Tag Archive for: Canada

Relief On Horizon for Mexico Natural Gas Market, Despite Short-Term Challenges

Mexico’s natural gas market faces multiple short-term challenges, the most urgent of which is a lack of supply to power generators, petrochemical plants, and industrial consumers in the southern and southeastern part of the country, as the state-owned oil and gas producer struggles to increase output.

Amid declining gas output by national oil company Petróleos Mexicanos (Pemex) and delays to critical midstream infrastructure that would bring abundant and inexpensive gas from Texas, consumers in southern Mexico now face the prospect of switching to more expensive fuel oil, diesel and liquid petroleum gas (LPG) in order to continue operating over the coming months.

A lack of Pemex supply and scarce available cross-border pipeline capacity for private sector gas shippers, as well as a dearth of storage capacity, are compounded by the fact that a new government will take over on Dec. 1.

However, relief appears to be on the horizon. The 2.6 Bcf/d Sur de Texas-Tuxpan marine pipeline is expected to enter operation next month or in January, with the Cempoala compressor station reversal project slated to finish in April. Both projects should provide relief to consumers in the south, the energy ministry’s general director of natural gas and petrochemicals, David Rosales, told NGI’s Mexico Gas Price Index.

While details of a planned tender to construct 45 Bcf of underground storage capacity still need to be ironed out, Rosales said the hope is for the new administration to give an order to proceed with the tender by early next year.

“I think it’s very clear for them that this is a [project] that will not cost the state, and will be paid for by the users of the gas system themselves,” Rosales said.

The incoming administration has generated unease among investors with its proposed oil policies, such as a pledge to halt crude exports and to divert Pemex investments from exploration and production to new refineries, but Rosales said a dramatic shift in course on natural gas policy is less likely. An efficiently run gas segment translates directly to cheaper electricity prices for end-users, he noted.

Recent days have also seen progress on other cross-border pipeline projects that should help meet rising demand from the power sector.

San Antonio, TX-based Mirage Energy Corp. last week said it has a memorandum of understanding (MOU) for reserved capacity on its proposed Texas-to-Mexico gas pipeline with commodities trader TrailStone NA Asset Holdings LLC.

The nonbinding MOU would allow TrailStone to purchase 150,000 MMBtu/d (146 MMcf/d) of reserved capacity for 10 years at a fixed tariff from the Banquete/Agua Dulce area in South Texas to Compressor Station 19 and Los Ramones interconnection points on the national pipeline network Sistrangas,” Mirage said. TrailStone is a partner and commercial operator in the recently commissioned Banquete header near Corpus Christi, TX.

The 42-inch diameter, bi-directional pipeline system under development would include nearly 140 miles of pipeline in Texas and about 103 miles of pipeline in Mexico. In addition to the four sections of pipelines in the two countries, Mirage said another interconnect in Falfurrias, TX, also in far South Texas, to Transcontinental Gas Pipe Line (Transco) is being considered, as is a 14-mile pipeline in Mexico known as the Storage Line that would connect the Progreso, TX, on the border to the Brasil storage field in Tamaulipas, Mexico.

Mirage expects to begin final development work on the project in December, “with a view toward receiving required United States and Mexico permits and authorizations in 3Q2019. The company has completed the necessary engineering and design of the pipeline. The alignment for the pipeline has also been substantially completed and Mirage is in the process of securing right-of-way agreements.”

Valley Crossing To Supply CFE Import Capacity

The Mirage news follows the startup of Enbridge Inc.’s Valley Crossing gas pipeline, which spans 168 miles in Texas from the Agua Dulce hub near Corpus to the Gulf of Mexico east of Brownsville.

Valley Crossing’s primary customer is Mexican state power utility Comisión Federal de Electricidad (CFE), which is undertaking a massive shift to combined-cycle gas turbines (CCGT) from fuel oil and diesel-fired power generation capacity. Mexico’s installed CCGT capacity stood at 28,084 MW at the end of 2017, a figure that is expected to double by 2032, according to the Energy Ministry’s 2018-2032 power sector development program.

“Valley Crossing is expected to account for about half of the CFE’s total import capacity,” Enbridge said last week. Transport capacity is “half the average daily production output of the entire Eagle Ford Shale basin — in fact, it’s more than 10% of the average daily production for the entire state of Texas.”

The pipeline is designed to “support Mexico’s growing electricity generation needs, as power companies like the CFE choose natural gas,” which is a “cleaner” burning fuel and more economical than imported liquefied natural gas, the Calgary-based operator said.

“Supply in Mexico continues to decline, but at the same time their demand continues to grow,” said Enbridge Executive Vice-President Bill Yardley. “And the U.S. has some of the most economical, plentiful and reliable natural gas supplies in the world.”

Valley Crossing connects to the Sur de Texas-Tuxpan pipeline, a joint venture of Sempra Energy unit Infraestructura Energética Nova and TransCanada Corp.

Fitch Bullish On Mexico Power Sector

A FitchRatings unit said last week it holds a positive outlook for Mexico’s gas-dependent electric power sector over the next 10 years, despite uncertainty over the energy and infrastructure policies of incoming President Andrés Manuel López Obrador, who is commonly known by his initials AMLO.

“We expect the Mexican power sector to register strong growth and offer investors significant opportunities over the coming decade, thanks to rising energy demand, a supportive market structure and favorable policies,” Fitch analysts said. “Our positive view for the market is premised on the expectation that AMLO will adopt a pragmatic approach and will not reverse reforms of the power sector that contribute to attracting investment in the market.”

Fitch analysts said they expect “Mexico’s total installed capacity — net of project retirements — to increase by almost 30% between 2018 and 2027, driven primarily by the development of wind, solar and thermal power projects. Moreover, we expect Mexico’s power consumption to increase by an annual average of 2.4% over the same period.”

Although wind and solar capacity is expected to increase the most on a proportional basis to current levels, conventional thermal power is seen accounting for about two-thirds of the country’s total capacity through 2026, Fitch said, citing projections from Mexican energy ministry Sener and the U.S. Energy Information Administration.

Despite the overall optimistic outlook, analysts cautioned that, “AMLO’s unorthodox approach toward decision making for the infrastructure sector could weaken private companies’ interest in investing in the market.” Fitch cited investor unease over López Obrador’s recent decision to cancel a $13 billion airport for which construction was more than 30% complete via a referendum in which only about 1.1 million of Mexico’s 129.2 million people voted.

Other risks to the power sector include López Obrador’s ability, because of the comfortable majorities held by his coalition in both of the national legislative chambers, to reverse the 2013-14 energy reform of predecessor Enrique Peña Nieto.

“AMLO has long opposed the liberalization of the Mexican energy sector, although his criticisms have mostly focused on the oil and gas industry rather than the electricity industry. A risk of changes to the power sector’s regulatory framework, however, must be taken into account.”

Fitch also cited the risk of an economic slowdown in Mexico, but noted that this risk is mitigated by the tentative agreement reached Oct. 1 by Mexico, Canada and the United States on the U.S. Mexico Canada Agreement, an updated version of the North American Free Trade Agreement. The agreement has yet to be completed.


Natural Gas Intelligence / Andrew Baker / November 12


Mexico, Canada play hardball on trade deal over steel tariffs

Washington Examiner / Sean Higgins / October 26


Juan Carlos Baker, Mexico’s deputy commerce minister, said Friday that his government may not sign the final text of the United States-Mexico-Canada Agreement on trade if the U.S. does not agree to provide exemptions to its tariffs on steel and aluminum.

The Trump administration is balking at that demand, however, as its counter-proposal, a quota system, is getting the cold shoulder from both Mexico and Canada, which is also seeking an exemption from the tariffs.

“We believe we need to solve that issue before the signing takes place,” Baker told reporters in Ottawa. The signing has been tentatively set for the end of November.

It was the toughest threat yet from one of the negotiators over the deal that would replace the North American Free Trade Agreement. Mexico and Canada have lobbied the U.S. to lift exemptions to the tariffs, 25 percent for steel and 10 percent for aluminum, arguing that now that the talks for the USMCA deal are complete, there’s no need to maintain those tariffs.

The U.S. however has resisted providing the exemptions, fearing that doing so would allow China, the main target of the tariffs, to harm the U.S. steel industry.

“The president is reviewing the steel and aluminum tariffs,” said Kelly Craft, U.S. ambassador to Canada, Friday at a forum hosted by the Ontario Chamber of Commerce. “That is not something that is against Canada … It’s just protecting North America from other countries that will be passing raw materials through, and also to protect our steel industry at home.”

The White House initially carved out exceptions for Canada and Mexico to its steel and aluminum tariffs , then revoked them in June as a way to pressure both countries during the talks to replace the North American Free Trade Agreement.

The U.S. has proposed replacing the tariffs with a quota system, similar to what it did for South Korea regarding steel, when in August it allowed a quota of 70 percent of average steel exports to the United States in the years 2015 to 2017. Neither Canada nor Mexico are expressing interest on that, according to an administration official who requested anonymity to discuss ongoing talks. As a consequence, there isn’t much talk going on between the countries to resolve the tariff issue, the official said.

A Canadian government official, speaking anonymously, told the CBC earlier this week, that a quota proposal was a concession that Canada would make. Officials see no reason why they cannot return to status quo on metal imports from before the NAFTA talks. “There is no need for those tariffs to be in place,” Canadian Ambassador David MacNaughton said Friday in Ottawa.

Backers of the administration’s policies say a quota is still the best compromise for all sides. “From a U.S. industry perspective, tariffs are similarly effective to quotas if done right,” said Michael Stumo, chief executive officer of the business-labor Coalition for a Prosperous America. “From Canada’s perspective, they should want quotas rather than tariffs because with a quota, their industry gets the money, but with a tariff, the U.S. government gets the money.”

Critics charge that the systems lead to cronyism. “They empower foreign governments to pick winners and losers by deciding which steel or aluminum companies are allocated part of each country’s quota to export to the United States,” said Bryan Riley, trade policy analyst for the National Taxpayers Union. “That’s one reason quotas may be harder to get rid of than tariffs — they can create a political constituency in foreign countries in support of the quotas.”

Hugo Perezcano Diaz, deputy director of the international law research program at Canada’s Centre for International Governance Innovation and a former NAFTA negotiator, speculates that the quota talk may be leading to an alternate solution, a closed three-country market. “Canada has already adopted a safeguard against imports of steel products from the rest of the world, including Mexico,” he said. “If Mexico were to do something similar and the three countries close the North American market, the U.S. may feel sufficiently protected to eliminate the tariffs.”


Washington Examiner / Sean Higgins / October 26



Unfinished business: Putting the final touches on the USMCA

The Hill /  David L. Goldwyn / October 29


The proposed US Mexico Canada Agreement (USMCA) makes important, but incomplete, progress in securing an integrated North American energy market.

In terms of progress, the agreement preserves zero tariffs for trade in oil, gas and petroleum products across North America. It effectively locks in Mexico’s historic energy reforms by ensuring that Mexico cannot reinstate restrictions on US investment in the oil and gas sector. A “ratchet” clause ensures that if Mexico decides to further liberalize the sector, then that higher floor becomes the new USMCA commitment.

While Investor-state dispute settlement (ISDS) mechanisms are weaker, they remain in force for certain “covered sectors,” including oil and gas investments in Mexico and power generation and pipeline investments where the investor has a contract with the government.

These are all positive steps for North American energy security. Mexico and Canada provide the United States with the heavy grades of oil not produced domestically, helping US refineries produce gasoline at the lowest possible cost. Thanks to this relationship,  the United States is an efficient net exporter of petroleum products.

However, while this progress is laudable, it remains incomplete.

In the rush to conclude the agreement, effective protection for power generation investments like new wind and solar plants, refining and natural gas infrastructure, and power transmission lines were left out, perhaps inadvertently. Contracts for these investments are with state owned enterprises (SOEs) like Mexico’s CFE and PEMEX, which do not now fall within the definition of “federal government” because they are not disposing of assets but signing a contract for service. These essential investments, in the gas and refined product infrastructure which carry US products to and through Mexico, transmission lines which carry US electricity south, and investments in power generation are not permitted to bring ISDS claims to enforce their rights.

This is an oversight, and a protection these investments should enjoy. Rather, the proposed agreement creates an uneven playing field as investors who do have a contract with the Federal government, say for exploration, are entitled to bring an ISDS claim for any of their businesses, while those who do not have such contract do not. The problem can be easily fixed by expanding the definition of federal government to include these wholly owned SOEs.

These (for now) unprotected investments are critical to North American energy security. They secure US exports of electricity and natural gas and assure the continued reliability of the North American electricity system. They are the lifelines which carry US exports to Mexico – currently our number one customer for natural gas and petroleum products.

Protecting investments in Mexico’s electricity sector improves US national security by supporting Mexico’s prosperity through a more resilient power system.

Finally, if US power sector investments in Mexico are not protected and thus potentially hindered or lost, China is certain to fill the gap.

Chinese investment in all forms of power generation, transmission, and distribution is rapidly accelerating throughout Latin America. According to a recent Atlantic Council report, cumulative flows of Chinese foreign direct investment in Latin America have reached $110 billion, with $25 billion in oil and gas investment, and $13 billion in electricity, utilities and alternative energy. China’s State Grid has invested $7 billion in Brazil, through a combination of greenfield investments and acquisitions.

If the Mexican government is willing to offer these investments protections (and they are), and create a level playing field for American companies investing in our closest neighbor, the US should not object.

Fortunately, there is still time to correct the definition of eligible claimants as both sides ready the agreement for ratification.  With these modest steps, the United States, Mexico and Canada can improve the resilience of North America’s energy system, and the US can simultaneously advance its economic and national security interests.

David L. Goldwyn is president of Goldwyn Global Strategies, an international energy advisory consultancy and serves as chairman of the Atlantic Council Global Energy Center Energy Advisory Group. He served as the U.S. State Department’s special envoy and coordinator for international energy affairs from 2009 to 2011; he previously served as assistant secretary of energy for international affairs and as national security deputy to U.S. Ambassador to the United Nations Bill Richardson. He is a member of the U.S. National Petroleum Council and the Council on Foreign Relations.


The Hill /  David L. Goldwyn / October 29


Comment: Investors keep a watchful eye on Mexico’s new leftist leader

International Investment / Jonathan Clare / October 22


Jonathan Clare recalls the strikingly different Mexico of the 1990s, and looks at the country’s prospects today under a new, left-wing, administration.

The Mexico of today is very different from the country I first experienced in the late 1990s. Back then I was based in Mexico City – the local population was still reeling from a banking crisis and severe recession.

Talking to locals in the fashionable coffee shops you would hear of the steady exodus of the middle class from the sprawling metropolis. There was a sense of gloom that the Institutional Revolutionary Party’s long stranglehold on Mexican politics would never end. Investor confidence was pretty low and lawlessness was a constant worry.

The bleak financial news and security risks preyed on people’s minds, but there were some notable compensations, principally the idyllic beaches and a world-class cuisine. Today, high-levels of crime continue to scar the nation, but the country has undergone an economic transformation – and one that has not been confined to the urban and industrial centres in Mexico City and Monterrey, where gleaming office blocks dominate the skyscape.

Since the PRI lost power in 2000, successive governments have worked hard to forge trading relationships with some 44 countries, as far afield as Israel and Japan. The previous perception of a tourism-and agriculture-based economy no longer holds. The country has diversified to include a variety of sectors from chemical, telecommunications and automotive, to energy to name just a few.


Taking the lead
Mexico is recognised as the leading emerging market in Latin America, while top Mexican companies are significant players across the Americas, Europe and Asia through a wave of mergers and acquisitions over the last decade. Increasingly, they are helping to drive growth in these markets. CEOs of top local conglomerates I speak to enthuse about the opportunities they have forged by connecting and partnering with research and development centres and companies in the UK, Germany and Switzerland.

Some question whether the recent economic progress, albeit sluggish of late, can be maintained following the election victory in July of the leftist Andres Manuel Lopez Obrador (popularly known as AMLO, an acronym of his initials). His key campaign theme was curbing corruption, which remains a national scourge. More broadly, though, Mexicans are still trying to gauge what his leadership will mean for the country, in particular its impact on foreign investors in the energy sector.

AMLO has sought to salve business fears over the direction he will take by insisting there will be no nationalisation and promising fiscal discipline. But over time he will come under pressure from his support base of those “left behind” by the country’s revival to introduce populist measures. He has already pledged to double pensions when he officially takes office on 1 December.

Indeed, the business community remains nervous about possible attempts to reverse previous administrations’ reforms, many of which have helped Mexico to make some important advances, not least within the telecommunications and energy sectors. However, his critics’ concerns should be tempered by AMLO’s record in office. As mayor of Mexico City in the early 2000s, he proved to be an effective operator, and one would hope that his penchant for organising disruptive political protests during national election campaigns is now a thing of the past.

Fortunately for AMLO, his tenure begins amid some positive developments. The protracted and thorny re-negotiation of NAFTA has been completed. The parties prudently agreed the successor United States-Mexico-Canada Agreement (USMCA) in advance of the new administration being sworn in at the end of year. And the strong economic outlook in the US can only benefit Mexico, as it will continue to be one of Washington’s most important regional trading partners for the foreseeable future.

The trade war between China and the US may also reap dividends for AMLO’s term as US companies look to their immediate neighbour to fill any supply chain gaps. According to the OECD, the Mexican economy is set to maintain its growth rate of over 2% in 2018. The same is forecast to hold in 2019.


The benefit of the doubt
In Mexico City and Monterrey it’s business as usual: traffic madness, buoyant trade, and deals still getting done. Looking ahead, there is no doubt there will be a shift in the new government’s approach to ensure the needs of AMLO’s support base are met, but there is likely to be a strong dose of pragmatism and deal-making when addressing the various challenges ahead. In all probability, AMLO will balance the needs of his constituency with keeping the political elite and business community onside.

Critically, the international investment community, for now at least, appears to have given the president-elect the benefit of the doubt, despite all the background noise and fears over the reversal of reforms. Building a consensus is the key going forward, and AMLO will be well advised to maintain close relations with foreign investors, and local business leaders in general, however much his supporters might protest.

The sentiment on the street is that he has shown enough to be trusted to move the economy in the right direction. Nearly twenty years on, in the trendy coffee shops, restaurants and bars of the capital’s upscale districts of Polanco and Roma there is little talk of escaping the city – quite the reverse in fact.


International Investment / Jonathan Clare / October 22


United States seeking Mexican steel export quotas: negotiator

Reuters / Frank Jack Daniel / October 15


MEXICO CITY (Reuters) – The United States is seeking to impose quotas on Mexican steel exports as part of a negotiation to remove metals tariffs, the chief trade negotiator of Mexico’s incoming government said on Monday, adding the issue needed to be resolved within weeks.

The administration of U.S. President Donald Trump imposed the tariffs on Canada and Mexico in June, citing national security reasons. Although the three countries agreed a renewed trade deal earlier this month, the measures remain in place.

Jesus Seade, who represented Mexico’s President-elect Andres Manuel Lopez Obrador in the wider trade talks, said the current Mexican government was leading the metals talks but that he had spoken to U.S. Trade Representative Robert Lighthizer on the matter.

“I have had a couple of calls with Lighthizer, and it is along those lines, to manage volumes etc with Mexico and with Canada,” Seade said in an interview with Reuters, declining to give more details about the content of the discussions.

Seade said the issue of tariffs on Mexican steel had to be resolved before the new government takes office on Dec. 1.

“There is a month-and-a-half left, so it needs to be resolved now,” he said.

Mexico’s economy ministry, which leads trade talks, did not immediately respond to a request for comment.

Mexico is a net importer of steel from the United States, although it did export $2.5 billion of iron and steel to its northern neighbor in 2017, according to the U.S. Census Bureau.

In March, the United States signed a deal with Seoul where in exchange for an end to steel tariffs, South Korea agreed to cut exports by 30 percent of the past three years’ average.

During talks on the new United States-Mexico-Canada Agreement (USMCA), U.S. officials told Canada they wanted a similar arrangement for steel and aluminum, one source told Reuters last week, declining to give specific details.

Canada rejected the demand and made clear any cap on the metals would have be at a level higher than current exports to allow room for shipments to grow.


Reuters / Frank Jack Daniel / October 15


How President Trump’s Trade Deals Could Lift the US Economy

Market Realist / Mark O’Hara / October 8

Trade deals

President Donald Trump has long lashed out against existing trade deals, calling them unfair to the United States. The Trump administration has been working to renegotiate several trade deals, and the focus has been on reducing the country’s massive trade deficit by moving its manufacturing onshore.


The Trump administration has used tariffs as well as tariff threats to obtain trade concessions. Less than halfway into his presidential term, Trump has renegotiated NAFTA and KORUS FTA (the United States–Korea Free Trade Agreement).

Under the new NAFTA—renamed USMCA (the United States–Mexico–Canada Agreement)—the United States is expected to gain access to Canada’s historically protected dairy industry. It also calls for more regional content in automotive manufacturing.

Under the new KORUS terms, South Korea relaxed the norms for automotive imports from the United States. It also agreed to a quota to obtain long-term exemptions from the Section 232 steel tariffs in the United States (QQQ).

Section 232 tariffs

Trump’s trade rhetoric has received support as well as opposition. Retail and tech giants such as Walmart (WMT), Alphabet (GOOG), Apple (AAPL), and Amazon (AMZN) are lobbying against these tariffs. However, the new trade deals have allowed the Trump administration to obtain incremental benefits that are expected to support US jobs. We’ve seen plant restarts in the US steel and aluminum industry after the Section 232 tariffs were implemented.


Market Realist / Mark O’Hara / October 8


USMCA: Who are the winners and losers of the ‘new NAFTA’?

Washington Post / Heather Long / October 1

Trump and Trudeau can tout this as a major victory ahead of key elections in their countries. It’s a lot less clear whether ‘NAFTA 2.0’ is good for Mexico and U.S. automakers.

The United States, Canada and Mexico finalized a sweeping new trade deal late Sunday, just hours before their Oct. 1 deadline. President Trump was up early Monday tweeting that the agreement is “a great deal for all three countries,” and Prime Minister Justin Trudeau said Sunday night that it was a “good day for Canada.”

The deal is expected to take effect around Jan. 1, 2020. Congress has to approve it, a process that will take months, but confirmation looks likely, given that Republicans are pleased Canada got on board and some Democrats are pleased with the stronger labor provisions.

Here’s a look at who’s smiling — and who’s not — as the world sees this news.


President Trump. He got a major trade deal done and will be able to say it’s another “promise kept” to his voters right before the midterm elections. And he won the messaging game — he persuaded Canada and Mexico to ditch the name “NAFTA,” for North American Free Trade Agreement, which he hated, and to instead call the new agreement “USMCA,” for United States-Mexico-Canada Agreement. It’s not a total trade revolution, as Trump promised, but USMCA does make substantial changes to modernize trade rules in effect from 1994 to 2020, and it give some wins to U.S. farmers and blue-collar workers in the auto sector. Trump beat his doubters, and his team can now turn to the No. 1 trade target: China.

Prime Minister Justin Trudeau. There might not be a lot of love lost between Trump and Trudeau, but in the end, Trudeau didn’t cave much on his key issues: dairy and Chapter 19, the treaty’s dispute resolution mechanism. Trudeau held out and got what he wanted: Canada’s dairy supply management system stays mostly intact, and Chapter 19 remains in place, a win for the Canadian lumber sector. On dairy, Canada is mainly giving U.S. farmers more ability to sell milk protein concentrate, skim milk powder and infant formula. On top of the substantive issues, Trump went out of his way to criticize the Canadian negotiating team in the final days of deliberations, which Trudeau can play up as a sign of just how hard his staff fought on this deal.

Labor unions. This agreement stipulates that at least 30 percent of cars (rising to 40 percent by 2023) must be made by workers earning $16 an hour, about three times the typical manufacturing wage in Mexico now. USMCA also stipulates that Mexico must make it easier for workers to form unions. The AFL-CIO is cautiously optimistic that this truly is a better deal for U.S. and Canadian workers in terms of keeping jobs from going to lower-paying Mexico or to Asia, although labor is looking carefully at how the new rules will be enforced. It’s possible this could accelerate automation, but that would take time.

U.S. dairy farmers. They regain some access to the Canadian market, especially for what is known as “Class 7” milk products such as milk powder and milk proteins. The United States used to sell a lot of Class 7 products to Canada, but that changed in recent years when Canada started heavily regulating this new class. USMCA also imposes some restrictions on how much dairy Canada can export, a potential win for U.S. dairy farmers if they are able to capitalize on foreign markets.

Stock market investors. A major worry is over, and the U.S. stock market rallied Monday with the Dow gaining nearly 200 points.

Robert E. Lighthizer. Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin couldn’t get major trade deals done for the president, but U.S. Trade Representative Lighthizer did. He led negotiations with South Korea on the revamped U.S.-South Korea trade deal (KORUS) that the president just signed, as well as on the “new NAFTA.” Lighthizer is proving to be the trade expert closest to Trump’s ear.


China. Trump is emboldened on trade. A senior administration official said Sunday that the U.S.-Canada-Mexico deal “has become a playbook for future trade deals.” The president believes his strategy is working, and he’s now likely to go harder after China because his attention won’t be diverted elsewhere (at least on trade matters).

U.S. car buyers. Economists and auto experts think USMCA is going to cause car prices in the United States to rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore. It’s unclear how much prices could rise (estimates vary), but automakers can’t rely as heavily on cheap Mexican labor now and there will probably be higher compliance costs.

Canadian steel. Trump’s tariffs on Canadian steel and aluminum remain in place for now, something Trudeau has called “insulting” since the two countries are longtime allies with similar labor standards.


Mexico. America’s southern neighbor kept a trade deal in place, but it had to make a lot of concessions to Trump. It’s possible this could stall some of Mexico’s manufacturing growth, and it’s unclear whether wages really will rise in Mexico because of this agreement. Big energy companies can also still challenge Mexico via Chapter 11, something that could constrain Mexico’s new government as it aims to reform energy policies.

Ford, GM, Chrysler and other big auto companies. There’s relief among auto industry executives that the deal is done, but costs will be high for big car companies: The steel tariffs are still in place on Canada; more car parts have to come from North America (not cheaper Asia); and more car components have to be made at wages of $16 an hour. It remains to be seen how car companies are able to adjust and whether this has long-term ramifications for their bottom lines.

Big business. Many business groups are relieved that Trump got a trilateral deal and didn’t end up tearing up NAFTA entirely, as he had threatened to do. And they like a lot of the trademark and patent provisions. But the details of USMCA include some losses for big business. Some regulatory compliance costs will probably rise, especially for automakers, and big business lost Chapter 11, the investor dispute settlement mechanism that companies have used to sue Canadian and Mexican governments (the one exception is that energy and telecommunications firms still get a modified Chapter 11 with Mexico).

Washington Post / Heather Long / October 1

Feature: Mexico’s oil industry cautiously optimistic of future energy policy

S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1


Mexico City — Oil and gas executives attending last week’s Mexican Petroleum Congress (CMP) in Acapulco told S&P Global Platts that they were cautiously optimistic about the future of the country’s energy reform, pointing to higher oil prices and some clarification of President-elect Andres Manuel Lopez Obrador’s policies.

The conference took place as Lopez Obrador held a closed-door meeting with the country’s association of hydrocarbon producers, AMEXHI, on Thursday in Mexico City.

The incoming administration gave a firm message: Mexico will continue the energy reform and private upstream investment as long as they can deliver results by boosting output.

The meeting cleared some uncertainties that had built up since Lopez Obrador’s electoral victory in July. Obrador has been historically opposed to private investment in Mexico’s energy sector.


According to a video of the meeting obtained by Platts, Lopez Obrador told operators that the future of the reform rested on their shoulders.

“We want to give you the opportunity to invest and work on this reform,” Lopez Obrador said. However, companies must invest and boost output to prove the success of the country’s new energy model.

The president-elect said his goal is that private operators produce 280,000 b/d of crude oil and 305 MMcf/d of the natural gas by the end of his term in 2024. “That would be the ideal. We aren’t asking for more and we are happy with that level,” he said.

This is a very conservative projection compared to the 430,000 b/d estimate shared by outgoing Energy Secretary Pedro Joaquin Coldwell at the inauguration of CMP.

At a webcast press conference Thursday, Mexico’s future energy secretary Rocio Nahle said that auction rounds would be halted. She said the country first needs to evaluate the 110 contracts awarded to date because they have not helped boost domestic production.

“It would be irresponsible to continue auctioning areas without a previous production gain [from awarded areas],” Nahle said.


AMEXHI members are allies of the state and can collaborate with Pemex to “continue strengthening Mexico’s energy security,” Alberto de la Fuente, AMEXHI’s president, said in a statement Thursday.

This message of partnership was also shared by senior executives from BHP Billiton, BP, Chevron, DEA Deutsche Erdoel, Equinor, and Shell at the CMP.

“We aren’t here to replace Pemex but to complement it and help to achieve the incoming administration’s goal of boosting oil output,” Steve Pastor, BHP Billiton’s president for petroleum operations, told Platts last week at the CMP.

De la Fuente denied that private operators were uncertain over the review of contracts awarded by the country’s National Hydrocarbon Commission (CNH).

In the statement, he said that AMEXHI members left the meeting with the incoming administration with the knowledge that Lopez Obrador will honor their contracts.

However, some industry members expressed their frustration to Platts at the conference about an apparent lack of understanding from the incoming administration on the long-term nature of the upstream industry.


At the meeting with AMEXHI members, Lopez Obrador said his administration would work with regulators to cut the red tape and quicken the development of new projects.

“Some of you have told me permits take too long, and regulators delay your investment plans as well as Pemex’s activities,” Lopez Obrador said. “We are going to solve all bureaucratic roadblocks.”

Juan Carlos Zepeda, CNH’s president commissioner, told reporters Friday there was space to make the regulatory process leaner and more efficient while protecting the wellbeing of the country’s fields and hydrocarbon resources.

“We share views with President-elect Lopez Obrador and the industry … we are working toward that path without neglecting our responsibility of protecting Mexico’s reservoirs,” Zepeda said.

Right now, Mexico is more efficient than the US when it comes to the development of wells as CNH only requires notice from the operators instead of regulatory approvals, Zepeda said.

Also, CNH is working on a new process to expedite the approval of exploratory and development programs, which is currently under public consultation, he added.

A major regulatory roadblock for Mexico’s upstream sector has been Pemex’s framework to farmout projects via CNH auctions, Pemex senior officials said at CMP.

Zepeda said he supports the idea of Pemex being able to choose its own farm out partners. However, the company should maintain transparency levels upheld by CNH.


S&P Global / Daniel Rodriguez / Edited by Pankti Mehta / October 1


Canada trade minister pushes quick ratification of trade deal with Asia Pacific

The Business Times / AFP / September 18


[OTTAWA] Canada’s trade minister on Monday signalled that the government will push ratification of the Trans Pacific Partnership quickly through parliament, as stalled North American free trade talks have raised concerns it could lose its privileged access to the US market.

“Rapid ratification of the TPP” will mean “farmers, ranchers, entrepreneurs and workers across the country can finally tap into new markets,” trade minister Jim Carr said in a speech to parliament.

Signed in March without the United States, the Trans-Pacific Partnership will come into effect 60 days after ratification by at least six of the 11 signatories – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

The trading bloc represents 500 million consumers and 13 percent of the world’s economic output.

Ottawa wants to be among the first six TPP signatories, but is facing pushback from the powerful union representing Canadian auto workers. Unifor wants stricter labour standards written into the pact and for negotiations with the United States and Mexico to revamp the North American Free Trade Agreement completed first.

High-level talks ended last week with no deal, and no date has been set yet for Canada’s foreign minister Chrystia Freeland to return to Washington to continue negotiations.

For Canada, implementing the TPP is “of paramount importance,” said Mr Carr, if only to act as a counterbalance to growing US protectionism under US President Donald Trump, who has threatened to cut Canada out of a new continental trade deal if Ottawa didn’t give in to his demands.

“This is not just a new trade agreement for Canada, it is also a message we send to the rest of the world: trade is important, the rules are important and we will not give in to protectionism,” the minister said.


The Business Times / AFP / September 18


U.S. turns up pressure on Canada to loosen grip on dairy industry in NAFTA talks

Calgary Herald / The Canadian Press / September 11


WASHINGTON — Canada’s foreign affairs minister says Tuesday’s anniversary of the 9/11 terrorist attacks on the United States should serve as a reminder of the deep ties between the two countries as they haggle over the future of North American free trade.

Chrystia Freeland underlined the anniversary at the start of another day of trade talks aimed at breaking an impasse on a renewed North American Free Trade Agreement.

The renegotiation of the 24-year-old NAFTA, which also includes Mexico and is integral to the continent’s economy, has dragged on for 13 months.

The in-person, high-level negotiations got back underway as events marking the 17th anniversary of the 2001 attacks took place around the U.S., including at the Pentagon with Vice President Mike Pence, not far from where the trade meetings are taking place.

Freeland said the memorials should help to add some context to the ongoing negotiations on free trade that were started at Trump’s behest.

“Maybe that helps us all put into perspective the negotiations that we’re having — and also put into a little bit of historical perspective the importance and the significance of the relationship between Canada and the United States,” Freeland told reporters outside the offices of her counterpart, U.S. Trade Representative Robert Lighthizer.

“At the end of the day we’re neighbours, and at the end of the day, neighbours help each other when they need help.”

Freeland and Lighthizer left the bargaining table Friday without a deal following two weeks of negotiations. She said she spoke with Lighthizer over the weekend and they agreed it would be useful for them to meet again face to face.

“The conversations over the weekend continued to be constructive and productive,” she said.

Freeland will spend Tuesday in the U.S. capital before she heads to Saskatoon to attend Liberal caucus meetings that begin later in the day and run through Thursday.

Lighthizer spent Monday in Brussels for trade discussions with the European Union — preliminary talks that are scheduled to resume later this fall.

Ottawa and Washington are trying to reach an agreement that could be submitted to the U.S. Congress by month’s end. A deal would see Canada join a preliminary trade agreement the Trump administration struck last month with Mexico.

The two sides have so far been unable to resolve their differences over U.S. access to the Canadian dairy market, a cultural exemption for Canada and the Chapter 19 dispute resolution mechanism.

A Canadian source with knowledge of the NAFTA discussions says an agreement is within reach, but getting there will require flexibility from all sides.

Prime Minister Justin Trudeau said during an interview Tuesday with a Winnipeg radio station, CJOB, that there are certain positions Canada has and remain firm on. But he said the Liberals plan to be flexible on other issues in order to get a deal.

“It’s time to update this deal after 25 years. We’re just going to stay working constructively to get to that win, win, win that we know is there,” he said in the interview.

There is another wild card in Washington: hurricane Florence, a monster Category 4 storm that’s bearing down on the U.S. east coast and is sure to make its presence felt in the national capital area later in the week.


Calgary Herald / The Canadian Press / September 11