FIRST Mexico State Visit Report 2015

PUBLISHED TO MARK THE STATE VISIT OF H.E. ENRIQUE PEÑA NIETO,PRESIDENT OF THE UNITED MEXICAN STATES

Promoting inclusive growth through deeper economic engagement

MÉXICOENERGY • INFRASTRUCTURE • CULTURE • TOURISM

O F F I C I A L S TAT E V I S I T R E P O RT

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BP welcomes the President of Mexico, Enrique Peña Nieto, to the United Kingdom for his State Visit. Best wishes for a successful trip.

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ContentsH.M. QUEEN ELIZABETH IIMessage 4

RT HON DAVID CAMERON MPPrime Minister of the United KingdomMessage 6H.E. ENRIQUE PEÑA NIETOPresident of the United Mexican StatesTransforming Mexico 8H.E. DIEGO GÓMEZ PICKERINGAmbassador of the United Mexican States to the United KingdomPromoting a stronger partnership 14H.E. DUNCAN TAYLOR CBEAmbassador of the United Kingdom to the United Mexican StatesOld friends, significant partners 18JOSÉ ANTONIO MEADE KURIBREÑASecretary of Foreign Affairs, United Mexican StatesA truly global citizen 16DR LUIS VIDEGARAY CASOSecretary of Finance and Public Credit, United Mexican StatesFrom reform to implementation 22ILDEFONSO GUAJARDO VILLARREALSecretary of Economy, United Mexican StatesRealising Mexico’s potential 25PEDRO JOAQUÍN COLDWELLSecretary of Energy, United Mexican StatesSharing best practice 30GERARDO RUIZ ESPARZASecretary of Communications and Transport, MexicoConnecting Mexico to the world 34DOMINIC JERMEYChief Executive, UK Trade & Investment (UKTI)Seizing Mexico’s moment 37CLAUDIA RUIZ MASSIEUSecretary of Tourism, United Mexican StatesMoving up the value chain 38JIM O’NEILLEconomist and Honorary Professor, University of ManchesterMaking a MINT 42EMILIO LOZOYA AUSTINDirector General, Petróleos Mexicanos (Pemex)Seconds out, Round 1 44DR ENRIQUE OCHOA REZADirector General, Comisión Federal de Electricidad (CFE)CFE: At the heart of energy reform 48ALDERMAN ALAN YARROWLord Mayor of the City of LondonSupporting Mexico’s growth 51WAJIH EFFENDIVice President and Country Manager, BG MexicoBG: The UK’s flagship for reform 52BECKY PASKINFood and Drink CorrespondentGetting into the Spirit of Mexico 54JOHANNA ZULETAArts and Culture CorrespondentLondon’s Mexican melting pot 58DR DUDLEY ANKERSON CMGPolitical Consultant and AuthorLooking back on Mexico 62ROB CAPURROCEO, Canning HouseLatin America’s home in London 64

Please convey my warm thanks to all at FIRST Magazine for your loyal

greetings, sent on the occasion of the publication of an official report to mark

the forthcoming State Visit of the President of the United Mexican States to the

United Kingdom.

I look forward to welcoming His Excellency Señor Enrique Peña Nieto

and to the opportunity which this visit gives us to strengthen the strong links

that already exist between our two countries.

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Message from The Rt Hon David Cameron mp,

Prime Minister of the United Kingdom

I am delighted to welcome Enrique Peña Nieto to Downing Street for his first visit to London as President of Mexico. It is fitting that the President’s State Visit is taking place this year, the dual year of

the UK in Mexico and Mexico in the UK – a year-long celebration of the business, scientific and cultural ties between our two nations.

The UK and Mexico have a growing relationship that spans sectors including trade and investment, international security, climate change, education and tourism. Building a vibrant economic partnership with Mexico is part of our long-term plan to deliver economic growth and jobs in both our economies, and it’s encouraging to see that the latest figures show that bilateral trade now stands at £3.3 billion. We are committed to continuing this growth to reach our target of £4.2 billion by the end of this year.

President Peña Nieto’s visit will highlight the huge

opportunities that the Mexican market offers and enable us to promote British capability and expertise to our Mexican counterparts. Through cooperative innovation, the UK and Mexico keep our economies competitive and sustainably improve global living standards.

The UK and Mexico are amongst the strongest advocates of free trade and open economies and are strong supporters of further trade liberalisation. We are natural partners on the global stage, cooperating closely within the G20, OECD and the UN.

Following on from the visit of Their Royal Highnesses The Prince of Wales and Duchess of Cornwall to Mexico in November, President Peña Nieto’s State Visit will celebrate the ties between the Mexican and British peoples and create new opportunities to work together. I am sure that this will leave a lasting legacy that binds us more closely together now and in the years ahead. F

Rt Hon David Cameron mp,Prime Minister of the United Kingdom of Great Britain and Northern Ireland

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Transforming MexicoIntervIew wIth h.e. ENRIQUE PEÑA NIETOPresident of the United Mexican states

Mexico’s reform programme is generating increased confidence in the country’s stability and consolidating its position among the world’s most attractive markets

Her Majesty the Queen extends only two invitations per year to the most highly-regarded foreign leaders to make State Visits to the United Kingdom, yet yours will be the second by a Mexican President in just six years. To what do you attribute the evidently high priority which Britain places on its relations with Mexico, and to what extent is this reciprocated?

It is indeed an honour to accept this invitation from Her Majesty The Queen.

This State Visit aims to achieve two specific objectives: First, to commemorate the UK-Mexico ‘Dual Year’ – which I will come back to in a moment – and second, to explore new areas for cooperation arising from the implementation of Mexico’s structural reform programme.

Mexico is undergoing a period of great transformation; in the coming months we will implement 11 crucial structural reforms. Six of these have an economic purpose, namely: to increase Mexico’s productivity and competitiveness.

Of these, the Energy Reform will enable the energy sector to reclaim its position as an engine of economic growth. The Economic Competition Reform, together with the Telecom Reform, will encourage competition. With the implementation of the Financial Reform, banks are now starting to give more credit at lower interest rates. The Fiscal Reform aims to increase tax revenue by an additional 2.5 per cent of GDP by the end of my administration; while we are shifting from a regressive to a more progressive tax system. And the Labour Reform, which has added flexibility to the job market, is stimulating the formal economy and improving job conditions for women and young people.

Another five reforms aim to strengthen social and political rights in Mexico: The Education Reform updates the curricula and modernises school infrastructure, while also establishing a new professional teaching service. The new criminal procedures and legal protection laws will also improve our justice system. The Transparency Reform will allow us to set standards for open government. And finally, a Political and Electoral Reform will help us to further consolidate our democratic regime.

All these reforms are generating increased confidence in our country’s stability and consolidating its position among the world’s most attractive markets for foreign direct investment.

These transformations explain the increasing

relevance that Mexico is acquiring in the world, including countries with strong economies such as the United Kingdom. Mexico is prepared to correspond in good will, in order to usher in a new era in our already extensive cooperation with the UK, as part of our long-standing bilateral relationship.

How did the ‘Dual Year’ of Mexico in the UK and the UK in Mexico come about? What do you regard as the most important elements of the programme, and by what benchmarks will you judge its success?

At the outset, the Dual Year was conceived purely as a cultural initiative. But fortunately, its scope has been expanded to include other areas of exchange, including trade, investment, tourism, education, science and innovation.

The Year of Mexico in the United Kingdom and the Year of the United Kingdom in Mexico will strengthen the level of cooperation between both governments and our countries’ private sectors, as well as in the academic, scientific and artistic fields, which will support innovative projects and initiatives.

The Dual Year 2015 programme spans more than 100 separate exhibitions, concerts, festivals, academic workshops and artistic residencies.

These include: The Mayas: Revelation of an Endless Time; a Mexican Día de los Muertos (Day of the Dead) Festival at the South Bank Centre in November; and exhibitions at the Tate Liverpool, Turner Contemporary in Margate and Modern Art museum in Oxford. The celebrated Mexican conductor Alondra de la Parra will also conduct the London Philharmonic Orchestra at the Royal Festival Hall, and Mexico will feature as a guest country at the London Book Fair, together with an 18-month literary programme and a strong creative presence in leading British film schools and film festivals, among others.

Regarding tourism, 2015 will feature Mexico as a partner country at the World Travel Market (WTM) in November. A spectacular traveling exhibition Encuéntrate con México (Meet Mexico) will be installed in London and other major cities.

Now one of the UK’s most conspicuous food trends, modern Mexican cuisine will be on the menu of pop-up restaurants featuring top Mexican chefs, who will partner with fifty of the UK’s best restaurants throughout the year.

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Every leader would like to have the highest possible approval ratings, but in government doing the right thing usually brings with it a certain degree of unpopularity

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Trade and investment activities will include business seminars and trade missions from both countries, including the inaugural Mexico Day event at Mansion House. Business relationships will be further strengthened by the formation of a high-level economic group comprising top CEOs from Mexican and UK businesses and industries.

The benchmarks by which the success of the Dual Year may be judged will be the attendance of the general public at all of these events, the numbers of British visitors to Mexico and Mexicans to the UK and, most importantly, the extent to which Mexico is better understood in the UK and the UK is better understood in Mexico.

What are the primary objectives of your visit to the UK in March, and where do you see the greatest opportunities for advancing bilateral ties and cooperation in international fora?

The main objective is to promote new cooperation opportunities that will emerge with the implementation of structural reforms in my country, particularly in the energy, telecommunications and infrastructure sectors. We want also to reinforce the image of Mexico as a nation with increasing global responsibility and an attractive destination for trade, investment, tourism and academic exchange.

This visit affords us the perfect opportunity to strengthen the strategic association that Mexico maintains with the United Kingdom. New bilateral instruments will be instituted in order to strengthen our cooperation in the education, energy, tourism, health and security fields.

During the visit we will also establish the Mexico-UK High Level Economic Group. This will be an ideal platform through which to identify new opportunities to increase the volume of our trade and to encourage investments in both directions.

We are also prepared to deepen our interaction and cooperation in international fora, such as the G8+5, the OECD and the G20. I foresee new opportunities for fruitful cooperation in new frameworks, such as the European Union-CELAC Dialogue and through the participation of the UK as observer of the Pacific Alliance, of which Mexico is a member State. And, of course, there is great potential for cooperation regarding the negotiation process of an updated Free Trade Agreement with the European Union.

You and David Cameron are the youngest leaders of your respective countries in decades – over a century in the Prime Minister’s case. How would you describe your relationship, and what common goals and approaches do you share?

Prime Minister David Cameron is a young, experienced and skilled politician, highly respected

and admired worldwide. I was honoured to be invited by him to attend the G8 Summit in Lough Erne, on 17 June 2013, just 7 months after assuming my position as Mexico’s President. As part of these discussions we agreed on the importance of supporting their ‘3Ts’ agenda regarding tax, trade and transparency.

Advancing trade, ensuring tax compliance and promoting greater transparency are necessary and critical conditions for promoting growth, prosperity and global economic development.

Fiscal discipline is another important area in which we share points of view. Prime Minister Cameron and the Chancellor of the Exchequer, George Osborne, have undertaken responsible measures to control public debt, which are essential to maintain macroeconomic stability.

We both believe in free trade as a tool of growth, as well as transparency, accountability and open government.

Our last meeting took place in New York on September 2014, as a part of the 69th Session of the United Nations General Assembly, where we both highlighted the importance of the dual celebration, in 2015, of the Year of Mexico in the United Kingdom, and the Year of the United Kingdom in Mexico, and emphasised our commitment to carry out a programme of activities that will help strengthen political dialogue and identify new opportunities for collaboration in areas of mutual interest.

We believe in the importance of taking joint measures to fight corruption and promoting measures to ensure transparency, and have also held discussions on shaping the United Nations’ post-2015 Development Agenda and the importance of fighting poverty.

Last but not least, we talked about Mexico’s structural reform programme and exchanged points of view, in particular, on the Energy Reform and its positive impact on climate change. In short, our relationship is frank, open and respectful.

You have come to be seen as the new face of Mexico: a country that has enjoyed sustained growth, a rapidly-growing middle class and strong macro-economic fundamentals – due, in large part, to the stability created by NAFTA, now in its third decade. Where do you feel that Mexico is now headed, and how do you see the country’s place and role in the world changing over the next 10-20 years?

I see a Mexico with great potential, as a country that is transforming itself to provide growth, opportunities and welfare to its entire population.

The potential of our country’s economy will be bolstered through the reform programme’s effect on productivity and investment. We believe the set of structural reforms implemented by my administration can increase economic growth from around 3 per

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If Mexico wants to have different and better results, it also has to do things differently

cent to 5 per cent in the medium term. It is estimated that this growth could translate into the creation of an additional 300 thousand-plus formal jobs per year, reaching over one million new jobs on an annual basis.

Furthermore, the reforms will improve the investment climate, with better regulation that provides legal certainty to private investment in the energy and telecommunications fields, in particular.

The ‘Holy Grail’ of energy reform is one that has eluded successive governments over the last 20 years, yet it took the return to power of the PRI – which originally nationalised the industry in 1938 – to achieve what the Fox and Calderón administrations could not. It must be frustrating, to say the least, that this huge achievement has coincided with a collapse in oil prices that threatens to reshape large parts of the petroleum industry worldwide. Are you confident that Mexico will still be able to attract the necessary technical know-how and capital to develop its vast potential at a time when many companies are retrenching and scaling back investment?

Undoubtedly, the present conditions of the oil industry should be taken into account. However, this reform is far-reaching; its benefits and results are planned to be achieved in the long run.

In fact, when you think about it, we were very fortunate to have been able to complete the Energy Reform before the fall in oil prices, because as a result Mexico will have increased flexibility to face any challenges that may arise in the coming years.

The risks posed for the implementation of this reform will also be moderate. A significant part of the areas included in the first bidding round will involve shallow-water and onshore fields. These are characterised by extraction costs significantly below current and projected international oil prices. Accordingly, these areas will continue to attract investors.

The second tranche of blocks consists of deep-water fields. While extraction costs in these are higher than in shallow-water and onshore fields, the planning horizons for these fields are considerably longer, typically involving several years. As a consequence, their attractiveness is not as sensitive to what may be perceived as transitory fluctuations in oil prices.

The final group is

made up of shale gas and oil fields. In this case planning horizons are shorter, and extraction costs are higher than in the two previous groups. Hence, this is the only group where an effect could be expected. However, oil prices may be very different by then. Let us not forget that these prices started falling less than six months ago.

The scale and ambition of the government’s reform programme is such that even your most loyal supporters admit privately that it may not be possible to complete in a single ‘sexenio’ (six-year presidential term). What are your key priorities for the remainder of your tenure, and what more can you do to lay the necessary foundations for your successor?

What follows is to implement the reforms. The priority is to translate the amendments to our Constitution and Laws into concrete benefits for all Mexicans: at the school level, at the level of small and medium-sized enterprises, at the household level and in the pockets of Mexican families. My priority is then to consolidate the reforms and complete the infrastructure projects in the established deadline for the benefit of my country.

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The duty of my government is to ensure that justice is done, and to prosecute those responsible for these terrible crimes, and that is precisely the course of action that we are following

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It’s a truism that one can’t make an omelette without breaking a few eggs, but even the boldest leader needs to carry the people with him (or her). To what extent do day-to-day opinion polls impact on your determination to ‘do the right thing’, as you see it?Obviously, every leader would like to have the highest possible approval ratings. Nevertheless, in government doing the right thing usually brings with it a certain degree of unpopularity in the short term. Change is not easy, or even comfortable. However, if Mexico wants to have different and better results, it also has to do things differently. That is why I am committed to pushing ahead with the transformation process, to make sure that the reforms will be implemented with the required effectiveness, and that this will raise living standards for all Mexicans.

When you assumed office you made a point of reorienting the government’s approach to tackling organised crime away from targeting the heads of criminal organisations in favour of improving security for the population, yet the murder of 43 students in Iguala, in Guerrero State, by the criminal gang Guerreros Unidos, with the apparent collusion of the police, has shocked Mexicans and people around the world perhaps more than any other. What is the government doing to reassure the population, as well as tourists and investors that it is getting to grips with this issue?

The duty of my government is to ensure that justice is done, and to prosecute those responsible for these terrible crimes, and that is precisely the course of action that we are following.

We already have enough evidence to convict more than 100 detained persons that have either direct responsibility or acted as accomplices to this horrifying crime. This includes the leader of the criminal gang, the Municipal President of Iguala, his wife, the local policemen who handed over the students to the criminals, and also the material murderers, who have confessed key details.

Now, the duty of the Mexican justice is to make sure that all these alleged criminals are punished according to our laws.

In addition, three months ago, I proposed a set of ten measures to improve Security, Justice and the Rule of Law in Mexico. These measures include a reform to prevent the infiltration of municipal authorities by organised crime groups, a bill that will redefine the jurisdictional system in criminal law, and the creation of state police corps instead of thousands of poorly-equipped municipal police.

Moreover, I have proposed a unique emergency response telephone number, actions to enhance the protection of human rights, governmental support to the creation of a National System against Corruption,

the adoption of Open Government standards in the Federal Public Administration, and a continued effort in the process towards the creation of a Unique Identity Code for every citizen. Lastly, a special police operation in the region known as “Tierra Caliente”, which includes the municipality where these crimes were committed, has been set in motion.

You have described your mission as “transforming” Mexico, rather than simply “managing” it. You made spectacular legislative progress in your first 12 months in office, but as we enter the year that will mark the half-way point of your Administration, what do you say to Mexicans who feel that they have yet to see the benefits of these changes in their daily lives?

Since last year, we have already achieved some important results. Today, the country is known for its low inflation rate, well-controlled levels of public debt, low interest rates, a highly capitalised banking system and one of the OECD’s lowest unemployment rates – less than 4.5 per cent.

Along with that, this year we are witnessing the first positive effects of our transformative reform programme. For example, at the beginning of this year, the electric power tariffs decreased across the entire country, both for households and industrial consumers. This is possible, for the first time, thanks to the Energy Reform.

Also, due to the Fiscal Reform, for the first time in five years, in 2015 there will be no more monthly increases to petrol, diesel and LPG prices.

As a result of the Telecommunications Reform, for the first time, all long-distance national calls are now charged as local calls. With this measure, telephone companies will stop charging Mexicans more than 20 billion pesos (around £870 million) per year.

Another benefit of the Telecommunications Reform is that there will be a smooth and fast transition to digital television. To achieve this, more than 10 million low-income families will receive a free digital TV set in the upcoming months.

Furthermore, we have implemented a special programme aimed at supporting young Mexican entrepreneurs: “Mi primer crédito” (My first credit). Thanks to the Financial Reform, we can now give a first push to people aged between 18 and 30 to start their own business.

Lastly, I recently presented measures aimed at accelerating the building of affordable housing, so more families will be able to have a home of their own. This includes a package of fiscal and financial measures to foster the development of the country’s housing stock, which will also give a boost to economic growth. F

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By h.e. DIEGO GÓMEZ PICKERINGaMbassador of the United Mexican states to the United KingdoM

DIEGO GÓMEZ PICKERING is the 20th Ambassador of Mexico in the UK, during the reign of Queen Elizabeth II.As well as being a foreign affairs specialist, writer and journalist, Ambassador Gómez has previously collaborated with President Enrique Peña Nieto and, from December 2012 to January 2014, worked as the Director for Foreign Media in the Office of the Presidency. Moreover, he was head of Foreign Press Coordination for both President Peña Nieto’s presidential campaign and throughout his transition period as President elect.

Promoting a stronger partnership

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The President of Mexico, Enrique Peña Nieto, will make a State Visit to the United Kingdom of Great Britain and Northern Ireland from 2 to 5 March at

the invitation of Her Majesty Queen Elizabeth II. He will accomplish an agenda that includes meetings with members of the Royal Family, government officials, headed by Prime Minister David Cameron, as well as parliamentarians, party representatives, intellectuals and businessmen.

This State Visit – the fourth undertaken by a President of Mexico – is being carried out within the framework of the Dual Year, resulting from the combination of the Year of Mexico in the United Kingdom, and the Year of the United Kingdom in Mexico, formally announced on November 3, 2014 in Mexico City, by President Peña Nieto and HRH The Prince of Wales.

The President will hold meetings with representatives of the business and commercial sectors of the United Kingdom, whom he will remind of the favourable investment climate that prevails in our country and that has prompted an increase in bilateral trade with Mexico.

By celebrating the Dual Year, representatives of both countries are coordinating their best efforts to showcase our respective cultural heritage, but also to underline the historic opportunity that this initiative offers to catalyse trade, encourage investment and increase tourism on both sides of the Atlantic.

Since the UK distinguished itself by being the first European nation to recognise the independence of Mexico and establish trade relations, the two countries have taken advantage of economic complementarities to promote their respective growth and improve the welfare of their populations.

A tangible example is that, since the signature of the Free Trade Agreement between the European Union and Mexico, in 2000, trade between the UK and our country has grown 153 per cent.

So, while we implement in both countries a vast programme of artistic, cultural, educational, scientific and culinary activities, we will also consolidate a strong legacy in economic matters. With that in mind we have set two goals:

First, to increase bilateral trade to £ 4.2 billion by the end of 2015, and increase to 500,000 the number of British people traveling to Mexico, taking into account the importance of tourism for the Mexican

economy, which generates US$13.8 billion a year.The 2015 programme spans more than 100 separate

exhibitions, concerts, festivals, academic workshops and artistic residencies; as well as trade missions, research projects and scholarships. Events are taking place across a number of cities in the UK including London, Manchester, Liverpool and Edinburgh. The Year of Mexico will showcase the country’s long history and traditions, its modern economic and commercial dynamism, and further strengthen its reputation as one of the world’s most exciting destinations for trade, investment and tourism.

On the 5th of February, President Peña Nieto held a meeting with Deputy Prime Minister Nick Clegg, who conducted a two-day visit to Mexico leading a delegation of 43 British businesspeople to promote bilateral trade and investment.

The leader of Liberal-Democratic Party travelled accompanied by the Minister for Trade and Investment, Lord Livingston, as well as Baroness Jane Bonham-Carter of Yarnbury, the Prime Minister’s Trade Envoy to Mexico. The Deputy Prime Minister underscored the fact that Mexico is undergoing a process of economic renewal, and expressed his support for the structural reforms promoted by President Peña Nieto.

So, the Dual Year will be useful to underline the UK’s relevance as a global trade and financial centre, as the third largest economy in Europe and the seventh worldwide, and to endorse our countries’ longstanding partnership.

It will also serve as a platform to present to potential investors the many opportunities that Mexico represents as an emerging market whose transformation efforts continue to generate high expectations, arising from the adoption of constitutional reforms in labour, public education, fiscal policy, electoral transparency, telecommunications and energy, among others.

The Year of Mexico in the UK and the Year of the UK in Mexico 2015 will inspire exciting exchanges, partnerships and cooperation in all areas, enriching and strengthening our strong bilateral relationship.

Thus, I strongly believe that the Dual Year #MXUK2015 represents a great opportunity to develop a growing, warm and dynamic relationship even further. And the President’s State Visit to the United Kingdom is a great example of that. F

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By H.E. DUNCAN TAYLOR CBEaMbassador of the United KingdoM to the United Mexican states

DUNCAN TAYLOR joined the Foreign & Commonwealth Office (FCO) in 1982. In addition to undertaking a wide range of jobs at the FCO in London, during his career he has held the positions of High Commissioner to Barbados and the Eastern Caribbean, Second Secretary in Havana, Head of Commercial Section in Budapest, and Governor in Grand Cayman. He was awarded a CBE in 2002 for his work in helping the families of British Victims of the 9/11 attacks in New York.

Old friends, significant partners

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Mexico is a natural strategic partner for the UK. We are like-minded, share values on a wide range of key issues which matter to both countries and

have the potential to become significant partners in business. The timely State Visit by President Enrique Peña Nieto will help to develop further the excellent relationship we already enjoy.

Mexico is an important country. It has the second largest economy in Latin America and the fifteenth largest in the world. By some forecasts Mexico could be the seventh largest economy in the world by 2050. And Mexico has a young, energetic and creative population. On the world stage Mexico is an increasingly important player. The UK and Mexico are remarkably like minded on many issues which help to shape the world we live in and the world we want to live in: we work closely and effectively on sustainable development and Climate Change, on international development, on transparency and open government, on free trade and open economies and in the UN, including on human rights.

Mexico is an old friend of the UK. We were the first European country to recognise Mexico’s independence and to start trading with Mexico in the nineteenth century. By the early twentieth century Mexico had become an important economic partner. But in the second half of the twentieth century, the UK’s diplomatic engagement focussed more on other areas of the world and the UK’s relationship with Mexico saw a period of relative quiet. That changed in 2010 when the then Foreign Secretary, William Hague, launched the “Canning Initiative,” aimed at strengthening relations with Latin America. Our relationship with Mexico has since grown very rapidly, particularly in respect of our commercial, political and cultural links. And this year promises to be a very special year indeed for our two countries; we are celebrating the Year of the UK in Mexico 2015 and, simultaneously, the Year of Mexico in the UK. The ‘Dual Year’ was agreed by the two governments to celebrate the increasingly strong links between our nations, transform perception in each other’s countries and build a legacy for the future.

The Year of the UK in Mexico 2015 has three strands: arts and the creative economy; education, science and innovation; and trade and investment. These are all areas where we already have good existing connections but where we also see real potential to work more closely together. These themes are also integral elements of the State Visit.

The arts and creative economy strand promotes the outstanding and rich culture in both countries; and celebrates the creativity of the British and Mexican people. Trade and education will also be part of our largest cultural event of the Year – the UK’s programme as Guest of Honour at the Guadalajara International Book Fair, the second largest in the world. Plans to bring the Designing 007: Fifty Years of Bond Style exhibition to Mexico will allow us to promote British design and technology, coinciding with the release of the new Bond movie, part of which be filmed in Mexico City.

The education, science and innovation strand focuses on the future. Signing an agreement on the mutual recognition of educational awards will be transformational, benefitting some 170,000 graduates of UK and Mexican institutions. We are on track to increase our offering of Chevening scholarships from 20 to 100. Increasing numbers of us are studying, visiting and working in each other’s countries, reflecting the importance we attach to building long-term personal links. Through the Newton Fund, set up to promote Science and Innovation links, we are supporting 45 Mexican researchers, helping them to bring pioneering ideas to market. And, as guest of honour at Mexico’s National Week for Science and Technology, we will reach young audiences across the country, exploring the cross-over between science and the arts and laying foundations for future collaboration.

Our two countries already play a leading role in the global economy, working together in the G20 and the OECD to promote openness and transparency, better tax regulation and to boost free trade. Our aim is that the trade and investment strand of the Dual Year will help us meet our target of increasing bilateral trade to £4.2bn by the end of 2015. Mexico’s energy reform is expected attract substantial invest and collaboration by major UK companies, generating opportunities for UK companies along the entire supply chain. President Peña Nieto’s State Visit will bring together senior business leaders from both sides, will underline the strength of the UK offer in energy and other sectors and will, I am sure, help promote long-term business links by highlighting the opportunities that we can each offer the other and the expertise we each have to deliver on those opportunities.

The Dual Year of Mexico and the UK 2015 will tap into the potential, the energy and the talent each country has to offer. Working together we aim to build a legacy that will last well beyond 2015. F

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Our contribution to improving health is to research and develop innovative medicines that make a real difference in the treatment of patients. In a world where health challenges are increasing, we are committed to using the best science for life. And to make this a reality, we have invested more than US$ 4.2 billion in Research & Development around the world in 2013 in search of solutions that make a difference to people's health, because we know that health is our most valuable asset.

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IntervIew wIth JOSÉ ANTONIO MEADE KURIBREÑAsecretary of foreign affairs, United Mexican states

JOSÉ ANTONIO MEADE earned his BA in Economics at the Instituto Tecnológico Autónomo de México, later completing a BA in Law at the National University of Mexico and then a PhD in Economics at Yale. He began his career in public office as Director General of Financial Planning at the National Commission of the Retirement Savings System. Prior to taking up his post as Secretary of Foreign Affairs, he was first Registrar at the Secretariat of Finance and Public Credit, then Energy Secretary, and after that Secretary of Finance and Public Credit.

A truly global citizen

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Much has been said and written about the ambitious domestic reforms undertaken by the current government, but relatively little about its international agenda. Would you say there has been a comparable shift in respect of Mexico’s foreign policy objectives? What are the administration’s most important international priorities for the next 3-4 years?

By geography, history, culture and economy, Mexico stands as a country of multiple belongings in the world. We belong in North America because of geographical proximity, large trade flows and similar political institutions. We are also a Caribbean nation that shares African, European and Asian roots with the island countries in this region. We identify ourselves as Central and Latin American, heirs to durable values and aspirations. Our economic relations place us in close contact with G20 and European countries, with whom we also share deep cultural traits. We are linked to Asia through the Pacific Ocean and trade routes that started 400 years ago, and feel close to Africa and the Middle East in our efforts to tackle common challenges. Our main priority is to use policy in each of these cases to transform our country’s belongings into concrete opportunities of development.

By 2050, Mexico can be among the ten biggest economies in the world. Today we rank 15th. Foreign policy has traditionally played a role in making this happen, by fostering international conditions that are conducive to Mexico’s development objectives. That is true today. In our strategy each region and country gets a focused treatment. So do international organisations and mechanisms. We employ the diplomatic tools at our disposal to make the most of every bilateral relationship. We strengthen our dialogue with other countries and other actors, we promote our country’s potential, and cooperate in finding opportunities for shared development. We also stand by Mexicans living abroad, be they workers, students, researchers, businesspeople or artists.

Mexico has a long and respected tradition as a supporter of international organisations and international law. In fact, our Constitution includes a provision that clearly states that the main principles of international law on which the UN is founded shall be observed in defining foreign policy objectives. Today we continue our efforts to promote a safer and more prosperous world, striving for

consensus and agreements in favour of non-proliferation, disarmament and conventional arms control, a climate regime to effectively combat climate change, social inclusion, open government and peace keeping.

Mexico benefits from a unique geopolitical position – it is the only Spanish-speaking country in North America, shares a border with the world’s largest economy and diplomatic power, enjoys maritime access to both the Pacific and Atlantic oceans and has international free trade agreements with more countries than any other, etc. Would you say that Mexico ‘punches its weight’ accordingly in international affairs?

It is fair to say that any country strives to punch above its weight, if by doing that its weight can be improved. In our case we see these conditions as opportunities for development and innovation. Internally Mexico is doing the right thing by strengthening its institutions and legislation in order to gain more competitiveness and provide a better standard of living to society. Abroad we see our geographical and qualitative conditions as a means to contribute to domestic development.

We want to consolidate North America as the most competitive and dynamic region in the world. We have seen shared prosperity grow by fostering the creation of value-added chains between the US, Canada and Mexico. As an example, today US-Mexico overland transactions are worth over one million dollars per minute. US value-added in Mexican manufacturing exports is about 37 per cent, which is ten times higher than the 3.7 per cent of US value-added in Chinese manufacturing exports. To complement this level of economic integration, the three countries are finding ways to promote education, innovation and entrepreneurship programmes, to improve human capital, student mobility and business environments.

Promoting prosperity, inclusion and security in Central American countries helps us achieve these same objectives in our country. Mexico trades more than 6 billion dollars a year with Central America, and this volume grows by 12 per cent annually. Therefore, it makes sense to invest in infrastructure, connectivity, energy and public health in countries such as Guatemala, Honduras or El Salvador, for it translates into increased shared growth. This in turn will diminish the incentives for young people to

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One of the priorities of the current administration in Mexico is to reposition the country and prepare it to fulfil its role as a regional leader and a global player

emigrate in search of opportunities elsewhere.Integration in South America has been a long-standing

goal. Mexico contributes to achieving it by actively participating in the Community of Latin American and Caribbean States, the Organisation of American States and the Pacific Alliance. The latter mechanism was born as a pragmatic and innovative mechanism to promote the free flow of persons, goods, services and capital among its members, and has attracted worldwide attention, as illustrated by the more than 30 countries that have attained observer status.

Asia-Pacific and Europe are also a key component in our foreign policy strategy. Mexico and China have launched an unprecedented new strategic association, investments from Japan and Singapore are on the rise, and cooperation is gaining strength with New Zealand and again, China and Japan. The start of the negotiations leading to a new trade and cooperation agreement between Mexico and the European Union is within reach now, while dialogue and cooperation with individual European countries means new investments, yearlong cultural and multi-themed business events.

You have called for a debate over the structure of the United Nations Security Council, saying it should be more representative, responsive and inclusive. Is Mexico prepared to lead the discussion on this issue and bring other emerging economies to the table? In broad terms, what needs to be done to reform the organisation, in your view?

The United Nations Security Council reform is long overdue. The current Security Council (15 members) is no longer representative of the total UN membership (193 members). The Security Council portrays a picture taken in 1945 while the international system continues evolving and changing at a fast pace. Take for example, the question of its working methods and particularly, the use of the veto by the permanent members. This simply does not reflect the values of transparency and accountability that many of our governments promote inside and outside our borders.

We have been discussing Security Council reform for over 20 years without arriving at even a single result. The reason behind the impasse lies in the unwillingness of many Member States to break away from their original positions and attempt to find a common agreement on what we like to refer to as a “compromise solution”. We are ready to reach out to all UN members and strive for a compromise. To achieve this, we

should not be looking for a Security Council reform that is desirable to just a handful States, but a reform that is acceptable to all.

In this regard for example, some believe that adding new permanent members is essential in any Security Council reform, and have even stated their aspirations to occupy those potential additional seats. Others, like Mexico, believe that adding new permanent members will further limit the capacity of the Security Council to act swiftly and effectively when facing threats to international peace and security, particularly if those new permanent members have the right to veto any key decision that, if otherwise approved, could translate in saving lives from, let us say, mass atrocities. When crafting the best formula, we are obliged to think about the people on the ground enduring all sorts of threats and hardships.

The compromise solution that Mexico – together with a group of States called the “Uniting for Consensus” – is advancing, calls for the establishment of new long-term seats. These new non-permanent seats could satisfy the appetite of those States interested in serving in the Council for longer terms than the current two-year mandate, while preserving the accountability to the UN General Assembly through periodic elections and re-elections. Mexico believes in the need for the international community to assess the Council’s members’ performance through elections in the General Assembly where all 193 countries cast a vote. This proposal might not be the ideal solution but we should not give out ‘blank cheques’ by allowing for the creation of new permanent seats to countries that in 20 or 50 years’ time would not necessarily hold the same stance and weight in the international system.

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HRH The Duchess of Cornwall and HRH The Prince of Wales with HE Enrique Peña Nieto and First Lady Angélica Rivera during the Royal visit to Mexico in 2014

Mexico and China have launched an unprecedented new strategic association, investments from Japan and Singapore are on the rise, and cooperation is gaining strength with New Zealand

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Along with France, Mexico has been vocally urging the permanent members to voluntarily limit their use of the veto when facing situations such as genocide, ethnic cleansing, war crimes or crimes against humanity. The Security Council cannot refrain from action in those extreme humanitarian situations that require the swift involvement of the global community, in order to halt atrocities from being committed.

Mexico will continue to be actively engaged in achieving a comprehensive Security Council reform. We are fully aware that to avoid doing so will progressively erode the Council’s relevance and credibility in performing its main duty: maintaining international peace and security.

The death of Hugo Chávez and Venezuela’s ongoing problems, together with the recent re-election of leaders like Dilma Roussef, Michelle Bachelet, and Juan Manuel Santos, and the prospect of better relations between Havana and Washington, present Mexico with an opportunity to help forge a new pan-American consensus to foster greater stability in the region. Are you optimistic that Latin America could be entering a new era?

We are moving into a new age for hemispheric relations based upon mutual understanding and respect for national sovereignty, fostering constructive engagement, as well as equality and social justice. In many ways, the Western Hemisphere is one of the most dynamic regions in the world: individually and collectively we have been pushing for meaningful economic, social, security and political changes, which together have created a positive momentum both at domestic and regional levels.

One of the priorities of the current administration in Mexico is to reposition the country and prepare it to fulfill its role as a regional leader and a global player. We have been confidently working on building consensus in Latin America and the Caribbean, while reaching out to all sub-regional organisations in order to shape a robust single voice regarding the most demanding challenges present in the region, while improving its relations with other areas of the globe.

Latin America and the Caribbean is a politically and economically diverse region. We are working to take advantage of that diversity to build stronger ties between countries and a more influential community in world affairs. We have built a set of regional and sub regional forums to advance our integration. All Latin American and Caribbean nations participate in CELAC, the Community of Latin American and Caribbean States. In April 2015, for the first time all the countries of the Western Hemisphere will gather at the Summit of the Americas, in Panama. In addition, the Organisation of American States (OAS) is working

on a strategic vision to plan for the future. Sub-regional mechanisms, including the Caribbean Community or CARICOM, the Pacific Alliance, UNASUR and MERCOSUR, have the ability to foster integration regionally, and gradually converge into wider integration schemes.

How important are collaborative efforts between Mexico and other Central American countries to the economic and political strengthening of the region, and what initiatives are you undertaking to improve trade and investment, as well as cooperation to deal with issues such as the trafficking of drugs and guns?

Prosperity in Central America means stability and security. If Central America prospers, so does Mexico. In the region, our country is working on the following priorities: strengthening the political dialogue; promoting trade and investment; increasing tourism flows; taking advantage of cultural relations as a source of greater economic growth; and building a broad framework of cooperation for development.

To strengthen bilateral relations, President Enrique Peña Nieto has appointed new ambassadors to Belize, El Salvador, Guatemala, Honduras, Nicaragua and Panama. He visited Costa Rica, Panama and Honduras, and hosted the presidents of Panama and El Salvador. Beyond mere protocol, these actions will translate into tangible results for our societies.

In infrastructure, for instance, Mexico is actively promoting the Tuxtla Mechanism for Dialogue and Cooperation, the Mesoamerica Project and the Infrastructure Fund for Mesoamerican and Caribbean Countries. All these initiatives provide financial resources and technical support to improve infrastructure initiatives that complement the process of Central American integration and foster economic development and job creation.

With the signing of the Single Free Trade Agreement between Central America and Mexico on November 22nd, 2011, significant investments of Mexican companies in the region were further enhanced, creating jobs and prosperity in the region.

Promoting a more integrated and low-cost energy infrastructure will certainly contribute to making the countries of Central America more competitive. Mexico is committed to assist in decreasing energy costs in the region through its plans to increase the capacity of the Electrical Interconnection System of the Central American Countries (SIEPAC) and bringing natural gas to the region.

Additionally, Mexico is determined to strengthen bilateral cooperation with Central American partners in order to eradicate transnational organised crime. To cooperate towards this common goal with the

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Prosperity in Central America means stability and security. If Central America prospers, so does Mexico

countries of the region, Mexico has developed institutional cooperation mechanisms, specifically the High Level Groups on Security (GANSEG) that allow security and law enforcement agencies of Mexico and Central American countries meet at a regular basis and establish direct channels of communication, information exchange, organisation of joint operations and training to strengthen security institutions in the region. Mexico has agreed to the formation of these mechanisms with Guatemala, El Salvador, Honduras and Belize over the past two years.

At a multilateral and regional level, Mexico remains committed with Central American nations on this issue through the Central American Integration System (SICA) in order to promote cooperation on security issues. The most relevant mechanism at this level is the Central American Security Strategy (ESCA), through which Mexico transfers best practices and contributes with specialised cooperation initiatives in order to achieve the goals set by the SICA countries in ESCA.

What are your thoughts on the rise of the so-called ‘MINTs’ (Mexico, Indonesia, Nigeria, Turkey)? Is the Mexican Government interested in strengthening ties with these countries to create a kind of informal ‘club’, as the BRIC nations have attempted to do?

Country groupings such as the so-called ‘MINTs’ are not a new phenomenon anymore. Since the inception of the BRICs, the alphabet soup has not ceased to pour and the variety of acronyms and the diversity of countries they group is just astonishing. However, there is something to be said about this phenomenon and its implications and usefulness in today’s world.

Global politics and economics are currently in flux due to power shifts among states in the international system and increasing interdependence at all levels due to the rapid changes brought about by globalisation. In this complex global scenario, middle powers such as my own country have an important role to play. The gradual transformation of the international system into an increasingly horizontal arrangement opens a window of opportunity for us to increase our influence and unleash our constructive and conciliatory roles, while tackling pressing international problems.

In our opinion, the best way to go about it has been to embark on the pre-existing trend that gave rise to various groupings, characterised by the creation of innovative informal forums, based exclusively on the political will of their members and specifically designed to exchange views on a regular basis to find ways of addressing collectively the new challenges of our day. Driven by these ideas, in 2013 the Ministers of Foreign Affairs of Mexico, Indonesia, the Republic

of Korea, Turkey and Australia decided to create MIKTA.

MIKTA is an informal space for cooperation among our countries, based on our commonalities and on our belongingness to other international forums such as the G20 and the United Nations. Like other groupings, MIKTA is a diverse group of countries; yet, we all share core values and face similar challenges. We are open economies that enjoy democratic pluralistic systems. We are all strategically located and strongly linked to our respective regions in a multitude of aspects. MIKTA is based on our common interest in strengthening multilateralism, supporting global efforts aimed at stability and prosperity, facilitating pragmatic and creative solutions for regional and global challenges, and implementing much-needed reforms within global governance structures.

MIKTA’s main objective is to strengthen bilateral ties, enhance cooperation amongst its members and promote coordination on global issues of common interest. It must be noted that exchanges within MIKTA are informal, flexible and issue-driven, because the last thing we want is to create a cumbersome structure with a rigid agenda. Administration-wise, we have agreed that each country will coordinate MIKTA’s agenda for a year. Mexico was the first to perform this duty, from September 2013 to September 2014. Currently, the Republic of Korea is in charge of coordinating MIKTA’s activities.

So far, we have agreed to hold high-level meetings on a regular basis in New York, Geneva and our capitals; to organise meetings on the margins of the UN General Assembly and G20 Summits, and organise academic seminars in the five capitals with renowned scholars, with the purpose of informing our ideas and activities with top-notch quality scholarship on various issues related to global governance, middle powers and public diplomacy, among other concepts, and to promote the gradual creation of an academic corpus on MIKTA within the Political Science and International Relations current debate.

During the little more than a year that MIKTA has been working, its members have reached a widespread consensus on issues such as the North Korean nuclear threat, the shooting down of Malaysian Airlines flight MH17 and the Ebola crisis and its repercussions on global health. Likewise, we have published two Op-Eds, with the intention of informing our friends around the world of our general aims and generating some debate around this new approach to common global challenges.

MIKTA, like every new initiative, is still a work in progress. However, I am certain that we have started something significant, definitely for our countries, which now enjoy a much closer relation than before MIKTA’s creation, but maybe even for global governance at large. F

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By DR LUIS VIDEGARAY CASOsecretary of finance and PUblic credit, United Mexican states

LUIS VIDEGARAY graduated with a BA in Economics from the Instituto Tecnológico Autónomo de México (ITAM), Mexico, and took a PhD in Economics at the Massachusetts Institute of Technology (MIT). His first public appointment was as Advisor to the Mexican Secretary of Finance and Public Credit, and he served as a Representative in the Mexican Congress between 2009 and 2011. In 2012 he was Campaign Director for the PRI’s Mexican Presidential Candidate, Enrique Peña Nieto, and was appointed Mexico’s Secretary of Finance and Public Credit later that year.

From reform to implementation

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Over the course of the past couple of years, Mexico has made huge strides with its structural reform programme. In point of fact, according to the OECD, Mexico has

achieved more than any other major economy since the financial crisis. However, given that we are clearly not yet where we want to be, we cannot afford to be satisfied with what we have achieved thus far.

The breadth and depth of Mexico’s reforms, as well as the speed with which they have been adopted, have few contemporary parallels. Taking into account the many areas involved (eleven major reforms were enacted), and the profound nature of most of those changes, one could safely say that the pace has been brisk.

It is inevitable that these structural reforms will have some short-term effect on growth, primarily through their impact on expectations and investment. Even so, it will take years to properly assess the full impact of this reform programme. Only over the course of time will we see the increases in productivity, aggressive competition, and the opening of new sectors. Structural reforms are not small-scale tools that one uses to manage aggregate demand or to tweak growth rates from quarter to quarter. We acknowledge that expectations were high, and in truth economic growth has continued. The reforms have not prevented the expansion of the Mexican economy. At the same time, however, over the past two years the economy has not improved at a faster rate than the averages observed in each of the past three decades.

Despite recent shocks and great uncertainty at a global level, Mexico is well positioned to leverage evolving conditions to accelerate growth. On the one hand, we have a very open and diversified economy that provides us with a strong export base. Moreover, through structural reforms we have addressed our most persistent limitations, such as stagnating productivity. We have done so by opening the economy to investment and increasing competition in our energy and telecoms sectors. We have improved competition policy and reformed our fiscal and financial systems, as well as our penal, labour, constitutional appeals, and education laws. We have also reformed our electoral system and our transparency (freedom of information) system.

Mexico’s economy, particularly our manufacturing sector, is deeply intertwined with the economy of the United States, which is creating jobs that will sustain a broad recovery. These results are reflected in our export figures, particularly for our automotive industry. Last December, non-oil exports grew at an annual rate of 14.3 per cent. Our manufacturing exports grew even faster at 15.8 per cent, while automotive exports grew 18.6 per cent during the same period.

Even before they bear fruit in terms of extracting more barrels of petroleum from the ground, the investments derived from the forthcoming oil projects will bring a direct stimulus to our economy. There are also significant infrastructure projects in progress, particularly the redesigned Mexico City International Airport. These infrastructure projects

will benefit from ready access to financing engendered by Mexico’s sustained fiscal discipline, prudent macroeconomic management, and substantial involvement of the private sector.

In order to strengthen and secure Mexico’s macroeconomic position, this year we announced a pre-emptive budget cutback. We have done so because of the importance financial stability has to us and our privileged access to deep, diverse, and liquid capital markets. In other words, we want to make sure we remain ahead of the curve, and we want to expand our fiscal buffers.

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In the pipeline: increasing supplies

of natural gas offers a significant

boost to Mexico’s competitiveness

Photo: Pemex

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The breadth and depth of Mexico’s reforms, as well as the speed with which they have been adopted, have few contemporary parallels

These budget cuts are consistent with the multiannual fiscal path set out in 2014: to consolidate a predictable and pre-announced fiscal policy, in order to allow all economic players to adjust smoothly and appropriately. More significantly, in the next few months we will undertake a thorough and comprehensive review of the 2016 budget to be presented in August 2015. The goal of this review is to eliminate redundant or inefficient expenditure items.

Although by any measure Mexico is an important producer and exporter of crude oil, over the past few decades we have significantly reduced our economic exposure to fluctuations in oil prices. While oil and gas production represent 5.9 per cent of GDP, our trade balance for the industry represents only 0.2 per cent of GDP. Oil revenues still account for a third of budget revenues. However, net export revenues, which are vulnerable to the international price of oil, account for less than a tenth of budget revenues (before hedging).

A sustained fall in international oil prices represents an important but manageable challenge to our public finances. Consequently, and given the adverse external conditions that Mexico faces, the Federal Government has implemented as a preventive measure a multi-year public spending adjustment. This measure aims to create additional fiscal buffers to guard against additional potential negative shocks during 2015 and beyond. The goal is to protect the Mexican economy as much as possible from such unpredictable forces as reduced global economic activity, a rise in interest rates by the US Federal Reserve, or a further drop in oil production. By employing this preventive strategy we are establishing conditions for a timely reduction in public spending, which in turn ensures that financing requirements in upcoming years remain within reason.

For 2015, the Federal Government, along with our newly independent energy companies PEMEX and CFE, has announced a joint reduction in expenditures totaling 124.3 billion pesos, or 0.7 per cent of GDP. In addition, the budget for 2016 will not be based on the inertial growth of existing programmes. Instead, the budget will be assembled via a zero-base system, meaning that every line item will be up for review, and each item will need to be justified to remain in the budget. Our goal is to ensure that it is those investment projects and programs with the greatest benefit for the population are the first to receive funding.

During this process the Mexican Government will have the support and advice of the World Bank as they conduct a comprehensive Public Expenditure Review. Such a review will enhance the efficiency of our spending policy. After more than a decade of historically high oil prices, it is time to refocus government spending by wiping the slate clean and evaluating each programme with fresh eyes.

In 2015 we expect the impact of these measures on economic growth will be marginal, and will not materially affect the range of growth we have forecast for the year. Specifically, we still anticipate that the rate of growth will fall between 3.2 and 4.2 per cent. Given that the adjustments targeted current spending and programmes and projects with low economic and social impact, any effect is expected to be mild. Up to 65 per cent of Federal Government cuts will come from current expenditures and not investment. This includes a 10 per cent reduction in salaries and wages, temporary personnel, and social communication services, as well as a realistic assessment of spending on consultancy services, cell phones, and travel expenses.

The approval of 11 structural reforms has given Mexico many opportunities for greater growth. For that to happen, though, it is necessary to implement these reforms as they are intended. Any dilution will blunt their purpose and effect. Even if we succeed in raising growth rates, however, this will not be enough for Mexico. We need to reestablish trust in our authorities and ensure that our democratic institutions are complemented by a strong rule of law. We must restore trust in the political process as well as in the ability of the federal government to implement the reforms in a fair and efficient manner. We need to step up, to face new challenges, as well as restore faith in our institutions. This is key if we are to follow confidently in the path we have set for ourselves towards higher growth and development.

Mexico will safeguard its established and well-earned macroeconomic stability. We will fully implement the reform agenda that has been approved by Congress. We understand that structural reforms, even if they are enough to increase growth to the levels we require, are not enough. This administration is fully committed to strengthening the rule of law, increasing transparency, and fighting corruption. F

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Preparing for take-off: an artist’s impression of the new Mexico City International Airport

Photo: Foster + Partners

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Last year saw the 20th anniversary of NAFTA, the agreement that ushered-in Mexico’s economic transformation of recent years. Would you say that the process of North American economic integration is finally complete? If not, which hurdles still remain to be overcome?

NAFTA has been instrumental in advancing North American integration. In the last two decades, trade within North America multiplied by almost 4 times. In 2013 alone, around 35 per cent of the region’s trade happened within it, totaling more than 1 trillion dollars. In fact, the Canadian, US and Mexican economies are so interlinked that nowadays, for every dollar Mexico exports, around 37 cents are of American content.

In spite of this, North America’s integration process is an ongoing one. Our countries are constantly working on new fields of cooperation to face the ever-changing economic challenges. Particularly, we are striving to improve our trade efficiency through the harmonising of standards, expanding customs pre-clearance programmes, and reducing requirements for the faster movement of persons and goods along our borders and within the region.

Moreover, Mexico, the US and Canada are focusing much of their efforts on increasing productive integration to improve regional competitiveness. This is especially important because of the relevance of global production schemes in today’s economic landscape, and the fact that sales to markets beyond NAFTA account for more than half of the region’s exports.

In this sense, we have a very active trade agenda. We have free trade agreements (FTAs) with numerous countries around the world, and have many FTA partners in common. It is clear to us in NAFTA that in order to remain competitive, we need to act as a region that competes globally for production processes linked to global value chains.

This vision is precisely our motivator in participating in the ongoing Trans-Pacific Partnership (TPP) negotiations. Through this effort, not only do we diversify our exports, we also create new investment and production schemes among the NAFTA partners, consolidating our region as an export platform towards Asia-Pacific and the world. Consequently, we get closer to reaching our trilateral goal of making of North America the most competitive region in the world.

Where do you see the next ‘game changer’ coming from, in terms of Mexico’s economic development? Our two major economic assets – macroeconomic stability and the internationalisation of our economy- have not been enough to achieve a growth rate in line with the potential of our economy.

For the past 20 years, structural changes in key sectors have been necessary to advance our country. Specifically, some of the changes sought were in the finance, telecommunications and energy sectors that provide inputs to the economy, as well as in transversal areas, such as economic competition and the labour market. The absence of this process obviously has impacts on productivity.

Mexico has seen its productivity decreasing 0.7 per cent on an annual basis over the past 30 years, while having a 2.4 per cent average growth rate. Certainly, we have much space for improvement, as our competitors (like South Korea, Ireland and Chile) have increased their productivity during this same period on average between one and two per cent, with growth rates of 4 to 6 per cent.

The Reform package I mentioned earlier aims to unlock the factors that have inhibited productivity and growth during the past decades. Out of the 11 reforms, six aimed specifically at improving the productivity of the economy – labour, telecommunications, antitrust, tax, financial, and energy. With this, we have finally tackled our historically rigid labour market, low access to credit, expensive telecommunications services, inefficient public spending, highly concentrated markets, and high energy costs.

Therefore, the next game changer for the economic development of Mexico will undoubtedly derive from the implementation of these unprecedented reforms.

Mexico’s bilateral trade with the United Kingdom has doubled since the signing of the Mexico-EU FTA in 2000, and the aim is to reach £4.2 billion by the end of 2015. Is this realistic in the current economic climate? Which sectors do you expect to account for the majority of this new business?

The development of the trade relationship between the UK and Mexico is quite encouraging. Numbers have been growing steadily over the last few years and as you rightly mentioned, our bilateral trade doubled between 2003 and 2013. Today, the UK is the 6th

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IntervIew wIth ILDEFONSO GUAJARDO VILLARREALsecretary of econoMy, United Mexican states

ILDEFONSO GUAJARDO holds a BA in Economics from the Universidad Autónoma de Nuevo León, as well as an MA in Economics from Arizona State University, and studied his doctorate at the University of Pennsylvania. He has served as a Federal Representative in the Mexican Congress, and has long-standing experience in the public sector, heading up the NAFTA Office in Washington, in the Technical Secretariat of Planning, Communications and Liaison in Secretariat of Trade and Industrial Development, the Chief Office of Secretariat of Foreign Affairs, and has held the post of Secretary of International Affairs and Assistant General Secretary of the PRI National Executive Committee.

Realising Mexico’s potential

Updating the Free Trade Agreement between Mexico and the European Union lies at the core of our efforts to increase bilateral trade with the UK

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largest investor in Mexico. Over 1,500 companies with British capital are established in our country. At the moment we are witnessing positive numbers in some sectors in which we have proven to be complementary, such as in advanced manufacturing, mainly automotive and aerospace components; in renewable energy; in services, mainly creative industries such as animation and film production; in medical devices and pharmaceuticals; and in processed foods and liquors, amongst others.

And although current sluggish world growth should drive us to lean on free trade more than ever, I do not think we will reach this goal by 2015. There is still much work to do to achieve our common goal.

Updating the Free Trade Agreement between Mexico and the European Union lies at the core of our efforts to increase bilateral trade to the desired goal. Adjusting the FTA will allow Mexico and the UK to seize untapped opportunities in sectors such as agriculture, manufacturing, services and investment.

Owing to their economic importance, both the UK and Mexico need to make the development of small and medium enterprises (SMEs) a priority. The UK has had a successful experience in promoting SMEs’ participation in global value chains. Mexico is very interested in learning from this practice, and adapting UK’s success stories to the Mexican context. Furthermore, I would say productive alliances among Mexico’s and the UK’s SMEs are central to increaseing bilateral trade and investment flows, perhaps more than what was originally foreseen.

Hence, it is necessary to intensify efforts in establishing cooperation schemes among both parties’ SMEs, and identify feasible business opportunities in the short and medium term.

Aside from raising awareness of opportunities among the two countries’ business communities, what impact do you expect the current ‘Dual Year’ to have in concrete terms?

2015 will be “The year of Mexico in the UK and the UK in Mexico”. It will be the perfect showcase to increase relations across the economic and investment arenas between our countries. The Mexico-UK Dual Year is a very exciting initiative which, in economic terms, is meant to foster our ties within the business environment.

Through the Dual Year, we expect more companies will seek to establish in either Great Britain or Mexico. For instance, we have been witnessing a wave of Mexican companies from the creative industries that are looking to create joint ventures with their British counterparts. Additionally, several Mexican entertainment companies have started building facilities in the UK. We expect that some of them will

speed up their plans to open their shops during the Dual Year to use it as a powerful promotional tool.

In sum, the economic events taking place all around the United Kingdom and Mexico this year will promote business between companies on both sides of the ocean, contributing to increased bilateral investment and trade, and ultimately a strengthened bilateral relationship.

The perception of Mexico among UK businesses is that the country has huge potential, but the security situation is an issue of concern to many people. What is the Government doing to reassure potential investors and traders that Mexico is a safe place to do business?

Actually, the vast majority of the Mexican territory is a very safe place to do business. As all the investors know, Mexico is a wide spectrum of thirty-two federal entities. Among most of them, the development and security conditions are world-class. Proof of this are the more than US$66,767 million in foreign investment flows Mexico received the first two years of President Peña Nieto’s Administration.

Our challenge is specifically located and contained in the southern states of Guerrero, Oaxaca and some parts of Michoacán. These regions do not offer the level of security and development that the northern and central areas of the country offer. It is in the latter where the automotive and aerospace clusters have flourished. That is why last year, 89 per cent of the foreign investment received by Mexico went to the northern and central regions while the southeast only received 11 per cent of the total FDI.

To help the southeast region catch up with the rest of the country, President Peña Nieto has instructed us to establish three Special Economic Zones (SEZ) there to foster infrastructure development and expand the business opportunities of this region. We expect the launch of the SEZ will be a driving force to create a virtuous circle of growth, social development, security and wellbeing.

One of the major outcomes of the February 2014 UK trade mission to Mexico was the decision to establish a British Business Centre to assist British SMEs in penetrating Mexican markets. Which sectors of the Mexican economy do you see as most attractive to British companies – and vice versa?

The recently opened British Business Centre attests to the growing interest of British small and medium sized companies to seize market opportunities in Mexico. The joint efforts of UK Trade and Investment, ProMéxico, and now the British Business Centre, will definitely translate into more investment and trade between us.

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The UK has had a successful experience in promoting SMEs’ participation in global value chains. Mexico is very interested in learning from this practice

One of the most attractive sectors to British companies is the telecom sector. Mexico’s Telecommunications Reform is granting access to greater competition in fixed-line and mobile networks. For instance, Sir Richard Branson, CEO of Virgin Mobile, is investing in this new sector and is building a presence in the Mexican telecom industry.

Another opportunity lies in the energy sector. The UK has a particular interest in the Energy Reform, because it is one of the leading countries in the world in terms of the energy sector and oil & gas exploration. In May 2014, HSBC and the Mexican Development Bank (Nacional Financiera/NAFIN) created a fund to finance firms who want to invest in the sector. The new fund can be accessed by both domestic and foreign SMEs looking to invest and work in the Mexican energy sector.

The aerospace industry is indisputably another appealing sector for British companies. While our aerospace industry was almost non-existent a decade ago, it has increased five-fold since 2005, and currently sustains 270 companies. KPMG’s Competitive Alternatives Report ranks Mexico as the most competitive country in the Americas for the aerospace industry. The degree of technological sophistication of our exports and the available engineering talent pool ranks Mexico as a world-class centre for high value-added strategic manufacturing, engineering and development. Likewise, the Wassenaar Arrangement allows us the possibility to develop and manufacture dual use technologies in Mexico.

Another opportunity is found in the Mexican creative industries. In this matter, our country could be a great ally for British companies. Mexico is a global hub for creative industries, including architecture, design, and fashion content, amongst others. We are also the largest film and videogame market in Latin America, the largest exporter of creative goods in the region, and one of the leading exporters of new media in the world.

We are also quite interested in bilateral cooperation. One example where we have worked together is Torre Bancomer, a project developed by Víctor Legorreta’s studios and the British architect Richard Rogers. Other successful examples include Grimshaw Architects with the Steel Museum in Monterrey and Foster + Partners with their apartment towers in San Pedro Garza, Nuevo León. Lastly, British architect Norman Foster and Mexico’s Fernando Romero studio have had their design chosen for Mexico City’s new airport, one of the largest in the Americas.

Finally, we also believe in the great value of cooperation in R&D projects to increase our investment ties in the future. Our country is an important global manufacturing hub, where in fact, 93 per cent of Mexican exports to the UK are manufactured goods.

As we transition from manufacturing to more R&D, we are interested in fostering innovation through partnerships offering your country’s expertise. Mexico is a fertile ground for UK companies in industries that require innovation and sophisticated manufacturing, such as aerospace, automotive and life sciences, among many others.

Our countries are natural partners in many areas. Mexico has the human capital and the infrastructure for advanced manufacturing, while the UK can provide its expertise in innovation and technology development. I am sure there is a wealth of opportunities in our renewed relationship.

Mexico’s economic model is based on manufacturing, but it is proving hard to consolidate growth while productivity remains low. Which areas of the economy still need to be addressed in order to create sustainable, steady expansion and increase productivity?

Under President Peña Nieto’s administration, raising productivity in Mexico is a priority. One of our five national goals is to build a “Prosperous Mexico”, where our country can grow to its full potential and generate more high-quality jobs. To reach such sustainable growth, this administration is committed to provide the best conditions for our manufacturing sector to innovate, to capitalise on our dynamic export sector, and to strengthen our domestic market.

Manufacturing currently represents our motor for growth in the country. It is not unusual for plants in Mexico to exceed productivity levels when compared to the United States. These medium and large enterprises are globally integrated and are able to reap the benefits of this integration.

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We have been witnessing a wave of Mexican companies from the creative industries that are looking to create joint ventures with their British counterparts

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Notwithstanding the success seen so far in the manufacturing sector, it only represents one-third of the economy. In fact, micro, small and medium sized companies represent the main source of employment in Mexico: 7 out of 10 Mexicans work in SMEs. Unfortunately these are still economic units with very low-productivity levels, which may be up to six times lower than productivity in the manufacturing sector. Needless to say, these micro, small and medium enterprises are still disconnected from the benefits of global integration.

In this sense, the Ministry of Economy designed its policy through a sectorial and transversal approach. This allows for the coordination of actions based on the objectives of each sector or production chain, with broad guidelines such as the development of supply chains, innovation, clusters, and human capital.

Furthermore, to reduce the above-mentioned gap, our strategy considers three action lines:

1. Expanding employment in dynamic sectors.We are aiming to achieve more competitiveness through the development of suppliers by expanding the technological and productive capacity. We are also boosting our innovation efforts through the development of high-level innovation and development centres. Through these efforts, we are pushing for an expansion of the sector and ultimately increasing employment levels.

2. Modernising and innovating the commercial and service sectors. Once again, we aim to increase productivity through innovation. Our efforts vary from supporting the increase of added value in their activities, to incorporating the units to the value chains.

3. Consolidating regional clusters. Strengthening the already existing clusters, as well as those currently in development, through the linking of mature industries with dynamic industries, as well as the creation of manufacturing regions focused on defined products with common standards.

Consequently we are able to focus our efforts where it matters the most, through what we call “precision shots”. This is how we are targeting those areas of the economy that need the most support to increase their productivity levels.

The Trans-Pacific Partnership (TPP) has been described as potentially the most important and ambitious multilateral trade framework that exists internationally. How will the signature of the TPP economic association agreement impact Mexico’s commercial ties, and what export sectors do you feel will be growth drivers through the TPP and the Pacific Alliance?

Given its wide array of disciplines, and the high level of ambition sought in them, the TPP will change not

only the way Mexico trades with the world, but world trade itself by becoming the blueprint for future trade agreements.

The TPP will contribute to diversifying Mexico’s trade, and enhance its economic presence in the Asia-Pacific region, one of the most dynamic worldwide, representing important growth opportunities to increase trade, and promote new investments and technology transfer.

In particularly, the TPP will enable access to six new Asian markets, some of whose average growth rates will surpass that of the world in the next five years, according to IMF estimates . But, most importantly, those new markets are complementary to Mexico’s, since they import goods in which my country’s competitiveness has been proven worldwide.

For instance, Mexico’s manufacturing exports, a driving force behind the country’s economic growth, could benefit some TPP markets in sectors such as electrical machines and devices, aerospace, automotive, chemicals, fuels and metals. The idea is to make the most of Mexico’s strengths, create new synergies in regional production chains, and capitalise on market opportunities with TPP partners.

Thus, I foresee that, through the TPP, Mexico will consolidate its position as an ever more relevant manufacturing hub in the Asia-Pacific region, and as a more active and efficient participant in regional production schemes.

How do you see the general outlook for Mexico over the medium term in light of the economic reforms of the last two years, and by what benchmarks will you measure their success?

The Structural Reforms approved by Congress are meant to steadily increase Mexico’s growth to its full potential. As the reforms will trigger productivity, investment and promote formal employment, a positive impact on the country’s productive capacity is expected. Furthermore, barriers currently preventing the economy from reaching its potential in key sectors will be eliminated.

It is estimated that with the implementation of the Structural Reforms, the economy’s potential growth will hike from 3.5 per cent in its initial level to 5.3 per cent by 2018. As a consequence of the expected growth for this period (2015-2018), the forecast for employment generation is of more than 300 thousand formal jobs per year. This means that job generation would exceed a million jobs per year, once full potential growth is reached.

In conclusion, by fulfilling the objectives established in the structural reforms, Mexico’s outlook will be one of success that will trigger benefits for Mexican society and move the country to reach its full potential. F

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IntervIew wIth PEDRO JOAQUÍN COLDWELL Secretary of energy, United Mexican states

PEDRO JOAQUÍN COLDWELLgraduated with a BA in Law from the Universidad Iberoamericana, and in 1974, after a brief period teaching, was elected to the State Congress of his home state, Quintana Roo. In 1979 he was elected to the Mexican Congress, becoming Governor of the State of Quintana Roo two years later, and following that, Senator for the State. He also served as Mexico’s ambassador to Cuba. He has held numerous key posts in the Institutional Revolutionary Party (PRI), and was appointed Secretary of Energy in 2012.

Sharing best practice

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The Government’s energy reform programme is arguably the centrepiece of its strategy for transforming Mexico. What makes this piece of legislation so crucial, in layman’s terms?

President Enrique Peña Nieto and the Mexican Congress have carried out the most significant energy reform in recent decades. It is a comprehensive reform that includes considerable changes in relation to both the hydrocarbons and electricity sectors.

On the one hand, the hydrocarbons industry will finally have access to the capital and cutting-edge technology that will enable Mexico to tap its deep-water deposits and unconventional fields. and to secure additional resources from the recovery of mature fields, which were not previously commercial. These new resources will help to reverse the decline of the oil sector and the shortages of natural gas that have been affecting the country over the past decade.

On the other hand, the changes to the electricity industry are not minor either, given that a wholesale electricity makert will be created, in which private and public companies will participate under equal conditions on a level playing field.

The high energy tariffs that Mexico had before the Energy Reform limited competitiveness in the industrial, services and agricultural sectors. Now, they will be able to use electricity at more competitive prices and Mexican families will have more affordable electricity bills, so it is no exaggeration to say that the Energy Reform is an unprecedented event in the history of our country.

It is also important to emphasise the state’s commitment to transparency and accountability. All public works contracts will be granted through open and transparent public tenders, whose guidelines, stages and selection criteria will be implemented with clear rules, available to all members of society and to interested investors.

With this reform, the state companies will be transformed and strengthened; the sector’s regulatory agencies will be granted technical autonomy and enforcement capacity; local content requirements will be included to promote Mexican industry; the protection of the environment will be safeguarded; the production of electicity from cleaner energy sources will be incentivised; the rights of land owners will be respected and they will enjoy the benefits; all of this within a framework of transparency that will give certainty to all participants and to society as a whole.

Will Round 1 of the international bidding process still proceed as planned, or will some of the more capital-intensive areas, such as shale and deep-water acreage be held back until the international conditions improve?

The bidding round schedule that we have proposed gives us enough room for manoeuvre to make decisions in an opportune manner and in accordance with the interests of the Mexican State. The order in which the bidding rounds will be announced is strategic; in other words, we will first allocate the fields with least risk of extraction, over which we have the greatest level of knowledge, or those which require fewer technical and financial resources.

We have set out a course for attracting new investments; however, the Mexican hydrocarbons industry operates within a global market in which multiple factors intervene and which, right now, is going through a challenging period which obliges companies to be more selective about the countries and areas in which they invest.

Our country enjoys a stable democracy and will benefit from a better institutional and legal framework by incorporating a greater degree of transparency, stronger regulatory bodies and clearer and more stable rules for competition and the efficient functioning of markets. We are confident that these new conditions, combined with a highly diversified portfolio of blocks and areas for exploration and production, will be key factors in attacting investors.

Whilst international oil executives are keen to praise the undoubtedly impressive progress made so far, few feel that the published draft of the production-sharing contract for shallow water acreage is sufficiently attractive in its current form. What more can be done, in your view, to improve its competitiveness?

The Mexican Government is open to analysing all serious proposals in order to offer the best possible contract to all interested companies. Nevertheless, we must always seek a balance between protecting the interest of the State and issuing a contract that is attractive for investors.

The contract model published last December was a first draft, intended to generate feedback from the industry in the following months. For this reason, the bidding guidelines allowed a reasonable time frame in order to work with the industry and experts before publishing the second draft and the final contract.

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The UK is a strategic partner for Mexico in the energy sector. We share common views on a number of global energy challenges

At present, we are working on improving key contract law provisions in order to fully clarify several relevant topics. For instance, the inclusion of a cure period on a contractual breach that could lead to an administrative termination of the contract, and that such a decision must be taken by the board of the National Hydrocarbon Commission (CNH). Another example is the time frame that the CNH has in which to approve exploration or development programmes, after which, if there is no explicit resolution, they would be deemed to be approved.

In mid-December, you attended a meeting with officials from Canada and the United States to coordinate energy policy and promote market integration – the first such meeting in seven years, and a sign of North America’s growing importance in the global oil market. Do you see North America emerging as an energy superpower and potential counter-weight to OPEC? What lessons can Mexico learn from the experiences of its NAFTA partners?In the meeting held on December 15, 2014, NAFTA members identified opportunities to promote common strategies on energy efficiency, infrastructure, innovation, renewable energy, unconventional energy sources, energy trade, and responsible resource development. Our aim was to advance an energy agenda that can enhance our shared views on economic prosperity and environmental performance.

As a result of our discussions, we identified strategic areas for trilateral cooperation in our energy sectors. Even though our energy markets are well integrated, we can still do much more to share publicly available energy data and information, responsible best practices for the development of unconventional hydrocarbons, as well as modern and more resilient energy infrastructure.

North America is one of the most promising regions in the world, because of the great energy potential of its partners. Mexico’s new model and policies for the industry welcoming private and public investment for the benefit of our energy sector, enhanced by our trilateral cooperation, opens promising horizons for sustainable technological development and innovation, advanced regulatory frameworks, a specialised workforce, and energy-efficient goods and services.

What are the main pillars of the new electricity regime, and how well has it been received by local and international investors so far?

Mexico’s power system will follow the best practices of many electricity

systems that have operated in a market regime for many years. The main pillars of these regimes are:

Competition, where it is technically possible: In the new Mexican power sector, competition is to be allowed and fostered in every activity and product where it is technical feasible. This will allow us to reduce costs for consumers.

Modern regulation on natural monopolies. Transmission and distribution networks will be subject to a specific regulatory regime, which will guarantee open access to every player and proper incentives for cost reduction.

A level playing field. Under the new regime, public and private participants will be able to participate in the market, having the same rights and obligations.

Independence of the System Operator. For the new regime to succeed, it is crucial for CENACE – the new system operator – to be independent. Besides operating the market, CENACE will have important duties such as elaborating and proposing to the Energy Secretariat the transmission network expansion plan, and proposing to the regulator, the Energy Regulatory Commission (CRE), changes to the market rules when they do not work properly for the system.

Local and international potential players have been very throughout in all the Energy Reform, providing continuous feedback on the needs of the sector, making this a more comprehensive reform. In these interactions, potential participants have found that this model is capable of satisfying the country’s needs, while opening opportunities to private and public investors.

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Winds of change: by 2024, 35% of Mexico’s energy will come from renewable sources

The Mexican oil industry operates within a global market which, at present, is going through a challenging period

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As part of the reform package, Mexico has set itself the goal of generating 35 per cent of its sources from clean energy by 2024. Which sources in particular do you expect to make up the bulk of this capacity, and what incentives are you putting in place to encourage investment in these?The Energy Reform comprehensively transforms the electricity sector, in which three elements stand out that will promote clean energies:

Firstly, the new Electric Industry Law establishes the obligation of creating a wholesale market of electricity, which can be accessed by clean energy producers.

Secondly, the obligation of having a minimum percentage of clean energies, through the Certificates of Clean Energies, with which we promote that the portfolio of clean energies in the country reaches the target established for 2024 – i.e. that 35 per cent of our energy will come from non-fossil sources.

And thirdly, to promote a resource of which Mexico has an extraordinary endowment, a specific law was designed for the promotion and use of geothermal energy.

In relation to research and technological development, the Ministry of Energy has taken a series of measures, amongst which are mechanisms for international cooperation to promote the development of innovation in the country and the creation in 2014 of the Mexican Centres for Energy Innovation (CEMIEs) in solar, wind and geothermal energy. By the of this year, we expect to have two additional CEMIEs: in bioenergy and oceanic energy.

Energy – and oil and gas in particular – is high on the agenda of President Peña’s State Visit to the United Kingdom in March. To what extent has the UK offered advice and assistance to the Mexican Government in this area, and what opportunities do you see for deepening bilateral cooperation?The UK is a strategic partner for Mexico in the energy sector. We share common views on global energy challenges such as climate change mitigation and the transition to a low-carbon economy. Both countries are committed to the responsible and sustainable development of the energy industry, and we share a common interest in training highly-skilled human resources for these purposes.

As an example of our key partnership, the UK has granted financial and technical assistance to Mexico through the Prosperity Fund, which has enhanced activities in areas such as energy efficiency, energy transition and climate change mitigation.

Our relationship with the Department of Energy and Climate Change of the UK is very close, through several high-level international mechanisms such as the Clean Energy Ministerial (CEM) and the International Renewable Energy Agency (IRENA), amongst others. Mexico will host the Sixth Clean Energy Ministerial meeting in May 2015, where we expect to welcome a high-level British delegation.

The opportunit ies to deepen our bilateral cooperation cover the entire energy sector. Firstly, our joint collaboration can enhance the development of the hydrocarbon industry through responsible

and sustainable international best practices. Additionally, we are keen to support each other on the enhancement of a progressive and integrated energy policy, including areas such as electricity markets and energy efficiency.

Given our unprecedented energy reform, we are strengthening our regulatory bodies, where the British experience can be greatly beneficial to foster capacities in regulation of the hydrocarbon and power sectors. Our new energy model also calls for the enhancement of a qualified workforce, so we will aim to closely collaborate with the UK on the development of technical capacities on research, innovation, science and technology, as well as in the education and training of specialised human resources for exploration, production, i ndu s t r i a l t r a n s for m at ion , t ranspor tat ion, storage and distribution of hydrocarbons. F

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Balls of steel: implementing Mexico’s

energy reform in the current climate is not without its challenges

IntervIew wIth GERARDO RUIZ ESPARZAsecretary of coMMUnications and transPort, United Mexican states

GERARDO RUIZ began his career in 1977 as Assistant Legal Director at the Head Office of Public Debt of the Secretariat of Finance and Public Credit (SHCP). He has held numerous posts, among them Director of Administration of the Federal Electricity Commission (CFE), and Secretary of Communications of the Government of the State of Mexico. He has been a PRI National Political Advisor, and was General Coordinator of Commitments in the electoral campaign of President Enrique Peña Nieto.

Connecting Mexico to the world

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An export-based economy such as Mexico’s depends on companies being able to get their products to market in a timely and efficient manner. What steps is the Government taking to facilitate this, and which projects in particular do you expect to have the greatest impact?

Our priority is to transform Mexico into a leading logistics platform that will allow companies to generate savings in both time and relocation costs.

In this administration we aim to build 46 highways, all of them with public and private capital, in order to reach nearly 3,000 kilometres, with a total investment of over US$12.3 billion. At the end of 2014 we concluded 13 highways with government financing of US$3.7 billion and a length of 917 km and we have initiated two more with a cost of US$231 million and a length of 51 km.

There will be 90 construction works to modernise Federal Roads with a total investment of US$6.9 billion. Last December we concluded 12, with an expenditure of almost US$267 million and we have 65 more under construction with an investment of over US$3.7 billion. With regards to rural and feeder roads, in 2014, we added 22,116 km with an endowment of US$2 billion.

On the railroad sector, I would like to with you the progress of three projects: The Mexico-Toluca train, The Guadalajara city train, both with an estimated completion date of December 2017, and the Monterrey Subway line 3, which is 55 per cent complete and whose construction will conclude in March 2016.

In terms of airport infrastructure, modernisations are being made to 20 of them with public and private investments to the tune of US$1.5 billion, with a focus on the improvement and enlargement of the Cancún, Chetumal, Hidalgo, Ixtepec, Jalapa, Nuevo Laredo, Tlaxcala and Toluca airports. The new Palenque Airport was finished last year and Creel’s Airport is almost done.

Also deserving of a special mention is the new Mexico City International Airport, conceived to improve the country’s international competitiveness and achieve the transformation of Mexico into a leading logistics platform, as I said at the outset. At the end of 2014: we chose the architectural consortium of Foster + Partners and Fernando Romero Enterprises to design the airport; we signed up Parsons Enterprises as the project manager; we obtained the pronouncement and

opinion of the environmental impact assessment and a US$1,000 million financing was closed.

We are committed to the modernisation of 23 national seaports and the development of two integral seaport systems: the Mexican Gulf (Veracruz and Altamira) and the Pacific Ocean (Manzanillo and Lázaro Cárdenas) with a total investment of almost US$5 billion. Our goal is to increase the operation and capacity from to 260 million tons up to more than 500.

In respect of telecommunications, during 2013 and 2014 the Telecommunications Reform was put forward to transform this sector, in order to reach the same level of competitiveness as our commercial associates.

President Peña Nieto’s ambitious infrastructure plans have been costed at over US$160 billion. Aside from the responsibilities of Banobras, Mexico’s development bank, what role do you foresee for the private sector in funding the country’s infrastructure requirements – and on what basis?

Of the total amount of the National Infrastructure Programme the public investment is 60 per cent, with 40 per cent coming from the private sector.

This is why this plan contemplates the promotion for investing in roads, railroads, seaports, airports and telecommunications, with a significant amount of private financing. This will be the mechanism that will allow us to realise this vision.

Given the huge economic potential of the Trans-Pacific Partnership, what plans are there to develop the port infrastructure on Mexico’s Pacific coast, along with arterial roads to transport goods to the Atlantic?

The Trans-Pacific Partnership is an exciting project because of the potential spread in the maritime trade flows between Mexican, Asian and American Ports in the Pacific Ocean. Certainly, it presents a challenge to our logistics chains, both in terms of capacity and efficiency. However, it is important to say that maritime trade on the Pacific Mexican coast has been increasing for more than a decade. In 2000, Manzanillo and Lázaro Cárdenas, our biggest ports in the Pacific Ocean, handled 8 and 14 million tons of cargo, respectively, whereas in 2014 they handled more than 28 million tons. Along with the ports of Veracruz and Altamira, they managed 97 per cent of the maritime containers

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We are aware that bigger ports are useless if our highway and railway networks cannot absorb a substantial increase in goods mobility

in Mexico. The development of Mexican Ports in the Pacific has long been a top priority for this Ministry.

We expect that this accelerated growth rate will be enhanced with the implementation of the TPP agreement, that is why we are constructing new multipurpose terminals as Manzanillo and Lázaro Cárdenas, so that by 2018 they can handle more than 50 million tons of cargo, twice as much as in 2012.

We are aware that bigger ports are useless if our highway and railway networks cannot absorb a substantial increase in goods mobility, that is why the increment in our port’s capacity will be paired with the modernisation of our multimodal trans- oceanic infrastructure.

Manzanillo and Lázaro Cárdenas are the Pacific gateway of Mexico’s central interoceanic corridor, all the way to the ports of Veracruz and Tuxpan in the Gulf of Mexico. We are modernising the railways and highways in this corridor, so that each of these four ports will be efficiently linked to one another, and to Mexico’s main production and consumption centres. In Manzanillo we are constructing a new railway tunnel that will allow an uninterrupted flow of trains, in Tuxpan we just finished a highway that links to Mexico City in only 2 ½ hours, in Lázaro Cárdenas we will develop an industrial and logistics park, and in Veracruz we are building a new railway segment that will connect the expansion project to the national railway system with an investment of more than US$5.1 billion, with two-thirds of this coming from the private sector. This will ensure Mexico’s maritime capacity and efficiency for decades to come.

The contract to design Mexico City’s new airport was won last September by a consortium led by the UK’s Foster + Partners. What were the main factors involved in the decision, and what is the current state of play and timescales regarding the bidding and construction phases?

Given the challenge that the size and complexity of the project represented, we sought the participation of the best, most experienced Mexican and international architecture firms in its design, for this purpose there were created two Committees formed by experts on aviation, infrastructure, airport infrastructure, transportation, engineering and architecture to evaluate the proposals made by 8 joint Mexican-international ventures. The winner was the consortium formed by Fernando Romero and Foster + Partners because, in regards of the soil, hydrological and environmental conditions of the area available for construction, their project represented the best alternative in terms of sustainability, flexibility for future growth, technological innovation, creativity, functionality, budgeting and work plan, among other

elements. The proposal is simply beautiful, and I would like to take this opportunity to advertise its website: www.aeropuerto.gob.mx, where detailed information can be found.

Currently, Grupo Aeroportuario de la Ciudad de México, builder of the new airport, is designing bidding packages for different units of the project. We are aiming to start the bidding processes during the second half of this year and, of course, would like to include the best Mexican, and foreign international firms to participate.

What measures is the government putting in place to safeguard infrastructure investments and provide transparency and legal certainty to investors?

On this subject, I want to point out that for the first time SCT has electronic proof of all of the process on its mayor requests for bids that allow anyone to know, through the internet web site, all the different procedures, from the initial bid request to the final contract issued.

It is important to mention that on the most significant contracts, there has not been a single legal nonconformity and all the projects have been contracted by public biddings under the principle of a “Social Witness”, appointed by the Public Function Secretary. Prestigious international specialised entities have been invited to certify the legality, the law observance and the technical validity of the bidding process.

To emphasise this concept, on January 9th, 2015 the Communications and Transportation Secretariat and the Organisation for Economic Cooperation and Development (OECD) signed an agreement to promote the integrity, transparency and public biddings good practices, for the construction of the new Mexico City International Airport.

Mexico’s telecommunications sector used to be the ‘poster child’ for liberalisation, with dominant provider Telmex charging some of the highest tariffs in the world. How soon do you expect ordinary Mexicans to see the benefits of greater competition?

Providing benefits for the end-user is the top priority for the Telecommunications Reform. As an example, it has already delivered direct and immediate savings to Mexican families, due to the elimination of charges in telecommunication services. Since January 1st this year, costs for domestic long distance calls on wireline and wireless telephones were eliminated. Since then, these calls are billed like local calls.

Together with price reduction, consumers will also experience improvements in telecommunication services. Regarding mobile telephony, for instance, connection in all Mexican territory is guaranteed regardless of the service provider. Additionally, prepaid service users are now be able to consult their balance

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The new competition environment and the more flexible regulation within the sector have prompted the entrance of new players to the Mexican mobile market

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without cost and it will remain valid for a whole full year. Users are now entitled to bonuses and discounts in case of service malfunction and can change to the provider of their choice, keeping their equipment and number, in only 24 hours. Before the Reform measures came into effect, this shift traditionally took days and even weeks to conclude.

On the broadcasting sector, the Reform has set ground rules for the “must carry and must offer” procedure that allows broadcasters to retransmit pay TV signals with no cost for viewers, while pay TV providers are allowed to transmit broadcasted signals on their systems with no charge for the consumer, thus allowing access to the same contents for all TV viewers.

The above mentioned benefits did not come about by chance; they were the result of better competition conditions originated by the Reform. This fact is acknowledged by the Organisation for Economic Cooperation and Development (OECD). In its 2015 OECD Economic Survey of Mexico it praises Mexican regulation for being in accordance with competition, and it even places the Mexican regulation index above the OECD average.

According to the sign of the times and aligned with its strategic intent of boosting telecommunications as development and digital inclusion tools, the Federal administration is responsible of bringing this to fruition by fostering infrastructure development, creating conditions for accessibility and connectivity, and promoting the use of the Information and Communications Technologies (ITC). It is also in charge of providing suitable conditions for the development of digital skills among the population. With this, it is intended that at least 70 per cent of households and 85 per cent of micro, small and medium sized companies can benefit from high speed internet access at world class standards and affordable pricing.

These connectivity goals will be reached by embracing an ambitious infrastructure plan that guarantees greater coverage for more Mexican people. To meet the challenge, actions are being taken to expand and strengthen the Backbone broadband fibre optic network owned by the Federal Electricity Commission (CFE, by its initials in Spanish), and deploy a Shared Wholesaler Network that will provide services for both, Mobile Virtual Network Operators (MVNO’s) and concessionaires.

How would you characterise the response from foreign telecoms/internet providers to the reform so far? How soon do you expect to see Telmex divesting those assets required by the reform bill?

As one of the first major steps to enhance effective competition in the industry, the new regulation allows foreign direct investment up to a 100 per cent ceiling in

telecommunications and satellite sectors, while in the broadcasting area is capped at 49 per cent. As envisioned, foreign investment allows access to state of the art technologies and new business models for services.

Openness to foreign investment in the Mexican telecommunications market was immediately embraced by global companies. In January 2014, Eutelsat, leading global provider of satellite communications, purchased Satmex, Mexican satellite services provider. The operation involved an investment of more than 800 million dollars. That same year, on November, AT&T completed the purchase of Iusacell, a Mexican carrier with more than 4 million subscribers. In January 2015, they mentioned plans to purchase NII Holdings, Nextel Mexico. This last operation is pending of approval. Both operations involved nearly US$4 billion.

On the other hand, the new competition environment and the more flexible regulation within the sector have also prompted the entrance of new players to the Mexican mobile market. Mobile Virtual Network Operators (MVNO’s) with global presence, like Virgin Mobile and Tuenti, from Telefónica, have started operations in the Mexican market by offering low cost service packages to pre-paid mobile users.

Enhanced competition is not limited to the telecommunications sector. In the broadcasting industry, the IFT launched the bidding bases for two new digital Television networks with national coverage and the announcement of the winner of the bidding process is expected to take place in March, according to the regulation ordered by the Federal Law of Telecommunications, the legal offspring of the Constitutional Reform. This will also benefit the users with new TV channels, with new contents, thus enhancing competition.

The Reform improves open and effective competition to reduce concentration levels, regulate upon basic structure and end unfair commercial practices. As a result, it ordered the IFT to issue specific regulation for preponderant economic agents in the telecommunications and broadcasting sectors thus ensuring fair competition conditions for all operators. On the telecommunications field, America Móvil, the flagship company for Telmex, was named preponderant economic agent.

As of now, Telmex and Telcel, the mobile branches of America Movil, have observed regulations ordered by the Federal Telecommunications Law. In January 2015, both companies published their public offerings for interconnection and infrastructure sharing. This will encourage new concessionaires to openly compete with these two major operators by providing high quality and moderately priced services; complying with this rule Mexican users will be provided with a variety of new options of more and better services. F

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By DOMINIC JERMEY OBE CVOChief Executive, UK Trade & Investment (UKTI)

DOMINIC JERMEYjoined the Foreign & Commonwealth Office (FCO) from investment bank J Henry Schroder Wagg in 1993. Whilst at the FCO he also served in the Balkans and Pakistan, and was head of the FCO’s UN Peacekeeping Team, as well as serving as Deputy Ambassador in Madrid and Director of UKTI from 2004-07. He was appointed Head of UKTI’s Defence and Security Organisation (DSO) in 2008, becoming acting Chief Executive of UKTI in 2009, and served as Ambassador to the United Arab Emirates from 2010-14, before assuming his current role.

Seizing Mexico’s moment

The British Government has set some challenging ambitions for its international business agenda including, by 2020, doubling exports to £1 trillion and helping

100,000 more UK companies to export. It also aims to secure £1.5 trillion in Foreign Direct Investment (FDI) support and remain Europe’s number-one destination for FDI. UK Trade and Investment (UKTI), the government department that helps UK-based firms export/grow overseas and international companies establish/expand in the UK, is at the heart of the drive to achieve these goals.

I have never seen a coalition of the willing across government quite as powerful in support of these ambitions – our challenge is to deepen that coalition across business; opening markets, identifying opportunities and creating the conditions for growth. Partnerships – between our governments and businesses working together – will be crucial to success.

I know it won’t be easy – the UK needs to earn its way in the world. We estimate that around a third of the UK’s medium-sized businesses (MSBs) do not yet export, while of those that do, just 17 per cent generate revenues outside of the EU, compared to 25 per cent in Germany and 30 per cent in Italy. This is a considerable missed opportunity. High-growth markets – including Mexico – all expect significant growth between now and 2020, due in part to the rise of the global middle class. We must seize this opportunity – and we can. In UKTI we are proud to be supporting over 3,000 UK SMEs to export through a special programme focused on their needs.

With a population of over 119 million and a growing middle class, Mexico represents the second-largest market in Latin America. It offers an attractive business climate, legal certainty, one of the largest free-trade agreement networks in the world, and highly developed industry groups. Furthermore, its strategic location gives the country the opportunity to act as a springboard into the region as well as being an attractive market in its own right. By 2050, Mexico could have the fifth-largest economy in the world, according to investment bank Goldman Sachs. That is one reason why we recognise its importance as a business partner.

As Mexico grows, its need for more infrastructure and transport links grows with it. Mexico’s new

National Infrastructure Programme includes a number of modernisation and expansion projects in airports which are part of a £65 billion investment to develop transport infrastructure throughout the country. It is clearly a nation full of opportunities and there has never been a better time to consider it as a business destination.

The UK perception of Mexico is of a modern country with a dynamic economy. Total bilateral trade in goods and services has increased by 16 per cent since 2010, and UK exports to Mexico increased by 45.7 per cent from 2010 to 2013. Nevertheless, the UK’s share in Mexico is less than 1 per cent. Clearly there is huge potential for these figures to increase.

The British Government is taking Mexico very seriously, which is why the country chose it for its first round of British Business Centres – subsidised temporary office spaces and soft-landing services for UK SMEs looking to establish themselves overseas. In Mexico, UKTI has identified opportunities in a range of sectors, including High Value Opportunities in infrastructure and energy, as well as other opportunities in automotive, aerospace, education, environment, financial services, healthcare, retail and the information economy.

However, not all British firms are aware of these opportunities. The possibilities for lively exchange and new connections between British and Mexican individuals and institutions are endless. The ‘dual year’ of 2015: The Year of the UK in Mexico and The Year of Mexico in the UK will be a chance to identify new opportunities for trade and investment and drive real interest in each other’s goods and services, contributing not only to domestic economic growth but also to shared trade targets. Mexico and the UK already have strong ties – the dual year will enhance these and mark the beginning of an exciting collaboration.

With the Government’s support for UK exports stronger than ever and the vast opportunities in Mexico, now is the right time for UK companies to look at this vibrant market. The two countries are recognised as innovative and creative, boasting an impressive array of world-renowned entrepreneurs and enterprises that have left their mark over time. Working together, the UK and Mexico can use the special partnerships of 2015 to build an economic legacy that will last for many decades. F

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IntervIew wIth CLAUDIA RUIZ MASSIEUsecretary of toUrisM, United Mexican states

CLAUDIA RUIZ MASSIEU holds a BA in Law from the Universidad Iberoamericana in Mexico City, and later studied Political Science at the Center for Political and Constitutional Studies in Madrid. She also has an MA in Comparative Public Policies from the Latin American Social Science Faculty (FLACSO). She has been a Federal Representative in the Mexican Congress and was President of the Justice and Human Rights Commission. Before taking up her post as Tourism Secretary, she was Secretary to the Government Commission in the Mexican Congress. She is also the current Vice-President of the Colosio Foundation.

Moving up the value chain

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President Peña’s tourism master plan is based on four key pillars: legislative and sector transformation; innovation and competitiveness; development and promotion; and sustainability and social benefit. What do these mean, in practical terms, for the Tourism Board, hotel and resort developers, local communities and visitors?

Mexico is one of the most diverse and rich countries in tourism matters. Our country offers a lot of tourist attractions, from some of the world most beautiful beaches to colonial cities and archaeological sites, trendy bars and world-class restaurants, as well as sustainable, nature and eco-tourism destinations.

Thus, the vision of the government of President Peña Nieto is to boost Mexico’s tourist potential to become a world class destination. Our National Tourism Policy’s main objective is to consolidate and exploit our touristic capital, in order to collaborate in the development of a more prosperous and inclusive country.

In this regard, a year ago, the President instructed the insertion of a strong touristic approach to the National Infrastructure Programme (PNI). For the first time, this programme includes Tourism within its six strategic areas: Communications and Transport, Energy, Hydraulic, Health, Agricultural, Territorial

and Urban Development, and Tourism.In practical terms it means that the Mexican

Government is positioning Mexico as an ideal place to invest in a wide variety of tourist destinations; in addition to facilitating the decision of visitors, communities, developers, and companies to support the tourism industry in the country.

What are the underlying trends shaping the evolution of the industry in Mexico? How can the industry diversify its offering, without losing its strengths in the sun and beach segment?

Tourism in Mexico is enjoying its best moment ever; 2014 was the most successful year ever for tourism in our country, achieving record numbers and impressive growth compared with other countries. In 2014, Mexico received 29.1 million international tourists, recording an increase of 20.5 per cent compared with 2013 numbers.

The growth of tourism in Mexico during 2014 was almost five times higher than the global average (4.7 per cent) and almost three times the growth rate of the Americas (8 per cent). Another outstanding fact is that while growth in Mexico was more than 20 per cent, countries like Canada, USA, Peru, Chile, China,

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Heavenly view: Huamantla, one

of Mexico’s 83 Magical Towns

Photo: Mexico Tourism

Board/Ricardo Espinosa – REO

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Tourism in Mexico in enjoying a ‘sweet spot’, achieving record numbers of visitors and posting impressive growth

Thailand and Austria did not exceed 7 per cent growth.We expect the growth of Mexican tourism in 2015 to

remain in double digits, as occurred in 2014, when we achieved historic figures. We acknowledge that every new tourist arriving to the country means more growth for the sector, an increase in foreign exchange inflows and, consequently, development for the country. Our goal is clear: we want more tourists, but we also want tourists who spend more.

The tourism sector in Mexico is on the right path, but we are by no means complacent. The Ministry of Tourism is fully committed to the development and diversification of the industry. Our sun and beach destinations will not be neglected, but this focus undersells the country’s potential as a destination for visitors. We will place greater emphasis on advertising our potential in cultural, eco, adventure and medical tourism, and promote the investment opportunities in these segments accordingly.

In the past, attempts to draw tourists to areas of Mexico outside developed resorts have been only partially successful, in part because hoteliers are reluctant to build and airlines to provide service to places unless their popularity is proven. What can be done to resolve this dilemma?

There’s huge potential in so many aspects of Mexican tourism, including culture, adventure, medical and sustainable tourism, also with our heritage and our gastronomy. The key is to promote strategies for each segment, rather than a general strategy for all Mexico. We’re targeting specific segments, such as devising specific tours for cultural and gastronomic routes.

These were just concepts in the past, but we’re now moving forward with real products for the marketplace.

Also, the Government of Mexico is committed in providing infrastructure through the National Infrastructure Programme, with a focus on tourism development. Mexico has ambitious plans for the construction and modernisation of airports, cargo and commercial ports, railways and highways to link well-known transportation hubs with lesser-known tourism destinations.

In connectivity matters, we have outstanding potential, because today we have the necessary airport infrastructure to be a bridge between Central America and the Caribbean to any international destination in Europe, Asia and even Africa, which will be reinforced with the new Mexico City International Airport.

Mexico’s mega-tourism centres, Cancún and Los Cabos are now more or less complete. Where do you see the greatest potential for comparable developments elsewhere?

We have traditionally leaned heavily on sun and beach destinations such as Cancún and Los Cabos, which of course are very competitive, but we also have other important destinations such as Puerto Vallarta, Huatulco, Riviera Nayarit, Riviera Maya, Acapulco, Cozumel, and Ixtapa, among others.

But Mexico is more than sun-and-beach; we want to show to the world our other competitive advantages, such as our cultural and natural heritage, tourism know-how and human resources. Mexico runs 2,000 miles from its northern border with the US to its southern border with Belize, Guatemala and the Caribbean

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Puebla by night: the city is one of Mexico’s most historic, as well as the centre of the country’s automotive industry

Our goal is clear: we want more tourists, but we also want to attract tourists who spend more

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Sea, which is why Mexico’s tourism attractions are so diverse and complementary.

The Ministry of Tourism has re-launched the ‘Pueblos Magicos” (Magical Towns) Programme, which consists of 83 of the most beautiful towns across the country from north to south, recognising them for their traditions and the beauty of their picturesque streets and buildings. The features that a site must have to be a Magical Town include being located in areas near large cities or tourist sites, accessible by road and with a high historical, religious and cultural value. Their common denominator is having a great importance in the national tradition.

Finally, we also plan to develop archeological tourism destinations within our country, with a common strategy. These efforts are aimed at identifying the real tourism potential of each region and site, as well as the particular segment, and determining how we can better channel investment to ensure their development

Mexico has some of the best eco-tourism potential of any country in the world. How important is this segment in economic terms? What is the Government’s strategy for nurturing it?

Worldwide, nine per cent of trips are related to eco-tourism. According to the Adventure Travel Trade Association and George Washington University, this market represents 263 billion dollars, and it has grown at impressive rates in recent years.

Mexico has identified 1,186 eco-tourism companies, of which only 927 operate tours all year round. It is estimated that each of these companies employ between 1 and 8 people, depending on the season.

As part of the strategy for the development of ecotourism, the marketing of the various tourism products is driven through the celebration of the Adventure Mexican Fair (ATMEX), which in its three editions to date has become a unique international, professional, dynamic and highly productive event, where major suppliers specialised in nature tourism in our country interact with major retailers from countries of origin, where a significant number of business appointments are made and trade agreements signed.

This event is unique, and its fourth edition will be held in the second half of 2015.

President Peña’s State Visit to the UK in March promises to be one of the highlights of the Dual Year of Mexico in the UK and the UK in Mexico. What is your Ministry and the Tourism Board’s strategy for capitalising on this important platform?

Supporting and stimulating tourism is one of the priorities of the Mexican Government. We have set

ourselves the objective of growing Mexico’s market share, primarily by focusing on showcasing the diversity of our tourist products to British people, adding attractions and value to complement the travel experiences in many of our well-known destinations and highlight those gems of Mexico that are not so well known overseas.

My Ministry’s goal is to increase British Tourism to Mexico from around 450,000 visitors in 2014 to 500,000 during 2015. To achieve this we already launched the second phase of the “Live it to Believe it” campaign, showing Mexican sites with a cultural vocation and showcasing our country’s diversity and unique experiences.

The Dual Year also includes an ambitious agenda which features artistic activities, education, science, innovation, technical and scientific cooperation, economic development, trade, tourism investment and gastronomy.

We are aiming to position Mexico as favourite destination in Latin America and the Caribbean for UK travelers. But we also want to make sure that British people are aware of the wealth of tourist experiences all over Mexico, not just the typical beach holidays in Cancún and Los Cabos. Our main objective for this Dual Year is to communicate the richness of Mexico internationally, as a modern, dynamic, attractive country with an amazing cultural, touristic and economic potential.

Both countries benefit from a combination of rich cultural heritage and a youthful, creative contemporary arts and design scene. What lessons can each learn from the other, in your view?

Under the framework of the Year of Mexico in the UK we will seek to inform the British of the diverse cultural heritage, rich history and traditions of Mexico, whilst at the same time, seeking to project its economic and commercial dynamism as a privileged destination for trade, investment and tourism. Similarly, the Year of the UK in Mexico will provide the perfect context to show the best of UK creativity and collaboration, to build a legacy for the future that further supports political, economic and cultural relations.

With the Dual Year Declaration, our governments have committed to support programmes of cultural activities, economic promotion events and academic seminars, as well as cooperative efforts between public and private institutions.

Finally, I also want to highlight Mexico’s strategy to use our gastronomy as a key tool for promotion and recognition of our country in the UK. We want to share with the British people our Mexican culinary heritage, which two years ago was recognised by UNESCO as an Intangible Cultural Heritage of Humanity. F

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We are pleased to welcomePresident Enrique Peña Nieto on the occasion of his State Visitto the United Kingdom.

Investing in Mexico since 1936, we build value for our shareholdersby addressing our social, environmental and economic impacts.

We believe in a responsible fiscal policy to promote investment in Mexico and we strongly support the authorities' combat against illicit trade.

Find out more at www.batmexico.com.mx

IntervIew wIth JIM O’NEILLeconoMist and honorary Professor, University of Manchester

JIM O’NEILL is a British economist best known for coining BRIC, the acronym that stands for Brazil, Russia, India, and China – the four rapidly developing countries that have come to symbolise the shift in global economic power away from the developed G7 economies. As of January 2014, he is an Honorary Professor of Economics at the University of Manchester.

Making a MINT

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It’s been over a year now since you reported from Mexico as part of your ‘MINT’ series for the BBC. Are you encouraged or disappointed by the country’s economic – and political – progress in the interim?

In some ways, it is still too early to tell. The kind of reforms that Mexico has embarked on will probably take many years to see the benefits from, and that is assuming that they are all implemented successfully. I remain just as excited about the scale of the ambition and the breadth of areas that are being changed. But we probably can only judge in another couple of years, and maybe not until late in the decade as to whether Mexico’s structural growth rate has risen.

Since the programme was made, the oil price – on which the Mexican government depends for around a third of its budget revenues – has halved, clouds have gathered over much of the global economy, and the optimism and consensus generated by President Enrique Peña Nieto’s early legislative successes has largely dissipated. Has Mexico missed its ‘moment’, do you think?

Well in some ways, I think it is a necessary challenge to go through. As I tried to argue in the past decade to many commodity producers, we could only really find out how

successful they truly were once oil prices declined. As otherwise, the economic success is simply due to an external development which is bound to not last, as we have now found out. Some oil producers are using the moment of lower oil prices to reduce their economies’ permanent dependency on it, such as reducing domestic subsidies. Of course, for Mexico that had such exciting plans to attract a lot of FDI in energy, it is a temporary issue, but for long-term energy companies, it should be more attractive than it was, because it should be cheaper! By the way, I don’t believe the issue about clouds over the global economy, it is doing fine, and for many oil importers, obviously lower oil prices are really good news, including importantly for Mexico, its still gas-guzzling northern neighbour.

Last year’s tax rises hit the Mexican middle class – which you identified as the key to rebalancing the country’s economy – harder than perhaps even the government realised. Is there a danger that, in seeking to balance the books, the administration has unwittingly cooked its own ‘golden goose’?

There is always a danger that a tax change has unforeseen consequences. In Mexico’s case, I believe the real key, as I did articulate in the BBC MINT series, is that they need to bring more people into the

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Driving increased productivity:

Mexico’s world–class automotive industry

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The MINT leaders are being quite sensible in trying to establish areas where they might co-operate without making a big show of it

tax base. It is quite striking how so many and so much of the economy has been in the so-called ‘informal’ economy, and unless and until this changes, Mexico won’t achieve its true potential and dreams.

You also highlighted Mexico’s world-class automotive industry as major engine, if you’ll pardon the pun, of economic growth and one of the main drivers of increased productivity. What many commentators are asking is where else is the anticipated growth going to come from? What bright spots do you see?

I think the automotive sector remains a huge positive for Mexico and I observe signs of increased competitive gains even compared to what I highlighted over a year ago. With respect to its northern neighbour, I really believe that the old GE motto “who needs Mexico when you have got China” is reversing, at least when it comes to manufacturing. It is now “who needs China when you have got Mexico next door?” I think, again as the programme highlighted, the aerospace industry is another where Mexico is becoming quite successful and has big potential.

What do you regard as the greatest challenge – internal or external – to Mexico’s ambition to take its ‘rightful place’ at the world’s economic top table?

Always internal!! External forces are usually cyclical and countries cannot control them (unless you are the US or China, or countries that are truly big enough to influence the world growth rate). It is also quite dangerous, lazy and a bad sign when policy makers blame external events for persistent disappointments. As the President outlined so clearly in his excellent book (at least the English version he gave me!), Mexico has some very transparent weaknesses that it needs to change, and who am I to argue with this? Of them, I think education energy, corruption and the tax gathering capabilities of the government are perhaps the most important, especially over the long term.

Should Mexico be seeking to build economic and political bridges with the other MINTs, as the BRICs have sought to do?

What was so interesting about the MINT programme was that Mexican policy makers asked me about this very question when I met them and seemed both remarkably open and

forthright about the possible benefits, and there have been subsequent discussions at least at the finance minister level since, one of which I had the privilege to be part of. I think the MINT leaders are being quite sensible in trying to establish areas where they might have some general discussions about what they could share and benefit from working together more closely, before wanting to make a big show out of it. To some extent, the BRIC leaders were too eager to announce that they were going to co-operate with each other before realising what was feasible. And in this regard, I think the MINT leaders are being quite wise. They do share similarities, especially in terms of having lots of diverse trade partners and young growing populations but they also have a number of differences. It is best to explore areas before becoming too ambitious and locking oneself into rigid arrangements that cannot be delivered on.

What piece of economic advice would you offer President Peña and his team as they approach the midway point of their term?

Make sure, he succeeds on everything he has stated as his goals in his excellent book! Easy (at least for me to say). If Mexico sticks to implementing these reforms, its growth rate from 2015-2030 could rise to 5 per cent.

And to would-be investors in Mexico? Follow what is done, as opposed to what is being said. Which of course, is the key motto for everywhere not just Mexico. But as I think Mexican policy makers know, investors are quite positively inclined towards the country, notwithstanding last year’s challenges and external forces. F

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Market forces: bringing informal workers into the formal economy is key if Mexico is to achieve its potentialPh

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IntervIew wIth EMILIO LOZOYA AUSTINdirector general, Petróleos Mexicanos (PeMex)

EMILIO LOZOYA AUSTIN holds BAs in Economics and Law from Mexico City’s UNAM and an MA in Economic Development from Harvard. He has worked in the private sector, setting up various investment funds, and in 2012 was appointed International Relations Coordinator for the presidential election campaign of Enrique Peña Nieto. The same year he was named Young Global Leader by the World Economic Forum, where he is Director for Latin America. He also works with the International Development Bank (BID) and Mexican Central Bank, and was Assistant Coordinator of International Affairs in the transition team of President Enrique Peña Nieto

Seconds out, Round 1

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You have a reputation as a fighter, both in your professional life as a turnaround specialist and in your spare time as a boxer. How do you intend to get an ageing ‘Rocky’ like Pemex fighting fit to take on the heavyweights of the global oil industry? What do you regard as the greatest single challenge facing the company?

Pemex is almost 77 years old, but it is still up and running as the most important company in Mexico and one of the ten largest integrated oil companies in the world. This “ageing Rocky” still has much to offer to Mexico and to the world.

Our company has a very good branding in Mexico, currently providing a third of the fiscal revenues and being a token of national pride. At the end of the day, Pemex’s efforts end up building one out of every three schools, one out of every three hospitals, one out of every three kilometres of roads that are built.

In the last year, the Energy Reform established a great challenge for Pemex: to transform itself into a Productive Enterprise of the State in two years. By 2016, we will be ready to face competition in a very different environment to what we have been used to, but to achieve this, we need to attain operative efficiency levels above the international standards that will make us become leaders in all the markets we will be competing in from now on.

This is why we are transforming our strategy, structure, business processes and even the corporate culture at a very fast pace. With these changes, we attain budgetary, operational and management autonomy.

We have to reinvent ourselves, our corporate structure and values and become surgically efficient in order to generate the most value for our company and our country. This shift in our mindset has to be quick and profound, and that is our greatest challenge.

Whilst Mexicans’ heads may accept the inevitability of change, Pemex still holds a special place in their hearts. How do you intend to develop the company and leverage it for the greatest benefit of Mexico and its citizens?

Pemex belongs to all Mexicans; it is a source of national pride for all, and as I said before, we are the providers of one third of the government’s budget. With the Energy Reform, Mexico will benefit enormously from having an open market in the Energy Sector, for many reasons. First, there will

be more capital investment, which will translate into better infrastructure and more sources of quality employment for our people.

Second, the government will stop depending only on one oil company to collect taxes. This will considerably diminish Pemex’s tax burden and the government will benefit from the oil revenues of other companies, which will pay around 70 per cent of their income in taxes, as is the standard practice elsewhere in the world.

Third, Mexicans will also benefit from the open market in gasoline and natural gas in 2018. By having more competitors, there will be better service and more competitive prices.

These are just a few of many opportunities that the Energy Reform and the openness of the sector will bring to the benefit of our country and the economy of Mexican families.

2013/14 was a year of dramatic reforms – in education, taxation, finance, labour and, of course, energy – but 2015 is going to be the year of implementation. What is your view of President Enrique Peña Nieto’s achievements so far, and how do you see the implementation side progressing?

Without any doubt, the structural reforms that were promoted and approved in 2013 and 2014 planted the seeds of the profound transformation our country is undergoing in the economic, political and social spheres. Our President, Enrique Peña Nieto is doing a great job of moving Mexico forward, with a complete transformation of the laws that have been keeping us from growing. Moreover, he has a difficult scenario to deal with, due to the fall in the price of oil and the weakness of the peso. This has given us challenges that we will have to resolve in creative ways.

For the Energy Sector and Pemex in particular, these past few months have been the most transcendental since its foundation in 1938. The Energy Reform has been a milestone in the history of Pemex, since it was the one that started the transformation of our company. The new legal framework gives us the necessary assets to strengthen and consolidate our position as one of the best oil companies in the world.

Pemex, as a Productive Enterprise of the State, for the first time in its history will be facing open market competition. To be successful, we have centralised

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OPPOSITE: Splendid isolation no more: Pemex is

now free to partner with NOCs and

IOCs from all over the world

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We are ready for the challenge: Nobody knows our fields, our geology or our strengths better than the engineers and geologists here at Pemex

some functions and gained financial and operative autonomy that will make our corporative structure more efficient. With these changes, the enormous quantity of bureaucratic paperwork will diminish and we will be able to respond more quickly to changes in the world.

With the transformation, we have implemented the best practices of international oil companies. Due to the significant budget cut that we have suffered due to the fall in the oil price, we will eliminate redundancy in functions and excessive bureaucracy. We will necessarily foster efficiency, transparency and accountability, which must always be the touchstones of our company.

The government has set an ambitious target of raising crude oil production to 3 million b/d by 2018. How will that target be met, in your view?

We predict that crude oil production in 2015 will be 2 million 400 thousand barrels a day. To achieve this, we are contemplating the reactivation of production from mature fields, increasing production in the Southeast Marine region and the commencement of operations at recently discovered fields such as Ayatsil-Tekel, which has strong growth potential.

In August 2014, the Ministry of Energy published the results of Round Zero, where Pemex had the first opportunity to be assigned the available fields, taking in consideration its technological capacity, before the rest of the oil companies. We can decide how to work on these fields that were assigned to us, either by ourselves or in association with other companies, so we can share risk, investment and technology.

We were assigned 83 per cent of the 2P reserves, which is 100 per cent of what we asked for from the Ministry of Energy, and 21 per cent of the prospective hydrocarbon resources. We have an area of approximately 90 thousand square kilometres to explore and 20,600 million barrels of oil equivalent.

It is a cruel twist of fate that the reform that many doubted could ever be achieved has coincided with the biggest collapse in global oil prices for a decade. How concerned are you about the impact of the current price environment on the appetite of international oil companies to invest in Mexico – and indeed, on Pemex’s own economic prospects?

Facing a dramatic drop in the price of oil, one of our fundamental resources is to have approved the Energy Reform in a timely manner. With the changes that have taken place in the international arena, by becoming a productive enterprise of the State, Pemex will have more and better financial and technological resources to extract oil from shallow and deep waters in the Gulf of Mexico, lowering the costs and risks of extraction and making the business more profitable, in spite of the low oil price.

Pemex’s extraction costs are among the lowest in the world, and that is why it is still very profitable for our company to extract and sell oil.

Will Round 1 continue as originally announced, or is it inevitable that certain components, such as shale acreage, may be scaled back or delayed? The details of Pemex’s farm-out and joint venture plans were originally scheduled for release in January, but the migration of the existing CIEP contracts has taken longer than expected. How is this process proceeding?

The shale oil and gas fields will surely have to be delayed because of the enormous costs involved, but Round 1 is still on schedule.

The association contracts with the main oil companies in shallow waters will be known during the first quarter of 2015. Similarly, the public auction calendar and the Round 1 calendars will stay the same.

We have been speaking to many oil companies that are interested in investing in the energy industry in Mexico, since our country has a great potential which is being opened for the first time to private investment.

We have also signed several Memoranda of Understanding with the world’s main oil companies, which ratify their commitment to work with Pemex. Moreover, we see a clear upward trend for oil prices

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Photo: Pemex

Due to the significant budget cut that we have suffered due to the fall in the oil price, we will eliminate redundancy in functions and excessive bureaucracy

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in the next few years, which makes it a very prudent time for all our potential partners to invest in Mexico and work with us.

How do you see the offshore shallow water evolving? Is this an area where private investment can make a contribution, or will Pemex keep it largely to itself?

Under the new scheme implemented by the Energy Reform, we will need to focus on those projects where we can generate the most value for Pemex and our country. These projects will necessarily be those where we have important experience, such as shallow water, where we are one of the main producers in the world.

For us, it makes no sense to deviate resources to smaller projects, because it takes away money, time and human resources from bigger production projects. We will therefore be in shallow water and, undoubtedly, will seek to be a major player in deep water. We have had, up to now, an exploratory success rate of around 60 per cent. We are clearly prepared to enter the business, but we will need to share risk and capital investment with partners.

Pemex currently refines around 1.4 million b/d, yet the country still has to import around 50 per cent of its gasoline requirements. How do see the refining sector post-reform? Will Pemex be investing more in it, partnering with other companies to build new capacity or getting out of it altogether?

Following the logic of focusing on the most productive projects, and given the reduction of the budget assigned to Pemex due to the lower oil price, we have been forced to look for creative solutions for several areas in our business.

One of these areas is refining, since it is one of our less profitable sectors. For several years now, we have been investing in our existing refineries and we intend to reconfigure several of these.

In spite of our budget cut, we have decided to diminish, not cancel nor postpone, the flow of investment in the refineries of Tula, Salamanca and Salina Cruz, which will fall under a different investment scheme.

Pemex has increasingly been looking overseas – particularly to Asia – for new markets for its crude, as the US becomes increasingly self-sufficient. How do you see the international outlook for the company?

We are facing the imminent self-sufficiency that can be achieved by our main consumer the United States of America, with an increase in the production of natural gas in the medium term and the decrease of imports in the short term. Therefore, we have focused on the diversification of our crude oil exports to other parts of the world, such as Europe, the Far East and even Hawaii.

With this new reality, Pemex has, since 2013 signed

several memorandum of Understanding with China to increase our exports of oil to Asia, as well as several MOUs with Chinese oil companies to share technology and expertise in the future.

Many key Pemex executives are due to retire in the next two years. How does the company intend to recruit and retain the brightest and best talent in an increasingly competitive environment?

The Mexican workers are ready for the changes that are happening right now. Nobody knows our fields, our geology, or our strengths better than the oil engineers and geologists here at Pemex.

Getting through these challenging times will only be possible with the support of our workers, who will be the main strength of our company, with their talent, dedication and commitment.

Facing the new environment of competition in an open market, we cannot forget that we have the challenge of attracting and keeping the best talent, and to achieve that we must give incentives and keep salaries competitive compared to the rest of the energy industry that will come to invest into our country.

For this reason, we have been working since last year on building human capital. There are not enough oil engineers, mechanical engineers, petrochemical engineers, etc, and in future, other companies will compete for our talent. This is why we have started a corporate college, the Pemex University, which will endow technical training and further education to our employees.

We are also implementing incentives to our engineers so they decide to stay with us, and also for the promising young students that are graduating from our universities, so they will want to work for Pemex.

You have a close relationship with your counterpart a CFE, Enrique Ochoa Reza. How do you see the relationship between Pemex and CFE developing, as CFE moves into gas marketing and Pemex into cogeneration?

Enrique Ochoa and I are very close colleagues and we are both working to move Mexico towards a better energetic reality and create more economic prosperity for all. To take advantage of the assets that the Energy Reform has given to both CFE and Pemex, we will have various electricity cogeneration projects together. Pemex will create three branches: perforation, electric cogeneration, and logistics and transport. These three will fortify activities that are substantive to Pemex. Specifically, the electric energy cogeneration will seek to sell our surplus energy production into the national market in cooperation with the Ministry of Energy and CFE.

Similarly, we expect to have many more joint ventures with CFE, so that both companies can maximise the value of our contribution to the country. F

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MO&GY ad_english.indd 1 2/17/2015 4:03:09 PM

IntervIew wIth DR ENRIQUE OCHOA REZADirector General, Comisión Federal de Electricidad (CFE)

ENRIQUE OCHOA REZAis Chief Executive Officer (CEO) of Mexico’s Comisión Federal de Electricidad (CFE). He holds a Bachelor of Science in Economics from the Instituto Tecnológico Autónomo de México (ITAM), as well as a BA in Law from the Universidad Nacional Autónoma de México (UNAM). He also obtained Master’s Degrees in both Political Science and Political Philosophy, as well as a PhD in Political Science from Columbia University in New York City. He began his professional career as an adviser to the Energy Secretary from 1997 to 1999. He is also a member of the Mexican Council on Foreign Relations (Consejo Mexicano de Asuntos Internacionales, COMEXI).

CFE: At the heart of energy reform

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Six months after Mexico’s Congress passed secondary legislation that will reshape the country’s energy sector by allowing private sector participation in the generation and

sale of electricity, the Federal Electricity Commission (CFE), which once held the monopoly on generation, is also being transformed.

One of the main implications of the energy reforms promulgated by the government of President Enrique Peña Nieto is the need for CFE to become a productive state enterprise. These are designed to allow it to compete on equal terms with large transnational corporations with years of experience in the power generation sector. In order for this to happen in a timely manner, operational changes and the appointments of professionals with a more modern attitude have been taking place since the start of 2014.

CFE has already established clear priorities for how it will address the issues facing the national grid and the industry at large. Projects need financing to be developed, technology needs to be updated,

innovation must be harnessed, and the country’s considerable talent pool brought into the frame. Engaging in healthy strategic partnerships with the private sector will be needed for CFE to overcome the hurdles separating it from the finishing line, as CEO Dr Enrique Ochoa Reza explains.

“The energy reform establishes new opportunities for CFE and for the energy sector in Mexico overall. For the first time in the country’s history, we have a competitive electricity market. Now multiple generators – both public and private – will converge in the marketplace,” says Dr Ochoa.

Under the new framework, CFE will be given the authority to establish its own business model, enabling it to compete under equal conditions within the new marketplace and to participate, through subsidiaries, in different market activities. CFE will continue to be the supplier of basic retail services to residential customers and small and medium-sized commercial customers under regulated tariffs, while none of its assets will be privatised.

In terms of their impact on the electricity sector

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Photo: CFE

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CFE is particularly interested in establishing partnerships to modernise its transmission and distribution networks in order to reduce its technical and non-technical energy losses

overall, the reforms will leave three key public entities in the electricity sector: the Ministry of Energy (SENER), the Energy Regulatory Commission (CRE) and the National Energy Control Center (CENACE).

SENER and the CRE will supervise the wholesale power market. The CRE will also be responsible for setting tariffs for transmission, distribution and basic retail services, setting general conditions for market participants, issuing forms of interconnection contracts, and managing clean energy certificates. Dr Ochoa says operational control over the national grid and the transmission and distribution of electricity are considered strategic areas that will remain in the hands of the Mexican Government through state entities. However, the private sector will be able to participate in transmission and distribution of electricity through agreements and joint ventures with state-owned agencies.

CENACE, now separated from CFE, monitors the wholesale market to ensure fair competition and efficiency, and to prevent discrimination in the provision of access to the transmission infrastructure. Another fundamental goal of CENACE is to increase the transparency of CFE’s operations.

Participants in the wholesale market are required to enter into an agreement with CENACE (the form of which is to be standardised by the regulator). They must also submit their operating costs and prices to CENACE, which will set the spot price for electricity. With this information, CENACE will be able to assess

whether electricity is being priced competitively in accordance with the rules governing the wholesale market.

Public private partnershipsThe energy reforms allow for public-private partnerships throughout the electricity value chain. The CFE will assess these opportunities to determine where the combination of public and private knowledge and experiences can yield profitable results for both parties.

Although the distribution and transmission of electricity will remain under the control of the State, the government will be authorised, through productive state enterprises (most of which will be CFE subsidiaries), to enter into agreements or joint ventures with private parties to finance, install, maintain, manage, operate, and expand the transmission and distribution neetwork.

“CFE is particularly interested in establishing partnerships to modernise its transmission and distribution networks in order to reduce its technical and non-technical energy losses. The reforms allow for modern contractual mechanisms on this matter, which can benefit both public and private investors,” says Dr Ochoa.

Increased use of natural gasAs part of the government’s commitment to provide lower-cost energy, Mexico will continue looking

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Left: The Cerro Prieto geothermal power plant in the northern state of Baja California: the second largest geothermal plant in the world, with 570MW of installed capacity

Opposite:CFE’s hydropower plant Chicoasén I, in the southern state of Chiapas. The company recently tendered and awarded the contract for the construction of Chicoasén II, five miles downstreamPh

oto:

CFE

Mexico, which has the ninth-longest pipeline infrastructure in the world, is expanding its 7,000-mile gas network by 75 per cent by 2018

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north to the United States to supply it with natural gas. Dr Ochoa says the natural gas projects are aimed at building additional capacity into the national pipeline network and increasing its reliability and redundancy.

The lack of transportation infrastructure has meant local industry has missed out on many of the benefits of the US shale-gas boom that significantly lowered North American natural gas prices in recent years. Mexico now has installed power capacity of about 54 gigawatts, nearly half of which is from natural gas, while about a fifth comes from costlier, dirtier fuel oil. The CFE, which generates much of its electricity using natural gas, has been forced to use more expensive, polluting fuels at its power plants to free up available natural gas for industry.

In fact, Mexico has the eighth-most-expensive electricity costs in the OECD. Not only do government electricity subsidies favour agricultural and residential users over industry and crowd out needed infrastructure investments, but Mexico’s largest businesses have seen their power costs more than double over the past decade. They have risen from 6 cents per kilowatt/hour in 2003 to about 13 cents per kilowatt hour this year.

Mexico, which has the ninth-longest pipeline infrastructure in the world, is expanding its 7,000-mile gas network by 75 per cent by 2018, as imports increase to record highs thanks to the lowest gas prices in more than a decade. CFE has already awarded pipeline routes along the western mainland and is promoting eleven new natural gas lines to feed its power generation needs in northern markets. The eleven projects add 1,400 miles to the national gas pipeline system and represent a US$5.2 billion investment. These pipelines will be privately built, run, and operated, says Dr Ochoa.

Developers who build a pipeline with greater capacity than the tender specified will have full commercial rights to market the gas, but CFE will have the right of first refusal in any particular commercial transaction.

Aside from the natural gas pipelines, the CFE will be commissioning seven power plant conversions from fuel oil to natural gas, new combined cycle natural gas-fired power plants (six have been announced since July 2014), as well as modernising transmission and distribution networks, says Dr Ochoa, adding: “The sound operation and management of these assets will enable our company to thrive in the new industrial arrangement.” Overall, in the past six months, CFE has announced 35 strategic infrastructure projects amounting to a total investment worth 11.9 billion dollars.

For CFE, says Dr Ochoa, the way forward is clear;

“A large part of the country does not have natural gas pipelines. That means you cannot produce electricity with natural gas in much of the country. So the first step is to transport natural gas from the areas where it is produced to the areas where it is required. That requires a natural gas pipeline.” The second and third steps, says Dr Ochoa, are power plant conversions from fuel oil to natural gas, and the construction of new combined cycle power plants. “This will create a true national system of natural gas pipelines to transport gas, with more backup for areas where there isn’t enough,” he adds.

Looking to the futureThe energy reforms also give state oil company Pemex the opportunity to produce electricity through co-generation plants for its own needs, and to sell the surplus in to the electricity market. At the same time, CFE will evolve into a power and gas company, meaning that it will not only be allowed to participate in the electricity market, but also to commercialise natural gas, an activity that until recently was reserved solely for Pemex.

“In other words, CFE will compete in the natural gas sector and Pemex will compete in the electricity sector,” explains Dr Ochoa, adding: “We are going to be doing so on level and competitive playing fields, with new and strengthened regulators. This competition, both nationally and internationally, will help us offer the best outcome to the consumer.”

“We will be participating in a competitive market, so we need to make sure that our plants become more efficient, that we leave behind the use of expensive fuel, that we also establish the new infrastructure needed so that we can use natural gas instead of fuel oil to produce electricity,” says Dr Ochoa, adding that CFE also intends to take advantage of the new framework to promote renewable energy from water, wind, geothermal, and solar.

He also highlights the importance of bringing in new talent to drive the reform process: “There has to be a cultural change within the company. We have to emerge as a new, productive company of the state. That’s going to demand transformation within the company, and that’s something we welcome.”

To sum up, says Dr Ochoa, the outcome of the reforms will be that Mexico’s electricity sector will operate within a new industry structure with robust incentives to promote competition and push generation costs down: “This is a unique opportunity for Mexico to completely overhaul the energy sector, and will affect every aspect of the industry, and most importantly, the new competitive environment will provide all consumers with lower prices and greater stability of supply.” F

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It gives me great pleasure to be able to welcome President Enrique Peña Nieto to the City of London this week. The UK and Mexico have long shared a close and fruitful relationship; Mexico

is one of the City’s key markets and most important trade partners. The UK is already Mexico’s 5th largest investor, investing over £5bn since 2000, but we have no intention of resting on our laurels: there are still many exciting opportunities to grow trade between our two countries. The City has much to offer in terms of exported knowledge and skills, and much to gain from working in partnership to support the development of the Mexican market as President Peña has outlined. Effective co-operation will be profitable for both our countries.

Mexico has come a long way in recent years and could potentially become the largest economy in Latin America in less than a decade. But openness and reform are crucial and will go a long way to determining the long-term sustainability of Mexico’s growth. In today’s globalised world, economies are intertwined as never before and no country can succeed in isolation. Inward investment is critical and the way to attract it is to cultivate an open and outward-looking business environment. President Peña’s administration is right to make economic liberalisation one of his targets, and the City of London is ideally placed to help with this.

The City of London’s financial services industry is world class. We are recognised globally as a leading financial centre and can provide the expertise that Mexico needs in order to support the huge growth it is experiencing in its financial services industry. For a strong financial services industry is crucial to supporting growth in the wider economy – providing loans for SMEs, driving entrepreneurship and expanding technologies. These are the building blocks for any economy and we have the expertise to help.

To deliver on the promise of its growing prosperity, Mexico needs 21st century infrastructure. This is another area where the UK can share global best practice across the range of services required throughout a project’s lifecycle, from planning to financing to construction. The City has a track record of financing and delivering major schemes on time and on budget – as was memorably demonstrated by the Olympic and Commonwealth Games, and is now being demonstrated by Crossrail. This expertise in delivering bespoke solutions can now help support the Mexican government’s ambitious investment plans in

transport, energy, housing and healthcare. Getting this investment right is vital if Mexico is to keep pace with its rivals, as current investment rates are below the regional and global averages. High quality infrastructure is a key driver of economic growth and foreign investment and by investing in its infrastructure Mexico can grow in stature on the world stage.

There are many more opportunities in a variety of other sectors – oil and gas, telecoms and energy – but these opportunities don’t fall in your lap. To take advantage, a country must have high-quality, well-financed infrastructure, complemented by a strong financial services industry with experts in these areas. That combination will help every industry to reach its full potential, creating sustainable growth well into the future. London is the best place to find these experts – many of whom will be delighted to help Mexico capitalise on the increased opportunities available. These opportunities spring from a growing population of young and middle class citizens throughout Mexico – a demographic development which brings challenges too, but also vast opportunities, especially in financial services. As people begin to move away from the unbanked sector and consider the possibility of investing in financial products, a whole new market opens up. The City of London has both the expertise and the experience to help Mexican financial institutions harness these opportunities.

One key factor is Mexico’s increasingly transparent financial services industry and open business environment. Transparency and openness are extremely attractive and have a direct impact on the scale of potential investments. The Free Trade Agreements Mexico now has with 44 countries continue to make it an even more attractive business destination and the City of London’s expertise in IPOs should encourage more Mexican companies to list on the stock market.

Mexico and the UK are natural partners and we are keen to deepen our commercial relationships, bilateral ties and cultural understanding. I welcome all the work that has been done on those fronts so far – much of which I have mentioned already – and I believe that with continued commitment to transparency and reform from the highest levels of governance, this partnership can flourish even further. Events such as this serve to reaffirm our commitment to deepening our economic, cultural and personal ties. By working together, the economies of both our countries will grow. F

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By ALDERMAN ALAN YARROWlord Mayor of the city of london

ALAN YARROW graduated from Manchester Business School. He left Dresdner Kleinwort in December 2009 after 37 years with the group, latterly as Group Vice Chairman and Chairman of the UK Bank. He was formerly Deputy Chairman of the FSA Practitioner Panel, Chairman of LIBA, Director of Complinet, a member of the Takeover Panel and of the Council of the British Bankers Association. He was appointed Chairman of CISI (Chartered Institute of Securities and Investment) in September 2009. He was also a member of the Chancellor of the Exchequer’s High Level Stakeholder Group and was appointed Lord Mayor of the City of London in November 2014.

Supporting Mexico’s growth

IntervIew wIth WAJIH EFFENDIVice President and Country Manager, BG Mexico

For international oil companies with the balance sheet and the technical expertise, Mexico offers great potential

BG: The UK’s flagship for reform

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Two decades ago, the government of Margaret Thatcher chose a state-owned company called British Gas as the flagship for an unparalleled privatisation

process that would not only encourage millions of ordinary people to invest in the stock market, but also revolutionise British industry, ushering in a new era of globalisation and interconnected financial markets.

In 1997, British Gas was split into two parts: Centrica, which became a gas and electricity supplier, and BG, which later became BG Group. The company embarked on an ambitious and highly successful expansion strategy that has led it to play a key role in the energy sectors of 24 countries worldwide, making it the UK’s third-largest oil and gas producer, employing more than 5,000 people. A FTSE 100 company with assets of £49billion, over the course of the last decade BG Group has added on average one billion barrels of oil equivalent of resources to its portfolio each year.

Now BG Group is set to take part in another revolution: one of the most ambitious energy sector reforms ever, and one that will open Mexico’s oil, gas and power industries to overseas players for the first time in almost 80 years. A radical new hydrocarbons law outlines a fresh contract framework offering companies a licensing agreement, a cut of the profits, a proportion of the production or a share of the servicing revenues.

For the last two years, Wajih Effendi has been overseeing BG Group’s strategy to enter the Mexican hydrocarbons market, and is now based in-country, a reflection of the company’s long-term commitment to Mexico.

“BG Group is here for the long haul. We saw the potential to invest in Mexico once President Peña Nieto had been elected in July 2012, and then, in the run-up to taking office in December, it was clear he was committed to implementing major reforms, particularly in the energy sector. It was obvious that this was somebody who had the political will to make things happen, and that he had widespread support from all parties,” says Mr Effendi, who is now vice president and country manager for BG in Mexico.

“There is strong leadership here, big decisions are being made, the country is looking outwards and it’s opening up to trade. Mexico is at a point where there is going to be a lot of activity in the energy sector over the next few years,” he adds.

“For international oil companies with the balance sheet and the technical expertise, this country offers great potential. If they get in early, the hope is they will be able to build up a material business over the years to come,” says Mr Effendi.

Mexico plans to offer 169 blocks for exploration and production with estimated resources of about 20 billion barrels of oil equivalent in several tenders throughout the year. Investment of US$8.5 billion a year over the next four years will be needed to develop the blocks, according to government estimates.

The first bids include 14 blocks in shallow waters in the Gulf of Mexico, and are expected to be awarded by August. The winners of deep-water blocks, eagerly awaited by most international oil majors, will be announced around November.

“The group’s strategy is to focus on areas of distinctive and competitive advantage: that means early stage origination, discovery and development in upstream oil and gas,” says Mr Effendi. Over the next three years, the company intends to spend US$1.8 billion a year on exploration across the globe.

BG Group has had a difficult couple of years: in early 2014 it said headline earnings would dip by 33 per cent on an annualised basis to around US$2.2 billion owing to unrest in Egypt, which makes up 20 per cent of BG group’s annual production. The domestic strife there in 2013 meant the Egyptian government didn’t honour agreements covering BG Group’s share of gas from fields in the country, with high levels of gas being diverted to the domestic market. Unable to fulfil its export obligations, the company had to serve force majeure notices to affected buyers and lenders, releasing all sides from contractual obligations for circumstances beyond their control.

Which makes Mexico, politically stable and with long-standing free trade agreements with over 40 countries, a logical choice within the company’s international expansion strategy. Not that there aren’t risks, admits Mr Effendi: “Obviously, there is the question of oil prices right now, but this is a long-term business, cyclical. That said; we’re going to have to make some tough investment decisions. We’ve been clear from day one that the risk and rewards has to balance; when we are considering the potential of hundreds of millions of dollars in exploration investment, the potential for the pay-off has to be

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Mexico is an established producer with a fantastic track record. They will have to scale up over time, but for a player like us coming in, it’s a lot easier than building from scratch

there. We know the hydrocarbons are there, but the upside still has to be very clear.”

Mr Effendi says BG is not focusing on bidding for tenders to build gas pipelines from the United States into Mexico and is focused on offshore drilling opportunities in the Gulf of Mexico, still one of the world’s largest unexplored reserves of oil and gas. Some 1,600 wells have been drilled in US waters, compared with 50 or so on the Mexican side.

“There are other companies better placed to build and operate pipelines in Mexico. Our strength is exploration and LNG, which is what sets us apart from our competitors. We focus on where we can add value across the value chain,” says Mr Effendi, adding: “We have a lean management structure, which gives us the capabilities of a much larger company while retaining the speed and agility of a much smaller outfit.”

Mr Effendi says that Mexico fits perfectly into the company’s global plans: “Mexico is in line with BG Group’s strategy to focus on securing prospective frontier acreage and enter, on average, one new basin each year. We’ve got a unique Caribbean strategy, a Latin American strategy. We have acreage positions in Colombia, Trinidad, Aruba, Honduras, Brazil, and Urugay... so for us, this is about moving north. Mexico is an established producer with a fantastic track record. At present they produce approximately two and a half million barrels a day. So the focus is on scaling up the

industry over time, but for a player like us coming in, it’s a lot easier than building from scratch, like companies have had to do in other locations, such as East Africa.”

He’s confident that BG can repeat its successes in Mexico, pointing to the company’s wide technological expertise and its people and culture. “We apply consistent and robust screening processes that enable us to make fast and efficient decisions, and establish positions rapidly.”

Mr Effendi points out that until now, the country’s huge deepwater reserves have been untouched by Mexican state oil company Pemex because of the technical expertise and the capital required to develop them. Which is where BG’s experience over the last two decades, as well as its sustainable approach to exploration, makes it the perfect partner for Mexico as it embarks on its energy sector revolution.

“Mexico needs technical expertise and capital to unlock the deep water reserves. That’s part of the reason they opening the hydrocarbons sector up. The country is in the early stage of developing their deep water reserves, while the UK is an advanced player and has mastered the skills to work in offshore fields. There is this great capability here in the UK, and British companies have acquired expertise and experience from the North Sea. Overall, the UK can help provide Mexico with technological help. That’s where the big connection is,” says Mr Effendi. F

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Platform for growth: Mexico is in line with BG Group’s strategy to focus on securing prospective frontier acreage and enter, on average, one new basin per year

By BECKY PASKINFood and Drink Correspondent

This historical, artisanal spirit that is at the heart of Mexican culture has grown to become one of the world’s most respected drinks

Getting into the Spirit of Mexico

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Mexico’s national spirit has worked tirelessly over the last decade to shrug off its reputation as a “shooter”. Once widely drunk alongside a lick of salt

and suck of lime by partygoers all over the world, tequila has been unfairly blamed for causing one too many hangovers in modern times.

But this historical, artisanal spirit that is at the heart of Mexican culture has grown to become one of the world’s most respected drinks, and is in hot demand as a refined, sipping spirit in both western and emerging markets.

In fact, tequila, as well as its distant cousin mezcal, is now so popular among “millennials” that it has become the latest fashion accessory for the stars of Hollywood, including the likes of actor George Clooney, rapper Sean “P.Diddy” Combs and The Kenny Everett Show actress Cleo Rocos who all own their own brands. Full bottles are now ordered to tables at some of London and LA’s hottest nightclubs – for sipping slowly rather than shooting, and any hipster worth his beard knows his blanco from his añejo.

Its modern popularity has propelled tequila exports by 16 per cent to US$568 million in the first six months of 2014, compared to the same period in 2013. The reason, explains Jeff Parrott, brand director for

Tequila Don Julio, is consumer experimentation, a growing interest in craftsmanship and an appetite to discover new flavours. “The tequila segment has been constantly evolving as consumers educate themselves into the category and realise tequila is one of the most complex and unique spirits in the world.” And just as tequila is enjoying a revival, its Mexican cousin, mezcal, is also finding favour among consumers, albeit with a much more niche appeal.

Jesse Estes, owner of El Nivel bar in London, and Tequila Ocho, a single-estate, artisanal tequila, notes: “To me, mezcal has the ‘bad-boy’ image that tequila had for so many years, whereas tequila is perhaps now perceived as being more refined.”

Tequila’s – and mezcal’s – success would not be possible if it weren’t for the collective drive of the entire industry – of which there are over 200 producers, who consistently strive to raise the quality of tequila and ultimately its reputation. Just like Scotch whisky or cognac, tequila must be produced to a strict set of guidelines that are governed by the Tequila Regulatory Council (CRT), run as part of Mexico’s Agriculture Secretariat.

“Since Tequila has an appellation of origin it has to be distilled in Mexico, unlike other categories like vodka or rum,” explains Rodrigo Braun, PR director of Jose Cuervo, the world’s largest tequila brand. “Nowadays

many of the most important brands in those categories are not from the same country of origin. That will never be the case with tequila. Mexican culture plays a fundamental role in the company and we are very committed to it.”

In order to carry the name tequila on the bottle, the spirit must be made from blue Weber agave, which grows indigenously in the Mexican state of Jalisco. Once fully mature, the agave plant is harvested by skilled ‘jimadors’, who hack the sturdy leaves off the plant to expose the heart of the agave, or the piña, beneath. An experienced jimador can

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Thirsty work: an experienced ‘jimador’

can harvest over 900kg of ‘piñas’ every day

Opposite: a Tahona wheel, pulled by mule or ox, is traditionally

used to crush the piñas before cooking

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The UK has developed such a strong taste for tequila and Mexican culture that a whole wave of themed bars have opened across the country in the last few years

work through over 900 kilograms of piñas every day. The agave is then cooked, usually in ovens, to convert the agave sugars into fructose and sucrose.

The piña is then crushed, sometimes by a traditional Tahona wheel pulled by a mule or ox, and its juices extracted for fermentation where the sugars are converted into alcohol. The liquid is then distilled in copper or stainless steel stills before either being diluted and bottled as a blanco tequila with a fruity, vegetal flavour, or aged in oak casks – usually those left over by the American bourbon industry – for reposado (rested for at least two months), añejo (rested for at least one year) or extra añejo (rested for up to three years). Ageing the tequila imparts sweet notes of vanilla as well as woody tones that complement the spirit’s characteristic earthy, vegetal flavour.

Mezcal meanwhile is controlled by the Consejo Regulador del Mezcal (CRM), which has lofty ambitions to raise mezcal as the most premium white spirit in the world. Just like tequila, the spirit is made from agave, but while tequila may only use blue Weber, there are around 30 varieties available to mezcal producers. The cooking process is vastly different too – mezcal distilleries roast their pinas in oven pits dug into the ground, which gives the spirit its trademark smoky, earthy flavour.

The close monitoring of these processes is seen as a vital role that not only protects tequila’s quality and heritage, but could very well see the spirit become as big as Scotch whisky one day. For now, its home market of Mexico and bordering US are tequila’s biggest fans – almost 90 per cent of all tequila drunk throughout the world is done so in the Americas, and the amount of money Americans are willing to part with for a high-end bottle is only increasing.

As Don Julio’s Parrott notes: “The US has the most highly developed ultra-premium tequila segment in the world, and we see this continued consumer-driven premiumisation of the category continuing as a large growth opportunity for the brand.” Don Julio, which has six different expressions in its range, saw sales grow 21 percent in 2014, driven by strong demand from US consumers for high-end tequila. The most expensive expression by Don Julio, which is owned by British drinks group Diageo, is Don Julio Real at $360, although expect to pay anywhere between $200-$250,000 for a bottle of ultra-premium tequila.

A thriving bar scene in the States is also driving interest in tequila as bartenders experiment with mixing their favourite brands into both traditional and unique cocktails. The Margarita – made with tequila, lime juice and Cointreau – is one of the most popular drinks in the US today.

And the trend is starting to take root in countries outside the Americas. Specifically, the UK has

developed such a strong taste for tequila and Mexican culture that a whole wave of themed bars have opened across the country in the last few years. From Neon Cactus in Leeds, which stocks over 100 varieties of Tequila, to Crazy Pedro’s Part-Time Pizza Parlour in Manchester and down to El Nivel in London and Pull and Pump in Brighton, tequila madness is sweeping across the UK.

El Nivel’s Estes explains: ”In the UK – and in London in particular – we see more and more people drinking good quality tequila, and with that there is also a growing understanding of how to drink tequila (not just as a shot at the end of a night out).

“Many people have had bad experiences with tequila and have been ‘put off’ from drinking it. That could be due in part to its past ‘shooter’ image. What I’ve seen is that through education and introducing people to good tequila, generally people change their minds.”

The UK’s tequila scene has grown to the extent that last year London hosted the country’s first ever Tequila & Mezcal Fest, a celebration of all things agave and an opportunity for the industry to truly educate consumers through tastings, seminars and food and cocktail pairings.

Eduardo Gomez, founder of Tequila & Mezcal Fest UK, says that despite a growing interest in agave spirits, the industry must do more to dispel the common myths associated with the products. “Our main objective is to educate trade and consumers; unfortunately there is a big misperception about tequila and mezcal in the UK,” he explains. “Therefore, it is our task to show all these new products to the general public, teaching them about it through seminars, master classes, tastings and a lot of fun.”

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Photo: Mexico Tourism

Board/Ricardo Espinosa - REO

The UK aside, the next big market on the horizon for tequila is China, which recently lifted its trade embargo on the spirit to allow imports

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The UK aside, the next big market on the horizon for tequila is China, which recently lifted its trade embargo on the spirit to allow imports. A ban on 100 per cent agave tequila was implemented in 2008 over fears the drink contained dangerous levels of methanol. However, the law was thrown out in June 2013 by the Chinese government after President Xi Jinping signed a bilateral agreement, dubbed the “Tequila Pact” with Mexican President Enrique Peña Nieto. The agreement means that China could become tequila’s second biggest export market behind the US, with an estimated 10 million litres expected to be shipped there by 2019.

Rodrigo Braun of Jose Cuervo, adds: “There is a huge opportunity for tequila in China, but at the same time it is a very peculiar market because of very marked consumption patterns and preferences. I am sure that we will find a way to become leaders in that market and to promote our products and our culture in that part of the world.”

However, a move into China must be gradual and considered to avoid an agave shortage, a cyclical situation that has plighted the Tequila industry for decades. Last year reports surfaced of farmers allowing their crops to rot in the fields as it was cheaper than harvesting them. Now agave, which takes up to 10 years before it is ready to harvest, is in such demand that the price of agave has shot up from 1 peso per kilo (£0.05), to 6.5 pesos (£0.30).

“Without any doubt China has now become a very important market for tequila brands,” explains Gomez. “However, the reality is that nobody knows how big this can be yet. What is worrying is that if Chinese tequila sales pick up, we could potentially face another agave shortage, as surely many producers didn’t expect the trade embargo to drop.”

If an agave shortage does kick in, shoving prices up even further, global interest in both tequila and mezcal is unlikely to wane. It may take slightly longer than anticipated, but perhaps tequila could well become the next Scotch whisky. F

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• El Nivel, London• Café Pacifico, London• Crazy Pedro’s Part-Time Pizza Parlour,

Manchester• Neon Cactus, Leeds• Mezcalería, London• La Capilla, Tequila Town, Jalisco• Happy Bar, Arandas Town Square, Jalisco• La Fuente, Guadalajara, Jalisco• Pare de Sufrir, Guadalajara, Jalisco• Corazón de Maguey, Mexico City

The top tequila Bars in the UK and Mexico

Raising the bar: London’s El Nivel,

a firm favourite among tequila and mezcal

conoisseurs

By JOHANNA ZULETAArts and Culture Correspondent

JOHANNA ZULETA is the Founder of La Zuleta, a PR, Cultural Production & Media consulting agency. She has lived in Colombia, the USA and France, and has been based in London since 2002. Johanna has pioneered the development and integration of the arts and culture between Latin America and the UK, originating various media projects with UK’s leading cultural institutions such as the Tate, Barbican, South Bank Centre and the British Council, as well as working with independent artists and government bodies. www.LaZuleta.com

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Royal Academy Curator, Dr Adrian Locke refers to our view of Mexico as “Britain’s Four Hundred Year Old Fascination.” However, Latin American artists have only

begun to be widely recognised in the UK in the last 15 years. From the beginning of Spanish colonisation in 1519 until Mexican independence in 1821, Madrid was the main port of call for Latin American connections with Europe. Nevertheless, when Mexico declared independence, its first recognition of sovereignty by a major power came from Britain.

The very first artistic link between the UK and Mexico is the Codex of Mendoza, a unique manuscript combining Aztec pictorial and glyphic images with written text in Nahuatl and Spanish. Being one of the major sources of Aztec history, the equivalent of the Rosetta stone for Mesoamerican studies. Commissioned about twenty years after the conquest, around 1540s, for presentation to Emperor Charles V of Spain by the Viceroy of Mexico, Antonio de Mendoza. It is known as “the first colonial manuscript painted according to a new style influenced by European art.”

When the Codex was sent by ship to Spain, French privateers attacked the fleet, taking it to France, where it later came into the possession of André Thévet (1516-1590, a Franciscan priest, explorer, and cosmographer to King Henry II of France). Thévet drew on it for his books of cosmography. Unfortunately for him, after a difficult situation where his scholarly reputation was decaying and his health weakened, he sold it three years before his death in 1587 to Richard Hakluyt (1552-1616, a geographer, editor and Anglican Minister), then chaplain to the British ambassador in Paris. When Hakluyt bought it, he began studying it as part of the research for his collection of English travel accounts, in the hope of finding further information regarding the Spanish empire in America. After Hakluyt passed away he left the document to Anglican pastor Samuel Purchas (1577-1626, an English essayist and compiler of travel and discovery writings). Hakluyt and Purchas met after the extremely successful publication of ‘Purchas his pilgrimage’. Purchas continued Hakluyt’s work and published it in 1625 as a compilation of travel accounts of universal history. When Purchas died he left the document to his son, who then passed it to John Selden (1584-1654, the greatest historian of English law, jurist and polymath). Selden later assembled a famous library

including a wide selection of Greek, Arabic, Hebrew and Latin works, among them the Codex Mendoza. His library became part of the Bodleian Library’s collections (Oxford) in 1659 where the Codex Mendoza remains.

Mexico has always been an international destination and represents the spirit of adventure. It is the number 1 spot for honeymooners, and has beaches (think Los Cabos!) that are regularly voted in the world’s top ten. It is the 14th largest economy in the world and boasts a rich pre-Columbian history of indigenous culture and popular art. It has led the way in several artistic movements. Muralism, for example, and the 1960s Generación de la Ruptura (Breakaway Generation). Mexico also fostered the development of Surrealism, welcomed exiled artists from the war, and embraced the British artist Leonora Carrington (whose retrospective will open on 6th March at the Tate in Liverpool).

Mexico is also the Latin American country that has drawn the largest fellowship of major British writers: D.H. Lawrence, Aldous Huxley, Malcolm Lowry and Graham Greene, for example, have all lived in Mexico.

We can’t talk about Mexican culture in the UK today though without mentioning Manuel Díaz-Cebrián. Manuel was Director of the Mexico Tourism Board in the UK and Europe for over 10 years, and was intrumental in the success of Frida Kahlo at the Tate Modern, The Aztecs at The Royal Academy, Moctezuma at the British Museum and Tina Modotti at the Barbican, among others. During this time he has fostered a passion to showcase contemporary Mexican design in the UK. Three years ago, he created Pinta Design, which he curates. Parallel to this he runs his consultancy, 110Perceb. Currently he is the consultant for The Year of Mexico in the UK.

To celebrate this exciting new era in UK-Mexico relations, the two governments have agreed to designate this year as The Year of the UK in Mexico and The Year of Mexico in the UK. In 2014, in the run-up to this planned year of collaboration and event integration, artists, designers, galleries and universities began a number of exhibitions and fairs, including Design Week in Mexico, for which, for example, Laurence Llewelyn-Bowen and Tom Dixon designed rooms in a specially curated ‘Design House’.

Someone Manuel works closely with in Mexico is the design curator Ana Elena Mallet. She believes that there is a unique movement in Mexico, involving the marriage

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The artistic links between the UK and Mexico date back 400 years, to the Codex of Mendoza, the ‘Rosetta Stone’ of Mesoamerican studies

of the traditional and the avant-garde in design, and that these new ideas and methods should put Mexican designers where they deserve to be on the world stage. Mexican designers in London are, accordingly, beginning to make a name for themselves.

Valentina González Wohlers (b. Mexico City, 1977) is an interior designer and product designer, based in London, who always tells a story through her designs. Her ‘Prickly Pear’ chairs, that resemble cactuses, have been on the front cover of Marie Claire. A harmonisation of tongue-in-cheek English style in their use of formal fabric and design references and Mexican in their iconic and idiosyncratic form. The chairs are both frivolous and provocative of reflection and acceptance. Karl Lagerfeld first bought some, after which she was commissioned to do a new version of Philippe Starck’s ‘ghost chair’. A faint sheet, immaterial and partly transparent, drapes gently over a Louis XV chair, falling over its soft curves and stylish armrest, reaching the floor with beautiful pleats, full of implied movement. “Ghosts have almost always been implausible,” she says. www.valentinagw.com

Liliana Ovalle’s (b. Mexico City, 1977) award-winning work is also a fusion of the two countries’ contrasting cultures. Her product and furniture design reflects ‘incomplete’ and ‘unrehearsed’ aspects of urban life. She has been exhibited in several major art museums and fairs worldwide, including: the Museum of Art and Design, New York; The Museo Poldi Pezzoli, Milan; Zona Maco, Mexico City; The London Design Festival and Depot Basel. She currently works in research at Goldsmith’s and is part of the Okay Studio design collective. Her hot-pot stand Small Flame, displayed at the the British Council event, Salone del Mobile di Milano, she says, was “inspired by my Mexican background,” and reflects “continuous adversity… seen as an opportunity.” Her work emanates serenity, but their beauty does perhaps stem from anguish.

For Sinkhole Vessels she collaborated with artists and artisans in Oaxaca, revitalising indigenous ceramic techniques. Sinkholes represent extinction – the sense that what we know and learn is always falling into a void. www.lilianaovalle.com

H Furniture. Alejandro Villarreal (b. Mexico City, 1973) started Hierve, a boutique design consultancy based in Mexico City and London in 1999, with the purpose of serving society through

high-quality projects in architecture, product design, visual arts and service design. In 2013, Hierve collaborated with British furniture company Case Furniture designing the Vitrina Collection, winning them the Homes & Gardens award for Best Furniture Designer. Villarreal then launched H in 2014, a new London-based furniture company with Mexican origins, merging history with new ideas while being detailed and responsible. H’s collection Loom was presented in ICFF New York and The London Design Festival. H Furniture also offers bespoke services. www.hfurniture.co

Felipe Ehrenberg (b. Mexico City, 1943) is a painter, printmaker, performance artist, writer, teacher, and publisher. He is internationally recognised as a multidisciplinary artist. His career spans over fifty years of drawing and painting, including the conceptual art of the seventies, performance, mail art and mimeograph, he is also a pioneer of neographic art. His work addresses sculpture, graphic design 3-D work, installation, sound poetry, object art, and photography. He has presented over 70 solo exhibitions and participated in over 200 group exhibitions. Ehrenberg lived in England from 1968 to 1972, where, with the architect Martha Hellion and the critic and historian David Mayor, he founded the Beau Geste Press/Libro Acción Libre in Devon to propagate the work of artists involved with the Fluxus movement.

During this time he made the film La Poubelle about his garbage walks around

London at the time of the strikes in 1970. The duration is 16 min 48 sec. The Tate Gallery keeps record of his life and works here.

www.tate.org.uk/context-comment/video/felipe-ehrenberg-la-poubelle

Tupac Martir (b. 1977, Reading) is a lighting designer, Conceptual

Artist, Production Designer, Creator & Basketweaver. Tu p a c h a s p r o v i d e d production design, visuals and lighting direction to artists such as Elton John, Sting, and Beyoncé. He is equally renowned within the fashion

industry having worked for fashion shows with

Alexander McQueen, Stella McCartney and Vivienne Westwood. In the art world, one of his most recent collaborations was

supporting Conrad

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Shawcross during Frieze 2014 in The ADA Project, The Vinyl Factory at Brewer Street Car Park, London.

Tupac won an official entry for the Morelia Film Festival with his multidisciplinary piece The Gentleman, The Mermaid, Mexican Cinema, Loteria!!! originally created for the British Council as part of the Cultural Olimpiad during London 2012. www.tupacmartir.com

Pedro Reyes (b. Mexico, 1972) uses sculpture, architecture, video, performance plus viewer participation. He has won international attention for large-scale projects that imagine solutions for a happier world. His politics and his use of found materials connect him with Arte Povera, particularly in his tackling of gun culture in Mexico. In Palas por Pistolas (2008), Reyes worked with local authorities in Culiacán, Mexico, to melt down guns and make them into shovels for tree planting. For Disarm (2013) the Mexican government passed over 6,700 confiscated firearms for Reyes to turn into mechanical musical instruments, which play a delightful, but emotionally raw, even surreal, sound loop. Other works tackle first world problems through participatory techniques. Sanatorium (2011) invites visitors to sign up for a ‘temporary clinic’, with the mission of treating various kinds of urban malaise. The Sanatorium manifesto mixes Reyes’ huge ambition with a healthy sense of the absurd. www.lissongallery.com/artists/pedro-reyes

Pia Camil (b. Mexico City, 1980) is currently the editor in chief of Celeste Magazine in Mexico, DF. Her work includes interaction of sculpture and performance. She investigates the basics of architecture and destabilises the typical dialectic between private and public. Although still a young artist, she has exhibited at the Bogotá Contemporary Art Fair, ART-RIO, Zona Maco Sur, Popo Paris, Proyectos Ultravioleta, to name a few. She has been selected for the second edition of Saatchi Gallery’s show Pangaea: New Art From Latin America and Africa opening in March. www.saatchigallery.com/artists/pia_camil.htm

Alejandro Pintado (b. Mexico City, 1973) came to London to do his MFA at Goldsmith’s. He returned to Mexico in 2001 but has continued to spend time abroad in France, England and the United States, where he was offered the prestigious Skowhegan residency in 2007. His work reflects upon the historical memory of landscape and how this is transformed over time, it is also an exploration of the “fourth dimension”. Solo shows include Medición del vacío (Vacuum Measure), Drexel Gallery, Monterrey, Mexico, Trayectoria del conocimiento (Path of Knowledge), dialogue with José María Velasco and the Art Project – Pinta Art Fair; curated by Pablo León de la Barra, London. Pintado is represented in London by the www.PostBoxGallery.com

Lourdes Almeida (b. Mexico, 1952) studied photography in the 1970s in Florence, and is considered the master of experimental Polaroid photography in Mexico. She has won many awards, including a bronze medal in the UNESCO World Photo Contest, 1993. Her work was first exhibited in London at the Pinta Art Fair by the Gallery Oscar Roman. In 2014 she also contributed to the exhibition Made in Mexico: The Rebozo in Art, Culture & Fashion organised by Hilary Simon; hosted by the Fashion and Textile Museum. Almeida’s photography portrays both reality and fantasy. In her work we can find portraits of rural people, animals, insects, circus scenes, religious images or aspiring presidents in Latin America. www.LourdesAlmeida.com

Oscar Roman has also been responsible for many other happy findings, such as Pilar Enrich, who lives and works in London, based here for more than 20 years. She started her career as an artist after winning the honorary prize in 1993 at the Art Students League in New York. She has also studied in Mexico, Washington, Paris and London. Pilar collaborated as a museum manager with the British Museum for the opening of their Mexican Gallery.

For her series enrich2: ex-photos, she worked in collaboration with her sister, Cristina, a photographer. The pieces are a mix between specific childhood photographs and her favourite places in London. She joins memories of past times with enjoyment of present locations, adding a personal touch, somehow missing in digital work, such as with handwriting. Enrich is continuously involved in charitable work, supporting several foundations. www.pilarenrich.com

Fernando Palma Rodríguez’s (b. Mexico, 1957) work combines sculpture and Electronic Engineering. He has exhibited in the Conran Shop in London, as well as in Paris and New York. Fernando works with machines he develops, builds and programs himself. These are often activated by the viewer and react and to their movements trough light and presence detectors. Through his work, he makes a critical remark about the way that cities are related to environment. He highlights his native indigenous community, exploring the Nahuatl myths and philosophy of this endangered language. He is represented by the Mexican gallery www.houseofgaga.com

Pablo Delgado (b. Curnavaca, 1979) is a young Mexican artist, who came to prominence in 2011 after bringing his narrative to the walls of the East End with his miniature figures, full of life and shadows. He was later commissioned to open the first East Wing Courtauld biennale, and is now represented by the Howard Griffin Gallery www.howardgriffingallery.com/artists/pablo-delgado F

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Liliana Orvalle: Sinkhole Vessels

Valentina González Wohlers: The Ghost Chair

Lourdes Almeida: La creación, 2011

Alexander McQueen’s catwalk show, production design by Tupac Martir

Tupac Martir

Pilar Enrich: Mi Corazón

By DR DUDLEY ANKERSON CMGPolitical consUltant and aUthor

DUDLEY ANKERSON is a political consultant specialising in Latin America and particularly in Mexico. Previously he spent twenty five years in Her Majesty’s Diplomatic Service, serving amongst other posts in Argentina, Mexico and Spain. He is the author of a biography of Saturnino Cedillo, a prominent figure in the Mexican Revolution, and of several articles on Mexican history. In 2013 he was awarded a CMG by the Queen for services to relations between the United Kingdom and Latin America.

Looking back on Mexico

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I first visited Mexico over forty years ago and am often asked how the country has changed in that time. It is a difficult question to answer because in some ways it has certainly changed, but not

in others. Economically and politically the country has altered quite fundamentally; in other ways it appears timeless.

The most visible change is demographic – a population of sixty million has become one of a hundred and ten million with a more marked proportion of younger people. Cities have grown. Querétaro was a small provincial city in 1972 and one travelled into the countryside to visit the Cerro de las Campanas where the ill-fated emperor Maximilian was executed in 1867; Querétaro is now a large conurbation which has long since engulfed that historic spot. The same is true of other provincial centres dating back to the colonial period, such as Guadalajara, Puebla and San Luis Potosí. The country’s infrastructure has also changed: an efficient highway system links not only the state capitals but all larger urban centres. In 1974 it took me over ten hours to travel by bus from Mexico City to Oaxaca, a journey which now takes half that - or even less by car.

It is remarkable how Mexico has absorbed such change successfully, coping with the additional pressure on the country’s health and education services. Medical facilities have expanded to cope with the demands of a growing population. And while there is room for further improvement in standards in primary and secondary education, particularly in rural areas, Mexico now possesses an impressive range of universities, both private and state.

In parallel with these developments the country’s political life has also changed. In the 1970s Mexico was effectively, if not theoretically, a one party state, governed by the all-powerful Institutional Revolutionary Party or PRI. It seemed at the time that the PRI – or the PRI system because it was more than a party – would remain in power for ever; but even then there were signs that it was being overtaken by developments beyond its control. The tragedy of the Tlatelolco massacre, the violent repression of the student protests on the eve of the 1968 Olympic Games, which was fresh in the memory when I first arrived in Mexico in 1972, appeared to have been a reaffirmation of the PRI’s power and a warning of the futility of outright opposition; but in retrospect it marked the first stage in the weakening

of the PRI’s hegemony. In fact the PRI was a victim of its own success in that it had presided over the creation of a more developed and modern country for which the old PRI system was no longer a suitable vehicle of government. The more far-sighted amongst the PRI’s leaders recognised that political reform was as necessary as economic reform and worked towards a liberalisation of the system. While they had hoped for a controlled transition events moved rapidly after 1994. Sensing the futility of seeking to delay change, President Ernesto Zedillo (1994-2000) guaranteed free and fair elections in 2000 which were won by the opposition National Action Party (PAN). This PAN victory was also a historic achievement for the party, some of whose members had fought for free elections for many years when their goal must have seemed unachievable.

This sense that the old system was no longer viable was also true with regard to the Mexican economy. By the 1970s Mexico’s import substitution model, based upon protectionism, which had been highly successful in stimulating the second wave of industrialisation in the 1950s and 1960s – the first was in the late nineteenth century – had served its purpose and was becoming an impediment to the development of a truly competitive economy. Presidents Echeverria (1970-76) and Lopez Portillo (1976-82) attempted to avoid the structural reforms required to modernise the economy by undertaking massive borrowing; but this strategy merely created an unsustainable foreign debt and led to painful devaluations. Presidents de la Madrid (1982-88) and Salinas de Gortari (1988-94) opened up the economy, culminating in the North America Free Trade Agreement in 1994. This truly historical step represented a dramatic advance and opened up new possibilities for Mexican trade and industry, the benefits of which are visible today.

The two terms of PAN governments under Presidents Fox (2000-06) and Calderón (2006-12) provided welcome economic stability after the upheavals of the mid-1990s and left the country with a healthy balance of payments. They also witnessed a number of social reforms. However, the electorate was concerned by the somewhat sluggish economic growth under the two PAN Presidents and by growing public insecurity and the rise of violent organised crime, particularly under President Calderón. As a result the PRI was returned to power in 2012 under President Peña Nieto, whose current State Visit to the UK underlines the excellence

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Economically and politically the country has altered quite fundamentally; in other ways it appears timeless

of the bilateral relationship. But the PRI of today is not the PRI of the 1970s. The current leaders of the PRI fully recognise the changes that have taken place over the last twenty years and that there is no return to the old system. Indeed, President Peña’s first two years have been spent in promoting a radical reform programme covering education, political institutions, telecommunications, and particularly energy, which will further transform the Mexican economy, increasing competition and building upon the changes promoted by President Salinas twenty years earlier. It is a remarkable achievement which will bring lasting benefit to the country.

The government’s stated focus is now upon tackling the country’s other challenges, such as security and the need for greater transparency in government. The proximity of Mexico to the US drugs market and to a ready supply of high-calibre weapons from gun stores across the US border, has led to a rise in organised crime and criminal violence in recent decades in Mexico with which both PAN and PRI governments have struggled. This in turn has exacerbated the problem of corruption. The urgency of tackling these issues has been underlined in recent months by continuing high levels of criminal violence and social protest in several states, such as Tamaulipas, Guerrero and Michoacán, which have led to widespread demands for corrective action. The President is publicly committed to addressing these problems during his four remaining years in office and they will doubtless be amongst his government’s top priorities.

But if Mexico is now a very different country from the Mexico of the 1970s politically and economically, in what ways has the country not changed? What, then, is timeless?

There are three areas which come to mind. Firstly,

and most obviously from a tourist’s point of view, are the country’s stunning scenery and visible history. The variety of Mexico’s scenery is quite remarkable, from the beaches of the Pacific Coast and the Yucatán peninsula, to the rugged mountain ranges of the Sierra Madre Oriental and Sierra Madre Occidental or the arid deserts of the north. Numerous visitors from the days of the Spanish conquest onwards have rightly commented upon the country’s exceptional natural beauty. And this is complemented by the quite exceptional architecture one finds everywhere in Mexico, whether pre-Hispanic, colonial or modern. The country’s archaeological sites are world famous; whether the Mayan ruins in Yucatán and Chiapas, the pyramids at Teotihuacan near Mexico City or the Mixtec temples in Oaxaca. Returning to some of these sites after forty years I invariably find them as striking as ever.

The second constant in Mexico is the country’s cultural vibrancy, whether in painting, sculpture, music, cinema or literature. The Mexicans are an exceptionally creative people artistically, an inheritance which dates back to the pre-Hispanic period, as is evident from a visit to Mexico’s world famous Museum of Anthropology in Mexico City. In the twentieth century this rich artistic tradition produced the muralists such as Diego Rivera and José Clemente Orozco, writers such as Octavio Paz and film directors such as Emilio Fernández, Alfonso Cuarón and Alejandro González Iñárritu amongst others. Furthermore, popular culture, such as the music of corridos and mariachi compositions and – as any visit to a Mexican market will reveal – handicrafts, continues to flourish.

And finally, there are the Mexicans themselves. Their warmth and hospitality, their strong religious and spiritual roots and their family values are central to making Mexico as attractive a country today as it was when I first visited it. F

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In the mists of time: Mexico’s diverse landscapes continue to inspirePh

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By ROB CAPURROCEO, Canning House

The Canning Lecture has been and will remain the UK platform of choice for Latin American leaders seeking to engage with an informed and influential audience

Latin America’s home in London

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George Canning (1770-1827) was British Foreign Secretary, from 1807-1822, and briefly Prime Minister in 1827.

On 12 December 1826, in the House of Commons, Canning was given an opportunity to defend the policies he had adopted towards France, Spain and Spanish America, and declared: “I resolved that if France had Spain it should not be Spain with the Indies. I called the New World into existence to redress the balance of the Old”. During his early period in the Foreign Office (1807-09), Canning had become deeply involved in the affairs of Spain, Portugal and Latin America and had been responsible for a number of decisions that greatly affected the future course of Latin American history. George Canning was the first British Foreign Secretary to devote a large proportion of his time and energies to the affairs of Latin America (as well as to those of Spain and Portugal) and to foresee the important political and economic role the Latin American states would one day play in the world.

It is not a surprise, then, that the name Canning House was adopted when the Hispanic and Luso-Brazilian Councils established their original offices in Upper Berkeley Street in January 1947. Canning was, after all, widely respected and admired in most of the countries of Latin America as their friend and supporter in the days of their struggle for independence, and as the man who led the governments of Europe to recognise the newly emerging republics established by San Martín and Simón Bolívar.

The germination of the idea of a British centre for Latin American affairs began at least as early as the mid-1930s when the need became apparent to enhance Britain’s commercial and cultural relations with Latin America. Lord Davidson, co-founder of Canning House, noted the financial weakness and political vulnerability of some of the most important investments in Latin America, such as the British-owned railways in Argentina. He realised that the demand for an improvement in contacts with the Spanish and Portuguese-speaking world extended beyond the traditional Anglo-Argentine connection.

Canning House now consists of the Hispanic and Luso-Brazilian Council and Canning House Limited. The former was registered in 1973 as a company limited by guarantee and having no share capital. It is a non-political, non-profit organisation registered as a charity.

Fully supported by the British Government from the start, Canning House staged its first economic Seminar on Latin America at Lancaster House in May 1972 with the then Prime Minister, Mr Edward Heath, who inaugurated the format of it. The inaugural Canning Lecture entitled “The Argentine-British Relationship on the Threshold of the 21st Century” was given by HE The President of the Argentine Republic, Dr Carlos Menem. In April 2000, HE The President of Colombia, Dr Andrés Pastrana, delivered the second lecture entitled “Colombia: A Nation with a Great Future” and in October 2001, HE The President of the Bolivarian Republic of Venezuela, Hugo Chávez Frías, gave the third Canning Lecture entitled “A New Vision for Venezuela”. A major annual occasion, Canning House has held this Lecture with most Latin American Heads of State ever since, with one notable exception, in 2010, when Mr William Hague, then Foreign Secretary, used the Lecture as a platform to launch the Government’s policy on Latin America which is now known as “The Canning Agenda”. The most recent Canning lecture was delivered in 2013 by HE Pedro Passos Coelho, Prime Minister of Portugal.

Aside from hosting the Canning Lecture every year, Canning House has become the natural ‘home’ and place of meeting for distinguished guests and visitors from Mrs Evita Perón in 1947, to the likes of The Earl of Mountbatten, Senhor Heitor Villa-Lobos, Salvador Allende, HRH the Duke of Edinburgh, Dr Jorge Luis Borges, Arthur Schlessinger, Maestro Alberto Ginastera, HRH the Princess Royal, the Rt Hon John Major, Carlos Fuentes and José Saramago, to name but a few.

Building on this tradition, the current mission of Canning House is to be the UK’s leading forum for informed comment, contacts and debate on Latin American politics, economy and busines.

The Canning Lecture has been and will remain the UK platform of choice for Latin American leaders seeking to engage with an informed and influential audience on matters of state pertaining to their countries in general and their relationship with the UK in particular.

In this tradition, we are delighted to welcome His Excellency President Enrique Peña Nieto to deliver the 2015 Canning Lecture, following in the footsteps of four of his predecessors, namely Presidents Miguel de la Madrid, Ernesto Zedillo, Carlos Salinas de Gortari and Vicente Fox. F

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OFFSHORE AND ONSHORE DRILLING PLATFORMS INSTALLATION AND MAINTAINANCECONSTRUCTION AND ADMINISTRATION OF INDUSTRIAL PRODUCTSGAS OEPRATION AND PRODUCTION

Founded in 1960, Grupo R is the largest and most diversified conglomerate in the oil & gas industry in Mexico providing services in onshore and offshore drilling, including ultra-deepwater drilling, offshore construction and maintenance, gas fields operations, fabrication yards and specialized transportation.

Engaged in the drilling industry since 1967, Grupo R has extensive expertise in different types of drilling contracts in Mexico, including: day-rate charters, turn-key wells, integrated service contracts and operation of gas fields (known as multi-service contracts).

Grupo R has the most modern ultra-deepwater drilling fleet in Mexico with three 6th generation semisubmersible drilling rigs: Centenario, Bicentenario and La Muralla IV. In addition, Grupo R is currently building five high-spec, B-Class design, Jack Ups of 400 ft water depth capacity with deliveries during 2015.

www.grupor.com.mx

A. Melchor Ocampo 193 Torre A, Piso 11. Col. Verónica Anzures,Delegación Miguel Hidalgo. México D.F.C.P. 11300

T. +52 (55) 52628100 F. +52 (55) 52628129 E. [email protected]

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FIRST Mexico State Visit Report 2015

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