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The Economics of Natural Gas in Mexico -- Revisited

Michelle Michot Foss, Francisco Garcia Hernandez, and William A. Johnson

Year: 1993
Volume: Volume14
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No3-2
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Abstract:
How long will Mexico continue to be a net importer of natural gas? We explore this question and raise the logical corollary-will import volumes increase? During 1992, gas imports by Mexico peaked at 300 to 350 MMcf/d, primarily to serve incremental demand in Mexico's northern region. We begin our investigation by suggesting that natural gas demand in Mexico is a junction of GDP and the real price of gas, the latter being tied to U. S. prices. Low U. S. gas prices have driven Mexico's import strategies. If downward pressure on U. S. gas prices continues, the import market in Mexico could be preserved through the end of this century. Other factors contribute to the prospects of a long-run import strategy, in particular, capital investment constraints at Pemex; the need to substitute cleaner burning natural gas for the residual fuel oil used widely in Mexico; and a North American free trade zone which may encourage greater gas imports by Mexico. We conclude that it is reasonable for Mexico to remain a net importer of gas for at least the next 10 years.



The Mexican Petrochemical Sector in the NAFTA Negotiations

Georgina Kessel and Chong-Sup Kim

Year: 1993
Volume: Volume14
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No3-9
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Abstract:
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.



Mexico's Economic Reform: Energy and the Constitution

Luis Rubio

Year: 1993
Volume: Volume14
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No3-11
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Abstract:
Oil is a fundamental component of nationhood in Mexico. The 1938expropriation of oil resources concluded a process of internal politicalconsolidation and thus became the most important symbol of nationalism. Mexico has been undergoing a process of economic reform that has altered the country's economic structure and has subjected it to international competition. Oil in particular and energy in general have been left untouched. There is recognition that without an equal reform of the energy industry, the potential for success will be significantly limited. While the Constitution allows private investment in the industry-with the exception of the resource properties themselves--the Regulatory Law bans any private participation. Because of its political sensitivity, however,amending the law in order to reform the oil industry will necessitate a domestic initiative rather than foreign pressure. In this perspective, NAFTA served to slow and postpone the reform of the industry, rather than the opposite. Once NAFTA is well in place, the industry will have to face competition.





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