USA stands for United States of America—the world’s No. 1 superpower. Yet USA has a national government that can’t reform its anti-economic tax code, can’t reform its ancient entitlement programs and can barely eke out a de minimis budget deal.
So it is a pleasant surprise, and frankly a bit embarrassing, to draw attention to a remarkable political event down Mexico way. On Thursday, Mexico’s Congress passed what could be the most transformative economic legislation there in a century. The members had a few fist fights and some screamed “treason,” but the lower House still voted to expose the state oil company, Petroleos Mexicanos, to the free market. And at 354-134, the vote wasn’t close.
t is hard to overstate what this means, both as a political accomplishment and potential boon to the economy of Mexico and North America. For most of the past century, Mexico has treated its state-owned oil company, Pemex, as part of the national patrimony. Permitting participation by foreign oil companies or investors in developing Mexico’s huge oil reserves was regarded as, well, unpatriotic. Reforming Pemex, like reforming America’s Social Security system, was the “third rail” of Mexican politics. Which meant that Mexico’s oil wealth sat underdeveloped.
Mexican President Enrique Peña Nieto was elected last year on a promise to change the status quo. This would be like the Democrats leading a real reform of the U.S. entitlement state. Mr. Nieto’s party, the PRI, was known for decades as “the dinosaurs.”
The new legislation alters the constitution to permit non-Pemex companies to join in exploration and production projects for oil and gas. Foreign companies will even be allowed to take control of produced oil. Mexico will have to make sure that the law’s implementing rules are written in a way that gives investors certainty that they can capitalize on their investment. But if they are, then Mexico will begin to emerge as a global energy powerhouse the way that Canada and parts of America have.
The surge in economic activity—in energy and related indutries—will add wealth and jobs for the Mexican people, who inhabit an economy that has underachieved for decades. The energy law continues a trend that began with a series of pro-market presidents and continued with the North American Free Trade Agreement in 1993.
Speaking of underachieving, the U.S. can’t even muster the political will to welcome the economic boon that would come from building a single pipeline to carry crude oil from Canada to Texas refineries. We don’t need fist fights in Congress to approve the Keystone XL pipeline. Just a simple yes from one U.S. President. Who’s a dinosaur now?