EXTRACTIVE INDUSTRIES

Mexico is a major oil producer and exporter. In 2007 total oil production reached 3.5 million barrels daily and oil exports 1.5 million barrels daily. Mexico is the 6th largest crude producer and the 10th largest exporter. Although Mexico is also a significant producer of natural gas, it is a net importer of this commodity.

The sector is dominated by the national oil company Pemex, which holds a constitutional monopoly over exploration and production of hydrocarbons. Private investment in exploration and production is also forbidden by the Constitution, but private companies can provide services for the national oil company.

Over the past six years, the government has benefited from extraordinarily large oil windfalls, which made up 40 percent of the federal budget in 2006 and 34 percent in 2007. Despite record earnings, Pemex faces declining reserves and production, which together with a steep increase in consumption could turn Mexico into a net oil importer within the next decade. As a result, Mexico's government and Congress have begun to discuss reforms; however, any proposal to liberalize the sector is bound to face strong opposition.

Mineral reserves are also significant and the sector is organized in a totally different fashion. Exploration and production of minerals are open to private investors, which control a sector that lacks clear and transparent regulation.