Energy reforms in 2014 ended state monopolies in electricity generation as well as oil & gas sectors, encouraging private investment and foreign participation in exploration, production and transportation activities.
More than 60 onshore and offshore blocks have already been assigned to a wide range of Mexican and international companies, entailing an estimated investment of more than US$57 billion. Further bidding rounds in onshore, offshore (shallow and deepwater) and unconventional fields are planned for the next 4 years from 2016.
Among the firms that have won rights to explore and/or produce in Mexican fields are important multinationals such as ExxonMobil, BP, BHP Billiton, China Offshore, Petronas, ENI and Chevron, as well as Mexican companies like Carso Oil and Gas, Sierra Oil and Gas, Petrobal, and PEMEX. Singapore upstream E&P equipment companies can benefit by supplying rigs, vessels and equipment, as well as sophisticated technology and engineering integrated solutions.
The manufacturing sector is a key growth driver of the Mexican economy, accounting for half of the US$30.3 billion in foreign direct investments in 20151.
Over the past decade, Mexico has become an attractive manufacturing location relative to other large economies. With the nearshoring of US companies back to North America, rising consumption as a result of the US’ economic recovery, and a skilled and affordable Mexican workforce, more and more companies are leveraging Mexico’s infrastructure and logistics support to manufacture for the US market.
This growth has resulted in greater demand for suppliers, providing opportunities for Singapore’s component manufacturers. Singapore manufacturers supplying to aerospace, automotive and medical technology players in the US and Latin America can consider Mexico as a potential manufacturing base. Closer proximity to key clients translates to reduction in logistics costs and makes it easier to keep pace with developments in clients’ supply chains.
In addition, Singapore component manufacturers with tooling, stamping and machining capabilities can support and complement the domestic Mexican manufacturing industry.
1 UNECLAC, 2016
There are opportunities to improve Mexico’s infrastructure in areas such as roads, ports, airports and urban transport. Improving port infrastructure was a major focus of Mexico’s 2014-2018 National Investment Program, and there will be a continued need to improve port facilities to support increased trade and industrial activities.
There are also plans to develop intelligent urban transportation systems. Singapore companies can secure such urban transportation projects through early and comprehensive engagement of authorities and operators.
The development of four Special Economic Zones in the south of Mexico is expected to spur massive economic activity over the next decade. Singapore companies with expertise in industrialisation, master-planning, management of ports and airports, provision of intelligent transport systems, management of water, waste treatment plants, e-government solutions, hospitality and tourism infrastructure can benefit from these plans.
The Mexican economy is rapidly digitalising. Incumbents across verticals central to the daily life of Mexicans have been seeking technological solutions to improve their operations, increase cost efficiency, and expand their services. Verticals that have been adopting technology include financial services, healthcare, retail, trade, and transport.
The Mexican aerospace sector is steadily expanding, with the number of aerospace manufacturers tripling from 100 to almost 300. Major Original Equipment Manufacturers (OEMs) such as Airbus, Bombardier, Cessna, Honeywell and Safran have established manufacturing facilities in Mexico.
The lack of a strong domestic supporting industry means that there are opportunities for Singapore companies to enter this growing sector, particularly those with expertise in complex machining and surface treatment.
Mexico’s total trade with the world reached US$761.7 billion in 2016, representing a CAGR of 8.87% since 1993 (pre-NAFTA times). The US currently receives over 80% of Mexico’s exports. However, threats posed by the ongoing renegotiation of NAFTA have led to important diversification efforts by the Mexican government, both politically and in foreign trade.
Mexico is the 10th largest food producer in the world. The agri-food industry is the country’s most dynamic export sector and the third largest, only behind manufacturing and automotive. Mexico’s agri-food trade amounted US$54.8 billion in 2016. However, Asian markets accounted for less than 5% of the total exchange.
There are many opportunities to source premium items from Mexico, such as avocados, berries, and meat. There is also immense potential to export Asian food items to Mexico.
Enhanced integration between Pacific Alliance countries and the need to diversify Mexican exports both translate into a clear opportunity for Mexico to become a consolidator for food products which are exported from the Pacific Alliance markets to Asia – and for Singapore to play a role in this new trade corridor. Singapore can be a regional hub, helping products from Mexico reach South Asia and Middle East markets. To do this, governments must improve digital and physical connectivity (air and sea) and logistics, strengthening the cold chain for perishables in particular.