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BBVA Compass Chief Economist Testifies Before Texas Senate

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Mexican Energy ReformsBBVA Compass’ Chief Economist Nathaniel Karp testified at a Texas Senate subcommittee Sept. 19 about Mexico’s historic energy reforms, which he said will add more than 200,000 jobs, almost $3.5 billion in state revenues and $45 billion in GDP to the Texas economy.

Karp was invited to speak before the Natural Resources subcommittee by Sen. Juan Hinojosa, of McAllen, the committee’s chairman. He spoke about research his team at BBVA Compass conducted on the economic impact that Mexico’s groundbreaking legislation, which was passed in December and allows private firms to invest in the country’s energy sector, will have on Texas.

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“Texas stands to be the major beneficiary from the reform due to deep economic ties, geographic proximity and expertise in energy exploration, production and distribution,” Karp told the subcommittee. “Mexico ‘will need Texas‘ firms to provide physical resources, cutting-edge technologies, human capital and expertise.” This is especially true in deepwater and horizontal drilling and extra heavy oil.

He anticipates a large share of the foreign direct investment to Mexico will be used to purchase goods and services from Texas, benefiting a wide range of the state’s industries. In addition, he predicted that Mexico’s faster economic growth created by the reforms will further boost trade with Texas and business opportunities throughout the state.

He pointed out that of the five promising basins in Mexico, the two largest are on or near the Texas border. The Burgos Basin in northeast Mexico is estimated to hold two-thirds of Mexico’s shale gas resources. It’s an extension of Texas’ Eagle Ford Shale, and would have significant appeal for companies that operate on the Texas side of the border. Karp said this will help narrow the socioeconomic disparities between Texas’ border cities and big metro areas, like Houston and Dallas.

“If these border towns effectively seize the opportunity, the Texas-Mexico border could see one of the most dramatic transformations in its history,” Karp said.

Watch the full video of Karp’s appearance here. His testimony starts at 2:13:05.

Led by Karp, the BBVA Compass research team analyzes the U.S. economy, banking and monetary policy. The economists build models and provide forecasts for growth, inflation, monetary policy, financial markets and industries. The economic research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates. In addition to Karp, the bank’s economic research group includes Kim Fraser Chase, Marcial Nava, Shushanik Papanyan and Boyd Nash-Stacey. Follow their work on Twitter @BBVAResearchUSA and @BBVACompassNews.

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