Mexico To Reap the Benefits of Energy Reform

Mexico will likely get a huge economic boost from reforms to its energy market, according to experts, and the reasons go beyond stripping monopoly power from its state-run oil company.

Domestic and international businesses have been scrambling to position themselves since Mexican President Enrique Peña Nieto signed a major series of energy reforms into law earlier this month. But one thing is for sure: Experts agree the Mexican economy will reap major benefits from the new legislation—with several organizations estimating that the reforms will generate a 2 percent GDP boost by 2025, and add about 2 million jobs.

Much of that growth is expected to come from increased oil and gas production and foreign investment allowed, but Mexico’s economy will also see major gains from the availability of cheaper domestic energy, experts told CNBC.

“Mexican firms have gained in past years because of an improvement in human capital…but energy costs have kept them from being more competitive,” said Carlos Serrano, the chief economist for Mexico at BBVA Bancomer. His firm “conservatively” predicts that Mexico will see a see a 1 percent GDP boost from the reform, with half of that coming from the changes in electricity costs and half coming from foreign investment in the energy sector.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza