Mexico, Cuba: Next Hot Spots for Energy?

 

Both look overseas for project developers, but some U.S. firms worry they'll miss out.

With its electric grid primed for privatization, Mexico stands ready to open the door to an estimated $25 billion in new investment in its energy infrastructure. Companies from the United States, Canada, France, and Spain, among others, all appear eager to enter the market.

Cuba, too, is attracting attention, especially among U.S. firms with global affiliates.

Yet U.S. investors worry they'll miss out on some opportunities. And not just in Cuba-for the obvious reasons-but in Mexico as well, since private capital may find itself at a disadvantage when bidding against public sector competitors to win contracts.

Part of the attraction of investing in Mexico's electric generation capacity is the generally strong economic state of the nation, expected to grow 5 percent this year in gross domestic product. But since the advent of the North American Free Trade Agreement in the early 1990s, Mexico's regulatory regime has become far more transparent to global commerce, making entry for U.S. companies particularly attractive. While there still are limits on the private sector participation in distribution and transmission, the needs for generation are profound.