Shortly after Mexican President Enrique Peña Nieto took office last year, he organized a coalition with the leaders of the country’s three largest political parties called the Pact for Mexico. The purpose of the pact was to pave the way for desperately needed but politically difficult reforms.The alliance has made big strides so far this year, including progress in education and telecom reforms. But the cross-party ties have begun to fray in the wake of a series of state and local elections that have “deteriorated into mud-slinging and violence.“The pact’s cohesiveness will be further tested by Peña Nieto’s proposed reforms to Pemex, Mexico’s state-owned oil and gas company. The federal government currently derives roughly a third of its budget from Pemex’s coffers. As a result, the monopoly has little money left over to invest in new production. This has lead to stagnating oil and gas outputs: Pemex has added 22,000 employees since 2004, yet production has fallen by a staggering 23 percent. That’s despite the fact that the country has the world’s sixth-largest shale gas reserves and eighth-largest shale oil reserves.But the nationalization of the country’s fossil fuels is for many a point of cultural pride, and Peña Nieto’s reforms are deeply unpopular to many. Pushing these changes through could shatter the Pact for Mexico, but the Economist argues that these reforms are worth paying that price:
The pact is certainly worth trying to preserve. In a country scarred by violence and with a rabble-rouser in the wings, it remains a shining example of political civility. And getting cross-party consensus on energy reform will improve the chance that it is properly done. […]However, if he cannot bring the other members of the pact with him, the president should push ahead with reform regardless…. For the first seven months of Mr Peña’s presidency, the pact has been a way to bring about vital reforms. It must not be allowed to become an obstacle to them.
That sounds about right to us. Taking advantage of its natural resources will help fuel Mexico’s ongoing manufacturing boom.[Image of President Nieto at 2010 WEF courtesy of Wikipedia]