"Energy is the heart of our economy"
The petroleum industry reforms just enacted in Mexico will generate at least $10 billion dollars in domestic and foreign capital investment during the current administration of president Enrique Peña Nieto, which ends Dec. 1, 2018.
That was the prediction of the president of this country's Energy Regulatory Commission, Xavier Salazar Diez de Sollano, in a weekend interview with a major Mexican national news service. "The PEMEX reforms are the most important in decades," he added.
Effective Saturday, oil giant Petróleos Mexicanos (PEMEX), a tightly controlled state monopoly for three quarters of a century, is now open to private capital and foreign technical expertise. PEMEX reforms are now officially the law.
Mexico's federal congress will begin work early next year on the dozens of implementing statutes and administrative regulations which must now be drafted, debated and voted on to effectuate the reforms, which were constitutional amendments. That process is likely to prove as politically contentious as was the legislative battle over changing the internal structure and operations of PEMEX. Exit Stage Left: PRD says "The Pact for Mexico is dead."
Salazar Diez said that within 10 or 12 years, energy sector reforms will attract an estimated $90-100 billion USD investment. Much of that capital is expected to be foreign, but the CRE president insisted that much also will be of domestic origin.
"Investors are reevaluating Mexico in a positive way," he said. "This will favor the in-flow of cash, will reduce the cost of borrowing money and will have a beneficial impact on the entire economy. It will also generate jobs," added Salazar Diez.
Earlier this month Mexico's secretary of energy, Pedro Joaquín Coldwell, concurred in the latter assessment, saying that opening PEMEX's doors would bring 500,000 high quality jobs to a country which desperately needs them. Poor labor market a victim of Mexico's economic backslide in 2013.
The PEMEX reforms have already paid off with respect to Mexico's credit rating, which improved a notch the same day Peña Nieto signed them into law. Mexico's sovereign credit rating upgraded on PEMEX reform news.
"Mexico is part of a globalized market, and it is one of the most open nations with respect to trade. But paradoxically, until the PEMEX reforms it was one of the most sealed off in the energy sector. And energy is the heart of our economy," noted Salazar Diez.
Members of Mexico's two centrist parties, the National Action Party (PAN) and the Institutional Revolutionary Party (PRI), have agreed to work together on the PEMEX implementation legislation in the months ahead. But a coalition of far left parties continues to denounce the energy reforms as a sellout to foreign oil interests, and has promised to challenge the new rules in court and in a repeal referendum which they hope to stage in July 2015.
Referring to PAN's participation in the passage of the PEMEX reforms, a party leader said over the weekend that PAN is committed to "transforming and modernizing the face of Mexico."
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