While Congress was congratulating itself on reaching a minimalist budget deal, Mexico demonstrated how a more functional democracy can tackle a nation’s biggest problems.
The ruling Institutional Revolutionary Party, or PRI, and the opposition National Action Party, or PAN, joined last week to pass a constitutional amendment dismantling the state’s monopoly on oil production. While the fight’s not entirely over, the action is a triumph for President Enrique Pena Nieto, and it opens the door for a Mexican economic takeoff.
Using terms like functional or democracy to describe Mexico would have been far-fetched not so long ago. Not until the 1990s did the country have genuinely free and competitive elections, and when the PRI was finally ousted from power by the PAN, the result was gridlock that left long-festering problems unaddressed.
Chief among them was the state oil monopoly Pemex, which lacked the capital or expertise to develop new fields offshore and was hamstrung by a constitutional commitment to nationalization.
Pena Nieto, who took office a year ago, managed to break the impasse by fashioning Mexico’s version of a grand bargain. The parties agreed on a series of groundbreaking reforms in education, taxation, banking and telecommunications.
While some reforms were watered down, the oil reform was made more ambitious. Foreign firms will be able to partner with Pemex and book expected revenues from production for accounting purposes, a key to obtaining financing.
The notoriously inefficient Pemex will have a revamped governance that eliminates union members from its board. Private companies will compete to supply electricity to the national grid.
The courage of the reforms can be seen in Pena Nieto’s lackluster opinion polls: The payoff will mostly be in the longer term, so most Mexicans have yet to see tangible improvements. Economic growth has been lackluster in the past year and the drug war drags on. It’s still possible that the oil reform could be stopped.
For now, however, Pena Nieto and his coalition can savor a historic breakthrough that positions Mexico to return as a major oil producer, attract billions in investment and modernize its economy.
The Washington Post (Dec. 16)