Mexican President-Elect Eyes Early 2013 for Energy Bill

WASHINGTON - Mexico's new government plans to pass energy-sector legislation early in the new year, measures that Luis Videgaray, head of the president-elect's transition team, says should help boost the country's petroleum production and growth prospects.

The energy legislation is part of a broad-ranging strategy that Mexico's president-elect, Enrique Pena Nieto, plans to roll out when he takes office in December. Mr. Videgaray, who is widely tipped to be named Mr. Pena Nieto's chief of staff or finance minister, said energy legislation is the "low-hanging fruit" in a plan that should allow the country to better compete with its biggest emerging-market rival, China.

He said Mr. Pena Nieto plans to send the legislation to Congress after first dealing with the budget. "We hopefully will get it done early next year," he said in an interview.

Mr. Videgaray led a Mexican delegation in Washington this week to meet with White House and State Department officials, jump-starting the international dialogue for the next administration on trade, drug trafficking and border security issues.

"We're at a high point in the relationship in terms of trust...and we want to build upon that," Mr. Videgaray said.

The brutal violence of the country's drug war has dominated international coverage of the country in recent years, raising concerns in the business world about investing in Mexico.

But investors are also watching how committed Mr. Pena Nieto and the Institutional Revolutionary Party is to restructuring the economy, in particular, tackling the powerful union and corporate interests entrenched throughout the country's political architecture.

Aside from energy, Mr. Videgaray said other top economic priorities for the new administration include improving education quality and participation and trying to loosen the grip that a handful of companies have on some sectors, including telecommunications. The government must "go beyond" recent changes that gave the country's antitrust commission sharper teeth in order to spur slowing growth and stagnant innovation, he said.

"I am personally convinced that lack of competition is one of the key things holding Mexico back," Mr. Videgaray said. "It's not only telecoms, but it's many sectors of the economy where we have high degrees of concentration." Mexico is home to the world's richest man, Carlos Slim Helu, head of the Latin American telecoms giant America Movil SAB.

The pace of growth in the Mexican economy's has slowed after a sharp rebound from the 2007-2008 global financial crisis. The IMF latest projections see growth in 2013 at 3.6%, down from 3.9% this year.

Unlike in the energy sector, where small legislative changes can produce a big difference, Mr. Videgaray said fighting antitrust practices needs "a commitment throughout six years of consistent policies and government actions conducive to competition."

Disputes over ruling by the Federal Competition Commission currently go through ordinary courts.

"That can take forever and these are complex resolutions...It's not the best setting," Mr. Videgaray said. That's why he says Mr. Pena Nieto will send to Congress legislation that will create specialized courts "that can expedite the process and be really knowledgeable on these complex issues."

To help insulate the Mexican economy against fallout from the euro zone or a global slowdown, Mr. Videgaray said Mexico is exploring renewal of its flexible credit line with the International Monetary Fund. The IMF approved the two-year $72 billion credit line for Mexico last year as a precautionary measure. The facility is designed for countries with strong economic fundamentals and track records that are at risk from outside pressures, and unlike most IMF loan programs there are no conditions tied to using it.

Current Finance Minister Jose Antonio Meade said last month that the factors that drove Mexico to seek the credit line in the first place still exist and that the program had proved useful in calming investors.

Mr. Videgaray didn't elaborate much on the details of the energy legislation, other than saying that it would open up the sector to much-needed private-sector capital and technology.

State oil monopoly Petroleos Mexicanos has seen its crude production fall from a record 3.4 million barrels a day in 2004 to just over 2.5 million barrels a day at present. Future increases in output will rely on exploiting complex reserves, such as those in deep waters of the Gulf of Mexico and the sprawling onshore Chicontepec basin. Changes in oil laws in 2008 allowed Pemex to grant more flexible service contracts to private companies, seeking to attract interest through results-based incentives. But the constitutional ban on oil and gas concessions, and contracts in which private firms can profit from their expertise, has kept oil majors away.

Mr. Videgaray said there are no plans to privatize Pemex, but the new legislation would allow the private-sector to partner with Pemex. Aside from its massive conventional oil resources, Mexico still hasn't tapped the as-yet unknown amount of natural gas and oil in its shale deposits, which could provide a substantial revenue windfall.

Tony Harrup in Mexico City contributed to this article.


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.