Regulatory Reform in Mexico's Gas Industry

Abstract

This paper addresses the economic considerations behind the regulatory policies that are being considered after the recent reforms to the gas legal framework in Mexico. These reforms let Pemex maintain its monopoly over production but allow private investment in transportation and distribution. The main challenge for gas regulation in Mexico is to develop a competitive structure when i) the initial condition is Mexico's upstream monopoly and ii) there is a dominant competitor in transportation. The paper discusses the solutions that are being designed during the elaboration of the gas regulatory framework. The main purpose is to describe how economic policy is responding to a fast evolving phenomena and to suggest topics for future research.