Mexico's Congress voted amid fistfights and shouts of "treason" to end
the 75-year monopoly of the state-owned oil firm Petroleos Mexicanos.
The landmark bill aims to open the door for foreign oil giants to return
to one of the world's biggest energy markets for the first time since
1938.
The bill passed the lower house 354-134 just minutes before
midnight Wednesday, a day after it passed the Senate, and on Thursday
Congress cleared the remaining related articles.
Proponents say the initiative will attract tens of billions of
dollars in foreign investment, lift Mexico's sluggish economic growth,
and add to a North American energy boom that could lower costs for
manufacturers across the region.
The vote itself was high drama.
Opponents from the leftist Party of the Democratic Revolution
(PRD) tried to prevent discussion by blockading the entrances to the
lower house's main voting hall. Lawmakers from the ruling Institutional
Revolutionary Party (PRI) and the conservative National Action Party
(PAN), meeting in an adjacent conference room, decided to skip sending
the bill to committee and carried out a quick and unexpected vote.
Angry PRD lawmakers scuffled with members of the PRI and PAN
and called them traitors. One sang the national anthem to honor "the
dead body of Pemex," or Petroleos Mexicanos.
The final touch came in the early hours of Thursday, when a
leftist lawmaker stripped down to his underwear, saying: "This is the
way you're stripping the country to the bone."
The bill, which changes several articles of Mexico's
Constitution, now needs to be ratified by a majority of state
legislatures, but that is seen as a formality. Mr. Pena Nieto is
expected to sign it into law by early February.
The government may have its work cut out convincing ordinary
Mexicans that the moves will benefit them. Polls show many Mexicans are
skeptical of allowing private investment in the oil industry, not
because of nationalism but because they are worried the country's oil
wealth will be pilfered by companies and unscrupulous politicians.
"Until now, we Mexicans used oil revenue to pay 40% of our
public spending," said Bishop Raul Vera, a leftist priest. But now we'll
have to negotiate that money with foreign oil firms. That's what awaits
our children."
If all goes as planned, Mexico will shift from an oil and gas
market currently run by a single player, Pemex, to one in which private
companies will be allowed to search for and produce oil and natural gas
on their own, under contract with the Mexican state. Foreign companies
will be allowed to open up gasoline stations, something long barred.
The changes go beyond what many analysts had expected just
months ago. They allow for contracts that are seen as globally
competitive, including licenses that allow foreign companies to take
control of the oil as it comes out the well, after paying royalties and
taxes. The Mexican state keeps ownership of the oil underground.
The first tenders for exploration could be ready by late next
year, analysts say. "I didn't think the [government] would go this far,"
said George Baker, a Houston-based energy consultant.
An Exxon Mobil Corp. executive said Thursday that Mexico
opening its oil market would benefit the country and energy consumers
globally. "We think that would be a win-win if ever there was one," said
William Colton, Exxon's vice president of corporate strategic planning.
Financial markets in Mexico were closed for a national holiday
Thursday. But investors said a near-term rally in the country's stock
market was unlikely because excitement over Mexico's economic revamp
effort had already stoked a market rise.
Passage of the bill marks a huge victory for Mr. Pena Nieto, a
former state governor who took power a year ago. He has vowed to
recharge Mexico's slow-growing economy, which has lagged behind other
emerging markets such as China and India during the past decade.
Mexico, especially the deep waters of the Gulf of Mexico,
represents the largest unexplored oil patch outside the Arctic Circle,
according to the U.S. Energy Information Administration. Mexico's
government says the moves could raise oil output to 4 million barrels a
day by 2025 from a current 2.5 million barrels.
Mexico's oil output has been falling for a decade, as Pemex lacks both the cash and know-how to tap deep water reserves.
Economists say the move will send shock waves through the
global energy market, deepening the energy revolution in North America
and eventually helping make the region an energy exporter.
It is hard to overstate what the change could mean to Mexico,
which in 1938 became the first major oil producer to nationalize its
industry, a move followed in later decades throughout Latin America and
the Middle East.
The development completes an economic transformation that
began in 1982, when former President Miguel de la Madrid began to end
decades of a closed economy. Even after the 1994 North American Free
Trade Agreement liberalized most of the economy, energy remained off
limits -- a legacy of the country's long history as a commodity
producer, first of minerals like silver and then oil.
Even culturally, the step is a big change for Mexico, where
school textbooks have taught for decades that the oil nationalization
was the high point of the country's recent history.
"Today, Mexico shows that it no longer is the north of Latin
America. It is the south of North America," said Jose Antonio Alvarez
Lima, a former governor of Mexico's Tlaxcala state. "The Mexican
introspection of how they see themselves and what they believe
themselves capable of is changing dramatically and they are giving
themselves the tools to do so."
The move carries risks, too. A tide of investment could cause
Mexico's peso to rise in value and undercut the boost to exports from
cheaper gas. Another risk: a rise in corruption, which is already
widespread in Mexico, that so often plagues oil-producing countries,
especially less developed ones.
The PRD has vowed to try to hold a referendum on the bill in
2015, coinciding with midterm elections. It will be up to the Supreme
Court to decide if the referendum can be held.
The next step is for the government to propose the
implementing laws, which will give oil companies a clearer picture of
the changes. It will also need to carry out scores of legal changes to
Pemex and the country's regulators.
"These changes make the opening of the oil industry legal.
Now, the government has to try to make them legitimate in the eyes of
Mexicans by building transparent regulators," said an executive from a
major oil company.