Energy reform among several sweeping changes for Mexico

Mexico’s effort to open up its energy sector to international investment has captured global attention, but it’s just one of several fundamental reforms taking place in Mexico, one of the country’s top political leaders told a Houston audience Tuesday.

“The energy reforms, the telecommunication reforms and the political reforms are game changers for Mexico,” said Gustavo Madero, president of the National Action Party,  known as PAN for its Spanish abbreviation and  currently the leading political opposition party in Mexico. “They will transform the entire nation.”

Madero was one of several panelists at a Houston breakfast seminar on Mexico’s energy overhaul , sponsored by the Mayer Brown law firm.

Since taking office in early 2012, Mexican President Enrique Peña Nieto of the Institutional Revolutionary Party — PRI –has proposed a range of profound policy changes in areas as disparate as education, taxation and telephones. The energy overhaul, arising from a constitutional amendment the Mexican Congress passed last December, is significant because of the potential foreign investment it could provide, Madero said.

Although it is the opposition party, PAN’s support was crucial to securing the votes for the constitutional amendment and Madero often is credited for rallying the party behind the measure. Former Presidents Vicente Fox and Felipe Calderon, both members of Madero’s party, had tried to institute earlier energy reforms, and have said support by PAN was the critical factor in ensuring the legislation’s passage last year.

The constitutional amendment allows some private investment in Mexico’s oil sector, ending  decades as a monopoly for the national oil company, Petroleos Mexicanos, or Pemex.

Pemex is likely to focus on its shallow water fields, where it has a relatively high level of experience and skill, leaving most of the deep-water work and unconventional onshore shale plays for private investors, said Jesus Reyes Heroles, the former CEO of Pemex and former Mexican energy secretary.

The policy overhaul allows Pemex to form joint ventures with foreign partners, however, which could provide it the capital and expertise to expand into additional oil fields, Reyes Heroles said.

Madero said the success of the new energy policies will depend partly on other recent measures affecting labor, transparency, access to information, and well as Mexico’s fiscal and political systems.

In turn, the energy sector will be key to getting Mexico’s sluggish economy moving, Reyes Heroles said. “This administration will have to make the economy grow much faster and for that, you need higher investment,” he said. “For higher investment, you need to open up the energy sector.”

Madero noted that the nationalized oil industry has become a point of pride and Mexican identity — an attitude Mexicans will have to modify as the energy overhaul takes effect.

“The ideological position has always been that the petroleum belongs to Mexicans,” he said, “but in reality, the petroleum belonged to Pemex, and that is what we are trying to change.”