Investors eyeing assets in Mexico’s energy and telecoms industries – Jones Day

Energy and telecommunications sector reforms mean international investors are continuing to target Mexico despite the country’s political instability, says Manuel Romano, partner in charge of Jones Day’s Mexico City office.

Despite the uncertainty caused by the run up to this July’s presidential election in Mexico, as well as the ongoing renegotiation of the North America Free Trade Agreement (NAFTA), the country is performing well, says Romano. He points out to that this is partially due to concerted efforts by the national government to reform and increase competition in the energy and telecommunications sectors. “These changes are not short-term and they draw more long-term investment, which is less affected by electoral cycles,” Romano adds. Another factor behind the relative buoyancy of the economy is the stability and strength of its internal market, which is supported by long-standing political and economic institutions, Romano says.
Romano says the first quarter of 2018 has brought an increase in financing, with Mexican companies rushing to refinance debt or obtain fresh capital before uncertainty increases in the run-up to the elections. For example, Jones Day recently acted for the operator of the new Mexico City international airport on its $1.6 billion IPO of ‘Fibra E’ shares.
Another sector where M&A activity is on the rise is the car manufacturing industry, according to Romano, who adds that car part suppliers are particularly active. He notes that while the US market remains important for the Mexico-based car industry, “it is not the only market.” Indeed, Mexico currently holds ten foreign trade agreements with 45 countries, which is likely to help the nation weather any storm caused by the possibility of a less than favourable outcome from the NAFTA renegotiation.