Miriam Grunstein
Professor
CIDE
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View from the Top

Expectations for Future Energy Reform?

Wed, 01/25/2012 - 09:19

Q: What points do you think should be included in any future energy reform?

A: Sharp separation between the regulated entity, Pemex, and the regulator, CNH. Right now we have a mess, and we have an Energy Minister that is presiding over the board of directors of Pemex. The Energy Minister cannot be two people at the same time. He cannot be a regulator and a policy maker, whilst leading the regulated entity and receptor of the policy. That is one of the reasons that Brazilian energy reform has been so successful because there is constitutional distance between the regulated entities, Brazil’s regulator ANP, and the Energy Ministry. We need to teach Pemex how to comply and partner, and the only chance we have to do that is by making Pemex compliant with and receptive to rules, and so far it is not. Aside from the fiscal issue (where Pemex is completely compliant, because the Mexican government can sanction Pemex by denying them budget), Pemex is a self-regulating entity with two very weak regulators, the CRE and the CNH. We need a constitutional amendment, and we need Pemex to be a regulated commercial entity, not a self-regulating state organisation, that is receptive to regulation and receptive to partnership.

Q: Do you think the CNH can step in and play that role? Do you think it has the potential to develop into a meaningful regulatory agency?

A: If they give it the budget and the personnel and the legal power, but right now the law limits its empowerment, it has very limited budget and it has no personnel. The problem with the regulators in Mexico is that the monopolistic nature of the industry has created a shortage of specialist personnel. It is a tragedy, because in the United States, Norway, Britain and Brazil, there are so many sources of specialized personnel because the industry is open, so you have companies, ministries, universities, and they are producing people with know- how. Here you don’t, and specialized personnel comes from the service companies or from Pemex; those are the only two sources. When people move from Pemex to the regulatory agency, there is a risk that they will still think, feel and act like Pemex executives. Therefore, it is fundamental to widen the sources of specialized personnel.