Mexico's Senate set to implement historic oil reform

Agence France Presse

Posted at Aug 07 2014 07:31 AM | Updated as of Aug 07 2014 03:31 PM

MEXICO CITY - Mexico's Senate debated Wednesday the final piece of legislation to implement a historic energy reform that will open the state-controlled sector to foreign investment for the first time since 1938.

The upper chamber of Congress was set to vote on the enabling laws that will break the monopoly held by state-run energy giant Pemex since foreign companies were kicked out of Mexico 75 years ago.

It is the showpiece legislation of President Enrique Pena Nieto's reform drive aimed at breathing new life into Latin America's second biggest economy.

Pena Nieto argues that the legislation will boost growth, create jobs and reverse declining oil production.

But the leftist opposition says the reform amounts to a damaging privatization of Pemex, the country's main source of tax revenue and a symbol of national sovereignty.

The constitutional reform was approved in December with the backing of Pena Nieto's centrist Institutional Revolutionary Party (PRI) and the conservative National Action Party (PAN).

To be enacted, the Congress needs to pass "secondary laws" that outline how contracts will be offered, among other things.

The lower house already approved the legislation, which will head to Pena Nieto's desk for his signature if the Senate votes for it without changes.

The reform will allow foreign companies to sign profit-sharing contracts with Mexico as soon as next year and drill for oil and natural gas.

The government says the reform will allow Mexico to obtain the technology to drill for shale gas over land and deep-water oil in the Gulf of Mexico.

The legislation will reduce Pemex's tax burden and compensate landowners by offering them three percent of profits earned from oil or gas extracted from their properties.

One of the most controversial measures calls for the government to absorb a portion of the Pemex worker union's unfunded pension liabilities.