Mexico GDP Beats Forecasts on Consumer Spending; Peso Rises

4/29/16 Bloomberg Business

pesoMexico’s economy expanded more than analysts forecast for the third time in four quarters as strength in domestic consumption offset weak exports and a drop in oil output. The peso extended its gain, rallying to the strongest level in more than four months.

Gross domestic product rose 2.7 percent in the first quarter from a year earlier, according to preliminary figures released by the national statistics institute Friday. That compared with the 2.4 percent median forecast of 19 economists surveyed by Bloomberg. From the previous quarter, GDP expanded 0.8 percent. The institute will release final GDP figures May 20.

Mexican consumers are spending more as inflation holds near a record low and remittances rise amid weakness in the peso. The country has been a bright spot for growth compared with some Latin American economies such as Brazil, and in an interview last week, central bank Governor Agustin Carstens said it may get even better as factors that have held back the expansion, such as weak exports, begin supporting growth.

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Cash-Hungry U.S. Power Producers Lured by Mexico Energy Reforms

3/23/16 Bloomberg
photoEscudo_TAMPS_iti_Tula_STULA_Itinerario_CerrodelaCruz_HEADER_950x434[1]_0U.S. electricity producers seeking a salve for low prices at home and growing competition from solar and wind power are exploring whether to make a bet on Mexico’s sputtering energy revolution.

This year, for the first time, Mexico will allow independent companies, including those from outside the country, to compete in selling wholesale power. In anticipation, at least three top U.S. producers have held talks on entering the new market, according to Alfredo Alvarez, Ernst & Young LLP’s energy sector leader in Mexico City. He declined to identify the companies, but said the talks were spurred by the tough conditions they face at home.

Electricity prices have plunged over the past year in the U.S. and demand has flattened as grid operators have turned increasingly to renewables for cheaper, cleaner power. In Mexico, meanwhile, less efficient plants fired by coal and fuel oil routinely carry higher operating costs, giving U.S. companies an edge in a country where the payoff can be twice as high, Alvarez said in an interview.

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Mexico Will Defer Oil Exploration Projects to Slash Spending

3/1/16 ABC

energy- oil pumps 2The state-run oil company, Petroleos Mexicanos, said Monday it will slash spending 22 percent and cut unprofitable production about 100,000 barrels a day as it struggles with liquidity problems and past-due payments to suppliers.

The company, known as Pemex, said it will cut $5.5 billion from its 2016 budget, delay deep-water exploration and decrease production of super-heavy crude because of low world oil prices.

Delaying production and exploration projects will account for about two-thirds of the $5.5 billion spending cut.

Pemex still faces a serious issue: It owes suppliers almost $7 billion, a debt the company acknowledges is a problem.

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energy - oil pumps

Why Lower Oil Prices Don’t Hurt Mexico as Much as They Used To

2/23/16 Bloomberg

Oil Rig 2 by Flickr user tsuda

The tumble in global oil prices has sent Mexico’s currency to a record low and forced the nation to cut spending and raise interest rates. Yet for all the focus on crude, Latin America’s second-largest economy is actually less dependent on oil revenue than at any time in the past decade.

The chart below shows the percentage of the federal budget that comes from oil sales. While they’ve traditionally funded more than one third of the government’s spending, that contribution dropped to less than 20 percent last year.

You might think the decrease in oil’s contribution is due mainly to lower prices and production, but the data show otherwise. The increase in non-oil tax revenue last year exceeded the drop in oil revenue by 174 billion pesos ($9.6 billion), or 4 percent of total revenue, showing that the higher non-oil intake was a bigger factor than falling crude. Other sources of revenue, like income from government services and state-owned companies other than oil monopoly Pemex, contribute another 25 percent to the total federal intake.

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Depressed Energy Prices Cause Decline in U.S.-Mexico Trade


2/23/2016 Forbes.com

By Christopher Wilson, Deputy Director, Mexico Institute

forbesFrom 2009-2014, U.S.-Mexico trade skyrocketed. Bilateral trade grew 75%, faster than U.S. trade with any other major trading partner, including China (61%), and importantly, both imports and exports were growing rapidly. In 2015, trade growth came to a screeching halt, though strong fundamentals suggest this may be more of a temporary blip than a new trajectory.

The Census Bureau recently released U.S. merchandise trade statistics for 2015, and though Mexico is still the United States’ second largest export market and third largest overall trading partner, for the first time since the economic crisis of 2008-2009, U.S.-Mexico trade declined from the previous year’s level. Interestingly, as shown in the graph below, U.S.-Canada trade dropped sharply in 2015, allowing China to become the United States’ top trading partner. In 2014, the two countries traded $534.3 billion, but in 2015 that number fell to $531.1, a decline of some $3.2 billion dollars. U.S. imports from Mexico basically held steady, growing from $294.1 to $294.7 billion, although this apparent stagnation masks multiple underlying trends. Exports, on the other hand, dropped some $3.8 billion. This brief analysis examines recent trends in bilateral trade and their implications for the future of U.S. and Mexican economies.

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That Didn’t Work as Planned: Mexico’s Oil Monopoly Ends, Then Oil Tanks

2/23/16 Bloomberg

Enrique Pena NietoThe timing couldn’t have been worse. The end of the 76-year Petroleos Mexicanos monopoly was supposed to unleash an investment flood with companies rushing to develop massive oil reserves. It was going to be historic, and then came the rout.

“It’s tragic that Mexico waited so long to open the sector and that when an administration finally passed a meaningful energy reform, the bottom just falls out of oil prices,” said Tim Samples, a Mexican-energy analyst at the University of Georgia in Athens. “The parade did not last very long.”

Now opponents of President Enrique Pena Nieto, who was accused in some quarters of treason when he denationalized the industry in 2014, are saying they’re being proven right. Some want to bring the monopoly back. “A reform needs to be done to the energy reform,” said Jesus Zambrano, president of the Chamber of Deputies, the lower house of the national legislature, last week.

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Mexico’s Pemex Lowers Expected Oil Output for 2014

08/22/14 The Wall Street Journal

oil rigsMexico’s state-owned oil company Petróleos Mexicanos said Friday that crude-oil output this year would fall to about 2.35 million barrels a day after accounting for water and other impurities coming out of its fields in increasing quantities.

Pemex, as the company is known, said crude-oil measured at the wellhead in the January-to-July period averaged about 2.47 million barrels per day, while the amount of oil obtained after removing water, segregating products and accounting for inventories was 2.34 million barrels a day.

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