Nieto is pushing energy reforms Nieto will be successful with energy reform

NIETO
Nietos push key to Energy Reform Martin 6/20 Eric. "Mexico's President Pushes Reforms for State Oil Company Pemex."Bloomberg Business. N.p., 20 June 2013. Web. 21 Aug. 2013. <http://www.businessweek.com/articles/2013-06-20/mexicospresident-pushes-reforms-for-state-oil-company-pemex>.

But now Pemexs main asset, the giant Cantarell offshore field, is shrinking fast. The company says it needs to boost annual investment by 46 percent, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Without some private capital and expertise
from abroad, Mexico risks becoming an importer in the next decade. Many of Mexicos politicians and policymakers have known this for years. Yet Mexican

nationalism, resistance from the unions, and the sheer size of the task of transforming Pemex have stood in the way. The planets may be aligning for a solution: Mexican President Enrique Pea Nieto says hes negotiating to get the political support he needs to break the state monopoly in oil and gas exploration and production this year in a bid to accelerate Mexicos economic growth. In the model envisioned by Pea Nieto, Pemex would develop certain fields, while foreign and private companies would tap others. The oil and gas reserves in the ground would still be the property of Mexico. Pea Nieto declines to discuss many details of the proposal or whether it would
include a change in the constitution, which limits how private companies can profit from the nations energy resources. He has, however, been sending signals to international oil companies that he needs their help to arrest eight years of decline in Mex icos crude output. Its obvious that Pemex doesnt have the financial capacity to be in every single front of energy generation, the 46year-old president said in an interview in London on June 17, before he traveled to Northern Ireland for meetings with Group of Eight leaders. Shale is one of the areas where theres room for private companies, but not the only one. Pea

Nieto says his administration will send the energy bill to Congress by September, when regular sessions resume. Hes relying on the Pact for Mexico, an alliance of the countrys top three political parties, which have vowed to work together to achieve major reforms. Pea
Nietos own party, the Institutional Revolutionary Party (PRI), doesnt have enough votes on its own for a constitutional amendment. Were approaching key deadlines, Pea Nieto says. Im optimistic

that this political climate of

understanding and agreement will be maintained.

Nieto pushing reform-Pact eliminates chance of the bill being voted down Marinho 6/17 Helder. "Pena Nieto Plans End to 75-Year Pemex Monopoly in Crude Oil."Bloomberg.com. Bloomberg, 17 June 2013. Web. 21 Aug. 2013. <http://www.bloomberg.com/news/2013-06-17/pena-nieto-plans-endto-75-year-pemex-monopoly-in-oil-production.html>. Mexican President Enrique Pena Nieto said hes negotiating support to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth. The peso pared its loss. In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. He declined to discuss details of the proposal, or whether it would require a change in
the constitution. Seven decades after his party seized fields from the predecessors to Exxon Mobil Corp. and Royal Dutch Shell Plc (RDSA), Pena Nieto is preparing for the return of internationaloil companies to arrest eight years of decline in crude output. An

opening would probably be broad, from offshore drilling to shale fields similar to those that have revived the U.S. petroleum industry, Pena Nieto said. Its obvious that Pemex doesnt have the financial capacity to be in every single front of energy generation, the 46-year-old president said in an interview in London today, before traveling to
Northern Ireland for meetings with Group of Eight leaders. Shale is one of the areas where theres room for private companies, but not the only one. Pena Nieto

said his administration will send the energy bill to congress by September, when regular sessions resume, along with a tax proposal. He said hes confident the so-called Pact for Mexico of the countrys top three political parties will ensure the bill is approved by Congress before year end.
Mexico is seeking to attract capital for deep-water and shale deposits found in the past decade as reserves dwindle in Cantarell, the 1976 oil discovery that ranked among the worlds largest.

Energy reform will pass-Nieto opposition concedes Casey 3/21 Casey, Nicholas. "Mexico Leader's Next Push Is to Tackle Energy." LA News. Wall Street Journal, 12 Mar. 2013. Web. 21 Aug. 2013. <http://online.wsj.com/article/SB10001424127887323826704578356641370976554.html>. In his first 100 days, the new Mexican president has surprised many with the momentum he has gathered toward achieving a major economic overhaul. Enrique Pea Nieto has revised Mexico's 40-year-old labor code
and its dysfunctional education system. He jailed a union boss once considered untouchable and submitted legislation to attack corruption by stripping away public officials' immunity from prosecution. On Monday, he presented to Congress proposals to reform Mexico's telecommunications sector that would give the government for the first time the power to force asset sales of monopolies and challenge the world's richest businessman, Carlos Slim, who controls more than 70% of Mexican phones. Now

the president is setting his sights on another major goal: An overhaul of the energy sector and state-run Petrleos Mexicanos, one of the world's biggest oil firms, whose output is slipping. He proposes to change the law to attract foreign investorsan about-face for a country that once nationalized its oil and barred foreign participation by constitutional amendment. "Mexico was long viewed as a stable country but one that was marred by lots of security concerns," said Gray Newman, chief Latin America economist. "But now it's seen as a leader among emerging markets on the reform front." Pea Nieto's initiatives
on labor, education, telecom and energy Giving employers more flexibility in hiring and firing Diminishing control of teachers union Letting the government evaluate teachers Allowing regulators to break up large telecom companies Creating two new television networks to challenge duopoly Pushing

for a constitutional amendment to open state-owned Pemex to foreign cash To be sure, Mr. Pea Nieto's reforms depend on the continued support of Mexico's three political parties,
which are often fractious. When Mexico transitioned out of one-party rule in 2000, the country's political establishment disintegrated. State

PRI, then in the opposition, even blocked many measures it now supports. There is also the issue of enforcement. Mexico has a long history of laws on the books that authorities fail to implement and powerful interests manage to circumvent. But there are signs that Mr. Pea Nieto has found a workable solution with Mexico's lawmakers, Mexican politicians say. Shortly after taking office, he signed the so-called Pact for Mexico, an accord with Mexico's three main
governors refused to cooperate with presidents for the first time; Mr. Pea Nieto's Institutional Revolutionary Party, the

political parties, which includes wide-ranging reform goals to be achieved during his term in office. Members

of Mr. Pea Nieto's opposition say they are inclined to cooperate. Alejandra Barrales, a senator from the leftist Party of the Democratic Revolution, who helped negotiate the pact for her party, said she felt "the PRI is open to negotiation.They want to get the reforms." On Tuesday, ratings agency Standard & Poor's moved Mexico's debt ratings outlook to "positive" from "stable," saying energy reform was now looking likely. Mr. Pea Nieto, the agency said, was pushing through overhauls that
escaped his predecessors "due in part to the president's stronger political power." In trying to overhaul the telecom sector, education, labor and energy, Mr. Pea Nieto is taking on many of Mexico's sacred cows. In trying to do so,

he has the professed support of large

majorities in Congress. Genuine Support but Nieto must push Latinvex, 4/15/13, cites 2 experts David Shields is an independent energy consultant in Mexico City, Falcn is a senior research analyst for LA energy at IHS CERA: IHS Cambridge Energy Research Associates
(Mexico Energy Reform This Year? April 15, 2013 Latinvex http://latinvex.com/app/article.aspx?id=644) // czhang David Shields, independent energy consultant based in Mexico City: The

PRI's overhaul of its statutes will give party lawmakers freedom to make decisions on energy reform and it gives President Enrique Pea Nieto the status of party leader. It may not be entirely auspicious for Mexico's democracy for the president to also be the leader of the ruling party, as it implies concentration of power in one person. However, it may well be vital to energy reform because the decision to get foreign and private investment involved in a more competitive, open Mexican oil industry is very much the president's. The country's political establishment is fickle and fragmented on this issue and it is still not clear just what form reform will take and who will support it. So if Pea Nieto does not put his full weight behind it, the reform may not happen in any meaningful way. Even the PRI may not be united in supporting the changes, but its lawmakers are certainly more likely to back it now that the party's statutes are no longer steeped in nationalistic, protectionist rhetoric. Ahead lies a complex debate on just how best to improve the energy industry's performance,
but it seems clear that if the key goal is to increase crude oil production, then Mexico will have to welcome major flows of foreign investment into the industry. Curiously, this opportunity arises at a time when Latin America's other major oil-producing nations are sending less favorable signals to foreign investors, so let's see if Mexico can make changes that will whet investors' appetite. Ricardo Falcn, senior research analyst for Latin America energy at IHS CERA: The

PRI is adding further momentum to Pea Nieto's plans for reforming the

fiscal and energy sectors. With the modification of its internal statutes, the ruling party not only shows a knack for pragmatism, but
also fully endorses the president's policy agenda. PRI legislators will now be able to vote on initiatives that extend the value-added tax to food and medicines and allow greater private investment in the oil industry. These changes will be critical for the government in the face of rising public spending and lower tax revenues from the continued decline in oil output. Thus, with its platform change, the party sends a positive signal to international markets that it is willing to unlock structural reforms in areas that were previously seen as untouchable. This

move is already bearing fruit as confirmed by S&P's recently improved outlook on Mexico's sovereign credit ratings. It also reaffirms Pea Nieto's political capital by strengthening his bargaining position in Congress, where the PRI holds roughly 42 percent of the seats. The likely support of both the Green Party and the promarket PAN would let the administration push for legal and constitutional amendments that could suffice for a meaningful energy reform package. Still, any such amendments would hardly represent a quick fix or a dramatic improvement to the oil sector's performance.

the state will keep control of Mexico's hydrocarbons resources. Although the government may pave the way for more flexible business conditions for private investors, it is yet to define a viable strategy to improve Pemex's investment decision and risk allocation capabilities. The congressional ratification of the National Energy Strategy in late April will be the first real test for the new government's mandate in energy policy.
Implementation would take time, and the PRI has made it clear that, by all means,

Nieto is putting all his political capital into Energy Reform-It will pass Hernandez 13 Maria Jose, analyst in Eurasia Group's Latin America practice, holds a master's degree in public administration and economic policy analysis from the School of International and Public Affairs (SIPA) at Columbia University, Politics and Oil: Mexico's Road to Reform, 2013, http://eurasia.foreignpolicy.com/posts/2013/06/20/politics_and_oil_mexicos_road_to_reform

Is Mexico

six months, President Enrique Pea Nieto

finally on the verge of a historic reform push? Expectations are on the rise, and for good reason. In office just over has taken steps that suggest he is serious about pushing through policy

changes meant to, among other things, improve the quality of an education system that produces students who score lower than their
counterparts in all other OECD countries in reading, math, and science, and to open the country's lucrative telecommunications sector, which could lower prices for millions of Mexican consumers. The government is also pushing for a state and local fiscal responsibility law intended to prevent governors and local authorities from taking on too much debt. Pea Nieto's financial reform could also help promote public access to credit. According to data from the World Bank, credit as a percentage of GDP remains at about 26 percent (in 2011), much lower than in Latin American peers like Brazil (61 percent) and Chile (71 percent). But the highest hurdle, energy reform, has not yet been cleared. In the past decade, Mexico's

energy sector has suffered from deteriorating operational, financial, and technological capabilities, sharply lowering production for a vital source of state revenue. Production has fallen from a record 3.4
million barrels per day in 2004 to about 2.5 million today. Faced with rising pensions and health-care bills, the government's high dependency on oil revenues (around 30 percent of total revenues) is becoming increasingly worrisome. Given the opportunities it might create and its impact on the broader economy, substantive reform of Mexico's energy sector has also captured the attention of foreign investors. In particular, Mexico may have the world's fourth-largest shale deposits, exciting intense investor interest in opportunities for private participation in both offshore and shale plays through profit-sharing agreements (possibly a variant of production-sharing agreements).

Energy reform would also offer Pea Nieto an important political victory, since he will have succeeded where so many of his predecessors have failed. Past attempts have been defeated by a populist commitment to nationalized
energy that is written into the Mexican Constitution, limits on investments by state-owned oil company Pemex, the ability of state governments to grab a large share of the industry's resources, Pemex's labyrinthine bureaucracy, assertive labor unions, and politicians who were unwilling to accept the costs and risks that come with change. The

Mexican public has historically opposed the constitutional changes needed for real reform, and it's not clear that this has changed. Recent polling data suggest that 65 percent
of Mexicans are aware of the so-called Pact for Mexico, the president's broader reform plan, but there is no public survey on popular attitudes toward the opening of the energy sector to private investment. Yet, this time around, Mexico's president has the demonstrated political will to bring about change, and there are enough lawmakers within his own party and the major opposition party, the National Action Party (PAN), to negotiate a substantive agreement by the end of 2013. That said, there are a few obstacles Pea Nieto must overcome. The most underappreciated of these is the need to reform Mexico's electoral politics. In early May, the Pact for Mexico survived a challenge from opposition parties when Pea Nieto agreed to allow discussion of electoral reform before September, forcing lawmakers to debate a hotly contested issue just before they take up a crucial energy reform plan that demands goodwill and compromise. The Mexican Congress is currently in recess, but legislators have announced that they will hold at least two extraordinary sessions in July and August to debate some bills left on the table, helping to clear the legislative calendar. But electoral reform was not included in the schedule; lawmakers are still in the process of designing it and are probably waiting until after local elections on July 7 to finish drafting their proposal. The

fight over electoral reform will sharpen the battle lines among the three major parties just as energy reform will require open negotiation among political rivals. Some opposition factions want a reform that not only increases transparency
in the use of campaign funds, but that also includes major changes to the electoral and political systems. Senators from opposition parties -- the PAN and the Democratic Revolutionary Party (PRD) -- want to introduce a second round in presidential elections and reelection of legislators and mayors, as well as introduce coalition government and chief of cabinet, probably as a way of extracting concessions in exchange for support. A large segment of the ruling Institutional Revolutionary Party (PRI) has long opposed these proposals for fear that a second round would enable the PAN and PRD to organize resistance to a PRI candidate and that an end to term limits for lawmakers and mayors would make it more difficult for the party to enforce discipline among its members. In addition, a system that provides more power for parliament could heighten the risk of gridlock at a crucial moment for reform. As a result, the government is unlikely to accept all these demands. In the end, if the government is as serious as it appears on energy reform, it will have to compromise on electoral reform. Pea Nieto

remains committed to keeping things on track, and he will probably cede some ground on the electoral front. That's why odds of success on energy reform remain good, but the next few months will test the new president's political skills.