Can Enrique Peña Nieto's Energy Reforms Make Mexico a Major Oil Exporter?

Mexico’s latest presidential elections have been making headlines around the world due to charges of corruption, yet for all intents and purposes Mexico has elected its next President. We must now look to how Enrique Peña Nieto and his PRI (Partido Revolucionario Institucional) government can realise the ambitious reforms that he promised. Peña Nieto promised that he would make Mexico more productive and more competitive in order to create faster economic growth and development; throughout his campaign he said that this will start with the nation’s energy sector.

All oil reserves are state property, and Mexico has huge potential, however, the only company, Petróleos Mexicanos (PEMEX), with the rights for exploration, processing, and selling of the oil, do not have the resources to maximise extraction. Since 2004 Mexican oil output has fallen by 25%, which is a problem as the government receives nearly a third of its revenue from the oil industry.

Peña Nieto has decided to encourage growth in the sector by opening it up to foreign investors, specifically Brazil’s Petrobras. In an interview with the Financial Times back in 2011 he said that PEMEX “can achieve more, grow more and do more through alliances with the private sector.”

In order to open the industry to private investors such as Petrobras, Peña Nieto must pass a reform agenda through the nation’s congress; a congress where his party does not hold a majority. This means that he will rely upon support from opposition parties to gain the necessary two-thirds vote that he needs to achieve his plans.

Some worry that this will prove impossible and that it will result in his term as president being unremarkable, with continued political squabbling resulting in little progress. Others believe that this reliance on others will force the PRI to make deals and listen to the suggestions of other parties. In this manner they may even find a partner in their main opponent, the PAN (Partido Acción Nacional).

In the days since the elections Enrique Peña Nieto has been repeatedly stating that energy reform is at the top of his agenda. His ambitious plans have the potential to turn Mexico into a fairly major oil exporting country, and develop its economy with the added revenue, but it requires serious negotiation with other parties. At the moment it is too early to tell whether he will be successful or not.

By. Joao Peixe of Oilprice.com