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Consultant: Mexico Tariff Holds Up Pipes
The current North American Free Trade Agreement (NAFTA) tariffon gas imports into Mexico is holding up pipeline development fromthe U.S. to northern Mexico, said consultant George Baker of Baker& Associates. “The only people that have to pay this tariff arethe private industry who would contract with a U.S. gas supplier.If they buy [gas] from Pemex [Petroleos Mexicanos], however, it’s arolled-in price and they don’t pay it.” The tariff, originally 10%in 1991, is rolled back 1% a year and currently stands at 5%.That’s still too high for the private sector to feel confident itcan make money shipping gas to Mexico, Baker told attendees Tuesdayat the conference portion of Houston Energy Expo ’98, formerlyknown as Gas Fair. “That’s an important delay, and the origin of itis largely Pemex’s wanting to say, ‘we’re not ready for competitionyet.’ Some people say, ‘have you ever heard of a state monopolythat has acknowledged that it’s ready for competition yet.’ Mostpeople say no.”
The tariff isn’t the only inhibitor to private companies thatwould do business south of the border. Mexico’s requirement thatbids be written in Spanish is an obstacle that even some in Pemexadmit is not necessary, Baker said. “‘Sometimes, we get bidswritten in Spanish, the Spanish is so defective that we have totranslate the Spanish document of the bid back into English.”
While Mexico has opened up gas distribution systems to privateinvestment, the country has told outsiders exploration andproduction activity will remain the province of the state. “Thereis no change in the regulatory framework of E&P,” Baker said.”The government has said we can handle this by ourselves. We don’tneed international participation.” However, Baker said he andothers believe that will change.
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