Bill Passes In Mexico To End 75-Year Oil Monopoly

Access to oil by foreign investors is seen as a major shift among Mexicans – and the world

The Mexican Congressional body recently approved a controversial bill to end a 75-year state oil monopoly that can trace its roots to the 1930’s. The new bill will potentially generate nearly $20 billion in additional foreign investment per year, according to industry analysts.

Mexican lawmakers celebrated after the lower house gave the final approval to a landmark energy bill on Thursday in Mexico  City. Reuters
Mexican lawmakers celebrated after the lower house gave the final approval to a landmark energy bill on Thursday in Mexico City. Reuters

NAFTA is generally seen as the most significant economic reform over the past few decades, but this ruling will introduce foreign trade investment and cooperation like no other piece of legislation in Mexican history. The new bill, which still needs to be formally ratified by local government bodies, will change the processes and mentalities that have mired the Mexican oil trade in a state of inefficiency and dwindling production for years. Most of the local authorities have voiced support for the bill, though nearly a third of total congressional representatives voted against the move.

The new bill will shift Mexico’s national energy charter to permit companies such as Exxon and Chevron to begin development activities in the largest unexplored crude area, save for the Arctic Circle. The increased production could move Mexico into the top five crude exporting countries – but not everyone is happy about the possibilities of future oil growth. Those opposed to the move state that the majority of the profits will shift to foreign investors, and that the bill isn’t a good move for the country of Mexico, nor the citizens of the struggling nation.

The PRI helped foster and support this bold new bill

President Enrique Peña Nieto took office on December 1, 2013, and succeeded Felipe Calderón as leader of Mexico. His election returned the Institutional Revolutionary Party, or PRI, as the governing authority after a 12-year absence. President Nieto has fought hard for the shift in oil policy, and considers it a major achievement of his administration.

He and his administration are also credited with creating a bill that will increase teacher accountability in public schools – a major focus for the country of Mexico as the global competition for high technology jobs becomes more intense. Nieto and team also introduced a law that aims to foster better competition among telecommunications companies, and a ruling that seeks to jumpstart bank lending and economic investment.

The new oil law will help to diversify the Mexican economy, as much of it is dominated by a small group of consortiums like América Móvil SAB (the leader in the telecom industry in Mexico), or the Comisión Federal de Electricidad (the big player in the national electrical energy field).

The potential for Mexico to emerge as a key player in the worldwide energy sector is a compelling position for all involved. Foreign investors will help to increase Mexican oil production – driving revenues and possibly stabilizing the world market at the same time. With the potential for significant local investment as well, foreign drilling and refining operations may help bolster the local Mexican economy dramatically. In a nation that needs more jobs, additional gross domestic product to export, and a sense of optimism that can unite the nation, this bill should do wonders for the nation of Mexico.