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January 22, 2014

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Very interesting post, and I believe most Mexicans would tend to agree (though SENER won't publicly say so). Now the tight and deepwater oil part would be even more interesting...

Wouldn't the most important aspect of shale gas be to support domestic industry and expanding electric generation? I'd think that when it comes to natural gas, exporting is probably not a reasonable expectation (speaking without one whit of knowledge of what Mexico generates and what it consumes).

Ah, reading that update closer, it seems you may agree...

The Energy Reform it´s important for México because it breaks away from old oil nationalism and it will open opportunities that otherwise would have never been there.
However, ¿does it really matter that much for a country whose income from auto exports double it´s oil exports´s income? More than 85% of Mexico´s exports are manufactured goods and the country keeps opening factories to produce more cars (this week Honda opened a plant, Audi´s opening another one, BMW is considering opening one, etc), but also aerospace industries are settling here too, and not to mention the country´s already a leading producer of televisions, microwave ovens, refrigerators and the like.

In my opinion, the state is continually reforming the tax code to move from depending on oil revenues to fiscal revenues from an expanding industrial base.

Chapo Guzman has just been arrested, Zeta´s leadership was also taken down by Calderon´s war on drugs, along with many other cartel leaders and there are new police forces with more training and fire power being trained in many states, specially border states, so the state is moving in to retake power we once lost to cartels. Mexico´s changing, I don´t see everything in a positive light, but I do believe the country´s moving and changing, sometimes slowly, but building better institutional frameworks to cope with the challenges we face.

In the end, I agree with you, it´s likely that Mexico won´t see any benefits from shale deposits, but at the same time, the country´s industry stands to benefit from an efficient shale gas and oil industry across the border, already pipelines are under construction in Los Ramones and in Sonora to take advantage of cheap gas prices, a quarter of what Mexico is already paying for to bring it from Peru and other nations.

Great post by the way.

Thank you! I read about Chapo this morning. It's interesting; I should probably write something.

You're right that both past administrations have pushed big fiscal reforms through Congress ... but Mexico still depends on oil for a third of its tax revenue. That isn't going to change radically in the near future.

In other words, I agree that energy reform is only important in terms of tax revenue ... but for the next decade or so that revenue will still be vital.

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