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The Mexican Petrochemical Sector in the NAFTA Negotiations

Since 1985, there have been important changes in the Mexican petrochemical sector, including trade liberalization, deregulation and the elimination of subsidies. NAFTA represents another step towards liberalization of the sector. Given the low tariffs currently applied to international trade among the three nations, we do not anticipate major impacts of NAFTA on trade flows. Nevertheless, the elimination of restrictions to foreign investment is expected to increase capital flows into the sector and to promote productivity increases. On the other hand, the new barriers to trade in petrochemical feedstocks and the restrictions on private investment in infrastructure may negatively affect the sector's growth, making it necessary to adjust domestic regulations to improve the performance of Pemex.

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Energy Specializations: Petroleum – Refining and Products; Petroleum – Policy and Regulation

JEL Codes: D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, Q41: Energy: Demand and Supply; Prices, D22: Firm Behavior: Empirical Analysis, Q37: Nonrenewable Resources and Conservation: Issues in International Trade, Q40: Energy: General, F18: Trade and Environment, L11: Production, Pricing, and Market Structure; Size Distribution of Firms

Keywords: Petrochemical industry, Mexico, NAFTA, Pemex, Policy, Regulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No3-9

Published in Volume14, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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