With the increase in the demands for energy in recent years the government of Mexico has increased its budgeted capital, but due to its high tax burden the company has been forced to depend upon debts to finance the projects. PEMEX has been adversely affected by the increase in oil prices over the years and requires funding to stabilize its position in the market.
The main oil field Cantarell has reached its peak capacity of production and heavy investments is desirable coupled with explorations for new area for oil production as the current capacity of 3.3 million barrels per day would deplete towards the end of this decade. Being heavily taxed, the President of Mexico has relaxed the tax by $2.4 billion to be paid by the company next year. Despite the reserves Mexico has started importing oil at the rate of 374,000 barrels per day in the recent past due to non availability of refining process for oil and related products. The tax break and provision of favorable environment for the oil companies to undertake oil exploration is one of the major steps which the newly appointed President has taken over the period of time. There have been quiet an opposed reaction to the initiative as private investments is deemed to be loss of control over PEMEX. As PEMEX has invested more in oil exploration rather than investing in refineries for a quarter of the century, Mexico now imports 20% of its current capacity of oil and 25% of the natural gas based products.
The aim of the paper is to analyze and understand effect of PEMEX on the Mexican economy and society in general. The paper also analyzes the employment opportunity which private investments create and the favorable business environment for business growth.
Mexico has the second largest oil reserve after Venezuela among the western countries and the country has been ranked among the top five oil producing nations for crude and refined oil production.