CHAIRMAN OF THE BOARD OF DIRECTORS U.S.-MEXICO CHAMBER OF COMMERCE
An Interview with Dr. José Zozaya
José Zozaya was born on May 24, 1952 in Mexico City. He earned a law degree from the Universidad Iberoamericana with advanced studies in corporate law and economic competition from Instituto Tecnológico Autónomo de México, commonly known as ITAM. He also participated in the executive program in international management at Thunderbird University in Arizona and in the management program for lawyers at Yale University. He has over 40 years of experience in government relations and legal affairs, as well as in mergers and acquisitions.
Zozaya was appointed president, general manager and executive representative of Kansas City Southern de Mexico (KCSM) in April 2006. Prior to joining the executive team at KCSM, he was legal and relations government director of ExxonMobil Mexico for nine years.
He was the national president of the American chamber for two terms, 2010 to 2012, and vice president of the Executive Council of Global Enterprises from 2010 to 2013. He served as president of the Mexican Association of Railroads from 2013 to 2015.
He is currently vice president of the American chamber and the Association of American Chambers of Latin America. He was appointed chairman of the board of directors of the United States-Mexico Chamber of Commerce in May 2016.
“I’m certain that the railroad will become a rolling pipeline, positioning itself as one of the best means of transportation for oil, gas and petroleum derivatives due to its safety and efficiency.”
Alliance: Taking into consideration your experience as president and executive representative for Kansas City Southern de México what is your opinion of Mexico’s energy reform?
Zozaya: Mexico’s energy reform has been one of the country’s main topics of discussion since it was enacted in 2013, due to its expected impact on the economy.
Mexico is now on a path toward its energy market’s transformation. For the first time in seventy-six years, private companies will be able to participate in oil and gas exploration and production, which has made Mexico a competitive destination for upstream investment.
Although Mexico’s oil industry has been hit by the global downturn in oil prices and budget cuts, President Enrique Peña Nieto’s announcement of speeding the liberalization of the fuel market beginning this past April to lure investment and push down prices for consumers, regained investors’ confidence in the reform.
According to the Mexican government’s forecasts, the energy overhaul will bring in $62.5 billion in investment by 2018.
As Mexico deregulates its oil industry, it is opening one of the largest fuel marketing and retail opportunities on the horizon. This, in turn, will boost several sectors of the economy, offering new opportunities for investors and consumers, as well as for all connected operations in the value and supply chains.
The energy reform’s benefits will extend beyond Mexico’s own economy, strengthening economic ties and fostering more integration across North America
A: Is Mexico prepared to face the challenges of successfully implementing the energy reform?
Z: Mexico is undertaking a complete transformation of its energy sector and creating the conditions to become more competitive.
With energy reform underway, one of the biggest opportunities is the need to develop the infrastructure and transportation logistics to support new exploration and production activities. Significant investments will be needed to accelerate the infrastructure buildout required.
Public-private partnerships could be used to finance, build and operate projects and help fill the gap in this matter. They will allow the government and the private sector to work together and share resources on key projects, as a way to boost productivity and economic development.
While challenges remain, the government and the private sector have demonstrated their intention to act quickly and efficiently in order to support the development of this new pattern of growth and production.
Within the transportation sector, it is expected that the amount of freight moving on the Mexican railroad system and crossing the Mexico-U.S. border will increase in the short term since additional materials will be needed as well as an effective transportation and distribution system.
Given the shortage of Mexican refineries and pipeline, I’m certain that the railroad will become a rolling pipeline, positioning itself as one of the best means of transportation for oil, gas and petroleum derivatives due to its safety and efficiency.
At Kansas City Southern, our priority is to contribute our business vision and experience in freight transportation. We visualize the North American railroad structure as one single system to offer efficient and safe service on both sides of Mexico-U.S. border.
A: How will the energy reform impact the U.S.-Mexico bilateral relation?
Z: Mexico is one of United States’ major trading partners and vice versa, so economic growth in Mexico is of great importance for the region. Energy is an input to nearly every good and service in the economy. For this reason, a more dynamic and interconnected energy market will trigger economic growth.
Integrating the energy markets across the region will also increase industry efficiency and production capacity, strengthening the energy independence, security, competitiveness and economic stability of North America.
Mexico’s energy reform reinforces the region’s position as one of the top oil and gas producers and will propel the continent to become the world’s energy powerhouse. This will mean greater employment and regional investment flows, better and lower-cost goods and services, as well as more tax revenues but in order to realize this aspiration, the proper infrastructure must be in place to connect the region’s economies with the opportunities available to them.
Mexico will have to improve and modernize its logistics and transportation infrastructure to move oil and gas from the production centers to their final destinations. Pipelines, railroads, and vessels will be needed to ship hydrocarbons.
A: How can the energy reform boost Mexican freight railway transportation?
Z: The railroad can feasibly deliver gas, diesel and gasoline to and from Mexico to help eliminate the shortages caused by refinery outages and increasing demand, as well as relieving pressure on the pipeline infrastructure which will contribute to improved reliability of the supply.
Until the pipeline infrastructure can be expanded, using the railway is one of the best viable short-term solutions for hydrocarbons distribution.
Transporting crude oil by rail has proven to have several advantages, such as:
Increased market coverage.
Alternative pipeline in growth markets with lower capital requirements.
Flexibility to deliver to key markets, direct to refinery, or to move where the production occurs.
Fast delivery time per train.
Fast construction—rails are already in place.
Lower permitting hurdles.
Crude quality management.
Lower losses during transportation.
Shorter investment horizon.
The reform may increase rail shipments in the following ways:
Increase of LP gas and refined products.
Transportation of steel pipe for gas pipelines under construction.
Frac-sand imported from the United States.
Transportation of crude oil from new producing regions to refineries.
Transportation of Mexico’s oil shale basins. Imports of refined products (gasoline, diesel and biofuel).
Kansas City Southern is strategically positioned in the heart of North America. Its railway network crosses 6,000 miles across the United States and Mexico, with over 125 years of experience in the United States and 19 years in Mexico. KCS’s North American rail holdings and strategic alliances are primary components of a NAFTA railway system, linking the commercial and industrial centers of the United States, Mexico and Canada.
In Mexico, our international intermodal corridor begins in Lazaro, Cardenas and runs throughout 15 states in the central and northeastern sections of the country, connecting the main industrial areas with the rest of North America.
We are the only trans-national railroad that connects with all Class 1 railroads in the United States and Mexico.
