Mexican President Andres Manuel Lopez Obrador promised radical changes and an end to corruption during his inauguration speech, attacking the country's planned energy reform and promising to intervene to lower energy prices.
Lopez Obrador on January 1 plans to enact a 25-km free economic zone across the 3,180-km long Mexico-US border, which will cover all Mexican border cities. "This will be the world's biggest free economic zone," he said during the Saturday speech.
Power and gasoline prices in this zone will match those in US border states such as California, Texas, New Mexico and Arizona, he added.
Lopez Obrador didn't say how he will achieve this goal, but cutting taxes might be an option to decrease fuel prices in border cities such as Tijuana, Reynosa and Ciudad Juarez.
Also, a 300-km economic corridor will be built between the ports of Coatzacoalcos and Salina Cruz in Southern Mexico, Lopez Obrador said. In this corridor, there will be low-cost gas and power and fiscal incentives to bring new industries.
Despite his promise to end Mexico's foreign dependence and decrease gas costs, Lopez Obrador reaffirmed his pledge to ban fracking as well any other oil and gas extraction method that harms nature and depletes water resources.
MAKING MEXICO FUEL SELF-SUFFICIENT
Lopez Obrador noted Mexico hasn't built a new refinery in the last 40 years, blaming this on neoliberal policies. Mexico used to be self-sufficient in refined products, but it now depends on imports to fulfill over half of its domestic demand, he added.
Within three years, he said Mexico would rehabilitate its six refineries and begin operating a new one in Tabasco state. With this achievement, the country will end gasoline imports and decrease fuel prices, he added.
Lopez Obrador said gasoline, diesel and power prices would be frozen nationwide, and these won't rise beyond inflation until new refining projects are completed.
"The energy reform, they told us it would save us. But it only has meant a decrease in our production and the disproportionate increase in gasoline, diesel gas and power prices."
Despite his disdain toward the reform, Lopez Obrador said he will respect contracts signed by the previous administration.
"I'm a trustworthy man and the investments from national and foreign investors are secured and I will create conditions to obtain good returns because Mexico will be a clear rule of law," he added.
Lopez Obrador said the country's energy sector must be saved from failed neoliberal policies. The previous administration promised the reforms would lead to oil output of 3 million b/d by 2018, but output has fallen to 1.76 million b/d, he added.
LACKLUSTER FOREIGN INVESTMENT
"Oil production has fallen to a point where crude oil is being bought to feed Mexico's six refineries," Lopez Obrador said. "This is a situation never seen before in our country."
"When the energy reform was approved four years ago, it was affirmed foreign investment would pour in like never before," he said.
Over the last four years, private companies have spent $760 million in upstream operators, only 1.9% of the investment made by Pemex during this period.
To date, Mexico has awarded 111 contracts under the energy reform. However, most of these have been for exploration acreage and marginal mature fields.
Under these contracts, operators have pledged to drill 131 wells. From these, 18 have been completed, and the remaining are expected to be completed in the coming four years.
SAVING PEMEX AND CFE
The incoming administration is going to "save" both state oil company Pemex and state power utility CFE, Lopez Obrador added.
"We are going to save again Pemex as General [Lazaro] Cardenas did in 1938," he said, referring to the nationalization of Mexico's oil industry.
Lopez Obrador said no more CFE power plants will be closed and instead will be modernized, and he reaffirmed his pledge to focus resources on Mexican hydropower. He also said Mexico would continue the development of wind, solar and geothermal power.
CFE's power plants are on average 34 years old, according to S&P Global Platts Analytics, the limit on the average lifespan of power plants in the US.
