Congressional Negotiations with Costly Voting: Understanding the Reforms to PEMEX in 2006–2008

The state-owned petroleum company in Mexico has played a fundamental role in the economy, but its productivity has been worryingly in decline. Several presidents of Mexico before Felipe Calderón tried to modernize Pemex but they failed to pass any meaningful legal reform through Congress. In this chapter I explain why Calderón was successful where other presidents were not. At the same time, I explain why Calderón’s successes were not as large as they could have been: indeed, the legal reforms to the Mexican oil industry in 2006–2008 were not as profound as they were expected to be. I claim this was due to the costs that political conditions imposed on congressional negotiations. Irrespective of their preferences, legislators faced punishment by radical political leaders and passionate voters if they supported Calderón’s initiatives. At the same time, some pivotal negotiators in Congress were able to extract significant side payments for their support of government initiatives. To clarify these complex dynamics, I use the traditional concepts from spatial voting theory: I identify the main issues regarding Pemex; the main political agents in charge of reform; and the positions of these agents on those issues. I also propose a modeling innovation to the traditional spatial theory of voting, which consists on considering the punishment that legislators may incur from supporting a bill that they like. With these theoretical tools I am able to explain the puzzling coalitions that were formed for the 2006 budget law, the 2007 fiscal reform and the 2008 energy reform. I suggest that these same theoretical tools could be used to understand congressional negotiations in other contexts.