Mexico's energy reform will benefit U.S.: Column

• The energy reform proposal will bring dramatic advances to Mexico%27s energy market.
• It will open investment opportunities for American energy.
• It accelerates the already downward pressures on unauthorized Mexican emigration to the USA

Mexico's Congress paved the way last week for a deep, positive change. With all the bad news coming out of most everywhere else in the world, it is a relief to see a part of the western world where politics remain constructive.

The energy reform proposal will bring dramatic advances to Mexico's energy market, allowing private investment in the country's oil and gas sector for the first time since former President Lázaro Cárdenas nationalized oil in 1938. The reform will have profound economic implications for Mexico and the international energy supply equation.

It is also a coup for President Enrique Peña Nieto, 47, who successfully built a coalition with his main political rivals to pass the reform. In a move reminiscent of Nixon's trip to China, this youthful president of the same party that 75 years ago nationalized Mexico's natural resources accomplished a reform previously considered the third rail of Mexican politics. Indeed, the Peña Nieto administration is able to provide the United States and Europe with a Harvard Case Study on leadership, partnership and putting citizenship before partisanship.

Mexico's energy sector desperately needed change. Mexico relies on its oil revenues, controlled for the past 75 years by the state monopoly PEMEX, for a third of its national revenue. Oil is how Mexico pays for social investments like schools, hospitals and roads. But, for some time now PEMEX's production has been declining. Promising energy deposits, particularly in shale beds and deepwater wells, remain untouched because PEMEX needs the latest technology and financial capacity to profitably extract from these sites.

The approved constitutional reform to Mexico's energy sector will change this equation. The reform will allow private investment through various schemes: profit sharing, production sharing or in the form of a license. Mexico will benefit from the technology, financial and human capital to exploit its abundant energy deposits, not to mention from the royalties it will receive. Foreign and domestic private investors will benefit from entering a market with plentiful energy resources.

This is a win-win situation if there ever was one. The reform will open investment opportunities for American energy and service infrastructure companies that seek new energy markets. U.S. energy companies that have the experience in developing the exact same shale geology and similar Gulf of Mexico deepwater challenges will be in a privileged position to gain access to Mexico's market.

The effects will reverberate far beyond the energy industry. Some estimates predict the change will boost Mexican GDP by 2% and create 2.5 million Mexican jobs by 2025.

Mexico is already one of the world's top-15 economies, and energy reform clears a major hurdle for Mexico to fully reach its global potential.

A strong and prosperous Mexico is good for the United States in both security and economic terms. It accelerates the already downward pressures on unauthorized Mexican emigration to the United States. Some 17% of Mexicans moved into the middle class in the last decade. The economic opportunities of energy reform will accelerate this trend, opening new markets for U.S. companies with a free-trade partner just across our southern border.

Beyond the opportunities for the U.S. private sector, the change means the creation of stable and secure new sources of oil and gas adjacent to our border. It strengthens a growing North American energy zone consisting of Canada, the United States and Mexico that further chips away at U.S. dependence on Middle Eastern oil.

President Peña Nieto has had quite year. Before energy reform was approved, other important changes were made such as expanding competition in telecommunications, reforming the education system, and opening access to credit.

The job is far from over. The implementation of this reform will require technical and administrative oversight that is independent, separately-funded and run by experts protected from political pressures. Energy projects anywhere move a lot of money and they are often accompanied by the temptation to buy and sell influence.

Those decisions are for next year. For today, we can join in celebrating Mexico's success.

Peter Schechter and Jason Marczak are the director and deputy director of the Atlantic Council's Adrienne Arsht Latin America Center.

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