President’s policies fatally undermine the energy companies he needs for funds

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March 3, 2021

pemex truck — 'For the rescue of sovereignty,' reads the slogan on a Pemex truck.

Andrés Manuel López Obrador, Mexico’s controversial president, has embarked on a program of national change he grandly calls the “Fourth Transformation.” Underpinning this historic overhaul are a costly series of infrastructure investments and an array of welfare initiatives.

So far, they have been paid for by a shift in government spending and increased tax collection. However, sustaining these programs will require new revenue sources and, as he has promised not to raise taxes or take on additional debt, that leaves just one option: Mexico’s two state-owned energy companies. This is where his whole project falls apart.

López Obrador, or AMLO as he is known, dreams of times when the national oil company Pemex was a cash cow. Yet those days are long gone, and his policies all but guarantee they will remain so. For one, a mix of nationalist energy policies is undermining the efficiency and profitability of both Pemex and the Federal Electricity Commission (CFE), draining scarce fiscal resources. Furthermore, these policies are undermining the CFE’s capacity to deliver the cheap and clean electricity Mexico needs for economic growth. Yet without the extra tax revenues that come with faster growth, his vision of a transformed Mexico will fail.

Take Pemex. It has been losing billions of dollars, failing to meet its production targets, and its reserves continue to decline. The firm’s bonds have lost their investment grade, making its enormous debts more expensive to finance. The government’s decision to reduce private investment in the energy sector, and to plow several billions of dollars into building an unnecessary refinery, have further hurt this troubled firm.

Even if Pemex was a healthy company, doubling down on fossil fuels is an unsustainable strategy. The global economy is transitioning towards renewable energy: British oil company BP says it is shifting into green energy, while General Motors is going all-electric. Oil-based fuels are clearly the past, not the future.

Then there is the CFE, the giant utility that is Mexico’s second most powerful state-owned company. Under a new five-year plan personally endorsed by López Obrador, the CFE will end the electricity auction system that had provided users with access to cheap renewable energy. This will be replaced instead by its own power generation, which is far more expensive.

At the same time, López Obrador has promised to not raise household electricity prices. As a result, either government subsidies will be needed to make up the difference, further draining public funds, or industrial tariffs will need to be raised, undermining competitiveness. Under either option, Mexico shoots itself in the foot.

The CFE also plans to exclude any new capacity in renewable energy. This will jeopardize the estimated 65,000 jobs in the solar sector. More broadly, it will limit Mexico’s ability to attract new industrial investment, given that international companies increasingly set stringent clean energy requirements for their production facilities. Both will further undermine private investment just as Mexico’s economy emerges from a pandemic-induced slump.

These mooted changes in CFE policy have already faced legal challenges. The Supreme Court has said this nationalist energy strategy is unconstitutional and, because it favours domestic investment over foreign firms, elements of it may be at odds with several trade agreements, including the USMCA with the U.S. and Canada.

Nevertheless, López Obrador will not back down, despite the potentially expensive international arbitration that lies ahead. Nor does he seem moved by evidence that his strategy is failing. Quite the contrary. The impact of the cold snap last month in Texas, which dramatically reduced flows of cross-border natural gas and caused blackouts throughout Mexico, was mitigated by renewable electricity supplies. Yet the president took the incident as evidence that supported his plans.

How will Mexico generate the energy that it needs? How will it produce the strong growth needed to replace the jobs and firms lost during the pandemic? How will the government find the funds needed to pay for the president’s priority infrastructure projects and social welfare programs?

Without a shift in energy policy, which seems unlikely, none of these things seem possible. Mexico’s economic future, and the future of López Obrador’s “fourth transformation,” look bleak.

The writer is professor of international relations at the University of Southern California. Pedro Niembro of Monarch Global Strategies co-authored this piece.

Wife of ex-governor wanted for corruption pleads for halt to ‘political persecution’

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MND Staff

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March 3, 2021

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The wife of former Nayarit governor Roberto Sandoval has issued a plea to President López Obrador to stop the “political persecution” against her family after a judge ordered the arrest of her husband and daughter on money laundering charges.

“We have nothing to hide. It’s not possible that these limits of depravity have been passed,” Ana Lilia López Torres said in a radio interview on Wednesday two days after a Nayarit-based federal judge issued arrest warrants for ex-governor Sandoval, who was in office from 2011 to 2017, and his daughter Lidy Alejandra Sandoval on charges of carrying out operations with resources of illicit origin.

“… I ask the president of the republic, Andrés Manuel López Obrador, for an investigation to be carried out. … What I’m asking for is to stop this bitter political persecution,” López Torres said.

The order for Sandoval to be detained came 3 1/2 months after a state judge in Nayarit issued a warrant for the former governor’s arrest on charges of embezzlement and wrongful performance of duty.

The ex-Institutional Revolutionary Party governor was placed on the United States Kingpin List in May 2019 for corruption and suspected ties to drug traffickers, and former U.S. secretary of state Mike Pompeo accused him of “significant involvement in corruption” in February 2020.

roberto sandoval and family — The former governor and his family in a file photo.

The arrest warrants for the former governor and his daughter were granted after the government’s Financial Intelligence Unit (UIF) filed a complaint with the federal Attorney General’s Office (FGR) in January in relation to an embezzlement and money laundering scheme in which Sandoval, López Torres and their daughter and son were allegedly involved.

According to a UIF file to which the newspaper El Universal obtained access, López Torres and her children designed and operated a scheme to launder resources Sandoval obtained through the embezzlement of public money.

The scheme detected by the UIF had financial links to companies controlled by the ex-governor and his family members, El Universal reported. Sandoval allegedly siphoned off public money that had been allocated for the payment of government contracts.

To support its application for arrest warrants for Sandoval and his daughter, the FGR alleged that an “excessive amount” of public money was embezzled by the ex-governor and laundered by his family’s scheme.

The UIF has frozen 42 bank accounts linked to Sandoval which collectively contain almost 1.2 billion pesos (US $57.2 million). Among those that have been blocked are the accounts of his wife, daughter and son.

After the arrest warrants were issued on Monday, the FGR said it would seek the assistance of Interpol to locate and arrest Sandoval should he be outside the country. Until at least November 2020, authorities in Nayarit believed that the ex-governor was in San Pedro Garza García, an affluent municipality that is part of the metropolitan area of Monterrey, Nuevo León.

Entering the United States, legally at least, would not be an option for Sandoval as the U.S. announced last year that he and his immediate family members were ineligible for visas due to involvement in corruption.

In her radio interview, López Torres asserted that the accusations against her husband and family are based on lies and falsehoods.

She pleaded with López Obrador to give her the opportunity to meet with officials in order to submit financial documents that prove the innocence of Sandoval and her family.

“I’ll show that I’m right. I want you to know the history of our family. It’s political persecution,” López Torres said.

Although the latest arrest warrants stem from a federal investigation, the ex-governor’s wife accused current Nayarit Governor Antonio Echevarría of involvement in the fabrication of accusations against her family.

If Sandoval is detained, put on trial, convicted and imprisoned, he won’t be the first member of his government to end up behind bars. The former governor’s attorney general, Édgar Veytia, was sentenced to 20 years in jail in the United States in September 2019 after pleading guilty to drug trafficking charges.

Sandoval is suspected of collaborating with Veytia to commit a range of crimes while in power, including kidnappings, extortion, drug trafficking and murders.

The former governor has previously distanced himself from his attorney general’s criminal actions and has denied allegations of wrongdoing while in office in Nayarit.

Source: El Financiero (sp), El Universal (sp)

AMLO insists electricity bill doesn’t violate constitution but a court challenge is likely

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Jude Webber

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March 3, 2021

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President López Obrador has dismissed suggestions that a law overhauling the country’s electricity market to favour a state-owned utility is unconstitutional, hours after it was passed by the Senate.

“There is nothing in it that violates constitutional rights, nothing, nothing, nothing,” López Obrador told his morning news conference on Wednesday.

Legal experts and trade lawyers have said the bill violates the constitution, the U.S.-Mexico-Canada trade agreement and international trade treaties, and opposition politicians have vowed to pursue legal challenges. Investor unease pushed the peso down 1.4% in morning trading.

The law, passed early on Wednesday, rolls back key parts of an energy reform passed in 2013-2014 that created the country’s electricity market.

López Obrador, a populist nationalist who believes the state should be in control and that energy is the motor of national development, said the previous reform was an effort to squeeze the Federal Electricity Commission (CFE), the former state monopoly, out of the market.

Nicknamed the “fuel oil law” by critics, the legislation passed Wednesday changes the order in which electricity is dispatched into the national grid, relegating cheap renewables behind all power generated by the CFE, including that from coal and fuel oil.

Hydropower from the CFE will now be at the front of the queue for dispatch into the national grid. López Obrador said he would announce a plan to modernize the company’s hydroelectric plants “to produce clean energy more cheaply.”

The CFE’s average generating costs for hydropower in 2020 were 1,400 pesos/MWh ($67) versus 650 pesos for electricity contracts under long-term supply auctions, which López Obrador has now scrapped, according to the Mexican Association of Wind Power.

Washington has already admonished Mexico over abrupt rule changes in the energy sector. López Obrador said the issue did not come up at a virtual summit with U.S. President Joe Biden on Monday.

The peso’s fall to around 20.88 to the dollar in part reflected investors’ higher perceptions of risk in a country where López Obrador has already scrapped prominent infrastructure projects and renegotiated contracts he considers to have allowed private companies to profit at the expense of the CFE and Pemex, the state oil company.

Gabriela Siller, head of economic and financial research at Banco Base, said “we do not rule out reaching levels close to 21 to the dollar again.”

Senators from the opposition PRI, PAN and PRD parties, which have teamed up to fight López Obrador in midterm legislative elections on June 6, said they would take action to the Supreme Court.

The legislation is similar to electricity rules favouring the CFE that were proposed by the energy ministry last year. Those changes were ruled unconstitutional by the Supreme Court this month.

Ana Laura Magaloni, a lawyer who was among three candidates for a Supreme Court seat submitted by López Obrador in 2019, told the Financial Times it was “very shameless to send a bill [to Congress] that is unconstitutional.”

Analysts expect a flood of injunctions from renewable power companies, many of them from Europe and the U.S., to stop the law being applied to them.

Chihuahua priest sentenced to 34 years for sexual assault of altar girl, 8

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Michelle Aguilar

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March 3, 2021

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Aristeo Baca assaulted the girl at least three times.

A Chihuahua priest who was convicted in February of aggravated sexual assault against an 8-year-old who served as an altar girl at his church was sentenced Tuesday to more than 34 years in prison.

Aristeo Trinidad Baca, 78, a suspended priest at the Santa María de la Montaña Parish Church in Ciudad Juárez, assaulted the girl between 2015–2018, the court found on February 22. The priest received multiple sentences, totaling 34 years, five months and 10 days, reflecting the fact that he had sexually assaulted the girl on at least three occasions.

Prosecutors said they were dissatisfied with the length of the sentence and would be pursuing action to advocate for more jail time for Baca. They also said they would try to increase the amount of financial restitution Baca was ordered to pay the victim, which currently stands at 59,129 pesos (US $2,800).

Baca’s defense team argued that the girl was lying about the assaults because her family had robbed Baca and had only made the accusations after the robbery was discovered.

The girl was frequently left alone with the priest on Sundays while her father helped out around the church. During her own testimony, the victim, now an adolescent, said Baca assaulted her in 2015 at the church’s parish hall after taking her to an ice cream social for children at a local orphanage he directed. In another incident in 2016, she said, he fondled her underneath some blankets just meters away from her unsuspecting parents while they all watched a film together.

The girl testified that the assaults made her uncomfortable and sad, but it was not until she reached the fifth grade — about two years after the initial assault — that she realized that was happening to her was wrong after she learned in a class that no one had the right to touch her body.

“I don’t just want that they throw him in jail,” she responded at one point to a prosecutor’s questions. “That’s not enough for me. I want him to die.”

About 20 witnesses provided testimony against Baca, including expert medical witnesses who said the girl showed psychological evidence of the assaults and that she would bear emotional consequences for the rest of her life.

The girl’s father told the court that after they reported the assaults, Baca asked for his forgiveness, saying that he had done “something stupid.”

“He taught us the Ten Commandments,” one of the victim’s sisters said in her testimony. “He said not to steal, and he stole our confidence from us. He said not to lie, and he lied to our entire family. He said not to kill, and he killed our faith.”

Baca is the first priest ever to be prosecuted for sexual abuse in Ciudad Juárez, according to the newspaper Milenio.

Sources: Milenio (sp), Periodico Enfoque (sp)

Italian bread brought here 140 years ago still a staple in one Puebla town

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Joseph Sorrentino

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March 3, 2021

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Chipileña baker Dominga Zanella prepares small loaves of pintha. — Assistant baker Dominga Zanella prepares small loaves of pintha. All photos by Joseph Sorrentino

Karina Precoma is a bundle of energy, running between the batter she’s mixing, the front sales counter and the oven in her small bakery. She somehow manages to answer questions and talk on the phone the entire time.

Despite the chaos, the bread she’s baking — called pintha here in Chipilo, Puebla — always turns out perfect.

Chipilo is located about 10 miles west of Puebla city and was founded by Italians from the Veneto region of northern Italy in 1882. Although Italians and other Europeans settled in many parts of Mexico in the mid to late 1800s, Chipilo is the only pueblo that has maintained its ancestral customs and traditions, the only one that can truly be called an Italian pueblo. And it’s the only one in all of Mexico where pintha is made.

While some people think that the bread was invented in Chipilo, its origin is a little unclear.

“No one knows for sure because it’s been here for so long,” said Esperanza Sevenello Stefanoni. She and her husband Jacobo Simoni Piloni have a machine that grinds corn into the polenta that’s used in the bread, and she’s considered a local expert on all things chipileño. Their machine’s over 100 years old and, as Sevenello proudly pointed out, has been in use for three generations.

Karina Precoma busy at the sales counter of her Chipilo bakery.

“The legend is: ‘I learned to make the bread from my nonna [grandmother], who learned from her nonna,’” she said. “I am sure they brought the recipe from Italy, but it has changed.”

In fact, there’s a bread enjoyed in Italy called pinza that is somewhat similar to pintha.

“Pinza is Italian,” said Antonio Zaraín García, who has written about the history of Chipilo. “Pintha is Venetian.”

He said that when the first families arrived in Mexico, they were poor and didn’t have all the ingredients needed to make pinza.

“They make a bread in northern Italy that is much larger than what is made in Chipilo,” he said. “It is also sweeter. Here, pintha is considered as a bread of poor people.”

Both pinza and pintha are made with polenta, but pinza is a stuffed bread containing dried fruits and flavored with grappa and fennel. Neither grappa nor fennel is used in pintha, and it’s not stuffed; a few raisins, almonds or chocolate chips are sprinkled on top, along with a dusting of sugar.

Isabel Minutti is one of two assistants at Precoma's bakery. — Isabel Minutti is one of two assistants at Precoma’s bakery.

And while pinza is traditionally only served at Christmas or on Easter morning, pintha is available all year in Chipilo.

“I learned how to make pintha from my mother-in-law,” Precoma explained. “The recipe was passed down from her and an aunt, handed down through generations. I changed it a little: a little more of this, a little less of that. I use milk. Before, they did not use milk, only water.”

The milk gives the bread a richer flavor, she said.

The bakery has been in business for five years now and is the only bakery in Chipilo that makes the bread.

“There are people who still make it in their homes,” she said, “and every family has their own version of the bread. In most homes, people only use polenta.” Precoma uses a mix of flour and polenta to keep the cost down. Still, she said, “Polenta is the most important ingredient.”

Precoma and her two assistants typically turn out 200 loaves a day. Isabel Minutti keeps an eye on the bread in the ovens while Dominga Zanella sprinkles sugar on the tops of the unbaked loaves that sit in small metal pans.

Precoma with a fresh-baked batch of pintha loaves.

“When people first arrived here, they were poor,” said Sevenello. “They cooked on firewood and made large loaves that they would then cut.”

Each baked loaf weighs a bit under a pound and sells for 16 pesos (about 80 cents). Pintha tastes a lot like cornbread or a corn muffin. With its sugar topping, it makes a tasty breakfast bread or a great accompaniment to that afternoon cup of coffee.

Zuri Merlo is a regular customer at the bakery and is glad Precoma bakes the bread.

“It is easier now to have [it],” she said. “The measurements are very precise, it takes a long time and there is always a secret to making it.”

But Edith Merlo Stefanoni, her aunt, still prefers to make it at home.

“It has a homemade flavor and is more economical to make,” she said. “And nothing compares to the taste of the original [family] recipe.”

Husband and wife Jacobo Simoni Piloni and Esperanza Sevenello Stefanoni have a machine that grinds corn into the polenta for pintha bread.

Although Precoma’s pintha can be bought in many stores in Chipilo, it isn’t made, or even available, in nearby pueblos. It can, however, sometimes be found in cities like Puebla or Cholula.

“When it is,” said Sevenello, “it is called pan originál de chipileño” — original bread from Chipilo.

Joseph Sorrentino, a writer and photographer, is a regular contributor to Mexico News Daily. More examples of his photographs and links to other articles may be found at www.sorrentinophotography.com He currently lives in Chipilo, Puebla.

Covid vaccinations give Morena party a shot in the arm for Congressional elections

By

MND Staff

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March 3, 2021

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Candidates for vaccination await their turn.

The Covid-19 vaccination program has given the ruling Morena party a significant boost, one new poll indicates, while another found that a majority of people approve of President López Obrador’s management of the pandemic despite Mexico having the third highest death toll in the world.

A poll conducted by the newspaper El Financiero in mid and late February found that 44% of 1,000 respondents would vote for Morena if the election for federal deputies were held the day they were polled, an increase of 6% compared to January. The poll was conducted as Mexico’s vaccination program was broadening beyond health workers to include seniors, the first of whom were inoculated against Covid-19 on February 15.

Morena was widely criticized last month for continuing to support the candidacy of alleged rapist Félix Salgado for governor of Guerrero but the issue didn’t appear to damage the party’s standing among respondents.

Support for Morena now is more than double that of March 2020 when just 18% of El Financiero poll respondents said that they would vote for its candidates in a lower house election.

Both the National Action Party (PAN) and the Institutional Revolutionary Party (PRI) attracted just 10% support in the latest poll while 3% of respondents said that they intended to vote for the Democratic Revolution Party (PRD). Almost a third of respondents didn’t declare a preference.

Voter preferences for the federal Chamber of Deputies since June 2019. Those who said none or undecided are shown in black. el financiero

Support for Morena was even higher among people who believe that the government’s vaccination program is proceeding very well or well, with 64% of that cohort indicating that they would vote for the ruling party or its allies.

(Almost 2.6 million vaccine doses, or two for every 100 people, had been administered in Mexico as of Tuesday night.)

Support for Morena slumped to 25% among those who believe that the vaccine rollout is proceeding very badly or badly, while 35% of that cohort indicated they would vote for the PAN-PRI-PRD alliance.

Among respondents who have a lot or some confidence in Covid-19 vaccines, 50% said that they would vote for Morena while only 19% opted for the three-party opposition bloc. Among those with little or no confidence in the vaccines, support for Morena dropped to 26% and increased to 37% for the PAN-PRI-PRD coalition.

Meanwhile, a new survey conducted by consulting and research firm Mitofsky found that 55.9% of 1,000 respondents approve of López Obrador’s management of the coronavirus crisis, an increase of 12.4% compared to the end of March 2020 when Mexico’s official Covid-19 death toll was below 30.

The significant increase appears to defy logic: the official death toll is now above 187,000, the economy slumped by 8.5% last year, there has been scant economic support for people affected by the downturn and the news agency Bloomberg has rated Mexico as the worst country to be in during the Covid crisis.

In contrast, the popularity of the government’s coronavirus czar, Deputy Health Minister Hugo López-Gatell, has declined since the early stages of the pandemic – but not significantly.

On April 12 last year – when Mexico’s Covid-19 death toll rose to 296 – 58% of respondents to a Mitofsky poll said they had a good opinion of the coronavirus point man. Last Sunday, 52.8% of respondents said the same, a decline of just 5.2%.

López-Gatell, who was hospitalized for five days last week due to Covid-19 complications, has maintained strong support in Mitofsky’s polls despite leading a widely-criticized pandemic strategy and coming under fire for ignoring his own stay-at-home advice by traveling to the coast of Oaxaca for a New Year’s holiday while the country faced a worsening coronavirus situation.

The latest Mitofsky poll also found that 62% of respondents are afraid of dying of Covid-19 and 75.3% are fearful that they or a family member will contract the virus.

Almost 92% of those polled on February 28 said they know someone who has had the virus – Mexico’s official case tally is just under 2.1 million but that figure is considered a vast undercount due to the low testing rate – and 80.1% said that they knew at least one person who died from Covid-19.

The survey found that 28.3% of respondents had a preference for being inoculated agains Covid-19 with the Pfizer/BioNTech vaccine while 24.2% opted for the Sputnik V shot. The AstraZeneca/Oxford University (13.7%) Johnson & Johnson (5.1%) and Moderna (2.8%) vaccines ranked third, fourth and fifth respectively.

The Chinese-made CanSino Biologics and Sinovac vaccines, both of which have been approved for use in Mexico, were chosen by just 0.8% and 0.6% of respondents, respectively.

Source: El Financiero (sp), El Economista (sp)

Analysts see rule of law, crime, corruption as biggest barriers to investment

By

MND Staff

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March 3, 2021

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economic growth forecasts — The consensus among analysts consulted by the Bank of México was for growth of 3.89% this year. el economista

Rule of law concerns, crime and corruption are the biggest barriers to investment in Mexico, according to analysts consulted by the central bank for its February expectations survey.

Two-thirds of analysts consulted by the Bank of México believe that now is not a good time to invest in the country.

The federal government has been widely criticized for changing the rules of the game in the energy sector, a move that many analysts say will scare off investment. A reform that seeks to overhaul the electricity market to favor the state-owned Federal Electricity Commission passed the Senate on Tuesday and will now go the president for promulgation.

In its first two years in office, the government has failed to make any substantial progress in reducing the high levels of violent crime. Its first full year in office, 2019, was the most violent year on record in terms of homicides and murders only declined 0.4% in 2020 despite the coronavirus pandemic.

President López Obrador claims that his administration is eradicating corruption but the 2020 Corruption Perceptions Index (CPI) published by the non-governmental organization Transparency International in January indicates that the progress made last year was minimal. Mexico ranked last out of the 37 OECD countries and its score on the CPI scale was well below the global and Americas averages.

inflation forecast — Analysts’ consensus is that inflation will reach 3.88%. el economista

Only 45% of analysts consulted by the central bank believe that Mexico’s business and investment climate will improve in the next six months, while 48% believe it will stay the same.

They are slightly more optimistic about Mexico’s growth prospects in 2021 after the economy slumped 8.5% last year in its worst performance since the Great Depression. The consensus forecast was 3.89% growth this year, up from a 3.74% prediction in January.

Electricity sector changes were cited by 31% of analysts as an obstacle to growth while 30% said that broader energy sector issues, including ones that affect oil, gasoline and gas, could hinder economic expansion.

The survey found a consensus forecast of 3.88% annual inflation at year’s end, up from a 3.65% prediction in January. It was the biggest fluctuation to the estimated inflation level in 12 months.

The survey also found a consensus prediction for an exchange rate of 20.32 pesos to the US dollar at the end of the year compared to a 20.18 pesos forecast in January. The exchange rate on Wednesday morning was about 20.8 pesos to one greenback, according to the currency conversion website xe.com.

The consensus forecast is that the central bank’s benchmark interest rate will be 3.73% at the end of 2020, about a quarter point lower than the current rate of 4%.

UPDATE March 3, 1:50 p.m. CT: The Bank of México raised its 2021 outlook for economic growth to 4.8%, well over its previous forecast of 3.3%. For 2022 the bank foresees growth of 3.3%, up from its earlier forecast of 2.6%.

Source: El Economista (sp)

Tourism businesses hope for Holy Week visitors but some beaches will be closed

By

MND Staff

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March 2, 2021

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mexican beach — There may be a few empty beaches during Semana Santa this year.

After going through their worst year in living memory in 2020, tourism businesses are hoping to recoup some of their losses during the Easter vacation period but beach closures in some destinations won’t help.

Average hotel occupancy across popular destinations in Semana Santa, or Holy Week, which starts in late March and extends into early April, is expected to be as high as 65%, according to the Ministry of Tourism.

More than 5 million international and domestic visitors are expected to descend on Mexican destinations and an economic spillover of more than 13.9 billion pesos (US $674.3 million) is predicted, the Confederation of Chambers of Commerce, Services and Tourism (Concanaco) said in a statement.

That would go some way to making up for estimated losses of more than 52 billion pesos during the Easter period last year when much of the world was in lockdown due to the coronavirus pandemic.

Concanaco president José Manuel López Campos expressed confidence that the cancelation of travel from Canada due to the three-month suspension of flights from that country to Mexico will be compensated for by the arrival of people from the United States, some of whom have already been vaccinated against Covid-19 and are keen to resume international travel.

He also noted that none of Mexico’s 32 states are currently maximum risk red on the coronavirus stoplight map, asserting that will encourage Mexicans to go on vacation during the Semana Santa period. Magical towns, colonial cities and beach destinations all stand to benefit, López said.

However, some coastal destinations will have to attempt to attract visitors without the lure of their beaches as authorities in at least two states have said they will be closed over the Easter holiday to reduce the risk of new coronavirus outbreaks.

Baja California Sur (BCS) Health Minister Víctor George Flores said that beaches in that state, home to destinations such as Los Cabos, Loreto and La Paz, will be closed, while authorities in Navolato, Sinaloa, a coastal municipality near Culiacán, said the same.

Given that increases in coronavirus case numbers in states such as Guerrero and Quintana Roo were attributed to an influx of visitors over the Christmas-New Year vacation period, there is a possibility that more coastal destinations will follow the lead of BCS and Navolato and close beaches over Easter.

Patricia Segura Medina, a researcher at the National Institute of Respiratory Diseases, warned that the Easter vacation period, along with a relaxation of health measures and the currently low vaccination levels, could trigger a third wave of infections.

“[With the] arrival of Semana Santa I have no doubt that people will want to go out again, … there’ll be fewer distancing restrictions [due to the reduced coronavirus risk level in many states] and crowds of people that could start a third wave,” she said at a recent conference.

Segura also noted that new strains of the coronavirus have been detected in Mexico, including ones shown to be more contagious. That only increases the risk of new outbreaks being seeded over Easter, she said.

The researcher called on the authorities to speed up the vaccination process, saying that at least 80% of the population will need to be inoculated before there is herd immunity against the virus.

According to a New York Times vaccinations tracker, only 1.6% of the Mexican population has received a vaccine dose and just 0.4% are fully vaccinated.

Source: Periódico Viaje (sp), Milenio (sp), El Heraldo de México (sp), ADN 40 (sp)

Mexican conglomerate pulls out of landmark sale of its core business

By

Jude Webber

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March 2, 2021

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Orbia decided against selling its profitable vinyls business. — Orbia decided against selling its highly profitable vinyls business.

At the start of this year, Mexican conglomerate Orbia was poised for a landmark divestment. The company, which makes almost all the famous soles for Doc Martens footwear and a quarter of the world’s turntable records, planned to exit one of its core businesses: vinyls.

The negotiations between Orbia and Apollo Global Management on a deal came close to completing — part of the 68-year-old company’s ambitious shift to focus less on legacy businesses and more on people and the planet.

Under high-profile chief executive Daniel Martínez-Valle, a former government official and entrepreneur, the company had changed its name from the more solid Mexichem to the trendier Orbia and adopted a new mission statement: “to advance life around the world.”

Vinyls and plastics had jarred with that ambition and Orbia’s drive to focus less on chemicals and more on agriculture, water and infrastructure.

But at the 11th hour, the company balked on the vinyls sale. The deal was off and Martínez-Valle left. Orbia’s financial results released late last month showed why.

CEO Daniel Martínez-Valle had a vision for the firm that didn’t include chemicals. He is no longer with the company.

Overall, its 2020 performance beat market expectations. But vinyls was the standout. Accounting for just over a third of group revenues, its operating income surged nearly 300% in the fourth quarter, and earnings before interest, tax, depreciation and amortization leapt 86%.

“Today, the vinyls business is printing money,” said one person with knowledge of the failed transaction, adding the sale “would have left money on the table.” Orbia and Apollo declined to comment.

Orbia’s billionaire patriarch, 82-year-old Antonio del Valle, made his name in banking before president José López Portillo nationalized the sector in 1982. He switched into industry, building Mexichem within a quarter of a century into a major global chemicals and petrochemicals businesses.

Analysts believe the shrewd businessman ultimately could not accept the price. Orbia had discovered that when it came to ditching a highly lucrative legacy businesses, breaking up is hard to do.

Orbia’s positioning of environmental, social and governance (ESG) values at the core of its operations made it a trailblazer among Mexican corporates. So does the collapse of the vinyls business sale show that, when the rubber hits the road, ESG is the first thing to go?

“I don’t think it is,” said Graham Stock, emerging markets sovereign strategist at BlueBay Asset Management, which is part of the Climate Action 100+ and other investor groups holding companies to account on ESG. “But it’s part of a suite of factors that companies take into account. The bottom line is the dominant factor everywhere.”

Orbia has been through transformation before. It began life in 1953 as a steel cable company, but exited that business in 2005 a year after acquiring a hydrofluoric acid producer — used in Teflon, refrigerants and medications. It later expanded further into chemicals, PVC pipes, irrigation equipment and other industrial supplies.

With Sameer Bharadwaj newly installed at the helm, Orbia says it has no intention of abandoning its focus on ESG — indeed his pay contains a “strong component” tied to delivering on these issues.

But Bharadwaj, an Indian with a doctorate in chemical engineering, an MBA from Harvard Business School and a hobby as an astronomer, talked more in the analysts call for the recent results about delivering sustained earnings and unlocking shareholder value than doing well by doing good.

His focus, people familiar with this style say, is less flashy and more about delivering. That might reflect a need to boost a share price that remains stubbornly below its level in March 2018 when Mexichem kicked off its transformation. At that time, its stock was trading around 56 pesos (US $2.71); now it is at 49 pesos.

Bharadwaj previously led Orbia’s vinyls and fluorspar mineral divisions. He knows the vinyls business is cyclical. Things are booming now because a supply crunch has boosted PVC prices. Orbia is one of the world’s top producers of speciality PVC.

As such, he was careful never to say never to a sale. But he told analysts the outlook was solid and there was more value to unlock for shareholders, adding “we won’t be in a rush, but we will explore joint ventures and other opportunities.”

Orbia is not ditching its green goals — but with a vinyls business that insiders say is doing “insanely well,” business logic is proving hard to ignore.

jude.webber@ft.com

Marine protection fundraiser takes its annual concert virtual this year

By

Elisabeth Ashe

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March 2, 2021

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Whales of Guerrero educates Zihuatanejo-area locals about the value of marine conservation and ocean health while promoting sustainable tourism projects.

Although she freely admits that she is not a scientist, somehow Katherina Audley had felt for a long time that her destiny lay in the need to preserve the whales and habitats of birds and other wildlife in the Zihuatanejo-area village of Barra de Potosí.

And so, Whales of Guerrero, the organization she eventually founded to do that, feels like a dream come true, she says.

In recent years in Barra de Potosí, fishing has become sparse, and locals were struggling to earn a living from their depleted resources. The Whales of Guerrero project, in part, increases awareness and education through scientific research. It also brings revenue to the region through numerous ecological and environmental programs that employ locals.

In the organization’s own words, “This project aims to inspire and empower local leaders to create thriving communities and kickstart conservation in Guerrero, Mexico.”

Whales of Guerrero provides local fishermen with the means to support themselves through whalewatching tours on the ocean and kayak tours through the lagoon. To date, a core group of 40 safe whalewatching guides monitor and create a culture for new guides. The result is that Guerrero maintains a reputation for safe whalewatching in the region.

This year's virtual concert will feature the Grammy-winning duo Rodrigo y Gabriela. — This year’s virtual concert will feature the Grammy-winning duo Rodrigo y Gabriela.

Whale watching tourism in the village also means that members of the community can sell arts and crafts to the increasingly growing number of tourists. Locals offering cooking classes, Airbnb experiences, field trips and expeditions with students and nature enthusiasts have contributed to improved economic conditions for residents, not to mention pride in themselves and the project they represent.

An annual fundraising project Audley organized last year for Whales of Guerrero was one of Zihuatanejo events to be at, taking place at the exclusive Thompson Hotel. The elegant dinner and concert featured Gabriela Quintero, half of the Grammy-winning duo Rodrigo Y Gabriela.

Special guests, including Ali Tod from Scotland (who Rodrigo and Gabriela met while on tour in the U.K.), local guitarist Pablo Araujo, vocalist Tita Bravo, and Gabriela’s nephew Carlos on bass rounded out the ensemble for a riveting performance. The next day the concert was repeated free of charge on the beach at Barra de Potosí for locals and visitors, with villagers showcasing their wares of arts and crafts to the public.

Although the Whales of Guerrero fundraiser is happening again this year on March 11, and is again a concert, due to Covid-19 it will feature exclusive online performances by Rodrigo y Gabriela, as well as the online world premiere of Music for the Animals by Gabriela Quintero.

According to the event’s Facebook page, “We promise you a night of beauty and inspiration and hope you will all join us to help raise funds to keep our programs strong, and to celebrate our community and all the good we have accomplished together.”

This year’s event aims to raise US $10,000 to keep whales safe, communities united and oceans healthy in Mexico and worldwide. Donations will be tax-deductible.

The Whales of Guerrero fundraiser put on a second free concert last year at the beach, which allowed locals to sell artisan wares.

The cost is just US $20, which gets visitors into an online performance with both Rodrigo y Gabriela this time, and 90 minutes of beauty and inspiration. You can visit their event site to purchase tickets in advance, which are limited, or if you prefer, you can simply make a donation to Whales of Guerrero to protect ocean health.

The writer divides her time between Canada and Zihuatanejo.