Although something of a source of national pride, Mexico’s state run oil industry, which has been protected from private involvement for 75 years, is being opened up to private investment. Mexico’s President, Enrique Pena Nieto, hopes that the proposed reforms will help to encourage both foreign and domestic investment in the petroleum industry.
Mexico’s oil industry is currently dominated by the state oil firm Pemex, and has previously been very sceptical of foreign, or multi-party, investment. However, it is though Pena Nieto’s latest move was spurred by Mexico’s pressing need for investment and expertise to develop new oil and gas fields.
At present, private companies can be awarded service contracts within the oil industry. However, the new proposals would go much further, allowing private companies to share the risks and profits of developing new fields. Unsurprisingly, Mexico’s political leaders have stressed that the reforms do not constitute privatisation because no oil concession will be sold off. This being said, Mexico’s leftist political parties have argued that this is a step too far and have opposed the reforms adamantly.
Analysts have suggested that, if the reforms do go through, the “liberalisation” of the oil sector could double foreign investment in Mexico, giving the economy its biggest boost since the country joined the North American Free Trade Agreement twenty years ago.
According to a BBC correspondent in Mexico, “The reform won’t be simple to get through congress. The government faces a complicated task in negotiating with all sides, including the powerful unions. Yet, there is a growing sense among ordinary Mexicans that Pemex is no longer fit for purpose, is an aging and out-dated institution and that root and branch reform is probably needed.”
Foreign oil companies, including BP and Exxon Mobil, are waiting to see the details of the reforms to see exactly what investments will be allowed.
Read the full article at: http://www.bbc.co.uk/news/business-23669605
Very interesting WSJ article: Q&A: What Does Mexico Oil Reform Mean for Consumers, Companies?
- Mexico proposes private firms in oil industry (miamiherald.com)
- Mexico proposes energy reform, some investors skeptical (postzambia.com)
- Mexico may open up oil to foreigners after 75 years (usatoday.com)
- Mexico opens oil sector to investment (japantimes.co.jp)
- 75 Years Later – Mexico Tackles Energy Reform (ibarbee.wordpress.com)