Sheinbaum's Energy Dilemma: Green Dreams vs. Nearshoring Needs
Ana Carolina Mexia Ponce
Co-Founding Partner at Nido Ventures | Stanford CS & MBA | Ex LinkedIn
?? Sheinbaum's Energy Dilemma: Green Dreams vs. Nearshoring Needs
Mexico's new president faces a complex balancing act: reconciling her background as a climate scientist with the country's surging energy demands. This week, we're exploring the tensions between renewable ambitions and industrial growth.
Our analysis by José Luis S. reveals the paradox: as nearshoring drives manufacturing growth, Sheinbaum must navigate between her party's fossil fuel legacy and her own green energy vision. From PEMEX's oil production shifts to Mexico City's solar projects, we uncover how the president's dual identity as scientist and Morena leader could reshape Mexico's energy future.
As always, you're reading ConteNIDO, your go-to place for all things Mexico/US, AI, and innovation. Make sure to subscribe to receive our up-to-date analysis ??
Nido Indicators ????????
Auto Exports: 315,706 units on Sep 01, 2024 (??23,036 units from Aug 01, 2024)
Consumer Confidence Indicator in Mexico: 47.10 points on Sep 01, 2024 (??1.05% from Aug 01, 2024)
Consumer Confidence Indicator in United States: 70.50 points on Oct 01, 2024 (??0.57% from Sep 01, 2024)
Federal Reserve Interest Rate: 5.00% on Sep 18, 2024 (??9.09% from Jul 31, 2024)
Bank of Mexico Interest Rate: 10.50% on Sep 26, 2024 (??2.33% from Aug 08, 2024)
USD/MXN Exchange Rate: MXN 20.05 on Oct 29, 2024(??MXN 0.43, ??2.17% from Oct 01, 2024)
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In the Know with Nido: What we are reading
?? LG Launches New Automotive Plant in Coahuila
LG Electronics has unveiled a state-of-the-art automotive component plant in Ramos Arizpe, Coahuila, with an investment of over 1.2 billion pesos. This facility will enhance the region's automotive industry by producing advanced audio, video, and navigation systems, while creating jobs and supporting local economic growth. [Mexico Industry]
?? Mexico City’s Industrial Real Estate Soars to Record Occupancy
In 2024, Mexico City’s industrial real estate occupancy reached unprecedented levels, with 1.2 million square meters leased, up 55% from 2023. The surge is driven by logistics and e-commerce demand, bolstered by significant foreign investment. CBRE forecasts continued growth in key areas, indicating a robust market ahead. [El Economista]
?? Sheinbaum Unveils Bold 2025 Budget Plans
Mexico's government aims to finalize a budget exceeding 9.5 billion pesos by 2025, focusing on reducing the deficit to 3.5%. The plan allocates over 6 trillion for essential expenses and earmarks 1.3 trillion for key projects and social programs under President Claudia Sheinbaum's leadership. [El Porvenir]
???? Mexico Eyes Tax Incentives to Attract Foreign Investment
Mexico's government is exploring tax credits to entice foreign companies in sectors like EVs and semiconductors, aligning with North American strategies. The move aims to boost local manufacturing while ensuring economic stability and sovereignty. Collaborations with major firms highlight Mexico's commitment to reducing reliance on Asian imports. [Reuters]
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?? Mexico's Ruling Coalition Moves to Diminish Judiciary Power
Mexico’s Morena party is pushing a constitutional amendment to limit Supreme Court oversight of congressional legislation, raising alarms about democratic integrity. Critics argue this shift threatens judicial independence and consolidates power under President Claudia Sheinbaum, echoing previous tensions with the judiciary. The reform, which includes plans to elect judges, awaits further approval. [Financial Times]
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In-depth with Nido: What we are thinking
Mexico 's new president, Claudia Sheinbaum, is facing a serious challenge. In the coming months, she’ll have to outline an ambitious climate policy that satisfies a number of key actors both in her administration, party, and the country at large. And, quite crucially, one that can meet rising demands for a transition to clean energies while also enabling manufacturers to set up shop in the country amidst the rise of nearshoring (more in IMCO).
This week at Nido we wanted to look more closely at these tensions as they are likely to be the most crucial debate of Sheinbaum’s administration. Moreso, as we seek to provide startups with a full background on the Mexican economy and the many opportunities that might arise within it. So, we put together a brief summary of the many tensions faced in the Sheinbaum administration when it comes to energy policy.
Let’s start by outlining a fact that might not be obvious from the get go. Often, when we speak of these tensions on the energy field, we are referring to two very different scenarios. First, is the tension between Mexico’s plan to expand capabilities and a drastic increase in demand from the many companies seeking to open new factories in the country but wary about the lack of energy (more in COPARMEX). Second, and equally as important, we have a debate between Sheinbaum’s own prioritization of renewable energy and her party’s strong stance towards energetic sovereignty, often through fossil fuels
It is worth looking at each of these challenges in due course, starting with the rising demand in the wake of nearshoring. Previously at Nido, we’ve written about the dire need to invest in electric production in Mexico. Data clearly shows that, despite growing production capabilities, Mexican energy demand is growing steadily (more on ConteNIDO). A pattern that will only be exacerbated by hundreds of companies investing in manufacturing capabilities in Mexico in the wake of nearshoring.
Although this second pattern is worrisome on paper, it seems to be the case that Mexico is dead focused on making energy a key policy of the coming years—more of this in a second. The question, however, is how will that demand be met? Will it be through fossil fuels, as has been the case over the last decades, or through a noble interest in clean energy?
This brings us to the second tension to discuss: the internal debate between Sheinbaum and her own party. You see, over the last six years, President Andrés Manuel López Obrador of Morena spearheaded a series of legislations meant to preserve Mexico's energetic sovereignty—a phrase that refers to a nation’s ability to produce its own energy without having to import it from abroad. Chief amongst them was the acquisition of an oil refinery in Houston and the construction of another refinery within Mexico in the southern city of Dos Bocas—a key infrastructure project for the administration (more in Capital21 and El País). On the legal side, President López Obrador tried to pass an ambitious reform to roll back the participation of private actors in Mexico's energy production, highly favoring the nation’s state-owned oil company (PEMEX) and electricity administration (CFE) (more on KAS). At the time, however, reforms of this sort were pushed back by Mexico' s Supreme Court (more on Forbes).
As one can see from these points, the vision of energetic sovereignty—especially, the one tied to the López Obrador administration—is closely related to fossil fuels, which are, in turn, seen as the best bet to maintain Mexico’s growing energetic demand with existing resources. Not surprisingly, when López Obrador first came into office, PEMEX—again, Mexico’s state-owned oil company—was producing the lowest amount of crude oil it had ever seen in recent history: just 1,823 thousand barrels of oil per day. By the end of his administration, the tide had turned to a slight increase of 1,855 thousand barrels, with increases starting in 2020.
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CTO & Cofounder at XHash
4 周if she had a dual identity as a scientist she would agree that going nuclear is the only correct answer, it’s a shame a Physicist don’t see that, well what can be expected of someone that make a dissertation about wood burning stoves It’s a shame someone that received so many votes would have the ability to sell the Nuclear solution to the Mexican people, but instead she is leaning towards “green energy” and more gas powered plants