The Mexican Congress approved a reform that will end 75 years of a nationalized oil industry. The bill received two-thirds majority with a 353-154 vote in Mexico City’s lower house.
This key reform will allow outside oil companies, such as ExxonMobile, to develop stations in Mexico’s large oil reserves. It is expected to help boost Mexico’s declining crude output and boost them into the world’s top five producers. “There’s potential to attract additional investment into shale and ultra-deep waters so that those resources can be exploited in a way that’s ultimately good for the country,” said Tony Garza, fromer US ambassador to Mexico under President George W. Bush.
The allowance of non-Mexican oil companies will increase foreign direct investment (FDI) into Mexico up to $15 billion annually. Jobs will be created as well. “It’s the biggest perceived opening of the Mexican economy since Nafta, there’s no question,” noted James Jones, the former US ambassador to Mexico when the North American Free Trade Agreement (NAFTA) was implemented. Since NAFTA, Mexico has been one of the most open economies, but monopolies in many sectors made created an impossible barrier to break.
The Mexican peso has increased since the energy bill was introduced, but has since pulled back on dollar strength. The energy overhaul can be a successful attempt to create energy availability throughout Mexico at lower costs. This will increase Mexico’s gross domestic product (GDP) which has been steadily declining over the last few years.