Lessons from Mexico’s Oil and Gas industry…possibilities for Guyana

Oct 21, 2021 Letters

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Dear Editor,

Even as we think of the possibilities for Guyana as a new oil and gas producing and exporting country and what governance structures would be best to ensure that all Guyanese benefit from the country’s wealth, I would like to focus this letter on some lessons from reforms in Mexico’s oil and gas industry which presents possibilities for Guyana.
These are mostly extracts from an academic assessment I did on Mexico, one of the world’s leading oil producers, ranked tenth worldwide and the top oil producer in Latin American and Caribbean. Its crude reserves in 2013, was documented at 10.1 billion barrels and 17.0 billion cubic feet of natural gas. The population of Mexico is about 126 million and its Gross Domestic Product (GDP) in 2020, was 1,076 trillion US dollars.
The study was basically a rapid legal assessment of the reforms in the Mexican energy sector from 2013 to December 2019 and examined what further reforms could be undertaken to encourage broader and fairer distribution of growing revenues as a result of those reforms. I am sure that Mexico presents a good example for Guyana in terms of an inclusive approach to the kinds of reforms necessary, as well as developing a more equitable system of wealth distribution for the country. For almost 80 years, there has been a deadlock over Mexico’s energy sector and several efforts to reform the nationally owned Pemex, were unsuccessful or partially successful. The energy sector, specifically oil, was the centre stage of controversy in various chapters of Mexico’s modern history. A critical point to note is that the fragmented and predominantly tripartite nature of politics in Mexico has had important legislative ramifications. Since 1997, no president has had a congressional majority, and consequently major reform measures were either blocked or diluted.
After decades of the myths and taboos about the Mexican energy sector, in December 2013, the legislature in the state of San Luis Potosí voted in favour of constitutional amendments and reform measures. The approval by the state-level legislature was the key moment in what was described as an audacious endeavour by the new administration, as it observed its first year in office and saw twenty-four out of thirty-two states and federal districts ratifying the reforms. The Pacto por Mexico, or Pact of Mexico, which was the agreement between the three major political parties and which allowed for the reforms, ushered in a new era of changes in the economic structure of the energy markets and opened the hydrocarbons industry in Mexico. The reforms were a paradigm shift in the way the country’s energy sector operated; it was now aimed at attracting private investment through market competition and liberalisation.
It is important to note that the Pact of Mexico was signed the day after the new administration, the Institutional Revolutionary Party (PRI), came into office in December 2013. The other political parties to the pact were: the Party of the Democratic Revolution (PRD) and the National Action Party (PAN). The agreement provided an immediate political and strategic roadmap for the PRI and included timelines and goals for translating it into policy and delivering fiscal, education, political, and energy sector reforms. The reforms were essentially, to establish largely autonomous, independently funded regulators for licensing, safety, and environmental protection in the energy sector. The reforms also established new regulations, which would provide a basis for regulators to supervise the opening of the sector to greater competition and more efficient use of national resource wealth. Implied in this initiative was that these reforms would result in a broader and fairer sharing of wealth from the energy sector.
A key factor to note is that Mexico’s energy sector is owned and operated by the Federal Branch and the reforms of 2013 open the doors of the sector to private investment. Constitutional amendments and the complementary secondary legislation facilitated legislative, institutional, as well as administrative changes and broke almost four decades of myths and taboos. A profound point to note is that key stakeholders were institutions in the Federal Branch, as well as political parties. At the institutional level, the reforms facilitated constitutional reform, new legislations and regulations, and give greater autonomy to and created new independent regulatory and financial agencies. The history of the United Mexican States (Mexico) will record 2012 as a groundbreaking year. In December 2012, leaders of Mexico’s three most prominent political parties at that time, agreed to and signed on the Pact of Mexico and this set in motion a new path for Mexico and its economy.
Guyana has an excellent opportunity to evolve as one of the best examples of a resource-rich, and more specifically, an oil producing country. However, it would require a high level of political and leadership maturity, whether there is sufficient awareness, conviction and commitment to the fact that it is only through an inclusive governance approach that Guyana and Guyanese would finally realise the potential that we have been talking about since Independence on May 26, 1966.
Can Guyana break the myths and taboos that the Peoples National Congress (PNC) and People’s Progressive Party (PPP), and Afro-Guyanese and Indo-Guyanese; and all six ethnic groups cannot work and govern together, for the happiness and prosperity of Guyana?

Yours faithfully,
Citizen Audreyanna Thomas

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