How are President AMLO's economic policies currently affecting Mexico's energy prices? (Tony Hatch)

20161212 Tonyhatch (Cropped)

65th president of Mexico, AMLO (Andrés Manuel López Obrador) lives, at least until 2024 (supposed term limits). After it seemed with the rejection of his “Energy Reform” efforts by congress that a tide had been turned, but in the most recent elections his party’s control of governors actually grew and his approval ratings, immune to continental trailing economic growth, still hover at ~60%. Why does this matter? His economic policies have led to a 12% decline in annual FDI and his focus on energy has roiled what looked (looks?) to be a hot market for KCS – refined products. He is trying to roll back all of the reforms of the previous governments.

  • Mexican energy prices are today ~40% higher than the US.
  • One result is an emissions level that is scaring away foreign business.
  • The shutdown – “at gunpoint”! -  of a KKR-owned refined products (rail) terminal – because the terminal couldn’t prove that its (US-originated) gasoline wasn’t stolen (!!) is the example to look at – KKR has launched a $667mm lawsuit.
  • Pemex was granted $2B to pay off immediate suppliers – but still has $100B in debt.