CFE moves to renegotiate 7 natural gas pipeline contracts

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July 2, 2019

Amid international criticism, the Federal Electricity Commission (CFE) announced yesterday that it had filed requests for arbitration in courts in the United Kingdom and France to annul clauses in seven gas pipeline contracts.

The CFE said it had lodged preliminary claims to void certain clauses in contracts with the companies Fermaca, Carso, IEnova and TC Energy (formerly TransCanada Corporation).

The public utility said last week that it wished to negotiate a “fairer” outcome to contract disputes. President López Obrador has described the terms of the contracts with the pipeline construction companies as “abusive” to the state.

The CFE has previously said that it will have to pay 16 billion pesos (US $840 million) to the operators of the seven pipelines this year even though the projects are not yet operational as they have faced delays due to community opposition.

The London Court of International Arbitration has been asked to hear six cases, while the mediation of the International Court of Arbitration in Paris has been sought in one.

The legal action relates to contracts for the pipelines Tuxpan-Tula (TC Energy); Tula-Villa de Reyes (TC Energy); Samalayuca-Sásabe (Carso); Guaymas-El Oro (IEnova); La Laguna-Aguascalientes (Fermaca); Villa de Reyes-Aguascalientes-Guadalajara (Fermaca); and Texas-Tuxpan (TC Energy/IEnova).

Earlier yesterday, the United States Chamber of Commerce (USCC) criticized the CFE for seeking to nullify clauses in the contract for the submarine gas line between Texas and Tuxpan, Veracruz, a US $2.5-billion project that was completed last month.

The USCC said in a statement that President López Obrador pledged at the United States-Mexico CEO Dialogue in Mérida, Yucatán, earlier this year, to honor existing contracts.

It also said that there are “few factors more critical to investment and economic growth than the legal certainty and predictability fostered by the respect for the rule of law.”

“For these reasons, we are concerned by CFE’s decision to seek arbitration to nullify several key terms of the contract with the owners of the Sur de Texas-Tuxpan pipeline, a key infrastructure project that would contribute to economic development and job creation in the states of southern Mexico,” the USCC said.

“This action risks sending a negative signal to U.S. and other international investors about the business and investment climate in Mexico. We therefore urge CFE and the government of Mexico to reconsider this decision and to observe the president’s pledge to honor the sanctity of existing contracts.”

Canada’s ambassador to Mexico said last week that he was “deeply concerned” about the CFE’s decision to take legal action aimed at nullifying clauses in the contract for the Texas-Tuxpan line.

Pierre Alarie charged that the move showed that “despite López Obrador’s statements, Mexico doesn’t want to respect gas pipeline contracts.”

Fitch Ratings said the pursuit of arbitration was “credit-negative” for the CFE, the companies involved and the energy sector in general.

The president said last week that the government would seek to reach an agreement with Canada’s TC Energy, while the CFE announced yesterday that it had begun talks with Fermaca.

“All the companies have agreed to talk about the contracts. Today we met with Fermaca to determine how to negotiate,” said CFE spokesman Luis Bravo.

He added that the discussions will take place in parallel to the international arbitration process. The two parties agreed to meet again on July 12.

Today, Carlos Salazar Lomelín, president of the Business Coordinating Council, a leading private sector group, said that he had reached an agreement with López Obrador to hold conciliation sessions between representatives of the government and the four companies subject to the CFE legal action.

“We had a very friendly meeting with the president . . . [and] we came to the conclusion that we are going to favor dialogue . . . we’re going to form a conciliation board to try to put aside the legal problem and to try to reach a solution that benefits everyone,” he said.

The business leader explained that the president will decide who represents the government and that he and Mexican Business Council president Antonio del Valle will put together a team to act in the interests of Fermaca, Carso, IEnova and TC Energy.

Although Salazar acknowledged that the CFE will continue to pursue the international arbitration processes it has initiated, he asserted that “we’re going to try to find meeting points instead of being in a legal dispute that doesn’t benefit anyone.”

Source: El Economista (sp), Reuters (en), Milenio (sp)

Construction of Baja natural gas plant to begin in August

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César Hernández

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July 2, 2019

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Location of the new LNG terminal at Pichilingue.

The government of Baja California Sur has announced that the construction of a US $192-million liquefied natural gas (LNG) terminal will begin in August at the port of Pichilingue, La Paz.

To be operated by New Fortress Energy, a United States developer and operator of LNG energy projects, the plant should be ready to receive its first shipment of fuel in July 2020, said Governor Carlos Mendoza Davis.

He described LNG as a cheaper and cleaner alternative for electric power generation, and (the new LNG facility) should have important repercussions in the state.”

Boats, trucks, taxis and all kinds of vehicles can be converted to burn the fuel, along with the Federal Electricity Commission’s generation plants, the governor said.

New Fortress Energy CEO Wesley Edens explained that LNG transportation is among the safest in the world, and that the fuel should become a catalyst for the state’s economic growth.

Source: Milenio (sp)

Pitbull attacks, kills 2-year-old child in Mexico City

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César Hernández

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July 2, 2019

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The Iztapalapa neighborhood where the pitbull attack occurred.

A toddler died yesterday after being attacked by a pitbull in Iztapalapa, Mexico City.

Witnesses said the young boy, almost 2 years old, climbed to the roof of a house with his mother when he was attacked by the dog, which reportedly lived on the roof and was kept tied up at all times.

The dog bit the youngster several times. When paramedics arrived he was pronounced dead.

Borough authorities took the owner of the dog into custody and the dog was secured by the animal services agency Agatan.

Animal rights organization Mundo Patitas A.C. lamented the attack, stressing that the dog was an innocent being that had been deprived of the most basic rights, and whose abuse, neglect and confinement atop a roof had taken its toll on an innocent child.

Source: Infobae (sp)

Specialists not optimistic as homicides reach an average 94 per day

By

MND Staff

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July 2, 2019

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national guard — A security analyst doesn't expect the National Guard to make much difference: there have been almost as many military personnel doing the same thing without success.

An average of 94 homicides per day made the first half of the year the most violent on record, and security specialists are not optimistic that things will improve in the final six months of 2019.

There were 17,065 victims of homicide and femicide between January and June, according to National Public Security System statistics for the first five months of the year combined with figures for June that were published daily by the Secretariat of Security and Citizens Protection (SSPC).

The government’s preliminary figures have underestimated the actual number of homicides by 20% this year but even so the figure above is 3% higher than the 16,585 murders recorded in the first half of 2018, which ended up being the most violent year on record.

When the 2,879 homicides recorded in December are added to the murder figures for this year, the total number of victims of violent deaths since President López Obrador took office is almost 20,000.

If the SSPC trend of underestimating homicide figures by 20% occurred again in June, not only will the total number of murders during López Obrador’s government exceed 20,000 but last month will go down as the most violent on record with more than 3,000 victims.

“The last year of [the administration of] former president Enrique Peña Nieto was bad in terms of the crime rate but 2019 is on the path to being [even] worse,” said security specialist Ricardo Márquez Blas.

“. . . It’s important to understand that we’re doing worse [in security] than the worst year [on record],” he added.

The states that have recorded the highest number of homicides during the seven months the government has been in office are Guanajuato, México state, Jalisco, Baja California, Chihuahua, Veracruz, Mexico City and Guerrero.

The Jalisco New Generation Cartel (CJNG), considered Mexico’s most powerful criminal organization, and the Santa Rosa de Lima Cartel are engaged in a turf war in Guanajuato to control fuel theft, extortion and kidnapping.

In México state, which currently ranks as the second most violent entity in the country, the CJNG, the Familia Michoacana, the Caballeros Templarios, the Gulf Cartel and the Nuevo Imperio gang are all fighting to control the drug trafficking trade, according to a report in the newspaper El Universal.

With cartel wars also raging in other states, Márquez believes that the murder rate will not decline by October, the month by which López Obrador forecast that the government’s security strategy will begin to yield results.

Flanked by the heads of the army and navy, the president inspects the National Guard on Monday. Behind them is Security Secretary Alfonso Durazo.

“In October, when we reach six months [since the president’s promise], there will be no essential downward change in terms of the crime rate, particularly for homicides. It’s going to continue, the statistics show that,” he said.

The security expert challenged the president’s claim that the deployment of 70,000 National Guard troops will improve the security situation, stating that “there were already 63,000 elements of the armed forces [engaged] in security tasks and that hasn’t had any positive impact.”

Márquez added that “the best example” of the failure of military personnel – which also make up the majority of National Guard members – to combat crime is Tijuana, Baja California.

“Kidnapping and femicides have gone up, and that has to do with the lack of resources. There is no priority in terms of investing [ in security] . . .” he said.

The director of the National Citizens’ Observatory, a crime watch group, told El Universal that the security situation has been “serious for a long time” and that a strategy with well-defined actions is needed to combat it. However, Francisco Rivas charged that the government hasn’t presented any such strategy.

“The problem is that this government doesn’t have a strategy, they’ve [tried to] explain . . . that there is a strategy but the truth is that it cannot be confirmed that one exists,” he said.

López Obrador has only shown “good intentions and a series of naiveties,” Rivas charged. “. . . His social policy, as it is set up, will not be able to reduce homicides . . .”

Jorge Alberto Lara Rivera, an academic at the National Institute of Criminal Sciences and a former assistant prosecutor at the federal Attorney General’s Office, charged that members of the government are not all on the same page with regards to security.

In contrast, organized crime groups understand it “perfectly” well, he said, adding that if the government doesn’t design adequate strategies to combat them “we’re going to continue seeing the same results.”

Source: El Universal (sp)

Consumer demand, agave prices put pressure on price of tequila

By

Simon Schatzberg

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July 2, 2019

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Tequila producers say that rising demand and increases in the price of agave are to blame for the drink getting more expensive over the last four years.

According to data from Iscam, a Mexican company that tracks prices of consumer goods, a bottle of tequila costs on average 438 pesos (US $23), 23% more than in 2015.

José Antonio Cebeira, an analyst at Actinver, a financial services company, told the newspaper El Financiero that one of the factors pushing up the price of tequila is rising demand for other agave products, like agave syrup.

“The causes are a strong demand for tequila which, because of the denomination of origin, can only be produced in some regions,” he said. “And also the success of agave syrup and sweeteners on the international level, all of this is pushing up the price of agave.”

The denomination of origin, which allows tequila to be made only from agave produced in five states, and the fact that agave plants can take as long as seven years to mature, limits the supply of the plant and makes it difficult for growers to respond to rising demand.

And agave is getting more expensive much faster than tequila. According to Carlos Riggen, professor of business at the Monterrey Technological Institute, the price of a kilo of agave went up eightfold over the past five years, from 3 pesos to 26.

Agave represents more than 60% of the cost of making tequila. So even as tequila has been getting more expensive, profit margins for tequila companies have declined an average of 50% over the last five years. Becle, Diageo and Brown-Forman, which own the brands José Cuervo, Don Julio and Herradura, are all reporting pressure on their margins because of the rising price of agave.

But many tequila companies have been making up for declining profit margins with increased sales. According to Mexico’s national statistics institute, Inegi, tequila makers produced 85.5 million liters in the first quarter of 2019, 48.4% more than in the same period five years ago.

Source: El Financiero (sp)

Airbnb brought 5 million travelers to Mexico last year

By

Simon Schatzberg

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July 2, 2019

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The Seashell House, an Airbnb rental on Isla Mujeres, Quintana Roo.

Airbnb brought five million international travelers to Mexico in 2018, according to a company document.

Based on internal surveys and data analysis, the document also revealed that Airbnb travelers in Mexico had a direct economic impact of US $2.7 billion last year, including money spent directly through the platform as well as on restaurants and other activities.

Across the world, Airbnb travel generated US $100 billion in 2018.

The company said a significant part of the money spent by travelers is connected to recommendations made by hosts. The report notes that 83% of Mexican hosts who were polled said they recommend cafes and restaurants to their guests, while 47% recommend daytrips and 66% recommend cultural activities. Four out of five Mexican hosts received five-star ratings, the highest on the platform.

Mexico saw more Airbnb revenues than any other Latin American country, and was in ninth place on the global ranking, below countries including the United States, France, Spain, Italy and the United Kingdom. Those five countries together accounted for 63.5% of the total economic impact of Airbnb in 2018.

The report also showed a significant increase in Airbnb trips to lesser-known destinations like Moldova, Vanuatu and New Caledonia.

An Airbnb press release stated that hosts keep an average of 97% of the price paid by their guests, but spend around 51% of what they earn on maintaining and paying for their homes.

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

Looking for best gasoline price? There’s a new app for that

By

Madison Koen

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July 2, 2019

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Profeco's director presents new app for motorists.

The federal consumer protection agency has designed and released a smartphone application intended to help consumers locate the cheapest gas stations.

Profeco director Ricardo Sheffield Padilla presented Litro x Litro Tuesday morning at the president’s morning press conference, where he told reportes that President López Obrador had urged him to design an app that would be able to account for the needs of consumers at the pump.

“The app has the ability to search according to the desires of the consumer . . . It can tell me where the most expensive gas stations are, which are the cheapest and exactly where all the mid-price gas stations are located . . . . It’s an easy-to-use app, a practical app.”

Sheffield explained that the app can search for regular, premium and diesel fuel options within a 19-kilometer radius. In addition, consumers can lodge official complaints against any irregularities in service or prices in real time.

“These complaints can be anonymous, or you can give us all of the information; you can even upload your gas station receipt.”

López Obrador said that the app will help the federal government uphold its promise to keep gasoline prices low for consumers.

“This system helps us to fulfill our promise that fuel prices will not increase, because even though we can guarantee fair prices at Pemex, sometimes the profit margins at the distribution point are excessive and this will help us to even out the prices.”

The president added that his administration will continue to support Profeco’s efforts to guarantee low fuel prices to citizens through measures like

He said “this empowerment [of consumers] is very important so that people have the information necessary to make their own decisions. This is competition and it allows us to ensure that those who offer services do not take advantage of consumers and that the consumers are the ones who ultimately decide.”

The Litro x Litro app is available at smartphone app stores.

Source: Milenio (sp), Publimetro (sp)

Specialized container terminal welcomes first ship at New Port of Veracruz

By

Simon Schatzberg

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July 2, 2019

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First ship arrives at new container terminal.

The New Port of Veracruz welcomed its first ship on Monday, the Maltese-flagged container carrier White Shark, in what was heralded as “a great day for the country.”

The vessel, which had come from northern Europe, dropped off and picked up containers at the new specialized container terminal (TEC) built by Hutchison Ports-Icave.

Jorge Lecona, Hutchison-Icave director for Mexico and Latin America, told reporters that the new terminal offers cutting-edge technology including blockchain and artificial intelligence.

“This is a great day for the country, for Veracruz and for Hutchison Ports, the entire port community, importers and exporters,” he said. “We deserve to have infrastructure as modern as we have today.”

The TEC is the first of a series of expansions to the Port of Veracruz, described as the most important maritime infrastructure project in Mexico in recent years.

With an investment of around 31 billion pesos (US $1.6 million), of which 80% came from private investors, the capacity of the port has nearly tripled from around 24 million tonnes of cargo to 66 million.

The next phase of the expansion project will bump capacity to more than 95 million tonnes. The new port occupies 1,113 hectares on land and sea, more than double the previous 554 hectares.

Veracruz port director Miguel Ángel Yánez Monroy said that a liquids terminal will open later this year, which will be used for imports of hydrocarbons. Agricultural and mineral terminals will open in the first quarter of 2020.

According to the general manager of Corporativo Enciso, a customs agent, the improvements to the port will allow imports to be shipped directly to Mexico from northern Europe rather than to ports in the United States and then on to Mexico by land.

Óscar Enciso Villarreal said the new port will create an industrial corridor that will create as many 150,000 jobs by 2024.

“We’re going to achieve a goal we’ve had for many years, which was to bring in the huge ships that didn’t used to come, and we’re also going to gain ground against all the cargo that goes to U.S. ports like Houston and crosses the border into Mexico,” he said.

“With the inauguration of this new specialized terminal, which is considered the biggest logistics project in the country, today is the day to take back the cargo that naturally belongs to the Port of Veracruz.”

Source: Milenio (sp), Seatrade Maritime News (en), T21 (sp)

Guadalajara hailstorm explained: climate change not necessarily to blame

By

MND Staff

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July 2, 2019

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About 60 vehicles were damaged in Sunday's storm.

After parts of Guadalajara were buried in hail more than a meter deep on Sunday morning, Jalisco Governor Enrique Alfaro was quick to point his finger at climate change.

“I was witness to scenes I’d never seen before,” Alfaro wrote on Twitter. “Hail more than a meter high, and then we wonder if climate change exists.”

But according to meteorologist and television weather presenter Abimael Salas, the heavy hailstorm is not necessarily a consequence of climate change.

Writing in the newspaper Milenio, Salas explained that while a hailstorms in the middle of summer might seem unusual, they are in fact common.

The meteorologist said that summer months – which in much of Mexico coincide with the rainy season – are more favorable for hailstorms because “very warm and humid air rises violently” and causes atmospheric instability.

Water vapor then turns into tiny drops of rain that together form cumulonimbus, or vertical, clouds, Salas wrote.

As time passes, the droplets significantly increase in size and reach altitudes where the temperature is below 0 C, causing them to freeze within the cloud, where there are strong currents that force the newly-formed hail to either ascend or descend, he explained.

Descending hail comes into contact with “very cold water,” which causes it to again increase in size until “eventually air currents cannot hold it and it falls towards the surface” of the Earth, Salas said.

“The quantity and size [of the hail] varies considerably depending on the humidity and the degree of atmospheric instability,” he wrote.

In the case of Guadalajara, the meteorologist said that high humidity and high temperatures on Saturday, the city’s altitude – it’s more than 1,500 meters above sea level – and a low-pressure system that brought colder than usual air to the atmosphere combined to “considerably heighten atmospheric instability” and create favorable conditions for the formation of large quantities of hail.

Salas said the storm clouds also “generated intense rain that caused significant water streams, which due to the urban design of the area, dragged hail towards the lowest parts [of the city], where large quantities of ice accumulated.”

He added: “In phenomena as extreme as this, we’re tempted to exclusively blame climate change. However, that cannot be applied [solely] to [this] particular phenomenon – poor urban planning also has an influence.”

“As temperatures increase globally, the energy available in the atmosphere increases and [to that] we add the excessive growth of the population and large urban centers, many of which are located in areas of risk,” Salas wrote.

“Material damage and losses of human life tend to increase even though alert systems and meteorological forecasts improve as [has occurred] in recent years.”

Source: Milenio (sp)

Vendors expected to do well with sales of presidential souvenirs

By

Madison Koen

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July 2, 2019

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A display of AMLO dolls at yesterday's AMLOFest.

AMLO dolls and other presidential souvenirs were on full display yesterday Mexico City’s zócalo, where street vendors expected to make a killing off AMLOFest, the first-anniversary celebration of President López Obrador’s election win.

Despite authorities’ attempts to block their access to the zócalo and surrounding streets, vendors persisted, drawn by the prospect of selling mugs, t-shirts, umbrellas and stuffed figurines bearing the president’s likeness to the thousands of presidential fans expected to attend the event.

Many of the souvenirs bore the president’s most popular refrains, such as “Al pueblo de México le voy a cumplir” (“I will keep my promise to the Mexican people”), “Me canso ganso” (a popular colloquial phrase meaning “I am as good as my word” or literally “I’m tired goose”) and a common rhyming slogan among his followers, “Es un honor estar con Obrador” (“It’s an honor to stand with Obrador”).

Prices for the mementos ranged from 35 pesos for stuffed AMLO keychains, 70 pesos for presidential baseball caps, 80 pesos for t-shirts and up to 260 pesos for replicas of the president’s distinctive maroon vest.

Some 100,000 supporters turned up to hear the president deliver a 90-minute speech highlighting his achievements seven months after taking office.

The event also included performances by the Symphonic Band of Tlaxiaco, Oaxaca, flautist Horacio Franco and double bassist Víctor Flores, and Margarita Vargas, also known as the Goddess of Cumbia.

Source: Milenio (sp)