Enrique Pena Nieto, Mexico's president, center, smiles after signing… (Susana Gonzalez / Bloomberg )
Mexico's president, Enrique Peña Nieto, unveiled a proposal this month to reform the country's state-owned oil and gas monopoly Petroleos de Mexico, or Pemex. The plan, which requires a constitutional amendment, would allow foreign firms to partner with Pemex for the first time since 1938, when then-President Lazaro Cardenas nationalized the industry. It's a plan worth pursuing.
The proposal has enormous implications for Mexico's growing and yet still-troubled economy. The waters off Mexico contain one of the largest oil and natural gas reserves in the world, but Pemex has yet to realize their potential because it lacks the technology and money to drill in deeper waters. One result is that the country's oil production is declining, alarming to a government that relies on revenue from oil to make up about a third of the national budget.
Inviting foreign firms to help shoulder the costs of deep-water exploration in exchange for a share of the profits would surely help lift Mexico's economy and boost sagging oil production for years to come. But not without costs. Continued dependence on oil will contribute to climate change, and deep-water drilling carries special perils, as Americans were reminded in 2010 when an oil rig in the Gulf of Mexico exploded, killing 11 workers and fouling thousands of miles of coastline.
Mexico, however, does not have the luxury of weaning itself from oil; its challenge is to extract that oil while minimizing the threat to the environment and maximizing economic benefit. Pemex does not appear up to that challenge. It has little experience in deeper waters, and some critics worry that it might cut corners or run risks that private companies would not accept. If Mexico is to engage in deep-water drilling, outside experts could help it do so safely.
Peña Nieto's effort may help reduce dangers and take advantage of the country's oil riches. If he invests some of that bounty in renewable fuel sources, he may help his country even more.