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Mexico Looking to Central America for Energy Development

Mexican Congressman Eduardo De La Torre told a Houston audience Thursday that strategies his country's government has espoused over the last nine years have been a failure. He called for a more modern vision as Mexico embraces the principles of a market economy. That vision includes integration with Central America, both economically and through infrastructure projects, particularly those related to energy. "Our society is lost when we are just importers," he said.

De La Torre was joined by Hector Moreira Rodriguez, undersecretary of hydrocarbons in Mexico's Ministry of Energy, on a panel at Platts 10th Annual Mexican Energy Conference.

Rodriguez lamented that while many countries have thrived with the advent of globalization, Central American countries have largely been left behind when it comes to economic growth. He blamed a lack of sustainable productivity growth. Trade is key, he said. Mexico has done well in efforts to integrate with the United States and Canada, "but if we look south we don't see anything." He noted that Mexico's trade with Spain is greater than trade with its neighbors to the south. "We were one nation once and we have no trade with them."

What could change that is development of oil, natural gas and electricity infrastructure that would link Mexico economically and physically with its Central American neighbors, with the ultimate goal being a CAFTA-NAFTA free trade zone stretching from Columbia to Alaska. Rodriguez said there is no point in talking about economic integration without physical integration, in part through energy. However, establishing the economic and industrial linkage won't be easy, Rodriguez admitted. "It's going to be more difficult with Central America than it was with the United States."

A first step on the energy side is building a refinery in Central America that would be fed with oil from Pemex. The west coasts of Guatemala and Panama are two favored potential locations for such a plant, which would have capacity of about 100,000 b/d. Rodriguez said his office is now trying to drum up interest in a refinery project, which he said could be operational in about five years.

Another energy project the Mexican energy secretary is promoting is a gas pipeline from Mexico to Columbia. Such a pipe could be fed at either end by either country's gas supplies, Rodriguez noted. He said that if Mexico made a policy of bringing in more liquefied natural gas (LNG) there would be more native natural gas available for export to Central America via pipeline.

On the electric power side, Rodriguez called for similar physical and market integration of the electric grids serving Mexico and Central America. Additionally, Mexico should look to the United States for direction in terms of energy efficiency, and Central America should follow along, watching the example that Mexico would intend to set.

Speaking in Spanish and heard through an interpreter, De La Torre called on Mexico's president-elect, Felipe Calderon, to have a "new relationship" with Mexico's congress. In such a relationship 80% of government reforms would originate from lawmakers, not the president as was the case in the previous administration, said De La Torre, who represents the states of Vera Cruz, Tabasco and Campeche. He also called for "management autonomy" at Mexico's Electricity Commission (CFE) and at Pemex and said that "strategic alliances" should be promoted, where appropriate, to bring technical support to Pemex.

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