Mexico's Energy Reform: Ready to Launch
This report was originally published by the Atlantic Council. Read the full analysis here.
Just over eight months ago—and one day after congressional passage—the Adrienne Arsht Latin America Center released a landmark report on Mexico’s energy reforms. The constitutional changes served as the precursors to legislation that would implement sweeping energy reform in Mexico.
The December report, Mexico Rising: Comprehensive Energy Reform at Last?, had a poignant question mark at the end of its title. This second report on Mexico’s energy reform no longer has any need for a question mark. The government of Enrique Peña Nieto has provided the country with a legislative energy infrastructure designed to encourage business, increase transparency, and lower costs for citizens.
Mexico’s oil has long been the third rail of the country’s politics. Although unwilling to open up the hydrocarbons sector to foreign and private investors in a large-scale way, the Mexican government searched for solutions to increase production while keeping the constitutional ban against foreign investment in the upstream in place. These included smaller scale reforms in 2008, allowing for private companies to enter into incentivized service contracts with Petróleos Mexicanos, the state-owned oil and gas company, while not allowing them to acquire direct shares in projects or derive profits from production. Still, Mexico was caught in a trap where the oil income so critical to government expenditures continued to dry up. The economy lost jobs and income opportunities.
President Enrique Peña Nieto took a bold step in leading the Pacto por México to change that. Governments worldwide would be wise to note how the Pacto, an alliance of the three major political parties in Mexico, established an agreement whereby each party committed to making the sacrifices necessary to address some of the most pressing issues facing the country. Though, in the end, energy reform unraveled the Pacto, two of the three parties forged ahead and enacted this important reform. First constitutionally, and now in the legislature.
This report illustrates what Mexican energy reform means both for Mexico and for energy worldwide. The new laws promote transparency and collaboration, establish legitimate regulators and promote a business-friendly environment.
Read the full report here.
Neil Brown is a non-resident fellow at the German Marshall Fund of the United States