Twenty-six pages dealing with a statement of purpose: two Constitutional paragraphs modified. This was the “energy reform” presented by President Enrique Peña Nieto on August 12th. During his speech at the official residence of Los Pinos, Peña Nieto used several rhetorical tools directed towards the general population and mass media, instead of potential investors. The Head of State spoke about creating “hundreds of thousands of jobs”, of following “word by word” the 27th Constitutional article, issued by the father of oil expropriation, Lázaro Cárdenas and highlighted the concept of shared utilities contracts (though the proposed changes to the Constitution are not specified anywhere). The subsequent answers followed a peculiar pattern. Firstly, none of the aforementioned reform overexcited financial markets, which was reflected on some reactions by international press. Afterwards, comments disapproving the reform such as “unattractive”, “falling short of expectations” and even “disappointing” appeared. By the third day, there were applauses on one side and doubts over the ability of government to carry out an integral project, that is to say, accompanied by secondary legislation, able to satisfy all expectations. Nevertheless, the Executive Power’s strategy seems to recognize, in a clearer way than past administrations, the importance of setting the reform at two essential timings: political and technical.
Changes to the 27th and 28th Constitutional articles break the fundamental taboo of “oil nationalism”: the expressed ban of private participation, domestic or foreign, in the hydrocarbon extraction chain. It has been said that such an action would contradict the President’s statement regarding the Cárdenas-like spirit within his reform: it does not. The restriction of signing any type of contracts within the oil industry can be traced back to the Constitutional reform issued in 1960, not the laws immediately arising from the expropriation decree of 1938. As a matter of fact, in the two following decades after Cárdenas expropriation decree was issued, PEMEX signed different contracts – even “shared-risk” ones – with private entities. It is also true that abuses derived from some of these contract operations fostered the prohibition issued by López Mateos in 1960. But the fact that a part of the Cárdenas text is being followed “word by word” cannot be argued.
Despite the fact that removing the main obstacles for private investments in the energy sector is not a minor issue, specific details for these operations remain to be seen. In the case of hydrocarbons, even though the statement of purpose outlines matters such as shared utilities contracts, the rethinking of PEMEX tax regime (which could be included in the coming tax reform), and an eventual compensation scheme for those workers that account positive results in exploration and production, nowadays it is futile to foresee what would be the actual scope of the reform. Though opening up the sector is a clear objective, an integral vision that would suit potential investors doesn’t seem as obvious.
Nevertheless, leaving the fine points of the energy reform for a better time doesn’t seem mistaken at all. Modifying the Constitution, not only in Mexico but in many countries worldwide (where there exists some sort of opposition, of course) is quite an ordeal. Congress should approve with a qualified majority – two third parts of quorum present at the time of voting – a single draft in both Chambers. From that point on, it will pass to local Congresses in order to be given clearance in at least 16 of the 31 legislative chambers. With the current conformation both within the federal legislative power as well as the local, the consensus of PRI, the Green Party, PANAL and one of the main opposition parties, who, by pragmatic coincidences would turn out to be PAN. In the other hand, with the aim of green-lighting the secondary laws, where all the substance of the reform would be contained, it will only take to pass its drafts with simple majorities at Federal Congress – 50% plus one vote, a number guaranteed with PRI and its allies – and there will be no need to pass it over local Congresses.
Overall, the government intends to reduce the size of the “bitter spoonful” of a Constitutional reform, but leaving the true “cure” in less stormier procedures. Street protests will follow, whether the Constitution is modified or not, even without taking into account the details that may come afterwards. If Peña wants to be successful in this process, its cost should be assessed and assumed. Given the fact that the political cost of approving a good reform is just the same as approving a bad or insufficient one, the question is whether he has proposed to set out the best possible.
CIDAC
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