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Mexico a great investment for foreign oil and gas firms

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22 May 2015

Mexico is one of the best countries for foreign investments in the world right now, according to a report by international law firm White & Case. Their argument hinges on whether international companies will continue moving to Mexico and using it as a platform for manufacturing and other businesses that benefit from low cost, efficient and high-quality labor, as reported by Fuel Fix.

"Mexico is probably the country that offers the best opportunities for investments in the world, given its sound public finances, the favorable demographics, the availability of an educated, trained workforce and the new legal framework," said Vicente Corta Fernandez, senior partner of White & Case, in the report. "If it is to truly modernize, however, a massive investment of capital will be required, which has driven the decision to open Mexico's economy."

In view of this, President Enrique Peña Nieto has opened up much of Mexico to investment from foreign companies. In particular, the state-owned oil and gas firm Pemex has begun welcoming foreign investment from the oil and gas industry. Other improvements, according to the report, include changes to business laws. These changes include deregulation of much of the confusing laws surrounding telecommunications in order to make it a more viable option for U.S. companies. The tax code and political system has also become more transparent. Additionally, the Mexican central bank has established a strategy for shielding itself from the volatility of the world market. The Mexican education has been improved as well.

The expansion of Mexican the energy sector

Energy in Mexico is becoming cheaper. Electricity is lowering in price, and pipelines between the U.S. and Mexico are increasing the supply of natural gas. Additionally, Mexico has opened up its shale reserves, according to Bloomberg.

"Mexico holds about the sixth largest shale gas reserves in the world," Emilio Lozoya, CEO of state-controlled oil company Pemex​, said at the Cambridge Energy Research Associates energy conference in Houston. "You're more than welcome to come and join the exploration opportunity."

Pemex has held a monopoly on Mexican crude oil production since 1938, but that ended Dec. 20, 2013. Since that time, Pemex has been targeting investors from outside the country to begin building refineries and production sites.

According to Bloomberg, Pemex wants to raise? as much as $1 trillion in energy investment within the next 10 years.

"Capital from all over the world is welcome in Mexico," Lozoya said. "We hope to have hundreds of companies operating in any type of rock formation, be it shale, or shallow water, or mature fields, or deep water projects."

There is already a deal forming with Brazilian company Braskem for a $4.5 billion ethane cracker with a production capacity of 1.05 million tons per year. White & Case believes this project will be one of many to come in the future. White & Case argues it will promote a "re-emergence" of petrochemicals in Mexico, with many companies coming from outside of the country and investing in the industry, promoting a strong Mexican economy.

Along with these as of yet unexplored industrial sources, there are also flexible labor laws in Mexico, along with loosened telecommunication rules that will promote outsourcing, offshoring and nearshoring, all of which will build Mexico into a strong industrial nation.

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