This week in Mexico – Mar 7, 2020

This Week in Mexico

March 7, 2020 to March 6, 2020

Recruiters in Mexico hunker down as the Coronavirus halts worldwide activity

The Coronavirus crisis escalated as the week advanced, and it brought global economies to a screeching halt. The United States declared a national emergency this week as cases grew. 2,800 coronavirus cases have not been reported in the US, with 58 deaths.

Meanwhile, Mexico is considering closing its northern border with the United States to stop Americans from bringing more Coronavirus into the country. Cases in Mexico are gradually growing, but the count is heavily criticized because of the small amount of testing that is taking place. Official numbers are only taking into consideration cases verified by the government, while figures from tests taking place in private hospitals are being ignored in the official tally.

The private sector in Mexico is taking the lead in the effort to halt community spread by postponing events, meetings, and promoting working from home. However, as authorities across the world move to cancel concerts and sporting events, Mexico City went ahead with Vive Latino — one of the most famous music festivals in the country with the attendance of over 60,000 people. Only time will tell what the impact of Mexico’s wait and see approach will yield.

For now, recruiters in Mexico continue to see a strong hiring trend.

These are the companies that will bet on Mexico during 2020

Summary

fter a year after the federal administration of Andrés Manuel López Obrador began, companies are more confident to invest in Mexico . A Bank of America Merrill Lynch survey highlights that global investors trust more than a few months ago in Mexico. The survey details that the agreements between the United States and China, as well as the trade agreement recently signed by the negotiators of the three North American countries (T-MEC), were considered by investors to be favorable to the Mexican economy. In the monthly survey, 56 percent of investors detailed that Mexico will eventually lose its investment grade during the current government, which represents a considerable drop compared to what was expected in November, when 77 percent did not fully trust the country. One of the companies that did place its trust in the government of the so-called Fourth Transformation was Nestlé, who from the first week of AMLO’s inauguration reported that he would invest 200 million dollars.

Insecurity, uncertainty and less public spending, the risks for the economy

Summary

To improve the economy and social welfare, “it is essential that both the federal government, as well as the state and municipal governments, as well as the Private Initiative (IP), adopt actions that promote an environment of trust and certainty,” recommended the director of Research. Economica del Banco de México (Banxico), Daniel Chiquiar. “To the extent that Mexico is governed by clearer institutional rules, with greater certainty, greater respect for contracts, in an environment of greater security for productive activity, the national economy and even social welfare will improve.” In presenting the report on Regional Economies, one of the fundamental analysis in decision-making of the Banxico Governing Board, Chiquiar said that it is early to anticipate the economic impact that the double external shock of Covid-19 will have and the fall of oil prices in world activity and much more in the performance of Mexico’s federal entities, in addition, he maintained that the effect of the interruption of Chinese activity on the value chains of the United States and from Mexico. As will be remembered, among the sanitary measures applied by the Chinese government to limit the spread of the coronavirus, the operation of companies and factories stopped for seven weeks..

Mexico’s Oil Hedge Just Saved Its Economy

Summary

Petroleos Mexicanos has been in an unrelenting downward spiral for decades. Pemex, Mexico’s state-owned oil company, has seen a vast and speedy decline of its production rates for the last 15 years, and at times it has vied for position as the most indebted oil company in the world, with “about $105 billion of bonds and loans outstanding,” according to the Wall Street Journal, a figure that has almost certainly grown since that figure was released last year. Leftist Mexican President Andrés Manuel López Obrador, who won the 2018 presidential election in a landslide, used his planned improvements for Pemex as a central part of his platform. He promised to revive the ailing production numbers, crack down on the company’s rampant corruption scandals, and put an end to Mexico’s brazen and voluminous fuel theft. So far, many of those strategies have backfired. President López Obrador’s flagship Pemex revival project has been the Dos Bocas refinery in his home state of Tabasco. The project was determined by experts to be dead in the water before developers had even broken ground on the refinery that the president promised would be the first step in the long road of recovery to making Mexican oil production great again. Now, the President’s pet project is getting even more negative attention amidst concerning and widespread reporting that the development has caused widespread and illegal environmental damage, including the destruction of protected mangroves. Source

600mn pesos earmarked for Guanajuato airport expansion

Summary

The operator of the Bajío International Airport in Guanajuato will invest over 600 million pesos (US $27.4 million) to expand and improve the airport’s facilities. Guanajuato Governor Diego Sinhue Rodríguez Vallejo announced that the Pacific Airport Group (GAP) will increase the number of arrival gates from eight to 14 and carry out upgrades in the lobbies and VIP area and on the roof.The investment will also go toward providing services to cargo planes and renovations to the customs and shopping areas Governor Sinhue said that despite a lack of growth in both the domestic and global economies, Guanajuato has an opportunity to consolidate its competitive position in the market and become a hub of economic development and logistics. “Despite the storm clouds in the global and domestic economies, Guanajuato sees a great opportunity. What is happening in China’s economy is an opportunity for Guanajuato, and with the signing of the USMCA [trade agreement] we’re seeing more confidence among investors,” he said. To take advantage of this opportunity, the state government has committed to investing over 400 million pesos (US $18.2 million) in promoting the growth of micro, small and medium-sized businesses, known as mipymes in Spanish, in Guanajuato. “We have to bet on the Mexican people … so that they can become professionals and can be suppliers in the industry. This year we increased the investment in mipymes from 200 to 400 million pesos,” said Sinhue. Another tool Sinhue plans to use to drive economic growth in the state is the Central-Bajío-West Alliance, an economic partnership between the states of Guanajuato, Aguascalientes, Jalisco, Querétaro and San Luis Potosí.

Mexico central bank governor says dollar sales an option after peso losses

Summary

ACAPULCO, Mexico (Reuters) – Selling dollars is an instrument in the arsenal available to Mexico’s central bank, governor Alejandro Diaz de Leon told Reuters on Friday, after the peso hit all time lows this week. However, speaking in an interview at a banking conference, Diaz de Leon said Banco de Mexico preferred to use foreign exchange auctions because they do not reduce the country’s foreign reserves. He added that the bank’s March 26 monetary policy meeting will evaluate the complex scenario of coronavirus, falling oil prices and the higher risk premium for sovereign debt and for state oil company Pemex. The bank was still evaluating how the environment of risk aversion and higher risk premiums will impact the economy, financial markets and inflation, Diaz de Leon said. The impact on inflation from the expected economic shock due to coronavirus will take time to materialize, he said, and could eventually lead to lower inflationary pressures..

Battle over oil discovery is test case for Mexico investors

Summary

Energy companies trying to do a deal with Pemex to share one of Mexico’s biggest oil discoveries accuse the state giant of dragging its feet to win control of the project, in a test case for foreign investment under President Andrés Manuel López Obrador. A consortium made up of Talos Energy of the US, the UK’s Premier Oil and Wintershall DEA of Germany discovered the nearly 700m-barrel Zama field in 2017. They are awaiting a decision from the Mexican government on how to share responsibility for a resource that spills into acreage owned by Pemex.  But negotiations with Pemex have become bogged down, raising the alarm in a sector already concerned by Mr López Obrador’s efforts to build up the state-controlled company and limit private oil participation. “I don’t understand who a delay benefits — it’s not us, or the arrival of first oil, or workers or the Treasury — we can’t figure out who else that benefits except Pemex,” Tim Duncan, Talos chief executive, told the Financial Times.  Pemex is demanding a 50-50 split on the project and wants to operate it despite its fragile finances and lack of experience working at the depths of the Zama field, about 60km off the coast of Tabasco. The target is to begin pumping oil by 2023 — a year before the end of Mr López Obrador’s six-year term — by which time the president has promised that Mexico’s oil production will have risen to 2.6m barrels a day from 1.73m at the end of 2019.

Mexico to invite oil and gas investment

Summary

Mexico will soon invite private firms to invest in oil and gas projects to help a flagging economy hit by the fallout of coronavirus, Finance Minister Arturo Herrera said on Wednesday, but cautioned energy auctions were not on the cards for now. Herrera said a long-awaited energy plan will be unveiled soon that will detail where and how much private firms can invest. “It’s not just a general outline, we’re going to tell them this project here, here and here, this amount and size is open to investment,” Herrera said in an interview on the sidelines of a banking conference in Acapulco. Under President Andres Manuel Lopez Obrador, Mexico has pursued a more statist approach to the energy sector and suspended auctions of oil fields. Lopez Obrador said last week that the energy plan could be unveiled in March, after weeks of delays. The balance of public and private investment the plan will aim for has not been clear because of differences of opinion in the cabinet over energy policy. Also last week, Mexico’s private sector presented the government with a broad package of proposed energy investments worth almost $92 billion. Herrera’s comments suggest at least some of those proposals could be adopted.

Exclusive: U.S., Canada, European nations meet to discuss concern over Mexico energy policy

Summary

The United States, the European Union, Canada and six European nations have held joint talks on concerns over Mexico’s energy policy, sources told Reuters, as President Andres Manuel Lopez Obrador pushes for a bigger role for the state in the sector. The unusually broad diplomatic encounter is a measure of how the leftist Lopez Obrador’s break with the energy policy of the previous government is worrying economies that have traditionally been some of Mexico’s biggest foreign investors. U.S., Canadian and European officials privately voice concern that Mexico’s energy policy is eroding the legal foundations of contracts worth billions of dollars with the previous administration, in what they fear is a creeping squeeze-out of their interests. Mexico’s government denies it is undermining those deals, but says prior contracts were often damaging to the country, and has sought to renegotiate the terms of some. At Friday’s meeting in Mexico City hosted by the U.S. embassy, diplomats from Britain, Canada, the EU, France, Germany, Italy, the Netherlands and Spain discussed their concerns and how best to relay them to Lopez Obrador, said five people familiar with the gathering. Asked for comment, the U.S. embassy responded to Reuters that it did not discuss its diplomatic conversations. The other foreign embassies did not reply to requests for comment, nor did Lopez Obrador’s office.

Mexican Authorities Dismiss Coronavirus Concerns Regarding Vive Latino Fest

Summary

“Suspending massive events is not necessary,” says the mayor of Mexico City. A tweet on March 13 summed it up: “While Spain canceled international flights, Disney closes its doors, Canada switches university classes to online mode, Italy is in quarantine…in Mexico @CLaudiashein says #vivelatino2020 is on! Vive Latino — Mexico City’s massive annual music festival that can draw crowds up to 100,000 people — kicked off Saturday afternoon (March 14) despite thousands of tweets criticizing the choice to move forward in the middle of the Coronavirus pandemic. While at least a dozen acts had canceled their appearance by this morning — including Spain’s Vetusta Morla — the Festival’s headliners, including Guns ‘N Roses, Vicentico and Tucanes de Tijuana, are still slated to perform.”

Coronavirus: Mexico may consider border-crossing limits

Summary

Mexican health officials say the virus would spread from the US to Mexico, as confirmed cases remain low in the country. Mexican Deputy Health Secretary Hugo Lopez-Gatell has said authorities would consider mechanisms to control the flow of people entering Mexico from the United States in an effort to limit the spread of the coronavirus. “The possible flow of coronavirus would come from the north to the south. If it were technically necessary, we would consider mechanisms of restriction or stronger surveillance,” Lopez-Gatell said at a news conference on Thursday.