Constitutional reforms permitting private sector participation in Mexico’s oil production are proving controversial but necessary

In December 2013, Mexico’s Congress approved amendments to articles 25, 27and 28 of its constitution, ending the national oil company’s 53-year monopoly over the country’s hydrocarbons. The company, PEMEX, is now permitted to associate with the private sector in the extraction and refinement of oil, and private companies are able to participate in the production and commercialisation of electric energy. The controversial reforms were framed by ideological discussions, misunderstandings and public concerns about the future of the country. The PRD (the Mexican left) fought hard to block the changes, even blocking access to the Legislative chamber to prevent members of Congress from discussing the reform. Despite the controversy, a coalition composed of PRI and PAN MPs was able to change the articles, which were previously considered to be “untouchable”.

President Enrique Pena Nieto has maintained that the amendments will continue the national ownership of hydrocarbons, while allowing the company to seek alternative sources of national and international funding that it desperately needs to continue operating. Nevertheless, the public fears that it is a step backwards and a clear indication that the PRI (the hegemonic party that governed the country for more than 70 years) has returned to the presidency with the same privatisation style that characterised the years leading up to the transition to democracy, a strategy that resulted in a major economic crisis in 1994. So what do these reforms mean in real terms for the country? Why are they so controversial?

In March 1938, President Lazaro Cardenas gave a radio speech announcing Mexico’s oil reserves were to be nationalised, seizing it from the hands of international companies. The move was welcome in a country still suffering from the aftermath of a civil war and struggling to consolidate its governmental institutions. Numerous demonstrations supporting the initiative took place and people donated what they could to “pay the oil rescue”. However, Mexico didn’t have enough money to indemnify the international companies and the expropriation generated strong international pressure to boycott nationalisation. It wasn’t until 1947 that the debt was finally paid.

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