Energy Reform Opportunities and Obstacles

“Pemex has historically been the main contributor to Mexico’s federal budget, but in order to make it something more than a revenue mechanism we must reform the energy sector to generate jobs, improve competitiveness, and boost our economy,” claims Deputy Marco Antonio Bernal, President of the Chamber of Deputies Energy Commission.

The main reason Mexico has not been able to achieve this is because the country has a deep nationalistic connection to oil, according to Bernal. In essence, “what makes us feel Mexican and what we have learned since elementary school is that our resources belong to us,” he explains. For this reason, any serious mention of energy reform is not taken lightly by the Mexican public or its political parties, but after the Energy Reform of 2008 there seems to be a growing consensus regarding the need to talk about further reform of the energy sector. Bernal firmly believes the 2008 reform was the first step in a long process that will eventually make Mexico a leader in the oil and gas industry because of the three main virtues of the 2008 reform: “the beginning of the end of nationalistic ideologies connected to oil, a new sense of freedom awarded to Pemex to negotiate directly with foreign companies, and a strong realization by the government of the need to further open up the energy sector.”

Having a strong base from where to begin, there is a strong sense of optimism regarding the di†erent priorities and needs for a successful reform. According to Bernal, the Energy Commission is focused on “proposing, debating, and passing the energy reform, on talking about and deciding what will happen to the shale gas reserves recently discovered, and finding cheap alternative energy sources. Our priority is to find a way to change certain constitutional articles that proclaim the rules and regulations of Pemex without touching Article 27—which defines all hydrocarbons as Mexican property.”

To succeed, Bernal believes that a comprehensive reform encompassing every aspect of the energy sector must be pursued. In order to make Pemex a competitive company, he believes “we must give it the freedom to decide its own policy.” Currently, Pemex lacks the resources necessary to achieve all of its objectives, so the energy reform must find a way to invite private companies to invest in Mexico and reward their investment with oil revenue without violating Constitutional Article 27. “This is an internal debate we are currently having and that we need to resolve before we take any other steps towards passing a reform.”

One of the obstacles that could hinder the passing of the energy reform is the di†erent ideological views of the political parties at the Chamber of Deputies and the Energy Commission at the Senate, but Bernal does not believe this is the case because of the peaceful nature of the legislature. According to Bernal, “the PRD has already publicly proposed their version of a reform and the PRI and PAN are still working on it,” but this will not hamper their ability to eventually pass the reform because “everyone accepts the obvious fact that a comprehensive reform is needed. Dialogue between di†erent political parties will be paramount to the success of the reform, but does not consider this to be a problem because everyone is conscious of the positive e†ects this reform will bring to Mexico in economic, social, and political terms.” Regarding the di†erent views of the Energy Commission at the Senate and the Chamber of Deputies, Bernal claims this will not interfere in the passing of a successful comprehensive reform because “the presidents of both energy commissions come from the same political party and both share an electoral base that is demanding an opening to private industry in the energy sector.”

Even though Bernal is highly optimistic about the potential success of the energy reform, he believes the greatest challenge will be to change the cultural connection between Mexico and oil. In order to pass the reform, Bernal knows they must make Mexicans realize that “we will not interfere with Constitutional Article 27, and the reform will only bring positive outcomes for the country.” This will be the greatest challenge because the elected o·cials in the Chamber of Deputies and Senate will have to find a way to change one of the cornerstones of Mexican cultural identity, since the reform “will be redesigning the link between Mexico and its historic relationship with oil and a positive breakthrough for Mexico.”