Energy Reform and Local Content in Mexico: Effects in the Mining Sector

Musik Asali, Guillermo Adbel;
Apr 2015
Mexico is one of the world's leading oil producers; it currently ranks tenth worldwide and first in the Latin American and Caribbean region. However, in the last 10 years, oil production has fallen by almost a million barrels a day. Declines in Crude oil exports have led to increases in imports, and negatively affected the balance of trade. To reverse this trend, the federal government promoted a reform in the energy sector which was approved in December 2013. This reform declared that oil and gas exploration and production were strategic activities, and promoted private investment in the hydrocarbon industry. In addition to the direct benefits generated by this investment in terms of increased production and lower prices, there is great potential for its impact on more sectors of the economy through vertical linkages. This study analyzes the future effect of the changes in the hydrocarbon sector on the mining sector, with emphasis on existing and potential linkages between the two sectors stemming from local content policies. This analysis will be useful for generating financial and public policy instruments that allow the mining sector to maximize benefits from the expected growth in the hydrocarbon sector over the next few years.