PEMEX has been boosting exploration budgets significantly since 2006 without a corresponding boost in production, in fact, the numbers have been deteriorating. The larger picture, for our Mexican cousins, is the evolution of Mexico as a market with a rapidly advancing skilled workforce strategically placed with new land bridges connecting Atlantic and Pacific shipping lanes through powerhouse ports like Lázaro Cárdenas and Veracruz.
Mexico is growing quickly and Mexico needs to pay for infrastructure to underpin a rapidly growing economy. The trend to on shore is gaining momentum and I see very bright days ahead for North American manufacturing. Mexico's manufacturing sector is gaining steam and Nissan's CEO recently announced that Mexico would soon overtake Japan as an export base for Nissan vehicles. The trade growth of Mexico has seen investments in rail, roads, and inland port infrastructure to support the rapidly growing economy. A fine example that defines both economic growth and global integration of Mexico is their container traffic growth.
|Port of Lázaro Cárdenas|
|Mexican & Canadian TEU Growth 2000 - 2011|
source: Port Alberta
|Guanajuato Inland Port|
The dialogue in Mexico is not related to the ownership, per se, of the petroleum resources themselves, but rather, it is an accommodation that allows private companies to partner with PEMEX, which allows the private partners to declare reserves for the purpose of stock valuation while the citizens of Mexico retain their "ownership" of the actual hydrocarbons. Sounds a bit complicated, but it's not complicated. At the end of the day, the private interests that would invest heavily in Mexican oil are simply looking for a fair deal before they start pumping billions of dollars into Mexican investments.
I believe the parties can come to a political settlement, but it won't be without some discussions and concerns. To start with, there is a huge legacy where oil is concerned in Mexico. Lázaro Cárdenas, the President who nationalized Mexican oil is considered a political and social reformer and is widely lionized as a hero of the Mexican people. He occupies a very important part of Mexican history, and it is his legacy that is linked with land reform, the rights of industrial workers, unionization rights, and the nationalization of the railway. Perhaps one of the most important legacies of President Cárdenas was the expropriation of equipment and declaration that the petroleum reserves of Mexico were nationalized. Over seventy years later, PEMEX, the state run Mexican oil company, still stands as a legacy of President Cárdenas.
|President Lázaro Cárdenas|
|Senate of Mexico|
The Mexican oil and economic boom I sense could be right around the corner. Before Christmas, Mexicans should know the type of reform their President will sign.
If there is any predictability in the stock markets, the Mexican Peso was up today almost 1% as we move into the decision time frame. But even if the decision to reform the energy sector emerges and is signed by the President, the Mexican Senate was given 1.7 million signatures, a threshold dictated by the Mexican Constitution that would call for 2% of signatures of registered voters are required in order to bring public consultation. And just as the role call was being taken on the debate, I lost my feed from the Senate that was streaming beautifully from the Canal de Congreso. I thought the debate was very thoughtful, there was a minimum of emotion, and the leaders of the great nation are debating some of the most critical legislation I have ever, in my entire life, witnessed in the history of Mexico. And as much as I would love to stay until the very end of the session... actually, they're voting now. I'll stay. If it's a yes vote, then the title of the article will be Si! And I'm pleased to note that a few minutes ago, the legislation to reform elections, the main "political deal" that will allow energy reform to go forward, was passed by a vote of 106-15.
|Citizens protest the reforms|