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Uncertain future for deepwater oil in Mexico's Perdido Basin: Houston consensus

Labor freedom in selected countries

Labor freedom in selected countries

The economics and political science of deepwater oil production in Mexico

The findings of the report provide a systematic framework for understanding complex, interlocking issues”
— George Baker

HOUSTON, TX, UNITED STATES, July 22, 2022 / -- This report identifies the factors of success for deepwater oil operations. In addition to geological potential, technology and capital, successful operations require a supportive institutional environment. Why, after 30 years, has Pemex failed to convert exploration in deepwater areas in Mexico into producing fields? The focus is on the Perdido Basin, which is located near the US-Mexico maritime boundary.

Seeking answers, the researchers applied macroeconomic tests to the regions on each side of the boundary. Making use of the scores by the Heritage Foundation in its Index of Economic Freedom, the report compares the institutions such as Rule of Law, Judicial Effectiveness and Government Integrity.

Unexpectedly, it is the institution of Labor Freedom where the most marked difference between the U.S. and Mexico is found. This finding points to the Pemex workplace, which, in the language that the Foundation applies to national economies, is repressed. An authoritarian workspace limits the diversity of ideas. A restrictive legal framework during 75 years made partnerships impossible. Two years after the passage of the Energy Reform in 2014, Pemex negotiated an equity partnership with the Australian mining company BHP Billiton in the deepwater Trión block.

"We downloaded the Foundation's database in Excel and compared the scores of Mexico's economic institutions not only to those of the U.S. but also to the global average," says George Baker, the principal researcher involved in the 2-year study. The findings of the report provide a systematic framework for understanding complex, interlocking issues, he adds.

An audio introduction to the report is available and sample pages may be downloaded.

George Baker
Mexico Energy Intelligence
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