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PEMEX REFORM

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UNIQUENESS

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1NCNieto’s energy reform will pass now- political capital keyHernandez 13Maria Jose, analyst in Eurasia Group's Latin America practice, holds a master's degree in public administration and economic policy analysis from the School of International and Public Affairs (SIPA) at Columbia University, “Politics and Oil: Mexico's Road to Reform,” 2013, http://eurasia.foreignpolicy.com/posts/2013/06/20/politics_and_oil_mexicos_road_to_reform

Is Mexico finally on the verge of a historic reform push? Expectations are on the rise, and for good

reason . In office just over six months, President Enrique Peña Nieto has taken steps that suggest he is serious about pushing through policy changes meant to, among other things, improve the quality of an education system that produces students who score lower than their counterparts in all other OECD countries in reading, math, and science, and to open the country's lucrative telecommunications sector, which could lower prices for millions of Mexican consumers. The government is also pushing for a state and local fiscal responsibility law intended to prevent governors and local authorities from taking on too much debt. Peña Nieto's financial reform could also help promote public access to credit. According to data from the World Bank, credit as a percentage of GDP remains at about 26 percent (in 2011), much lower than in Latin American peers like Brazil (61 percent) and Chile (71 percent). But the highest hurdle, energy reform, has not yet been cleared. In the past decade, Mexico's energy sector has suffered from deteriorating operational, financial, and technological capabilities, sharply lowering production for a vital source of state revenue. Production has fallen from a record 3.4 million barrels per day in 2004 to about 2.5 million today. Faced with rising pensions and health-care bills, the government's high dependency on oil revenues (around 30 percent of total revenues) is becoming increasingly worrisome. Given the opportunities it might create and its impact on the broader economy, substantive reform of Mexico's energy sector has also captured the attention of foreign investors. In particular, Mexico may have the world's fourth-largest shale deposits, exciting intense investor interest in opportunities for private participation in both offshore and shale plays through profit-sharing agreements (possibly a variant of production-sharing agreements). Energy reform would also offer Peña Nieto an important political victory, since he will have succeeded where so many of his predecessors have failed. Past attempts have been defeated by a populist commitment to nationalized energy that is written into the Mexican Constitution, limits on investments by state-owned oil company Pemex, the ability of state governments to grab a large share of the industry's resources, Pemex's labyrinthine bureaucracy, assertive labor unions, and politicians who were unwilling to accept the costs and risks that come with change. The Mexican public has historically opposed the constitutional changes needed for real reform, and it's not clear that this has changed. Recent polling data suggest that 65 percent of Mexicans are aware of the so-called Pact for Mexico, the president's broader reform plan, but there is no public survey on popular attitudes toward the opening of the energy sector to private investment. Yet, this time around,

Mexico's president has the demonstrated political will to bring about change, and there are enough lawmakers within his own party and the major opposition party, the National Action Party (PAN), to negotiate a substantive agreement by the end of 2013. That said, there are a few obstacles Peña Nieto must overcome. The most underappreciated of these is the need to reform Mexico's electoral politics. In early May, the Pact for Mexico survived a challenge from opposition parties when Peña Nieto agreed to allow discussion of electoral reform before September, forcing lawmakers to debate a hotly contested issue just before they take up a crucial energy reform plan that demands goodwill and compromise. The Mexican Congress is currently in recess, but legislators have announced that they will hold at least two extraordinary sessions in July and August to debate some bills left on the table, helping to clear the legislative calendar. But electoral reform was not included in the schedule; lawmakers are still in the process of designing it and are probably waiting until after local elections on July 7 to finish drafting their proposal. The fight over electoral reform will sharpen the battle lines among the three major parties just as energy reform will require open negotiation among political rivals . Some opposition factions want a reform that not only increases transparency in the use of

campaign funds, but that also includes major changes to the electoral and political systems. Senators from opposition parties -- the PAN and the Democratic Revolutionary Party (PRD) -- want to introduce a second round in presidential elections and reelection of legislators and mayors, as well as introduce coalition government and chief of cabinet, probably as a way of extracting concessions in exchange for support. A large segment of the ruling Institutional Revolutionary Party (PRI) has long opposed these proposals for fear that a second round would enable the PAN and PRD to organize resistance to a PRI candidate and that an end to term limits for lawmakers and mayors would make it more difficult for the party to enforce discipline among its members. In addition, a system that provides more power for parliament could heighten the risk of gridlock at a crucial moment for reform. As a result, the government is unlikely to accept all these demands. In the end, if the government is as serious as it appears on energy reform, it will have to compromise on electoral reform. Peña Nieto remains committed to keeping things on track, and he will probably cede some ground on the electoral front. That's why odds of success on energy reform remain good, but the next few months will test the new president's political skills .

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Will PassStrong PAN and PRI Congressional influence mean Pemex reform will pass – but PRD opposesCattan, 7/9Nacha Cattan, Bloomberg News, 7/9/13, “Mexico Largest Opposition Party Seeks Constitution Change on Oil”, http://www.bloomberg.com/news/2013-07-09/mexico-largest-opposition-party-seeks-constitution-change-on-oil.html

Mexico’s largest opposition party said it will propose changes to the constitution to end an oil monopoly by state-owned Petroleos Mexicanos, raising optimism of reform in the energy industry.The National Action Party, or PAN, will push for an amendment to allow private companies to share risk in oil output, party spokesman Juan Molinar Horcasitas said in a telephone interview yesterday. The proposal is almost ready, though the PAN hasn’t decided whether to present it as part of a multi-party accord, known as the Pact for Mexico, or to push the bill on its own, Molinar said.President Enrique Pena Nieto said in a June 17 interview his administration will send an energy bill to Congress in September and is confident the Pact for Mexico will ensure lawmakers end the state oil monopoly this year. The PAN appears to be proposing a “much more market friendly” bill than what the ruling Institutional Revolutionary Party, or PRI, may present, Benito Berber, a New York-based strategist at Nomura Holdings Inc., wrote in an e-mailed message.“What is interesting about the PAN’s energy bill proposal is that together with the PRI, these two parties will have enough votes in congress to pass any reform they want , even if it is constitutional,” Berber wrote. “It does not matter what the PRD left-leaning party says or does. Also it does not matter if the Pact for Mexico survives or not.” The PAN proposal should be positive for the peso once the bill is discussed in September, Berber said.Mexico City’s former mayor, Marcelo Ebrard, has said his opposition PRD party should “strongly” oppose Pena Nieto’s oil plan.The PAN, on the other hand, “is in favor of a real reform,” Molinar said. Without risk sharing “there won’t be investment.”

Pemex reform will pass – political momentum and support from key investors Cattan and Espinosa 7/10Nacha Cattan & Veronica Navarro Espinosa, Bloomberg News, 7/10/13, “Mexico Poised to End State Energy Monopoly, Pemex Official Says”, http://www.bloomberg.com/news/2013-07-10/mexico-poised-to-end-state-energy-monopoly-pemex-official-says.html

Mexico is on the cusp of opening its energy industry to outside investment as a wide consensus has developed that the constitution must be changed to end the government’s monopoly on production, according to a board member of state-controlled oil producer Petroleos Mexicanos.The country needs “very deep” reforms to lure investment to its natural gas and crude fields, and proposed changes could be ready by the end of this summer, Hector Moreira, who also is a former official in the country’s Energy Ministry, said today at the Bloomberg Mexico Conference in New York.Mexico is “on the eve” of much-needed changes that will open the way for faster growth and a stronger currency in the region’s second-largest economy, Gray Newman, Morgan Stanley’s chief Latin American economist, said today at the event. Officials from JPMorgan Chase & Co. and Grupo Financiero Banorte said they were optimistic that President Enrique Pena Nieto will lead a successful effort at reforms this year.

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“This administration doesn’t only have the willingness, but the political power and political

capital” to enact the changes, Gabriel Casillas, Banorte’s chief Mexico economist, said at the event. Casillas said he was “very bullish” on the peso, the best-performing major currency against the dollar this year, and that investors hadn’t yet priced in the reforms.A slowdown in economic expansion is putting pressure on Pena Nieto to gain approval to open the energy industry and change laws to boost tax collection, reforms he says may lift growth to 6 percent. The ruling Institutional Revolutionary Party has the ability to pass the key bills, which will attract investment and bolster Mexican markets, according to Eduardo Cepeda, the senior country officer for JPMorgan in Mexico.There will be “appetite” for Mexican securities in the second half of the year, Cepeda said.

PAN leadership in Baja California means Pemex reform passes – bipartisan supportGraham and Gutierrez 7/8Dave Graham and Miguel Gutierrez, Reuters, 7/8/13, “UPDATE 4-Mexico opposition wins key state vote, boosting reform outlook”, http://www.reuters.com/article/2013/07/08/mexico-elections-idUSL1N0FE06320130708

* PAN victory to defuse tensions over cross-party accord* Conservatives still willing to push for reforms* Pena Nieto seeks overhaul of Pemex, changes in tax systemMEXICO CITY, July 8 (Reuters) - Mexican President Enrique Pena Nieto's economic agenda looked to be on surer footing after local elections on Sunday yielded results that favor a cross-party pact he forged to push reforms through Congress.In the most closely watched race, the conservative National Action Party (PAN) won a tight contest for governor in its stronghold of Baja California, an outcome that should help defuse tensions between the opposition and Pena Nieto's Institutional Revolutionary Party, or PRI.Baja California was the only governor's office up for grabs as nearly half of Mexico's 31 states voted for a mix of local parliaments and city halls, producing results that allowed both the PRI and the PAN to claim success at the ballot box.In Baja California, the PAN had accused the PRI of trying to steal the election, so a change of power could have destabilized the "Pact for Mexico" the president made with the opposition to help strengthen his hand in Congress, where he lacks a majority.But a preliminary vote count on Monday showed the PAN won the race, about 3 percentage points ahead of the centrist PRI.The PAN's triumph is probably more useful to Pena Nieto than a win for his own party would have been because it should foster consensus-building on the key planks of his legislative program: opening up state oil monopoly Pemex to more private investment and a reform to bolster tax revenues.News of the PAN victory helped push up the peso more than 1 percent against the dollar in early trading.PRI chairman Cesar Camacho hinted that his party might challenge the vote count in Baja California. But Pena Nieto later urged all sides to accept the results, underlining the need to keep things friendly in Congress."I reiterate that the government is ready to continue the dialogue and deal-making with the political forces to agree the reforms need to consolidate our democracy and speed up Mexico's development and progress," Pena Nieto said in Mexico City.The electoral process had deteriorated into mud-slinging and mutual recriminations between the PRI and PAN by the time Mexicans cast their votes on Sunday, with each side accusing the other of resorting to dirty tricks to gain advantage.Violence also blighted the campaign, with several activists from the main parties murdered in a reminder of the government's struggle to curb blood-letting by drug gangs that has claimed more than 70,000 lives since the start of 2007.

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PAN BLUESOutside of Baja California, the PRI did not go empty-handed, notching up some notable victories in mayoral elections.Jorge Buendia, head of polling firm Buendia & Laredo, said that the Party of the Democratic Revolution (PRD), Mexico's main leftist group and co-signatory of the pact, had fared less well.However, the PRD, which ran on a joint platform with the PAN in several electoral battlegrounds, including Baja California, said that it too had made important advances in some states.With 97 percent of the polling booths reporting in Baja California, the PAN gubernatorial ticket had won 47.2 percent of the vote against 44.2 percent for the PRI candidate, preliminary results from the local electoral authority showed.Since it lost the Mexican presidency last year, the PAN has been bogged down in infighting that has rattled the stability of the political accord Pena Nieto unveiled in December.PAN chairman Gustavo Madero, whose leadership has been under attack, said the party would still have to evaluate its commitment to the Pact for Mexico after an election campaign he said was marred by attempts by the PRI to steal and buy votes.But he said the results had vindicated the PAN."We are still convinced that Mexico needs reforms," Madero told Mexican radio, referring to the energy and tax plans.Those ambitious reforms are due to be presented to Congress by early September. Pena Nieto is likely to face strong opposition from the left, especially to the Pemex shake-up.Tax reform and the Pemex overhaul are vital to Pena Nieto's hopes to raise economic growth to 6 percent a year from an average of barely 2 percent since the millennium began.Pollster Buendia said setbacks for the left on Sunday were likely to push the PRI closer to the PAN's position on how to approach Pemex reform, implying a stronger push to open up the state oil giant to foreign capital.The PRD lost control of the local government in the tourist resort of Cancun, where the PRI candidate won by a clear margin.Buendia said that with no major round of elections due in Mexico until 2015, the pendulum was swinging towards a more business-friendly political platform for economic reform."For a couple of years what we're going to see is that there will be fewer approaches between the PAN and the PRD and more between the PRI and the PAN," he said.

Will pass -- Education and telecommunication reforms give Nieto momentum Martin, Rodriguez, Marinho, 6/17Eric Martin, Carlos Manuel Rodriguez and Helder Marinho, Bloomberg News, 6/17/13, “Mexico’s Pena Nieto plans end to 75-year Pemex monopoly in oil production”, http://business.financialpost.com/2013/06/17/pena-nieto-plans-end-to-75-year-pemex-monopoly-in-oil-production/?__lsa=f0c9-54c4

Mexican President Enrique Pena Nieto said he’s negotiating support to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth.In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. He declined to discuss details of the proposal, or whether it would require a change in the constitution.Seven decades after his party seized fields from the predecessors to Exxon Mobil Corp. and Royal Dutch Shell Plc, Pena Nieto is preparing for the return of international oil companies to arrest eight years of decline in crude output. An opening would probably be broad, from offshore drilling to shale fields similar to those that have revived the U.S. petroleum industry, Pena Nieto said.“It’s obvious that Pemex doesn’t have the financial capacity to be in every single front of energy generation,” the 46-year-old president said in an interview in London on Monday, before traveling to

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Northern Ireland for meetings with Group of Eight leaders. “Shale is one of the areas where there’s room for private companies, but not the only one.”Pena Nieto said his administration will send the energy bill to congress by September, when regular sessions resume, followed by a tax proposal. He said he’s confident the so-called Pact for Mexico of the country’s top three political parties will ensure the bill is approved by Congress by year end.‘Key Deadlines’“We’re approaching key deadlines,” Pena Nieto said. “I’m optimistic that this political climate of understanding and agreement will be maintained.”Opening oil and gas exploration for private investment will help Mexico revive oil production that is heading for its ninth year of decline. Crude output averaged 2.52 million barrels a day this month through June 9, compared with 3.38 million barrels a day in 2004.Pena Nieto said there’s political momentum to pass more reforms after the approval of sweeping education and telecommunications laws and the creation of the Pact for Mexico. His Institutional Revolutionary Party dropped opposition to an oil-law overhaul in March.

Pemex Reform will Pass in the Status Quo- But tight Schedule in end of year leaves little room for other plans to be on the agendaMartin 13By Eric Martin, Carlos Manuel Rodriguez & Helder Marinho , Jun 18, 2013, Pena Nieto Confident 75-Year Pemex Oil Monopoly to End This Year, Bloomberg, http://www.bloomberg.com/news/2013-06-18/pena-nieto-confident-75-year-pemex-oil-monopoly-to-end-this-year.html, Accessed 7/7/13

Mexican President Enrique Pena Nieto said he’s confident Congress will end the state oil monopoly this year, opening the way for companies such as Exxon Mobil Corp. and Royal Dutch Shell Plc (RDSA) to tap the nation’s reserves. In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop some fields, while others are tapped by foreign and private companies. He declined to discuss more details of the proposal, or whether it would require a change in the constitution. Enlarge image Mexican President Enrique Pena Nieto said, “It’s obvious that Pemex doesn’t have the financial capacity to be in every single front of energy generation.” Photographer: Jason Alden/Bloomberg 3:05 June 17 (Bloomberg) -- Mexican President Enrique Pena Nieto, talks about his proposal to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth. In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. Pena Nieto, speaking with Bloomberg Businessweek in London today, declined to discuss details of the proposal, or whether it would require a change in the constitution. (This report is in Spanish. Source: Bloomberg) Seven decades after his party seized fields from the predecessors to Exxon and Shell, Pena Nieto is preparing for the return of international oil companies to arrest eight years of decline in crude output. An opening would probably be broad, from offshore drilling to shale fields similar to those that have revived the U.S. petroleum industry, Pena Nieto said. “It’s obvious that Pemex doesn’t have the financial capacity to be in every single front of energy generation,” the 46-year-old president said in an interview in London yesterday, before traveling to Northern Ireland for meetings with Group of Eight leaders. “Shale is one of the areas where there’s room for private companies, but not the only one.” Pena Nieto said his administration will send the energy bill to congress by September, when regular sessions resume, along with a tax proposal. The support of the top three political parties in the Pact for Mexico should ensure the bill is approved by Congress before year end, he said. Skeptical Investors Mexico is seeking to attract capital for deep-water and shale deposits found in the past decade as reserves dwindle in Cantarell, the 1976 oil discovery that ranked among the world’s largest. Investors became more skeptical about the depth of the energy reform after it wasn’t included in the schedule for special congressional sessions in July and August, leaving it for the final four months of the year along with a crowded agenda that includes the tax overhaul and next year’s budget . Mexico’s peso pared its drop yesterday after Pena Nieto’s comments, falling 1 percent to

12.8361 per U.S. dollar after losing as much as 1.3 percent. Yields on peso-denominated fixed-rate government bonds due in 2024 increased 11 basis points, or 0.11 percentage point, to 5.31 percent. Yields on $2 billion Pemex bonds due in 2022 added one basis point to 3.98 percent. Pena Nieto’s comments boosted confidence he’ll make good on his pledge to open the state-controlled energy industry, said Ramon Cordova, a currency trader at Banco Base SA. ‘Good Path’ “What the market wants is the reforms to pass,” Cordova said by phone from

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San Pedro Garza Garcia, Mexico. The comments indicate “the energy reform is on a good path and it gives some more information, because up until now it’s been very opaque.” Opening oil and gas exploration for private investment would help Mexico revive oil production that is heading for its ninth year of decline. Crude output averaged 2.52 million barrels a day this month through June 9, compared with 3.38 million barrels a day in 2004. When Pena Nieto took office in December, he inherited an economy that had started to grow faster than Brazil in the final two years of predecessor Felipe Calderon’s administration amid record Mexican auto exports and waning Chinese demand for Brazilian commodities. Mexico’s gross domestic product will expand 3.2 percent this year, faster than 3 percent for Brazil, according to the median estimate of analysts surveyed by Bloomberg. Government Spending While Mexican growth eased to 0.8 percent in the first quarter, the least since the 2009 recession, Finance Minister Luis Videgaray said in an interview yesterday that the expansion will quicken as the government increases spending in the second half of the year. “We expect much more accelerated spending in the second semester,” Videgaray said. “The budget is there and the revenue is there.” Pena Nieto said there’s political momentum to pass more reforms after the approval of sweeping education and telecommunications laws and the creation of the Pact for Mexico. His Institutional Revolutionary Party, or PRI, dropped its opposition to an oil-law overhaul in March. “We’re approaching key deadlines,” Pena Nieto said. “I’m optimistic that this political climate of understanding and agreement will be maintained.” The start of July will mark one year since Pena Nieto’s election returned the PRI to power after a 12-years hiatus. Opening the energy industry to more private investment would be the “signature issue” for judging his presidency, Pena Nieto said during the campaign. Pact for Mexico Pemex bondholders are losing confidence in his ability to achieve the needed changes after signs of fraying in the Pact for Mexico alliance that Pena Nieto engineered between his own PRI, the National Action Party, or PAN, of predecessor Felipe Calderon and the Democratic Revolution Party, or PRD. “The PRD cannot sign on for an ambitious energy reform, and they’ve been quite explicit about that,” Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, said in an interview. “It’s going to be very difficult for the elite of the PRD to continue working with the government if the government and the PAN push through an energy reform that they’re opposed to.” Yields on $2 billion Pemex bonds due in 2022 jumped 72 basis points in the past month through last week to 3.97 percent. Yields on Brazilian oil producer Petroleo Brasileiro SA’s 2021 notes rose 63 basis points over the same period. Changing Reputations Pena Nieto has been working to overturn the country’s reputation for violence, while strengthening the economy. His administration passed a balanced budget and an education overhaul that created an independent institute to evaluate schools and foster competition for teaching jobs and promotions based on performance, a move that sparked violent protests. The government also arrested the powerful head of the teachers’ union, Elba Esther Gordillo, on corruption charges, taking on a leader long considered to be untouchable. Some of his other goals, such as progress in the war against organized crime, have proved more elusive. While the Milenio newspaper reported a 2.5 percent drop in drug violence in the first four months of the administration, communities in southern Mexico have armed themselves and kidnapped law-enforcement officials, saying police can’t protect them from cartels. ‘Excellent Job’ Pena Nieto’s energy and tax pledges, and his early legislative success, helped attract overseas asset managers including Pacific Investment Management Co., the world’s biggest bond fund, and lift foreign holdings of peso bonds to record levels. Yields on government peso debt due in 2024 dropped to a record low and the currency climbed to the strongest level in almost two years against the dollar last month. Yields have since climbed and the currency weakened on the prospect that the Federal Reserve will scale back its stimulus program. Pena Nieto’s energy initiative may be the industry’s biggest overhaul since then-President Lazaro Cardenas seized oil fields from British and U.S. companies in 1938, said James R. Jones, the U.S. ambassador to Mexico when the North American Free Trade Agreement, negotiated under U.S. President George H. W. Bush and Mexico’s Carlos Salinas de Gortari, took effect in 1994. The expropriation is celebrated March 18. Pena Nieto has “done an excellent job in his first six months in office,” Jones said in a telephone interview from Washington on June 14. “He has the best political sensitivity and touch I’ve seen since President Salinas was able to marshal various factions of Mexico to pass Nafta.”

Pemex reform will pass but there will be fightsSiskind 6/25Cory Siskind, Research Analyst, Control Risk, Huffington Post, 6/25/13, “Mexico Plays the Waiting Game on Big Reforms”, http://www.huffingtonpost.com/cory-siskind/mexico-plays-the-waiting-_b_3493542.html

Early 2013 saw one of the most productive one hundred days in Mexican political history and a burst of international press hype. Now, with Congress out of session, Mexico lies in wait. While the legislature has agreed to hold two special sessions in July and August to finalize details of previously agreed-upon reforms in education and telecommunications, new initiatives will be pushed off until the fall. The big ticket items to be addressed in several months are fiscal and energy reforms. In the meantime, Mexico's stock market reached its lowest point in a year in mid-June after disappointing growth figures. Fissures have appeared in Mexico's conservative National Action Party (PAN), an integral part of the Pact for

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Mexico (Pacto por Mexico) that facilitated reforms in labor, education, telecommunications, and public security. Mexico is playing the waiting game.The legacy of President Enrique Peña Nieto, as well as Mexico's economic growth, hinges on fiscal and energy reforms. Fiscal reforms aim to improve enforcement of existing and future regulations in order to boost the country's tax intake. They will also increase credit levels with lower interest rates to a broader swath of Mexico's population. In his speech at the G8 summit in Lough Erne, Peña Nieto explained that fiscal reforms will "increase overall Mexican financial system stability and, as a by-product, contribute to building a more solid, transparent, fair, and efficient international financial system." This is a welcome change for Mexico, which, World Bank data shows, has some of the lowest rates of domestic credit to the private sector in the Americas.While fiscal reforms have broad-based support, energy reforms promise a much livelier debate. Duncan Wood, the director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, called energy reform the "mother of all reforms" because of its enormous potential for job creation and economic growth. Partly because of its importance, the opening of Petróleos Mexicanos (PEMEX), Mexico's state owned hydrocarbons company, to private investment is a polarizing issue.Centrist and conservative Mexicans welcome the move in hopes that it will spur business and investment and make the notorious under-performer PEMEX more efficient. Many would like to see more exploration and new technologies in order to boost discoveries and production.Members of Mexico's left-wing Party of the Democratic Revolution (PRD) party are skeptical. Beyond the political complications of amending Mexico's constitution lies a historical distrust of foreign competition in the energy sector. US and Anglo-Dutch oil companies operating in Mexico were expropriated in 1938 by then President Lázaro Cardenas, a source of national pride for most citizens. Some Mexicans believe that opening the oil giant will dramatically decrease government revenue, of which PEMEX currently provides approximately 35%. They fear that this, in turn, will reduce government spending on badly needed public services.Another challenge to the speedy passing of energy reforms is the rupture of the political cohesion seen in early 2013. The PAN, party of former presidents Felipe Calderón and Vicente Fox, ousted its senate party leader, Ernesto Cordero, on May 20. The ousting, as well as July 7 local elections, has caused a shake-up in the party. Divisions are solidifying between two factions and tensions have come to a head in recent weeks. Yet, while the shake-up may delay the approval process, it is unlikely to entirely halt the

passage of energy reforms.As Mexico lies in wait, investors are anxious to know what the future will bring. The special congressional sessions in July and August will provide insight. In July, lawmakers will debate empowering Mexico's transparency agency and creating a new anti-corruption organization. They will also discuss state debt and appoint a new leader to Mexico's elections institute. In August, they will return to shore up education and telecommunications reforms. The level of multi-party cooperation seen in the special sessions will be a good indicator of what is to come in the fall.Passing fiscal and energy reforms will almost certainly happen, as most parties involved recognize their importance to Mexico's future. The markets are likely to boom in the wake of the new legislation, reinvigorating the hope and high expectations seen during Peña Nieto's first one hundred days. But in Mexico the real challenge will begin after the reforms have passed. Implementation, particularly in opening PEMEX, will be complicated by an extensive bureaucracy with a traditionally lethargic approach to change. The challenges are numerous, but the payoff will be big. Mexico must endure the waiting game, revive political cooperation, pass meaningful fiscal and energy reforms, and then actually implement both. If it succeeds, all the hype will have been deserved. It will truly be Mexico's moment.

Nieto has momentum from previous reforms, but Pemex will be difficult. Rathbone 6/17 Financial Times Latin America EditorJohn Paul “Peña Nieto pledges transformational reform of Pemex” Financial times. 6-17-13 http://www.ft.com/intl/cms/s/0/e4d99f60-d767-11e2-8279-00144feab7de.html#axzz2YPADo1tl

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Enrique Peña Nieto, the Mexican president, vowed to press ahead with what he claimed would be a “transformational” reform of Pemex, the state-owned oil monopoly, a controversial move widely expected to unleash billions of dollars of foreign investment.¶ Mr Peña Nieto said the need to liberalise Pemex was already agreed under the so-called Pact for Mexico, a coalition between the country’s three main political parties, and that a more detailed proposal would be forthcoming within “two to three months.”¶ “There are different options on what the reform should be, but I am confident . . . It will be transformational,” he told the Financial Times. Mr Peña Nieto added the reform would include “the constitutional changes needed to give private investors certainty”.¶ Oil majors such as ExxonMobil and Royal Dutch Shell, which have been shut out by Mexico’s protectionist energy policies, have said they are ready to invest if Congress passes the measure, a keystone of Mr Peña Nieto’s ambitious reform agenda. Pemex, with annual sales of more than $100bn, is the world’s seventh-largest oil producer but the government’s high tax take has left it struggling to fund investment.¶ Since taking office in December, Mr Peña Nieto has already pushed through education, competition and labour reforms. But liberalising Pemex and possibly allowing for profit-sharing with international companies would be the most politically charged change of all, given that the industry’s nationalisation in 1938 remains a point of national pride for many in Latin America’s second-biggest economy.¶ “Democracy is about respecting the majority, it’s not about unanimity,” Mr Peña Nieto said, commenting on potential opposition to the measure. “Although the pact does not include everybody, it includes the most important parties. And there will always be dissident voices – as happens in any country that is liberal and free.”¶ The importance of “inclusiveness” is often repeated by Mr Peña Nieto, 46, a former state governor with the looks and easy charm of a matinee idol. On a visit to the Financial Times – although accompanied by a phalanx of dark-suited ministers and aides – he spoke fluently and candidly without notes.¶ State elections set for July 7, “have caused political tensions,” Mr Peña Nieto admitted, tacitly acknowledging a recent scandal about the misuse of federal funds by members of his Institutional Revolutionary party (PRI) in Veracruz state. “But we [in the pact] have also agreed that occasional differences should not jeopardise the reforms we have agreed to work on.”¶ Meanwhile, faster economic growth was a central priority he said, “as that is the best way to address poverty and inequality”. The central purpose of a financial reform bill, he added, “is to generate more and cheaper credit for all”. Tougher competition policy is about generating a “more democratic economy.” Ever tactful, though, he said a fiscal reform expected this summer “is still being worked out: I don’t want to put it at risk by discussing particular variables”.¶ Mr Peña Nieto’s reform success has lately made Mexico an investors’ favourite – although the prospect of higher US interest rates has walloped the peso this month. The economy grew just 0.8 per cent in the first quarter, but Mr Peña Nieto said the slowdown was partly due to his new government coming to grips with budget execution. “The drop in public spending will be temporary. We expect growth of 3.1 per cent this year,” he said.¶

Pena working on opening up oil sector now but opposing party is key Cattan 12’ (Nacha Cattan is a reporter for Bloomberg News in Mexico City “Pena Nieto Has Ability to Open Mexico Oil Sector, Aide Says” October 30,2012 http://www.businessweek.com/news/2012-10-30/pena-nieto-has-strength-to-open-mexico-s-oil-industry-aide-says)Mexico’s President-elect Enrique Pena Nieto will be able to bring together members of his party and the opposition to pass laws opening up the oil industry to private investment, his top economic adviser said.Pena Nieto has “the conviction for the reforms, the political experience and the leadership of his party,” to push through the changes, Luis Videgaray, co-head of the incoming president’s transition team, said in an Oct. 26 interview. “It implies building a political consensus. It’s what we’ll do with energy.” The toughest resistance may come from within Pena Nieto’s Institutional Revolutionary Party, or PRI, a traditional ally of unions that have opposed past energy overhauls, said Lisa Schineller of Standard & Poor’s. Already, labor legislation presented by outgoing President Felipe Calderon and initially backed by

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Pena Nieto to ease the hiring and firing of workers is facing delays in Congress as PRI lawmakers refuse to approve some clauses to boost union transparency.Pena Nieto is returning the PRI to power after a 12-year hiatus from more than seven decades of uninterrupted rule. “Luis Videgaray represents this very reform-minded wing, but the PRI is diverse,” Schineller, a sovereign ratings director at S&P, said in a telephone interview from New York. “It’s different when the PRI was in power pre-2000. The power base at the local level is now greater. When it comes down to actual negotiations, it may be harder than expected.”Tax, Oil Pena Nieto wants to simplify and expand tax collection with a bill he plans on presenting in 2013 and which would take effect in 2014, Videgaray said. The legislation would seek to increase tax revenue sufficiently to create “universal” health care in Mexico, Videgaray said, denying speculation that the president elect would present the bill in December after taking power the first of the month.Pena Nieto hasn’t yet decided whether to push for a constitutional amendment to lift investment in the state-run oil company Petroleos Mexicanos, or rely on smaller legal changes, said Videgaray, who served as the president-elect’s finance chief when he was governor of Mexico state between 2005 and 2011. Pemex, as the company is known, is struggling to reverse seven years of production declines that have cut output 25 percent from a peak of 3.4 million barrels a day in 2004. Bypassing a constitutional change would be a departure from the strategy outlined by Videgaray before the July 1 election. He said in an interview in May that his party would ask Congress to approve changes to the nation’s charter to allow joint ventures.The PRI’s alliance with the Green Party fell short of winning a majority in Congress, garnering only 241 seats in the 500-member lower house.While that puts it close to the majority needed to pass laws and regulations, it’s less than the party had expected to win and doesn’t ensure it sufficient support for constitutional changes, which must also be ratified by a majority of legislatures in the 31 Mexican states and the federal district.

Piena has momentum now to push oil reform WEISSENSTEIN 3/13’ (Michael Weissenstein correspondent at the Associated Press “Enrique Pena Nieto Reforms: Mexico's President Pushes Sweeping Changes To Telecom, Oil Industry” 03/19/13 http://www.huffingtonpost.com/2013/03/19/enrique-pena-nieto-reforms-mexico-president_n_2906967.html”MEXICO CITY -- New President Enrique Pena Nieto has been fast out of the blocks in attacking some of Mexico's toughest issues in a country often stymied by monopolies and corruption.He arrested the most powerful woman in Mexico, leader of the largest union in Latin America, on allegations of corruption that previous presidents saw but were too compromised to tackle. He is taking on the richest man in the world, Carlos Slim, and pledges to bring diversity to a television industry dominated by the head of the largest network in Latin America, a scion of one of Mexico's leading families. At one time all three were key allies of Pena Nieto's Institutional Revolutionary Party, or PRI, which ruled for 71 years with a combination of coercion and corruption before being voted out of office in 2000. Now, Pena Nieto is declaring that there are no more sacred cows. The moves have built momentum behind what could be his most dramatic and difficult reform – modernizing and drawing foreign and private capital to the behemoth state oil compan y , a long sacrosanct but increasingly inefficient pillar of the Mexican economy. On Sunday, at a celebration of the 75th anniversary of the nationalization of the Mexican oil business, Pena Nieto said again that he will transform Petroleos Mexicanos. The longtime head of the Pemex union, who had been expected by many to fight any changes but has been the subject of questions about unexplained family wealth, pledged his support.Pena Nieto says his plan will make Mexico more democratic and competitive in the world economy, and his drive for reform is fueling international confidence about Mexico. Rating company Standard and Poor's raised the country's long-term sovereign credit rating from "stable" to "positive" last week, citing

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optimism about the government's ability to carry out structural changes. The Mexican peso is stronger against the dollar than it's been in a year and a half.

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Top of DocketPemex reform coming – before constitution amendmentLaconangelo 6-21-2013David, “Peña Nieto, Mexico President, Says Pemex Will Not Be Privatized But Reformed,” http://www.latintimes.com/articles/5534/20130621/pe%C3%B1a-nieto-mexico-oil-pemex-privatized-constitution.htmPeña Nieto says his administration will send a "transformational" reform bill to Congress by September, and hopes to work out a deal with the other two main parties, the Party of the Democratic Revolution (PRD) and NationalAction Party (PAN). Lawmakers from those parties have rejected the idea of amending the constitution. Jesús Zambrano, the former head of the PRD, said earlier this week that the Pact for Mexico -- an agenda of priorities and needs agreed upon by the three major parties -- says nothing about an amendment and asked the president to clarify his plans. Andrés Manuel López Obrador, the leftist presidential candidate who lost to Peña Nieto, has said he's against changing the constitution. So is Miguel Ángel Mancera, an ally of López Obrador and current mayor of Mexico City.Peña Nieto has called it "absolutely false" that the constitution must be amended before private investment can come into the oil sector .

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A2 Unq OverwhelmsPemex on the brink – pc keyBMI 2013Business Monitor International, “Mexico: Peña Nieto’s Reform Prospects On The Rise,” http://www.riskwatchdog.com/2013/03/13/mexico-pena-nietoreform-prospects-on-the-rise/That said, while these changes encourage us to take an increasingly optimistic stance on the passage of a number of key economic reforms, not the least comprehensive fiscal reform, we remain more cautious on energy sector liberalisation.At present, we anticipate a piecemeal reform process. President Peña Nieto’s own rhetoric has focused more on side issues, such as highlighting the need to reduce Pemex’s tax burden and even drawing the need for alternative energy sources in the debate. While these are useful points, they won’t reverse a decade of declining oil production. Moreover, when the issue of increasing private capital into the energy sector is raised, it comes with the heavy caveat that the state will continue to control Mexico’s oil.We are not ready to completely rule out energy sector liberalisation, and we acknowledge that the administration may be downplaying the controversial elements of its planned energy sector reform in an effort to tackle a number of other, less contentious reforms early on. Moreover, we note that recent events suggest Peña Nieto may have the political capital he needs to push through full-scale liberalisation . However, until the president indicates willingness to move forward with such a bill, we maintain a more tempered view.

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A2 UnconstitutionlThe Mexican Constitution won’t stop reform from passing Global Post 7/4 Global Post, Agencia EFE, 7/4/13, “PRI leader says constitution should not be barrier to energy reform in Mexico”, http://www.globalpost.com/dispatch/news/agencia-efe/130704/pri-leader-says-constitution-should-not-be-barrier-energy-reform-me

Mexico City, Jul 4 (EFE).- Constitutional reforms should not be a barrier to an overhaul of Mexico's energy industry, Institutional Revolutionary Party, or PRI, chairman Cesar Camacho said.The Mexican Constitution is not the "Holy Shroud," Camacho told foreign correspondents on Wednesday."The constitution should be at the service of Mexicans, and Mexicans should not have to be at the service of the constitution," the PRI chairman said.The idea that "the constitution is untouchable" should not become "legal dogma," Camacho said."It depends on how far we are willing to have energy reforms go," the PRI chairman said.Mexico's political leaders are expected to start looking at energy industry reforms in the next few weeks, with the focus on the future of state-owned oil giant Petroleos Mexicanos, or Pemex, and whether to allow private investment in the petroleum industry."It's clear that Pemex, a company we Mexicans are proud of, is not experiencing its best times, it needs major surgery," Camacho said.The idea is to make Pemex "a world class company" and that requires resources "that the federal government does not have" for oil exploration, the PRI chairman said.The Mexican left opposes Pemex's privatization and President Enrique Peña Nieto, a member of the PRI, has repeatedly denied that such a move was on the table.Peña Nieto told the Financial Times in an interview last month that constitutional changes would be part of the energy reforms that his administration hopes will come out of Congress.

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LINKS

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Generic – 1NCIncreasing cooperation with the US hurts NietoLong, 13 – American University international relations professor[Tom, PhD in International Relations focusing on US-Latin America relations, American University Center for Latin American and Latino Studies research fellow, "Will tensions over security spoil the Obama-Peña Nieto Summit?," AULA Blog, American University Center for Latin American and Latino Studies, 4-16, 14, aulablog.net/2013/04/16/will-tensions-over-security-spoil-the-obama-pena-nieto-summit/]

Peña Nieto’s political incentives do not point to the same, high-profile cooperation with the United States that occurred under President Felipe Calderón, who had already begun shifting priorities last year. Despite the major turnaround signified by the PRI’s signing NAFTA almost 20 years ago, Peña Nieto’s PRI still contains elements more skeptical of U.S. “intervention” than Calderón’s PAN. Materially, moreover, most of the U.S. aid planned under the Mérida Initiative has been disbursed, and Congress exhibits little appetite for major new appropriations. (Even at its height, U.S. spending was a fraction of Mexico’s contribution to the drug war.) That reduction, coupled with growing awareness that the Calderón strategy actually fueled violence, diminishes the enthusiasm in and outside of government for continuing his policies. Frustration from the left in both countries regarding persisting human rights violations and the slow pace of judicial reform could also grow more serious.

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Border Security – 1NCMexico backlashes against border enforcementRueda 6/26 [Manuel, Latin America Correspondent for ABC/Univision, Journalism Masters Degree from Columbia University, BA in International Affairs from the University of Virginia, always up for an invite to the local salsa club](Mexico Slams U.S. Border Buildup Plan, ABC News/Univision, June 26, 2013, http://abcnews.go.com/ABC_Univision/News/mexico-slams-us-immigration-reform-bills-proposed-border/story?id=19495974#.UdwObqUk_dk)

In recent years, the administrations of Presidents Enrique Peña Nieto and Felipe Calderón had stayed strictly on the sidelines of that debate, reluctant to issue any pronouncements that might stoke U.S. worries about Mexican intervention in American affairs. Some analysts have also argued that any Mexican declarations could be used as ammunition by congressional critics of immigration reform.¶ But after momentum gathered around plans for a law enforcement buildup on the border, several well-known analysts in Mexico pressed their government to say something about U.S. immigration reform, arguing that at some point, Mexico had to stand up for the interests of its citizens at home and abroad. ¶ "This is a contradiction," historian Lorenzo Meyer said in a Monday morning radio show about plans to build up border defenses. "The United States wants commerce with Mexico, they want [laws that allow U.S.] investment, but they don't want the unavoidable part of this relationship between unequal countries: The [Mexican] workers."¶ "It is a very unfriendly move," former foreign minister Jorge Castañeda said Tuesday on MVS Noticias, one of Mexico's top radio shows. Castañeda described the U.S. proposal as something that would happen along the borders of enemy countries "like North Korea and South Korea" - another border where the U.S. stations thousands of troops.

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Border Security – 2NCBorder security trades off with US investment in Mexico and other thingsRueda 6/26 [Manuel, Latin America Correspondent for ABC/Univision, Journalism Masters Degree from Columbia University, BA in International Affairs from the University of Virginia, always up for an invite to the local salsa club](Mexico Slams U.S. Border Buildup Plan, ABC News/Univision, June 26, 2013, http://abcnews.go.com/ABC_Univision/News/mexico-slams-us-immigration-reform-bills-proposed-border/story?id=19495974#.UdwObqUk_dk)

So if the U.S. border buildup proceeds, what will Mexico do in response? It is still unclear. But a couple of suggestions have been made.¶ "We have things we can shut down, too," said Meyer, who suggested that in retaliation, the Mexican government could make it harder for U.S companies to invest in the country, or cancel laws that enable U.S. citizens to buy property in Mexico. Meyer said that while those measures might have a small impact, they could "send a signal" to the U.S. government about Mexico's displeasure with the border fence.¶ Sergio Aguayo, a lawyer and human rights activist, had a more moderate suggestion. He said the Mexican government should seriously lobby the U.S. congress and American society in general for policies that better suit the country's interests, just as Israel currently does through a robust lobbying presence in Washington. ¶ Aguayo said that when it comes to lobbying, Mexico has an advantage that Israel did not have: More than 30 million Mexican-Americans who already live in the U.S. and make up 10 percent of the country's population. That segment of the population, he added, tends to sympathize with Mexico's interests.

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Drugs – 1NCObama and Nieto avoiding security which derails talksLopez 2013Julio Hernandez, “Obama and Peña Nieto Mexico Meeting: What Was Said and Not Said,” http://mexicovoices.blogspot.com/2013/05/obama-and-pena-nieto-mexico-meeting.htmlSecurity and migration?? Well, there are significantly more important issues, declare the evaders We are focusing on economic issues, on markets and investments in pesos and dollars, on the inevitable paradise promised to those who follow, to the letter, the adventurous new guidelines of the two neighboring administrators. They left the real rough points of the uneven meeting (and not just in the matter of height) for private sessions.Mexico the marvel, the democratic example, beginning with its three-party pact [Pact for Mexico], a sanctuary of plausible reformism, an example of good political work.This leaves in the background what to do about Central American migrants pulled off the top of a train for not paying fees or whole regions dominated by criminal cartels and where the natives stay at home, with adequate employment and compensation, without having to risk their lives in journeys north.The important thing is business: "give me profit and I will move the world," is the motto of the duo to whom are entrusted, like Archimedes, the longest of levers. The first generation dream of Salinas [President Carlos Salinas, 1988-94, who promoted NAFTA and the opening of Mexico to the global market] is presented in its current version: from free trade agreement to freely trading the country.The commercial dream attempts to convince Mexicans of an alternate route to happiness. It is by way of the consolidation of the U.S. annexation [of half of Mexico's territory via the Mexican-American War], in a scheme to sell the remainder of the nation ... for the benefit of the elites of both countries. It attempts to convince us that it is worthwhile to accompany Peña Nieto and his tutors in the redesign of the pie that is to be shared.That is why everything flows along with a surface calm in a duet of courtesies between a Mexican and an American who claim to respect each other's respective spheres of influence, although in fact the first comes to tighten the screws on the second and draw the lines in what, from the heights, is seen as a backyard run by helpful managers or administrators.The irony is widely discussed in the new media world of Internet: the armored vehicle used by the visitor is called The Beast, just like the train of death in which Central Americans and Mexicans often travel on route to the north of the failed "American dream". Two different beasts and one true, monstrous inequality. ...Economics as an alibi for the medium and long term in place of what is important in the short term. It would have been bad for yesterday's meeting to focus on issues such as greater U.S. control of the border with Mexico, the trafficking of gringo weapons into Mexico in furiously interventionist operations, and the details of the Calderón war on drugs, now elevated to the aspirational category of an unofficial truce arrangement.Obama says he does not get into the issue of security, but in fact he aims to restore the level of appeasement practiced during the servile Calderón administration, when agents and strategists from the neighboring country made decisions, supervised actions and moved with unusual freedom inside Mexico.

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Drugs – 2NCPena Nieto and Obama shifting drug policy – plan disrupts itGoldfarb and Miroff 2013Zachary A., Nick, “Obama begins bilateral meeting with Peña Nieto,” http://articles.washingtonpost.com/2013-05-02/world/38979927_1_nik-steinberg-mexican-security-forces-intelligence-agencies,

MEXICO CITY — President Obama acknowledged on Thursday that the relationship between U.S. and Mexican law enforcement and intelligence agencies is changing under new Mexican President Enrique Peña Nieto, who has been seeking to scale back the United States’ role in confronting drug trafficking and organized crime in Mexico.At the start of Obama’s three-day trip to Latin America, both leaders affirmed the depth of the relationship between the nations at a time when they are trying to forge closer economic ties and people in both countries are following immigration reform proposals in Congress.But the security partnership between Mexico and the United States has been the biggest potential point of conflict between the two leaders ahead of the meeting. With drug trafficking and the illegal transport of weapons over the border still major problems, U.S. officials are concerned that the new Mexican government seems less inclined to provide the same level of deep coordination with U.S. law enforcement and intelligence agencies that was offered by the administration of Felipe Calderóno.Peña Nieto has consolidated all law enforcement cooperation with the United States through Mexico’s Interior Ministry, reining in the wide-ranging and personal connections between U.S. and Mexican military and law enforcement officials.Obama, who earlier this week reserved judgment on the new approach, said he accepts it at a news conference after a bilateral meeting.“I agreed to continue our close cooperation on security even as the nature of that cooperation evolves,” he said. “It’s obviously up to the Mexican people to determine their security structures and how it engages with other nations, including the United States.”

Security will be an uphill fight – Nieto’s will devote leadershipFelbab-Brown 13 (Vanda is a Brookings Institution expert on international and internal conflicts and nontraditional security threats, “Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime”, Brookings Institution, February 2013, http://www.brookings.edu/~/media/Research/Files/Papers/2013/02/mexico%20new%20security%20policy%20felbabbrown/mexico%20new%20security%20policy%20felbabbrown.pdf) ~ew

Greater state and federal-level oversight is critical for discouraging the usurpation of public funds by local officials and limiting their cooptation by organized crime. But if local officials are not backed up in the security sector with equal vigor by the state and federal authorities, they will inescapably be highly susceptible to pressures from organized crime. The Peña Nieto government currently appears to favor greater centralization of security matters in the federal government and less power decentralization overall than his National Action Party (Partido Acción Nacional or PAN) predecessors Vicente Fox and Felipe Calderón.16 The PRI’s influence over public sector unions and legislative caucuses also gives the PRI more ability to obtain state governors’ cooperation with federal anti-crime efforts, such as vetting municipal and state police forces or deploying newly-certified ones.17 But if crime violence continues to remain high, the strategy to pass the buck to local authorities, to let them cope with or accommodate (and yield to) organized crime groups, may yet become very tempting for the new administration.

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Mexico actively excluding US from security coop – PC required for reversalArchibold, et al. 4/30 (Randal C., Damien Cave, and Ginger Thompson; “Mexico’s Curbs on U.S. Role in Drug Fight Spark Friction”, The New York Times, 30 April 2013, http://www.nytimes.com/2013/05/01/world/americas/friction-between-us-and-mexico-threatens-efforts-on-drugs.html?pagewanted=all&_r=0) ~ew

MEXICO CITY — In their joint fight against drug traffickers, the United States and Mexico have forged an unusually close relationship in recent years, with the Americans regularly conducting polygraph tests on elite Mexican security officials to root out anyone who had been corrupted. But shortly after Mexico’s new president, Enrique Peña Nieto, took office in December, American agents got a clear message that the dynamics, with Washington holding the clear upper hand, were about to change.“So do we get to polygraph you?” one incoming Mexican official asked his American counterparts, alarming United States security officials who consider the vetting of the Mexicans central to tracking down drug kingpins. The Mexican government briefly stopped its vetted officials from cooperating in sensitive investigations. The Americans are waiting to see if Mexico allows polygraphs when assigning new members to units, a senior Obama administration official said.In another clash, American security officials were recently asked to leave an important intelligence center in Monterrey, where they had worked side by side with an array of Mexican military and police commanders collecting and analyzing tips and intelligence on drug gangs. The Mexicans, scoffing at the notion of Americans’ having so much contact with different agencies, questioned the value of the center and made clear that they would put tighter reins on the sharing of drug intelligence.There have long been political sensitivities in Mexico over allowing too much American involvement. But the recent policy changes have rattled American officials used to far fewer restrictions than they have faced in years.Asked about security cooperation with Mexico at a news conference on Tuesday, President Obama said: “We’ve made great strides in the coordination and cooperation between our two governments over the last several years. But my suspicion is, is that things can be improved.”Mr. Obama suggested that many of Mexico’s changes “had to do with refinements and improvements in terms of how Mexican authorities work with each other, how they coordinate more effectively, and it has less to do with how they’re dealing with us, per se.” He added, “So I’m not going to yet judge how this will alter the relationship between the United States and Mexico until I’ve heard directly from them to see what exactly are they trying to accomplish.”Mr. Obama is scheduled to visit Mexico on Thursday and Friday on a mission publicly intended to broaden economic ties.But behind the scenes, the Americans are coming to grips with a scaling back of the level of coordination that existed during the presidency of Felipe Calderón, which included American drones flying deep into Mexican territory and American spy technology helping to track high-level suspects.In an interview, Mexico’s interior minister, Miguel Ángel Osorio Chong, made no apologies. He defended the moves, including the creation of a “one-stop window” in his department to screen and handle all intelligence, in the name of efficiency and “a new phase” in fighting crime.In a country worn down by tens of thousands of people killed in a drug war, he said Mexico needed to emphasize smart intelligence over the militarized “combating violence with more violence” approach of the Calderón years.

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Energy – 1NCEngagement over energy will happen after PEMEX reform- doing it now crushes Nieto’s capitalMcAllister, 13 -- Reuter’s senior energy correspondent [Edward, "For Obama and Pena Nieto, a delicate 'first dance' around energy," Reuters, 5-2-13, www.reuters.com/article/2013/05/02/energy-usa-mexico-idUSL2N0DI21H20130502]

When the conversation between President Barack Obama and his newly elected Mexican counterpart Enrique Pena Nieto turns to the controversial topic of energy during their meeting this week, both are apt to step carefully. The two countries have abruptly changed positions over the past decade: Mexico, once the growing energy power, is struggling to maintain production; the United States, once a guaranteed importer, is enjoying a lucrative energy boom. However, the thorny issues of foreign investment in Mexico's oil production sector or swapping different types of crude oil between the two nations will likely only be brought up in private, if at all. Although Mexico's aging refineries could operate more efficiently using some of the light crude emerging from U.S. oilfields, state oil and gas monopoly Pemex has long avoided incremental imports in order to maintain its reliance on the heavier crude produced domestically. Meanwhile, U.S. pipeline exports of natural gas to Mexico have surged, and could double within a few years as new projects link Latin America's second-largest economy with major U.S. producing regions, despite concerns in the United States that exports could push prices higher at home. Less divisive topics, such as climate change and how to improve cross-border energy efficiency, are expected to be discussed, Sergio Alcocer, Mexico's deputy foreign minister responsible for the United States, told Reuters. "This is more like the first dance of the season," said Bill O'Grady, chief markets strategist at Confluence Investment Management. "You get to see each other, get to know each other. But Mexico is still trying to figure out how to reform its own state oil company." SOME KIND OF A SWAP? Mexican oil and gas output remains flat while national demand increases, creating a dilemma for Pena Nieto , whose opponents vigorously oppose foreign investment in the country's energy sector. Although Mexican crude is a staple for Gulf Coast refineries, crude oil imports from Mexico have dropped a third over the past decade, sinking below 1 million barrels per day last year for the first time since 1994, according to government data. Mexico has duly shifted its focus. A month ago Pemex touted a new two-year deal to boost crude exports to China by 30,000 bpd. Talk of some kind of oil "swap" has also circulated, based on the idea that U.S. producers could get a better price for their light-sweet crude in Mexico while Texas and Louisiana refineries built to run on heavy-sour grades could get more of that type of oil from Mexico, albeit at lesser rates than in the past. There is little indication yet that Pemex is angling for U.S. shale oil, or that U.S. companies are pressing to sell it. GAS BONANZA As lawmakers engage in an increasingly fierce debate in Washington over whether natural gas exports would drive up fuel prices at home, foreign companies are racing to export more to Mexico, where demand is growing fast. U.S. natural gas exports to Mexico rose by 24 percent in 2012 to all-time highs, according to U.S. government data. The capacity to export will double by the end of 2014 as Mexican power plants hook up to pipelines running from the giant Eagle Ford play in Texas and further afield. Companies like Sempra Energy, Japan's Mitsui and Kinder Morgan are all planning to build new pipelines in Mexico, potentially reducing its dependence on imported LNG from overseas. Alejandro Martinez, the top natural gas executive at Pemex, said exports of U.S. gas to Mexico and Mexican oil to the United States present "a natural exchange" for the two countries. "I think we have to have a much greater integration," he said in an interview with Reuters this week. INVESTMENT ESSENTIAL Whether Obama and Nieto will discuss the more delicate matter of Mexico's allowing foreign investment in its struggling oil sector is unclear. Development of the country's large shale formations is still on hold as it considers its options. Mexico has the fourth-largest shale gas resources in the world after the United States, China and Argentina, according to a U.S. government report on global shale deposits in 2011, though it remains to be seen how they will be developed. Pena Nieto has pledged to open up Mexican oil production and exploration to more outside investment in order to ramp up growth. "When push comes to shove, it's U.S. companies that have the technology and experience to help Mexico develop its deepwater and onshore unconventional resources," said Ed Morse, managing director of commodity research at Citi Group. Traditionalists who view Pemex as a symbol of Mexican self-sufficiency strongly oppose the prospect. Jorge Buendia, political analyst and director of polling firm Buendia & Laredo, said Mexico was therefore likely to avoid open talk of oil and gas with the United States for now, though "back-room" discussions would no doubt take place. Raising the subject frankly would lay the new president open to accusations that he was selling Mexico out to those looking "to steal" its oil , and imply that the industry was falling behind , Buendia added. "The current situation doesn't lend itself at all to bringing this subject up in public."

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Energy – 2NCUS investments de-rail reform- urgency of failure key to reform motivationRodriguez, 12 -- reporter for Bloomberg News in Mexico City [Carlos Manuel, and Jonathan Roeder, "A Big Oil Find May Derail Reforms in Mexico," Business Week, 10-4-12, www.businessweek.com/articles/2012-10-04/a-big-oil-find-may-derail-reforms-in-mexico, accessed 7-10]

A Big Oil Find May Derail Reforms in MexicoWhen Mexican President Felipe Calderón turned 50 last August, the head of the state oil company called with what he labeled “a great gift.” After years of deep exploration and almost $10 billion in investment since 2009, Petróleos Mexicanos (Pemex) made a big oil find in the ultradeep waters of the Gulf of Mexico. A week later, Calderón appeared at a press conference holding a flask of crude from the new site, the Trion field. Pemex is preparing to announce a second deepwater discovery in coming days, according to company executives. The finds will bolster the legacy of President Calderón, who had overseen declines in crude output by Pemex every year since he took office in late 2006. But ultimately the discovery could derail an overhaul of the company promised by President-elect Enrique Peña Nieto, who assumes office on Dec. 1. Because Pemex’s petroleum production has dropped 25 percent from its peak of 3.4 million barrels a day in 2004, Peña Nieto called energy reform his “signature issue.” He promised to change rules that allow private and foreign oil companies to provide services to Pemex but ban them from owning stakes in Mexico’s oil and gas fields. Mexico depends on royalties from Pemex for about a third of its budget. Pemex lacks experience beyond shallow waters, and Mexico’s deepwater Gulf territory is too vast for a single company to explore and exploit, says Juan Carlos Zepeda, head of the nation’s Hydrocarbons Commission. Capital Economics, a London-based research firm, says allowing international companies to invest and produce in Mexico’s fields could boost the nation’s growth by as much as 0.8 percent a year. Now, with a possible 10 billion barrels in new reserves from the recent finds, politicians may find it easier to stick with the status quo. “Reforms are easier done in an urgency moment,” says Lisa Schineller, chief of Latin American ratings at Standard & Poor’s (MHP), which downgraded Mexico in 2009 in part because of its overreliance on oil. “When you’re losing oil revenue, there’s greater pressure.”

Nationalists oppose foreign involvement with PEMEX and prefer domestic reform.Garcia, Staff Writer for Business Day, 13 (David “Mexico’s leftist opposition rallies against energy reforms” Business Day, 3-18-2013, http://www.bdlive.co.za/world/americas/2013/03/18/mexicos-leftist-opposition-rallies-against-energy-reforms)Waving party flags and shouting their support, tens of thousands of leftist party members rallied on Sunday against government plans to overhaul Mexico’s energy sector, a preview of the tough road ahead for President Enrique Peña Nieto’s reform push. ¶ Organised by the leftist Party of the Democratic Revolution (PRD), the rally took place on the eve of the 75th anniversary of the nationalisation of the country’s oil industry, the historical pivot that gave birth to state oil monopoly Pemex.¶ Speakers denounced any move to privatise the government-run oil giant, even though Mr Peña Nieto and other members of his centrist Institutional Revolutionary Party have consistently denied any plans to sell or privatise Pemex.¶ "We are being loyal to this historical legacy that has given our oil riches to the nation and we are going to defend it with everything we’ve got," said Jesus Zambrano, the PRD’s national president, to rousing applause.¶ He later told reporters that it was "absolutely false" that Mexico’s constitution had to be amended to lure significant private investment into the country’s flagging oil sector.¶ Analysts say decades of mismanagement and a heavy tax burden have hobbled Pemex, while its oil output has fallen by more than a quarter since reaching a peak of 3.4-million barrels per day in 2004.¶

If major reforms are not undertaken, the government warns one of the top oil suppliers to the US could itself be importing crude as soon as 2018.¶ Mr Peña Nieto commemorated the anniversary of the 1938 expropriation in a Sunday speech at a Pemex refinery in the city of Salamanca, in Mexico’s central Guanajuato state.¶ Without going into specifics, he emphasised the need for major changes in the sector.¶

"The transformation of Pemex is indispensable to free up Mexico’s great economic potential," he said.¶

Cuauhtemoc Cardenas, a past PRD presidential candidate and the son of former president Lazaro

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Cardenas who ordered the 1938 nationalisation, also struck a nationalistic chord.¶ "We have a framework for the (energy) industry that will serve the country, and above all, that will strengthen our national sovereignty," he said, without going into details.¶ Mexico’s constitution says all hydrocarbons are owned by the state and only the state can exploit the country’s energy wealth, limiting the level of involvement by private companies to essentially service contractors for Pemex.¶ PRD officials said the rally attracted more than 60,000 people from all across the country.¶ "We’re defending what is ours," said retiree Hector Pedroza, 69, from the nearby state of Mexico, shortly after the rally ended.¶ Mr Pedroza said he would like to see a growing domestic oil industry, but he was sceptical that ordinary Mexicans would benefit from potential reform.¶ "Reform would be a good thing, but not one that treats Mexico like a slave. Foreign companies that come here to invest pay us so little," he added.

Compromise on domestic reform is likely, but international investors will cause backlashGraham, staff writer for reuters, 13(Dave, “Mexico's main leftist party proposes path to oil reform” Reuters, 6-25-13, http://www.reuters.com/article/2013/06/26/mexico-pemex-idUSL2N0F124F20130626)(Reuters) - Mexico's main leftist opposition party on Tuesday presented a set of proposals to make state oil giant Pemex independent, providing a foretaste of talks likely to surround government efforts to make the company more productive.¶ President Enrique Pena Nieto's pledge to allow more private capital into Pemex, a symbol of Mexican self-sufficiency, is one of the most contentious issues on his legislative agenda, even though he has yet to reveal many details of his plan.¶ Pena Nieto hopes to pass a reform with the other main groups in Congress, including the leftist Party of the Democratic Revolution (PRD), which is resisting the president's aim to make changes to the constitution to open up the industry.¶ Presenting their reform model in Mexico City, PRD leaders said they saw no need to alter the constitution to revamp Pemex, whose income makes up about a third of the federal budget.¶ Still, PRD Chairman Jesus Zambrano said he was ready to listen to the government's ideas, urging Pena Nieto to spell out his plans for the oil company, whose output has slipped from 3.4 million barrels per day in 2004 to just over 2.5 million now.¶ "We have our proposal, now we want to know theirs ... There must be a public debate," Zambrano said.¶ The PRD argues that corruption, inefficiency, a heavy tax burden and the fact the company is under the control of the finance ministry are holding back the 75-year-old Pemex.¶ To end this, the PRD plan envisions cutting Pemex loose to run its own operations, and bringing down its tax burden.¶ Senior PRI lawmakers are keen to keep the PRD on board for a reform of the oil monopoly to try and reduce the impact of protests likely to accompany the launch of the government plan.¶ Core elements of the PRD plan, such as giving Pemex more independence and reducing the company's tax burden, are likely to form part of the government's own vision.¶ The government aims to shift some of that burden onto the public with a tax system overhaul in tandem with Pemex reform.¶ Some PRD officials say the party may also be willing to contemplate small tweaks to the constitution provided Mexico retains control and ownership of its oil reserves.¶ Advocates of constitutional change say that without it, Mexico will fail to attract the kind of investment the industry needs, and risks falling further behind countries like the United States that have ramped up output in recent years.¶ PROFIT SHARING¶ Pena Nieto's ruling Institutional Revolutionary Party (PRI) fell short of a majority in Congress when he won office last year and the president sought to strengthen his hand by forging a loose alliance with Zambrano and conservative leader Gustavo Madero to work together on economic reforms.¶ Oil majors are hoping Pena Nieto will deliver a far-reaching shake-up to Pemex that will open the door to them participating in lucrative exploration and production work in Mexico.¶ They have held out hope his plan could allow them to book crude reserves that can be used as collateral - but even the strongest PRI proponents of a business-friendly reform say such a measure is almost certain to be blocked by Congress.¶ Instead, government officials and senior politicians say the reform is likely to set out a framework that could allow oil majors to enter profit-sharing agreements with Pemex in exchange for the companies shouldering production and exploration risks.¶ Ever since the PRI created Pemex when it nationalized the oil industry in 1938, Mexico has been highly protective of its oil wealth, keeping foreign investors out of the most

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strategically important parts of the business.¶ From the moment he took office in December, Pena Nieto has had to deny accusations he plans to privatize the company, repeatedly forcing him on the defensive over a reform his government plans to present by September at the latest.¶ Leading leftist politicians, such as Andres Manuel Lopez Obrador, the runner-up in the last two Mexican presidential elections, have pledged to oppose the reform vigorously.¶ Street protests are likely to be launched against the liberalization of Pemex in the coming weeks.

Increasing foreign cooperation on oil is politically unpopularWilkenson, staff writer for LA times, 13 (Tracy, “Mexico edges toward letting foreign oil firms invest in Pemex” LA Times, 3-4-2013 http://articles.latimes.com/2013/mar/04/business/la-fi-mexico-oil-20130305) MEXICO CITY — Mexico's ruling party has taken a step toward opening its state oil company to outsiders, a move that could eventually allow U.S. oil firms to drill south of the border.¶ In an important test of Mexican President Enrique Peña Nieto's sway over resistant factions of his party, the Institutional Revolutionary Party has changed its bylaws to clear the way for changes at Petroleos Mexicanos, or Pemex.¶ Pemex, a symbol of nationalist pride, is the top source of tax revenue for the Mexican government. But its production of oil has been declining dramatically and the company is in dire need of outside expertise for deep-sea exploration.¶ On Sunday, PRI, as the party is known, passed several changes that Peña Nieto needed for the reforms he promised as a hallmark of his administration. Chief and most difficult among them is opening the behemoth Pemex to private and foreign investment, long a taboo in this country.¶ "It's a win-win situation" for Mexico and the U.S., said Fadel Gheit, a senior energy analyst at Oppenheimer & Co. "The Mexican government finally realized that banning international companies from participating in this sector was very ill-advised because they lack the technology, they lack the expertise, and they don't have enough money to put up the capital needed to grow production."¶ U.S. oil companies are already familiar with the Gulf of Mexico, where Mexico's offshore oil reserves lie, Gheit said. But companies may be skittish after run-ins with Venezuela's President Hugo Chavez, who nationalized the assets of some foreign oil giants in recent years.¶ "It will be larger oil companies — the Exxons, the Shells" that invest in Pemex, Gheit said. "But they want to make sure the government doesn't pull the plug in a year or two because these investments are long-term and cost millions of dollars."¶ Calls to Shell Oil Co. and Chevron Corp. were not immediately returned.¶ For Mexicans, the issue is deeply emotional as well as politically charged. The country nationalized its industry in 1938 in response to decades of perceived exploitation by foreign oil interests. Ever since, most Mexicans have considered public ownership of the country's most lucrative natural resource to be a cornerstone of their sovereignty.¶

Mexico is one of the 10 largest oil producers in the world and an important partner in the U.S. energy trade. But production has been sliding for nearly a decade because of steep declines in the country's main oil field, Cantarell, located in shallow waters off Campeche state. Pemex lacks the equipment and expertise to drill in deeper waters.¶ Other oil-rich countries have struck deals with outsiders to develop their oil in exchange for a percentage of production. But Mexico's constitution prohibits such arrangements.¶ Peña Nieto's plans for Pemex have already led the political left to accuse the government of trying to privatize the oil company. The government insists that overall ownership of the oil business will remain in state hands; the proposed changes are expected to be presented to Congress late this year.¶ "Let's show, with attitude, with action and with voice, that we are a new generation of PRI," Peña Nieto told his party. "This is an assembly of renewal and transformation."¶ If the reforms pass, U.S. oil companies are well positioned to both refine and consume the oil produced, said Bruce Bullock, executive director of Southern Methodist University's Maguire Energy Institute. In the long run, he said, such partnerships could help smooth big gyrations in gas prices.¶ "The more oil we can get out of friendly places like Canada and Mexico, and the less oil we can get out of places like Venezuela and the Middle East, certainly the less volatile oil prices will be," he said.¶ For Mexico, Sunday's vote was a significant gauge of whether Peña Nieto would be able to win the support of the more stubborn members of the party who remain wedded to old-style PRI nationalistic paternalism and who are not inclined to change the way Pemex is run.¶ PRI governed Mexico for seven decades until being ousted in 2000. With its return three months ago, the PRI government is seeking to reassert its authority over many aspects of Mexican political life while trying to convince observers that it is a more modern, less authoritarian party.

US influence in Pemex reform causes massive backlashPacheco, 7/7Jerry Pacheco, ElPasoInc., 7/7/13, “Immigration battle just beginning”, http://www.elpasoinc.com/news/personal_finance/article_45a635ae-e72d-11e2-b2c5-0019bb30f31a.html

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President Barack Obama, who has pushed Congress to pass a comprehensive immigration reform package that he can sign, will inject his political will into the debate. Immigration reform will be a legacy issue that can be used to define his presidency for years to come, so he has a major stake in what happens in the House.Also watching from the sidelines with great interest is Mexico. Our southern neighbor has long advocated immigration reform in the U.S.; the overwhelming majority of people living illegally in this country are Mexican citizens. Even as Mexico has praised the Senate’s action, it has expressed concerns about border security. Mexico must step lightly when commenting on the Senate bill and what happens in the House, or risk backlash from U.S. lawmakers and citizens who would take offense that a foreign country is injecting itself into the American legislative process.This is especially true when it comes to Mexico, a country that cries foul every time it perceives U.S. interference in its affairs. It would not like the U.S. to insert itself into Mexican congressional discussions on the privatization of Pemex or its own immigration issues with countries like Guatemala.As the House settles down to work on this issue, I will be breaking out the popcorn, sipping on some soda and watching the players shuck and jive as the diverse interests clash on the world stage for a long overdue knockdown, drag-out fight on immigration reform.

Mexico’s overwhelming desire to be perceived as strong means there will be no US involvement in future reforms like Pemex.Archibold, Cave, and Thompson, 4/30Randal Archibold, Damien Cave, and Ginger Thompson, New York Times, 4/30/13, “Mexico’s Curbs on U.S. Role in Drug Fight Spark Friction” http://www.nytimes.com/2013/05/01/world/americas/friction-between-us-and-mexico-threatens-efforts-on-drugs.html?pagewanted=all&_r=0

MEXICO CITY — In their joint fight against drug traffickers, the United States and Mexico have forged an unusually close relationship in recent years, with the Americans regularly conducting polygraph tests on elite Mexican security officials to root out anyone who had been corrupted.But shortly after Mexico’s new president, Enrique Peña Nieto, took office in December, American agents got a clear message that the dynamics, with Washington holding the clear upper hand, were about to change.“So do we get to polygraph you?” one incoming Mexican official asked his American counterparts, alarming United States security officials who consider the vetting of the Mexicans central to tracking down drug kingpins. The Mexican government briefly stopped its vetted officials from cooperating in sensitive investigations. The Americans are waiting to see if Mexico allows polygraphs when assigning new members to units, a senior Obama administration official said.In another clash, American security officials were recently asked to leave an important intelligence center in Monterrey, where they had worked side by side with an array of Mexican military and police commanders collecting and analyzing tips and intelligence on drug gangs. The Mexicans, scoffing at the notion of Americans’ having so much contact with different agencies, questioned the value of the center and made clear that they would put tighter reins on the sharing of drug intelligence.There have long been political sensitivities in Mexico over allowing too much American involvement. But the recent policy changes have rattled American officials used to far fewer restrictions than they have faced in years.Asked about security cooperation with Mexico at a news conference on Tuesday, President Obama said: “We’ve made great strides in the coordination and cooperation between our two governments over the last several years. But my suspicion is, is that things can be improved.”Mr. Obama suggested that many of Mexico’s changes “had to do with refinements and improvements in terms of how Mexican authorities work with each other, how they coordinate more effectively, and it has less to do with how they’re dealing with us, per se.” He added, “So I’m not going to yet judge how this

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will alter the relationship between the United States and Mexico until I’ve heard directly from them to see what exactly are they trying to accomplish.”Mr. Obama is scheduled to visit Mexico on Thursday and Friday on a mission publicly intended to broaden economic ties.But behind the scenes, the Americans are coming to grips with a scaling back of the level of coordination that existed during the presidency of Felipe Calderón, which included American drones flying deep into Mexican territory and American spy technology helping to track high-level suspects.In an interview, Mexico’s interior minister, Miguel Ángel Osorio Chong, made no apologies. He defended the moves, including the creation of a “one-stop window” in his department to screen and handle all intelligence, in the name of efficiency and “a new phase” in fighting crime.In a country worn down by tens of thousands of people killed in a drug war, he said Mexico needed to emphasize smart intelligence over the militarized “combating violence with more violence” approach of the Calderón years.But American officials here see the changes as a way to minimize American involvement and manage the image of the violence, rather than confronting it with clear strategies.The lack of certainty over Mexico’s plans and commitment has jeopardized new security assistance from the United States. Plans to release $246 million, the latest installment of a $1.9 billion anticrime package known as the Merida initiative, have been held up by Senator Patrick J. Leahy, Democrat of Vermont. His office has been waiting for months for more details from the State Department and the Mexican government on how the money would be spent and what it might accomplish.A senior administration official, speaking on the condition of anonymity to provide a more candid assessment, said a recent visit by Mr. Osorio Chong to Washington helped calm some fears. A delegation of Mexican officials is also expected to visit in the coming weeks to explain the country’s plans to members of Congress.But there is growing anxiety that the violence has not diminished, with daily killings hovering around 50 since last fall. Some American officials say they are increasingly worried by public and private signs suggesting that Mr. Peña Nieto, the young face of the Institutional Revolutionary Party, which ran Mexico for 71 years, is putting the government’s crime-fighting image above its actions.“The cosmetics — that’s what they care about,” one American official said, insisting on anonymity so as not to worsen already tense relations.“The impression they seem to want to send is ‘We got this,’ ” one former American official said, asking for anonymity because he was discussing private conversations. “But it’s clear to us, no, they don’t. Not yet.”A senior administration official, asked for a sign of progress or a recent accomplishment in security matters, struggled with the question until pointing to the extradition to the United States of a few men on drug charges, conceding they were not big fish. Other extradition requests appear stalled; there were 155 last year, mostly for drug offenses, the highest in nearly a decade.Tuesday evening, less than 48 hours before Mr. Obama’s arrival and with mounting questions on whether Mexico would go after kingpins, Mexico announced it had captured Inés Coronel, the father-in-law of the most-wanted capo, Joaquín Guzmán Loera, known as El Chapo. It was unclear if the United States played a role in the arrest.If so, it would represent a step beyond the Mexican discomfort with Americans operating on their turf that emerged in December, just after Mr. Peña Nieto’s inauguration. It solidified after an explosion on Jan. 31 at the office complex of the state oil company, Pemex, in which 37 people died and more than 120 were injured.Agents with the Bureau of Alcohol, Tobacco, Firearms and Explosives were invited to help investigate. But after they suggested in a preliminary assessment that a bomb might have caused the blast, the agency’s role in the investigation was cut short, American officials said, adding that Mexican officials canceled a visit by a team of investigators from the United States.

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An administration official said that while American explosives experts were not allowed to contribute as much as they could have to the investigation, creating a sense that the Mexicans were rushing to conclude that the blast was an accident.On Feb. 4, the attorney general of Mexico announced that the cause was an unexplained buildup of gas, possibly methane, that was ignited by a spark in the basement of one of the buildings.The American ambassador was invited to the news conference on the findings, but a State Department official said the level of American involvement in the investigation did not warrant the ambassador’s presence. With the American agents leaving the cooperative center in Monterrey, which was first reported by The Washington Post on Sunday, and the development of the one-stop intelligence mechanism, the United States is worried and is seeking more information.“We’re still figuring out what that means,” a senior administration official said of the new intelligence arrangement.But the fear is that it will diminish the access that American law enforcement and intelligence agencies have established with branches of the Mexican police and military. Those hard-fought relationships could disintegrate if American agents have to go through a central office to communicate and share knowledge with their Mexican counterparts, some American officials say.

Significant PC needed for energy reformHennemuth 13[Elizabeth Hennemuth, Fellow of The Project on International Peace and Security, think tank based in the College of William and Mary, William and Mary Institute for the Theory and Practice of International Relations, “Unintended Consequences: Considering Mexico’s Stability when Designing U.S. Immigration Reform,” May 2013, http://www.wm.edu/offices/itpir/_documents/pips/2012-2013/hennemuth_e_brief.pdf]Corrupt politics undermining institutional reform. Under the decades-long rule of the Partido Revolucionario Institucional (PRI), many Mexican politicians accepted bribes from drug cartels in exchange for distribution rights, market access, and protection.75 Charting a new course, President Peña Nieto has asserted that the new PRI will neither cut deals with drug traffickers, nor continue President Calderón’s tactics.76 Moreover, President Peña Nieto has announced a series of reforms in labor, taxation, energy, and Social Security to improve economic growth.77 However, to implement these reforms, President Peña Nieto would need significant political capital that he may not have, as he only won 38 percent of the vote in the 2012 presidential election

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Immigration – 1NCImmigration causes brain drain—hinders Nieto’s other reformsHennemuth 13[Elizabeth Hennemuth, Fellow of The Project on International Peace and Security, think tank based in the College of William and Mary, William and Mary Institute for the Theory and Practice of International Relations, “Unintended Consequences: Considering Mexico’s Stability when Designing U.S. Immigration Reform,” May 2013, http://www.wm.edu/offices/itpir/_documents/pips/2012-2013/hennemuth_e_brief.pdf]

More visas for highly skilled and educated workers would create opportunities for middle-class Mexicans seeking employment, safety, and a better future for their children. A large-scale influx of Mexican professionals into the United States would deny Mexico the economic, political, and social leaders needed to enact President Peña Nieto’s proposed reforms. Mexico’s brain drain. One in three Mexicans with PhDs and one in seven Mexicans with Master’s degrees live in the United States.160 From 1971 to 2008, Mexico lost 2,100 scientists and more than 140 billion pesos the Mexican government invested in their education.161 Mexicans have several means to pursue nonimmigrant educational and employment migration, such as through the NAFTA Professional (TN) visa, which has had no numerical limit since 2004.162 Furthermore, from 2000-2012, the number of nonimmigrant Mexicans investing significant capital in U.S. businesses through E-2 NAFTA visas doubled.163 Moreover, the number of Mexicans immigrating on the EB-5 visa, which aims to grow the U.S. economy through immigrants’ capital investment and job creation in U.S. businesses, has recently increased.164 Mexico’s brain drain likely would worsen as immigration reform makes it easier for professionals, especially those in STEM fields, to immigrate to the United States legally . In an April 2013 report, the Banco de México and the Migration Policy Institute predicted more Mexican migration in skilled employment sectors, as well as an overall return to net migration inflows of 230,000 to 330,000 annually, between 2011 and 2017. 165 Many educated professionals cannot find employment in their fields in Mexico. For example, in 2012, President Calderón reported that 130,000 engineers and technicians graduate from Mexican universities and specialized high schools—more than in Canada, Germany, or Brazil.166 But the number of Mexicans employed as engineers has barely grown, increasing from 1.1 million in 2006 to 1.3 million in 2012.167 Engineering students often take technician jobs for which they are over-qualified.168 In contrast, 4 of the top 10 fastest-growing sectors of the U.S. economy are in STEM fields.169 Environmentally conscious building construction, which is predicted to grow 22.8 percent over the next 5 years, would likely attract skilled labor and engineers.170Mexico’s inhibited economy . Many of President Peña Nieto’s proposed reforms require a skilled labor force for successful implementation —the same groups that U.S. immigration reform targets. For example, President Peña Nieto’s proposal to renovate Mexico’s railway system would create jobs for engineers and skilled laborers.171 Mexico also is starting to see a return of manufacturing jobs from China as China’s labor costs increase. 172 If U.S. immigration reform attracts Mexicans employed in these sectors to the United States, then the demand for and wages of workers in Mexico would increase. The ensuing higher manufacturing costs would again put Mexico in closer competition with China. The departure of better-educated, higher-earning migrants would leave the general Mexican population worse off economically.173

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Immigration – 2NCNieto careful on Immigration issuesO’Reilly 13,[Andrew O’Reilly, journalist for Fox News Latino, Has a bachelor’s degree in journalism from the University of Pittsburgh and a master’s degree in journalism and Latin American studies from New York University, Fox News Latino, “Immigration: Mexico Stays Out of Debate,”1/30/13, http://latino.foxnews.com/latino/news/2013/01/30/immigration-mexico-stays-out-debate/]

Fox continued his efforts for immigration reform in the U.S., but the U.S. focus on the border dealt more with security than reform in the post-9/11 world. In the Calderón and now Peña Nieto administrations, Mexico appears reluctant to give anything more than tacit support for immigration reform, claiming that it is a domestic policy issue of the U.S. and not part of Mexico’s foreign policy.“Mexico is trying to be careful in terms of how it gets involved in the immigration debate,” said Christopher Wilson of the Mexico Institute of the Woodrow Wilson International Center for Scholars in Washington. “It will talk about border security, trans-migration, issues like that, but Mexico will weigh its involvement in immigration very carefully.”Before inauguration, Peña Nieto did say that he would support any move by the Obama administration to pass immigration reform during a meeting with the U.S. leader back in November. Their talk, however, focused more on border security and Mexico’s ongoing struggle with the country’s drug cartels.Peña Nieto has remained more or less mum on his drug policy, instead touting education, fiscal and energy reforms. On Monday, he told a summit of Latin American and Caribbean leaders in Chile that he wants Mexico to focus on being a player in solving world and regional problems.The Mexican government did urge a U.S. court in December to block a part of Arizona’s controversial immigration law that prohibits the harboring of undocumented immigrants."México cannot conduct effective negotiations with the United States when the foreign policy decisions of the federal governments are undermined by the individual policies of individual states," lawyers for the Mexican government said in a friend-of-the-court brief.Despite their plea to the U.S. court, Mexico does not appear to want to discuss immigration on a national level.

Meddling in US immigration problems causes backlashHennessey and Wilkinson 13[Kathleen Hennessey and Tracy Wilkinson, writers for the Los Angeles Times, LA Times, “Obama, Mexico leader to avoid hot topics, at least publicly,” 5/1/13, http://articles.latimes.com/2013/may/01/world/la-fg-obama-mexico-20130502Obama's visit to Mexico City comes as the fight over border security and immigration reform has begun to consume Congress. Peña Nieto supports the effort but wants to avoid the mistakes of a predecessor, Vicente Fox, who lobbied for a 2001 immigration reform bill in Congress. Conservatives charged that Fox was meddling in U.S. affairs.Obama will try to avoid the same charge. The White House is monitoring Peña Nieto's calls to reform Mexico's vast energy industry. U.S. companies could benefit if it opens oil and gas exploration to foreign investors. But a public endorsement by Obama, or even a perception of one, could undermine the already fraught endeavor." Mexicans have an understanding of noninterference. So they do not want us to talk about energy, and they will not talk about immigration," said Diana Negroponte, a senior fellow with the Latin America Initiative at the Brookings Institution. "It's a quid pro quo."

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If those issues are raised at length publicly, she said, it may signal a "degree of irritation" in private talks.The two leaders are likely to discuss their priorities and try to exert influence at a meeting and a dinner, both closed to journalists. Mexicans are concerned about the temporary work permits in the Senate bill on immigration, a detail that affects the flow of workers back and forth across the border.Obama's aides have billed his visit as a chance to shift the U.S. perception of Latin America from drug wars and illegal border crossings to a region on the rise. This argument leans heavily on the success of Peña Nieto's reform agenda, which includes changes in education, telecommunications, banking and energy."What I'd say broadly is that energy is an area of great promise and cooperation across the Americas," Ben Rhodes, deputy national security advisor, said Wednesday.Still, White House officials say they've put the word out that cooperation by Mexico is welcome, but commentary less so, especially on immigration. "We've emphasized on our side that this is a domestic political issue, primarily," said Ricardo Zuniga, senior director for Western Hemisphere affairs on the National Security Council."I think Peña Nieto has to be very careful, " said Carl Meacham, a director of the Americas Program

at the nonpartisan Center for Strategic and International Studies. " There are elements here who would view what he says as being partial to one side or the other . That is not helpful."

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Legalization – 1NCLegalization is an Uphill fight - unpopularPierre 7/10 (Allen St. is the NORML Executive Director; National Organization for the Reform of Marijuana Laws, “NORML Meets With Former Mexican President”, NORML Website, 10 July 2013, http://blog.norml.org/2013/07/09/norml-meets-with-former-mexican-president/?utm_source=twitter&utm_medium=social&utm_campaign=NORML+Meets+With+Former+Mexican+President)

Mexico’s current president, Enrique Pena Nieto, has opposed legalization. But he recently said that he would consider world opinion on the matter, particularly in light of recent voter-approved initiatives to legalize marijuana in Washington state and Colorado for recreational use.In San Francisco on Monday, Fox said he had signed on to attend and help develop an international summit later this month in Mexico to strategize a path to end marijuana prohibition.Participants scheduled to attend the three-day meeting starting July 18 in San Cristobal include an American surgeon, the dean of Harvard’s School of Public Health and a Mexican congressman who plans to introduce a bill to legalize marijuana in Mexico this summer, Fox said.The bill, which he expects to be introduced by Mexican lawmaker Fernando Belaunzaran, would legalize adult recreational use of marijuana, Fox said.Support for legalizing marijuana in the United States has been growing. Nineteen states and the District of Columbia have passed medical marijuana laws, according to the pro-legalization National Organization for the Reform of Marijuana Laws. But the drug remains illegal under federal law.Lifting the prohibition on cannabis in Mexico, however, appears to face more of an uphill battle. Mexican lawmakers have rejected previous legalization efforts and polls have shown little popular support for the idea.But Fox promised to wage what he said was a necessary battle.“We cannot afford more blood and the loss of more young people,” Fox said. “We must get out of the trap we are in.”

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Trade/NAFTA – 1NC( ) SQ policies aren’t working, Mexicans agree – don’t want increase in tradeThe Economist, ‘03[The Economist, weekly publication detailing international affairs, Free trade on trial, 12/30/2003, http://www.economist.com/node/2312920]

Unsurprisingly, a mere ten years' experience has settled few of these quarrels. Today, most trade economists read the evidence as saying that NAFTA has worked: intra-area trade and foreign investment have expanded greatly. Trade sceptics and anti-globalists look at the same history and feel no less vindicated. Look at Mexico's growth since 1994, they say—dismal for much of the period. Look at the contraction of manufacturing employment in the United States. As for the environment, go to the places south of the border where the maquiladoras cluster, and take a deep breath.Politically, the sceptics, ten years on, can fairly claim victory. NAFTA is unpopular in all three countries. In Mexico, which stood to gain most from freer trade (since its barriers were so much higher at the outset) and which has indeed benefited greatly according to most economic appraisals, the agreement is widely regarded as having been useless or worse. In a poll conducted at the end of 2002 by Ipsos-Reid for the Woodrow Wilson Centre in Washington, only 29% of Mexicans interviewed said that NAFTA has benefited Mexico; 33% thought that it had hurt the country and 33% said that it had made no difference. In all three countries, the perceived results of NAFTA seem to have eroded support for further trade liberalisation.NAFTA's champions are partly to blame for this: they oversold their case. It was never plausible, for instance, to expect that NAFTA would be a net creator of jobs. Trade policy is not a driver of overall employment; it affects the pattern of jobs, rather than the total number. To the extent that NAFTA succeeds in stimulating trade and cross-border flows of investment, jobs in each member country are created in some industries and destroyed in others. This was bound to be a painful process for some, even if it succeeded in making the member countries' economies more efficient overall, and hence in raising average incomes. Here was another instance of false advertising: NAFTA was never going to be, as some enthusiasts claimed, a win-win proposition for all of North America's citizens, even if all three countries could hope to gain in the aggregate.

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Trade/NAFTA – 2NC

( ) Only economist like free trade, voters and politicians don’tStonebraker, ’13 – Professor at Winthrop University, Ph. D. in economicsRobert J. Stonebraker, Winthrop University, received his Ph.D. degree in economics from Princeton University and a B.A. degree in economics from the University of Maryland, International Trade, 05/22/13, http://faculty.winthrop.edu/stonebrakerr/book/international_trade.htmMore than 150 years later, nothing has changed. Free trade remains unpopular – except among economists. We love it.Modern countries rely heavily on international trade. We in the U.S. import from other countries about 15 percent of the goods and services we buy. We export a similar proportion of what we produce to other countries. While we trade with almost every nation in the world, because of its geographical proximity, Canada is our primary trade partner. Although this trade is a critical component of our economic success, it does create controversy, and many countries (including the U.S.) actively restrict international trade by imposing tariffs (taxes) and quotas (physical limitations) on imports.Why? We make no attempt to limit trade between cities or states. Indeed, the U.S. Constitution forbids states to pass laws restricting trade with other states. Why not expand the “free trade zone” we enjoy within the U.S. to encompass the rest of the world?Think back through the Annie and Laurie examples in the last section. By finding their comparative advantages, specializing and trading, both women improve their lot. The same logic holds for two countries. Substitute Austria and Liberia for Annie and Laurie. The examples still work. Both participants still gain from specialization and trade. Specialization and trade among countries creates the same benefits as specialization and trade among individuals. The logic of gains from trade does not stop at an international border. We have made some strides toward freer trade in decades. After much rancorous debate Congress finally did approve our entry into the 1994 North American Free Trade Agreement (NAFTA) that mandates a phased elimination of all barriers to trade between the U.S., Canada, and Mexico, but opponents still abound.

( ) All trade agreements with the US are unpopularRevolución PanAmericana, ’12 – news site dealing the Latin American tradeRevolución PanAmericana, news site dealing with Latin American international ties, Romney’s Plan for Pan American Free Trade does Nothing, 8/23/2012, http://revpana.wordpress.com/2012/08/23/344/

However, such a plan would most likely fail or produce an impotent version of an original proposal. Simply put, the US has little power to sway the Brazilian giant, which already scrambles to protect its resilient, yet troubled domestic industry. Additionally, the US would bypass Argentina and other left-leaning ALBA states from an agreement. Under these conditions, a Pan American free trade zone would include Chile, Colombia, Honduras, Panama, Costa Rica, Peru and Mexico. But the US already has regional FTAs with Central America and Mexico, and Bilateral ones with Peru, Colombia, and Chile. So essentially, a positive outcome means exactly what we already have, but under a different name. Similarly, a negative outcome means exactly what we already have, plus another diplomatic failure.

Free Trade with the US is just plain unpopular. The North American Free Trade Agreement (NAFTA) destroyed the livelihoods of hundreds of thousands of Mexican farmers at the gain of US industrial agriculture. The Central American Free Trade Agreement (CAFTA) is not any better. Moreover, increased economic power in Latin America combined with a historical distrust of US

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proposals, makes a comprehensive plan lead by the US extremely unlikely. With Romney representing the hardline conservative face of US diplomacy in the Americas, Latin American leaders would be even more skeptical of a ‘mutually beneficial’ agreement.

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INTERNAL

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PC KeyPC key to Pemex reform – key to foreign investmentCattan and Espinosa 2013Nacha, Veronica Navarro, “Mexico Poised to End State Energy Monopoly, Pemex Official Says,” http://www.bloomberg.com/news/2013-07-10/mexico-poised-to-end-state-energy-monopoly-pemex-official-says.htmlMexico is on the cusp of opening its energy industry to outside investment as a wide consensus has developed that the constitution must be changed to end the government’s monopoly on production, according to a board member of state-controlled oil producer Petroleos Mexicanos.The country needs “very deep” reforms to lure investment to its natural gas and crude fields, and proposed changes could be ready by the end of this summer, Hector Moreira, who also is a former official in the country’s Energy Ministry, said today at the Bloomberg Mexico Conference in New York.Mexico is “on the eve” of much-needed changes that will open the way for faster growth and a stronger currency in the region’s second-largest economy, Gray Newman, Morgan Stanley’s chief Latin American economist, said today at the event. Officials from JPMorgan Chase & Co. and Grupo Financiero Banorte said they were optimistic that President Enrique Pena Nieto will lead a successful effort at reforms this year.“This administration doesn’t only have the willingness, but the political power and political

capital” to enact the changes , Gabriel Casillas, Banorte’s chief Mexico economist, said at the event. Casillas said he was “very bullish” on the peso, the best-performing major currency against the dollar this year, and that investors hadn’t yet priced in the reforms.A slowdown in economic expansion is putting pressure on Pena Nieto to gain approval to open the energy industry and change laws to boost tax collection, reforms he says may lift growth to 6 percent. The ruling Institutional Revolutionary Party has the ability to pass the key bills, which will attract investment and bolster Mexican markets, according to Eduardo Cepeda, the senior country officer for JPMorgan in Mexico.There will be “appetite” for Mexican securities in the second half of the year, Cepeda said.

Nieto’s PC is key—he’s rallying support nowEstevez 6/26(Dolia Estévez is a Senior Mexico Correspondent and foreign affairs analyst. She serves as a Senior Advisor for the U.S.-Mexico Journalism Initiative at the Woodrow Wilson Center and is an accredited correspondent with the Department of State, Capitol Hill and the Foreign Press Center, and is a member of Mexico’s Council on Foreign Relations. “Most Mexicans Oppose President Peña Nieto's Plans To Open Up Pemex To Private Investment,” Forbes, 6/26/13, http://www.forbes.com/sites/doliaestevez/2013/06/26/most-mexicans-oppose-president-pena-nietos-plans-to-open-up-pemex-to-private-investment/)

In London last week, Mexican President Enrique Peña Nieto said he will push for a “transformational” reform of Petroleos Mexicanos (Pemex), Mexico’s state-owned monopoly in oil and gas exploration and production. “There are different options on what the reform should be, but I am confident …  It will be transformational,” Peña Nieto told the Financial Times, adding that the reform would include “the constitutional changes needed to give private investors certainty .”¶ Foreign oil companies were expropriated by Mexican President Lazaro Cárdenas in 1938, and ever since Mexico’s vast oil resources — 13.9 billion barrels of crude-oil and possibly the world’s fourth-largest shale-gas reserves– became forbidden to outsiders. The Wall Street Journal said the announcement highlights a “willingness to break with the past among young, reformist members” of the PRI, Peña Nieto’s party. Exxon Mobil and Royal Dutch Shell are reported to be ready to return to Mexico, if Congress passes the measure. Both were among the group of American and British companies expropriated 75 years ago.¶ But Mexicans are less than ready to support Peña Nieto’s most ambitious and controversial reform to date. A new poll by the Centro de Investigación y Docencia Económicas (CIDE), a research institute, shows that 65 out of every 100 Mexicans are against opening up Pemex, the world’s seventh-largest oil producer with annual sales of more than $100 billion. “Energy, particularly oil, continues to be the stronghold of Mexican nationalism,” said CIDE.¶ Peña

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Nieto is counting on the Pact for Mexico, an alliance of the country’s top three political parties, to try to get the reform passed. The proposal, which is expected to involve reforming the Constitution, will need two-thirds support from Mexico’s Congress; the PRI, his party, does not hold a simple majority in either house. Peña Nieto reported that he’s negotiating to

get the political support he needs to break the state monopoly . However, some analysts believe that the Pacto, which succeeded in getting through a monopoly-busting telecom reform in May, will not hold up this time. The left-leaning Party of the Democratic Revolution, or PRD, warned that they will oppose Pemex’s reform. Marcelo Ebrard, a popular former mayor of Mexico City and likely PRD Presidential candidate in 2018, challenged Peña Nieto to a televised debate on the oil overhaul. Former PRD Presidential candidate Cuauhtémoc Cárdenas, Lazaro Cárdenas’ son, presented a counter proposal to “modernize” Pemex without changing Article 27 of the Constitution to undo the historical ban on privatizing the company. His proposal was endorsed Tuesday by top PRD politicians, including Ebrard and Mexico City Mayor Miguel Angel Mancera, and the party’s congressional leaders.¶ Pemex claims there is a need to boost annual investment by 46%, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Peña Nieto says that while he wants investment to come from private capital, he insists that Mexico’s oil and gas reserves will remain under the state’s control, i.e. will not be sold to private firms or privatized.

( ) PEMEX reform requires political cloutO’Neil, ’12 – analyst for CFR[Shannon O'Neil, analyzes developments in Latin America and U.S. relations in the region for CFR, Peña Nieto and Energy Reform, 6/12/12, http://blogs.cfr.org/oneil/2012/07/12/pena-nieto-and-energy-reform/]

Can Enrique Peña Nieto open up the energy sector? Possibly. One consideration is the PRI’s legislative heft. The party gained a plurality, but not majority, in both houses of Congress. Many commentators see this is worrisome for an ambitious reform agenda, predicting a weaker president, and continued gridlock . But energy reform was always going to require a coalition to create the necessary two-thirds constitutional majority. The lack of a majority may make the PRI more willing to come to the bargaining table (and more willing to negotiate in other areas, such as political reform). If they come, they may find a willing partner in the outgoing National Action Party, the PAN.The PRI also has the advantage of counting on the PEMEX union as a political ally rather than an opponent. In fact, the union’s leader, Carlos Romero Deschamps, was just elected to the Senate on the PRI’s proportional representation list, as was the union’s treasurer, Ricardo Aldana. Their presence, rather than stymieing negotiations, may help smooth the process, enabling a Nixon in China moment for Mexico.Another pressure for reform is the reality of Mexican oil exploration and production. Mexico has huge potential, but increasingly recognized limits on PEMEX’s ability to realize these riches. Since 2004 oil output has dropped by roughly a quarter (stabilizing in 2010). Under the status quo many expect further declines, which are worrisome not just for the economy; oil revenues account for a third of the government’s budget. Even if production remains stable Mexico will likely become a net oil importer during Peña Nieto’s tenure. For a party that aspires to remain in power, unleashing additional revenues is vital.In 2008 Mexico passed a more moderate energy reform (many say that behind the scenes Peña Nieto himself blocked a more comprehensive bill). Though disappointing in terms of its reach, it did put energy reform on the table—bringing politicians from across the spectrum, interest groups, and society at large together to debate, discuss, and successfully revise a once sacred cow of Mexican politics. This precedent created the space for contemplating a comprehensive reform today.The path to true change will require serious negotiations both within the PRI and with other parties—most likely with the PAN but perhaps also with members of the Party of the Democratic Revolution, or PRD (some of whom voted for the 2008 reform). In these few days since the election, both the president and his chief of staff, Luis Videgaray, have repeatedly placed energy reform as top of the agenda. Both know the challenges ahead. But, as the president elect says, “I’m optimistic.”

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Nieto’s PC key to pushing through reformsJackson 12, [Allison Jackson, Journalist for the global post based in Mexico, “Pena Nieto: Mexico’s new president faces an uphill battle on key reforms,” 12/1/12 http://www.globalpost.com/dispatch/news/regions/americas/mexico/121130/mexican-president-enrique-pena-nieto-inauguration]

Pena Nieto has set out an ambitious reform agenda that, if pushed through both houses of congress intact, could transform the country’s energy sector and tax system, which is hoped to boost economic growth.Earlier in November, lawmakers passed a controversial labor reform bill, albeit a watered down version, which will make it easier for employers to hire and fire workers.The reform’s supporters hailed this as a good omen for Pena Nieto, a former state governor, as he prepares to battle political opponents, including within his own party.But Pena Nieto’s slim presidential win coincided with the PRI’s loss of a majority of seats in both houses of congress, meaning he’ll have to reach out to members of Mexico’s other leading parties to pass legislation.On Friday, he announced his cabinet will include members of different political stripes — and even a carryover from the previous administration. Jose Antonio Meade, who was finance secretary under Calderon, will be Pena Nieto's foreign secretary, left-wing politician Rosario Robles was named secretary for social development and member of leftist Democratic Revolution Party, Manuel Mondragón y Kalb, was appointed interior undersecretary. But Pena Nieto reserved key government posts, such as finance secretary, for his closest party allies.At least he can count on the support of US President Barack Obama, who praised Pena Nieto on his “ambitious reform agenda” during talks at the White House this week.Analysts say he will need to move quickly if he is to succeed.“The political capital of a new president is generally the highest in the first year of presidency and the incoming president has stated his willingness to pursue energy and fiscal reforms in 2013,” said Shelly Shetty, head of Latin America sovereigns at Fitch Ratings.

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Yes PCNieto has political capital – will spend it on economic reformBremmer No DateIan, president of Eurasia Group, the leading global political risk research and consulting firm, http://www.weforum.org/content/mexican-president-pena-nieto-has-oodles-political-capitaland-hes-willing-spend-big-mainly-ec

mexican president pena nieto has oodles of political capital...and he's willing to spend big-- mainly on economic reform #LATAMgrowth @WEF

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Nieto PushingEnergy and tax reform coming soon – Nieto lobbyingThomson 6/27 Adam Thomson, Financial Times, 6/27/13, “Aztec tiger begins to sharpen its claws”, http://www.ft.com/intl/cms/s/0/0c8398e4-c79c-11e2-9c52-00144feab7de.html#axzz2YPxM1EdU

As part of a significant policy shift – which involves prioritising a reduction in violence over combating the cartels head-on – Mr Peña Nieto has lobbied for the idea of a gendarmerie to police the worst-affected areas of the country.On the political front, Mexico looks more promising than it has done for decades. Mr Peña Nieto’s Pact for Mexico, a cross-party alliance created in December with the express aim of pushing through an ambitious list of economic and social reforms, has got off to an impressive start. The pact has produced a badly needed education reform, it has agreed this year’s budget remarkably quickly, and passed a constitutional reform that stands to curb the powers of the country’s biggest private companies in the telecommunications and broadcasting sectors.Analysts agree that the pact may not prove strong enough to withstand the political pressures that will inevitably emerge as Mr Peña Nieto takes on the biggest reforms of all: energy and tax.Both are needed urgently: oil production has fallen by about one-quarter since 1994 – a worrying reality, given that oil accounts for about a third of all federal government revenues; non-oil taxes, meanwhile, are a paltry 10 per cent of government revenues – hardly enough to invest sufficiently in everything from social security to bridges, ports, tunnels and border infrastructure.In Mr Peña Nieto’s short time in office, he has shown himself to be what many political analysts consider the most politically skilled president in years, forging alliances when needed and patching up fissures as soon as they have appeared.That, combined with economic resurgence, has handed Mexico the best chance in decades to make the leap towards becoming a fully industrialised country.To do so, the president will need to keep up his impressive record on the political front. Mexico, as a highly open trading nation exposed to a global economy that is still struggling, will also need a dose of good fortune.

Nieto leveraging PC on energy legislation Martin, Rodriguez and Marinho 6/20 Eric Martin, Carlos Manuel Rodriguez, and Helder Marinho, Bloomberg News, 6/20/13, “Mexico's President Pushes Reforms for State Oil Company Pemex”, http://www.businessweek.com/articles/2013-06-20/mexicos-president-pushes-reforms-for-state-oil-company-pemex

Petróleos Mexicanos, known as Pemex, has long been the third rail of Mexican politics. The state-owned company, originally based on oil fields seized from foreign owners over 70 years ago, has produced sizable government revenue and union jobs for hundreds of thousands of Mexicans. Foreign investment has been largely restricted.But now Pemex’s main asset, the giant Cantarell offshore field, is shrinking fast. The company says it needs to boost annual investment by 46 percent, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Without some private capital and expertise from abroad, Mexico risks becoming an importer in the next decade. Many of Mexico’s politicians and policymakers have known this for years. Yet Mexican nationalism, resistance from the unions, and the sheer size of the task of transforming Pemex have stood in the way.The planets may be aligning for a solution: Mexican President Enrique Peña Nieto says he’s negotiating to get the political support he needs to break the state monopoly in oil and gas exploration and production this year in a bid to accelerate Mexico’s economic growth. In the model envisioned by Peña Nieto, Pemex

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would develop certain fields, while foreign and private companies would tap others. The oil and gas reserves in the ground would still be the property of Mexico. Peña Nieto declines to discuss many details of the proposal or whether it would include a change in the constitution, which limits how private companies can profit from the nation’s energy resources.He has, however, been sending signals to international oil companies that he needs their help to arrest eight years of decline in Mexico’s crude output. “It’s obvious that Pemex doesn’t have the financial capacity to be in every single front of energy generation,” the 46-year-old president said in an interview in London on June 17, before he traveled to Northern Ireland for meetings with Group of Eight leaders. “Shale is one of the areas where there’s room for private companies, but not the only one.”Peña Nieto says his administration will send the energy bill to Congress by September, when regular sessions resume. He’s relying on the Pact for Mexico, an alliance of the country’s top three political parties, which have vowed to work together to achieve major reforms. Peña Nieto’s own party, the Institutional Revolutionary Party (PRI), doesn’t have enough votes on its own for a constitutional amendment.“We’re approaching key deadlines,” Peña Nieto says. “I’m optimistic that this political climate of understanding and agreement will be maintained.” Yet investors have pushed down the price of Pemex bonds in the last month. They’re losing confidence in the president’s ability to achieve the needed changes amid signs that the Pact for Mexico is fraying. Corruption allegations against the PRI have already almost derailed the alliance. In April, the National Action Party, a member of the pact, released video and audio tapes allegedly showing officials from Peña Nieto’s party arranging to use government social programs to win support before local elections. The accord may end if Peña Nieto doesn’t prevent electoral irregularities in states where local contests will take place on July 7, said Jesús Zambrano, head of the Party of the Democratic Revolution, another member of the pact in May.“If the Pacto por México dies, then what’s the plan?” asks Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. “We don’t know what the plan is after that.”Peña Nieto has also waited a long time to make his push for a new oil law. Delays in introducing an energy bill could threaten its depth and support, says Jeremy Martin, an oil specialist at the Institute of the Americas in La Jolla, Calif. “The longer things go, people start taking different directions, and then politicians, his team, start finding reasons why they shouldn’t do something big,” Martin says. In the fall legislative session, an oil bill may also have to compete with the annual budget,a major distraction.Peña Nieto, who’s been president for seven months, says there’s political momentum to pass more reforms after the approval of new education and telecommunications laws that opened up both sectors to more competition. The education bill created an independent institute to evaluate schools and foster competition for jobs and promotions based on performance, a move that has sparked violent protests from teachers. The government also arrested the powerful head of the teachers’ union, Elba Esther Gordillo, on corruption charges, taking on a leader long considered to be untouchable. Her lawyers say she is innocent. In mid-June, Peña Nieto signed a law aimed at spurring more competition in telecommunications by threatening to break up companies that control a majority of the market. That’s a potential headache for billionaire Carlos Slim’s América Móvil (AMX), which has 70 percent of Mexico’s mobile phone subscribers, and Grupo Televisa (TV), which gets 70 percent of the nation’s broadcast television audience.“Overall he’s done an excellent job,” says James Jones, the U.S. ambassador to Mexico when the North American Free Trade Agreement took effect in 1994. “He has the best political sensitivity and touch I’ve seen since President Salinas was able to marshal various factions of Mexico to pass Nafta.”The bottom line: Mexico, facing a steady decline in oil output, needs foreign money to develop shale gas and deep-water reserves.

Pena Nieto pushing Pemex reformMartin et al. 2013

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Eric Martin, Carlos Manuel Rodriguez and Helder Marinho, Bloomberg News, “Mexico’s Pena Nieto plans end to 75-year Pemex monopoly in oil production,” http://business.financialpost.com/2013/06/17/pena-nieto-plans-end-to-75-year-pemex-monopoly-in-oil-production/?__lsa=3802-b726Mexican President Enrique Pena Nieto said he’s negotiating support to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth.In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. He declined to discuss details of the proposal, or whether it would require a change in the constitution.Seven decades after his party seized fields from the predecessors to Exxon Mobil Corp. and Royal Dutch Shell Plc, Pena Nieto is preparing for the return of international oil companies to arrest eight years of decline in crude output. An opening would probably be broad, from offshore drilling to shale fields similar to those that have revived the U.S. petroleum industry, Pena Nieto said.“It’s obvious that Pemex doesn’t have the financial capacity to be in every single front of energy generation,” the 46-year-old president said in an interview in London on Monday, before traveling to Northern Ireland for meetings with Group of Eight leaders. “Shale is one of the areas where there’s room for private companies, but not the only one.”Pena Nieto said his administration will send the energy bill to congress by September, when regular sessions resume, followed by a tax proposal. He said he’s confident the so-called Pact for Mexico of the country’s top three political parties will ensure the bill is approved by Congress by year end.‘Key Deadlines’“We’re approaching key deadlines,” Pena Nieto said. “I’m optimistic that this political climate of understanding and agreement will be maintained.”Opening oil and gas exploration for private investment will help Mexico revive oil production that is heading for its ninth year of decline. Crude output averaged 2.52 million barrels a day this month through June 9, compared with 3.38 million barrels a day in 2004.Pena Nieto said there’s political momentum to pass more reforms after the approval of sweeping education and telecommunications laws and the creation of the Pact for Mexico. His Institutional Revolutionary Party dropped opposition to an oil-law overhaul in March.

Nieto investing pc in reformJones 2013James R., member of the Advisor board and co-chair of Manatt Jones Global Strategies, “How Well Has Peña Nieto Performed in His First 100 Days?,” http://www.thedialogue.org/page.cfm?pageID=32&pubID=3245A: James R. Jones, member of the Advisor board and co-chair of Manatt Jones Global Strategies: "President Peña Nieto has excellent political instincts and he understands building momentum to

accomplish his political goals . While the anticipated energy and fiscal reforms seem to have been pushed back to the second half of this year, I don't detect any substantive or permanent retreat by the government in pursuing such reforms. Peña Nieto's performance has been impressive so far. Even before taking office, Peña Nieto and the PRI worked with the ruling PAN government to achieve significant, although not complete, reforms to Mexico's labor laws. And this week, Peña Nieto signed into law comprehensive education reforms which are absolutely necessary if Mexico is to be a competitive global economic player in the future. As if to emphasize that he intends to fundamentally reform education, the government arrested and criminally charged the powerful leader of the teachers' union who had been considered the main obstacle to giving Mexico a first-class education system. This also sends a strong signal to other powerful interests not to block other reforms that will be proposed. Next come reforms to the telecommunications and broadcasting sectors as well as transparency reforms to state and local government financing. All of these reforms have popular public support. Such support should help Peña

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Nieto build further backing in the summer local elections. With all of that political capital banked, every indication is that Peña Nieto will start spending it during the last session of Congress this year to advance the energy and fiscal reforms. If all of this unfolds successfully, Peña Nieto will have moved Mexico forward more progressively than anyone since NAFTA passed and put Mexico on the path to economic and democratic modernity. His next challenge needs to be reforming and strengthening the rule of law."

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Now Key

Now is key to push PEMEX reformMartin et al 6/20(Eric Martin is a reporter for Bloomberg News in Mexico City, Carlos Manuel Rodríguez is the Mexico bureau chief at Bloomberg News, Helder Marinho is the team leader of Bloomberg News’s Speed Desk team in Latin America. “Mexico's President Pushes Reforms for State Oil Company Pemex,” Bloomberg, 6/20/13, http://www.businessweek.com/articles/2013-06-20/mexicos-president-pushes-reforms-for-state-oil-company-pemex)

Peña Nieto says his administration will send the energy bill to Congress by September, when regular sessions resume. He’s relying on the Pact for Mexico, an alliance of the country’s top three political parties, which have vowed to work together to achieve major reforms. Peña Nieto’s own party, the Institutional Revolutionary Party (PRI), doesn’t have enough votes on its own for

a constitutional amendment.¶ “ We’re approaching key deadlines ,” Peña Nieto says. “I’m optimistic that this political climate of understanding and agreement will be maintained.” Yet investors have pushed down the price of Pemex bonds in the last month. They’re losing confidence in the president’s ability to achieve the needed changes amid signs that the Pact for Mexico is fraying. Corruption allegations against the PRI have already almost derailed the alliance. In April, the National Action Party, a member of the pact, released video and audio tapes allegedly showing officials from Peña Nieto’s party arranging to use government social programs to win support before local elections. The accord may end if Peña Nieto doesn’t prevent electoral irregularities in states where local contests will take place on July 7, said Jesús Zambrano, head of the Party of the Democratic Revolution, another member of the pact in May.¶ “If the Pacto por México dies, then what’s the plan?” asks Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. “We don’t know what the plan is after that.”¶ Peña Nieto has also waited a long time to make his push for a new oil law. Delays in introducing an energy bill could threaten its depth and support, says Jeremy Martin, an oil specialist at the Institute of the Americas in La Jolla, Calif. “The longer things go, people start taking different directions, and then politicians, his team, start finding reasons why they shouldn’t do something big,” Martin says. In the fall legislative session, an oil bill may also have to compete with the annual budget, a major distraction.¶

Peña Nieto, who’s been president for seven months, says there’s political momentum to pass more reforms after the approval of new education and telecommunications laws that opened up both sectors to more competition. The education bill created an independent institute to evaluate schools and foster competition for jobs and promotions based on performance, a move that has sparked violent protests from teachers. The government also arrested the powerful head of the teachers’ union, Elba Esther Gordillo, on corruption charges, taking on a leader long considered to be untouchable. Her lawyers say she is innocent. In mid-June, Peña Nieto signed a law aimed at spurring more competition in telecommunications by threatening to break up companies that control a majority of the market. That’s a potential headache for billionaire Carlos Slim’s América Móvil (AMX), which has 70 percent of Mexico’s mobile phone subscribers, and Grupo Televisa (TV), which gets 70 percent of the nation’s broadcast television audience.

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Econ Focus NowObama and Pena Nieto focusing on the economyKurata 2013Phillip, “Obama and Peña Nieto Highlight Economics at U.S.-Mexico Summit,” http://iipdigital.usembassy.gov/st/english/article/2013/05/20130503146817.html#axzz2YPVaYZfy

Washington — President Obama and Mexican President Enrique Peña Nieto say they have revitalized the multifaceted U.S.-Mexican relationship with a new focus on strengthening economic ties .“I believe we’ve got a historic opportunity to foster even more cooperation, more trade, more jobs on both sides of the border, and that’s the focus of my visit,” Obama said at a news conference with Peña Nieto in Mexico City May 2.

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A2 Drug Co-op NowObama and Pena Nieto are avoiding drug discussionsDeFrancesco Soto 2013Victoria M., NBC Latino and MSNBC contributor, Senior Analyst for Latino Decisions and Fellow at the Center for Politics and Governance at the LBJ School of Public Affairs at the University of Texas, at Austin, “Opinion: Obama and Peña Nieto can’t ignore the drug war,” http://nbclatino.com/2013/05/02/opinion-obama-and-pena-nieto-cant-ignore-the-drug-war/

Drugs. Whether we want to admit it or not, any discussion revolving around the U.S. and Mexico must start and end with drugs. However, these next two days President Obama and Mexican president Enrique Peña Nieto will do everything in their power to dance around the issue and ignore the elephant in the room.The official theme of President Obama’s trip to Mexico centers on economics. In a press conference earlier this week the president said,A lot of the focus is going to be on economics. We’ve spent so much time on security issues between the United States and Mexico that sometimes I think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border. We want to see how we can deepen that, how we can improve that and maintain that economic dialogue over a long period of time.

Drug coop decliningFox News 2013“Obama, Peña Nieto Talk Shift In Security Cooperation,” http://latino.foxnews.com/latino/politics/2013/05/03/obama-pena-nieto-talk-shift-in-security-cooperation/But being careful not to intrude on the southern neighbor's sovereignty, Obama noted that Mexicans have the right to determine how best to tackle the violence that has plagued their country. He spoke during a press conference Thursday with Mexican President Enrique Peña Nieto.Since taking office in December, Peña Nieto has moved to end the widespread access that U.S. security agencies have had in Mexico to tackle the violence that affects both sides of the border. It's a departure from the strategy employed by his predecessor, Felipe Calderon, which was praised by the U.S. but reviled by many Mexicans."I agreed to continue our close cooperation on security, even as the nature of that cooperation will evolve," Obama said during a joint news conference at Mexico's grand National Palace. "It is obviously up to the Mexican people to determine their security structures and how it engages with the other nations — including the United States."

Obama shifting away from drug cooperationFox News 2013“Obama, Peña Nieto Talk Shift In Security Cooperation,” http://latino.foxnews.com/latino/politics/2013/05/03/obama-pena-nieto-talk-shift-in-security-cooperation/Obama lauded his Mexican counterpart for launching bold reforms during his first months in office, not only on security but also the economy. Both leaders have said they want to refocus the U.S.-Mexico relationship on trade and the economy, not the drug wars and immigration issues that have dominated the partnership in recent years.

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A2 Gordilla ArrestArrest didn’t hurt pcBolton 2013Gene, Research Fellow at the Council on Hemispheric Affairs, “OFF AND RUNNING — PEÑA NIETO’S DOMESTIC AGENDA,” http://www.coha.org/21851/Although it is difficult to dispute the substance of Peña Nieto’s education reform, there is a concern regarding the political nature of Gordillo’s arrest. While Mexico City claims that their actions were not politically motivated, one cannot ignore the fact that Gordillo was highly opposed to this reform, and that passing a second law necessary for implementation would have been politically difficult had she been around to oppose it. During his presidential campaign, Peña Nieto repeatedly assured the Mexican population that a revitalized PRI would take office if he were elected—one that was free from autocratic governance and committed to democratic principles. However, Gordillo’s arrest resembles the 1989 incarceration of Joaquín Hernández Galicia, a former boss of the oil workers’ union. Then-Mexican President Carlos Salinas (also a PRI member) arrested Galicia after he opposed the president’s attempt to open Pemex to private investment. [12] Although the sectors in question are different, the circumstances appear eerily similar, the only difference being that Peña Nieto waited two months longer than Salinas to have a political opponent arrested. Furthermore, the newly inaugurated president knew that her arrest would not cost him much political capital. According to The Guardian, Gordillo was an “ideal target” after having “accumulated a battery of enemies across the political spectrum and among the intellectual and journalistic elite.” [13] In addition, as previously stated, education reform was an area in which opposing parties PAN and PRD could easily agree on. Although it is difficult to refute Elba Esther Gordillo’s corruption, her arrest was clearly an assertion of power, and given PRI’s history of authoritative governance, this raises serious concern.

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RENEWABLES

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1NCMexico key to global renewables- reforms keyHuacuz, 7 -- Electrical Research Institute [Jorge, "Renewable Energy in Mexico," Towards a Cleaner Planet, google books]

Mexico is at cross-roads regarding renewable energy. On the one hand, this country has all the necessary elements to become a major user and developer of the technology. Because of its geographic al position and foreign policy instruments in place, such as NAFTA and the Puebla-Panama Plan (between Mexico and the Central

American countries), Mexico could also become an important exporter of this technology to its neighbouring mar- kets. On the other hand, however, the big oil paradigm is too deeply imprinted in the minds of` many people, energy officials and industry leaders included. Hence, unless a quick and conscious effort is made to alter t his situation, the opportunities ahead (economic, social, political, environ- mental and otherwise) can be lost, as the window of opportunity to close the gap is too narrow. The effort to be made includes the implementation of aggressive renewable energy policies and a variety of technical and non- technical changes in the energy market. Barriers that could inhibit progress need to be identified and strategies to remove them in the short to medium terms must be developed; new capabilities and infrastructure (human, technical and physical) to identify and tap niches of opportunity where green power is technically and economically viable must be created, so that enough experience is gained within the country in this new field of the energy business; finally, mechanisms to assure a level enough playing field for renewables to compete with other alternatives, under equitable and transparent rules of game, must be introduced. Consumer awareness has to be raised, new capacities of the public, private and social entities have to be built, technology intermediation centers have to be strengthened or cre- ated, and new financing services have to be established. Above all, a new energy culture must be created.

ExtinctionKader, 10 -- Gulf News staff citing scientists (Binsal and Rayeesa Absal, "Renewable energy sources may save precious humanity from extinction," Gulf News (United Arab Emirates), 10-3-10, l/n)

Renewable energy sources may save precious humanity from extinction green drive mitigates the devastating effects of deforestation Abu Dhabi Scientists estimate that between 150 and 200 species of life become extinct every 24 hours - a phenomenon threatening the very survival of human beings on Earth . However, renewable energy can save biodiversity and mitigate the threat to humanity , according to a presentation delivered at the 11th World Renewable Energy Congress held in Abu Dhabi recently. An estimated 40 per cent of the global economy is based on biological products and processes, according to the United Nations (UN). The world's forests, wetlands, coral reefs and other precious ecosystems and the rich biodiversity they harbour provide trillions of dollars worth of benefits each year. They

feed and clothe human population, control floods and pollinate crops. Promoting renewable energy in deprived and remote areas is an important step to reduce the loss of biodiversity through community mobilisation, according to a presentation delivered by M. Abbaspour of

the Graduate College of Environment and Energy, Science and Research at Iran's Islamic Azad University. One important outcome of introducing renewable energy is that it mitigates deforestation caused by the felling of trees for firewood.

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Reform KeyPemex reform key- making oil more efficient allows resources to be shifted into alt energyPabst, 13 – The Financialist [Mark, "Saving Mexico's Golden Goose," The Financialist, 4-12-13, www.thefinancialist.com/saving-mexicos-golden-goose-pemex-mexico-oil/, accessed 7-10-13]

Because the Mexican economy depends heavily on Pemex, any major reforms to the country’s energy sector are likely to have significant impacts. Perhaps the most important knock-on effect of opening up the energy industry, however, may be the opportunity to diversify the country’s economy and unlock non-oil revenue streams, according to Alonso Cervera, a Mexico City-based economist and Managing Director at Credit Suisse. “If the government succeeds in opening spaces for private sector participation in the energy sector (gas, shale gas, oil, and even electricity), and if it can increase non-oil tax collections, Mexico’s growth potential will increase, while its stubborn and historical dependence on oil-related revenues will decline,” Cervera wrote in a recent research note entitled “Mexico: Back to Square One.”

Pemex reform key to Mexican renewables- massive potentialMarks, 8 -- UC Berkeley law professor, Universidad Panamericana in Mexico City visiting professor [Allan, partner in Milbank, Tweed, Hadley & McCloy LLP, an international law firm, "Mexico Offers Diverse Opportunities for Investment in Renewable Energy," World Energy, 10.4, www.worldenergysource.com/articles/text/marks_WE_v10n4.cfm]

Investors seeking opportunities in renewable energy outside the United States should consider our next-door neighbor to the south. Mexico has an abundance of renewable power resources and a keen awareness of the environmental and social benefits of alternative energy development. Mexico’s consumption of energy is growing much more rapidly than in more-developed countries, and there is a shortage of conventional energy resources for power generation. The majority of the energy consumed in Mexico is used for industrial production (38 percent) or transportation (27 percent), and losses related to electricity generation and distribution account for a significant portion of consumption, at 22 percent (Figure 1). Within the electricity sector in particular, renewable energy sources will need to play a significantly expanded role if there is any hope of covering the gap between demand growth and generation capacity growth, even with the continued substantial expansion of efficient natural gas-fired, combined-cycle turbine generators as the dominant part of the overall generation mix (Figure 2). In 2006 the Mexican government’s secretariat of energy (SENER) conservatively predicted important increases in installed capacity for hydropower (2,254 MW), wind energy (592 MW) and geothermal energy (125 MW) for the period from 2005 to 2014 (Figure 3). By 2005 the government had approved more than 50 renewable energy projects. When they were completed by the end of 2007, they already accounted for 1,400 MW of new capacity. Given Mexico’s available

renewable energy resources, domestic and international incentives and other environmental and economic factors, the market for renewable energy projects in Mexico could well be considerably larger. A significant proportion of the new gas-fired power plants in Mexico will replace older, inefficient steam generators powered by fuel oil, rather than creating incremental new capacity. Indeed, the rapid and large increase in demand for natural gas to

meet electricity generation needs in Mexico, as in the United States, has constrained available supplies and raised real wholesale gas prices. This has created new opportunities for companies using renewable energy to compete, and it has prompted the Mexican government to look favorably on foreign investment in renewable energy projects. Investment Climate Any discussion of investment opportunities and incentives in Mexico must first broadly consider political stability, the rule of law and macroeconomic factors. The current attractiveness of Mexico as a source for serious, long-term private investment in energy and infrastructure results from many dramatic shifts over the past several years. Mexico has become a considerably more stable country in which to invest since the 1994 passage of the North American Free Trade Agreement (NAFTA). Democratization and a commitment to market discipline, especially in the financial sector (through privatization of banks, pension reforms, new insolvency laws, growing capital markets, recent tax reform, greater regulatory transparency and other measures), have strengthened the nation’s economy, banking system, government institutions, the rule of law and monetary policy. The results include steady growth in gross domestic product (GDP) and GDP per capita, deeper capital markets and electoral stability – all despite serious internal political challenges and increasing foreign economic competition from Asia. Income inequality remains a major social and political problem, but the percentage of the population in extreme poverty has declined markedly in the past decade. GDP has grown about 4 percent per year for about 10 years. Aggregate external debt has dropped both in absolute terms and as a share of GDP, and the government budget deficit has been reduced. Inflation in the late 1990s was in the double digits and has declined dramatically to under 5 percent on average for most of this decade (Figure 4). It is no surprise, then, that the value of the Mexican peso has nearly doubled against the U.S. dollar in the past 12 or so years, and that Mexico (along with Chile) has the highest sovereign debt credit rating in Latin America. Additionally, Mexico’s relative political stability and investor-friendliness (compared to such other countries in the region as Argentina, Venezuela, Ecuador and Bolivia) and, conversely, the longer-term trend of economic liberalization and political stability in Latin America’s major economies (Mexico, Brazil and Chile) have combined for steady growth in inbound foreign investment. High global oil prices, liquid domestic financial markets and a more transparent tax system also contribute to currency stability and positive trends in Mexico’s current account deficit. So while much remains to be done in these areas, the trends are positive. Consequently, Mexico appears to attract a much lower risk premium from foreign investors than in the past. Historically, most foreign investment in Mexico comes from the United States or international companies building manufacturing facilities for the export of goods to the United States. After NAFTA, this trend has accelerated. Most of the rest of the foreign direct investment in Mexico comes from European countries. In the near future, capital flows from Asia (especially China, Japan and Korea) will become increasingly important. Capital flows within Latin America (such as Brazilian investment in Mexico) also are on the rise, with promising implications for regional stability. Regardless of the source, investment in high technology and export-oriented industries is particularly welcome. Although reforms are under active debate, investments in energy remain tightly restricted. In recent years, though, both electricity generation and natural gas distribution have been opened to foreign investment. Indeed, due to the opening of the electric sector, renewable energy projects (like wind, solar and geothermal power plants) can offer more liberal investment opportunities and incentives than do other energy sectors (like upstream oil and gas facilities and petrochemicals), which remain largely off-limits to direct foreign investment.

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Incentives for Foreign Investors The attraction for foreign investors in renewable energy projects in Mexico is further enhanced by the existence of strong domestic and international incentives. Mexican law encourages such investments in several ways. The federal tax laws allow for 100 percent depreciation in the first year for all renewable energy capital investments. There is a fiscal credit of 30 percent for research and development. And the law covering the use of renewable energy sources, passed in December 2005, sets a goal of having renewables constitute 8 percent of the power generation mix by 2012, not including large hydro projects, and creates a trust to support renewable energy projects, rural electrification, biofuels and technological research and development. The fiscal reforms enacted in September 2007 fall short of reforming Mexico’s energy sector. It is possible that the potential energy legislation planned for the coming year may create further incentives to stimulate more private investment, including by foreign investors, in Mexico’s energy sector and specifically in renewable energy projects. The other source of incentives is the Kyoto Protocol, which became effective in 2005 and seeks to reduce carbon emissions and address the problem of global warming. Under the Kyoto Protocol, Mexico is designated an Annex II country, which makes it eligible for Clean Development Mechanism (CDM) projects. The objective of the CDM is to displace future carbon emissions by rewarding investors who build power generation or other facilities using cleaner technology, rather than hydrocarbons, coal or other fuels that produce harmful carbon emissions. As of January 2008, Mexico accounts for 100 of the nearly 900 CDM projects registered worldwide, over 11 percent of the world total (Figure 5). Of these, 767 projects globally are related to energy production and efficiency. Overall, Mexican CDM projects have been awarded 2,333,150 carbon emission reduction credits, which represent about 2.8 percent of the world total (Figure 6). By this measure, Mexico is second only to Brazil in Latin America in the creation of carbon credits. In Mexico, while most CDM projects are for methane recovery and energy production in conjunction with other agricultural or industrial activities, renewable energy projects for either hydropower or wind energy generation account for the largest number of credits awarded. About a third of Mexico’s CDM projects are in the energy sector. If the Mexican government certifies a proposed undertaking as a CDM project and the United Nations Framework Convention on Climate Change approves it under the Kyoto Protocol, the owner of the new project will earn carbon emission reduction credits based on the number of carbon emissions that the facility is avoiding by not using carbon-based fuel. Carbon emission reduction credits have economic value that can be monetized in advance of the construction of a renewable energy power plant in Mexico. Already these credits are being traded in European carbon futures markets, though the forward price curve remains difficult to predict for a variety of economic and political reasons. To finance a wind farm in Mexico, for example, the investors could raise some of the money to build it by selling the credits expected to be earned. Credits for an approved CDM project constitute an additional source of capital to fund capital costs. As oil and gas prices rise, the expected revenues for power sales – even power generated by renewable sources – can be expected to rise. As such, renewable power projects today are benefiting from a happy confluence of factors: new government subsidies and incentives; improving technology, which is boosting both efficiency and reliability; higher costs for traditional energy sources, which makes renewable energy significantly more competitive even without subsidies; and popular support for all things “green.” Available Renewable Energy Sources in Mexico Mexico is better suited for some types of renewable energy than others. Here is a rundown of

the various types of renewable energy sources available in Mexico and the issues involved in developing those sources. Wind. Mexico has relatively few installed

wind power projects today. The country has a potential wind energy generation capacity of over 40,000 MW, according to SENER. The key to a successful wind energy project is identifying areas where the wind is consistently strong. Wind resources in Mexico are becoming much better known. The most promising areas for wind generation facilities in Mexico are in the states of Oaxaca and Baja California. The Yucatan Peninsula and other areas also may be suitable. By metering the intensity of the air flow in targeted areas, developers can determine appropriate places to construct wind farms, matching turbine technology to the specific characteristics of each site. Any wind farm that is constructed in Mexico will almost certainly be far from most load centers, the population concentrations or factories where the demand for power is greatest. Delivering power to these load centers must be done via Mexico’s power grid, and the nearest access point may be a considerable distance away. Thus, interconnection arrangements often can present the biggest challenges in developing a wind power generation project. Then there is the issue of who will pay for and own the necessary transmission line upgrades, substations and other interconnection facilities. It may turn out that the planned wind farm does not generate enough revenue to finance the upgrade and pay other expenses, absent subsidies. There also will be practical and commercial issues involved in the delivery of wind farms’ power to customers. The national public utility in Mexico, la Comisión Federal de Electricidad (CFE), is essentially a monopoly. There are some areas in which CFE is not the power provider – Mexico City, for instance – but CFE handles power transmission in most parts of the country where wind farms are operating or planned. Consequently, working out interconnection and transmission arrangements with CFE may be necessary even if CFE is not the ultimate purchaser of the power. For commercial reasons it may be preferable to sell a wind farm’s power to industrial hosts, such as “big box” retailers, factories or other large users of power. In such cases, careful project planning will address both dispatch procedures (by which power deliveries are scheduled and supplies balanced) and the reliability of transmission services (Figure 7). Another issue that must be confronted is backup power. Wind farms can generate electricity only when the wind is blowing, and potential customers will want to schedule power deliveries at any time they need it. The only source of backup power generally is CFE, so the wind developer’s arrangements with CFE must cover the provision of backup power on commercially reasonable terms. Fortunately, the Mexican government and CFE have taken steps to harmonize the wholesale tariffs for backup power and to address the dispatch priority more equitably, so that

CFE does not abuse its monopoly position. Solar. Mexico has vast areas in which the sun shines year-round. The International Energy Agency estimates that the installed photovoltaic capacity in the country is just 14 MW, and most of that is not connected to Mexico’s power grid. So finding an appropriate site for harnessing solar energy is much less an issue than transmitting that energy to its users. Here, the transmission issues for large solar power arrays match those already discussed with respect to wind power plants. A large-scale solar power development will, of course, require a lot of land. Acquiring such sites, securing the necessary rights-of-way and perfecting title can be time-consuming. For these reasons, some of the most promising solar projects involve smaller arrays that are located at a host facility (such as an industrial plant, a hotel or a “big box” retailer) that is also the purchaser of the power. In such cases transmission issues are avoided. Likewise, solar projects that produce process heat (like steam) for industrial uses, rather than power, also show promise. Another issue with solar power is its high cost. The materials for a solar facility – glass, silica and copper – are expensive. Eventually new photovoltaic technology will bring those costs down, but

currently making new solar power plants economically viable without subsidies or tax credits is a challenge. Geothermal. Mexico is the world’s third-largest producer of geothermal electricity, behind only the United States and the Philippines. In 2003, the latest year for which solid figures are

available, Mexico had 955 MW of installed geothermal capacity. That is a small portion of the potential for this energy source; the

U.S. Department of Energy estimates that installed geothermal capacity could increase to 8,000 MW. These projects hold enormous potential. Hydroelectric. Just under one-quarter of Mexico’s electricity supply is generated by hydroelectric power. The 2,300-MW Manuel Moreno Torres hydroelectric plant in the southern state of Chiapas is the largest in Mexico and, according to the U.S. Energy Information Administration, is the world’s fourth most productive hydroelectric plant. However, much of Mexico’s hydropower comes from small, outdated plants, many of which were built in remote areas as far back as 1920. Large new hydro plants are coming on line, such as the 750-MW El Cajon dam in the state of Nayarit, funded with foreign capital on the strength of an offtake contract with CFE. Hydropower, although not as directly subsidized as other renewable sources, will continue to play a substantial role in helping Mexico to meet its energy needs. Biomass. Biomass energy is produced from various sources: solid wastes and sludge gases; industrial waste incineration or processing, which costs little and displaces landfill use; and agricultural waste. The last of these sources displaces open field burning, and even with minimum control over emissions, air quality can be significantly improved. Consequently, many CDM projects in Mexico will be in the agricultural sector. But air emissions from biomass production can still create permitting and environmental issues. The waste management authority in metropolitan Monterrey is the only municipal waste utility generating electricity from biomass. This project was financed with World Bank funds. Other municipalities – among them Mexico City, Tlalnepantla, Cancún, Naucalpan, Puebla, Querétaro, Aguascalientes, Guadalajara and Tijuana – are currently studying the feasibility of a biomass production facility like that of Monterrey.

Conclusion Mexico offers many opportunities for investment in renewable energy. Incentives and resources are real. Careful planning through regulatory, transmission and market issues may yet boost investment in green energy in Mexico. The government capacity to cover the costs of new

energy facilities through CFE or otherwise is limited. The shortfall in public funds will likely become more dire in the coming years

as Mexico faces the politically sensitive conundrum of energy and fiscal reform. The vast majority of Mexico’s federal budget is funded by Pemex, the national oil company. As Pemex requires the ability to reinvest more of its revenues to maintain otherwise declining oil and gas production,

the government will face a serious budget deficit. The passage of major new tax legislation in 2007 helps, so far as it goes. How and whether the

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government can cover the gap through tax reform or other measures will determine to some extent how flexible the government can be to stimulate private investment in energy infrastructure. Conversely, it will also enhance the attractiveness to the government of private investment, both domestic and foreign, as an alternative source of development capital and expertise, particularly for renewable energy .

PEMEX reform leads to the development of renewablesOPC 13(Office of the Presidency of the Republic, “President Presents Reform Plans for Mexico's Energy Sector,” 3/15/13, http://www.mexidata.info/id3563.html)

President Enrique Peña Nieto hosted a ceremony commemorating the 75th Anniversary of the Expropriation of Petroleum, in which he noted that, "The government is determined to promote the energy reform that the country needs," and that, "In short, a reform that will benefit all Mexicans."¶ "We must move Pemex so that Pemex can move Mexico," said the president, addressing members of his Cabinet and governors of states with oil infrastructure. "This is a great opportunity to transform Pemex in order to transform Mexico," he said.¶ At the event, during which a postage stamp commemorating this 75th anniversary was issued, President Peña Nieto said that, "This will be an energy reform that will support the family economy by improving the electricity rates paid by households; an energy reform that will democratize productivity by reducing electricity rates for micro, small and medium enterprises."¶ "It will be a reform that increases the competitiveness of domestic industry to ensure the adequate, timely supply of gasoline and fuel, a reform that allows us to have the technology and investment necessary to extract and exploit the country's vast energy resources," he said.¶ He explained that PEMEX is, and will remain, the property of all Mexicans. "On the 75th anniversary of the Petroleum Expropriation, I assure the nation: Pemex will not be sold or privatized; Pemex must be transformed and modernized," he said.¶ Three Strategic Principles of Energy Policy¶ The President said that, "We must all join forces, focusing on ensuring that the production of oil and energy in general will speed up the country's growth. Achieving this, he explained, requires meeting three strategic principles that will guide the government's energy policy, particularly Pemex's urgently-needed modernization.¶ Energy efficiency: we must increase the productivity and production of the sector. We must also encourage more responsible and intelligent consumption.¶ Energy Security: we must have the capacity and resources to ensure power supplies for the entire country.¶ Energy Sustainability: It is time to shift to clean energy sources that will reduce the environmental damage associated with power generation.¶ President Peña Nieto reported that on January 1 of this year, proven reserves amounted to 13, 868 million barrels of crude oil equivalent. These proven reserves ensure hydrocarbon production for Mexico over the next ten years and puts us among the 20 countries with the largest reserves worldwide.¶ The president declared that preliminary Pemex estimates place the value of the country's total reserves, known as 3P reserves, at 44,530 million barrels of crude oil equivalent. This volume, which includes proven, probable and possible reserves, represents up to 30 years of hydrocarbon production.¶ Six Lines of Action for a Leading Oil Industry¶ The president said that the transformation of Pemex is essential to harnessing the country's economic potential. "We must take steps to achieve a leading oil industry, which will meet the requirements of Mexico. To this end, we will transform Pemex through six lines of action that are fully consistent with the agreement we have signed in the Pact for Mexico":¶ First. Establish a new organizational structure. As Mexicans' property, PEMEX must be administered with the greatest efficiency, honesty, transparency and accountability.¶ Second. Encourage corporate ethics and social responsibility. As a state company, Pemex is not only

committed to profitability, but also to progress and inclusive social welfare.¶ Third. Promote green growth. Pemex must be one of the cornerstones in the fight against climate change, by developing renewable energy and promoting energy savings.¶

Reform key to energy diversificationVinageras 12(Javier Vinageras is a writer for Mexico Oil & Gas Review, which provides a comprehensive overview of the latest developments, industry trends, business strategies, technological breakthroughs, and operational challenges in the Mexican oil and gas industry. “Pemex, S.A. de C.V.: The Diversification Strategy,” Oil & Gas Mexico, 12/10/13, http://www.oilandgasmexico.com/2012/12/10/pemex-s-a-de-c-v-the-diversification-strategy/)

When Felipe Calderón Hinojosa became President of Mexico in 2006, he appointed Jesús Reyes-Heroles as Pemex CEO. One of the main objectives with the changes

made was for the NOC to become more competitive. The strategic decisions made with this idea in mind included fighting for an energy reform that would allow more participation from private investment in the NOC’s business, and an organizational optimization to achieve more productivity and efficiency. The reform was achieved in 2008, with the Pemex Law looking to enhance operation functionality established in 2009. Some changes made by the reform haven’t been fully exploited, since the

learning curve is still active, but it has definitely improved the way Pemex operates.¶ One of the changes made to optimize Pemex’s operation was to

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diversify exploration in Mexico to try and find resources at different types of fields. Diversification, in finance, means dividing an investment between several different assets. This is a basic principle in investment theory: forming investment portfolios with diversification purposes.

The reasons behind the use of this technique are quite simple: diversifying helps to decrease the risk of the whole portfolio – if you have an investment that doesn’t go as well as you expected and generates losses, the profits obtained by other investments will counter those losses. On the other hand, if you depend solely on one investment, if (or when) this investment goes wrong, you are left with a big loss. The idea in diversification works since the combination of the expected value of all your assets will cancel out the fluctuations of each of them.¶ Pemex decided to use this risk-lowering technique in 2006 to try to stabilize

production. The main objective was to turn around the decline that was starting to happen in the country’s oil production. The strategy was a conservative one: Pemex wasn’t expecting to hit the jackpot by diversifying sources, but they were expecting to achieve oil production stabilization in the mid-term and an increase of reserves and future production for the long-term. In the worst of cases, Pemex would balance out its losses, obtaining enough production in the mid-term to stabilize production. In the best case scenario, Pemex would succeed in finding oil at every single one of its new exploration projects, allowing the country to start turning around oil production in 6-12 years.¶ The strategy had its ups and downs, taking longer than expected to get under way – the energy reform in 2008 was a big step towards propelling this, but, as we mentioned before, the learning curve function hasn’t peaked yet – but it has eventually paid off. Today, Pemex can boast three different discoveries made in the last three months: two of them in deepwater – a sector that was still to be truly exploited by Pemex – and one of them onshore. The oil discovery at Navegante last week is evidence that Pemex is going the right way towards exploiting the benefits of different assets and not losing out with a miss-or-hit strategy.¶ Navegante Finding¶ Oil Discovery at Navegante-1 (Image from Vanguardia.com.mx)¶ In the last week of November – and the last week of ex-President Felipe Calderón’s administration – Pemex announced the discovery of light crude 6,800 meter deep at the onshore well Navegante-1, in south Tabasco, 20 km away from Villahermosa in the geological province named Cuencas del Sureste. The oil column’s structure is 315 meters deep on an extension of 87 km2, and holds, according to Pemex, 3P reserves that amount up to 500 million of b/d of 45 API crude oil.¶ The main difference between the discoveries made in deepwater and this one – apart from one being onshore and the other being deep offshore – is that Pemex already has the infrastructure to start producing oil from this well in this month. Pemex E&P is corroborating the reservoir’s extension, as well as acquiring seismic information to determine if the block goes as far as the Antonio J. Bermudez complex in the south, which holds up to 1,000 million b/d of crude oil in 3P reserves.¶ The expeditious production of this well would further indicate that Pemex’s strategy continues to be a successful one, since oil is being found in different sources and at different timelines. The immediate oil extraction of Navegante would compensate for the oil needed while Pemex continues to develop deepwater wells.¶ Implications of this

Strategy¶ The main point made in the opening paragraph of this post was that Pemex’s future might be predicted by its recent past. The underlying message is clear: Pemex is trying to become more of a business, and less of a state-owned government branch and diversification is Evidence A. Diversification is usually the way all companies fund themselves, either through different investments that are not correlated – to balance the risk out – or through a separation of equity and debt in their funding projects. This is a business strategy that allows companies to distribute their investments freely through diverse assets and, therefore, exploit the most benefits of all production routes.¶ The implications of this strategy, though, are not all positive. If a company wants to distribute its investment throughout different assets, it means that it needs to invest in the start-up of each project. Pemex already has the facilities and infrastructure to exploit onshore and shallow water resources, but deepwater and unconventional sources, such as shale gas, require an extra investment to put the infrastructure in place and get the technologies needed. This is where the budget forecast for Pemex makes sense.

People criticize the fact that Pemex is asking for too much money in its forecast for next years, but this kind of investment is needed if the NOC is to diversify its portfolio and develop the different alternatives that the country will eventually need for its energy insurance.¶ “Pacto por México”¶ Pacto por Mexico (Image from Presidencia.gob.mx)¶ New President Enrique

Peña Nieto is already taking the steps needed to help Pemex become a business in the productive sense. Last

week, the new President met with representatives of all parties, all sectors, and his new cabinet to discuss a proposal to deliver the needed changes for the country. This proposal, accordingly called “Pacto por México” (or Pact for Mexico), includes in its section 2.5. the ideas for an energy reform to serve as motor for investment and development.¶ One of the points made in the document is to turn Pemex into a public business with a productive focus. The document states that the structural changes needed to accomplish that objective will be made in regulatory issues, both in the energy and fiscal

sector; all of this, among other things, with the ultimate goal of multiplying the exploration and production of hydrocarbons in a more efficient way.¶ The new government’s apparent goal for Pemex seems to be the enhancement of productivity and efficiency, and they believe that the best way to achieve it is through an energy reform that gives the NOC the ability to work as a business.

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Mexico Key – ModelingMexico is key to emissions reductions AND is modeled globallyFrenk, 9 -- Inter-American Development Bank senior climate change specialist [Claudio Alatorre, PhD in Engineering at Warwick University, UK, LEAD International fellow, independent consultant with expertise on the analysis of the energy transition, "Renewable Energies for Sustainable Development in Mexico," 2009, www.giz.de/Themen/en/dokumente/en-renewable-energies-sustainable-development-mexico.pdf]

In Mexico, the energy sector contributes with 61% of the emissions of greenhouse gases, and the country occupies the 13th place worldwide regarding this type of emissions.48 The use of renewable energies, when displacing the

consumption of fossil fuels, constitutes one of the main strategies for the mitigation of the climate change worldwide. Due to its high vulnerability to climate change, and to preach by example to the international community, our country has a special interest in promoting global mitigation mechanisms. Besides, the development of renewable energy projects represents an important opportunity for capturing international resources in the carbon bonds markets (the Clean Development Mechanism of the Kyoto Protocol and others such as the voluntary markets).

Mexican renewables leads to US modelingEconomist, 9 ["What's hot, green and Mexican?" 4-16-9, www.economist.com/node/13496067]

Mr Calderón's officials say his enthusiasm is motivated by pure utilitarian maths: Mexico is both one of the countries most vulnerable to global warming and one rich in renewable energy resources. It has been hit by extreme weather several times during his term: in 2007, a devastating flood put 80% of the southern state of Tabasco under water and caused some $5 billion in damage, while farming in the north has been hurt by a lengthy drought. Mexico lies in the path of hurricanes both from the Atlantic and Pacific which many scientists believe are becoming stronger as a result of rising sea temperatures. Rising sea levels from melting polar ice caps threaten nearly half of the country's eastern seaboard. Since Mexico produces just 1.5% of the world's emissions, it will be affected by climate change regardless of what it does at home. But greens argue that it must practice what it preaches—especially if it wants to influence the debate on the issue in the United States. Moreover, officials see potential economic and diplomatic gains.

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Mexico Key – SolarMexico key to solar- only location where its cost-competitiveLee, 11 -- Houston Journal of International Law executive editor [Zachary, "The Silver Lining to a Cloudy Situation," Houston Journal of International Law, 2011, 33.2, ebsco]

Not only is Mexico lucky enough to have “world-class” winds, but it also has incredible potential for solar power .30 By 1995,

Northern Mexico was recognized as a “promising location[]” for integrated solar combined cycle systems (ISCCS), then

seen as the only renewable energy projects “able to compete with large scale fossil-fueled power plants.”31 At that time, a $244 million, 341,000 square-meter ISCCS provided 312 MW of electricity to the area.32 Generally, though, start-up costs for solar photovoltaic (PV) projects have been prohibitive in Mexico despite ideal local environmental conditions.33 That looks likely to change in the near future.34 The Mexican government predicts that solar power will soon be able to compete with government-subsidized fossil fuels.35 Any decrease in oil subsidies would obviously make solar power more competitive, and the Mexican government is already exploring ways to redirect those subsidies to promote the growth of solar power.36 After being “quasi[-]stagnant” for several years, Mexico’s solar market began to grow again in 2009.37 Since then, the market has grown so quickly that there is a thriving black market for solar panels along the U.S.-Mexico border.38 In 2009, the government of Durango, a state in northern Mexico, began an ambitious plan to harness its solar potential of 6.3 kilowatthours (KWh) per square meter.39 The first phase called for 210 hectares (about 519 acres) of solar panels.40 In August 2010, twenty-three kilometers of Mexico’s Viaducto Bicentenario elevated superhighway were lighted entirely with solar power unconnected to the electrical grid.41

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Mexico Key – WindMexico key to windLee, 11 -- Houston Journal of International Law executive editor [Zachary, "The Silver Lining to a Cloudy Situation," Houston Journal of International Law, 2011, 33.2, ebsco]

Mexico had not made significant strides toward harnessing its wind potential until relatively recently.13 Real progress began in 2006, when former energy secretary Felipe Calderón was inaugurated as Mexico’s president.14 As a candidate, Calderón had broken with tradition and advocated for the opening up of Mexico’s energy sector to private investment.15 Political infighting has prevented any significant opening up,16 and plummeting oil production—it fell by 9.2% in 2008 alone—has forced Calderón to seek out alternative energy sources.17 Wind has been especially promising, and Calderón has ambitiously pledged to increase Mexico’s wind energy capacity to 2500 MW—enough to

power 700,000 U.S. homes—by the end of his term in 2012.18 Mexico’s Isthmus of Tehuantepec “is becoming the Saudi Arabia of alternative energy.”19 The isthmus is ideally placed “at the bottom of a funnel formed by two mountain ranges,” and “[w]ind from the Atlantic Ocean and the Gulf of Mexico whistles through this pass on its way to the Pacific Ocean.”20 Winds there consistently blow at rates of 15–22 mph—perfect speeds for wind turbines.21 Further east, the Yucatán Peninsula has been touted as “one of the most promising areas for wind energy development within the Latin American region.”22 Mexico’s unique geography makes the development of wind power more economically feasible in Mexico than it is in many other countries.23 Investors there can get a return on their investments without the lavish government subsidies necessary in the United States, Canada, and the European Union.24 This is fortunate; the Mexican government can hardly afford to subsidize renewable energy.25 It already spends $19.2 million to keep gasoline prices artificially low.26 The international community is not so strapped for cash, however. Mexico is one of a handful of developing countries benefitting under the U.N. Clean Development Mechanism program.27 The program has funded sixteen wind power projects in Mexico with an eventual capacity of 1964 MW.28 Only China and India have received more international assistance toward the development of wind power.29

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EXTN: Mexico KeyMexican solar would be 60-times more efficient than current leadersOseguera, 10 – journalist [Oso, "Sunny Mexico: An Energy Opportunity," GreenTechSolar, 7-7-10, www.greentechmedia.com/articles/read/sunny-mexico-an-energy-opportunity, accessed 7-10-13]

Mexico’s solar resources are among the best in the world, far superior to those of Germany and Spain, the countries currently recognized as the world leaders in installed photovoltaic systems. Experts rank the quality of Mexico's photovoltaic (PV) and solar thermal resources among the world's best. In terms of photovoltaic resources, the country has significant advantages: Average Global Horizontal Irradiation (GHI) is approximately 5 kWh/m2/day, the energy equivalent of 50 times Mexico's annual national electricity generation 70% of the territory has GHI values greater than 4.5kWh/m2 Just 0.06% of the Mexican national territory would be sufficient to generate the overall electricity consumption of Mexico in 2005 according the GTZ report "Nichos de mercado para sistemas fotovoltáicos en conexión a la red eléctrica de México" (June 2009). Global Horizontal Solar Radiation Mexico's average solar resources for PV (5 kWh/m2/day) are more than 60% higher than the best solar in Germany (5.4 GW of installed PV). Spain and Germany are the global PV leaders, with a total of 8.7 GW, 67% of the world's PV installed capacity, according to the IEA Photovoltaic Power Systems Program 2008 Annual Report. Comparative Solar Resources, PV Performance, Energy Pay-Back and Energy Return (GHI kWh/m2)

Mexico has the greatest solar energy potential in the worldEnergías-Renovables 12Energías-Renovables.com, Mexico, “Land of Opportunity for the Renewable Energy Sector”, Mexicali Industrial Park, September 5, 2012, http://www.mexicaliindustrialpark.com/2011/mexico-land-of-opportunity-for-the-renewable-energy-sector/, Accessed 10/7/13The Foreign Trade Institute, a public body under the Ministry of Economy and Competitiveness of Spain, says that “the commitment of the Aztec country by the transition to alternative sources of hydrocarbons makes Mexico a country of opportunities for the renewable energy sector and, particularly in the wind sector.” According to ICEX, the Aztec country also has “the greatest potential photovoltaic the world.” The Mexican government’s 2025 goal is to extract 35% of electricity from renewable sources. The ICEX holds that “the burgeoning Mexican energy industry is beginning to reap the rewards through the legal and regulatory framework that has allowed the industry has a promising future for the Spanish companies that are investing in the country”. According to ICEX, the “high investment” that Spanish firms are devoting to Mexico for the development of infrastructure, products and processes of energy generation “have begun to capitalize on big profits”. The institute notes that the incentives designed by the Mexican government to attract capital inflows ranging from a “deduction of 100% in the first year of operation of the total investment in power generation equipment” to reduce certain administrative costs for renewable technologies “compared to conventional care for other technologies.” According to ICEX, “during the past year, the Foreign Direct Investment (FDI) in Mexico grew 10% and today 15% of the total FDI received comes from Spain.” Twenty billion dollars According to ICEX, “the continued increase in demand for electricity and the commitment of the administration by the transition from oil to alternative sources have generated that Mexico is positioned as a” land of opportunity for the development of renewable energy sector. “According to the data handled by the Foreign Trade Institute of Spain, during the last five years, investments in this area have exceeded two billion dollars “and the government estimates that over the next decade this number will exceed 20,000 million.” According Climascopio 2012, report just published the Inter-American Development Bank and Bloomberg New Energy Finance consultancy on investment prospects in Latin America and Caribbean (LAC), Mexico, “is on track to become the first country with chain Full value wind and solar “, is the sixth-most attractive destination for investors in the 26 LAC studied. The world’s largest photovoltaic potential In the field of photovoltaic solar-added-ICEX, the Aztec nation has “the world’s largest photovoltaic potential, since about 90% of the territory has an irradiation of five to six kilowatt hours per square meter but, despite these -figures-

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school qualifies, companies have not yet developed a large-scale photovoltaic generation. ” However, the federal government concluded the ICEX-performs different plans for the promotion and use of solar technologies, such as the Program for Promotion of Solar Water Heaters in Mexico 2007-2012 (Procasol) Program or Development of Alternative Energy Sources in Agribusiness and Renewable Energy Risk Trust (Firco), with World Bank support. According to data from the Energy Regulatory Commission (CRE), during the period 2005-2011 Mexico has attracted more than 4,770 million dollars in foreign investment to renewable industry projects, among which is wind power, solar, Mini-Hydroelectric – Mexican administration means that all facilities of less than thirty-and geothermal megawatts.

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Impact – Mexican EconGrowing renewable energy sector solves Mexico’s economyLee 10Zachary J. Lee, THE SILVER LINING TO A CLOUDY SITUATION: HOW MEXICO’S BUMBLING MODERNIZATION OF PEMEX IS SPURRING DEVELOPMENT OF RENEWABLE ENERGY,2010, http://www.hjil.org/wp-content/uploads/2010/10/Lee-Final.pdf, Accessed 9/7/13Much has been made of Mexico’s efforts to inject private capital and expertise into Pemex.42 Likewise, much has been made of the absolute failure of these efforts.43 The result is a stagnation of Mexico’s oil industry and an inability to exploit the potentially vast oil reserves in the deep waters of the Gulf of Mexico.44 Fortunately, renewable energy in Mexico does not face the same obstacles to private investment, and Mexico’s wind and solar potential can be exploited relatively easily.45 President Calderón has made it clear that Mexico’s energy industry will continue to grow—with or without Pemex reform: “With nothing but wind power, without burning a drop of petroleum, we are generating electricity so people can live better, so companies can produce more and generate more jobs, and so that people here can benefit through rent or association with these projects.”

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A2 Renewables NowGlobal demand for renewables decreasing Polintan 6/13’ ( L.J Polintan is a correspondent at Ecoseed “Global demand for renewable energy on the rise – REN21 2013 report” 13 Jun 2013 http://www.ecoseed.org/renewables/16584-global-demand-for-renewable-energy-on-the-rise-ren21-2013-report)According to a report made by the global policy network REN21, the global demand for renewable energy was steadily on the rise the past two years but slow to start this 2013.The report, titled “REN21 Renewables 2013 Global Status Report,” found that in the years 2011 and 2012, the demand for renewable energy consistently went up. In 2011, 19 percent of the world’s global consumption was supplied by renewable energy. That number grew to 21.7 percent by 2012. There were over 1,470 gigawatts of renewable power back in 2012 – 8.5 percent higher from 2011. The year 2012 saw an increase in hydropower by 3 percent to 990 GW, while other renewable energy resources rose by 21.5 percent, exceeding 480 GW. Wind power was the biggest player in 2012, accounting for 39 percent of the total renewable power capacity, followed by hydropower and solar power, accounting 26 percent each.However, this year’s first quarter saw lower investments in renewable energy, going down to around $40 billion - the lowest figure in any quarter since first quarter of 2009. Investments in small-scale projects went down from $20 billion quarterly average of 2012 to $18.5 billion in the first quarter of 2013. This drop in investments was partly due to the expiration of subsidies on December of the previous year, but the report emphasized that this drop in investments was not at all seasonal.

US demand for renewables is continuing to decrease Marin 4/13’ (Christopher Martin is a reporter for Bloomberg News “U.S. States Turn Against Renewable Energy as Gas Plunges” April 23, 2013 http://www.businessweek.com/news/2013-04-22/u-dot-s-dot-states-turn-against-renewable-energy-as-gas-plunges) http://www.businessweek.com/news/2013-04-22/u-dot-s-dot-states-turn-against-renewable-energy-as-gas-plungesU.S. investment in renewable power and energy efficiency fell 54 percent last year to $4.5 billion as government support waned, according to data compiled by Bloomberg. The level may slip again this year if states dilute their requirements, which have pushed utilities to contract power from renewable providers and scale-back use of coal- and natural gas-fired generation.Alec wants to repeal state mandates, arguing that the free market is a better way to determine the most cost-effective source of power, Wynn said. It typically drafts model legislation for state lawmakers to use as a blueprint when drafting bills, including the Electricity Freedom Act, which was published in October. The anti-renewable mandate effort is also fueled by the Heartland Institute, the lobby group that’s pushing to repeal clean-energy goals that it says increase power prices, cost jobs and do little to improve the environment, according to Heartland’s website. Officials from the organization weren’t available for comment.

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OTHER IMPACTS

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Reform Key to Pemex( ) PEMEX needs foreign investors to surviveMartin, ’13 – reporter for Bloomberg News[Eric Martin, a reporter for Bloomberg News in Mexico City, Mexico's President Pushes Reforms for State Oil Company Pemex, 6/20/13, http://www.businessweek.com/articles/2013-06-20/mexicos-president-pushes-reforms-for-state-oil-company-pemex]

Petróleos Mexicanos, known as Pemex, has long been the third rail of Mexican politics. The state-owned company, originally based on oil fields seized from foreign owners over 70 years ago, has produced sizable government revenue and union jobs for hundreds of thousands of Mexicans. Foreign investment has been largely restricted.But now Pemex’s main asset, the giant Cantarell offshore field, is shrinking fast. The company says it needs to boost annual investment by 46 percent, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Without some private capital and expertise from abroad, Mexico risks becoming an importer in the next decade. Many of Mexico’s politicians and policymakers have known this for years. Yet Mexican nationalism, resistance from the unions, and the sheer size of the task of transforming Pemex have stood in the way.The planets may be aligning for a solution: Mexican President Enrique Peña Nieto says he’s negotiating to get the political support he needs to break the state monopoly in oil and gas exploration and production this year in a bid to accelerate Mexico’s economic growth. In the model envisioned by Peña Nieto, Pemex would develop certain fields, while foreign and private companies would tap others. The oil and gas reserves in the ground would still be the property of Mexico. Peña Nieto declines to discuss many details of the proposal or whether it would include a change in the constitution, which limits how private companies can profit from the nation’s energy resources.

( ) Without reform PEMEX will fail

O’Sullivan, ’12 – Harvard Professor, Bush administration advisor[Meghan L. O'Sullivan, a professor at Harvard University's Kennedy School of Government and former deputy national security adviser in the George W. Bush administration, Mexican Oil Reforms Are Vital on Both Sides of the Border, 6/30/12, http://www.cfr.org/oil/mexican-oil-reforms-vital-both-sides-border/p28770]

In recent days a coalition of Mexican advocacy groups has been protesting in front of Televisa, the country's largest TV network, to contest the legitimacy of President-elect Enrique Pena Nieto's July 1 victory.These protests are the second in a string of such demonstrations scheduled before Pena Nieto takes office in December. They bode ill for Mexico's near-term political future, pointing to a rocky transition at a time when the challenges facing the country are anything but modest. Americans might assume that tackling the drug trade that has resulted in more than 47,000 deaths since 2006 would top the agenda. But a strong case can be made that energy reforms are at least as urgent, for if Mexico can't stem its sharply deteriorating energy situation, its ability to tackle other systemic problems will be severely compromised.Despite some recent progress in diversifying its economy, Mexico still relies on oil for 30 percent of its fiscal revenue. Yet oil production has plummeted from 3.4 million barrels a day in 2004 to 2.5 million in 2011, with most experts predicting a continuing decline over the next decade. Absent changes, Mexico could be a net importer of oil by 2020, ceasing exports to the U.S. altogether.Oil ReservesThis assessment might sound odd to Americans who are getting used to the idea that their energy future is brightening significantly on account of burgeoning resources at home and among their neighbors. There

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is no question that Mexico, with the 12th-largest oil reserves in the world, has the geological resources to maintain and even improve its ranking as the eighth-largest oil producer. Equally striking is Mexico's recently acknowledged endowment of shale gas. Not surprisingly, the prolific formations in Texas do not end at the border; Mexico is thought to have the fourth largest deposits of shale gas in the world, after Argentina, China and the U.S.But, as is often the case, politics trump natural endowments in determining the energy profile of a geological giant. Mexico's constitution makes it illegal for foreign companies to develop the country's natural resources; Petroleos Mexicanos, the national oil and gas company known as Pemex, holds the exclusive ability to explore and bring to market vast petroleum reserves. Pemex, however, doesn't have sufficient capital and technology to do so, and is burdened by a bloated bureaucracy and persistent interference by the state. Without significant reform, Pemex won't be up to the task of reversing Mexico's energy decline.

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Mexico EconEcon on the brink – energy reform keyThe Economist 6-29-2013“Rolling with the punches,” http://www.economist.com/news/finance-and-economics/21580165-fed-one-bogeyman-half-hearted-energy-reform-another-rolling

Although other Latin American currencies have been weaker for longer, the peso took the Fed chairman’s punch on the nose (see chart). Since early May, when speculation that the Fed was likely to rein in its bond-buying programme increased, the currency has plummeted from below 12 per dollar to over 13. In the same period the yield on Mexico’s benchmark ten-year bonds has risen from an historic low of 4.4% to 6.2%, battering the Mexican pension funds that invest in them.So far the feared mass exodus of foreign investors has not materialised. According to Banco de México, the central bank, there has been a $4.3 billion net outflow of foreign money from the stockmarket in the three months to the end of May. But the stock of foreign holdings remains historically high; several firms have raised money on the bourse in recent days. Foreign holdings of government bonds have been relatively stable. Much of the peso’s volatility has been driven by investors hedging the currency risk on their fixed-income exposure rather than dumping bonds.Craig LeVeille of the Chicago-based CME Group, where peso futures are traded, says investors with Latin American exposure may also have hedged in the Mexican peso market because it is deeper and more liquid than its peers in the region, exacerbating the currency’s slide.One reason investors may be prepared to tread water in Mexico is that economic growth, which has been weaker than forecast in the first four months of the year, is highly dependent on demand in America. If the economy north of the border accelerates that would benefit Mexico, even if it also encourages Mr Bernanke to “taper”.The wild card, though, is whether the seven-month-old government of Enrique Peña Nieto can present a bill in September that succeeds in meaningfully reforming the energy sector, which is considered vital for boosting Mexico’s long-term growth potential . In London this month Mr Peña spoke of big proposed changes to increase the participation of private firms in the energy industry, but it was not clear how dramatically his reforms would alter the 1917 Constitution, which specifies that all natural resources belong to the state. Even such guarded comments sparked a backlash at home, suggesting Mr Peña would need to present a watered-down bill to keep the left in a three-way political pact he has forged to promote reform.It is hard to measure the impact of such uncertainty on markets, but some senior officials think it is meaningful. “Every fund manager that I speak to who knows Mexico well speaks about energy reform,” says one. “There have been so many mixed signals about energy that people are very sceptical.” Mr Bernanke’s writ runs far, but local politics still matter.

Now key—stock market drops 10% without reformCattan and Navarro 7/10 [Nacha Cattan & Veronica Navarro Espinosa, reporters in Mexico City]Pemex Official Sees Monopoly End as JPMorgan Backs Reform, Bloomberg, July 10, 2013, http://www.bloomberg.com/news/2013-07-10/mexico-poised-to-end-state-energy-monopoly-pemex-official-says.html)

A slowdown in economic expansion is putting pressure on Pena Nieto to gain approval to open the energy industry and change laws to boost tax collection, reforms he says may lift growth to 6 percent.¶ “We need far more investment, we need capacity in production and we need technology,” Moreira said. “We need to transform the energy sector in a very deep way. I think now is the time.” ¶ The ruling Institutional Revolutionary Party has the ability to pass the key bills, which will attract investment and bolster

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Mexican markets, according to Eduardo Cepeda, the senior country officer for JPMorgan in Mexico.¶

Mexico’s stock market may slump 10 percent if none of the promised reforms are carrier out this year, Cepeda said. Still, that could present a buying opportunity because the structural changes will eventually get done, he said.¶ The IPC stock index has dropped 8.4 percent this year, compared with declines of 25 percent for Brazil’s benchmark, 12 percent declines in Chile and a 15 percent fall in Colombia.

PEMEX reform coming—key to investmentsCattan and Navarro 7/10 [Nacha Cattan & Veronica Navarro Espinosa, reporters in Mexico City]Pemex Official Sees Monopoly End as JPMorgan Backs Reform, Bloomberg, July 10, 2013, http://www.bloomberg.com/news/2013-07-10/mexico-poised-to-end-state-energy-monopoly-pemex-official-says.html)

Mexico is on the cusp of opening its energy industry to outside investment as a wide consensus has developed that the constitution must be changed to end the government’s monopoly on production, according to a board member of state-controlled oil producer Petroleos Mexicanos.¶ The country needs “very deep” reforms to lure investment to its natural gas and crude fields after eight years of declining oil output, and proposed changes could be ready by the end of summer, Hector Moreira, who also is a former official in the country’s Energy Ministry, said today at the Bloomberg Mexico Conference in New York. A congressional bill to open the oil monopoly would prompt as much as $50 billion in annual investments if approved, he said.

Mexico is unable to drill—only energy reform solves for long-term economic growthVillagran 13(Lauren Villagran is the Mexico correspondent for the Associated Press, Dallas Morning News and Christian Science Monitor. “Can reform save Mexico’s oil industry?” Smart Planet, 3/27/13, http://www.smartplanet.com/blog/global-observer/can-reform-save-mexicos-oil-industry/10689)

The country’s national oil monopoly, Petroleos Mexicanos, lacks the technology and expertise to drill the deep waters of the Gulf of Mexico, where its latest oil finds lie. Historically, its hands have been tied: A prohibition on foreign partnerships and inadequate reinvestment in the business have prevented the company known best as Pemex from venturing beyond its shallow fields into the deep. But the energy reform currently under debate could change that, opening Mexico’s oil sector to foreign investment –- if the new government can amass the legislative support it needs and surmount substantial public opposition.¶ Mexican oil has been the property of the state since President Lazaro Cardenas expropriated the assets of foreign oil companies in 1938 and nationalized the industry. Although a 2008 reform loosened the tight, constitutional restrictions on foreign investment of any kind, the industry remains largely closed to the investment experts say it needs to modernize. ¶ “Currently, (Pemex) has neither the capital nor the technology necessary for deep water exploration, for which alliances with the private sector are practically essential,” the think tank Center of Research for Development (CIDAC) said in an analysis.¶ President Enrique Pena Nieto has promoted reform that would restructure the company and open refining, petrochemicals, and shale gas exploration to foreign capital, as well as limited participation in deep water projects –- provided the oil remains in Mexican hands. The administration hasn’t released a timeline for introducing the reforms, but analysts say the president may need to move quickly to capitalize on the support he earned through a recent pact among the three major political parties establishing common ground on the energy issue. Without reform, CIDAC said, “ Mexico could be left without oil and without an industry .”¶ Mexico’s economic growth is at stake, say supporters.¶ Heavily taxed Pemex earnings account for roughly a third of the country’s budget, and its ability to exploit reserves is crucial to long-term growth . Crude production dropped 20 percent from a high point in 2004 of 3.3 million barrels per day to 2.55 million barrels per day last year.

( ) Energy reform is key to Mexico’s survival – sustains governmentMelgar, ’13 – undersecretary of Electricity for Mexico, Ph. D. in economics

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LOURDES MELGAR, director of the Undersecretary of Electricity for Mexico, doctorate in in Economics from MIT, The Future of PEMEX, 2013, http://www.americasquarterly.org/node/3781

The oil and gas industry is a different story. Since 2004, oil production has been in sharp decline, going from a peak of 3.4 million barrels per day (mbd) to 2.5 mbd in the first quarter of 2012. At current rates of production, reserves are expected to last 9.5 years. At the same time, domestic demand has been rising and is expected to reach 2.3 mbd by 2015. In addition, Mexico imports close to 50 percent of its gasoline and over 40 percent of its natural gas.The decline in production is particularly worrisome, since oil revenues are critical to the financial solvency of the government, accounting for 35 percent of government income. The sustained high level in oil prices has masked the net decline in crude exports, but a significant shift in the international oil market could result in a severe financial crisis. That fear, and the perceived need to increase oil income, drove the 2008 Energy Reform.The government currently relies on extracting revenue from petroleum production and sales rather than taxation to finance the public budget. As a result, PEMEX's financial condition is determined not only by the market but by the policies of the Secretariat of Finance and Public Credit—where, even under the latest fiscal regime, 70 percent of PEMEX net income goes to paying taxes and duties. Thus, despite being one of the top petroleum companies in the world, pemex is technically bankrupt, sharply curtailing the possibilities for growth and investment for innovation.Restoring the financial health of PEMEX is critical to the oil company’s future, and that means freeing it from its status as the state cash cow. Most experts and politicians converge on the view that PEMEX needs to be structured more as a private company. As such, it should follow international best practices, be removed from the federal budget, become autonomous, have its own capital and assets, and adopt better corporate governance. Still, it’s also generally agreed that the state should continue to be the sole owner of Mexican hydrocarbon reserves.

( ) Reform needed for Mexican economy, now is keyMartin, ’13 – reporter for Bloomberg News[Eric Martin, a reporter for Bloomberg News in Mexico City, Pena Nieto Confident 75-Year Pemex Oil Monopoly to End This Year, 6/18/13, http://www.bloomberg.com/news/2013-06-18/pena-nieto-confident-75-year-pemex-oil-monopoly-to-end-this-year.html]

“What the market wants is the reforms to pass,” Cordova said by phone from San Pedro Garza Garcia, Mexico. The comments indicate “the energy reform is on a good path and it gives some more information, because up until now it’s been very opaque.”Opening oil and gas exploration for private investment would help Mexico revive oil production that is heading for its ninth year of decline. Crude output averaged 2.52 million barrels a day this month through June 9, compared with 3.38 million barrels a day in 2004.When Pena Nieto took office in December, he inherited an economy that had started to grow faster than Brazil in the final two years of predecessor Felipe Calderon’s administration amid record Mexican auto exports and waning Chinese demand for Brazilian commodities. Mexico’s gross domestic product will expand 3.2 percent this year, faster than 3 percent for Brazil, according to the median estimate of analysts surveyed by Bloomberg.Government SpendingWhile Mexican growth eased to 0.8 percent in the first quarter, the least since the 2009 recession, Finance Minister Luis Videgaray said in an interview yesterday that the expansion will quicken as the government increases spending in the second half of the year.“We expect much more accelerated spending in the second semester,” Videgaray said. “The budget is there and the revenue is there.”

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Pena Nieto said there’s political momentum to pass more reforms after the approval of sweeping education and telecommunications laws and the creation of the Pact for Mexico. His Institutional Revolutionary Party, or PRI, dropped its opposition to an oil-law overhaul in March.“We’re approaching key deadlines,” Pena Nieto said. “I’m optimistic that this political climate of understanding and agreement will be maintained.”

( ) SQ energy policies make Mexico less competitive

Luhnow, ’13 – WSJ Bureau Chief for Latin AmericaDAVID LUHNOW, The Wall Street Journal’s Bureau Chief in Latin American, Mexico Moves on Energy in Economic Reset, 2/13/13, http://online.wsj.com/article/SB10001424127887324162304578302343638712694.html

For decades, Mexico's energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state monopoly Petróleos Mexicanos to a different end: cheaper energy, said Pemex CEO Emilio Lozoya.In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Peña Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that could drive a more competitive economy.Now, the Mexican government relies on Pemex, one of the world's biggest oil firms, for 35% of government spending, leaving the company with little left over to invest in areas like natural gas. Private companies, meanwhile, are largely barred from investing thanks to Mexico's nationalistic energy laws.The result is an energy-rich country where companies often pay higher prices for energy than elsewhere. Mexico has large reserves of natural gas, for instance. But since Pemex doesn't invest enough in gas, the country imports gas from the U.S.—raising costs to Mexican firms as they try to compete with global players like China."Energy ought to be looked at on a competitive basis and not as a foreign-exchange generator," Mr. Lozoya said, pointing to a prospective investment boost in industries ranging from gas to petrochemicals to fertilizers.Complicating matters, Mexico's oil output has slipped to 2.55 million barrels a day from a peak of 3.4 million in 2004, as easy oil in the Gulf is replaced by more difficult reserves of deep-water oil and heavy oil onshore. To boost production, the company will need more money, technology and know-how.Changing Mexico's energy laws is widely seen as an important test for a country that captured the imagination of investors for linking its economy in a free-trade deal with the U.S. in the mid-1990s, but which saw its star dim to other emerging markets like China and Brazil in recent years.For Mexico, beset by drug violence the past few years, such a move would send a powerful signal to investors, likely driving billions in foreign investment, economists say."This is all about regaining the reform momentum, and you don't see that that often in emerging markets today. Taking on those taboos, and those changes, it would re-establish the Mexican narrative as a reformer and be very positive," said Gray Newman, chief economist for Latin America at Morgan Stanley MS -0.61% .

Pemex reform solves accidents and helps Mexico’s economy

Investors 13

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“Pemex Explosion Should Push Mexico To Privatize” 02/04/2013 06:29 PM Investors.com http://news.investors.com/ibd-editorials/020413-643108-mexican-oil-company-explosion-spur-pemex-privatization.htm?p=fullWhether it was an accident or sabotage, the deadly explosion at Mexico's state-owned oil firm wasn't an unusual event. The one thing Thursday's incident at the Pemex tower should be is a spur to privatize.Despite a much-publicized war against cartels, the real Mexico story is one of moderately good economic growth with zero net illegal emigration and a public sector financed by a budget showing a $1 billion annual surplus.But then there's Pemex, the supposed symbol of national sovereignty, which in reality is nothing but a millstone around Mexico's neck holding the country back from far greater gains.Pemex's many costs and debts are among the reasons why that $1 billion annual surplus is not $6 billion. It's also a big reason Mexico has $59 billion in debt. Its unionized 150,000-strong workforce is one of the least efficient, yielding an average of $506,000 of revenue per employee per year, far below the $2.865 million each employee at the top five international oil companies brings in, according to a Baker Institute study.Less revenue, less investment, less safety. Oilmen will tell you every incident is different, and some accidents do occur at private firms of course. But the overall Pemex record speaks volumes, with comparable events at its installations in 2012, 2010, 2007, 1993 and 1984.Even as Pemex costs the government, the government costs Pemex. Its earnings are effectively taxed at 60% to finance about a third of the government, leaving it miserably under-invested in its own production. Not surprisingly, Mexican oil production fell from 3.4 billion barrels a day in 2004 to about 2.5 billion a day in 2012."The government vacuums the cash flow out of this company like an Electrolux because they need to support the government and social services. Is that how a private company behaves? Of course not," noted Garfield Miller, president of Aegis Energy Advisors, who explained to IBD that private and public oil companies have different goals."When you are a government institution, almost by definition an instrument of social policy, your mission becomes inescapably broader than simply maximizing value for a narrow set of constituents" — as occurs with private oil companies that answer to shareholders.The situation is so bad in Mexico that it cannot take advantage of its vast new deepwater discoveries in the Gulf, just as the U.S.' highly efficient private companies expand production on the U.S. side of the Gulf and the shale revolution increases production, as well.Things are so dire that already Mexico is importing gasoline from the U.S. and by 2019 is expected to be importing oil. That's ironic for a country which by national lore considers oil a symbol of independence and has indoctrinated its people into believing it is therefore impossible to privatize.Yet the hard facts worldwide show that privatized companies outperform public ones — in technology, production, profitability and safety.The Baker Institute's 2007 "Empirical Evidence of the Operational Efficiency Of National Oil Companies" study impartially demonstrated that private companies operate better than public enterprises.

Accessing shale gas is key to Mexican economic growthWood 13Dr Duncan Wood-Director of the Mexico Institute ,Hearing Before the Subcommittee on the Western Hemisphere of the Committee on Foreign Affairs, House of Representatives, March 14 2013, http://docs.house.gov/meetings/FA/FA07/20130314/100445/HHRG-113-FA07-Wstate-WoodD-20130314.pdf, Accessed 10/7/13Underlying all three of these areas are broader concerns about regional economic competitiveness and the consolidation of economic development in Mexico. The first of these concerns derives from the hugely important comparative advantage that the North American economic region has derived in recent years from low-cost energy, driven by the shale revolution. In order to maintain this comparative advantage, and to ensure that the integrated manufacturing production platform in all three countries benefits from

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the low-cost energy, the gains of recent years must be consolidated by fully developing Mexico’s energy resources. With regards to the second concern, economic development, a number of commentators, analysts and political figures in Mexico have identified energy reform as a potential source for driving long-term economic growth and job creation, and the potential opportunities for foreign firms are considerable. While the United States cannot play an active role in driving the reform process, the implementation of any future reform will benefit from technical cooperation with the U.S. in areas such as pricing, regulation and industry best practices.

Pemex is the Mexican Governments largest Revenue provider and without reforms will lose money within the DecadeSamples 12TIM R SAMPLES, ENERGY REFORM AND THE FUTURE OF MEXICO’S OIL INDUSTRY:THE PEMEX BIDDING ROUNDS AND INTEGRATED SERVICE CONTRACTS, 6/21/2012, http://tjogel.org/wp-content/uploads/2012/07/Samples-Formatted_Final_June13.pdf, Accessed 9/7/13Mexico is the sixth largest producer of crude oil in the world—ahead of Brazil, Iraq, Norway, and Venezuela—but is a major consumer of petroleum as well, ranking eleventh in the world in 2009.24 Current projections for production and consumption suggest that Mexico could become a net importer of oil within a decade.25 In recent years, Mexico has lost almost a quarter of its production capacity, dropping from 3.9 million barrels per day in 2004 to 2.98 million in 2010.26 Production at most of Mexico’s most important fields is falling.27 Current declines in productivity will have major consequences for the Mexican government. Pemex is Mexico’s largest taxpayer and has typically accounted for 30%–40% percent of federal government revenues.28 As one of the three largest suppliers of foreign oil to the United States, Mexico’s declining production carries consequences north of the border as well. Pemex does not perform well in comparison with peer companies in economic efficiency and other key indicators.30 The most difficult issue facing Pemex is its heavy tax burden.31 Historically, this tax burden routinely amounts to well over half of the company’s revenues.32 Pemex recently recorded a quarterly loss of 81 billion Mexican pesos—one of its worst quarterly results in recent years—with tax payments representing 55% of income.33 Though recent reforms have eased Pemex’s tax burden slightly, disturbing the status quo remains politically daunting.34 Additionally, Pemex employs roughly 140,000 people, a payroll which some have suggested is far too large.35 Pemex is under immense pressure to finance the Mexican government, sponsor social programs, and provide for Mexico’s energy needs—all while remaining a major employer of the Mexican people.36 In many ways, Pemex has succeeded in accomplishing these goals.37 However, the sustainability of the current model has been brought into question.38Pemex is suffering the consequences of a prolonged strategy focused on maximizing immediate revenues for the government at the expense of research and development, new exploration, technical innovation, infrastructure spending, and capital reinvestment.39 In other words, Pemex has been focused on sustaining immediate production rather than exploration and future development. During the most bountiful years of the supergiant Cantarell field, significant investments in exploration and new development were not necessary to sustain high levels of production.40 However, sharp declines at Cantarell have exposed weaknesses in the Pemex business model.41 Pemex is hobbled by factors beyond its tax burden, such as high debt and pension liabilities, cumbersome internal governance, complicated administrative and political relationships with the federal government, the Petroleum Workers Union of Mexico (the Pemex Union), and deficiencies in capital and technology. Reversing the tide of declining production will require changes within Pemex as well as a deeper overhaul of the existing regulatory framework constraining Pemex. Continued Declines Will Have Far-Reaching Consequences for Mexico As the most important company in Mexico, a source of national pride, and a symbol of sovereignty, Pemex’s troubles are Mexico’s troubles. Though it is clear that declining production must be reversed, questions remain as to how Mexico will approach its production conundrum. The most immediate question facing Pemex is whether existing fields can be effectively managed to extend production and slow decline through various recovery strategies.42 In order to boost long-term production, Mexico will likely need to look to the Chicontepec Basin and to deep-sea reserves in the Gulf of Mexico.43 All of the above scenarios—and particularly the long-term solutions—require advanced technology and capital investments beyond what Pemex is currently capable of providing.44

PEMEX Reforms are key to Innovation and Growth in the Mexican Energy Sector and economyLuhnow 13DAVID LUHNOW and LAURENCE ILIFF , Mexico Moves on Energy in Economic Reset , The Wall Street Journal, February 13, 2013,, http://online.wsj.com/article/SB10001424127887324162304578302343638712694.html, Accessed 9/7/13MEXICO CITY—For decades, Mexico's energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state monopoly Petróleos Mexicanos to a different end: cheaper energy, said

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Pemex CEO Emilio Lozoya. In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Peña Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that could drive a more competitive economy. Pemex CEO Lozoya on Mexico's Energy Reform Plans Lozoya on Foreign Companies Drilling for Mexico's Shale Gas Now, the Mexican government relies on Pemex, one of the world's biggest oil firms, for 35% of government spending, leaving the company with little left over to invest in areas like natural gas. Private companies, meanwhile, are largely barred from investing thanks to Mexico's nationalistic energy laws. The result is an energy-rich country where companies often pay higher prices for energy than elsewhere. Mexico has large reserves of natural gas, for instance. But since Pemex doesn't invest enough in gas, the country imports gas from the U.S.—raising costs to Mexican firms as they try to compete with global players like China. "Energy ought to be looked at on a competitive basis and not as a foreign-exchange generator," Mr. Lozoya said, pointing to a prospective investment boost in industries ranging from gas to petrochemicals to fertilizers. Complicating matters, Mexico's oil output has slipped to 2.55 million barrels a day from a peak of 3.4 million in 2004, as easy oil in the Gulf is replaced by more difficult reserves of deep-water oil and heavy oil onshore. To boost production, the company will need more money, technology and know-how. Changing Mexico's energy laws is widely seen as an important test for a country that captured the imagination of investors for linking its economy in a free-trade deal with the U.S. in the mid-1990s, but which saw its star dim to other emerging markets like China and Brazil in recent years. For Mexico, beset by drug violence the past few years, such a move would send a powerful signal to investors, likely driving billions in foreign investment, economists say. "This is all about regaining the reform momentum, and you don't see that that often in emerging markets today. Taking on those taboos, and those changes, it would re-establish the Mexican narrative as a reformer and be very positive," said Gray Newman, chief economist for Latin America at Morgan Stanley MS +0.08% . Change won't be easy. The oil nationalization in 1938, by Mr. Peña Nieto's own Institutional Revolutionary Party, is seen as a key event in Mexican identity. Some leftist lawmakers, Mexican contractors and even some foreign oil-service firms that work with Pemex on a fee basis might see change as a threat, analysts say. The freshly appointed Mr. Lozoya, the youngest ever Pemex chief and who is seen as close to the president, was careful not to discuss specifics about proposed changes to energy laws in the Tuesday interview, saying it was up to Mexico's political parties. But he did point out that political parties here from left to right had already come together in recent months on topics like education and labor reform. "Obviously, our challenge is we need to deliver on the pending reforms and governing responsibly over the next years, but I do see this as a very good opportunity for Mexico to retake a path of higher productivity and higher economic growth," he said. Mexico's conservative opposition, the National Action Party, largely favors a broader opening of the energy business to private investment, while the leftist Party of the Democratic Revolution has proposed a more limited opening for areas like refining. Mr. Newman believes Mr. Peña Nieto may well deliver a broad-ranging reform. "I don't think the prospects for reform have been this strong in Mexico in over 20 years," Mr. Newman said. The son of a former energy minister, Mr. Lozoya has had a tough start as head of Mexico's largest company, which had 2011 sales of $111 billion. An explosion at a Pemex office building at the company's Mexico City headquarters last month killed 37 workers. The company said the blast was caused by a buildup of methane in the building's cellar, but doesn't yet know what caused the gas to accumulate. The investigation, led by the country's attorney general's office, will take a few more weeks, Mr. Lozoya said. "We are in mourning, but we're standing and looking forward, and working on our modernization plans," said the executive, who is the grandson of a revolutionary general and politician. He pointed to the shale-gas revolution in the U.S., along with deep-water and heavy oil, as examples of how Mexico can benefit from new technologies that boost energy output, lower prices and create jobs. Mexico may hold the world's fourth-biggest reserves of shale gas, according to the U.S. government. But Pemex has drilled only a few wells and not produced any gas. "Mexico ought to be producing more of its own gas, and eventually exporting it," Mr. Lozoya, a lawyer and economist who got his master's degree in public policy at Harvard said. "Clearly the geology that you have in some parts of the U.S. extends into Mexican territory. So it's a matter of just investing and getting it done." Mr.

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Lozoya also envisions Pemex acting as a lever of development for the economy, spurring the development of a stronger oil service sector and promote new industries like ethanol. "It is important we support medium-size companies, together with programs from national development banks, so they can access credit and be suppliers to Pemex, and make sure over the next few years that we develop a strong oil-servicing industry in Mexico that can grow and be regionally competitive," he said, speaking in English. The government is considering slowly replacing additives like MTBE in gasoline with ethanol, he said. Pemex would act as the buyer and gatekeeper to the industry, Mr. Lozoya said. Last year, Pemex had to abandon its second tender for ethanol to be used as a gasoline additive because the offers made were above the price the oil company was prepared to pay. Mr. Lozoya said Pemex would be prepared to pay "above average prices" to firms. "Pemex may end up paying a little bit more, but it would have a positive impact on the environment and on jobs domestically, so it would be worth it," he said. "I foresee and I hope that in a couple of years we'll have a much stronger energy sector with many more medium-size companies present in it; and that Pemex becomes a much stronger development lever of the country."

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Mexico Energy SecurityPEMEX reform solves Mexican energy securityMorales 11(Isidro Morales, Ph.D., is a professor at the Monterrey Institute of Technology and Higher Education (ITESM), Sante Fe Campus, in Mexico City. Morales’ main research areas are the geopolitics and geo-economics of energy, trade, and investment markets; the political economic of regional integration; Mexico-U.S. trade and security relations’ and U.S.-Latin American relations. “Energy Trade and Security Issues at the Mexico-U.S. Border,” James A. Baker III Institute for Public Policy at Rice University, 4/29/11, http://www.bakerinstitute.org/publications/EF-pub-MoralesTrade-04292011.pdf)

In other words, Mexico’s oil rent in the past five years has increased in spite of the decline in volume, thanks to the new cycle of high oil prices

witnessed by international markets. However, Mexico’s oil addiction—in both the energy mix and in the balance of payments— has become a major vulnerability . Mexico has become vulnerable to the behavior of oil markets because of two reasons: 1) the unpredictable price fluctuations that may occur in the mid- to long terms; 2) the secular decline in oil exports while imports of refined fuels—mainly gasoline—are growing. This probably explains why in Calderon’s 2010 National Energy Strategy, the concept of “energy security” was introduced for the first time in the country's official jargon. ¶ In principle, a strategy of energy security should target the reduction of vulnerabilities—social, economic, or political—vis-à-vis unexpected or critical changes impacting the energy system of a country. In fact, the governance of risk, uncertainty, and adaptation must be at the root of any security policy. In the case of energy, a risk is mainly defined in terms of unexpected shocks affecting the stability of energy supplies (in the case of Mexico, mainly oil and gas), which may be unleashed by national depletion (the current decline of conventional oil reserves), natural disasters, or geopolitical changes (Morales 2011). The supply shocks may at the same time unleash uncertainties in energy markets and undermine policy options, i.e., the evolution of new investments and drilling exploration, etc. However, President Calderon’s National Energy Strategy has a limited view of energy security for the country, because one of the most important goals to be achieved in the present and forthcoming presidential administrations, i.e. 2024, is the restitution of Pemex oil production to its historical level—3.3 million barrels per day (b/d)—and the ratio of proved reserves replacement to 100%. In 2009 the actual record of these two figures was 2.6 million b/d and 72% respectively (SENER 2010a, 63). That is, in Calderon’s view, the major security goal is to raise oil production to its historical levels and reduce the rate of depletion of nonrenewable resources, all under the aegis of a

Pemex monopoly. Under his strategy, it is not clear how a transition to a more diversified energy mix will be accomplished or combined with right price signals for ensuring the participation of private firms (in the domains where this is permitted or in the exploitation of renewable resources) in the order to adapt Mexico’s energy system to a scenario of growing energy demand while reducing carbon emissions.

Energy reform key to Mexican competitiveness – cheap energy, foreign investment, job creationLuhnow & Iliff, 13 (David, the Latin America Bureau Chief for the Wall Street Journal, and Laurence, reporter for Wall Street Journal Latin America Bureau, “Mexico Moves on Energy in Economic Reset”, Wall Street Journal, 2/13/13, AD: 7/9/13, http://online.wsj.com/article/SB10001424127887324162304578302343638712694.html | Sina)

For decades, Mexico's energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state monopoly Petróleos Mexicanos to a different end: cheaper energy, said Pemex CEO Emilio Lozoya. In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Peña Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that could drive a more competitive economy. Now, the Mexican government relies on Pemex, one of the world's biggest oil firms, for 35% of government spending, leaving the company with little left over to invest in areas like natural gas. Private companies, meanwhile, are largely barred from investing thanks to Mexico's nationalistic energy laws. The result is an energy-rich country where companies often pay higher prices for energy than elsewhere. Mexico has large reserves of natural gas, for instance. But since Pemex

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doesn't invest enough in gas, the country imports gas from the U.S.—raising costs to Mexican firms as they try to compete with global players like China. "Energy ought to be looked at on a competitive basis and not as a foreign-exchange generator," Mr. Lozoya said, pointing to a prospective investment boost in industries ranging from gas to petrochemicals to fertilizers. Complicating matters, Mexico's oil output has slipped to 2.55 million barrels a day from a peak of 3.4 million in 2004, as easy oil in the Gulf is replaced by more difficult reserves of deep-water oil and heavy oil onshore. To boost production, the company will need more money, technology and know-how. Changing Mexico's energy laws is widely seen as an important test for a country that captured the imagination of investors for linking its economy in a free-trade deal with the U.S. in the mid-1990s, but which saw its star dim to other emerging markets like China and Brazil in recent years. For Mexico, beset by drug violence the past few years, such a move would send a powerful signal to investors, likely

driving billions in foreign investment , economists say. "This is all about regaining the reform momentum, and you don't see that that often in emerging markets today. Taking on those taboos, and those changes, it would re-establish the Mexican narrative as a reformer and be very positive," said Gray Newman, chief economist for Latin America at Morgan Stanley . Change won't be easy. The oil nationalization in 1938, by Mr. Peña Nieto's own Institutional Revolutionary Party, is seen as a key event in Mexican identity. Some leftist lawmakers, Mexican contractors and even some foreign oil-service firms that work with Pemex on a fee basis might see change as a threat, analysts say. The freshly appointed Mr. Lozoya, the youngest ever Pemex chief and who is seen as close to the president, was careful not to discuss specifics about proposed changes to energy laws in the Tuesday interview, saying it was up to Mexico's political parties. But he did point out that political parties here from left to right had already come together in recent months on topics like education and labor reform. "Obviously, our challenge is we need to deliver on the pending reforms and governing responsibly over the next years, but I do see this as a very good opportunity for Mexico to retake a path of higher productivity and higher economic growth," he said. Mexico's conservative opposition, the National Action Party, largely favors a broader opening of the energy business to private investment, while the leftist Party of the Democratic Revolution has proposed a more limited opening for areas like refining. Mr. Newman believes Mr. Peña Nieto may well deliver a broad-ranging reform. "I don't think the prospects for reform have been this strong in Mexico in over 20 years," Mr. Newman said. The son of a former energy minister, Mr. Lozoya has had a tough start as head of Mexico's largest company, which had 2011 sales of $111 billion. An explosion at a Pemex office building at the company's Mexico City headquarters last month killed 37 workers. The company said the blast was caused by a buildup of methane in the building's cellar, but doesn't yet know what caused the gas to accumulate. The investigation, led by the country's attorney general's office, will take a few more weeks, Mr. Lozoya said. "We are in mourning, but we're standing and looking forward, and working on our modernization plans," said the executive, who is the grandson of a revolutionary general and politician. He pointed to the shale-gas revolution in the U.S., along with deep-water and heavy oil, as examples of how Mexico can benefit from new technologies that boost energy output, lower prices and create jobs. Mexico may hold the world's fourth-biggest reserves of shale gas, according to the U.S. government. But Pemex has drilled only a few wells and not produced any gas. "Mexico ought to be producing more of its own gas, and eventually exporting it," Mr. Lozoya, a lawyer and economist who got his master's degree in public policy at Harvard said. "Clearly the geology that you have in some parts of the U.S. extends into Mexican territory. So it's a matter of just investing and getting it done." Mr. Lozoya also envisions Pemex acting as a lever of development for the economy, spurring the development of a stronger oil service sector and promote new industries like ethanol. "It is important we support medium-size companies, together with programs from national development banks, so they can access credit and be suppliers to Pemex, and make sure over the next few years that we develop a strong oil-servicing industry in Mexico that can grow and be regionally competitive," he said, speaking in English. The government is considering slowly replacing additives like MTBE in gasoline with ethanol, he said. Pemex would act as the buyer and gatekeeper to the industry, Mr. Lozoya said. Last year, Pemex had to abandon its second tender for ethanol to be used as a gasoline additive because the offers made were above the price the oil company was prepared to pay. Mr. Lozoya said Pemex would be prepared to pay "above average prices" to firms. "Pemex may end up paying a little bit more, but it would have a positive impact on the environment and on jobs domestically, so it would be worth it," he said. "I foresee and I hope that in a couple of years we'll have a much stronger energy sector with many more medium-size companies present in it; and that Pemex becomes a much stronger development lever of the country."

Reform key to competitiveness – private sector investment and access to US gasSnow, 13 (Nick, Washington editor for the Oil & Gas Journal, “Mexico's energy reforms will need to be bold, experts suggest”, Oil & Gas Journal, 7/8/13, AD: 7/9/13, http://www.ogj.com/articles/print/volume-111/issue-7a/general-interest/mexico-s-energy-reforms-will-need.html | Sina)

Mexico's government, which is expected to announce energy reforms in August, will need to take bold steps if it expects to meaningfully participate in North America's oil and gas renaissance, experts said at a Woodrow Wilson Center for International Studies forum. "North America's oil and gas revolution is of enormous importance to Mexico," said Ernesto Marcos Giacoman, founding partner of Marcos y Associados, a consulting firm specializing in Mexico's energy industry. "If we don't do more serious reforms, more Mexican companies will start to build plans in the US because natural gas prices are lower, and Mexico will lose its competitive advantage." "A good part of Mexico's private sector is withholding investment in [national oil company Petroleos Mexicanos] because it wants to see what happens with the reforms," added

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Juan Pardinas Carpizo, general director of the Mexican Institute for Competitiveness. "The sooner this is resolved, the better." Duncan Wood, who directs the Wilson Center's Mexico Institute and led the June 21 discussion, said Enrique Pena Nieto became president in December after campaigning to reform the government overall. Other political reforms agreed to move legislation ahead, and fiscal and energy reform proposals are pending, he indicated. "This time around, everyone recognizes that changes need to be made," Wood said. "There's not agreement yet on what those changes will be." It's generally assumed that Pemex will continue to own Mexico's hydrocarbon resources, but production-sharing contracts and labor reform have been mentioned, according to Marcos. Downstream private investment also might be allowed, and the national hydrocarbons commission could have more regulatory power, he said. "The last time I checked, there were no chemical molecules on Mexico's flag, but everyone treats it that way," said Pardinas. "The challenge the next few months will be to draw a line from oil and other chemical molecules through a national company with a confused corporate identity." The US could help reform efforts by releasing more information about dramatic changes under way in North American energy so Mexico would understand what it's missing, he added. Pemex is the only one in the world that operates from the wellhead to the retailer, Pardinas said. " Even Cuba is more competitive ," he observed. The country also badly needs to connect US gas transmission systems with Mexico's industries, he said. "In parts of Mexico, we're paying prices similar to China," Pardinas said. "It's essential to build infrastructure to bring US gas to Mexican industry, not only for energy security but also for economic growth." Marcos said Pemex would like to explore shale gas plays near the US border that are believed to be extensions of the Eagle Ford field. "My personal opinion is that it should not get involved in shale because it doesn't have the technological capacity," he said. "It's hiring Schlumberger, Halliburton, and other service companies to operate field laboratories instead."

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Mexico Oil

Pemex reform would solve Mexico’s oil productionEconomist 09“How many Mexicans does it take to drill an oil well?” Oct 1st 2009 The Economist http://www.economist.com/node/14548839?zid=298&ah=0bc99f9da8f185b2964b6cef412227beIT IS bad enough that Mexico's economy is in deep recession, triggered by its close links to the ailing United States. To make matters worse, the country's oil industry, its fiscal cash-cow for the past three decades, is declining swiftly (see chart). As recently as 2004 Cantarell, the country's main offshore field, produced 2.1m barrels per day (b/d) of crude. Now its output is just 600,000 b/d. There are no obvious replacements: 23 of the 32 biggest fields are in decline. Barring big new finds, the world's seventh-largest oil producer is forecast to become a net importer by 2017.The Mexican treasury is ill-prepared for this. Taxes and royalties from Pemex, the state-owned oil monopoly, have accounted for almost two-fifths of federal revenues in recent years, compensating for one of Latin America's weakest tax regimes (which collects just 11% of GDP). If oil output drops below 2m b/d, as many industry-watchers fear, the government would be forced to cut spending by more than 10%—or jack up taxes correspondingly, to avoid an unsustainable budget deficit. This might threaten economic recovery.

There is no mystery behind the decline. The constitution bans private investment in hydrocarbons. Ever since Lázaro Cárdenas expropriated foreign oil companies in 1938, the state oil monopoly has been seen by many politicians, especially from the formerly ruling Institutional Revolutionary Party (PRI) and its offshoots, as the untouchable bone marrow of Mexican sovereignty. To make matters worse, Pemex has been run more in the interests of its workers and their trade unions than of the Mexican people, its notional owners.

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Mexico Democracy/CorruptionPemex reform solves corruption, inefficiency, and promotes investors

Graham 13Dave Graham, “Mexico's main leftist party proposes path to oil reform” June 25 Tue Jun 25, 2013 8:05pm EDT, http://www.reuters.com/article/2013/06/26/mexico-pemex-idUSL2N0F124F20130626The PRD argues that corruption, inefficiency, a heavy tax burden and the fact the company is under the control of the finance ministry are holding back the 75-year-old Pemex.

To end this, the PRD plan envisions cutting Pemex loose to run its own operations, and bringing down its tax burden.

Senior PRI lawmakers are keen to keep the PRD on board for a reform of the oil monopoly to try and reduce the impact of protests likely to accompany the launch of the government plan.

Core elements of the PRD plan, such as giving Pemex more independence and reducing the company's tax burden, are likely to form part of the government's own vision.

The government aims to shift some of that burden onto the public with a tax system overhaul in tandem with Pemex reform.

Some PRD officials say the party may also be willing to contemplate small tweaks to the constitution provided Mexico retains control and ownership of its oil reserves.

Advocates of constitutional change say that without it, Mexico will fail to attract the kind of investment the industry needs, and risks falling further behind countries like the United States that have ramped up output in recent years.

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OTHER REFORMS

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ECONOMY

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Will PassEconomic reform will pass Graham and Gutierrez 7/8 (Mr. David B. Graham and Gutierrez are correspondents at Reuters “Mexico opposition wins key state vote, boosting reform outlook” Updated 7/8/2013 3:10:52 PM ET http://www.nbcnews.com/id/52423073/ns/world_news-americas/#.Udwem0LRlUR) MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto's economic agenda looked to be on surer footing after local elections on Sunday yielded results that favor a cross-party pact he forged to push reforms through Congress. In the most closely watched race, the conservative National Action Party (PAN) won a tight contest for governor in its stronghold of Baja California, an outcome that should help defuse tensions between the opposition and Pena Nieto's Institutional Revolutionary Party, or PRI. Baja California was the only governor's office up for grabs as nearly half of Mexico's 31 states voted for a mix of local parliaments and city halls, producing results that allowed both the PRI and the PAN to claim success at the ballot box.In Baja California, the PAN had accused the PRI of trying to steal the election, so a change of power could have destabilized the "Pact for Mexico" the president made with the opposition to help strengthen his hand in Congress, where he lacks a majority.But a preliminary vote count on Monday showed the PAN won the race, about 3 percentage points ahead of the centrist PRI.The PAN's triumph is probably more useful to Pena Nieto than a win for his own party would have been because it should foster consensus-building on the key planks of his legislative program: opening up state oil monopoly Pemex to more private investment and a reform to bolster tax revenues.

Economic reform happening nowAdrian 5/13’ (Jazmín Adrián correspondent at Demotix news “President Enrique Peña presents Financial Reform Initiative in Mexico” May 8th, 2013 http://www.demotix.com/news/2034262/president-enrique-pe-presents-financial-reform-initiative-mexico#media-2034276)Accompanied by members of the Governing Council of "Pacto por Mexico" presented a project to reform different laws regulating the financial sector that seeks to promote the low level of credit in the second Latin American economy. The reform, which includes dozens of rules changes, including strengthening parastatal development banks in order to promote lending to small businesses and make it easier to run assurances for non-payment of loans, an old claim of Mexican banks. Mexico, an oil power and industrial growing below its potential, analysts say. The reform seeks to increase the role of the banking sector, involving some of the largest international players.The project, to be sent to the House of Deputies, was introduced in the framework of the so-called Pact of Mexico, an agreement with opposition parties to achieve key reforms and was relaunched on Tuesday after disputes over electoral issues.These differences were to be postponed for a couple of weeks the presentation of this proposal, the second economic reforms introduced by the Government, which took office in December, after another addressed to the telecommunications sector that was approved in April. The reform will have based on four pillars: 1. - New mandate for the development banks.2. - Encourage competition to lower costs. 3. - Generate additional incentives for banks to pay more. 4. - Strengthen the banking system. Among the measures are intended to explicitly prohibited from banking sales have tied. The Financial Reform package contains 13 initiatives with more than 30 changes in the law which will upgrade to the Insolvency to give greater credit.

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Key EconomyTax reform boosts economy and investmentHughes 2013Krista, June 26, “Mexico aims to bring shadow economy into the light,” http://www.reuters.com/article/2013/06/26/us-mexico-economy-informal-idUSBRE95P09C20130626

(Reuters) - Seeking to dismantle a black economy dragging on economic growth, Mexico wants to lure informal workers into the social security net - and the reach of the tax man.Six in 10 Mexican workers, or 30 million people, live in the informal economy, eroding Mexico's already-low tax base and hindering plans to set up a universal social security system."The country loses 3 or 4 percentage points of GDP every year because 60 percent of its workers don't generate any taxes and also don't have social security benefits," Labor Minister Alfonso Navarrete said on Tuesday."If there are no real incentives to make it attractive for informal workers to turn formal ... it's difficult to get this group to migrate."Navarrete said the new program would get government and employers working with Mexico's powerful labor unions to bring workers into the formal fold and give them access to mortgage and lending programs set up for workers.The initiative, to be launched in July, will complement fiscal reforms due for presentation in September which aim to boost Mexico's tax collection from a meager 9.7 percent of GDP and crack down on loopholes and tax evasion.Tax reform, along with an overhaul of the state-dominated energy sector, is a key plank of the reform agenda promised by President Enrique Pena Nieto, whose plans to boost growth to 6 percent a year have captured the imagination of investors .

Pemex reform is key to steady economic growth and stability in Mexico Ortega, December 17.2012 , Deputy Editor at Grupo Editorial Expansión, Editor in Chief at GreenMomentum Inc, studied at Universidad Chapultepec,Editor at Grupo Editorial Expansión (Time Inc.) , Adolfo , PEMEX reform is the formula to 8% economic growth in Mexico says the global director of general electric , http://www.lajornadajalisco.com.mx/2012/12/01/modernizacion-de-pemex-e-impuestos-claves-para-acelerar-el-crecimiento-economico-imco/ CNN Expansion 12’

Jeff Immelt CEO of General electric says the economic stability of Mexico is outstanding, and that the country looks better than it has in years however, he appoints the urgency of a reform in the energy sector as the only path to accomplish an important economic growth that goes to 8% or 9% annually. Immelt explained his vision over the challenges that Pemex faces in an interview published by Expansion magazine in December 2012. When asked what he believed was missing to reach the 8% or 9% of annual growth in economy. He explained the only thing in his mind to economic growth is the reform of the energy sector since it is an issue that is very important to the country. Immelt believes that the liberalization and privatization of Pemex is an opening to natural gas, and it is about the evolution of Pemex going from two and a half millions of barrels per day to four millions of barrels per day. Immelt said that if Pemex is compared to Petrobras, Saudi Aramco or other state companies of pretroleum eventually , then it could access productivity, direct foreign investment, and many other things. It could open new sources of energy like gas, probably opening some

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structures where private investors can invert and adjust the law of Pemex to recover the inversion of foreign investment like petrobras did. According to Immelt, The United States is a country of distinct energy from the country it was ten or fifteen years ago due to shell gas. The United States in reality doesn’t need Pemex to give petroleum. This reform is more of an opportunity for Mexico to become more competitive and to create more jobs. If the Mexican president Nieto takes charge of this reform and accomplishes it, then he deserves a monument.

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Key to Other Reforms

Now is key delaying tax reform will hinder other reformsSchtulmann and Broholm 2/13’ (Alejandro Schtulmann is the founding partner and president of Emerging Markets Political Risk Analysis (EMPRA), a political risk advisory and consulting firm focusing primarily on Mexico. He is also the head of research. And Sergio Broholm is an analyst at EMPRA focused on Mexican politics and security. In his current role, Mr. Broholm conducts research, performs data analysis, and formulates reports on matters pertaining to national and local politics, congressional dynamics, electoral processes, and public security issues. “Mexico’s Tax Reform in the Works: Preview and Initial Considerations” February 18th, 2013 http://www.economonitor.com/blog/2013/02/mexicos-tax-reform-in-the-works-preview-and-initial-considerations/) The political considerations listed in this article are of particular importance in the context of Mexico’s reform agenda. Peña Nieto must ensure broad inter party support in order to minimize damage to his political persona, maintain good standing in Congress and keep his party’s electoral outlook strong.Despite the wisdom in waiting to pass tax reform, further delays would be very hazardous. Delayed action on tax reform will stall energy reform and will hinder the country’s potential for economic growth at a particularly critical juncture. In the past, Peña Nieto has demonstrated a strong aversion to political confrontation and a desire to have strong inter-partisan support for legislative issues before presenting them to Congress. This thinking has so far worked on less complex legislative issues like education and labor reform, however, some level of political confrontation is inevitable when it comes to tax and energy reform.

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JUDICIAL

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TODJudicial reform is a top priority for NietoSeelke 3/18[Clare Ribando Seelke, Specialist in Latin American Affairs for the Congressional Research Service, “Supporting Criminal Justice System Reform in Mexico: The U.S. Role,” 3/18/2013, http://www.fas.org/sgp/crs/row/R43001.pdf]More than halfway into the reform process, judicial reform efforts in Mexico are at a critical juncture. As of December 2012, 22 of Mexico’s 32 states had enacted new criminal procedure codes (67%), but only 12 states (36%) had begun operating at least partially under the new system. Reform states have seen positive initial results as compared to non-reform states: faster case resolution times, less pre-trial detention, and tougher sentences for cases that go to trial. Daunting challenges remain, however, including counter-reform efforts and opposition from some key justice sector operators (including judges). Although reform efforts have lagged at the federal level, President Enrique Peña Nieto, inaugurated in December 2012 to a six-year term, has said that advancing judicial reform will be a top priority. U.S. policymakers are likely to follow how the Peña Nieto government moves to enact a unified penal code and code of criminal procedure to hasten reform at the federal level and to increase support to states transitioning to the new system. The United States has been supporting judicial reform efforts in Mexico since the late 1990s, with assistance accelerating since the implementation of the Mérida Initiative in FY2008, an anticrime assistance program for which Congress has provided $1.9 billion. While the Mérida Initiative initially focused on training and equipping Mexican security forces, it now emphasizes providing training and technical assistance to help reform Mexico’s justice sector institutions. Funding for “Institutionalizing the Rule of Law” now dwarfs other types of U.S. assistance to Mexico.

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Impact – Drug WarsReforming the Judicial system and the police is necessary to solve the drug warsNieto ‘12[Enrique Peña Nieto. President of Mexico. “5 solutions for Mexico's drug violence and security challenges.” 6/4/2012. http://www.csmonitor.com/layout/set/print/Commentary/Opinion/2012/0604/5-solutions-for-Mexico-s-drug-violence-and-security-challenges/Reform-the-judicial-process]Once every 12 years there is a unique opportunity to reinforce the bonds between Mexico and the United States, when our presidential election cycles coincide. For Mexico, the July 1 elections will be a crucial moment that will set the tone for our future and define the US-Mexico relationship for generations to come.Undoubtedly, one of the main concerns that has caused social unrest today is that of security. At this time, violence has made an impact in Mexico and threatens to escalate and surpass the US border. This challenge transcends my country and could have far-reaching consequences for Central and North American security. Unless we act now to solve these common issues, we are placing the future competitiveness and prosperity of the entire region at risk, and a good way to start is by focusing on Mexico’s domestic situation.True progress requires a real strategy based on partnerships that recognize the failed efforts of the broken system we live in, and present bold initiatives that can guide our country’s security efforts. I believe there are five main points of action that we must follow in order to move forward on Mexico's security challenges.1.Eliminate the root cause of criminalityA woman is comforted while walking outside a drug rehabilitation center in the outskirts of Torreon, Mexico June 3 where armed gunmen left 11 people dead and at least 8 wounded. Mexico's drug war has claimed more than 55,000 lives in less than six years. Leading Mexican presidential candidate Enrique Peña Nieto says Mexico's security challenges threaten an entire region.(Reuters)We must address our country’s unacceptable poverty and inequality rates. This means leveling the playing field by introducing universal social security, investing heavily in all levels of education, and reactivating economic growth by implementing a set of structural reforms. Acting aggressively will allow our youth to aspire for better-paid jobs and find alternatives to criminality.In the last decade we have seen dismal economic growth of less than 2 percent per year on average. This is the worst record for Mexico in 70 years, particularly shocking when compared to double-digit growth in other developing countries. We need to quickly move onto a path of sustained growth that will increase investor confidence and provide stability for an eager workforce.2.Reform the judicial processWe have to fight impunity and corruption by expediting the judicial process. It is imperative to give individuals and companies confidence in our legal system, which is now slow, unorganized, and unable to deliver justice impartially.This can be accomplished through a more professional investigative service that increases the state’s ability to mete out justice, and by accelerating the switch to a system based on oral trials in order to have an efficient and transparent judiciary.3.Professionalize our police forcesWe must professionalize our police forces. We require well trained and equipped police, capable of investigating proficiently and using information and intelligence to perform surgical strikes against the organized mafias, tackling their structures from the top down.It is very telling that over the past 12 years, the corruption perception index in Mexico has worsened from 3.3 to 3 according to Transparency International. In order to fight corruption, we need to unify the police forces from the municipalities and regional state governments, increase the use of intelligence, and create

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an inter-agency coordination plan that will guarantee the concerted efforts among various security organizations.4.National security, not diplomatic discourseI believe that we can no longer tackle issues of national security merely through diplomatic advances. We have been using foreign affairs ministries to address security issues, but this practice is outdated. It’s time to assign the handling of regional security to national organizations and expert institutions.This fundamental shift will set a defining direction, as the days of diplomatic negotiations have been overrun by the serious nature of the security challenges confronting us. We need to bring about more efficient cooperation in terms of intelligence sharing and joint information gathering, particularly among the main drug-producing and drug-consuming nations in the region.5.Joint border partnership with US and CanadaIn an effort to strengthen the ties with our regional allies, we need to launch a more comprehensive partnership between Canada, the US, and Mexico that goes beyond security. It is time for a renewed push for more integration on transportation, education, and infrastructure. This is no longer a choice; it is our responsibility.Developing a joint border-management agency working under harmonized customs rules will help promote trade and commerce. By eliminating redundant practices, we will facilitate economic growth while at the same time increasing each other’s security by having more control over our common borders. The time for this kind of thinking has come if we want to compete with other regional economic blocs.By increasing productivity and becoming more competitive, we will be able to offer better opportunities and improve the standard of living for all Mexicans. This is the Mexico I aspire for: a safe country that spurs creativity and innovation, and attracts investment.And while Mexico will do its part to reduce illegal immigration by creating greater economic opportunities and improving its safety record at home, the US will add greatly to our renewed relationship by addressing comprehensive immigration reform. In this regard, there is a full agenda for cooperation that can be seen under a new light.A great opportunity lies before our two nations. Let’s seize it and rebuild our historic partnership on the basis of shared responsibility and mutual respect.

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POLICE

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PC KeyNieto needs political Capital to push police reform Security Weekly 13Security Weekly , MAY 16, 2013, Understanding Pena Nieto's Approach to the Cartels, Stratfor Global Intelligence, http://www.stratfor.com/weekly/understanding-pena-nietos-approach-cartels, Accessed 7/7/13

As in the United States, the law enforcement and intelligence agencies in Mexico have terrible problems with coordination and information sharing. The current administration is attempting to correct this by centralizing the anti-cartel efforts at the federal level and by creating coordination centers to oversee operations in the various regions. These regional centers will collect information at the state and regional level and send it up to the national center. However, one huge factor inhibiting information sharing in Mexico -- and between the Americans and Mexicans -- is the longstanding problem of corruption in the Mexican government. In the past, drug czars, senior police officials and very senior politicians have been accused of being on cartel payrolls. This makes trust critical, and lack of trust has caused some Mexican and most American agencies to restrict the sharing of intelligence to only select, trusted contacts. Centralizing coordination will interfere with this selective information flow in the short term, and it is going to take time for this new coordination effort to earn the trust of both Mexican and American agencies. There remains fear that consolidation will also centralize corruption and make it easier for the cartels to gather intelligence. Another attempt at command control and coordination is in the Pena Nieto administration's current efforts to implement police consolidation at the state level. While corruption has reached into all levels of the Mexican government, it is unquestionably the most pervasive at the municipal level, and in past government operations entire municipal police departments have been fired for corruption. The idea is that if all police were brought under a unified state command, called "Mando Unico" in Spanish, the police would be better screened, trained and paid and therefore the force would be more professional. This concept of police consolidation at the state level is not a new idea; indeed, Calderon sought to do so under his administration, but it appears that Pena Nieto might have the political capital to make this happen, along with some other changes that Calderon wanted to implement but could not quite pull off. To date, Pena Nieto has had a great deal of success in garnering political support for his proposals, but the establishment of Mando Unico in each of Mexico's 31 states may perhaps be the toughest political struggle he has faced yet. If realized, Mando Unico will be an important step -- but only one step -- in the long process of institution building for the police at the state level. Aside from the political struggles, the Mexican government still faces very real challenges on the streets as it attempts to quell violence, reassert control over lawless areas and gain the trust of the public. The holistic plan laid out by the Pena Nieto administration sounds good on paper, but it will still require a great deal of leadership by Pena Nieto and his team to bring Mexico through the challenges it faces. They will obviously need to cooperate with the United States to succeed, but it has become clear that this cooperation will need to be on Mexico's terms and in accordance with the administration's new, holistic approach. 

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TODNieto plans on reforming the entire counter-drug forceChalk 4/23[Peter Chalk. senior political scientist at the RAND Corporation; Ph.D. in political science, University of British Columbia; M.A. in political studies and international relations, University of Aberdeen. “Mexico’s New Strategy to Combat Drug Cartels: Evaluating the National Gendarmerie.” 4/23/2013. http://www.ctc.usma.edu/posts/mexicos-new-strategy-to-combat-drug-cartels-evaluating-the-national-gendarmerie]Responding to the apparent failure of the Merida Initiative to fundamentally weaken the drug threat gripping the country, Enrique Pena Nieto announced a “Pact for Mexico” on coming to power in December 2012.[9] A central platform of his proposed solution is to take the counternarcotics function out of the hands of the military—which he argues has not only been ineffective but counterproductive—and return it to a law enforcement structure that is “clean,” transparent and trusted.[10] To this end, the government has pledged to create an entirely new paramilitary unit that is equipped and authorized to reestablish security across the country.The National Gendarmerie, which is modeled after counterparts in France and Spain, is due to become operational later this year. According to the Office of the Presidency, the “corps will be responsible for strengthening territorial control in rural municipalities with the greatest institutional weakness, as well as strategic installations such as ports, airports and borders.”[11] The force will fall under the authority of the secretary of the interior and initially be 10,000-strong, with 8,000 personnel drawn from the army ( which, unlike the police, has largely not been afflicted by corruption ) supplemented by 2,000 marines from the navy.[12] The plan is to expand this cadre to 40,000 during the next two years with all personnel assigned on long-term deployments.[13] Although a civilian will have the responsibility for leading these personnel, the troops themselves will remain under military/naval command.The National Gendarmerie will be divided into 14 regional commands that correspond to major drug trafficking zones in the country. Three bases will be established along the U.S.-Mexico border and are expected to be fully operational by the beginning of June 2013.[14] Members will be thoroughly vetted, equipped with modern weaponry and body armor and will have access to an air lift capacity of at least 24 helicopters.[15] According to the PRI, the force will be financed from fiscal and energy reforms, with initial expenditures estimated in the range of 1.5 billion pesos ($117.4 million); exact dollar figures have yet to be made public.[16]

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Impact – Drug WarsReforming the Judicial system and the police is necessary to solve the drug warsNieto ‘12[Enrique Peña Nieto. President of Mexico. “5 solutions for Mexico's drug violence and security challenges.” 6/4/2012. http://www.csmonitor.com/layout/set/print/Commentary/Opinion/2012/0604/5-solutions-for-Mexico-s-drug-violence-and-security-challenges/Reform-the-judicial-process]Once every 12 years there is a unique opportunity to reinforce the bonds between Mexico and the United States, when our presidential election cycles coincide. For Mexico, the July 1 elections will be a crucial moment that will set the tone for our future and define the US-Mexico relationship for generations to come.Undoubtedly, one of the main concerns that has caused social unrest today is that of security. At this time, violence has made an impact in Mexico and threatens to escalate and surpass the US border. This challenge transcends my country and could have far-reaching consequences for Central and North American security. Unless we act now to solve these common issues, we are placing the future competitiveness and prosperity of the entire region at risk, and a good way to start is by focusing on Mexico’s domestic situation.True progress requires a real strategy based on partnerships that recognize the failed efforts of the broken system we live in, and present bold initiatives that can guide our country’s security efforts. I believe there are five main points of action that we must follow in order to move forward on Mexico's security challenges.1.Eliminate the root cause of criminalityA woman is comforted while walking outside a drug rehabilitation center in the outskirts of Torreon, Mexico June 3 where armed gunmen left 11 people dead and at least 8 wounded. Mexico's drug war has claimed more than 55,000 lives in less than six years. Leading Mexican presidential candidate Enrique Peña Nieto says Mexico's security challenges threaten an entire region.(Reuters)We must address our country’s unacceptable poverty and inequality rates. This means leveling the playing field by introducing universal social security, investing heavily in all levels of education, and reactivating economic growth by implementing a set of structural reforms. Acting aggressively will allow our youth to aspire for better-paid jobs and find alternatives to criminality.In the last decade we have seen dismal economic growth of less than 2 percent per year on average. This is the worst record for Mexico in 70 years, particularly shocking when compared to double-digit growth in other developing countries. We need to quickly move onto a path of sustained growth that will increase investor confidence and provide stability for an eager workforce.2.Reform the judicial processWe have to fight impunity and corruption by expediting the judicial process. It is imperative to give individuals and companies confidence in our legal system, which is now slow, unorganized, and unable to deliver justice impartially.This can be accomplished through a more professional investigative service that increases the state’s ability to mete out justice, and by accelerating the switch to a system based on oral trials in order to have an efficient and transparent judiciary.3.Professionalize our police forcesWe must professionalize our police forces. We require well trained and equipped police, capable of investigating proficiently and using information and intelligence to perform surgical strikes against the organized mafias, tackling their structures from the top down.It is very telling that over the past 12 years, the corruption perception index in Mexico has worsened from 3.3 to 3 according to Transparency International. In order to fight corruption, we need to unify the police forces from the municipalities and regional state governments, increase the use of intelligence, and create

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an inter-agency coordination plan that will guarantee the concerted efforts among various security organizations.4.National security, not diplomatic discourseI believe that we can no longer tackle issues of national security merely through diplomatic advances. We have been using foreign affairs ministries to address security issues, but this practice is outdated. It’s time to assign the handling of regional security to national organizations and expert institutions.This fundamental shift will set a defining direction, as the days of diplomatic negotiations have been overrun by the serious nature of the security challenges confronting us. We need to bring about more efficient cooperation in terms of intelligence sharing and joint information gathering, particularly among the main drug-producing and drug-consuming nations in the region.5.Joint border partnership with US and CanadaIn an effort to strengthen the ties with our regional allies, we need to launch a more comprehensive partnership between Canada, the US, and Mexico that goes beyond security. It is time for a renewed push for more integration on transportation, education, and infrastructure. This is no longer a choice; it is our responsibility.Developing a joint border-management agency working under harmonized customs rules will help promote trade and commerce. By eliminating redundant practices, we will facilitate economic growth while at the same time increasing each other’s security by having more control over our common borders. The time for this kind of thinking has come if we want to compete with other regional economic blocs.By increasing productivity and becoming more competitive, we will be able to offer better opportunities and improve the standard of living for all Mexicans. This is the Mexico I aspire for: a safe country that spurs creativity and innovation, and attracts investment.And while Mexico will do its part to reduce illegal immigration by creating greater economic opportunities and improving its safety record at home, the US will add greatly to our renewed relationship by addressing comprehensive immigration reform. In this regard, there is a full agenda for cooperation that can be seen under a new light.A great opportunity lies before our two nations. Let’s seize it and rebuild our historic partnership on the basis of shared responsibility and mutual respect.

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AFF – PEMEX REFORM

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UNIQUENESS

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2ACPemex Reform won’t passEstevez 6-26-2013Dolia, “Most Mexicans Oppose President Peña Nieto's Plans To Open Up Pemex To Private Investment,” http://www.forbes.com/sites/doliaestevez/2013/06/26/most-mexicans-oppose-president-pena-nietos-plans-to-open-up-pemex-to-private-investment/But Mexicans are less than ready to support Peña Nieto’s most ambitious and controversial reform to date. A new poll by the Centro de Investigación y Docencia Económicas (CIDE), a research institute, shows that 65 out of every 100 Mexicans are against opening up Pemex, the world’s seventh-largest oil producer with annual sales of more than $100 billion. “Energy, particularly oil, continues to be the stronghold of Mexican nationalism,” said CIDE.Peña Nieto is counting on the Pact for Mexico, an alliance of the country’s top three political parties, to try to get the reform passed. The proposal, which is expected to involve reforming the Constitution, will need two-thirds support from Mexico’s Congress; the PRI, his party, does not hold a simple majority in either house. Peña Nieto reported that he’s negotiating to get the political support he needs to break the state monopoly. However, some analysts believe that the Pacto, which succeeded in getting through a monopoly-busting telecom reform in May, will not hold up this time . The left-leaning Party of the Democratic Revolution, or PRD, warned that they will oppose Pemex’s reform. Marcelo Ebrard, a popular former mayor of Mexico City and likely PRD Presidential candidate in 2018, challenged Peña Nieto to a televised debate on the oil overhaul. Former PRD Presidential candidate Cuauhtémoc Cárdenas, Lazaro Cárdenas’ son, presented a counter proposal to “modernize” Pemex without changing Article 27 of the Constitution to undo the historical ban on privatizing the company. His proposal was endorsed Tuesday by top PRD politicians, including Ebrard and Mexico City Mayor Miguel Angel Mancera, and the party’s congressional leaders.

Nieto doesn’t have political capital and scandals thump itAckerman 2013John M., professor at the Institute for Legal Research of the National Autonomous University of Mexico and a visiting scholar at American University, “The Mexico Bubble,” http://www.foreignpolicy.com/articles/2013/05/01/the_mexico_bubble_enrique_pena_nieto?wpisrc=obnetworkAccording to the hype, Peña Nieto has already transformed the political landscape in Mexico after only four months in office. Time magazine has named him one of its "100 Most Influential People in the World," claiming that he "combines Reagan's charisma with Obama's intellect and Clinton's political skills." The Financial Times raves that with the death of Venezuela's Hugo Chávez, Peña Nieto may now take up the torch of Latin American leadership and revive the "Washington Consensus" that predominated in the region during the 1980s and called for drastic restrictions in social spending and the implementation of "trickle-down" neoliberal economic policies. The Washington Post editorial board suggests that "Washington should be cheering Mexico's gridlock busting -- and taking it as an example." Meanwhile, Thomas Friedman, of the New York Times, has called Mexico the "Comeback Kid" and Shannon O´Neil argues in Foreign Affairs that Mexico has now "made it."Such exaggerations have no basis in reality . Even after months of an expensive, high-profile media blitz, Peña Nieto has begun his administration with the lowest public approval rating of any Mexican president over the last two decades. Only 50 percent of Mexicans approve of his presidency today, much less than the 70 percent who supported the first non-PRI president, Vicente Fox, at the beginning of his term, according to Reforma newspaper. Peña Nieto's approval rating is even lower than that for presidents Ernesto Zedillo and Felipe Calderón at the disastrous crisis-ridden beginnings of their terms, according to the same source.

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A recent poll also shows increased public skepticism in Peña Nieto's, "Pact for Mexico," Today, only 21 percent of the population believes that this pact will benefit them while 31 percent are convinced that it will harm them. This same independent poll reveals that the majority of the population perceives the agreement to be in the interests principally of the political parties and big business. Only 35 percent think that the country as a whole will benefit.It is important to remember that Peña Nieto only received 38.2 percent of the vote in the 2012 presidential elections and that the voting base of his party (Party of the Institutional Revolution-PRI) is principally located in the poorest, least educated, and most isolated rural sectors of the population. All of the most "modern" and "middle class" sectors of the population voted overwhelmingly against bringing the PRI and its pretty-boy candidate back to power, according to independent exit polls and demographic surveys. For instance, the only time Peña Nieto dared to hold a campaign event with college students during last year's presidential race, he was aggressively run off the campus amid shouts that he was an "assassin" and a "thief."Peña Nieto's strategy has been to compensate for this weakness in public support by co-opting the old political opposition and turning his back on his critics in society. But this approach has recently come up against a brick wall .For instance, in their haste to demonstrate quick legislative results, the politicians forgot to consult with civil society before pushing through a controversial education reform at lightning speed last December. As a result, today thousands of teachers are on strike throughout Mexico's poorest southern states of Chiapas, Oaxaca, Guerrero, and Michoacán in protest against a reform which they correctly claim threatens to drastically reduce job security, introduce excessive standardized testing, entrench inequality between schools in wealthy and poor areas, and privatize public education. In the state of Guerrero, local citizen militias, parents, and youth groups have even joined with the teachers in a broad-based coalition against Peña Nieto's broader neoliberal economic agenda.Indeed, the Pact for Mexico itself may soon entirely break apart . A new scandal involving the use of Peña Nieto's federal social programs to purchase votes has led the two leading opposition parties, PAN from the right and PRD from the left, to threaten abandoning the pact altogether unless the president takes action against his own top officials. This will be an important test of political will for Peña Nieto to see whether he is able to prioritize accountability over political expediency.

US will aid Mexico in combatting the drug trade – Merida sets the markFelbab-Brown 13 (Vanda is a Brookings Institution expert on international and internal conflicts and nontraditional security threats, “Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime”, Brookings Institution, February 2013, http://www.brookings.edu/~/media/Research/Files/Papers/2013/02/mexico%20new%20security%20policy%20felbabbrown/mexico%20new%20security%20policy%20felbabbrown.pdf) ~ew

Although Washington continues to be wary of the new security policy in Mexico, the United Statesgovernment has indicated an important willingness to elevate the importance of reducing violence in Mexico. There are precedents for such a shift in U.S. anti-crime priorities abroad. In Central America, for example, the U.S. government has come to give more attention to addressing violence suffered by ordinary people and reducing overall citizen insecurity. Its primary vehicle for combatting criminality in Central America, the Central America Regional Security Initiative (CARSI), shifted by 2011 to focus not only on disrupting the movement of criminals and contraband and supporting the development of strong, capable, and accountable governments in Central America, but also on creating safe streets for the citizens in Central America and fostering the rule of law.36 The U.S. Mérida Initiative to support Mexico’s anti-crime efforts equally evolved from its original emphasis on technological transfers and heavy equipment toward greater support for institutional building in the law enforcement and justice sectors and an emphasis on building communities that are resilient to penetration, intimidation, and

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cooptation by criminal groups. The changed focus was captured in the new label the first Obama administration gave its Mexico assistance package—Beyond Mérida.37 Prioritizing violence reduction is a greater leap for U.S. anti-crime efforts abroad than the previous shifts and one that requires a more radical break with the history and tendencies of U.S. supply-side counternarcotics policy and outside-assistance anti-organized-crime policies—but it is the right strategy.

PAN-PRI election fights destroy the Pact for Mexico and block Pemex reform Gardner 7/7Simon Gardner, Reuters, 7/7/13, “Mexico reform drive at stake as regions vote”, http://www.trust.org/item/20130707151532-gpuc6/?source%20=%20hpbreaking

By Simon Gardner MEXICO CITY, July 7 (Reuters) - Mexican President Enrique Pena Nieto's sweeping economic reform plans hang in the balance in local elections on Sunday with a strong opposition showing seen as crucial to preserve a cross-party pact. Nearly half of Mexico's 31 states are voting for a mix of local parliaments and municipal governments, but all eyes are on the race for governor in the state of Baja California, a stronghold of the conservative National Action party (PAN). The PAN lost control of Mexico in last year's presidential elections, being relegated to the third force in Congress, but Pena Nieto must keep them on board to help him push through planned overhauls of state oil giant Pemex and the tax system. Baja California is one of the PAN's few remaining bastions and if the party can hold the state it could be just what Pena Nieto needs to keep alive the so-called Pact for Mexico he forged with opposition leaders upon taking office in December. PAN lawmakers already have accused Pena Nieto's centrist Institutional Revolutionary Party, or PRI, of trying to steal the election by buying votes, and have warned that any sign of fraud could scupper the political accord. "If the elections don't go freely and democratically, it is clear the pact will come to no good," said Francisco Dominguez, a PAN senator on congressional commissions debating the shape of energy and fiscal reforms. "It's very simple. If there are complaints, if there are irregularities, we will act." Baja California, which nestles along the U.S. border in northwest Mexico, was the first state the PAN wrested from the PRI 24 years ago as it eroded the party's stranglehold on power before ending a 71-year ruling streak in 2000. Although a poll late last month gave the PAN an eight-point lead over the PRI in Baja California, the race is expected to be tight, with some voters in the state weary of more than two decades of rule by the same party. Moreover, the PAN has been locked in public, petty infighting since last year's drubbing, when voters castigated the party for failing to curb violence between warring drug cartels that has claimed more than 70,000 lives since 2007. That bloodshed has continued, and the election campaign has been marred by the murder of a number of candidates. Jose Maria Martinez, a PAN senator presiding over a committee to observe the electoral process, said this week the elections would be the "most violent" in Mexican history. BETTER THE STATUS QUO? PAN chairman Gustavo Madero will be under the spotlight, and if Baja California is lost, it risks plunging the party into a leadership crisis and endangering the pact - a fact not lost on Mexicans looking to Pena Nieto to revive the economy. "The most convenient thing would be for the PAN to win, so it at least holds this governorship after last year's defeat and so the pact remains in place," said Pedro Feria, 32, an out-of-work lawyer who supports the PRI. "What I want is for them to focus on creating job opportunities. I've been looking for a year now. They should create policies to help people progress," he added, sitting in the blazing sun on a park bench in downtown Mexico City. The pact has already pushed a wide-reaching education reform and a major shake-up of competition in the telecoms sector through Congress, with a separate bill aimed at spurring bank lending expected to pass in coming weeks. But the central planks of Pena Nieto's hopes to raise economic growth to 6 percent a year from barely two percent since the millennium began are the reform to improve the tax take and the plan to open up Pemex to more private investment. Those measures may be in doubt if the pact falls apart. The PAN's Madero has laid the ground for post-electoral fight, pinning accusations of vote buying, fraud and corruption against the PRI on a giant map of Mexico during the campaign. Adding fuel to the fire, a

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PAN candidate running in the eastern state of Veracruz said a few days before the elections that he had been kidnapped and questioned about party politics. When asked about the incident, PRI chairman Cesar Camacho said he suspected the Veracruz case had been made up in an attempt to discredit the ruling party and that reports were surfacing to generate a "general sense of disorder and discontent." "It seems like an advance justification of defeat," he said.

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1AR – Won’t Pass

Internal strife and political clash will prevent Pemex reform from passingEconomist 7/9The Economist, 7/9/13, “Why might Mexico’s president want to lose an election?”, http://www.economist.com/blogs/economist-explains/2013/07/economist-explains-5

MEXICANS went to the polls in almost half the country’s states on July 7th for a round of local elections. All eyes were on Baja California, the only state to be electing a new governor. In a close race, President Enrique Peña Nieto’s Institutional Revolutionary Party (PRI) looked to be in with a chance of snatching control of the state from the National Action Party (PAN), which has held it for 24 years. Preliminary results suggest that in the end the PAN managed to cling on to power. So why might Mr Peña be breathing a sigh of relief that his PRI candidate lost the race?When his presidency began on December 1st, Mr Peña unveiled the “Pacto por Mexico”, an agreement between the three main parties to pass a broad package of reforms for which the country had been crying out for years. The effect of the Pacto has been dramatic: in contrast to the legislative logjam seen during much of the past decade, Mr Peña’s government has pushed through a slew of important new laws. The past six months have seen an education reform, an anti-monopolies law to attack the fiefs of Carlos Slim and Televisa, and a legal reform to free up the courts. Many more are planned.Yet the Pacto is at risk. Some members of the two main opposition parties, the conservative PAN and the left-wing Party of the Democratic Revolution (PRD), are beginning to wonder if it’s such a good idea to vote for all the president’s initiatives. Though the Pacto contains policies that all parties broadly agree on, its success is making the president and the PRI rather popular. Meanwhile, internal rivalries are tearing the PAN apart, and the PRD is facing a crisis after Andrés Manuel López Obrador, its presidential candidate last year, announced that he would establish a new, rival left-wing party. As the July 7th elections approached, some members of the opposition began to argue that, if the results were bad, they should withdraw from the Pacto, and pursue a more obstructive line against the president.Mr Peña might therefore be relieved that preliminary results suggest that his party’s candidate lost the battle of Baja California. Winning a single state, and in return risking the Pacto, could have been quite a Pyrrhic victory. That’s not to say that the Pacto is safe. For one thing, a recount under way in Baja California may yet change the result. Secondly, with the elections out of the way the government is about to pursue its most controversial reforms yet, to allow more private investment in the energy sector and to raise taxes. With Mr López Obrador preparing street demonstrations against these initiatives, it will be more tempting than ever for the main leftist opposition party to bail out of the Pacto. Although the battle of Baja California appears to have been successfully fought and lost, Mexico’s president faces a long, politically heated summer.

Public opposition makes Pemex reform failEstevez 13 foreign correspondent, former bureau chief for El Financiero[Dolia, “Most Mexicans Oppose President Peña Nieto's Plans To Open Up Pemex To Private Investment” Forbes.com, 6-26-13 http://www.forbes.com/sites/doliaestevez/2013/06/26/most-mexicans-oppose-president-pena-nietos-plans-to-open-up-pemex-to-private-investment/]But Mexicans are less than ready to support Peña Nieto’s most ambitious and controversial reform to date. A new poll by the Centro de Investigación y Docencia Económicas (CIDE), a research institute, shows that 65 out of every 100 Mexicans are against opening up Pemex, the world’s seventh-largest oil producer with annual sales of more than $100 billion. “Energy, particularly oil, continues to be the stronghold of Mexican nationalism,” said CIDE.¶ Peña Nieto is counting on the Pact for Mexico, an

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alliance of the country’s top three political parties, to try to get the reform passed. The proposal, which is expected to involve reforming the Constitution, will need two-thirds support from Mexico’s Congress; the PRI, his party, does not hold a simple majority in either house. Peña Nieto reported that he’s negotiating to get the political support he needs to break the state monopoly. However, some analysts believe that the Pact, which succeeded in getting through a monopoly-busting telecom reform in May, will not hold up this time. The left-leaning Party of the Democratic Revolution, or PRD, warned that they will oppose Pemex’s reform. Marcelo Ebrard, a popular former mayor of Mexico City and likely PRD Presidential candidate in 2018, challenged Peña Nieto to a televised debate on the oil overhaul. Former PRD Presidential candidate Cuauhtémoc Cárdenas, Lazaro Cárdenas’ son, presented a counter proposal to “modernize” Pemex without changing Article 27 of the Constitution to undo the historical ban on privatizing the company. His proposal was endorsed Tuesday by top PRD politicians, including Ebrard and Mexico City Mayor Miguel Angel Mancera, and the party’s congressional leaders.¶ Pemex claims there is a need to boost annual investment by 46%, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Peña Nieto says that while he wants investment to come from private capital, he insists that Mexico’s oil and gas reserves will remain under the state’s control, i.e. will not be sold to private firms or privatized.¶ But many Mexicans are skeptical. They believe that a better alternative would be for the government to stop taking such a high tax from Pemex —40% of total government revenues — to allow it to reinvest instead of leaving it struggling to fund investment. Then there is the ever present problem of high-level corruption in Pemex that accounts for billions in losses. The press has reported on government officials being paid millions of dollars by drug-connected contractors for juicy contracts with Pemex. The lavish lifestyle of the oil workers union leader, Carlos Romero Deschamps and his children, has also come out in the open. Newspapers published Facebook FB -0.65% images of Paulina Romero, Romero Deschamps’ daughter, boasting about her world travels aboard private jets accompanied by her three English bulldogs — Keiko, Boli and Morgancita, dining in first class restaurants with Vega Sicilia wines, and sporting Hermes luxury hand bags. His brother, José Carlos Romero Durán, was also featured driving a $2 million limited edition red Enzo Ferrari sport car, a gift from his father, whose trade union monthly salary is $1,864. Opposition politicians are conditioning talks on the oil overhaul to the government cracking down first on high level corruption, starting with Romero Deschamps.

No pass – insiders know that it will fail to help Pemex attract sufficient investmentMander 6/27Benedict Mander, FinancialTimes, 6/27/13, “Energy: Focus on Pemex raises hopes of private investors”, http://www.ft.com/intl/cms/s/0/6aeb8e5a-c79c-11e2-9c52-00144feab7de.html#axzz2YZCf3y7x

The development of these reserves is becoming increasingly urgent since Mexico’s oil production has fallen from 3.4m barrels a day in 2004 to about 2.5m b/d, in large part because of over-dependence on its massive Cantarell oilfield, which is running dry.But the ability of foreign oil companies to help reverse this trend will depend on the success of constitutional reform. Mr Peña Nieto has made this a priority, since foreign companies have been prohibited from getting Mexican oil out of the ground since the 1938 nationalisation.While many see this as Mexico’s best chance for energy reform in the past 75 years, it is far from being a done deal. A reform package is expected to be submitted to Congress by September. It remains unclear what it will contain.“We don’t know if it’s going to change enough for it to be attractive to invest,” says an executive at an international oil company.Pemex’s capital investment in the past decade has quadrupled to almost $25bn, with most of it destined for exploration and production.That may be a huge amount for one company, but it is not nearly enough for the development of the oil sector of a country the size of Mexico, comment analysts.

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Just to start producing in deep waters would require investments of $10bn a year, according to Mr Mereles.“It’s just not possible for Pemex to do this alone. We are going to need hundreds of companies coming in,” says one industry insider.

Pemex reform will be pushed back – state debt, education reform, and financial reform all come first Reuters, 6/12 Reuters, 6/12/13, “Mexico Congress to hold special sessions, buttressing reforms”, http://news.yahoo.com/mexico-congress-hold-special-sessions-buttressing-reforms-025354932.html

MEXICO CITY (Reuters) - Congressional leaders of Mexico's main parties said on Wednesday they had agreed to hold two special sessions of Congress in July and August to tackle outstanding initiatives, paving the way for key energy and fiscal reforms to move forward in the autumn.President Enrique Pena Nieto plans to send measures aimed at boosting Mexico's paltry tax take and overhauling ailing state-oil monopoly Pemex to Congress during the second regular session of Congress, which begins in September.But an overhang of outstanding initiatives from the first congressional session, which ended in April, threatened to push back the much anticipated reforms.The two extraordinary sessions agreed to on Wednesday would be held in the second halves of July and August respectively, said Emilio Gamboa, who heads the ruling Institutional Revolutionary Party (PRI) in the Senate.Representatives of the leftist Party of the Democratic Revolution (PRD) and the conservative National Action Part (PAN) also agreed to the plan.In the July session, lawmakers will discuss measures that would give more power to the transparency institute, regulate state debt, appoint a new leader for the election authority and create a new anti-corruption body.In August, the legislators plan to draw up secondary laws to implement recently approved measures aimed at improving education and boosting competition in the telecoms sector, which is dominated by billionaire Carlos Slim.Both special sessions are due to take place after charged regional elections in 14 states slated for July 7.Opposition parties have accused the PRI of misusing state funds to win votes in states they govern, which has shaken the so-called "Pact for Mexico," signed by the government and major parties to push through reforms.A financial reform aimed at boosting credit was also unveiled by the president in May but has not yet been approved.

The public hates Nieto and his Pemex reform proposal -- leaders are forced to oppose it too to not garner public supportBBC 7/2BBC News, 7/2/13, “In pictures: Mexico's Pemex protests”, http://www.bbc.co.uk/news/world-latin-america-23145802

Mexican President Enrique Pena Nieto's promise to overhaul state-owned oil firm Pemex has sparked angry protests in the capital, Mexico City. The demonstrators suspect the government is planning to privatise Pemex, which has long been a symbol of national pride for many Mexicans. The slogan "Pemex is not for sale" was emblazoned on hats and scrawled on walls during the march. The government says it wants to allow Pemex to raise more private capital to pay for much-needed infrastructure development

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and further exploration of Mexico's undersea reserves. Some of the protesters donned the V for Vendetta mask that has become the ubiquitous symbol of protests from Turkey to Brazil. Police were out in force to protect the city's landmarks, but the rally passed off peacefully. The issue remains one of the clearest dividing lines between Mr Pena Nieto and his left-wing opponents, and could be a deciding factor in local elections due this weekend.

Big opposition in Mexico to PEMEX reformEstevez, June 26 2013, native of Mexico who lives and works in Washington D.C. as a Foreign Correspondent. From 1989 to 2005 was bureau chief for El Financiero, Mexico’s leading financial newspaper and covered the NAFTA negotiations, Dolia, Most Mexicans Oppose President Peña Nieto's Plans To Open Up Pemex To Private Investment, http://www.forbes.com/sites/doliaestevez/2013/06/26/most-mexicans-oppose-president-pena-nietos-plans-to-open-up-pemex-to-private-investment/ Dolia Estevez 13’

In London last week, Mexican President Enrique Peña Nieto said he will push for a “transformational” reform of Petroleos Mexicanos (Pemex), Mexico’s state-owned monopoly in oil and gas exploration and production. “There are different options on what the reform should be, but I am confident …  It will be transformational,” Peña Nieto told the Financial Times, adding that the reform would include “the constitutional changes needed to give private investors certainty.”

Foreign oil companies were expropriated by Mexican President Lazaro Cárdenas in 1938, and ever since Mexico’s vast oil resources — 13.9 billion barrels of crude-oil and possibly the world’s fourth-largest shale-gas reserves– became forbidden to outsiders. The Wall Street Journal said the announcement highlights a “willingness to break with the past among young, reformist members” of the PRI, Peña Nieto’s party. Exxon Mobil and Royal Dutch Shell are reported to be ready to return to Mexico, if Congress passes the measure. Both were among the group of American and British companies expropriated 75 years ago.

But Mexicans are less than ready to support Peña Nieto’s most ambitious and controversial reform to date. A new poll by the Centro de Investigación y Docencia Económicas (CIDE), a research institute, shows that 65 out of every 100 Mexicans are against opening up Pemex, the world’s seventh-largest oil producer with annual sales of more than $100 billion. “Energy, particularly oil, continues to be the stronghold of Mexican nationalism,” said CIDE.

Peña Nieto is counting on the Pact for Mexico, an alliance of the country’s top three political parties, to try to get the reform passed. The proposal, which is expected to involve reforming the Constitution, will need two-thirds support from Mexico’s Congress; the PRI, his party, does not hold a simple majority in either house. Peña Nieto reported that he’s negotiating to get the political support he needs to break the state monopoly. However, some analysts believe that the Pacto, which succeeded in getting through a monopoly-busting telecom reform in May, will not hold up this time. The left-leaning Party of the Democratic Revolution, or PRD, warned that they will oppose Pemex’s reform. Marcelo Ebrard, a popular former mayor of Mexico City and likely PRD Presidential candidate in 2018, challenged Peña Nieto to a televised debate on the oil overhaul. Former PRD Presidential candidate Cuauhtémoc Cárdenas, Lazaro Cárdenas’ son, presented a counter proposal to “modernize” Pemex without changing Article 27 of the Constitution to undo the historical ban on privatizing the company. His proposal was endorsed Tuesday by top PRD politicians, including Ebrard and Mexico City Mayor Miguel Angel Mancera, and the party’s congressional leaders.

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Pemex claims there is a need to boost annual investment by 46%, to $37 billion, to tap undeveloped shale-gas deposits and deep-water reserves. Peña Nieto says that while he wants investment to come from private capital, he insists that Mexico’s oil and gas reserves will remain under the state’s control, i.e. will not be sold to private firms or privatized.

But many Mexicans are skeptical. They believe that a better alternative would be for the government to stop taking such a high tax from Pemex —40% of total government revenues — to allow it to reinvest instead of leaving it struggling to fund investment. Then there is the ever present problem of high-level corruption in Pemex that accounts for billions in losses. The press has reported on government officials being paid millions of dollars by drug-connected contractors for juicy contracts with Pemex. The lavish lifestyle of the oil workers union leader, Carlos Romero Deschamps and his children, has also come out in the open. Newspapers published Facebook FB +1.4% images of Paulina Romero, Romero Deschamps’ daughter, boasting about her world travels aboard private jets accompanied by her three English bulldogs — Keiko, Boli and Morgancita, dining in first class restaurants with Vega Sicilia wines, and sporting Hermes luxury hand bags. His brother, José Carlos Romero Durán, was also featured driving a $2 million limited edition red Enzo Ferrari sport car, a gift from his father, whose trade union monthly salary is $1,864. Opposition politicians are conditioning talks on the oil overhaul to the government cracking down first on high level corruption, starting with Romero Deschamps.

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1AR – Union ThumperTeachers union protests hurt political capitalMontes 2013Juan, “Strikes by Mexican Teachers Challenge New President,” http://online.wsj.com/article/SB10001424127887323551004578438882863242710.htmlLast week, tens of thousands of teachers, some armed with metal bars and Molotov cocktails, marched in Guerrero's capital, Chilpancingo. They again blocked for hours the highway that connects Mexico City with the Pacific port of Acapulco, hurting a key economic and tourist hub. The demonstrations have been held sporadically since the overhaul bill was signed.A protracted conflict could undermine Mr. Peña Nieto's political capital as he is seeking wide consensus for his ambitious agenda , which he put into action with the education-revamp bill just after taking office on Dec. 1. It would also raise doubts over whether the education overhaul will be fully implemented, analysts say. Government officials say the protests won't stop the changes from proceeding.

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1AR – Drug ThumperObama plans to aid Nieto in drug policyBrewer 7/8 (Jerry, “Mexico's Law Enforcement and Police Policies Questioned”, Mexidata.info, 8 July 2013, http://www.mexidata.info/id3656.html) ~ew

Peña Nieto has vacillated from enforcement postures against drug traffickers and drug kingpins, to pursuing violent criminals with more of a focus on so-called "traditional crime." His stated desires, to move priorities away from drug arrests and seizures and simply towards violence reduction, have created concern among US political leaders.President Barack Obama speaks of close cooperation with Mexico, while moving "to a more humanistic counternarcotics policy, and plans to strengthen communities in the border region with resources to be dedicated to tackling substance abuse and violence through health and education programs." This described as policies focused almost entirely on security, which too include broader social issues that fuel organized crime and the drug trade. And this appears to be much of Peña Nieto's message.

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LINK DEFENSE

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Climate Co-opClimate change initiatives are popular—momentumMcCain 12(Christina McCain, Ph.D., heads EDF's climate change initiatives in Mexico. She is a formally trained tropical forest ecologist and works as a policy expert on tropical forests and climate change, with an emphasis on Reducing Emissions from Deforestation and Degradation (REDD+). “Mexico’s Congress looks to pass climate change law this spring,” Environment Defense Fund, 2/1/12, http://blogs.edf.org/climatetalks/2012/02/01/mexicos-congress-looks-to-pass-climate-change-law-this-spring/)

Particularly over the last several years, the country has shown political willingness to address climate change, with a pledge to halve its emissions by 2050 from 2000 levels, and a number of sweeping climate change bills brought up in the Senate. Though the other climate bills never became law, the current bill’s overwhelming approval in the Senate by a broad coalition of sponsors (76-2 with 5 abstentions) shows a stronger momentum

than we’ve seen .¶ While the political composition of Mexico’s lower chamber may mean the bill will not have as broad support in the Chamber of Deputies as it had in the Senate, it may benefit from that momentum.¶ Meanwhile, President Felipe Calderón has made clear

climate change is a top priority in his administration, and in mid-January signed a formal agreement with the U.S. to

“advance towards a green economy.”¶ Mexico’s passing this bill to enshrine domestic action on climate change into law guarantees the country’s efforts to curbing climate change can extend far beyond the current president.

Plan popular—support from all partiesRTCC 13(Responding to Climate Change (RTCC) is a Non-Governmental Organisation and an official observer to the United Nations climate change negotiations dedicated to raising awareness about climate change issues. “Mexico’s climate change laws,” Responding to Climate Change, 2/19/13, http://www.rtcc.org/in-focus-mexicos-climate-change-laws/)

Mexico was the standout country in 2012 on climate change.¶ It passed a comprehensive climate change law – The General

Law on Climate Change – with the support of all major political parties , a real achievement in a usually partisan Congress.¶ In parallel, Congress approved legislation to prepare for the implementation of so-called REDD (Reduced Emissions from Deforestation and Forest Degradation). ¶ This progressive stance is indicative of Mexico’s positive approach to tackling climate change .¶ In 2005, Mexico successfully lobbied to become part of the “+5″ group of countries to participate in the UK’s G8 Summit outreach on climate change and subsequently hosted the 2006 meeting of the “Gleneagles Dialogue”, an informal forum on climate change involving the G8 and major emerging economies.¶ In the UN space, Mexico put forward proposals for a Green Fund, hosted the annual UN negotiations in Cancun in 2010 and, as a member of both the OECD and the developing country bloc, it has acted as a bridge between the rich and poor countries, helping to build trust.

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DrugsMexican Public supports drug war reform – too much violence Felbab-Brown 13 (Vanda is a Brookings Institution expert on international and internal conflicts and nontraditional security threats, “Peña Nieto’s Piñata: The Promise and Pitfalls of Mexico’s New Security Policy against Organized Crime”, Brookings Institution, February 2013, http://www.brookings.edu/~/media/Research/Files/Papers/2013/02/mexico%20new%20security%20policy%20felbabbrown/mexico%20new%20security%20policy%20felbabbrown.pdf) ~ew

Mexico’s new president, Enrique Peña Nieto, has a tough year ahead of him. After six years of extraordinarily high homicide levels and gruesome brutality in Mexico, he has promised to prioritize social and economic issues and to refocus Mexico’s security policy on reducing violence. During its first months in office, his administration has eschewed talking about drug-related deaths or arrests. The Mexican public is exhausted by the bewildering intensity and violence of crime as well as by the state’s blunt assault on the drug trafficking groups. It expects the new president to deliver greater public safety, including from abuses committed by the Mexican military, which Mexico’s previous president, Felipe Calderón, deployed to the streets to tackle the drug cartels. Seeking to bring violent crime down is the right priority for Mexico, and indeed, should be a key goal for law enforcement in any country. The United States should wholeheartedly support that objective in Mexico. But achieving violence reduction will not be easy, major questions remain about the outlines of the security strategy Peña Nieto has sketched, and some approaches to reducing violence would come with highly negative side-effects.

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Immigration

Mexico backs Obama’s push for CIRReuters ‘12[Reuters News. “Mexico's Pena Nieto backs Obama immigration reform push.” 11/27/2012. http://townhall.com/news/politics-elections/2012/11/27/mexicos_pena_nieto_backs_obama_immigration_reform_push]Mexican President-elect Enrique Pena Nieto on Tuesday backed President Barack Obama's planned push for U.S. immigration reform, pledged cooperation on border security and promised efforts to reduce violence in his own country.Three weeks after winning re-election, Obama held White House talks with Pena Nieto, who is due to take office on Saturday, to begin forging a personal bond and discuss shared challenges that have sometimes created fraught relations between their countries.Pena Nieto made clear that Mexicans were closely following Obama's plan to tackle a major U.S. domestic issue - fixing America's immigration system. The porous, nearly 2,000-mile (3,200-km) U.S.-Mexican border is the No. 1 crossing point for illegal immigrants entering the United States.Emboldened by strong support from Hispanic voters in the November 6 U.S. election, Obama said just days later that he planned to move quickly in his second term to address an immigration overhaul, an achievement that eluded him in his first term."We fully support your proposals," Pena Nieto told reporters as he began an Oval Office meeting with Obama. "We want to contribute, we really want to participate in the betterment and the well-being of so many millions of people who live in your country."Obama spoke of what he called a "very ambitious reform agenda" put forth by Pena Nieto, who takes power at a time when Mexico is bucking an international economic downturn but is coping with widespread drug gang violence."In terms of security, that's another major challenge that we all face. My government is set out to reduce the violence situation in our country," Pena Nieto said through a translator. "I will do everything we can for this."Outgoing President Felipe Calderon launched a six-year offensive against the drug cartels that led to a spike in violent crime. About 60,000 people have died in drug-related violence during his term.Pena Nieto's July victory marked the return to power of the former ruling Institutional Revolutionary Party (PRI) after a 12-year absence. He has said his priority will be to reduce violence and focus on tackling crimes like extortion and kidnapping.Mindful of U.S. concerns about border security, Pena Nieto told reporters at the White House: "We want our border to be a safe, modern, connected border, a legal border. That's exactly what we've set out to accomplish."

Immigration reform popular in MexicoGoldfarb and Miroff 13[Zachary A. Goldfarb and Nick Miroff, writers for the Washington Post, Washington Post, “Obama begins bilateral meeting with Peña Nieto,” 5/2/13, http://articles.washingtonpost.com/2013-05-02/world/38979927_1_nik-steinberg-mexican-security-forces-intelligence-agencies

Mr. Obama’s posture on immigration reform has widespread support in Mexico, where leaders from across the political spectrum have long criticized the U.S. treatment of illegal immigrants.Mr. Shifter said Mr. Obama’s re-election has fueled Mexican hopes for a broader softening of the U.S. posture toward Mexicans living illegally in the U.S.

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Meanwhile, Mr. Pena Nieto’s victory has been watched closely by U.S. energy executives eager to capitalize on the potential opening of Pemex, Mexico’s state-controlled oil and gas corporation.But the “Obama administration is going to encounter resistance to immigration reform here in the United States, and there’s going to be resistance to energy reform in Mexico,” said Mr. Shifter.

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Trade/NAFTA

( ) No link – plan popular among most Mexican votersTaylor, ’12 – Washington Times correspondant[Guy Taylor, the Washington Times State Department correspondent, whose work was supported by the Pulitzer Center on Crisis Reporting and the Fund For Investigative Journalism, Charismatic front-runner in Mexican presidential race vows shift on drugs, trade, 4/17/12, http://www.washingtontimes.com/news/2012/apr/17/trade-top-priority-for-mexican-front-runner/]

The front-runner in Mexico’s presidential race has attracted throngs of supporters among elite and ordinary citizens alike with his calls to boost his country’s trade relationships with Canada and the U.S. — a refocusing effort his staffers call “NAFTA 2.0” — and to tamp down the drug violence that has muddied Mexico’s reputation.For Enrique Pena Nieto of the Institutional Revolutionary Party — and apparently the majority of the Mexican electorate — the economic ties that bind the U.S. and Mexico “need to grow.”“If we take into consideration what’s happening in the world and the way that competition among countries today is being built by blocs, I believe we have a great opportunity to make a very strong bloc in North America,” he said in an exclusive interview with The Washington Times.“I will work on building infrastructure that can make the whole region of North America more competitive.”His message may sound unusual, if not naive, in a country where the news is dominated by reports about drug gangs, corrupt cops and the deaths of nearly 50,000 people in drug-related violence during recent years.But he is bent on shifting the narrative away from the illicit drug trade and toward a collective realization of the potential for growth in the legal economic flow between Mexico and the U.S. — a message that resonates among rank-and-file voters seeking jobs and business owners seeking new markets.A centrist politician with boyish good looks and charm, Mr. Pena Nieto has built a big lead in the polls ahead of the July 1 election. If he wins, which many here say is inevitable, his plan is to channel that charm toward the United States.“We have an opportunity to go further in our relationship with the United States and Canada, but especially with the United States,” he said.

( ) Trade popular with Mexico – key to economy and quality of lifeTaylor, ’12 – Washington Times correspondant[Guy Taylor, the Washington Times State Department correspondent, whose work was supported by the Pulitzer Center on Crisis Reporting and the Fund For Investigative Journalism, NAFTA key to economic, social growth in Mexico, 5/14/12, http://www.washingtontimes.com/news/2012/may/14/nafta-key-to-economic-social-growth-in-mexico/?page=all]

The North American Free Trade Agreement, which went into effect in 1994, has been the key driver of Mexico’s economic and social transformation of the past 20 years, analysts say.NAFTA at first brought an explosion of low-skill-labor factories to the Mexican side of the U.S. border. By the mid-2000s, the trade pact had triggered an increasingly sophisticated manufacturing base that now reaches across Mexico’s 31 states.

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“What we’re seeing now is a growth of industry in Mexico that requires more engineers,” said Christopher Wilson, an associate with the Mexico Institute at the Washington-based Woodrow Wilson International Center for Scholars.“To put a name on it, specifically, we’re talking about automobiles and aerospace,” Mr. Wilson said. “Mexico is now graduating more engineers than Germany every year.”A 40 percent jump in Mexico’s per capita gross domestic product since the inception of NAFTA has brought with it an increasingly robust middle class.“What that means is Mexicans are becoming more educated, and there is more investment in children, which is why you are able to see the development of an aerospace sector,” Mr. Wilson said.Poverty rate nearly halvedAbout 47 percent of Mexico’s 115 million people live in poverty, down dramatically from the 80 percent rate half a century ago. Today, 98 percent of homes have electricity, and more than 4 million people study at the university level each year.Through early 2012, the nation of 112 million had an unemployment rate of roughly 5 percent.The per capita salary of about $15,000 ranks the country 81 out of 195 nations.

( ) Increased trade popular in MexicoDaniels Fund Ethics Initiative, ’11 – Inter-University academic fund[Daniels Fund Ethics Initiative, an education fund throughout several universities, including the University of New Mexico, NAFTA Good for Mexico and the United States?, 2/9/2011, http://danielsethics.mgt.unm.edu/pdf/NAFTA%20DI.pdf]

Finally, the drug and gang violence in Mexico has begun to deter foreign investments in the country. Whereas the violence was formerly limited mostly to cities on the crossroads between the U.S. and Mexico, like Juarez, the violence has now spread even to Mexico’s business capital of Monterrey—home to many U.S. and foreign businesses and/or franchises. If the violence is left unabated, pressure to disband the trade agreement is likely to increase.

Despite the numerous negative effects of NAFTA, support for the trade agreement remains strong among many citizens among the three countries. After NAFTA was initiated, trade between the countries increased significantly (although whether this was a result of NAFTA is still being debated). Additionally, Mexico has become a hotspot for technological industries as well as the more traditional maquiladora. Electronics, aerospace, and software companies have begun relocating to Mexico, revitalizing some of the country’s metropolitan areas. Since both sides make convincing arguments for the benefits or disadvantages of NAFTA, there is no easy answer as to whether the pact should be retained as is, changed significantly, or repealed altogether.

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IMPACT TURNS

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BacklashPublic hates Nieto’s Pemex reform, hurts stabilityEstevez 13“Most Mexicans Oppose President Peña Nieto's Plans To Open Up Pemex To Private Investment” By Dolia Estevez, 6/26/2013 11:51AM, Forbes, http://www.forbes.com/sites/doliaestevez/2013/06/26/most-mexicans-oppose-president-pena-nietos-plans-to-open-up-pemex-to-private-investment/Foreign oil companies were expropriated by Mexican President Lazaro Cárdenas in 1938, and ever since Mexico’s vast oil resources — 13.9 billion barrels of crude-oil and possibly the world’s fourth-largest shale-gas reserves– became forbidden to outsiders. The Wall Street Journal said the announcement highlights a “willingness to break with the past among young, reformist members” of the PRI, Peña Nieto’s party. Exxon Mobil and Royal Dutch Shell are reported to be ready to return to Mexico, if Congress passes the measure. Both were among the group of American and British companies expropriated 75 years ago.But Mexicans are less than ready to support Peña Nieto’s most ambitious and controversial reform to date. A new poll by the Centro de Investigación y Docencia Económicas (CIDE), a research institute, shows that 65 out of every 100 Mexicans are against opening up Pemex, the world’s seventh-largest oil producer with annual sales of more than $100 billion. “Energy, particularly oil, continues to be the stronghold of Mexican nationalism,” said CIDE.

Pemex reform causes protestsLatin American Herald Tribune 13“Mexican Leftist Leader Plans Protests Against Pemex Privatization” Latin American Herald Tribune http://www.laht.com/article.asp?ArticleId=673444&CategoryId=14091 A series of peaceful protests will be held across Mexico in defense of state-owned oil giant Petroleos Mexicanos (Pemex) and against a supposed plan to turn the firm over to foreign oil companies, former leftist presidential candidate Andres Manuel Lopez Obrador said.

“We are going to defend the petroleum peacefully,” Lopez Obrador said.

The leftist politician announced the protest plans during a rally staged by his National Regeneration Movement (Morena) on Tuesday in Mexico City.

Lopez Obrador barely lost the 2006 presidential election and blamed his second-place finish in last year’s vote on corrupt practices by the victorious Institutional Revolutionary Party (PRI).

The “El petroleo es de todos” (The Petroleum Is Everyone’s) campaign will hold its first demonstrations on Sunday, Lopez Obrador said.

Protests will take place in the plazas of cities across the country, with a rally planned for Mexico City, the leftist leader said.

Oil reform empirically causes instability, 2008 proves

Roig-Franzia 8“For Many, Control of State-Run Pemex Is About National Pride” Manuel Roig-Franzia Washington Post Foreign Service Wednesday, April 30, 2008 The Washington Post http://www.washingtonpost.com/wp-dyn/content/article/2008/04/29/AR2008042902566.html

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Mexico's giant state-run oil company was once a source of universal pride here. Ballads were sung in its honor, and the money gushed as much as the crude.

But the company -- Petróleos Mexicanos, or Pemex -- is not aging well, and it is fast eroding into a creaking, crippled behemoth that even its biggest defenders say must change to survive.

In a once-unthinkable move, President Felipe Calderón urged an overhaul of Pemex earlier this month, calling on the Mexican Congress to allow the company more freedom to sign contracts with foreign firms better equipped to build efficient refineries and conduct expensive deep-water drilling.

But the proposal -- being touted by its supporters as one of the most important economic reforms in recent Mexican history -- has drawn fierce resistance from a determined coalition of left-leaning opposition parties for whom outsider involvement in Pemex is anathema. They seized control of the Mexican congressional building for more than two weeks this month, with some members spending nights on the floor and leading rowdy protests during the day.

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Mexican EconReform cuts government revenues and public servicesSiskind 6/25 [Cory, research analyst for Control Risks, a global risk management consultancy](Mexico Plays the Waiting Game on Big Reforms, Huffington Post, 06/25/2013, http://www.huffingtonpost.com/cory-siskind/mexico-plays-the-waiting-_b_3493542.html)

Members of Mexico's left-wing Party of the Democratic Revolution (PRD) party are skeptical. Beyond the political complications of amending Mexico's constitution lies a historical distrust of foreign competition in the energy sector. US and Anglo-Dutch oil companies operating in Mexico were expropriated in 1938 by then President Lázaro Cardenas, a source of national pride for most citizens. Some Mexicans believe that opening the oil giant will dramatically decrease government revenue, of which PEMEX currently provides approximately 35%. They fear that this, in turn, will reduce government spending on badly needed public services. ¶ Another challenge to the speedy passing of energy reforms is the rupture of the political cohesion seen in early 2013. The PAN, party of former presidents Felipe Calderón and Vicente Fox, ousted its senate party leader, Ernesto Cordero, on May 20. The ousting, as well as July 7 local elections, has caused a shake-up in the party. Divisions are solidifying between two factions and tensions have come to a head in recent weeks. Yet, while the shake-up may delay the approval process, it is unlikely to entirely halt the passage of energy reforms.

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US EconMore profitable for US if Pemex not reformedMexican Law blog 13Mexican law blog, MEXICO ENERGY SECTOR INVESTMENT OPPORTUNITIES: GAS IMPORTS, BEFORE YOU DO BUSINESS, APR 07 2013, http://beforeyoudobusiness.com/archives/747, Accessed 10/7/13

Mexico, although it has what are potentially large amounts of shale gas and oil in its territory, isn’t producing nearly enough natural gas to meet the country’s growing demand for energy. The result is that for now and the foreseeable future, Mexico will be needing to import natural gas from the United States. While this might at first encourage companies to invest in American facilities and energy infrastructure projects north of the border, there are actually boundless opportunities to invest in Mexico’s energy sector as the Spanish-speaking north American country scrambles to provide energy for its expanding economy. According to the U.S. Department of Energy, the amount of gas extracted from U.S. resources bound for Mexico will most likely double in the next year. There are several pipelines that will be constructed between the two neighbors and these are expected to transport an additional 3.5 billion cubic feet of natural gas per day by 2014. Last year, exports of natural gas from the U.S. to Mexico reached their highest levels in four decades, and there seems to be no sign that the level of exports will be slowing down. According to the Energy Department’s Energy Information Administration, “Natural gas consumption is rising faster in Mexico than natural gas production, and as a result, Mexico is relying more on natural gas imports from the United States.” Although Mexico has traditionally relied solely upon the United States as a source of natural gas when its own resources were insufficient to meet demand, since 2006 Mexico has been looking for other overseas suppliers in a move to diversify its domestic energy sector. As mentioned above, Mexico is sitting upon a tremendous amount of shale gas, and Pemex, the state oil monopoly, has reported that there are possibly 1 trillion cubic feet of natural gas – but production is idle. Presently, chances are that this resource will go undeveloped because private investors are not allowed to develop or implement projects dealing with the natural gas. However, Pemex has announced that given certain financial conditions, 24 shale gas wells may be drilled in the next eight or nine months. So where do the investment opportunities exist for those who want to be profitably involved in Mexico’s energy sector? Are there any ways in which investors can benefit from Mexico’s natural gas crisis? The good news is that while there might not be any opportunities in the natural gas extraction industry, there are ample opportunities in pipeline projects. In order to meet demand, several pipelines will need to be constructed for United-States/Mexico natural gas transport. Furthermore, the Mexican state power company Comisión Federal de Electricidad (CFE), who has recently awarded billion-dollar plus pipeline construction contracts to the Calgary-based pipeline giant TransCanada Corp., might be looking for more pipeline construction companies to help meet its energy needs. Speaking of his company’s 25-year natural gas transportation contract with the CFE, TransCanada CEO and president Russ Girling stated: “Mexico’s government is engaged in a comprehensive plan to expand the nation’s electrical grid and generating capacity and much of that generation will be natural gas fired. This award is another example of TransCanada’s commitment to help develop Mexico’s energy infrastructure in a sustainable and cost-efficient manner.” To summarize, if the government decides to break the monopoly Pemex currently enjoys in Mexico, there will be great opportunities for early investors in natural gas extraction. However, even if this monopoly continues on for years, profit can be made from Mexico’s natural gas shortage. Pipeline infrastructure will be necessary and the CFE will possibly be financing many more projects in the years to come.

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IMPACT DEFENSE

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Reform FailsEven with Pemex reforms it’s too risky to do business with MexicoCasillas 13- Juan Casillas, based in Mexico City, provides consulting services to international corporations regarding their activities in Mexico as well as to Mexican businesses on their operations and initiatives overseas. He is a seasoned participant in the Mexican market who has worked in both Mexico and the United States and has substantial experience in business development, strategic planning and analysis, government public affairs, and consulting in both countries. He has worked with companies in the financial, energy, manufacturing, infrastructure, hospitality, pharmaceutical, transportation, security, technology, and mining industries amongst others. He is fluent in Spanish and English. Prior to joining ManattJones, Mr. Casillas was the General Manager of STR SA de CV, a software development company. In 2000, Mr. Casillas founded Colegioweb SA de CV, an Internet company dedicated to providing Extranet services to schools and medium-size companies and organizations. From 1993 to 1999, Mr. Casillas was the Assistant General Director of a hologram manufacturing company in Mexico. Prior to the above, Mr. Casillas worked at Andersen Consulting in the Chicago office and at Servicios de Fomento Industrial, a Mexican consulting firm.

Juan Casillas, Michael Melamed, Mexico's upcoming energy reform: Opportunities, limitations, and challenges, Lexology, January 25 2013, http://www.lexology.com/library/detail.aspx?g=65b2a55c-4e63-44d5-bfb5-c90113fdf287, Accessed 10/7/13

Of course, there are and will continue to be risks associated with doing business in Mexico. Despite Peña Nieto's reform-minded agenda, numerous competing civic and political factions in Mexico—labor unions; local, state, and national politicians; environmental groups; etc.—can make doing business a challenge, especially for extractive industries. When working with Pemex, contracts (with some exceptions) are granted through a bid system rather than negotiations—a process that is not necessarily difficult, but requires knowledge of the system. Security continues to be an issue, though threats are declining and are by no means prohibitive to doing business in Mexico. Inflexibility in current labor laws and union negotiations can increase the cost of doing business; however, labor reform was the final legislative victory of the prior Calderon Administration. Yet more is needed, and further efforts as well as implementation of the reform are on the current Administration's agenda.

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Mexican EconTheir impacts are exaggerated—Mexican economy is resilient and oil not keyBaker Institute 11(James A. Baker III Institute for Public Policy at Rice University is a non-partisan organization focusing on the study, formulation, execution, and criticism of public policy. “The Future of Oil In Mexico,” Baker Institute Policy Report, April 2011, http://www.bakerinstitute.org/files/pubs/EF-pub-PolicyReport48-English.pdf) The economic consequences of Mexico’s failure to change course are significant but could be managed. Under a “pessimistic scenario” where Mexican oil production continues its current rate of decline, the oil trade balance might turn negative as early as 2013 and could continue to deteriorate until it reached a US$30 billion deficit by 2020. This would imply a “negative shock” over 10 years equivalent to 11-12% of the 2008 level of total exports. Although this would be serious, it pales by comparison with the shock the Mexican economy experienced from 1985 to 1986, when

oil was a far more crucial component of the national economy. Our analysis finds that the Mexican economy is now sufficiently liberated from its previous oil dependence to be capable of absorbing the shock without a major crisis (Ros 2011). There would be important consequences both for the balance of payments and for the fiscal accounts, but these could be managed through appropriate policy responses. For example, the export shock might require a more competitive exchange rate, to stimulate compensatory non-oil exports. The fiscal efforts would be more serious, and could prove “potentially catastrophic” if the adjustment came through the slashing of public investment rather than through

compensating increases in non-oil public revenues of debt financing. But such declining oil revenues need not be negative for overall economic growth . Everything would depend upon whether the government opted for an orderly

adjustment—or resorted to short-term emergency cuts that harmed the long-term competitiveness of the overall economy.

( ) Mexico’s economy stableCattan, ’11 – CSM and Bloomberg correspondent[Nacha Cattan, correspondent for Christian Science Monitor and Bloomberg News, Mexico's stable economic outlook a rare piece of good news, 5/31/2011, http://www.csmonitor.com/World/Americas/Latin-America-Monitor/2011/0531/Mexico-s-stable-economic-outlook-a-rare-piece-of-good-news]Mexico’s economy might not be the fastest-growing or most dynamic in the region, but the macroeconomic landscape here has looked pretty rosy these days - rare good news in a place where drug mayhem monopolizes headlines.That means that unlike other large economies in Latin America, it is not battling soaring consumer prices.Brazil, for example, might get all the attention for its powerhouse growth, but it is grappling with 6.5 percent inflation rates while Mexico's dropped to a five-year low at 3.04 percent in March. Brazil, Chile, and Colombia, among others, are facing appreciating currencies too. Mexico’s peso has strengthened but not nearly as dramatically as the Chilean peso or Brazilian real.So what has put Mexico in such a cushy position?Some of it is hard work that has paid off. Bank of Mexico Governor Agustin Carstens has received credit for controlling inflation, which could boost his bid to head the International Monetary Fund.Some of it has more to do with good fortune. Mexico grows much of its food on its own turf and doesn't have to pay the high price tags caused by global shortages in order to import food from elsewhere. The food it does import from its main trading partner and northerly neighbor is bought on the cheap as Mexico’s currency has strengthened extensively against the US dollar. And Mexico's policy of maintaining generous gasoline subsidies keeps the price of skyrocketing fuel much lower than it really is (some say this is to a fault).

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RenewablesPemex reform not key- renewables too easily exploited Lee, 11 -- Houston Journal of International Law executive editor [Zachary, "The Silver Lining to a Cloudy Situation," Houston Journal of International Law, 2011, 33.2, ebsco]

WITH OR WITHOUT PEMEX REFORMMuch has been made of Mexico’s efforts to inject private capital and expertise into Pemex.42 Likewise, much has been made of the absolute failure of these efforts.43 The result is a stagnation of Mexico’s oil industry and an inability to exploit the potentially vast oil reserves in the deep waters of the Gulf of Mexico.44 Fortunately, renewable energy in Mexico does not face the same obstacles to private investment, and Mexico’s wind and solar potential can be exploited relatively easily.45 President Calderón has made it clear that Mexico’s energy industry will continue to grow—with or without Pemex reform: “With nothing but wind power, without burning a drop of petroleum, we are generating electricity so people can live better, so companies can produce more and generate more jobs, and so that people here can benefit through rent or association with these projects.”46

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AFF – ECON REFORM

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2ACTax reform wont pass too much opposition between opposing parties Graham 5/13’ (Dave Graham correspondent at Reuters “Cracks in Mexican political pact threaten president's reforms” Wed May 1, 2013 2:08pm http://www.reuters.com/article/2013/05/01/us-mexico-reforms-penanieto-idUSBRE9400NR20130501)

(Reuters) - The fanfare accompanying Mexican President Enrique Pena Nieto's first months in office is increasingly being drowned out by discord in Congress that could undo his plans to raise more tax revenue and open up state oil giant Pemex to outside investment.A pact that Pena Nieto painstakingly built with opposition leaders to strengthen his hand in Congress risks falling apart over accusations his ruling Institutional Revolutionary Party, or PRI, has been using dirty tricks to buy votes in the first major round of state elections since July's presidential vote. Taking office in December after fighting off claims that his own campaign team bought votes, Pena Nieto has won much praise for his efforts to re-energize Mexico's economy.A telecommunications bill passed by Congress on Tuesday aims to bring more competition to industries dominated by phone tycoon Carlos Slim and the No. 1 broadcaster, Televisa. Pena Nieto's government has also pushed through a law aimed at improving the education system and arrested teachers' union boss Elba Esther Gordillo on corruption charges. A former PRI stalwart, Gordillo was seen as a persistent obstacle to change.Lacking an outright majority in Congress, Pena Nieto mapped out an informal legislative program with the opposition under the "Pact for Mexico," an agreement that has served as a workshop for the parties' proposals to modernize the economy.If his reforms succeed, Pena Nieto insists Mexico's growth can reach 6 percent per annum. Investors have been encouraged by the pact's achievements, piling into Mexican stocks and bonds and recently pushing the peso currency to a 19-month high.But last week, months of political goodwill evaporated amid angry recriminations when opposition leaders accused the government of trying to use public money to help the PRI in local elections in the Gulf state of Veracruz this July.When videos were leaked showing PRI officials advocating the use of Social Development Ministry funds to corral votes in Veracruz, the conservative National Action Party, or PAN, and the leftist Party of the Democratic Revolution (PRD) were livid.

Nieto won’t get the 2/3 vote in CongressGraham 5/13’ (Dave Graham correspondent at Reuters “Cracks in Mexican political pact threaten president's reforms” Wed May 1, 2013 2:08pm http://www.reuters.com/article/2013/05/01/us-mexico-reforms-penanieto-idUSBRE9400NR20130501)

Defusing tensions between the PRI and its rivals is a big enough challenge for Pena Nieto . But he must do so at a time when there are major splits inside the opposition parties - in particular the PAN - his natural allies on economic reform. Without support from at least the PAN, Pena Nieto's ruling coalition of PRI and the Green Party is unlikely to muster the two-thirds majority in Congress needed to enact a constitutional change he wants to make Pemex more attractive to investors. The PRD is opposed to changing the constitution to open up the oil industry and is highly skeptical about imposing a value-added tax on food and medicine, a measure the PRI is considering to improve Mexico's weak tax revenues. Meanwhile, both the PAN and the PRD are pressuring Pena Nieto's Social Development Minister Rosario Robles to step down over the Veracruz revelations. To date, they have not made her departure a condition of their support for the pact.The parties were incensed when Pena Nieto last month backed Robles publicly, withdrawing their support for a banking bill negotiated under the pact, and putting that reform on ice."It's up to all the political players to carry on working for the reforms our country needs," Pena Nieto said at the time. The opposition says, however, that the PRI has yet to atone for Veracruz. Robles quickly

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dismissed seven officials over the affair and has denied any wrongdoing, but the PAN and the PRD have said 57 people were involved and want more heads to roll.The government has repeatedly stressed that the pact is intact, but opposition lawmakers chafing under the fetters of the agreement have jumped at the chance to attack the president.