Crime Beginning to Deter Foreign Investment in Mexico

By Girish Gupta Nearly 30 people were killed last week as an oil pipeline exploded in the central Mexican state of Puebla. Owned by state-owned oil company Pemex, the pipeline is thought to have been under attack from thieves, siphoning oil off in order to sell it on. With "rivers of fire" reported on the streets of San Martin Texmelucan, Pemex was keen to downplay the incident and reopen the line as soon as possible. A Twitter message revealed the line was up and running on Wednesday. The news comes after crude oil exports reached their highest level in November for more than two and a half years. Pemex exported an average of 1.62 million barrels of crude every day in November, up from 1.377 million a day in October and 1.22 million in November 2009. The average price was $76.79 a barrel, up from $74.30 in October and $72.44 in November 2009.

(To see Craig Mellow's position on Russian markets, click here.)

The week saw the price of crude oil reach its highest in a year, hitting $82.92 a barrel on Wednesday, in line with international prices. Boeing (BA) is the winner of a Mexican government contract to build three communications satellites for approximately $1 billion. MexSat will provide secure communications for the military and government, as well as extend coverage for civil communications. The launch is scheduled for the end of 2012. Meanwhile copper production in Mexico fell nearly 20% in October from the same period in 2009. Analysts suggest that companies may be using lower-grade deposits, accounting for the dramatic fall in output.

(To see Toby Connor's piece on why a bear market will return in 2011, click here.)

Grupo Mexico (GMBXF) reopened Mexico's largest copper mine, Cananea, earlier this year, after a three-year strike. Another labour dispute hit La Caridad in September but that mine was back online a month later. The group's shares rose as copper prices hit a record with demand from China and reduced supply due to the closure of a Chilean copper mine. The mining company is looking to claw back $210 million in "excess" environmental fines it paid for subsidiary Asarco's bankruptcy proceedings. It is hoping to show that Environemental Protection Agency officials in the United States destroyed documents that could have lessened the fine.

(To read Mr. Practical's article on why you should beware experts staying that the economy is recovering, click here.)

General Electric (GE) is selling its $2 billion consumer mortgage portfolio in Mexico to Banco Santander (STD). Santander's Mexican unit has agreed to pay $162 million for the mortgage operations of the company, making it Mexico's second-largest home lender. General Motors de Mexico (GM) has had to recall 329 Cadillacs for possible problems with their airbags. Former presidential candidate Diego Fernández de Cevallos has been released by kidnappers seven months after his capture at gunpoint, reportedly having paid a ransom of $30 million dollars. Though not thought to be connected to drug cartels, the crime highlights Mexico's problems with kidnapping and general crime against wealthy members of society. Swedish appliance manufacturer AB Electrolux (ELUXF) cited Mexico's deteriorating security situation as a factor in its decision to build a $190 million factory in Memphis, rather than south of the border.

To read the rest, head over to Minyanville.