Summary:"Mexico is a country of paradoxes," declared Jorge Hierro. "We have oil sitting in the ground, and a lot of savings." And yet, the U.S.′ southern neighbor also has great social problems and is seemingly without the money to fund solutions to them.
Jorge Castañeda, a candidate for the Mexican presidency, believes he has an answer: create a North American Energy Fund (NAEF) that issues securities backed by oil revenues, and use the invested capital to fund oil exploration and a Mexican Development Fund to reduce poverty, create jobs, and improve criminal justice and education.
"The idea comes from a simple equation," he explained. "Mexico has a lot of oil… and enormous social needs. We should export more oil." Castañeda added that his plan has benefits for the U.S., which would be able to import oil from Mexico instead of from the less stable and less democratic nations that it currently relies on.
Castañeda estimates that the NAEF will require between $65 and $75 billion, and expects it to double Mexico′s oil exports in five years. He hopes that institutional investors — at least some of whom will come from the U.S. — will help fund the venture.
But there are difficulties. The Mexican population has had many experiences with government corruption, José Alberro asserted, and may prefer the oil in the ground, where it cannot be stolen. "It is only going to be credible if… it abides by the rules of transparency." To further these goals, both the NAEF and the MDF will have independent board members, and will be autonomous from the state-run oil company, PEMEX.
Even if the program succeeds in gaining approval, however, it remains saddled with the highly inefficient PEMEX to conduct exploration, production and refining. This raised the question of why they don′t open the market to private competition, instead of attaching the plan to PEMEX?
"One word," exhorted Alberro, "Con-sti-tu-tion." The Mexican Constitution, he explained, does not allow any private interests to own Mexico′s oil.
Still, panel members were optimistic about the prospects for the NAEF. "I think the profitability is there," said Alberro. The trick, he stated, is "to create a financial instrument that can take into account these risks."
Aside from offering high returns in return for the risks, Castañeda pointed out that Mexican debt backed by future oil revenues have been used before. More importantly, they worked. He cited the U.S. bailouts of the Mexican economy in 1982 and 1995 as examples.
If the program succeeds, it could mean a more stable, economically secure Mexico and improved quality of life for its people. "What we have to do is put this together and get elected," summarized Castañeda.
