ENERGY REFORM FOR MEXICO MEANS MEXICO COULD BECOME A GLOBAL COMPETITOR IN THE OIL AND ENERGY MARKET….
It is history in the making, as Mexico’s ruling party changed its platform today allowing private investment in the oil industry. The revision lays the foundation for what might be a considerable oil and gas industry game changer; returning a state-owned company regarded as a staple of Mexico.
Nearly 5,000 members of the Institutional Revolutionary Party( PRI), voted unanimously at the Mexico National Convention to eliminate content from the party’s platform opposing the investment capital of private money in the sector. Petroleos Mexicanos, or “Pemex” as it is known in Mexico nationally, is the only company authorized to execute the oil refining in Mexico.
President Enrique Pena Nieto has determined the energy and fiscal reforms will provide Mexico with the leverage to become globally competitive. Encouraging party members, President Enrique Pena Nieto is asking for support when he sends the bills to Congress. “The PRI is seeking renovation to bring the changes Mexico needs,” Pena Nieto told a crowd of thousands. “The PRI is not pleased and it is choosing to reexamine and redefine where it stands on the challenges facing the country.” (Associated Press)
Opposition however is in strategy mode, as leftists are adamantly opposed to opening oil opportunities in the private sector, as the bill that stands in effect, and the nationalization of which, is regarded with Mexico’s Leftist National pride.
Opposition Mayor’s are rallying for protests on their position of opposition to ruling in favor of PRI’s new platform. After Sunday’s decision, political analysts expect the PRI to posture a unified front when it comes time to vote. Although the PRI is not the majority in Mexico’s Congress, it is the strongest fraction of legislation boasting 241 of 500 representatives.
“The party is leaving behind its old taboos to be able to discuss the reality of the country,” said Alejandro Schtulmann, head of research of the firm Emerging Markets Political Risk Analysis. (Associated Press)
During the PRI’s 12-year hiatus from presidency, members opposed the measures proposed by the then governing body of Mexico’s National Action Party. The debate suggested Mexico would lose her sovereignty allowing foreign investment activity into Pemex. Oil is a sensitive topic for many Mexicans who learn early on in school that state ownership is one of the three main principles of Mexico’s Constitution. Mexico has seen oil production fall annually for years now, however lesser known is Mexico’s reserves remain untapped because Pemex lacks the advanced and efficient technology for data and exploration. Allowing the foreign investors the opportunity to invest in oil and gas production in Mexico, with the capital to support the expedition, will uncover Mexico’s untapped Oil reserves and leverage a global position favorably.
Although the preceding Mexico president, President Felipe Calderon, successfully signed a law for foreign exploration opportunities within Mexico, theoretically drawing in the foreign investors, political resistance intervenes, complicating the opportunities and contracts, prolonging the sealing of the deals. The conundrum is that Mexico depends on the revenue from oil for 1/3 of her budget. The impact ultimately will be interesting to watch unfold in the years ahead.