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Mexico Congress gives final nod to landmark oil reform

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Mexico’s Congress gave final approval to a historic energy reform that will break the 75-year-old state monopoly on oil drilling and invite foreign companies back to the country.

After a heated marathon debate, the Senate on Wednesday voted 78-26 for the package of bills that will overhaul a sector that has struggled to reverse declining production under the state-run Pemex company.

The legislation, which was already approved by the lower house of Congress, now goes to President Enrique Pena Nieto, who said he would sign it into law in the coming days.

The reform is the centerpiece of Pena Nieto’s reform drive to breathe new life into Latin America’s second biggest economy.

Foreign companies have eagerly awaited to see the final details of the legislation, which will allow them to sign profit-sharing contracts as soon as next year to drill for oil and natural gas.

“Today, a great step was taken for the future of Mexicans,” Pena Nieto wrote on Twitter, adding that the reform will create a “more competitive and prosperous Mexico.”

Pena Nieto’s centrist Institutional Revolutionary Party (PRI) argues that the legislation will boost growth, create jobs and modernize Pemex, whose oil production has fallen from 3.4 million barrels per day in 2004 to 2.5 million today.

But the leftist opposition says the reform amounts to a fatal privatization of Pemex, the country’s main source of tax revenue and a symbol of national sovereignty.

“Our dear Mexico is becoming more and more like a restaurant where foreign customers can enjoy our energy resources without limits and almost for free,” said Senator Fernando Mayans Canabal of the leftist Democratic Revolution Party (PRD).

PRD lawmakers brought a life-size picture of late former president Lazaro Cardenas to the Senate floor and accused the PRI of betraying the legacy of the man who nationalized the oil industry in 1938.

– Oil firms eye reform –

The constitutional reform was approved in December with the backing of the PRI and their longtime rivals, the conservative National Action Party (PAN).

But to be enacted, the Congress needed to pass “secondary laws” that outline how contracts will be offered.

Major oil companies have kept a close eye on the legislation, with US giant ExxonMobil and British rival BP leading an “energy task force” within the American Chamber of Commerce of Mexico.

The government says the reform will allow Mexico to obtain the technology to drill for shale gas over land and for deep-water oil in the Gulf of Mexico.

As part of Pemex’s overhaul, the legislation will reduce Pemex’s tax burden.

One of the most controversial measures calls for the government to absorb part of the Pemex worker union’s unfunded pension liabilities, which total more than $125 billion, or 10 percent of the country’s GDP.

The company and workers would then have to renegotiate their labor contract.

The PRD said the notoriously corrupt union’s accounts should be audited if Mexicans are to take care of its debts.

“The Mexican people have already paid too much,” said PRD Senator Dolores Padierna Luna. “Don’t burden them with more debt that is of your own making.”

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