Skip to comments.What Does Mexico’s President Know That President Obama Doesn’t?
Posted on 02/16/2014 1:32:02 PM PST by Kaslin
It is not often that Americans look south of the border for solutions, but Mexicos President Enrique Peña Nieto seems to have figured out a few things in his first year of power that has, in six years, eluded Obama.
Late last month, Peña Nieto spoke at the World Economic Forum in Davos, Switzerland. There, he highlighted his first-year achievements: a legislative consensus with the two major opposition parties on the transformations and structural reforms that the country needed, reports Mexico Citys The News. He pointed out that this has been achieved in a climate of plurality and diversity.
A few months ago, with great enthusiasm, I wrote about Peña Nietos proposed energy reformssomething his predecessor had been unable to achieve. (President Felipe Calderons critics believed his proposals violated the constitution.) The reforms passed on December 12, 2013, amend Articles 25, 27 and 28 of Mexico's constitution to allow profit- and production-sharing contracts, and licenses. The reforms also put an end to government monopolies in the operation of oil-and-gas fields, while maintaining the Mexican governments ownership of the countrys resources.
The current governments ability to build coalitions puts Mexico on the verge of its biggest economic victory since the North American Free Trade Agreement, states Arturo Sarukhan, who has served in Mexicos Foreign Affairs Ministry.
The reform is important because one third of Mexicos federal budgetincluding healthcare, schools, and infrastructurecomes from oil wealth that has declined 25 percent since its peak just a decade ago. It has the potential to transform Mexicos economy by inviting foreign investment, which Peña Nieto successfully argued is needed to allow Mexico to capitalize on its shale oil-and-gas deposits. Because almost all of the profits of Mexicos state-owned oil company, Pemex, have gone back into the national coffersand not into research and developmentMexico lacks the technical expertise to exploit its unconventional resources and deep-water deposits. Even in Mexico, the era of easy oil is over.
Fluvio C. Ruiz Alarcon, an independent director at Pemex, explains: It will be vital to improve its technological competencies if Pemex is to remain competitive. It will need firm partnerships with companies from other countries. He adds: Pemex will need to change from a public entity to a productive state enterprise.
Not everyone is happy. The day the reforms were signed, protesters pounded on metal barriers with rocks and spoons. Riot police stood guard. Inside, Reuters reported: Critics lamented the energy reform as an act of submission and the end of an era, tapping into the pride many Mexicans still feel over President Lazaro Cardenas move to expropriate foreign oil companies' assets in 1938 and create Pemex. More than 1.6 million signatures have been gathered on a petition demanding a referendum on energy reform.
Sarukhan believes There will be challenges. He says: One will be making sure the victory which has been won can be translated into public opinion. Privatization is still a dirty word to many people. The devil will be in the details, which will be worked out in the next few months.
In a thorough discussion of the topic, titled: Mexico's energy reforms: can Mexico emerge as a prime global oil & gas industry expansion prospect? Roman Kilisek posits: Here a difficult balancing act needs to be struck: Mexico has to offer international companies attractive enough returns on capital employed to make them willing partners in developing its oil and gas wealth while retaining good enough equity stakes in joint projects to benefit and placate Mexicans.
The critical phase of drafting the laws to implement Decembers energy reform bill began February 1. These laws will spell out the terms and conditions for foreign international oil companies to explore and develop Mexicos deep-water and shale resources. OilPrice.com reports: Mexican Congress has 12 months to develop energy-related environmental regulations and to establish the National Center of Natural Gas Control and the National Energy Control Center.
Peña Nietos energy reforms are not a sure thing, but he understands how important developing Mexicos energy resources are to economic growthsomething that seems lost to Obama.
In his Davos comments, Peña Nieto said that Mexico is committed to conditions of security and legal certainty. And that were seeking to be more competitive. These attitudes, combined with the ability to build coalitions should offer lessons to President Obama.
Another thing that could be learned from Peña Nieto is that lower energy prices are the key drivers of economic growth. His energy reform also tackles electricity.
While most of the focus on Mexicos energy reform has been on the oil-and-gas sector, Peña Nietos plans also end the monopoly held by the national utility CFE. Mexicos manufacturing and commercial customers currently pay a surcharge for electricity, while residential, agricultural and service industry users rates are subsidized.Barclays Marco Oviedo, points out: Mexican industry this year has paid 45 percent more for its electricity than factories in the U.S.Even though residential customers rates are subsidized, they are still, according the Financial Times: Among the highest in the 34-member Organization for Economic Co-operation and development.
Francisco Salazar, head of CRE, the country's regulatory energy commission, has called the high price of electricity in Mexico: a deterrent to investment.
Reuters reports:About half of Mexico's current electricity is generated from natural gas, up dramatically since 2000, when costlier, dirtier fuel oil was the major electricity fuel. Despite its vast, albeit inaccessible with Pemexs current technology, suppliesestimated to be one of the worlds largest shale gas resource basesPemex is building pipelines to bring cheap U.S. shale gas into Mexico. The Los Ramones natural gas pipeline will bring natural gas from Texas Eagle Ford shalewhich extends into Mexico and may be even bigger than the portion on the U.S. side of the borderinto Mexicos industrial heartland. Kilisek believes that it will take years for Mexico to unlock those reserves, while facing a severe natural gas shortage in the meantime. He says that by the time the Los Ramones pipeline is finished, natural gas demand will have already outstripped the pipelines capacity. To meet the demand, Pemex is importing Liquefied Natural Gas at more than five times the price of gas in the U.S.Rafael Ch, an energy researcher with Mexico's CIDAC think tank, says: The main problem is that we just don't have the capacity to meet our future electricity demand.
Peña Nieto understands the need to build pipelines to bring the needed supplies into the country. Meanwhile, in America, weve been waiting for five years for the Obama administration to approve the Keystone pipeline. Peña Nieto understands that lower energy costs will help his country be competitive. Obamas policies have increased electricity pricesboth residential and industrialin the U.S.
Having just spent the past week in Mexico, where I observed many impoverished communities, I am keenly aware of the need for Mexico to lift its standard of living and increase economic growth, which Peña Nieto understands energy can provide. As Americas economic numbers slip, this, too, is a lesson Obama needs to learn.
Hopefully enough to draw their people back home.
Hmmm...if Mexico was the "victor" with NAFTA I wonder who was the loser?
Of course they are doing better, we gave all if their welfare leeches now.
A whole lot more, because Obama is short of brains.
“What does Mexico’s President know that President Obama doesn’t?”
The a bunch of lowlifes leaving Mexico is a good idea for Mexico and a bad idea for the U.S.
I'd guess quite a bit...
There were a number of freepers who argued that Mexico was DOOOOOOOOOOOOOOOMED if the PRI took back control of govenrment from the "conservative" (in name only) PAN party.
Seems they're eating crow now.
You said it.
Just about anybody...except the Latin American Marxists and Fascists (Cuba, VZ, Ecuador, Bolivia, Argentina and a couple of marginal ones)...understands more than Obama.
Longest book ever written?
Well... for one... he knows how to keep Americans from entering his country illegally.
There were no NAFTA losers (at least no NAFTA loser nations). Apparently, you’ve fallen for what Milton Friedman called the “fixed pie fallacy”.
Which is what?
What a joke the PAN turned out to be.
He knows how to either follow the Constitution or legally change it. Mexico has a chance with this guy as president.
-——The current governments ability to build coalitions ——
See the real problem is. Obama doesn’t understand simple English....
He thinks the world coalition means bent over....
I am clueless as to what dumBO does know!
If this PRI jerk is actually effecting more positive reform than Fox and Calderdon did, indeed. Such a waste, they had power for 12 years. Much like we have little to show from W. Bush with 4 years of a GOP Congress. Alito and a sunsetted tax cut.
Still, it's more conservative than anything PAN did during the twelve years they had in power. Most of Fox & Calderon's reign is remembered for attacking our gun laws, protesting when we executed one of their scumbag criminals (which really doesn't make sense to me, I wouldn't bat an eyelash if one of our rapist murderers fled into Mexico and got snuffed by the locals), and of course, demanding amnesty for their citizens who were living in the US illegally. I can't think of a single time Fox OR Calderon used the bully pulpit to push for any conservative reforms in Mexico.
Interesting that the PAN cheerleaders on FR have widely disappeared from threads about Mexico.