Mexican Congress opened a new chapter in the country’s oil, gas and electricity sectors when it opened all three to foreign investors. Supported by two thirds of the congress and most of Mexico’s states, the reform also allowed private companies to invest after the country nationalized the sectors over 70 years ago. However, as tempting as the offer was, most investors had their doubts.
This is because the opposing PAN party intervened to create the last form of the legislation. In addition, the PRI and Mexican companies have reserved space for national providers and investors. A third concern was the lack of transparency by the managers of the section. Finally, the last concern was the government’s ability to provide regulatory bodies with autonomy to carry out their duties and create frameworks for the energy sector. Addressing these concerns gradually, the government has started taking many steps, starting with becoming involved in government-funded projects.
In addition to 21 laws related to oil and gas contracts, regulatory agencies, and taxes, the Mexican government is encouraging joint ventures between foreign and national firms and even financing the former. Among these 21 laws, 9 are new. The topics of the laws are divided in: hydrocarbons (includes foreign investment, mining and PPP), electricity, geothermal energy (includes water regulation), energy security (includes environmental), government companies (includes PEMEX, CFE, government procurements and works), regulators (includes coordination among regulators), taxes (includes taxes on hydrocarbons and duties), sovereign fund and federal budget.
Mexico has been reorienting its federal procurement system around principles of delivery for results and away from compliance and overarching procedures. The process has been taking place since 2009, allowing the country to save USD 1 billion over three years. Moreover, it helped the World Bank interact better with other sectors like Poverty Reduction while improving the Bank’s engagement in public procurement reform in Mexico
However, the biggest effect is of course the Bank’s interest in continuing to support Mexico, especially as the latter has set objectives to align its public procurement system with expenditure policy to ensure value for money, transparency, efficiency, and quality of procured goods and services. As a result, Mexico will have ample funds to establish government-funded projects and profit SMEs that can profit local and international investors.
The reform is expected to be approved by mid June by the Congress. Can Mexico grab energy momentum until then?