Can Mexico Power Its Way to Prosperity with Sun, Oil, and Dollars?

Mexico's geographical position, its proximity to the United States, the existence of the T-MEC and macroeconomic stability in this post-pandemic time due to COVID-19, have made the Mexican nation attractive for nearshoring, but to achieve stability it is necessary to guarantee greater energy autonomy (with renewable and non-renewable), according to the researcher of the Institute of Economic Research (IIEc) of the UNAM, Ernesto Bravo Benítez.

The doctor in Economics from the National University recalled that the international economic scenario has become more complex due to the problems related to the supply crisis and its inflationary consequences, as well as the geopolitical tensions derived from the conflicts taking place in the Middle East, Central Europe, and Southeast Asia.

Participating in the panel discussion “Energy self-sufficiency and nearshoring”, held in the videoconference room of said academic entity, the specialist stated that the potential of our country at this time is confirmed by the growth of foreign direct investment (FDI) flows that arrive, such as the growing demand for industrial parks in the northern areas, the Bajío and Mexico City, but not in the southern and southeastern regions.

The academic from the Faculty of Economics also highlighted that in the context of nearshoring, the influx of FDI to Mexico during the first half of 2024 was 51,409 million dollars (20,313 million dollars (mdd) in the first quarter and in the second quarter the investment was 31,096 mdd), which implies a great economic commitment in terms of logistics and physical and social infrastructure, and also political stability and public security to guarantee its permanence and continued attraction.

In this scenario, he stressed that everything related to the electricity supply demanded by foreign investors must be prioritized, to a greater extent from sustainable sources, due to the international environmental certification of several of the firms, which commits, in the first instance, the federal authorities to find ways to ensure that the population and the productive apparatus (national and foreign) have a reliable, growing, and sustainable supply of energy.

At the table moderated by the IIEc researcher, Miguel Ángel Alamillo Hernández, the researcher of this university entity, Arturo Ortiz Wadgymar, explained that Mexico, being a producer of oil and its derivatives, is in a situation of comparative advantage and is attracting certain capital from other nations that need to associate with national capital and generate the process known as nearshoring, a way in which the country would achieve a new industrialization. In this way, the supply of hydrocarbons is assured.

The economist estimated that by the end of 2024, the importation of 10 percent of gasoline is expected, and that the nation will be self-sufficient in diesel and jet fuel. This is the basis for Mexico to be well positioned in the face of nearshoring, although it is not well known how it is intended to be applied and what treatment or renegotiation can be given to it in the Treaty between Mexico, the United States, and Canada (T-MEC).

Ortiz Wadgymar pointed out that in a situation like this, it gives the country a comparative advantage and elements to better renegotiate a treaty, now that they are living through the most difficult month of the North American election, and situations are about to be defined that cannot be predicted, but will manifest themselves from now until December.

The international trade specialist clarified that this does not prevent the need to continue in a process of energy change, but in the short term, it is important that Mexicans be owners of our oil and the products derived from it, which implies a comprehensive long-term project that is already, at least in the letter, recorded in the T-MEC.

He reiterated that nearshoring implies that foreign companies reposition themselves closer to their territory due to competitive advantages, which 30 years ago were superior in China, but today they can relocate to Mexico, Latin America, the Caribbean, in closer places where transportation costs are lower.

The author of “The economic opening of Mexico 30 years later, from Gatt to Trump” (2018) stated: I have faith that the next government will support this type of thinking and that the nation will once again achieve, as it did at one time, “a Mexican miracle,” that is, when oil generated a process of national industrialization.

The coordinator of the Annual Seminar on World Economy at the IIEc and member of the Mexican Academy of Political Economy also assessed that with the support of the government, in the long run, Petróleos Mexicanos will be self-financing, since when it stops importing and sells gasoline, it will then obtain profits and, in some way, it will be able to face its debt problems.