Baker Institute: Mexico elections could disrupt energy reform continuity

Feb. 16, 2018
Public perceptions coupled with Mexico’s upcoming presidential and local elections could disrupt continuity of the nation’s ongoing oil and electric reforms, panelists said during a Feb. 15 event at Rice University’s James A. Baker III Institute for Public Policy.

Public perceptions coupled with Mexico’s upcoming presidential and local elections could disrupt continuity of the nation’s ongoing oil and electric reforms, panelists said during a Feb. 15 event at Rice University’s James A. Baker III Institute for Public Policy.

Lourdes Melgar, former Mexico undersecretary of energy and now a research affiliate at the Center for Collective Intelligence at the Massachusetts Institute of Technology, said different perceptions exist inside and outside of the country about energy reforms passed in 2013.

Melgar helped implement those reforms, which stemmed from constitutional changes.

“Outside Mexico, it is seen as a revolution. Inside Mexico, it is seen as a completely failed energy reform,” she told an event entitled “Political Uncertainty and Mexico’s Energy Reforms.”

Melgar said, “It takes time to get results in the energy sector,” blaming Mexico’s administration for making a strategic mistake by promising too many changes too fast to Mexico’s residents.

Mexico’s retail gasoline and diesel prices remain higher than US fuel prices. Meanwhile, Mexico’s oil production has not ramped up as quickly as some had suggested, she added.

The presidential election is scheduled for July 1. Two leading candidates are Andrew Manuel Lopez Obrador of the Morena Party and former finance minister Jose Antonio Meade of the ruling Revolutionary Institutional Party (PRI).

Pemex IPO possible

Former Pemex Chief Executive Jesus F. Reyes-Heroles believes any major change will be “extremely difficult” for Mexico’s next president, scheduled to take office Jan. 1, 2019.

“Whoever wins will not have a majority in Congress,” Reyes-Heroles said. “Nobody will have a majority in local governments.”

He noted that the presidential election results are far from certain because campaigning formally starts Mar. 30. He was Pemex chief executive officer from 2006-09 and now is executive president of StructurA, a group of consulting firms.

Reyes-Heroles believes a new administration will end an existing compromise in which Mexico lawmakers agreed Pemex's assets are not to be sold. Consequently, that could set the stage for an initial public offering for Pemex “as a way to defend the company from arbitrary changes by the government,” he said.

Separately, Miriam Grunstein, a nonresident scholar at the Baker Institute’s Mexico Center, said the continuity of energy reforms could be disrupted regardless of who wins the election.

“I do not think there is one party in Mexico that really believes in markets,” Grunstein said. “They believe in keeping people happy. And people are not very happy right now.”

Contact Paula Dittrick at [email protected].