MercoPress. South Atlantic News Agency

Mexico breaks 75-year myth: opens energy sector to private and foreign investment

There were scuffles during the all night debate but the bill was finally by an overwhelming majority vote

Mexico's Congress approved on Thursday early morning a historic energy reform aimed at luring foreign investment and ending the state's 75-year-old oil monopoly following a heated debate. After a marathon session that lasted nearly 24 hours, the lower house voted 353 to 134 for the legislation championed by President Enrique Peña Nieto, one day after it passed the Senate.

 Supporters pumped their fists and chanted “Mexico!” after the vote, while opponents shouted “traitors” following a debate during which a couple of lawmakers scuffled and another stripped down to his underwear in discontent over the reform.

Peña Nieto welcomed the vote on his Facebook page, saying the reform marks “a fundamental transformation that will drive economic growth and generate jobs in our country.”

The constitutional changes must now be approved by a majority of 32 state legislatures, most of which are expected to back it.

The legislation is the centerpiece of Peña Nieto's reform agenda, which has led to overhauls of education, tax collection, banking and telecommunications to boost Latin America's second biggest economy.

But opening the oil and gas industry to private investment is a highly sensitive issue in Mexico, where many look back with pride at the expulsion of foreign companies by president Lazaro Cardenas in 1938.

Supporters of the reform insist that state-run energy firm Pemex urgently needs outside help to reverse a downward trend in production and drill for shale gas and deep-water oil deposits. Peña Nieto's historic Institutional Revolutionary Party (PRI) joined forces with their historical rivals, the conservative opposition National Action Party (PAN), to draft the reform.

“Transforming our energy sector is urgent,” said PAN deputy Juan Bueno Torio, noting that Mexico imports 51% of its gasoline and 75% of petrochemicals. Oil output has dropped from 3.4 million barrels per day in 2004 to 2.5 million currently.

The reform would let private firms explore and extract oil and gas, as well as share profits, production and risk with Pemex, ending a ban cemented in Mexico's constitution. The reform, however, says the oil will remain the property of the country.

Although it falls short of more controversial concessions, analysts say the reform's contracts and license schemes are more ambitious than Peña Nieto's original proposal, which had called for profit sharing deals.

The opposition Democratic Revolution Party (PRD), had called for a referendum on the reform, arguing that it amounts to a privatization of the oil sector and a give-away to US companies.

Lawmakers voted one by one by voice following a rowdy session held in an auditorium because two-dozen lawmakers had padlocked themselves inside the 500-seat chamber of deputies.

The lower house had given general approval to the legislation in a 354 to 134 vote late Wednesday and then proceeded to reject a series of objections raised by the opposition in an all-night debate.

The session took an unusual turn when PRD deputy Antonio Garcia Conejo took to the podium before dawn and removed his socks, suit and tie. Standing in his black underwear, he accused the ruling party of having “stripped down the nation” with past privatizations of telecommunications. Two other lawmakers, leftist Karen Quiroga and PRI deputy Landy Berzunza, scuffled during the session, leaving Berzunza with a scratched retina.

The passage of the bill meant the end of an unprecedented accord between the PRI, PAN and PRD that had led to the passage of political, education, fiscal, telecoms and banking reforms.

“The Pact for Mexico is dead,” PRD president Jesus Zambrano told reporters. Zambrano said his party would send a letter to international oil companies, warning them that they would call for a referendum in 2015 to repeal the reform.