The document summarizes the impact of falling oil prices on Mexico's economy. Lower oil prices have hurt state-owned oil company Pemex and reduced expected oil revenues, diminishing Mexico's economic growth prospects. However, Mexico remains closely tied to the growing US economy through trade, with the two countries exchanging $1 billion daily. While lower oil prices pose challenges, Mexico may be able to rely on its trade relationship with the US to support its economy.

1. The
News17>tuesdayjanuary 27, 2015
LeadingStockExchangecompanies
theNewsindex
Banorte
The sole remaining
major commercial bank
that is still Mexican-owned.
-0.55
CHANGE
-0.68%
GRupocarso
Industrial and retail conglo-
merate controlled by billio-
naire mogul Carlos Slim.
0.25
CHANGE
0.37%
grupoméxico
Multinational copper mi-
ner with operations
in Mexico, Peru and the U.S.
1.06
CHANGE
2.63%
ALSEA
Foodservice company that
operates brands including
Domino’s Pizza and Burger King.
0.35
CHANGE
0.85%
CEMEX
The third largest cement
company in the world.
Based in Monterrey.
0.04
CHANGE
0.29%
EmpresasIca
Mexico’s largest construc-
tion company, specializing
in large infrastructure projects.
0.02
CHANGE
0.12%
GRUPOMASECA
The largest producer of
flour for tortillas, the natio-
nal food staple, in the world.
3.56
CHANGE
2.15%
Wal-martdeméxico
The largest and fastest-
growing supermarket chain
in Mexico.
0.56
CHANGE
1.86%
FEMSA
The largest Coca-Co-
la bottler in the region and
owner of OXXO stores.
-0.08
CHANGE
-0.06%
ALFA
Conglomerateofpetroche-
mical,telecommunications
andrefrigeratedfoodbusinesses.
0.51
CHANGE
1.71%
AmÉricamóvil
Provides fixed and wireless
telephone service in Latin
America, including Telcel.
-0.42
CHANGE
-2.43%
Grupotelevisa
The country’s largest
broadcaster, cable opera-
tor and magazine publisher.
0.98
CHANGE
0.99%
marketreport
Greek vote spurs euro worries
BYNANCYPALENCIA
The News
Back in 2013, Mexi-
co looked like a ris-
ing star in the in-
ternational market-
place. Economy Watch said that by
2015, Mexico would outpace Italy
and make it into the top 10 econo-
miesworldwide.
The promise of a robust Mexi-
can economy was only spurred fur-
ther when President Enrique Peña
Nieto’s energy reform was passed, at
lastallowingforeigninvestmentinoil
exploration.
It was oil
thatfirstignit-
ed the Mexi-
can economy,
and it helped
to fuel the
motorgrowth,
making up a
reported one-
thirdofthenationalbudget.
For the past 76 years, it has re-
mainedunderthecontrolofasingle,
state-run company, Petróleos Mexi-
canos(Pemex).
So when oil prices were peaking
at around $110 a barrel, foreign in-
vestors were knocking at the door,
eagertogetafootholdintotheMex-
icanmarket.
And since Pemex lacks the re-
sources to further offshore drilling
– which other nations have used to
reap big profits – opening up the
Mexican oil market to foreign capi-
tal posed a win-win situation for the
company.
Opening the oil market to for-
eign investment would give Mexico
anopportunitytogainaccesstonew
drillingtechnologiesand,insodoing,
bringinincreasedrevenues.
When the reform was passed in
August2014,manyinternationaleco-
nomicpundits,includingCNBC,pre-
dictedthatthereformswouldgener-
ate a 2 percent GDP boost and add
about2millionjobsby2025.
The forecast for the Mexican oil
market – and in turn, the Mexican
economy–wasshinyandbright.
But the recent plummet in inter-
nationaloilprices(thankstoaglutin
supply and a refusal by Saudi Arabia
Mexico gets
hit by low oil
to halt production) puts a serious oil
wrenchinthatsunnyscenario.
Global oil prices from 2010
through mid-2014 had remained rel-
ativelystable.
But since June of last year, pric-
es have dropped by more than 50
percent.
Today, international Brent crude
oilpricesstandatorslightlybelow$50
a barrel, and with Saudi Arabia pro-
claiming it has enough reserves to
hold its current production levels for
eight years, they are not expected to
increasesignificantlyanytimesoon.
These are the lowest prices the
worldhasseensinceMay2009.
So what does this mean for
Mexico?
Essentially,thatshiningpromiseof
freshoilrevenueshasbeentarnished.
Pemex,
like other
oil compa-
nies around
the globe, is
scrambling
tostayafloat.
The com-
pany is a top
employer in
Mexico, boasting some 153,000 full-
timeemployees.
Pemexhassaiditwillnotcutjobs.
“Job-cutting is not an area in
which we’re looking for possible sav-
ings,”PemexChiefExecutiveOfficer
EmilioLozoyaAustinsaidrecently.
But at the same time, Pemex,
which is ranked as the world’s sev-
enth-largest crude producer, is seek-
ingtocutoperatingcostsbybetween
$2and$3billionthisyear.
The company must find a way to
stay competitive while at the same
time tackling the challenges of dra-
maticallylowoilprices.
Lozoyasaidthatonewaythecom-
pany can save and keep Pemex em-
ployees is through competing under
anewsystem.
TheMexicanoilcompanyreport-
edlyplanstobidasaminoritypartner
infiveblockswhichwillbeawardedin
Julyofthisyear.
Nevertheless, it seems as though
Pemexitselfmaynotforeseeabright
futureforthecompany,asevidenced
by an internal Pemex memo issued
Jan. 2 that canceled all outsourcing
oftechnicalpersonnelduetocostcuts.
Given the change in internation-
aloilprices,Mexicomaywellhaveto
rely on another big part of the econ-
omy to keep the peso afloat – its ex-
portsector.
The federal budget will also de-
pend on the international trade of
non-petroleumgoods.
According to the Observatory of
Economic Complexity, exports from
Mexico total at about $349 billion
annually, while imports come in at
around$295billion.
Themovementoftheseproducts
is,forthemostpart,shippedwithtrac-
tortrailers,andtheUnitedStatesisthe
country’sbiggestbuyer.
Beforethedropinoilprices,Mexi-
cotriedtoreducethenumberofener-
gy-inefficientvehiclesonitshighways.
On Jan.13, the Overweight and
Dimension Regulations for Trans-
port Vehicles (NOM-012) act, which
standardized the type of trailers al-
lowed to travel across Mexico, went
intoeffect.
The measure will decommission
manyvehiclescurrentlyinuse.
AlthoughNOM-012givescompa-
nies two years to adhere to the new
regulations,itmaymeansmallercom-
paniesthatdonothavethemeansto
buytrailersthatmeetNOM-012stan-
dardswillbeclosedown.
A n d
N O M -
012 is so
b r o a d -
reaching
that, cur-
rently,Pe-
mex ve-
hicles do
not meet
itsstandards.
Still, while the Mexico economy
may seem like it is falling off its am-
bitiouspathtogrowth,ithasanally.
Mexico is the United States’ sec-
ond-largestexportpartner.
According to U.S. Ambassador
to Mexico Earl Anthony Wayne, the
volatilepanoramathatMexicoiscur-
rently facing can be calmed by in-
creasedinvestmentinthenow-stable
U.S.economy.
Combinedtradebetweenthetwo
nationsaddsuptonearly$1billiondai-
ly, and U.S. companies have invested
over$101billionindirectinvestments
intoMexico.
The U.S. economy is on the rise,
andMexicomaybeabletorealignits
economiccoursebylatchingontoits
northernneighbor.
BY CAROLINEVALETKEVITCH
Reuters
NEWYORK–Theeuro
reboundedfromtwo
days of sharp losses
on Monday, even as
an anti-bailout party was victori-
ous in Greek elections, while glob-
al stock indexes edged up on con-
fidence in the European Cen-
tral Banks’s new money-printing
program.
The electoral results spurred
concern over new instability in the
eurozone,evenasthepossibilityof
Greeceleavingtheblocwasconsid-
ered remote.
The MSCI’s global share index
was up 0.2 percent, while the S&P
500 was nearly flat. The main Ath-
ensindexfellandGreekbondyields
rose.
The Dow Jones industrial aver-
agefell32.53points,or0.18percent,
to 17,640.07, the S&P 500 gained
0.16 points, or 0.01 percent, to
2,051.98andtheNasdaqComposite
added 3.73 points, or 0.08 percent,
to 4,761.61.
Overseas, the Greek vote failed
toderailanECB-drivensharerally.
An index of European shares end-
ed up 0.6 percent.
The ECB announced a massive
bond-buying plan last Thursday,
whichismeanttobuoytheflagging
eurozoneeconomy,whereinflation
has turned negative.
Following the outcome of Sun-
day’s vote, the euro hit its low-
est against the U.S. dollar since
September2003at$1.1098inAsian
trading, according to the EBS trad-
ing platform. In late-morning New
York trading, the euro was up 0.64
percent to trade at $1.1278, just off
its high for the day of $1.1291.
“Everything that was priced in
foreuronegativehashappened.We
are already at a stronger level for
thedollar.Idon’tseeanythingpush-
ingtheeurobelow$1.10iftheECB
and the Greek election couldn’t do
it,”saidJohnDoyle,directorofmar-
kets at Tempus Inc.
Mexican economy may lean on northern ally
Global
Markets
Analysis