Mexico’s Congress Approves Energy Reform

November 17, 2008
Mexico’s Congress Approves Energy Reform

On October 28, 2008 Mexico’s Chamber of Deputies approved amendments to various Mexican laws collectively referred to as the “Energy Reform”.The Energy Reform presented by President Felipe Calderon’s administration, which has generated much anticipation on the part of Mexicans andforeigners alike, does not rise to the level requiring constitutional amendments or imply a fundamental change of the Mexican Government’s monopolyon petroleum and hydrocarbons. Even if the reform does not open significant new sectors to private investment, it does confirm that private companiesmay provide goods and services required by Petróleos Mexicanos (PEMEX) and other state-owned companies, but the payment for such goods orservices may not be in kind or imply a profit participation in oil production. In general terms, the so-called Energy Reform is limited to granting greaterautonomy to PEMEX’s administration and decision-making processes, making such more closely resemble the decision-making authority enjoyed byprivate companies. In addition, the Energy Reform creates “Citizen Bonds” that allow Mexican companies and citizens to invest in the petroleum sectorvia Mexico’s financial market. This reform seeks, in terms more programmatic than concrete, to increase investment in, and exploration of, renewableenergy sources.

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