Mexico: Oil industry overhaul?
If Mexico really makes significant improvement, it will reverse the decline in oil production, says Liam Denning:
The Mexican bill, which is likely to get congressional approval but could cause a firestorm among nationalistic politicians and the public, marks a watershed moment for a country that was in 1938 the first big oil producer to nationalize its oil industry—a move followed by other developing nations in the following decades. Mexico has among the world’s most restrictive energy laws, comparable to Kuwait’s; even Cuba’s are more liberal.
“If Mexico passes this bill, and we have peace in the streets, then the country will make an important leap forward,” said Enrique Krauze, a prominent Mexican historian.
Mexican officials hope the initiative, the biggest potential overhaul to the economy since the 1994 North American Free Trade Agreement, will spur economic growth by attracting billions of dollars in investment, improve competitiveness by lowering energy prices for manufacturers and spotlight Mexico as a rising power as other big emerging markets struggle.
doesn’t, for instance, give private oil companies outright ownership of oil fields via concessions. And Mr. Peña Nieto said the government won’t give oil firms a share of the oil, but rather the cash equivalent of the oil they find and produce.
and Mexico will probably limit the number of foreign oil companies it will allow to participate.
It’ll be interesting to see the reaction from the labor unions, the nationalists, and the beneficiaries of Pemex cronyism.
Then, in the longer term, is the question of whether future Mexican government administrations wouldn’t nationalize whatever the foreign companies have.