Mexico institute recommends upstream opening

The Mexico Competitiveness Institute (IMCO) has called for dramatic policy steps to confront Mexico's decline in the world economy.

By OGJ editors
HOUSTON, July 27 -- The Mexico Competitiveness Institute (IMCO) has called for dramatic policy steps to confront Mexico's decline in the world economy.

The institute, which studies the relative competitiveness of 48 countries, reported that Mexico had fallen two places in the ranking to 32nd in the 3 years ended in 2007. Worse, it said that Mexico had retreated in eight of the 10 key variables that matter most.

Regarding energy policy liberalization, Mexico was the only country that scored zero on IMCO's index scale of zero to three.

The institute also took note of the fall in Mexican oil production, which since 2004 represented a 700,000 b/d drop that has been a severe blow to public finances.

Mexico may be facing its last opportunity to counter the trend—that is, before the aging of the Mexican population and the spread of poverty render societal changes irreversable.

With this dark landscape in view, it may not be surprising that IMCO should propose a course of action to maximize Mexico's potential petroleum rent by inviting private industry to take part in exploration and production activities and to be compensated on a competitive basis. Every year of delay in reversing the fall in oil production and fiscal flow costs the Mexican economy $40 billion, IMCO estimated.

Each section of IMCO's report contained an invited essay. Preparing the essay on energy was George Baker of Houston, the only non-Mexican among 23 contributors. That essay focused on the natural gas value chain in Mexico.

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