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President Nieto submits new bill to revitalize energy sector in Mexico

An upward view at a large power tower showing that the energy sector is changing with Nieto's new bill.
30 Apr 2014

The new bill by Mexican President Enrique Peña Nieto has been submitted to Congress, according to The Wall Street Journal. The bill finalizes many of the changes that Nieto has introduced to the constitution, including details about allowing private investment in the energy sector, particularly to drill oil and gas deposits such as shale reserves. The bill will open up the energy sector as a whole, including power utilities and gas stations. The rules have not yet been approved by Congress.

The Journal reports there will be a 25 percent "national-content rule" that will come into effect by 2025. This means that a goal of 25 percent of energy contracts will go to private Mexican companies if their price, quality and delivery terms are equal to those offered by foreign companies. This will only be for the energy industry. A maquila is not extracting natural gas or providing energy, and so it will not have to compete with Mexican companies under any 25 percent rule. In fact, Nieto's goal is to attract more foreign investment and boost the economy, 11 percent of which supports the energy sector.

The Mexican government expects oil production to increase by 40 percent by 2025, which is possibly why they set 2025 as the deadline for enforcing the national-content rule.

Current rules
Under current rules, according to The Associated Press, Petroleos Mexicanos (Pemex), the Mexican petroleum monopoly, can form contracts for profit-sharing and production sharing. Additionally, companies can pay royalties and taxes to the government directly for the right to explore sites and begin drilling. Currently, Pemex gets first consideration for all licenses.

The AP reports that Mexican Energy Secretary Pedro Joaquin Coldwell expects electricity prices to come down within two years of the current legislation having passed.

Growth of maquila industry remains strong
Expanding to Mexico continues to be an option that many companies are considering. One company that has been in Mexico for a long time is Honda. Honda builds many of the cars it ships north via truck to the U.S. and Canada in Celaya, Mexico, according to Savannah Now. Other cars are shipped along the U.S. coastline through the Port of Brunswick in Brunswick, Ga.

"Highlighting the truly global nature of auto manufacturing, a Japanese company building cars in Mexico has chosen Georgia's deep water ports as a vital gateway to the U.S.," said Port of Brunswick Executive Director Curtis Foltz. "These shipments will serve dealers in major markets across the Southeast."

The Offshore Group: You Manufacture ... We Do The Rest.

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