Energy and the Environment

How the next government will respond to Mexico’s energy challenges, especially with regards to dwindling oil supplies, and whether they will continue Mexico leadership role on climate change and global warming will be closely followed as well.

News and Analysis

Pena Nieto’s promise of “bold steps” to boost outside involvement in oil exploration, refining and production are at the heart of his vision to grow the economy and revamp the image of the PRI, which ruled Mexico for most of the 20th century. But if he wins the July 1 election as expected and even if his party wins a majority in Congress, Pena Nieto will have a fight on his hands trying to change Pemex, which is buckling under a heavy tax burden, a bloated workforce and declining oil fields.

His plans could also face a wall of opposition from factions within the PRI and leftists seeking to keep foreign hands off Mexico’s oil wealth. The PRI has close ties to the 174,000-strong oil workers’ union, whose leaders have interests to protect and a history of corruption scandals.

  • 5/6/2012: The presidential candidates debate the future of state-owned oil company Pemex during the first televised debate. From “The Week in Review: 5/7/2012:”
Peña Nieto (PRI), for example, called for greater private sector participation in the state-owned oil company Pemex. He pointed to the Brazilian and Colombian examples as models, and also stressed the importance of renewable energy. Vázquez Mota (PAN) proposed issuing citizen bonds to fund the modernization of Pemex.
  • 3/28/2012: Reuters on the presidential candidates’ energy policy:

Mexico’s constitution blocks private ownership of its oil resources. Calderon broke a taboo with a 2008 oil reform to open up the sector and allow private firms to bid for oil operating contracts. The first incentive-based contracts were awarded last year and more are on the horizon to exploit oil-rich deep waters in the Gulf of Mexico. All the candidates say they recognize the need for more change.

Pena Nieto calls for “audacious steps” to reform state-run energy giant Pemex, including increased private investment from foreign capital markets to boost exploration, production and refining capacity.

Vazquez Mota has raised the possibility of listing oil monopoly Pemex on the stock exchange – following the model of Brazil’s Petrobras – to help revamp the state-owned giant and attract additional investment.

Lopez Obrador seeks to expand refinery construction to reduce gasoline imports, which now cover around half of national demand in the world’s No. 7 oil producer.

  • 3/26/2012: Reforma publishes a profile of the three presidential candidates’ energy proposals. As translated in “The Week in Review:”

All candidates oppose outright privatization but two, in particular, favor increasing private participation in the state-owned Pemex, and greater competition to foster efficiency:

Enrique Peña Nieto (PRI) points to the challenges of falling production rates and aging technology to stress that the current model is not sustainable. He thus calls for renewed investment in exploration and extraction, as well as for legal reforms that would help to boost the relationship between the private sector and Pemex.   By allowing for shared production and shared risk contracts, as well as greater linkages between the private and public sector, Pemex could potentially access greater capital and better technology, making it a competitive entity.

Josefina Vázquez Mota (PAN), too, emphasizes the importance of running PEMEX as a “smart business.” She argues that meetingMexico’s growing energy demands, developing new exploration and collection technology, and working with private businesses should be the top focus for the next administration. Vázquez Mota also would push to improve current industry practices and for scientific research on alternative energy sources.

Andrés Manuel López Obrador (PRD) is more skeptical of private participation. He argues that private involvement would preclude the possibility of continued economic development in Mexico.  Privatization would condemn businesses to paying exaggerated prices for energy, he emphasizes, hurting small and medium-sized enterprises in particular and disrupting economic growth and stability in general. Keeping Pemex as state-owned, on the other hand, enhances its “operational honesty” and efficiency and allows it to carry out (his would-be) government priorities: environmental sustainability, continued exploration of new sources of fuel, and investment in new technology.

  • 10/10/2011: Enrique Peña Nieto (PRI) includes in his 10-point economic plan the need to “pass reforms to make state-owned oil monopoly Pemex more competitive.”
  • 9/28/2011: Mexico City Mayor and presidential contender Marcelo Ebrard (PRD) introduces the capital city’s first electric taxis, in an attempt to “promote the use of environmentally friendly vehicles in one of the world’s smoggiest metropolitan areas.”

Water quality, air quality, and natural resources suffer a disproportionate amount of environmental degradation compared to each nation’s overall environment in the border region.  The 14 metropolitan areas along the border have abysmal air and water quality.  Rapid population growth in these urban areas has lead to increased demand for land and poorly planned development; greater demand for energy, amplified traffic congestion and waste generation, overburdened or unavailable waste treatment and disposal facilities, and frequent chemical emergencies.

  • 6/22/2011: Marcelo Ebrard (PRD) says an alliance between Brazil’s Petrobras and Mexico’s Pemex would be “convenient:”

Me parecería muy interesante hacer una alianza estratégica con ellos (Petrobras) pues han desarrollado una tecnología de exploración de aguas profundas. No veo por que no podemos hacer una alianza estratégica con ellos, le convendría mucho a México y otros países”, dijo Ebrard en entrevista.

  • 5/2011: Duncan Wood of ITAM, CSIS and the Mexico Institute details the likely positions of the three major parties of energy reform:
The PRD is the least likely of all three parties to propose meaningful reform of the  energy  sector, having protested vehemently against the partial reforms of 2008. A PAN  president would likely try again to get far-reaching reform of the oil sector. The PRI is probably the best equipped of the parties in the sense of its ability to tackle the PEMEX union, it is the most likely to control Congress (fundamental if a constitutional change is to take place), and it has the broadest base of support among state governors (also a necessary requirement for constitutional reform). Yet the PRI also has hard-line groups within it who continue to resist
any increased flexibility in terms of private participation in the sector.
Pensemos en una soberanía en sentido moderno, que es más que la propiedad de un recurso como fin en sí mismo. Es la propiedad de un procedimiento, es la capacidad de innovar, es la posibilidad de aportar valor agregado, es crecimiento económico y ejercicio efectivo de ciudadanía económica. Es transformarse en un país más fuerte social y económicamente. Esa es la soberanía a la que aspiramos”, indicó.
Debemos realizar una reforma fiscal integral que permita reducir los recursos que Pemex transfiere al gobierno (casi 40% de los ingresos federales). De esta manera, la empresa podría invertir parte de la renta petrolera en el desarrollo de energías “limpias”. En pocas palabras, que el propio petróleo financie el nuevo modelo energético sustentable.
  • 10/28/2010: Rodrigo Camerena writes in the World Politics review about the future of Pemex:
Given Calderón’s waning time in office and the PAN’s congressional minority, public-sector reforms are unlikely to occur before congressional and presidential elections in 2012. But unless radical changes to Mexico’s energy sector are enacted soon, the country’s fate as a future net oil importer may very well be sealed.
  • 3/24/2008: Voice of America on Andrés Manuel López Obrador (PRD) and Pemex reforms:

Supporters of Andres Manuel Lopez Obrador say he will find a way to rebuild the state oil industry without outside help and provide a better future for the poor. They hope his consolidation of power within the PRD will help him launch another bid for the presidency in Mexico’s 2012 election.

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