Mexico’s Timid Energy Reform

Juan Carlos Hidalgo After weeks of speculation, yesterday Mexican president Enrique Peña Nieto unveiled his proposal to reform the country’s sclerotic energy sector. The move has been heralded by the media as Mexico’s boldest economic overhaul since the signing of NAFTA in 1994. However, even though the reform aims at relaxing the grip of the country’s state-owned monopoly on oil production, it falls short of significantly opening the sector to much needed private investment. The reason for so much caution is well-known: The government’s monopoly on oil production is the third rail of Mexican politics. Ever since President Lázaro Cárdenas nationalized the sector in 1938, Mexicans commemorate the event every March 18. School textbooks mention the nationalization as a defining moment of Mexico’s history. It is no wonder previous attempts to break up the monopoly of Petróleos Mexicanos (Pemex) have so far failed. This, of course, is the result of decades of propaganda by Mexico’s long-running governing party, the PRI (to which Mr. Cárdenas belonged). It skillfully embedded a nationalist attachment to the oil industry in the population’s psyche while using Pemex to extract and distribute jobs, rents, and power. However, the party is rapidly coming to an end. Due to lack of investment and a highly politicized and inefficient corporate structure, Pemex’s oil production has fallen by a quarter in the last decade. The government uses Pemex as a milk cow to finan...
Source: Cato-at-liberty - Category: Health Medicine and Bioethics Commentators Authors: Source Type: blogs