Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

Mexico’s Energy Reform: Few solutions, but better conversations

by Shannon K. O'Neil Friday, October 31, 2008

Mexican President Felipe Calderon (L) and his Energy Minister Georgina KesselThe Mexican Congress approved a long-overdue energy reform on Tuesday October 28 following 6 months of debates, referendums in 8 Mexican states and Mexico City, and numerous public demonstrations from both sides. While some newspapers tout the government got 80% of the reforms it asked for, Calderon started with an already limited proposal, rejecting any foreign investment in production, which would have required substantial changes to the 1938 constitutional amendment governing Mexican oil. The shared risk/shared reward bargain present around the world, and with other state-owned oil companies such as PETROBRAS in Brazil and PDVSA in Venezuela, was never on the table in Mexico. Even so, the “20 percent” that the President conceded to the PRI and PRD in Congress was an important part. The final bill , and soon law, prohibits private companies from operating refineries and transporting oil within Mexico. It allows Pemex, Mexico’s state-owned oil company, to contract with other companies for some (but not all) types of desperately needed investment in exploration and production, leaving out in particular difficult deep water explorations. The approved reform also sets up disincentives to contracting with Pemex at a time when capital and credit are limited. It mandates that contracted companies must be paid in cash and forbids paying them based on the amount of oil found, produced, or sold by Pemex, although it does offer bonuses for early completion of projects and transferring technology to the Mexican oil company. While the reform does give Pemex more financial autonomy and greater flexibility – allowing it to keep more of its profits so that it can use them for investment in technology and exploration – the company’s employees currently lack many of the necessary skills to realize these new opportunities. So, in the end, production will continue to decline. Read more »

Corruption in Mexico's Attorney General's Office

by Shannon K. O'Neil Wednesday, October 29, 2008

Mexico’s attorney general said yesterday that employees of his elite force to combat organized crime, SIEDO, passed confidential information to the Beltran-Leyva cartel in what has been described as the “worst case of infiltration of law enforcement by drug cartels in 10 years.” This is what I had to say about this for PBS’s new show WorldFocus last night.