Mexico and the United States have staged an international controversy since Andres Manuel Lopez Obrador, the Mexican president, returned to a protectionist stance on energy. According to the USA, Mexico is violating terms of the Agreement between the United States of America, Mexico, and Canada (USMCA) with this and has affected American companies that invested in energy.
To all eyes, this could mean a stagnation of foreign investment in Mexico. Nonetheless, reports from the Mexican Ministry of Economy show that during the first semester of 2023, Foreign Direct Investment (FDI) amounted to approximately $29 billion USD, 41% higher than the first semester of 2022, which registered approximately $20 billion USD.
If you are thinking of Starting a business in Mexico but you are worried about energy for companies in Mexico, this article is for you.
Companies keep coming
According to Reuters, nearshoring brought $9 billion USD into Mexico since last October, considering manufacturers such as Unilever, Mattel, and Tesla, mainly because of proximity to the huge U.S market, labor costs, and geopolitical stability. Even though this is contrasted with fears of lack of investment in energy infrastructure, companies like Tesla are willing to work together with Mexico to solve this.
Samuel Garcia, governor of Nuevo Leon, where Tesla is installing its 5th gigafactory worldwide, said the company would assist the region in a transition “from fossil fuels to renewable energy for our state and for our country, Mexico”. Tesla’s position is evidence that although there are challenges of economic development in Mexico, particularly in the energy sector, this is not an impediment to take advantage of the multiple benefits of nearshoring in Mexico.
A look into the future: companies, government and energy
El Financiero, a Mexican newspaper specialized in business, financial markets and politics, shares with us a note with some interviews details about the collaboration between the Federal Electricity Commission (CFE) and real estate developers for the supply of electricity in industrial parks in the country.
- Jonathan Pomerantz, Chief Investment Officer (CIO) of real estate fund Meor, mentioned that “with the arrival of more companies in Mexico with nearshoring, energy consumption in industrial parks could increase 33 percent between 2022 and next year”.
- Sergio Argüelles, president of the Mexican Association of Private Industrial Parks (AMPIP), mentions that they have been working with the CFE with mutual support to solve the energy supply in new industrial parks.
- Other important players such as Arturo Carranza, specialist and director of energy projects at the consulting firm Aksa ADvisors, mentions other energy infrastructure investment projects in Mexico to consolidate the relocation.
Bloomberg Linea also notes that Mexico’s National Energy Control Center (Cenace) and private companies are also working on new measures to include storage in new renewable energy plants.
In an interview with Gerardo Pérez, president of the Mexican Wind Energy Association (AMDEE), companies are working with the authorities, including the CFE “so that renewable projects come with storage support to avoid this intermittency”. He also mentioned that he trusts any of the two most solid presidential candidates will be open to private investment with renewable technology for the health of the next generations.
Nearshoring and energy in Baja California
If you’re looking for business opportunities in Mexico, especially with a nearshoring eye, it is important for you to consider the Cali-Baja binational region. With 70 Billion USD of cross-border trade value from manufacturing operations, multiple tech centers, a great variety of normative and tax incentives, a prime source of talent and its proximity to the richest state in the US, Baja California is your best option.
In this regard, Kurt Honold Morales, Secretary of Economic Development of Baja California, assured that the local government works very closely with the federal government every day to ensure that there is no lack of energy. He mentions that as a result of these efforts “a very important amount of energy is guaranteed so that for more than 10 years we will not have any (energy) problems”.
If you want more details about energy for companies in Mexico, and you could use help in settling your company for a nearshoring strategy, contact Tijuana EDC. We are a non-profit organization with over 30 years of experience, expert in international businesses, providing services to foreign companies that are looking for business opportunities in Mexico to successfully expand their operations.
