Oil and Gas in Mexico

Víctor Gerardo Carreón Rodríguez () and Juan Rosellon
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Víctor Gerardo Carreón Rodríguez: Division of Economics, CIDE

No DTE 540, Working Papers from CIDE, División de Economía

Abstract: Mexico is a highly centralized federation. The states and municipalities are highly dependent on federal transfers and so equally at risk to the country's fiscal dependence on oil. Although Mexico has become more truly federal since multiparty competition has become vibrant and several states are in opposition hands, the states remain very minor actors in relation to oil and gas. However, as the political system has democratized, states have had an increasing say regarding oil and gas activities, particularly when these involve social or environmental damage or costs. This institutional framework has implications on Pemex (a major contributor to public budget), whose development is hindered in all stages of production. In this paper we discuss measures to promote Pemex development in the context of Mexico's federal system, such as: (i) the Government must find additional and more diverse sources of public revenue (ii); Pemex itself must derive greater wealth from its investment in petroleum projects (iii); Pemex must also be able to allocate more of its investment to exploration in order to replenish its depleted sources (iv); political manipulation in the estimation of the oil revenues should be eliminated brought greater certainty, transparency, and accountability for federalism in Mexico, and (v), a clear mechanism to distribute the oil proceeds is crucial. The new fiscal scheme must make clear how Pemex pays rights and taxes, based on rules set by the National System of Fiscal Coordination.

Keywords: Oil; gas; Mexico; fiscal policy; development (search for similar items in EconPapers)
JEL-codes: E62 N76 Q56 R11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-12
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