacturing (top 10 in the world); housing for a growing population; oil and gas production (6th largest producer today); and other sectors.

Key moves have taken place by investors in the cement manufacturing sector to support the projected economic growth. Cement, of course, is a major consumer of energy.

In a recent address to the US Economic Club, in New York City, Mexican president Enrique Peña Nieto underlined the serious structural reforms that his country has undertaken to underpin its plans for economic growth. See Reference 1. Mr. Peña Nieto emphasized that these reforms are more than dreams, that they have been converted into law by the Mexican congress with expectations that they will spur investment and economic growth. Increases in oil production in the range 2.5 million barrels per day is expected as a result of investments in the sector by private investors.

Not only is direct growth in the energy sector expected but also in other sectors such as transportation with a planned new airport for Mexico City, a high speed rail system, 3000 km of superhighways, and a doubling of port capacity, among others.

Growth in the energy sector is needed not only as a means of increased foreign exchange but also to sustain internal consumption by its population with increasing aspirations to a higher standard of living.

But the energy sector in Mexico is not just hydrocarbon based. Mexico is in the top 5 countries in the world for solar energy development potential.

By some estimates, México’s use of its wind energy potential is in the low single digits and this deficit is likely to draw investments over the next 10 years of tens of billions of dollars and could move Mexico into a leading position in this sector. Part of the investment will have to address transmission capacity as it is currently a restraint on the development of wind energy. See Reference 2.

Adding strength to these economically favorable decisions is Perú’s concern that this positive move by Mexico will impact Peruvians ability to draw foreign investments for its own benefit. See Reference 3.

According to knowledgeable sources, the reforms enacted by Mexico will have a positive impact on the Texas economy. This impact could create hundreds of thousands of jobs and exceed $3 billion. All of this impact will be seen in increased acquisition goods and services from Texas. See Reference 4.

The question then arises as to who is ready within the US construction industry to participate in these opportunities.

Discussions are also underway at the highest levels of government and industry between Mexican and Spanish firms in the construction sector. See Reference 5. AboutAEC has been tracking the participation of Spanish architecture, engineering, and construction companies in Latin America for some time, as can be seen in the map. Spanish companies have opened up many business fronts in the western hemisphere. More information on this topic may be found at Spanish Architectural, Engineering and Construction Firm Presence in The Americas.

According to AboutAEC’s data base, many U S based companies are already positioned to participate in the upcoming work. Traditionally these companies focused on hydrocarbon sector services work, however, as can be seen in the graphic below, those U S based companies are well equipped to serve each of the energy sectors that will underpin Mexico’s future growth.

AboutAEC can help you strategize to take advantage of these opportunities. Contact us today: info@aboutaec.com

References:

(1) Peña Nieto Destaca en EU Reformas de México
(2) México captará 20,000 mdd en energía eólica
(3) Perú en riesgo de perder inversiones en energía a causa de México
(4) Reforma energética de México beneficiará también a Texas
(5) Constructoras Mexicanas Buscan Aliarse con Españolas

Analysis

    Texas: Where Challenge Meets Opportunity
    Over the last decade the Texas economy, as well as the national economy, has certainly seen stormy years. We are now pulling out of the down cycle and Texas’ traditional strength in the oil & gas industry has been hugely influential.

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