Mexico opens up to foreign investment - The Globe and Mail

Mexico is being touted as a new frontier for Canada’s oil and gas industry as its government opens the energy sector to foreign investment for the first time in more than 70 years.

During a three-day visit to Mexico City and Toluca last week, Prime Minister Stephen Harper and Natural Resources Minister Joe Oliver spoke enthusiastically about new opportunities for Canadian firms. Mr. Harper was in the country for a North American leaders summit with Mexican President Enrique Pena Nieto and U.S. President Barack Obama.

Once the new rules are in force, foreign and domestic companies should be free to bid on contracts and licences, breaking a decades-old monopoly by Pemex, the state-owned petroleum company. The move is aimed at encouraging investment by firms that will be better equipped to tap Mexico’s substantial oil and gas reserves and turn around 10 years of decline.

Speaking at TransCanada Corporation’s Mexico City headquarters on Wednesday, Mr. Harper said the changes would create “great opportunity” for Canadian energy companies. Mr. Oliver met with Mexico’s energy minister to discuss ways the two countries can work together.

“I’m looking, obviously, from the perspective of opportunities for Canadian companies,” Mr. Oliver told The Globe and Mail in an interview last week. “You know, this is a big, big deal here. They’re changing a law which was in place for about 75 years and it’s deeply ingrained in the political ethos of the country, so I would say it was a very major political accomplishment.”

Mr. Pena Nieto has garnered international approval for a sweeping reform package he introduced last year, which includes fundamental changes to the country’s energy, education and telecommunications sectors. Less than a week before the summit, he was featured on the cover of Time magazine along with the headline “Saving Mexico,” and Mr. Obama congratulated him during Wednesday’s summit for changes that promise to make the country “more competitive and increase opportunity for the people of Mexico.”

But enthusiasm for the reforms is far from universal, with a recent poll showing Mr. Pena Nieto’s domestic approval rating dropped to 32 per cent – down from a high of 51 per cent in July of last year – and growing concern that the changes are being made too quickly to measure their long-term impacts.

Luis de la Calle, a consultant who helped negotiate the North American Free Trade Agreement, said he sees the reform package as a good start, but added there is still an open question about how the changes will be put into effect.

Not all of the reforms are viewed enthusiastically by investors. For example, a new royalty fee for mining companies is being met with concern from the Canadian business community in Mexico, which argues the change will make Mexico a less desirable place for extractive companies compared with the rest of Latin America.

Mexico’s secretary of economy, Ildefonso Guajardo, told The Globe earlier this week that changes to the energy sector, in particular, should have a “tremendous” impact on boosting manufacturing in North America. And, like Mr. Oliver, he said he expects there will be plenty of opportunity for Canadian companies under the new regime.

Canadian energy companies have significant expertise in processing, refining and transporting crude oil, Mr. Oliver said, all aspects of Mexico’s energy sector that will be in demand under the new system. “They’re looking to us,” he said. “Not only Canadian companies, but they’re also looking to draw on our experience on the regulatory side.”