Mexico’s biggest boom in a century?

Forbes has a breathless article on Mexico called “How Oil Reforms Could Trigger Mexico’s Biggest Economic Boom In A Century.”

It is still far from certain that EPN can get serious oil reform through the Congress, but if he does, then it’s true that Mexico’s fortunes will change for the better.  Still, I’m skeptical of the following claim:

“Not only will it be bigger than the revolution in shale drilling and fracking has been in the United States,” says Duncan Wood, director of the Mexico Institute at the Woodrow Wilson Center, “This will be the most significant change in Mexico’s economic policy in 100 years.”

What is fascinating though is EPN’s genius spin on these reforms.  President Lazaro Cardenas is still hailed as a hero for taking over Pemex in 1938. Nationalization was so popular that the day is still commemorated in a national holiday. What is less known that in 1940, Cardenas changed the laws to allow Pemex “to enter into production-sharing and profit-sharing contracts with private, Mexican-owned companies.”

It was President Ruiz Cortines in 1958 who modified the law to essentially eliminate the possibilities of such contracts.  So Peña Nieto has positioned himself as a latter day Cardenas, or at least a man intent on restoring Cardenas’ original intent with respect to oil.  Duncan Wood has a great quote where he “likens Peña Nieto’s political performance to Jesus Christ’s miracle of raising Lazarus (or Lazaro) from the dead.” As he concludes, “They know how to put on a show.” That they do.

oil_nationalization

Mural of Cardenas signing into law oil and agrarian reforms.

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