Speculations on the Elections & Mexico's Oil & Gas SectorBy Pedro Alcalá | Tue, 06/08/2021 - 16:37
The impact of last Sunday’s election results on Mexico’s oil and gas sector remains unclear, nevertheless, it has not stopped media outlets from speculating on what these effects could be.
In terms of the international oil and gas market, the impact of Mexico’s elections was negligible. In fact, the event that was mentioned as having the most effect on oil barrel prices was the announcement of a possible return of crude exports into the international market from Iran, although international talks to lift the necessary sanctions are still pending.
The general results of the election so far indicate that the country’s prevailing political force, MORENA, lost enough seats in both chambers of Congress to maintain a majority that is no longer able to push through constitutional amendments, at least not on its own. This would appear to halt the party’s ongoing effort to reform the country’s hydrocarbon laws. These reforms are currently suspended by a number of judges pending a constitutional review. However, deeper changes could take place through changes in the president’s cabinet. This report from El Comentario explores the possibility that the election results could force President López Obrador to minimize his legislative initiatives in favour of a more executive approach led by new cabinet appointees. The president was asked about this on Friday, and he said that he would not comment on the matter until after the elections. During this Monday’s daily morning press conference, he made no mention of any impending cabinet changes.
However, MORENA’s majority is still enough to approve federal budgets. This means that PEMEX’s future will still be fundamentally tied to the country’s fiscal structure, since the NOC is still the largest contributor to the government’s coffers. The expected result of this is that the value of the peso is expected to face a short term decline of up to 2 percent, according to an analysis from El Economista. Another idea explored in this report is that once MORENA loses its “qualified” majority, it will rely more on political tools such as plebiscites and “citizen polls” to create support for initiatives that it can no longer approve through the legislature. This could include currently approved or future changes to the legal framework of the oil and gas sector. On a positive note, the president has been open in his acceptance of the results, and he has not questioned the validity or standing of any of the institutions involved, which promotes market stability.