Implications of the energy reform in Mexico

Introduction

This paper comments on the energy reform imposed by President Enrique Peña Nieto in 2013. Explaining what it is about, what its origins are, the objectives that this Energy reform wants to meet, as well as its consequences that it would have, how it would affect People like that they could raise some taxes because they would lose the taxes of some companies like Pemex. Also how it would affect companies such as Pemex and CFE, also commenting on the positive aspects that would be obtained with this reform, such as the decrease in payments for Electricity and gasoline, causing a greater flow to invest or create companies and thus generate more jobs.

Background

In article number 27 of the 1917 constitution it was established that the nation had dominion over minerals, solid, liquid or gaseous hydrogen carbides and the federal executive was also given the opportunity that individuals can extract oil for their own use. and other hydrocarbons.

In December 1938, with President Lázaro Cárdenas del Río, the government of the country promulgated the first energy reform in the country, which consisted of the state maintaining exclusive ownership over subsoil resources, abolishing concessions on Hydrogen carbides and petroleum, that convention conferred on individuals the rights to exploit the resources found in the national territory and this was considered the exclusive right of the state to be able to exploit hydrocarbons through the norms that were established in a secondary law.

This initiative was approved until November 1940 and was published in the official gazette of the federation at the same time.

In this same period, the regulatory law of article 27 of the Constitution was also published, which creates the instruments to be able to make a contract with an individual in order to carry it out on behalf of the federal government, this if putting at risk the rights of the state.

The regime that allowed concessions for the construction of refineries and oil pipelines for gas distribution was established

In 1958, a new regulatory law was created in article 27 of the Constitution that ended with the possibility of creating contracts with individuals for exploitation and kept all the activities of the oil industry for the Mexican people.

In 1960 the Constitutional Reform incorporates the prohibition of contracts in article 27 in the Magna Carta.

It was until years later in February 1983 that articles 25, 26, 27 and 28 of the constitution were amended so that it could be established that they do not constitute monopolies of the exclusive functions that the state exercises in areas for a oil and other hydrocarbons strategy

Energetic reform

The Energy Reform is an initiative presented by President Enrique Peña Nieto in his first year in office whose objective is what is established in Article 27 of the Constitution of Mexico with the purpose of improving the quality of life of Mexican citizens by creating jobs while conserving that Mexico's oil as well as other hydrocarbons continue to be the exclusive heritage of the Mexican nation

The main purpose of the energy reform is to improve The oil rent, which is the value of hydrocarbons that are extracted from the subsoils at the international market price, discounting the costs that are made for the extraction, This rent is determined by 3 variables that are the price in which oil is sold, how much is produced and how much it costs the company to extract it

The energy reform aims to improve oil income that allows the country to develop in a better way,This is to be achieved by Giving tools to Pemex to be able to do deep-water exploration since at this time due to lack of resources Pemex has not been able to update itself in technology that allows it to explore and extract deep in the Gulf of Mexico since due to the depth the machinery must withstand a very high pressure and also be able to heat up since at those depths the tubes would freeze due to the low temperatures deep in the sea but it is necessary to get there because it is where the country has more oil and thus, to sustain the oil income in order to grant the following generations the same amount or more oil income that the old generations left behind.

The objectives that the energy reform wants to achieve are:

Improving the quality of life of Mexican families by reducing electricity and water expenses Increasing investment in companies generating more jobs Strengthening companies such as CFE and PEMEX so that they continue to be public and Mexican Strengthening the trajectory of the state of oil and gas.

Negative aspects

Some consequences that the energy reform could bring would be that electricity, hydrocarbons will no longer be exclusively the impulse for the national economic development, as well as the Bank of Mexico will have to look for new alternatives for the entry of oil in order to conserve national reserves.

Another thing that must be taken into account is the free trade agreement that Mexico has with the countries of the United States of America and Canada, since this initiative cannot be reversed with only the authorization of Mexico but will also have to have the approval of the other countries that are involved in the free trade agreement.

When the Mexican government has problems with oil companies and electricity companies, instead of being in national courts, it will have to be resolved before international arbitration and judged according to international law.

By accepting this initiative, by allowing foreign companies to exploit the country's natural resources, Mexico will lose the control it has over its natural resources. As well as the oil rent will be lower because we will share it with the big oil companies of the planet.

The nation of Mexico will not be able to impose itself with the interests expressed by the oil companies that are exploiting Mexican resources, In addition, companies such as Pemex and CFE will be at a disadvantage compared to foreign companies that even having equal conditions will have a disadvantage due to their lower economic expression.

In a nutshell, if the energy reform that President Enrique Peña Nieto proposed is approved, Mexico would be to give our wealth found in Mexico to foreign companies, Mexico could not have how the resources in the country would be exploited and in that case Mexico I would like to take back the reins of things, I would have to pass several international barriers that are imposed.

Positive aspects

Some positive aspects of the Energy reform would be that this with the income of foreign companies to the country would create new jobs in the country, as well as increase the production of gasoline in the country, this would cause that it would be required to import less saving billions of pesos that is spent annually

In addition to the fact that with the same thing that more gasoline would be produced in the country, there will be more for the country's consumption and the cost of the product would be lowered, in addition to that the decrease in the price of gasoline would allow the companies that use it to be able to invest in continue its growth and at the same time be able to generate more jobs in the country

Another thing would be that the reinforcement that Pemex would obtain by the federal government would increase the resources it would obtain and these could be used for the country's needs such as reducing poverty, creating hospitals, schools, improving water networks and giving water in places that still have no possibilities. to obtain this resource, etc., among other things that would improve the living conditions that Mexicans have

Based on other countries, the strengthening of Pemex would increase Mexico's economic growth rate.

conclusion

In my opinion, the energy reform will have both positive and negative consequences in the country, some positive aspects would be of great help to the citizens of the country since the decrease in the price of gasoline would help companies as well as people because it would help the investment thus creating new sources of jobs, but we would have to sacrifice the dominance that we have over the country's subsoil resources, and the income that the government would no longer receive from companies like Pemex since it would no longer be so high and this represents a great part of the total money the government receives in the year.