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Monterrey 2014 Blog: Closing Remarks - Secretary of Economy Ildefonso Guajardo

Ildefonso Guajardo. (Image: Miguel Leyva)

Wednesday, November 19, 2014

Mexican Secretary of Economy Ildefonso Guajardo described the expected benefits of the energy reform and the steps left to secure economic growth.

First, Guajardo explained the context of the energy reform. In the 1980s, manufacturing exports outpaced oil exports, and now, manufacturing makes up around 83 percent of exports, while oil exports encompass only 13 percent. And in spite of increased trade and financial stability, productivity has fallen since 2000. Plus, energy investment has risen steadily, even as oil production dropped. Given this scenario, it was time to change the rules of the game, said the secretary. Through the reform and, eventually, lower energy costs, Mexico's industries will be able to increase productivity, he said.

Next, Guajardo explained the anticipated impact of the reforms, including lower gas and electricity prices within two years, a 1 percent increase in GDP by 2018, and the creation of 500,000 jobs over the same period.

The secretary also noted that gas production is expected to double by 2025, while oil production could increase by 40 percent from 2013 to 2014.

Guajardo outlined how the energy reform will affect strategic players, noting that the transportation and industrial sectors are the country's largest energy consumers. For example, steel producers spend 25 percent of costs on energy alone. So with energy reform in place, industries such as petrochemical and plastics producers will have lower costs and more productivity. The secretary underscored the fact that energy reform will ultimately affect electricity costs, which he said have become "excessively expensive" in recent years. Electricity accounts for around a third of industrial energy expenses.

Finally, Guajardo noted the importances of building gas pipelines, ensuring that both energy-rich and energy-poor states benefit from the reforms. He added that the reform means supply chains will ultimately benefit across a variety of industries.

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