Mexico’s Energy Reform of 2014: When Will It Lead to Market Dynamics?

For decades, Mexico’s needs for electricity and petroleum products have been managed by the state in all phases, from the generation of power to the pricing of the kilowatt-hour and from the exploration and extraction of oil to the price of gasoline at the pump. Critics of this policy framework claim that Mexico’s society and economy have paid a terrible price for this utopian vision. It has stifled innovation, restricted capital deployment, and left Mexico’s consumers at the mercy of international indexes for the pricing of their energy products. In this issue brief, I will examine the signals—those in writing and otherwise—that are conveyed by the energy reform package that was promulgated on August 11, 2014. There are two areas of concern: theoretical and contractual. I want the energy reform to succeed—to surpass expectations—but I see limitations in law, institutional design, and policy that may delay, if not derail, its success