Mexico To Reap the Benefits of Energy Reform

Mexico will likely get a huge economic boost from reforms to its energy market, according to experts, and the reasons go beyond stripping monopoly power from its state-run oil company.

Domestic and international businesses have been scrambling to position themselves since Mexican President Enrique Peña Nieto signed a major series of energy reforms into law earlier this month. But one thing is for sure: Experts agree the Mexican economy will reap major benefits from the new legislation—with several organizations estimating that the reforms will generate a 2 percent GDP boost by 2025, and add about 2 million jobs.

Much of that growth is expected to come from increased oil and gas production and foreign investment allowed, but Mexico’s economy will also see major gains from the availability of cheaper domestic energy, experts told CNBC.

“Mexican firms have gained in past years because of an improvement in human capital…but energy costs have kept them from being more competitive,” said Carlos Serrano, the chief economist for Mexico at BBVA Bancomer. His firm “conservatively” predicts that Mexico will see a see a 1 percent GDP boost from the reform, with half of that coming from the changes in electricity costs and half coming from foreign investment in the energy sector.

via CNBC

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