Interview: Vicente Rangel Mancilla
What does the implementation of energy reform mean for investment in downstream activities?
VICENTE RANGEL MANCILLA: Energy reform has been well thought out, and it is a necessity for the country’s development, although it could have been communicated to businesses and the general public in a better fashion. The challenge is to implement it in a more rapid way, because people have invested a lot of money in the reform, and they want to see their investments matched by a speedier implementation. That being said, considering the daunting task of the reform, the progress so far has been impressive. In geographic terms, the central region of the country benefits most from storage and distribution. Recently, the rail company, Kansas City Southern, along with Grupo Valoran and energy logistics firm Watco, signed a joint venture to transport refined energy products directly from Texas to the World Trade Centre in San Luis Potosí, cementing San Luis Potosí’s reputation as a strategic, central distribution point for the rest of the Bajío region and beyond. Mexico’s total fuel reserves stand at around 48 hours, but as the government is obliged to increase this, there are huge opportunities for investors in privately operated storage facilities. So it makes sense that an increase in the need to store the country’s most important commodity reserves should mean they are stored in a geographically strategic location in the centre of the country such as San Luis Potosí.
What infrastructure measures should be implemented to help grow the regional economy?
RANGEL: San Luis Potosí is an ideal location not just for the transport of hydrocarbons, but also for a wide variety of products. Studies show it is an ideal place to transport products to the Gulf of Mexico and the Pacific Ocean. The governor is developing a new infrastructure strategy that marks a turning point for the industrial zone of San Luis Potosí, which covers 5000 ha. The current road network is insufficient to support its strong growth. To support this infrastructure plan, the state needs to focus on other areas, such as its electricity capacity. Until now the Federal Electricity Commission has neglected its role of providing sufficient energy; we hope the energy reforms and the involvement of the private sector will move this forward, and we also have the first distributive generation power plant in the country under the new energy reform in order to push the growth of San Luis Potosí. Mexico also has an economic productivity issue, and it has nothing to do with the market or macroeconomic conditions. Rather, it is about the mindset of workers, who lack the beliefs of their counterparts in more developed markets. With the current situation in the US, companies need to address this issue by incentivising their workers and encouraging them to do supplemental training, which will give them soft skills needed to add value to their employment, and drive them and their productivity.
How will the changing commercial relationship with the US affect the investment dynamic?
RANGEL: The changing relationship with the US and the hostility of the current administration towards the Mexican economy could produce some unexpectedly positive outcomes. It will help us improve our levels of productivity, and give a collective mental boost to the country for workers and businesses. However, the country needs to create new opportunities for itself. Mexico has free trade agreements with 46 countries, and on a macroeconomic scale we need to use that advantage to forge relationships with new markets. Until now we have not made the most of it, but this is a golden opportunity. We also need to diversify our economic offering to make us a more attractive market. In Asia, especially in leading markets such as Japan, there is more interest than ever to do business with and invest in Mexico. Even in the US, many companies in California and Texas that have strong trading relationships with Mexico are fighting elements of the current administration’s policy to protect bilateral trade interests.
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