Backward Step in Mexican Energy Policy: Energy Regulators Affirm Status Quo in Name of Competition

11 Pages Posted: 13 Nov 1997

Abstract

Mexico is undergoing a general transformation from a closed, command-type economy to an open, market-type economy, but today Mexico is still more closed than open. Two areas where since early 1995 the Government has sought to force open doors long held shut by state monopolies and monopolistic practices and mindsets are petrochemicals and natural gas. On November 7, 1995, the Government announced its new policy framework for private participation in natural gas transportation and distribution. Within Mexico, Metropolitan Monterrey is the industrial heartland and, in consequence, the principal market for natural gas. Owing to its proximity to the major U.S. gas producing zone in South Texas, Monterrey is also an ideal test case for the Government to try out its ideas about regulated markets in which there will be actual competition (as distinct from "potential" or "virtual" competition). Despite a promising initial outlook for Monterrey as an area where competition in gas transportation and distribution could take place, by mid-1997 there were several anti-competitive elements at play, including a major policy reversal by the Mexican Energy Regulatory Commission (CRE). As a result of the potential precedent-setting character of the CRE ruling in Monterrey, the overall outlook for international investments in gas distribution and transportation in Mexico is one in which there is greater market risk??and lower expectations of upward growth??than before. than before. What might change the present policy course would be a strong lobbying effort on the part of Mexican industry to respond to the Request for Comments issued on November 3, 1997 by the Mexican Commerce Department (SECOFI) on the desirability of including natural gas in the list of products whose duties would be scheduled for elimination or accelerated reduction. As the deadline for comments is December 19, the medium-term outlook for gas markets in Mexico will be known before Christmas.

JEL Classification: Q43, N76

Suggested Citation

Baker, George, Backward Step in Mexican Energy Policy: Energy Regulators Affirm Status Quo in Name of Competition. Available at SSRN: https://ssrn.com/abstract=41301 or http://dx.doi.org/10.2139/ssrn.41301

George Baker (Contact Author)

NeoSoft Inc. ( email )

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Houston, TX 77050
United States
713-627-9390 (Phone)
713-627-9391 (Fax)

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