The Mexican government's plan to build new solar power plants across Sonora state will be a boost to nearshoring investors looking for reliable energy infrastructure, according to Fitch Solutions.
The Sonora Plan, announced during the COP27 climate talks in Egypt last November, anticipates the construction of up to five 1,000MW solar parks in Sonora as part of a state-wide electricity hub that will power new industrial plants and export electricity to the US.
The first, 120MW phase of the 1GW Puerto Penasco solar park is expected to start operations in May, with the remaining capacity and accompanying battery system to launch by 2024.
Mexico is experiencing a boom in nearshoring investments, where US and Canadian companies look to move parts of their supply chains to countries that are closer, amid increasing tensions with countries like China that may have housed some operations previously.
But while foreign direct investment (FDI) in Mexico increased by 12pc last year to $35bn compared to 2021, according to Mexico's economy ministry, a lack of electricity infrastructure is impeding further growth.
President Andres Manuel Lopez Obrador's statist energy policy and attempts to roll back the 2014 energy reform that opened the door to more private-sector investment has deterred energy investment since 2018, particularly within the renewable energy market.
"There are many paused investments across the country due to a lack of electricity and, in some cases due to a lack of clean energy," Jose Medina, president of Mexico's business chamber Coparmex said yesterday.
While Lopez Obrador's policy deters energy investments, broader nearshoring investments are not expected to be deterred "by the political noise," Conor Beakey, associate director at analysis firm Fitch Solutions, said today. "FDI inflows last year reached a seven-year high, suggesting that 2023 will be strong too."
The increase in nearshoring investments is one of the main drivers for Fitch's more optimistic growth forecast for this year of 1.8pc versus 1.1pc last year, Beakey said.
Despite the growth in FDI in other sectors, Fitch expects energy sector investments to remain depressed, particularly following the government's purchase of 13 combined cycle plants from Spain's Iberdrola.
"Iberdrola was bullied out of the sector and that will discourage future development," Andrew Trahan, head of Latin America country risk at Fitch Solutions said.
