Enrique Pena Nieto, the president of Mexico has promised to take drastic measures in an effort to amend the Mexican constitution in order to allow for private investment into the oil sector for the first time since 1917. Mexico, the sixth largest producer of oil in the world and the tenth largest exporter of oil in the world, has one of the most notoriously statist approaches to it's oil industry compared to the rest of the world's nations. In 1917 the congress passed Article 27 which granted the government of Mexico complete and permanent rights to all subsoil resources which in effect nationalized the oil industry. So if you were a land owning farmer in Mexico who was sitting on an underground pool of oil, well that's just too bad the rights to that oil belongs to the government. On top of the blatant disregard for property rights Article 27 also disallowed foreign companies to invest into Mexican oil. The state run Petroleos Mexicanos, aka Pemex, is the sole provider for commercial gasoline in the entire country and the only oil field operators in the nation.
The historically inefficient nationalized system is now failing the people of Mexico. Without any foreign investment, exploration, risk based production contracts, or joint ventures with larger international companies, production of oil in Mexico has been on a steep, steady decline since 2004 where it peaked at 3.5 million barrels of oil being produced per day to today where only 2.7 million barrels are being produced. This drastic slowdown in production has brought pain to an already stagnant economy since oil accounts for close to a quarter of Mexico's entire GDP and 10% of it's total exports. The Mexican economy as a whole has contracted by 6% since the begin of the Pemex decline. While some hardline nationalists and Pemex supporters have blamed the slowdown on “Hubbert's Peak,” a theory that supports peak oil and that reserves are being tapped out since production follows a bell shaped curve, independent geophysicists and oil consultants have reported that Mexico is in fact sitting on at least 45 billion barrels of untapped oil and has 500 trillion cubic feet of untapped natural gas.
President Nieto is doing right by the people in leading an effort to amend the constitution (an amendment which is expected to be passed by the congress later this year) in an effort to bring positive growth back to the Mexican economy. With larger more efficient oil companies such as Exxon Mobil, Petro China, and British Petroleum being able to explore, produce, and refine oil alongside Pemex there will be a boom in productivity and jobs. Revenues for the government which have fallen 11% since the oil slowdown of 2004 would also rise with a new generation of high wage earners working the fields in various capacities. On the denationalization of the oil industry, Duncan Woods of the Mexico Institute at the Woodrow Wilson Center says “This will be the most significant change in Mexico's economic policy in 100 years.”
Free markets have always lead to prosperity, economic opportunity, and civil liberties. With an open market in the Mexican oil industry many other industries and individuals will also benefit. Private companies will compensate individual land owners for the rights to the oil under their land. Lower skilled workers in rural Mexico will have an opportunity to make a better income working the fields. Worldwide talent will be drawn to Mexico to support operations and other technical business matters. Companies like BRIC Language Systems, ACEC, and various Mexican based housing firms will play a supporting role in the cultural and technical training employees will need for a booming oil sector in Mexico.
Enterprising individuals who look globally will find opportunity. It's all over the world in a multitude of emerging economies. Lead by the wisdom of President Nieto to bust the nationalized oil industry in favor of a free market, Mexico is going to be one of those places where opportunity awaits.