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Latino Daily News

Friday December 13, 2013

Mexico’s Lower House Passes Historic Energy Reform Bill

Mexico’s lower house passed an energy overhaul bill that opens up that crucial sector to private investment for the first time in three-quarters of a century.

Legislators approved the bill in general terms by a vote of 354-134 late Wednesday, roughly 24 hours after the Senate gave the green light to the legislation. Debate, however, was continuing on challenges to specific articles.

The governing Institutional Revolutionary Party, or PRI, and the conservative National Action Party, or PAN, backed the measure to end state oil company Petroleos Mexicanos’ 75-year monopoly, while the center-left Party of the Democratic Revolution, or PRD, and its allies vehemently opposed the bill.

Because it sought to modify three articles of Mexico’s constitution, the bill needed to be passed with a two-thirds majority in both houses of Congress.

Once the challenges (which only have the support of minority parties) have been overcome, the next step will be to secure the approval of a majority of Mexico’s 32 state legislatures.

Lower-house proponents of the overhaul argued that it was necessary to boost sagging oil output, which, according to Pemex, has fallen by a quarter from a high of 3.3 million barrels per day in 2004 due to a sharp decline in production at offshore Cantarell, formerly Mexico’s most productive field, and a lack of investment.

They say it is necessary to attract major multinational energy companies to develop promising but technically challenging deepwater reserves in the Gulf of Mexico.

PRD lawmakers and their allies, however, took over the main legislative chamber, calling supporters of the bill “traitors.”

Opponents of the overhaul have expressed support for modernizing Pemex and the energy industry, but reject constitutional changes they assert would hand the nation’s resource wealth over to private investors.

Under the initiative, Pemex reserves the right to develop the most profitable fields, while private companies could enter into profit- and production-sharing contracts with the government in more complicated, less accessible areas.

Crude production by private companies will not take place in the near future, because secondary legislation must be passed to define the contract conditions.

The energy overhaul is the cornerstone of President Enrique Peña Nieto’s plans to modernize Mexico.

Since taking office a year ago, he also has pushed through major changes to the education and telecommunications sectors, as well as a tax overhaul that lessens the burden of Pemex, which accounts for roughly a third of government revenue.


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