The Energy Factor in the Attractiveness of Mexican States

As nearshoring continues, Mexico presents a historical opportunity for investors. However, one of the main challenges accompanying the growing influx of companies is the corresponding demand for more infrastructure and services. This raises pivotal questions about the role of reliable, cost-competitive electricity in determining Mexico's allure as an investment destination. 

Nuevo Leon, Tamaulipas, Puebla, Hidalgo, and Jalisco have proven active in attracting investment and dealing with the deployment of infrastructure for industrial operations. The Bajio region, with its strategic location, energy capacity, and workforce, is particularly attractive for various sectors, including automotive. Similarly, Puebla is known for investments in the automotive sector.

State governments are already making substantial investments in infrastructure, including roads and mobility systems. “Mexico has the energy capacity and an extensive distribution network spanning 110,000km — a phenomenon ripe for leveraging in the context of nearshoring initiatives,” says José Ramón Silva, Tamaulipas Minister of Energy Development, during the panel “The Energy Factor in the Investment Attractiveness of Mexican States” at Mexico Business Summit 2023. 

Considering renewables, both states and corporations see distribution and availability as a challenge. “Availability is fundamental for all industries,” says Gabriela Carvajal, General Director Energy Commission, State Government of Puebla. 

There has been a decrease in electric fluctuations for the past 10 years, which makes availability much more viable. Puebla ranks second in energy reliability nationally, and its capacity to recover swiftly from interruptions adds to its appeal, says Carvajal. Puebla stands as the only state generating energy from five renewable sources across more than 600ha. This gives the state a key strength, as energy interruptions have severe repercussions across supply chains. 

“Interruptions cost businesses money,” says Eduardo Sánchez, Director General Renewable Energy of Nuevo Leon, “there are multimillion dollar losses that must be mitigated.” To do this, Sánchez advocates for co-responsibility, where both government entities and corporations pitch in to make energy use more efficient and comply with network codes. If every company uses energy as efficiently and as responsibly as possible, the quality improves. 

Nuevo Leon, says Sánchez, has been one of the most active states in attracting investments. It now hosts six OEMs: Kia Motors for light vehicles; Navistar International for heavy trucks; Mercedes-Benz Group for buses; and Polaris, CF Moto, and Kawasaki for all-terrain vehicles. The state also awaits Tesla’s investment.

“To ensure the quality of energy, maintenance is of utmost importance,” says Ivonne Ramírez, Director General of the Energy Agency, State Government of Hidalgo. With the new plants, maintenance is the key to guarantee the network’s stability, so that new companies, both national and international, are able to work with the amount of energy they require. “At the federal level, the challenge is clearly understood, advocating for self-supply as a new opportunity for industries, providing a chance for energy and development that streamlines the energy generated by solar panels or turbines in line with the industry's needs, and in collaboration with the government,” she adds. 

As more foreign companies look toward Mexico as an infrastructure and manufacturing hub, state government bodies are faced with client demands that match their net-zero goals. To achieve this, Victor Cervantes, President of the Energy Commission of Jalisco, advocates for leveraging each state's unique strengths, such as biomass in regions that are agricultural powerhouses. 

“Jointly transforming our states and country is imperative, as our collective strength is unparalleled. This collaborative approach is essential to understanding the industry's needs and, in doing so, positioning Mexico as an energy powerhouse,” says Ramírez.