DECEMBER 13, 2013
MEXICO'S REFORMS: A CRUCIAL STEP FORWARD by Samuel George On the evening of December 12, following lengthy and heated debates, the Mexican Congress approved an energy-reform bill that will open the country’s oil and gas sector to international investors. The legislation, which proved more investor-friendly than initially expected, represents a major breakthrough in President Enrique Peña Nieto’s year-long quest for reform. In his first year at the helm, the president from the centrist PRI party has attempted to make up for decades of action deferred. His push for reform is an intensely political process in which the future of the Mexican economy hangs in the balance. Simply stated, Mexico cannot unleash its tremendous economic potential until the country addresses the bottlenecks that protect vested interests but preclude market sophistication. With an underperforming energy sector, inefficient taxation and stifling private-sector monopolies, Mexico needs a reform package with punch. The Key to Unlocking Mexican Growth Between offshore oil and shale gas, Mexico has the resources for an energy revolution, but PEMEX, the state-owned energy giant, lacks the capacity to exploit either fully. The current status quo threatens Mexico’s hard-fought foothold in global manufacturing. Despite massive shale gas reserves (the world’s sixth largest, according to Duncan Wood of the Wilson Center), PEMEX has been unable to meet spiking domestic gas demand. With pipelines from the US operating at capacity, Mexican gas prices have increased as those across the border have dropped precipitously. For industry, Mexican oil-based electricity runs at roughly twice the price of US gas-based electricity. Bloated energy costs eat away at the price advantages Mexico