President Enrique Peña Nieto has made sweeping changing for the country through the creation of new laws, amendments, and reforms. The changes made in Mexico certainly show promise for the country, but what do you believe Mexico still needs to do in order to reach its full potential-economically speaking?
The reforms must first be implemented. An important step was that of getting the reforms passed and issuing the regulations, but now, the challenge is to implement the reforms fairly, justly, and transparently. The federal government authorities will discover along the way that there are probably other adjustments they will have to make. These are important basic reforms, and they should make a big difference. But as we’ve discovered in the United States, you are never done changing and reforming things. I think the key thing is going to be the implementation.
On the Energy Reform, we are just now working through the first bidding process of round one. This will be an important test of how well they will carry out the reforms moving forward. It will, of course, test international interest and how the entire process works. The bidding process will take a number of months, and it won’t be done a bit later in 2015. Then, they will have to put the bids into practice. The end results of this investment are clearly several years off. It is an ambitious process, and in this process, the government authorities will be learning and adjusting. This is natural because it is new.
Mexican Energy Reform coincides nicely with the current US energy revolution, which, in the medium term, should allow for the US to become completely independent in terms of its energy production. Is it realistic to consider the region encompassing the US and Mexico to be the next great potential energy hub in the coming decades?
As we’ve seen over the past few months, the expanded production in the United States has had a major impact on international markets and on our own consumption of hydrocarbons in their various forms. I do think that Canada, the United States, and Mexico can make a big difference, and I think we will see that difference expressed in several different ways. One of which is the security of knowing that energy is available—energy that does not have to travel across troubled regions or through long sea shipments to reach our industries. That is already having an impact in the United States. Having the three countries with, what will be, fairly liberal markets where you can actually attract investment and apply best practices will have a big impact. We don’t know exactly what impact this will have because we are just starting off, but there is a tremendous difference in the world just from 2005/2006 when I stopped working on energy issues back in Washington. There is now an entirely different world outlook. The new techniques that are being developed in the United States are certainly not only applicable in North America; there are many other places in the world that have similar geological formations where there is probably a lot of natural gas and a lot of liquids that can be developed. There is no reason for us not to see this energy revolution spread to other areas in the globe through these new technologies and practices.
The US recently pledged to provide 68 million dollars to support the court and justice system reform in Mexico. What does the US and US companies coming to Mexico stand to gain from the success of this reform?
We signed the initial agreement to start helping Mexico in its law enforcement and justice sector in 2008 underneath Merida Program. We really started spending money in 2010. This was largely focused on training programs and some related equipment. We spent around 1.2 billion dollars over the last few years, and we have another billion dollars in process, approved to spend. What we have to gain from this is that Mexico is our neighbor, and if it has they have a well-functioning law enforcement and justice system, it will presumably have good effects for the work of this economy and society. That will have direct implications for us, not only because we are so close, but also because there is so much mutual investment already set up between the two countries. There are about 18,000 US companies working in Mexico, and there are more and more Mexican companies investing in the United States. We trade almost 1 million in goods a minute. Also, it is always good to have a neighbor without huge problems of insecurity and where there are few questions about how institutions work. If we can share some of our best practices to help them achieve what they are trying to accomplish—and they are spending much more than we are—we are happy to do so.
Through our talks with Mexican CEOs and Presidents, a common trend of thought is that the current increase in insecurity in the country and the country’s history with corruption on all levels could hinder otherwise ensured foreign investments in the energy sector from companies from the US. The US went as far as to release a travel warning to Acapulco discouraging people from traveling to this area of the country. Would you still recommend Mexico as a viable place to do business in?
We have 18,000 businesses working here, and clearly there are many American businesses who believe it is worth their while to be in Mexico. Many of these companies have had a presence here for decades. In certain areas of Mexico, there are problems with security, and it is our responsibility warn American citizens. There are, however, big chunks or Mexico where there are no travel warnings issued. Mexico is a federal system like the United States. There is a federal government, state, and local governments in place. The crime problem is different in different areas. There are big chunks of the country with a lot of US investment, and there are other areas that eventually might be good for investment, but now, have higher costs of investment to go to work there. About 25 million U.S. tourists visited Mexico last year.
Your attended the US-Mexico border energy forum in Monterrey. What conclusions were drawn from this forum, and what do energy related companies on both side of the border stand to gain by working together?
I think there is a tremendous amount of interest between both Mexican and US companies in regard to this potential for colaboration. In the former Mexican system, PEMEX had a monopoly over the oil and gas industry, and the only way in to the industry was by acting as a service provider to PEMEX. Now, however, the possibility of directly developing oil resources has opened up. Being a full partner with PEMEX or maintaining one’s status as a service provider are also possibilities. The same new opportunities go for those interested in generating electricity and the creation of energy infrastructures. There are now tremendous opportunities all along the chains of production.
With the energy reform, there is a great opportunity for growth for not only Mexico but also the US. What is the US currently doing to take full advantage of this moment?
We have been working very hard since the beginning of this administration in the economic area. In May of 2013, our two Presidents called for us to set up something called the High-Level Economic Dialogue. This is a gathering whose purpose is to identify what we need to make economic relations flow more effectively—what we need to change to make both of our economies more competitive. For example, under that process, we have negotiated a bilateral civil aviation agreement, which will greatly expand aviation opportunities for both passengers and cargo. We have just mutually recognized the trusted trader programs between Mexico and the United States. Trusted traders refer to companies who take the right steps in their plants to make sure there are no issues with placing drugs or other contraband in their products. Such traders will have sealed products that, once at the border, can go right across because they are approved shippers. We have also been working to enhance the border infrastructure so trucks don’t have to wait for hours to cross the border. These types of things will make both economies more competitive, lower prices for consumers, and they are going to create more jobs than we have seen in the past.