Results from the first phase of unofficial referendums on oil privatization are in. More than 83% of citizens of Mexico City said no to the questions: “With the whole cycle of oil production under state auspices, do you agree that the private sector should play a role?” and “In general, are you in agreement with the proposed energy reforms in Congress?”
This is the first of three referendums, with the other two taking place on August 10th and 24th. Although they do not carry legal weight, the first “no” will pose a serious annoyance to the Calderon administration's proposed reforms to keep Pemex in the black. Since 2005, “daily [Pemex oil] production has dropped more than 300,000 barrels per day, or some 10% of the total” (see Economist article here).
That said, Mexico's economic policy is a paradox. The country that has the world's most free trade agreements (see post here) is also the same place that appears to vehemently oppose private sector participation to keep Pemex afloat, despite heavy losses in spite of all-time highs for oil prices.
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Just a clarification. I’m not sure where The Economist got the figure 300kbpd decline since 2005. maybe the author was looking at a boe basis including natural gas. But the real story here is crude oil production, which accounts for almost all of Pemex and Mexico's oil exports and foreign currency earnings. Crude production already fell 226kbpd in 1H08 compared to 2007 and 400kbpd since 2006. Export barrels are down 336kbpd. On an annualized basis, the decline in exports will cost the Mexican government $8bb in revenue in 2008 alone.
This is the real problem. The government is dependent on oil, and these forgone windfall profits could be used to tackle serious infrastructure deficiencies and social needs. Too bad the PRD seems obsessed with the antiquated idea that oil must be produced by the government to benefit the people. Bottom line is, if you don't invest and can't produce, noone wins.
Thanks for that information! You’re absolutely correct that the possibility of windfall profits could do so much to improve the country's infrastructure. I’m reminded of the early 1980's when oil prices were high and the country was growing, only to face the oil price collapse.
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