Mexico’s energy reform will impact the global energy markets as well as the economies of Mexico and the United States.

BY BEATRICE E. RANGEL

In his book The End of Power Moises Naim asserts power to be “..the ability to direct or prevent the current or future actions of other groups and individuals.”

This definition places the President of Mexico Enrique Peña Nieto at the zenith of power not only in Mexico but the region, as he has directed his country into a promising geopolitical path that is bound to reshape the energy landscape in the Western Hemisphere.

GLOBAL IMPACT

To be sure, the passage by the Mexican Congress of the Energy Reform Acts sets the stage for the brisk development of an energy multilateral mega power integrated  by Canada, Mexico and the United States. This will bear a direct impact upon three world players. First comes Saudi Arabia whose geopolitical weight and capacity to influence world events will enter into a deflating mode. Second comes Brazil, as the development of Mexican oil and gas fields as well as shale oil reserves will bring to the forefront how prohibitively expensive that country’s pre-salt oil fields are to exploit. Third, of course, is Venezuela whose relative weight as oil procurer to the US has consistently fallen over the last decade as a result of  US strategies to reduce dependence on imported oil and the Venezuela government push for high oil prices. All these impacts will create a very different energy portrait in a decade.

LOCAL IMPACT

But perhaps the most important impact that president Peña Nieto’s effective wield of power will be borne upon his country.

From the political view point the passage of energy reform heralds a new stage in political development. It created the conditions for political actors to define themselves in favor or against modernity. With polls showing that the overwhelmingly young Mexican population had  a weak emotional attachment to Lazaro Cardenas’ legacy, President Peña Nieto pushed forward with reform. This allowed him to corner the cardenista faction inside his own party. The government pro-reform drive was strengthened by a series of well publicized corruption scandals and power abuses perpetrated by Pemex union leaders that turned the non-believers into supporters of change.

Political parties had to define themselves vis-à-vis their constituents as the Mexican government pushed forward, given that many leaders in the center-right PAN had verbally supported reform in the understanding that it would never happen. Also left wing leaders that had been publicly against energy reform found many of their constituents enraged by their posture.

ECONOMIC IMPACT

Another important domestic impact that has perhaps been better recorded and followed will be felt in the economic realm.  Not only will reform initiate a new wave of growth beginning at the end of 2014, but energy development will speed up industrial redeployment in the US. As a result, there will be an important stimulus to the US  growth  rate  by 2015 that will feedback the Mexican development.

A virtuous circle will emerge whereby energy FDI will trigger investment in non-energy activities; this will boost aggregate demand while improving US competitiveness. In sum, as Paul Valery would put it:  Energy reform will bring about a development revolution that “will not proclaim itself with the thunderous clamor of cannons but will happen softly as doves walk.”  

Beatrice Rangel is CEO of AMLA Consulting Group, a business development advisory firm in Miami. She wrote this column for Latinvex.

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