Mexican Energy Reform

DESCRIPTION: Mexico’s energy reforms provide a historic opportunity to revitalize its ailing energy sector and bolster the overall economy. No Mexican assets will be privatized, but the nation’s vast oil resources, including offshore and unconventional fields, will be opened to international companies. Still, many important, specific details of the reforms have yet to be addressed. Important secondary and enabling laws are being discussed in congressional committees now, and the government wants them approved by end-June. Given the long-term importance of these laws and their complexity, a deeper review would be preferable. Steep drops in oil production over the past 10 years and weak GDP growth are driving the need to open up the energy sector. Reforms in the power generation sector, which have attracted less attention, will also be critical for economic growth, including manufacturing. Mexico’s midstream has suffered after years of underinvestment by state companies, but no assets will be privatized. Reform of the retail fuel market will be gradual.