Investor Report Mexico: Hard bargain

Sep 1, 2012

Far-reaching reforms to Mexico’s energy sector are crucial to securing much-needed investment. All eyes are now on the incoming government

By Ivan Castano

That Mexico’s energy sector, Latin America’s second-largest, is in dire need of investment is nothing new. But long-delayed reforms to overhaul an inefficient oil sector and improve conditions to boost renewable energy investment have now become critical.

As an increasingly embattled state oil producer fails to boost Mexico’s declining oil output, calls for a 'Pemex reform’ have reached new heights, especially in an election year which will see PRI candidate Enrique Peña Nieto officially assume the presidency on December 1. His proposed reform plan calls for private companies to own stakes in oilfields, mainly through joint ventures with Pemex – a process that would essentially open Mexican oil production and exploration to foreign competitors.

Major challenge

The scheme, however, will require a big change to Mexico’s constitution, which bans foreign companies from engaging in production and exploration activities. The process is expected to be one...

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