The Privatization of Mexico’s Oil Industry: Benefits and Problems associated with Privatization
Currently, Mexico’s Congress is discussing an energy reform proposal put forward by Mexico’s President, Enrique Pena Nieto. The President is looking to privatize Mexico’s oil sector in the upcoming months. This energy reform proposal is significant for Mexico and its citizens. The energy reform is also very controversial for Mexico because the country’s oil industry has been nationalized since 1938 and is considered the cornerstone of Mexican National pride (Azul, 2012). President Pena Nieto believes that the reform is the answer to many of Mexico’s oil industry’s problems. Mexico’s oil company, Pemex, has been experiencing a consistent drop in oil production over the past decade. Many of their oil sites are drying up and Pemex has few resources to devote to research and technology that could help them tap into their vast, untouched oil supplies.
President Pena Nieto’s privatization proposal comes with its own set of obstacles, first of which is modification of Articles 27 and 28 of the Mexican Constitution. The modification would allow contracts between the Mexican government and private companies to share profits from the extradition of oil and gas throughout the country, as well as, the deep-water sites located in the Gulf of Mexico (Krauze, 2013). If passed, the reform would make radical changes to the entire industry in Mexico and beyond by opening up competition along the entire oil and gas supply chain including the refining process, transportation, storage, distribution and basic petro chemicals. However, the privatization of Pemex will stir up strong opposition and controversy in Mexico. The Democratic Revolution party has already voiced its strong opinion against the reform. However, Pena Nieto’s ruling Institutional Revolutionary party and the Conservative National Action party should be able to secure the two thirds majority vote needed in...