To gain public support for Mexico’s energy reforms, the government promised a future of low gas prices. The author documents the fallout when gas prices instead shot up 20 percent.
This brief argues that, in contrast to the pessimism and ongoing recession in Latin America generated by the collapse of commodity prices, there are reasons for optimism in the area of external financing.
Trade and financial shocks have worsened Latin America’s economic prospects in the past year. Latin America — and South America in particular — are expected to perform poorly into 2016.
The decade 2003-2013 was an exceptional one for Latin America in social terms, but less clearly so in economic terms. Growth slowed down significantly after the exceptional factors that fed the 2003-2007 boom came to an end. The possible unwinding of the super-cycle in commodity prices and, to a lesser extent, of the expansionary monetary policy of the United States, has added new challenges. But the major issue is the need to overcome the
poor long-term economic performance that has characterized the region in the post-market reforms period, particularly by adopting active production sector development strategies.
Energy regulation under Mexico's energy-sector reforms are of great interest to investors, since autonomous regulators—protected from political pressures and able to make and sustain technical decisions—can guarantee greater legal consistency than government authorities exposed to political pressures. The difficulty was finding an alternative model that ensured the institutional strengthening of the agencies without relinquishing too much control of the executive branch.
