As the world in general and oil producers in particular continue to navigate a world awash in cheap crude, Mexico is trying to get ahead of the game — and potentially reap a big reward in the process.
Home to oil reserves of at least 10 billion barrels according to U.S. Energy Information Administration figures, Mexico has traditionally done very well by hedging oil in global markets. The derivatives strategy reaped the country a record $6.4 billion last year, and just last month Mexican officials announced a $1 billion bet on crude markets that would price the commodity at $42 per barrel in 2017.
The objective is to help the government offset a sustained drop in oil prices, the likes of which has sent the economies of Nigeria, Venezuela and other crude-producing nations reeling. Recently, the International Energy Agency warned a sustained drop in prices was a risk given shaky global demand.
To be certain, Mexico has already taken a hit from falling oil revenue, which has eroded public finances and sent the government scrambling to carve out billions in savings in both 2016 and 2017 budget proposals. The impact to public investment has also prompted Mexico to lower its ambitions on energy reform, in a year that analysts initially believed would be pivotal to attracting more private investment into the sector.
"The decline in oil prices has also hurt growth, particularly through unrealized potential, as energy reform — formerly big sources of optimism, has been much slower to progress due to lower oil prices and their impact on oil company capex [capital expenditure] budgets," Eduardo Suarez, co-head of Latin America strategy at Scotiabank told CNBC in an interview.