Energy reform in Mexico faces jeopardy in a general election next year. Andres Manuel Lopez Obrador, former mayor of Mexico City, leads in early polls in the presidential campaign. He opposed the constitutional changes implemented in 2014 that ended 80 years of Petroleos Mexicanos monopoly and allowed participation by foreign companies in oil and gas projects.
Whether Lopez Obrador would try to reverse Mexico's energy opening is uncertain. He has said he'd call a referendum on the issue. An adviser, Alfonso Romo, told a Reuters interviewer earlier this year that Lopez Obrador probably would not cancel existing contracts with non-Mexican companies but might not approve new deals. In its effect on Mexico's otherwise bright energy future, reform truncated in this way would differ little from outright repeal.
Disastrous setback
For Mexico and companies interested in working there, such a setback would be disastrous. Although timing, to no one's fault, was inauspicious, reform instigated by President Enrique Pena Nieto has gone well. Oil and gas licensing rounds have drawn respectable bids from international operators careful with their money after the mid-2014 oil market collapse. The demonstrated interest attests to the quality of prospects on offer and to the acceptability of participation terms. It gives the promise of national wealth from hydrocarbon development a needed boost and should appeal to all Mexicans.
As it happens, curbing energy reform seems not to be a priority for Lopez Obrador's supporters. According to Richard G. Miles, director of the US-Mexico Futures Initiative and deputy director of the Americas Program at the Center for Strategic and International Studies, the ruling party has suffered under Pena Nieto, who cannot run for reelection, not because of energy reform but because of corruption and insecurity. Violence by criminal organizations has surged with the Institutional Revolutionary Party (PRI) in power, Miles writes in an Aug. 14 report. And 10 of 32 state governors have been incarcerated or are under investigation for corruption. Eight of them are from the PRI. According to anticorruption groups in Mexico cited by Miles, at least half a dozen corruption cases involving PRI officials are in progress.
Lopez Obrador also benefits as a counterweight to populist scorn for illegal immigration in the US. In a book to be published soon, Windfall: How the New Energy Abundance Upends Global Politics and Strengthens America's Power, Meghan L. O'Sullivan notes that Lopez Obrador lost bids for the presidency in 2006 and 2012. "But the rhetoric of [US President] Donald Trump as a candidate and as a president has bolstered Lopez Obrador's popularity as Mexicans search for a figure who can be a forceful leader for Mexico in potentially adversarial times," writes O'Sullivan, a special assistant to former President George W. Bush now at Harvard University's Kennedy School of Government. If Lopez Obrador wins the election next July 1, she adds, "Mexico's energy reforms could stall or at least lose momentum."
What seems unlikely-and certainly impracticable-is outright reversion to the nationalist regime in place, with Pemex at its center, prior to reform. The company had become bloated by patronage, gutted by taxation, and undermined by corruption. While international operators found and developed giant discoveries in deep waters of the Gulf of Mexico, Pemex watched, forced to yield to noncommercial priorities of federal energy planning and fiscal needs. Institutionally unable to develop and apply the essential technology, it also could do little with unconventional resources.
Old prerogatives
Reform has stripped Pemex of most of its old prerogatives. Reversing the process would mean reconstituting an institution once important as a symbol of national pride but now unable to extract maximum benefit from Mexican oil and gas. Voters with foresight, no matter whom they support for president, can't favor that option.
It's encouraging that rising support for Lopez Obrador seems unaccompanied by fierce opposition to energy reform. Maybe voters know what some politicians might still need to learn: With energy reform, there's no turning back.
