Mexico's Economic Reform: Energy and the Constitution

Oil is a fundamental component of nationhood in Mexico. The 1938 expropriation of oil resources concluded a process of internal political consolidation and thus became the most important symbol of nationalism. Mexico has been undergoing a process of economic reform that has altered the country's economic structure and has subjected it to international competition. Oil in particular and energy in general have been left untouched. There is recognition that without an equal reform of the energy industry, the potential for success will be significantly limited. While the Constitution allows private investment in the industry-with the exception of the resource properties themselves--the Regulatory Law bans any private participation. Because of its political sensitivity, however,amending the law in order to reform the oil industry will necessitate a domestic initiative rather than foreign pressure. In this perspective, NAFTA served to slow and postpone the reform of the industry, rather than the opposite. Once NAFTA is well in place, the industry will have to face competition.