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Mexico manufacturing economy will be boosted by energy reform say experts

A historic piece of legislation, requiring changes to the Mexican Constitution, was passed on Thursday, December 12, 2014 by the nation’s legislative body, which will change how Mexico’s energy sector has operated since 1938. That was the year that the oil industry was fully nationalized by then president Lázaro Cárdenas. Among other benefits, experts anticipate that the reform of the country’s energy industry will have a positive effect on the Mexico manufacturing economy. The successful bill was crafted by a coalition of politicians formed by the ruling PRI and the conservative political party, PAN.

Since Mexico’s oil industry was nationalized in 1938, and the State company, Petroleos Mexicanos, or, PEMEX, took over all operations, private foreign companies have been banned from entering into contracts with the Mexican government oil monopoly to explore and drill for energy in the form of oil and gas. By a vote of three hundred and fifty-three to one hundred and thirty-four, this longstanding state of affairs changed. The final action that is required to transform Mexico’s closed energy sector into one that that welcomes investment that allows participation in exploration and drilling by foreign parties is an approval of the measure by seventeen of the country’s thirty-one states. It is anticipated that this will be forthcoming.

Economists predict that a more efficient oil and gas industry in Mexico has the potential to boost that nation’s GDP by one percentage point. Thomas Donahue, president of the U.S. Chamber of Commerce, believes that the increase in supply of oil and coal will be beneficial to both the Mexico manufacturing, as well as to manufacturing in North America as a whole.

Although the measure passed, some opposition to this historic industry opening did exist.  It. was voiced by  members of Mexico’s third major political party, the Democratic Revolution Party, or PRD. As a result of PRD protest, the physical location of the vote on legislation had to be changed from the main chamber in the House of Deputies to another room on the premises. PRD members blocked the entrance of the main chamber with tables and chairs.

Although the U.S. has been experiencing an oil and gas production boom, output among its two NAFTA region partners has declined by approximately a quarter during the last decade. New capital infusions into the Mexican oil and energy sector will facilitate the access to the fourteen additional billion barrels of proven reserves, and the one hundred and fifteen billion barrels of projected reserves that lie beneath Mexican subsoil and territorial waters.

Mexico is the fifth largest global suppliers of crude oil to the U.S.  Augmented Mexican production will expand access to more secure energy resources, as well as will reduce the cost of oil and gas to end users that include consumers, the Mexico manufacturing economy, as well as that of North America as a whole. The time frame over which this increase in energy supplies occurs will be gradual, as it will take time to raise the capital required to conduct sufficent exploration activiites that will result in increased production. Pemex estimates that, in order to fully explore and access Mexico’s energy potential, it will take investments of $60 billion dollars a year for the forseeable future. Currently, Petroleos Mexicanos has an annual twenty four million dollars earmarked for this purpose.

Read the primary source for this post at MSN Money.

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