Mexican #Energy Reform: We need to talk about PEMEX

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Mexico Moment (#MEMO) is being fuelled by structural reforms that promise open markets in telecom, energy, finance and infrastructure. Now all three major political parties, academics and NGOs are publicly discussing their proposals to energy reform, and PEMEX is the centre of the debate. All of them agree that PEMEX needs an overhaul. Thus, we need to talk about PEMEX.

What are the Parties proposing?

President Peña Nieto comes from the PRI (Partido Revolucionario Institucional), which has been the ruling party for most part of Mexico´s modern history. The PRI has declared that will fully Peña Nieto´s bill for a constitutional reform upgrading PEMEX. This proposal pretends to keep PEMEX state-owned, reduce its subsidiaries from 5 to 2, allow production-shared agreements with private companies and reduce its taxes to promote reinvesting.

On the other hand, Partido Acción Nacional (PAN), a centre-right party proposes a constitutional reform, too. In that reform, PEMEX keeps current wells and next ones will be bid, with participation of PEMEX and private companies. This proposal also pretends to open refining, petrochemicals and transport to private companies.

Finally, Partido de la Revolución Democrática (PRD), a centre-left, proposes amendments to secondary legislation only. This proposal pretends to reduce tax burden of PEMEX to allow it become a profitable State-owned company. The taxes paid by PEMEX and the savings would be used for research and development. Technology and services needed for shale and offshore drilling would be contracted with private companies through biddings, as long as PEMEX do not have capacity or technology.

Who owns Lazaro Cárdenas?

On 1938, President Lázaro Cárdenas nationalised the oil industry taking ownership over hydrocarbons. Since then, Cárdenas has been the icon of nationalism and oil independence. Cárdenas, a president from the PRI, is also shared with the PRD, a party that was founded by his son, Cuauhtémoc Cárdenas.

During the debates, both parties have been using Cárdenas legacy to support their own arguments. Cárdenas took decisions based on whole different circumstances and no pressure from globalization of the oil industry, though.

The Odds for Approval

Considering the numbers of the PRI at the House of Representatives (42% of 67% needed) and at the Senate (42% of 67% needed), it would be necessary to get support either from the PAN to secure the Reform, or from the PRD plus other minor Parties. However, it is possible that some congressmen from PAN and PRD vote in favour of PRI´s proposal not following their Parties proposals.

However, if you look closely at the proposed bills for Constitutional Reform and the Hidrocarbons Tax Law, you will find that PRI met both PAN and PRD in the middle, but still, devil is on the details.