1.1.1

The following is the first in a series of summaries of each presentation and panel that took place during the Mexico Oil and Gas Summit last Tuesday, July 1st in the Sheraton María Isabel in Mexico City. To download the speaker’s presentations which have been approved for public distribution so far, click here.

1.1

Senator David Penchyna inaugurated the summit with a speech that both praised and explained the benefits of the Energy Reform, claiming that the summit provides a great opportunity to think about the current state of the country. He emphasized that the Energy Reform is one of the most important legislative changes Mexico has seen in the past 60 years because it replaces an obsolete model with one that will maximize Mexico’s hydrocarbons potential.

“There are representatives of both national and foreign companies in this room that are interested in Mexico’s business opportunities. The old monopoly model did not allow the flow of foreign investment, but now there is judicial certainty.” Penchyna also noted that Mexico cannot be isolated from the models that operate in the rest of the world; therefore the Energy Reform provides adequate international standards that allow for better economic development.

The President of the Senate’s Energy Commission explained that a trait of contemporary democracies is an often limited ability to reach agreements at the legislative levels. “After 15 years of failed attempts to restructure the energy sector, the country’s political forces decided to stop blaming each other and work to reach agreements instead.” He claims the “Pacto por México” led to two-thirds of Congress approving the Energy Reform, and the number of reforms passed in the last 18 months surpassed the number of reforms passed in the past 25 years.

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Addressing those who oppose the Reform, Penchyna said: “It would be enough to read the Constitution to see that no one is selling Mexico’s oil reserves; we are simply creating a competitive model to maximize the energy sector.” He highlighted that the ongoing debate on the secondary legislation comes from constitutional premises that have already been approved. The Constitution points out strategic sectors that are under the government’s economic regulation. In this sense, Penchyna urges legislators to be critical and to understand the regulatory framework being crafted with the secondary laws. “Back in the 1990s, the reforms on the telecommunications sector did not result in an appropriate legislative framework, which led to a monopoly. We took chances in opening this sector and we did not do it properly. Mexico now has little if any competition in this area and the monopoly does not provide the Mexican people with services similar as those offered in other countries. This was a valuable lesson for legislators and policymakers, and this will definitely not be the case for the energy sector.”

Senator Penchyna mentioned more cases in which opening a sector backfired and detailed how these lessons were applied to the Energy Reform. He noted that Mexico, as a society, is not used to liberalizing its industries and many actors take advantage of this resistance for political purposes. The senator stressed that the government does not want to impose partners on PEMEX; what it wants is a transparent sector where years of corruption can be fought through healthy competition, which will only yield results through a solid regulatory framework.

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