Mexico Approves Oil Law Amid Passionate Protests

By Fusion Staff | December 13, 2013 | 3:47pm

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Mexico has approved an energy reform bill that will allow foreign companies to invest in its oil fields for the first time in decades.

The reform, which was a top priority in President Enrique Peña Nieto’s agenda, was passed by Mexico’s Congress amid passionate, and bizarre protests that were staged inside and outside congressional buildings. [See the video above for more on that.]

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Many in Mexico think of oil nationalization as a critical part of the country’s independence, and they’d rather see the state-owned oil company, Pemex, manage all of the country’s oil wealth.

With the reform passed on Thursday foreign companies will be able enter into contracts with the Mexican government which allow them to inject money into oil projects, but also enable them to keep a significant share of profits.

For some people this is the equivalent of privatizing Mexico´s oil reserves.

“I am very, very sad,” said a middle aged protester, who grabbed a large tree branch and banged at a metal barricade placed outside the Senate, put there to keep angry people from storming the building. “How am I going to explain this act of treason to my children?”

The government argues that Mexico needs foreign companies to invest in its oil infrastructure, and conduct offshore oil exploration. Oil production in Mexico, which is currently monopolized by Pemex, has decreased by 25 percent over the past ten years, due to the state-run firm’s mismanagement and lack of technology.

Protesters and leftist politicians in Mexico would rather the government improve Pemex and keep all the oil state-owned. They’re concerned that national oil revenues will decrease if foreign companies like Chevron and Exxon are allowed to set up shop in Mexico, forcing taxpayers to pick up the bill for government services currently paid for by Pemex.

“We are going the opposite way of the world,” said Emmanuel Lugo, a college student who attended a protest outside the senate. “There are countries like Argentina who are nationalizing their oil now.”

The Mexican government argues that foreign investment will increase oil production and create jobs in Mexico. It also says that it will be able to pay for more public services and invest in the country’s infrastructure, with taxes it levies on the oil industry.

The protests this week were led mainly by leftist political parties. In Mexico City, which has a population of 18 million, protest leaders failed to rally more than a couple of thousand people at any time.

Despite the small numbers, the protesting went on for days, with different contingents of supporters of the leftist Democratic Revolution Party marching around Mexico City´s Independence Monument throughout the week.

Supporters of other leftist movements gathered in front of the Senate and banged away at a security barricade placed in front of the building.

It’s difficult to tell what most Mexicans think of the energy reform bill, as opinion polls on this law vary wildly. One poll, conducted in March by an NGO called Alianza Civica, suggests for example that 80 percent of Mexicans are against opening Mexico’s oil to foreign investment. Meanwhile, a poll conducted in August by Excelsior newspaper says that 63% of Mexicans approved of the president’s plans for oil reform.

There’s one thing that’s clear about this energy bill though; it’s passage is a big blow for left wing parties in Mexico who have opposed it since the start, and were easily outnumbered in Congress by supporters of the law.

Time will tell if Mexico wins or loses with this energy reform. Currently opinions on its possible impact are split. You can read more about how the law could help here. And here´s some info on the risks.

Manuel Rueda is a correspondent for Fusion, covering Mexico and South America. He travels from donkey festivals, to salsa clubs to steamy places with cartel activity.