Mexico Congress approves oil bill breaking 75-year monopoly

Job Creation

The peso appreciated for the first time in three days, gaining 0.1% to 13.0282 per U.S. dollar at 12:43 p.m. in Mexico City. The nation’s stock market is closed today for a holiday.

The energy overhaul probably will be ratified by a majority of Mexico’s 31 states early next year, with the first contracts based on its model ready by the end of 2014, Alexis Milo, chief economist at Deutsche Bank Securities Inc. in Mexico City, wrote in a research note.

The overhaul “will increase the availability of energy for Mexicans, at more affordable prices, and increase oil and natural gas production,” Eloy Cantu, a PRI lawmaker, said during the bill’s debate. It will “generate greater economic growth that will lead to job creation,” he said.

Before today’s final passage, the bill received approval in general terms in a 354-134 lower-house vote late yesterday and was passed by the Senate two days ago.

Bill’s Opposition

The proposal was supported by the PRI, the National Action Party and the Green Party. The Democratic Revolution Party, or PRD, and smaller allied parties say Mexico should hold a voter referendum on whether to allow private investment in the energy industry and that the debate should have first gone through lower house committees.

PRD lawmakers and allies forced yesterday’s legislative session into a cramped alternate auditorium at the lower house complex in Mexico City after seizing control of the main legislative chamber in a bid to prevent the bill from being debated.

“You’re traitors to your country,” Ricardo Monreal, a Citizens’ Movement lawmaker who opposes the bill, shouted at rival legislators after they assembled at the alternate location.

Stripped Wealth

Antonio Garcia, a PRD lawmaker, stripped down to his underwear during a speech before the lower house today to symbolize the bill stripping the nation of its wealth.

Manlio Fabio Beltrones, leader of the PRI in the lower house, said the PRD’s seizure of the chamber was undemocratic and that lawmakers had a right to skip the committee stage and proceed to a full house debate.

Mexico is the world’s ninth-largest oil producer, according to the U.S. Energy Information Administration, and possesses the biggest unexplored crude area after the Arctic Circle. Industry analysts and the bill’s authors say the overhaul will reverse eight years of oil output declines for Pemex and increase production to as much as 4 million barrels per day by 2025.

“With reform there will undoubtedly be a spurt of production growth as Mexico is a very rich hydrocarbon area both onshore and offshore,” Ed Morse, the New York-based head of commodities research at Citigroup Inc., said in a phone interview. “Realistically, it could double the amount of oil that Mexico produces.”

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