At Any Price? Political Priorities and Economic Returns in Mexican Petroleum Licensing Rounds (2014-2017)

Abstract

The liberalization of the oil sector represents one of the most significant changes in Mexican economic policy in recent decades, but few studies have systematically evaluated its achievements against its promises. This article focuses on one of its key components: the oil bidding rounds (2014-2017). It argues that their institutional design subordinated economic rationality to the political objective of opening the sector at full speed, even in an adverse international oil price environment, in an attempt to ensure the irreversibility of the reform. From a comparative perspective, it shows that the use of contraindicated auction mechanisms (maximum limits for both additional royalties and the profit-sharing percentages that could be offered, as well as self-imposed restrictions regarding the collection of cash bonuses) adversely affected the potential economic returns of liberalization for the state. The article also explains why the public revenues generated in the oil auctions were significantly lower than those recorded in other countries during the same period.