With a new president taking the reins of power for a six-year term and the rest of North America undergoing an energy transformation, the time is right for Mexico to use its deep energy resources to become a fully developed nation over the next two decades, a Mexico City economic consultant and former federal official told a Manhattan Institute forum on Monday.
Mexican citizens and government officials will have to be willing to pay the costs and open markets to competition if this fundamental transformation is ever going to take place, said Luis De la Calle, a former U.S.-educated economist specializing in international business in Mexico’s Ministry of Economics.
De la Calle said Mexico has plenty of natural gas, but it doesn’t have the free markets it will take to reach fulfillment as a developed nation. More than Canada, the demographics are on the side of Mexico if it has the political and public policy will to seize what De La Calle and his fellow panelists at the forum agreed was a “unique opportunity” for North America overall to lead the world in growth.
“If the United States re-industrializes because of the decline in natural gas prices thanks to the shale revolution and Mexico does not have natural gas at those prices and volumes, Mexico’s industry will not benefit from the re-industrialization process,” De la Calle said. “And the larger problem we have is that Mexico has no energy market. Prices are determined by the [federal] treasury and volumes by banks; that is not conducive to really resolving the energy markets in Mexico.
“So the question we have to ask ourselves is ‘are we willing to have a common North American market for energy goods?'”
From Mexico’s perspective, this can be accomplished without a constitutional change; it can be done through the North American Free Trade Agreement (NAFTA), said De la Calle, contending that it should be done unilaterally by the Mexican government opening the nation to exporting and importing more energy goods.
It also will take a substantial infrastructure building effort in Mexico, which is now under way. “The only way to get these natural gas markets is to lay pipelines all over that are truly connected across borders, so that when the gas prices go up we’ll have the supply,” said De la Calle, advocating that Mexico rethink its land policies and its approach to unconventional oil and gas, such as shale.
“I think now is the right time to ask the question as to whether we want to have energy be the spark plug for true development in Mexico.”
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