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Mexican President-Elect Inherits Trade Agreement and Speaks to Oil Companies

By the time Mexican President-Elect Andrés Manuel López Obrador (a.k.a. AMLO) takes power on 1 December 2018, international investors hope to get a clearer understanding of his administration’s plans regarding international investment in his nation’s offshore oil reserves. While questions remain about AMLO’s policy regarding both new and existing contracts for offshore oil, some experts see reason for optimism.

noticias 09New Trade Deal Could Boost Mexican Economy

While the North American Free Trade Agreement is best known by a five-letter acronym (NAFTA), as far as politics goes, it has been reduced to a four-letter word.

This is true not only in the United States, but in Mexico as well. And while outgoing President of Mexico, Enrique Peña Nieto, negotiated and signed the new United States–Mexico–Canada Agreement (USMCA) set to replace NAFTA (pending ratification), it could be AMLO who benefits politically from the new accord. That’s the opinion of Duncan Wood of the Wilson Institute who says that the resolution of uncertainty that this new agreement brings will inspire international investment.

“Mexico now has a renewed free-trade agreement with the United States at the same time that the United States is engaging in trade conflict with other parts of the world, in particular with China,” he says. “And this is the big one: As the United States-China trade war picks up, a lot of the investment that would have gone to China, in order to export to the United States, is not going to go there anymore. It’s going to go to places like Mexico, particularly in those areas where there aren’t any regional content or salary based content requirements (per the USMCA).”

One such area for investment, according to Duncan Wood, is the refining and petrochemical sector connected to energy production, which AMLO has promised to boost.

“If you want to produce plastics in North America,” Wood states, “there’s one place where you could do that really easily now, and that would be Mexico.”

Big Oil Meets with AMLO

At a 27 September 2018 meeting with the Asociación Mexicana de Empresas de Hidrocarburos (Amexhi), a trade group representing nearly fifty companies that includes BP, Royal Dutch Shell, Chevron and ExxonMobil , López Obrador expressed his desire to partner with private investors to reverse the decline in Mexico’s oil production. In response, the attending representatives stated their desire to be strategic allies of the Mexican State in the development of an energy industry that contributes to the growth and well-being of the country.

Aside from the President-Elect, the event was attended by Rocío Nahle, Mexico’s future Secretary of Energy, Alfonso Romo, Chief of the Cabinet of the President Elect and Octavio Romero, future Director General of Petróleos Mexicanos.

On behalf of the Mexican Association of Hydrocarbons Companies (AMEXHI), Alberto de la Fuente, Chairman of the Board of Directors, presided over the conversation. On the part of the National Association of Hydrocarbon Producers was its president, Horacio Méndez.

During the event, the President-Elect communicated to the industry his commitment to maintain the current energy model and give good results for the Nation, as well as the willingness of his Administration to eliminate bureaucratic obstacles in the regulatory bodies. "I am optimistic because together we are going to reverse the fall in oil production and move the energy industry forward. This administration will not act arbitrarily, we want you to be able to invest, but we expect results. "

Alberto de la Fuente reflected on the important role that AMEXHI members can play as strategic allies of the Mexican State and that today the private sector can collaborate with Pemex to continue strengthening energy security and to guarantee that Mexico has the energy it needs to continue growing and developing.

"The companies in the sector are a complement for Pemex, not a substitute," de la Fuente said.

To conclude, de la Fuente said "We want to collaborate with the Mexican State to produce more oil. We contribute to public finances through the payment of taxes derived from our commercial activity and from our own extractive activities. We generate jobs in Mexico and hire national suppliers. We invest decisively in exploration and production. We want to continue investing in Mexico. "

For this, de la Fuente stressed, it is essential that there is certainty and transparency to build a prosperous Mexico.

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