On December 21st, Mexican President Enrique Peña Nieto signed the controversial Mexican oil and gas law that opens up drilling for oil to foreign competition for the first time in 75 years.
On December 13th, the bill was passed by Congress and then endorsed by a majority of states across the country.
According to President Nieto, Mexico’s oil and gas industry needs investment to stem falling output. In 2004, Mexico was pumping 3.4 million barrels per day compared to 2.5 million today.
One of the opposition parties disagrees, saying the new law is like selling the family silver.
The new legislation also opens up the country to foreign investment in the electricity industry, a state monopoly run by the Comisión Federal de Electricidad (CFE).
As far as oil and gas is concerned, the new law allows private firms to sign contracts to drill for oil and gas with PEMEX (Petroleos Mexicanos), the Mexican state-owned monopoly. In the deals PEMEX gets a share of the profits.
After signing the bill, Peña Nieto said “(the new legislation)is one of the most transcendent in recent decades, it will help Mexico face the challenges of the 21st century. This is the beginning of a new history for our country. We have opened the doors for a better future for all.”
When lawmakers debated the bill in the Chamber of Deputies earlier this month there were fierce protests by one of the opposition parties, the center-left PRD (Partido de la Revolución Democrática – Democratic Revolution Party).
During the debate one deputy of the ruling PRI (Partido Revolucionario Institucional – Institutional Revolutionary Party), Landy Margarita Berzunza Novelo, was taken to hospital with a scratched retina after a scuffle with Karen Quiroga Anguiano of the PRD. Antonio Garcia Conejo, also of the PRD, protested by walking around in his underpants.
Mexico’s credit rating improves
Mexico’s credit rating with S&P (Standard and Poor’s) improved from BBB to BBB+. S&P believe the new legislation will boost private investment and encourage economic growth.
Experts believe that over the next 12 months Mexico may attract over $20 billion in additional foreign direct investment.
Since coming into office, Pena Nieto has confronted several power groups in his drive to open up the country. He has pushed through legislation making it mandatory for teachers to undergo annual evaluations, and limited the market power of Carlos Slim’s telecommunications companies.