A drop in the price of fossil fuels will mean lower industrial electricity rates in Mexico in 2015 for manufacturers.
The advent of 2015 brings with it good news for maquiladora manufacturers in the form of what will be lower industrial electricity rates in Mexico. As a direct result of the drop in the global price of a barrel of crude oil, the country’s main power provider, the Comision Federal de Electricidad, or CFE, estimates that industrial electricity rates in Mexico will be 16.3% lower this January, when considered in year-over-year comparative terms. Approximately seventy-percent of electricity in Mexico is generated from fossil fuels.
Access to reduce priced electricity will favorably affect the country’s ability to promote and sustain itself as a location in which energy intensive manufacturing activities can be conducted in an internationally competitive manner. Historically, high electricity prices for industrial users have been an obstacle to the proliferation of these types of production activities, as well as a brake on the economy’s capacity to generate related employment opportunities for Mexicans workers.
In addition to immediate price gains to be enjoyed as a result of the falling price for a barrel of crude, Mexican power generation will also become more cost-effective as a result of concurrently lower global prices for other fossil fuels such as natural gas and diesel. The price of these two forms of energy have fallen by seventeen and eight percent, respectively, over the last several months. Natural gas in Mexico is increasingly being delivered to Mexico at historically low prices from US sources.
Lower industrial electricity rates in Mexico in 2015, as well as going forward, will be a catalyst which will enable the country to continue to move towards more accelerated future economic growth, as well as reach its full manufacturing job creation potential. In addition to the external macroeconomic forces that will drive lower industrial electricity rates in Mexico in 2015, it is reasonable to expect that recently approved and enacted reform in the Mexican energy sector will help to sustain a competitive price for industrial use power in the country over the medium and the long terms. The knowledge that the trend towards lower industrial electricity rates in Mexico will continue for the foreseeable future will enable companies that are already doing business in Mexico to make and execute plans to expand the scope of their manufacturing activies, as well as will motivate large energy consumers to consider the initiation of new manufacturing ventures in the southernmost NAFTA partner country. In the past the cost for large users of energy such as plastic injection molders, aluminum extrusion firms, large metal stampers and other similar types of manufacturers has been prohibitive. The new year, 2015, will be the year in which this longstanding state of affairs will begin to reverse itself.