Friday, December 13, 2013

Partial Deregulation in Mexico's Energy Sector

I want to spread awareness of some breaking news today in Mexico.
The lower House of Representatives has passed a bill that allows foreign companies to own up to 50% of energy companies in Mexico. This includes oil, natural gas and electricity companies.
The bill still needs to pass in the Upper House of Representatives.
If you haven't read the news already, check out the following story by the LA Times.

I think that this bill is a step in the right direction. Government monopolies over the energy sector are never as effective as private companies, so I'm glad to see this partial deregulation of the oil/NG/electricity sector. However, it's only a partial step, and it doesn't do what's ultimately required for real positive change.

(To my knowledge) The bill doesn't give landowners back their mineral rights.
This has been one of the major problems in Mexico. The mineral rights are owned (and still will be owned) by the government.

The Current Law: Per the Federal Mexican Constitution, the Federal Mexican Government owns and holds all the mineral and petroleum resources located under the surface of the ground (In other words, the owner of land in Mexico only owns the surface thereof and any non-restricted treasure therein).

So, until the Mexican government gives the mineral rights back to the landowners, I'm slightly skeptical that we'll see huge increases in production of oil&gas in Mexico's.
The new law is a good first step, but it's only the beginning towards a free market.

(Side note:  I'm completely in favor of capping CO2 emissions from combusting fossil fuels. The reason I want to see free energy markets is that I think that we'll be drilling for oil&gas long after we stop emitting CO2 into the atmosphere because we still need oil&gas for making plastics. Also, we can capture and storage any CO2 generated at power plants. So, you can be pro-oil&gas development and pro-capping-CO2 emissions. The two are not exclusive.)

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