KKR Looking at Mexico Opportunities, David Petraeus Says

KKR & Co. is looking at potential investments in Mexico as the nation ends a seven-decade state monopoly in oil production, said David Petraeus, who runs a division for public policy and economic research.

KKR, the private equity firm led by billionaires Henry Kravis and George Roberts, is considering opportunities such as real estate and corporate takeovers that will arise from Mexico’s energy opening as well as its growing economy and increasing consumer spending, the retired general said.

“There are a number of different opportunities that we’re evaluating,” Petraeus said yesterday in a telephone interview from Monterrey, Mexico, following a conference of U.S. and Mexican business executives. “The reason that I’ve been in Mexico four times in the last seven or eight weeks is this extraordinary promise that the financial community sees in this country.”

Sixty-one percent of private-equity investors based in Latin America want higher target allocations to the asset class in the next year, and they’re most optimistic on Colombia and Mexico, according to a September survey from Coller Capital and the Latin American Private Equity & Venture Capital Association.

KKR in April said it was acquiring Brazilian data-center company Aceco TI. General Atlantic made its first direct private equity investment in Mexico this year, buying a stake in closely held drug company Laboratorios Sanfer SA.

Petraeus, the 62-year-old former Central Intelligence Agency director who joined the New York-based firm last year to head its new KKR Global Institute, declined to name specific companies KKR is considering for investment.

Economic Expansion

Mexico’s economy will grow 3.5 percent next year, up from 2.3 percent in 2014, according to the median forecast of economists surveyed by Bloomberg. The country will auction 169 blocks to private companies for exploration and production in 2015 and expects about $13 billion in energy investment next year, according to the energy ministry.

“Obviously we’re looking very closely at the energy space, upstream and downstream production, the entire gamut of that,” Petraeus said.

President Enrique Pena Nieto’s administration needs to follow up on its legal changes to the energy industry with improvements to security and the rule of law, said Petraeus, who was also commander of U.S. military forces in Afghanistan and Iraq. Mexico in recent weeks has been racked by protests after 43 college students were allegedly kidnapped and killed by a drug gang working with police in the southern state of Guerrero.

Legal Challenge

“This isn’t just an illegal narcotics cartel problem, this is a rule of law issue,” Petraeus said. “This has to be tackled in order for Mexico to capitalize on tremendous opportunities made available by the historic reforms.”

Robert Zoellick, former president of the World Bank, said he sees growing momentum for the U.S. reducing barriers for oil exports to Mexico after Republicans won control of the Senate in mid-term elections last month. Zoellick and Petraeus led a Council on Foreign Relations task force that published a report in October looking at ways to improve the economic relationship between Mexico, the U.S. and Canada, partners in the North American Free Trade Agreement.

“Mexico ranks very high among global investors, not only because of the energy reform but because of the telecom reform,” Zoellick, chairman of Goldman Sachs Group Inc.’s international advisers, said in a telephone interview alongside Petraeus. “Part of this is also the North American story. The U.S. is a better growth economy. Given Mexico’s economic connections from the U.S., it will benefit.”

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