Oil
is the name of the game in the relationship between Mexico and Saudi Arabia , especially in the current transition period marked by strategic shifts in the energy market and the global geopolitical outlook.
Although the bilateral relationship dates back to its formal establishment in 1952 , it is only in recent years that the Mexican government, eager to attract foreign investment and the export-oriented private sector showed a renewed interest in doing business with the world’s largest oil producer and its wealthy Persian Gulf neighbors, aligning with their conservative positions in multilateral political issues.
In line with this policy, Mexican President Enrique Peña Nieto made a State visit to Saudi Arabia , the United Arab Emirates , Kuwait , and Qatar in 2016 .
During the visit, the first of a Mexican leader since 1975, Peña Nieto participated in Riyadh in a meeting dedicated to his government’s recent energy reform, stressing that as a result of trade liberalization and integration process Mexico has undergone, “my country is increasing its participation in global value chains.”
Peña Nieto said that Mexico also has new opportunities in key sectors as telecommunications , infrastructure , and energy .
“In hydrocarbons, investors can participate in exploration, extraction and manufacturing projects, as well as transport, storage, and marketing services. Another aim is to create a large market of petroleum products and petrochemicals and to create additional opportunities for investment in pipelines and distribution systems”, he added.
During his intervention in the event, the Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi , considered one of the most influential figures in the industry, said both countries have “a great deal of credibility and respect in the international arena , and this cooperation has achieved tangible success”.
For its part, Mexican Minister of Energy Pedro Joaquín Coldwell highlighted that the meeting took place in the middle of a “cyclical drop in oil prices, coupled with a profound structural change in the industry”.
The participation of capital from the Arabian Peninsula in Mexico, he added, “would contribute to promoting the integration of markets that until now have been operating in isolation”.
Trade opportunities
Peña Nieto and Saudi King Salman bin Abdulaziz Al Saud held a bilateral meeting in which they highlighted the opportunities in tourism and agribusiness trade.
The two leaders witnessed the signing of memorandums of understanding for cooperation in the air services and fiscal sectors, as well as an agreement to combat organized crime, among other documents.
While Peña Nieto identified export opportunities for Mexican coffee, vegetables and fruit producers, it is worth noting that Saudi Arabia is the 41st trade partner of our country, importing mainly iron tubes, freight vehicles, and terephthalic acid.
For its part, Saudi Arabia exports to Mexico are composed of gasoline , polyethylene , and copper ore .
There is ample room to continue developing the bilateral relations, and the rapprochement is undoubtedly appropriate in a time when Mexico needs to find new markets and the energy industry is still changing, after the crisis caused by the 2014-2016 oil glut.
The meeting of the Joint OPEC-Non-OPEC Ministerial Monitoring Committee ( JMMC ) in Vienna last week confirmed that Saudi Arabia and Russia have forged a deal to roll back production cuts, abandoning the historic agreement in late 2016 which allowed the recovery of the oil market, despite the opposition from Iran .
The JMMC decided to raise production in the order of 600,000-1 million barrels a day , after the United States , China , South Korea , and India reiterated their complaints about high oil prices (the Brent crude surged on May to a more than three-year high above USD $80 a barrel ).
Due to the growing power of the JMMC , a body composed by 24 OPEC and non-OPEC countries including Mexico, some pundits are already talking about the formation of a “ super-OPEC ” that would counter the American and Canadian shale oil producers, as well as the giant Brazilian offshore fields.
The new cartel would comprise the 11 OPEC members plus Russia , Mexico , Kazakhstan , Azerbaijan , Bahrain , Malaysia , Oman , Sudan , and South Sudan. These countries produce some 16.5 million barrels a day , which combined with OPEC’s 32 million barrels a day would amount for half of the world’s production .
Saudi Arabia
and Russia together produce around 21 million barrels a day and the new bloc would give them more leverage in decisions according to their weight, eliminating the veto power that each country currently has in OPEC.
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