Legal framework governing Mexico’s energy industry has changed dramatically

The general legal framework governing Mexico’s energy industry has dramatically changed since the implementation of the country’s energy reform in 2013, according to a new paper from the Mexico Center at Rice University’s Baker Institute for Public Policy.

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“The New Energy System in the Mexican Constitution” was co-authored by Jose Ramon Cossio Diaz, a Supreme Court justice of Mexico, and Jose Ramon Cossio Barragan, a lawyer in Mexico.

The paper identifies the main constitutional elements of the Mexican energy system and considers the main aspects of the legislative process that led to constitutional reforms.

Mexico’s energy sector had been under strict governmental management since 1938. This changed in 2013 and 2014 when Mexico amended its constitution and passed legislation overhauling its energy sector to allow private and foreign investments.

The purpose of the study was to abstract the legal categories of analysis for these constitutional amendments and not to identify the determining factors for the political, financial or economic decisions that motivated the reform, the authors said. They separately considered the two most important sectors of the Mexican energy system since the constitutional reform went into effect: the hydrocarbons sector and the electrical industry.

The authors reached the following conclusions:

— The general legal framework has dramatically changed, since the status of oil and hydrocarbons or those of activities and services remain under the exclusive property or control of the Mexican state.

— People enjoy wide-ranging possibilities of participation with respect to the goods or the performance of the activities in the petroleum and electrical sectors.

— A new and complex network of state agencies was established to participate and/or regulate the natural resources and the direct activities of each of the sectors.

— Additional agencies and companies were created regarding the actions required to fully cover the goods and activities linked to these sectors and the effect that their actions must generate.

— The basic structure and competitive environment of all the created bodies is designed more to enhance the effectiveness and operation of the corresponding sectors than to control participants.

The paper was written for a Mexico Center research project examining the rule of law in Mexico and the challenges it poses to implementing the country’s energy reform. The project’s findings are compiled in a Spanish-language book and are being posted on the Baker Institute’s website in English.