After investigating the use and production of ethanol for nearly a decade, the Mexican federal government recently passed renewable fuels legislation that awaits the signature of Mexico's new president Felipe Calderon.

The title of the recent federal legislation translates to, "The Law to Promote Biofuels," according to Rafael Nieves, business development and international projects manager with BBI International. One measure of this legislative effort—portions or all of which are slated to go into effect as early as this summer—would require 10 percent ethanol blends in areas like Mexico City, Guadalajara and Monterrey. Mexico City, population 8.6 million, sits in a valley basin 7,400 feet above sea level surrounded by mountains on three of its four sides, exacerbating the pollution from the city's aging vehicle population.

A potential obstacle to the Mexican ethanol industry is its corn supply. The country has steadily relied on tariff-free corn imports from the United States. Mexican tortilla production demands much more white corn than what Mexico grows, but Nieves pointed out that yellow corn would be used to make ethanol. However, prices of white corn track yellow feed corn prices; therefore, the record U.S. corn prices are putting the crunch on the Mexican tortilla industry as a whole—for now. "We expect U.S. acreage to increase and prices to come down once those numbers are released," Nieves said, which should alleviate concerns from corn purchasers south of the U.S. border. At press time in late February, corn prices in Mexico were at US$6.43 per bushel.

Other sources tell EPM that "Mexico is on the verge of an ecological change," and renewable fuels use and production is expected to take off despite concerns over current corn pricing issues. One company, Implementacion de Servicios S.A. de C.V. (IS)—Service Implementation Variable Capital Company—is seeking to build up to 10 ethanol plants across Mexico. The group has access to 1.8 million tons of corn per year, and each proposed facility is scaled to produce 30 MMgy. Joel Fis, an involved member of the projects, told EPM the first project has been approved for financing. Until the mandate is implemented IS will seek to export their ethanol into the absorbent U.S. markets. "All we need is a letter of intent," said Fis, meaning once a U.S. marketer agrees to procure ethanol from Mexico in writing, construction may begin. Three of these 30 MMgy plants are being targeted for Vera Cruz, Mexico. IS is working with Delta-T Corp. for plant design. Once The Law to Promote Biofuels is fully implemented, IS intends to help satisfy domestic Mexican demand in addition to exporting product to the United States. Mexico's annual gasoline consumption is 8 billion gallons, so a nationwide 10 percent ethanol blend would require 800 MMgy of the renewable fuel.