Mexico Proposes Energy Rules to Attract Investment

energy - oil barrelsEconoMonitor, 5/5/14

The Mexican government has released its much-anticipated new rules on its oil sector, putting some meat on the bones of major energy reforms it announced last year. The rules appear to be crafted with the intention of attracting quick investment from international oil companies, according to the Wall Street Journal.

Mexican President Enrique Pena Nieto has made energy reform a centerpiece of his agenda for a reason: Mexico’s economy is dependent on oil. Its oil industry accounted for 32 percent of government revenuesin 2013. But in the last decade, production has been on the decline.

Oil production dropped 25 percent between 2004 and 2013. Last year’s average production of 2.9 million barrels per day was the lowest level in over 20 years. Pena Nieto has blamed the drop on monopoly control by the state-owned oil company, Pemex, which has been faulted for inefficiency and corruption. International oil companies have long only been allowed to be paid for oil services; they could not take ownership of oil fields or derive profits from the reserves.

The government’s energy reform plan, and these latest rules to codify specific changes, will end that model and open up the sector to private companies. Pena Nieto has said he hopes the reforms will boost production to 3.5 million barrels per day by 2025.

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Mexico Peso Drops To Three-Year Low As Lopez Obrador Gets Boost

Bloomberg, 5/31/2012

Mexico’s peso fell to its weakest since 2009, triggering an intervention from the central bank, after a poll showed gains by a presidential candidate who favors increased public spending and disappointing U.S. jobs reports.

“Until now there has been almost no political risk priced in to Mexico from the elections, and this sparked the possibility in people’s heads,” Eduardo Suarez, a currency strategist at Bank of Nova Scotia (BNS), said by phone from Toronto.

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