Mexico's Energy Reform Drawing Interest in Texas - Mexico Institute in the News

Mar 07, 2013
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The Texas Tribune

Analysts say, however, that interested entities should view the proposal cautiously. Energy reform was one of the hallmarks of Mexican President Enrique Peña Nieto’s campaign last year, when he successfully propelled the PRI back to the capital after 12 years out of power.

Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, said the effects of such a proposal, however, remain unclear.

“They are talking seriously about allowing private investment in the oil sector in general, [but] they want the state to retain control. So what that actually means in reality is very tough to work out,” he said. “Because retaining control could be legislative, regulatory; it could be the dominant player. No one is quite sure what that means.”

Wood added that Peña Nieto’s administration would like to put forth additional reforms, and that those could affect the political climate leading up to the PEMEX negotiations.

“The PRI is fully aware that it needs to maintain a broad popular support for its agenda, and if it’s going to engage in fiscal reform, where they are talking about adding value added tax on food and medicine, that’s going to be hugely unpopular,” he said. “If they also begin talking about opening up the oil sector, then that’s possible that will cause a reaction from the base as well. And the political party that is best placed to take advantage of that is the left-wing [Party of the Democratic Revolution]. That could cease upon an upswell of popular rejection of an opening of the sector.”

Foreign companies are very likely to express interest, Wood said, but he doesn't predict an instant influx.

“It’s not as in we’re going to see a flood of companies in to Mexico immediately," he said. "They are going to sit back and analyze and make sure the conditions are right."

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