Thursday, February 20, 2014

It is not often that Americans look south of the border for solutions, but Mexico’s President Enrique Peña Nieto seems to have figured out a few things in his first year of power that has, in six years, eluded Obama.

Late last month, Peña Nieto spoke at the World Economic Forum in Davos, Switzerland. There, he highlighted his first-year achievements: “a legislative consensus with the two major opposition parties on the transformations and structural reforms that the country needed,” reports Mexico City’s The News. He pointed out that this has been achieved “in a climate of plurality and diversity.”

A few months ago, with great enthusiasm, I wrote about Peña Nieto’s proposed energy reforms—something his predecessor had been unable to achieve. (President Felipe Calderon’s critics believed his proposals violated the constitution.) The reforms passed on December 12, 2013, amend Articles 25, 27 and 28 of Mexico's constitution to allow profit- and production-sharing contracts, and licenses. The reforms also put an end to government monopolies in the operation of oil-and-gas fields, while maintaining the Mexican government’s ownership of the country’s resources.

“The current government’s ability to build coalitions puts Mexico on the verge of its biggest economic victory since the North American Free Trade Agreement,” states Arturo Sarukhan, who has served in Mexico’s Foreign Affairs Ministry.

The reform is important because one third of Mexico’s federal budget—including healthcare, schools, and infrastructure—comes from oil wealth that has declined 25 percent since its peak just a decade ago. It has the potential to transform Mexico’s economy by inviting foreign investment, which Peña Nieto successfully argued is needed to “allow Mexico to capitalize on its shale oil-and-gas deposits.”

Because almost all of the profits of Mexico’s state-owned oil company, Pemex, have gone back into the national coffers—and not into research and development—Mexico lacks the technical expertise to exploit its unconventional resources and deep-water deposits. Even in Mexico, the era of easy oil is over.

Fluvio C. Ruiz Alarcon, an independent director at Pemex, explains: “It will be vital to improve its technological competencies if Pemex is to remain competitive. It will need firm partnerships with companies from other countries.” He adds: “Pemex will need to change from a public entity to a productive state enterprise.”

Not everyone is happy. The day the reforms were signed, protesters pounded on metal barriers with rocks and spoons. Riot police stood guard. Inside, Reutersreported: “Critics lamented the energy reform as an act of submission and the end of an era, tapping into the pride many Mexicans still feel over President Lazaro Cardenas’ move to expropriate foreign oil companies' assets in 1938 and create Pemex.” More than 1.6 million signatures have been gathered on a petition demanding a referendum on energy reform.

Sarukhan believes “There will be challenges.” He says: “One will be making sure the victory which has been won can be translated into public opinion. Privatization is still a dirty word to many people. … The devil will be in the details, which will be worked out in the next few months.”

In a thorough discussion of the topic, titled: “Mexico's energy reforms: can Mexico emerge as a prime global oil & gas industry expansion prospect?” Roman Kilisek posits: “Here a difficult balancing act needs to be struck: Mexico has to offer international companies attractive enough returns on capital employed to make them willing partners in developing its oil and gas wealth while retaining good enough ‘equity stakes’ in joint projects to benefit and placate Mexicans.”

The critical phase of drafting the laws to implement December’s energy reform bill began February 1.

These laws will spell out the terms and conditions for foreign international oil companies to explore and develop Mexico’s deep-water and shale resources. reports: Mexican Congress has 12 months to develop energy-related environmental regulations and to establish the National Center of Natural Gas Control and the National Energy Control Center.”

Peña Nieto’s energy reforms are not a sure thing, but he understands how important developing Mexico’s energy resources are to economic growth—something that seems lost to Obama.

In his Davos comments, Peña Nieto said that Mexico is committed to “conditions of security and legal certainty.” And that “we’re seeking to be more competitive.” These attitudes, combined with the ability to “build coalitions” should offer lessons to President Obama.

Another thing that could be learned from Peña Nieto is that lower energy prices are the key drivers of economic growth. His energy reform also tackles electricity.

While most of the focus on Mexico’s energy reform has been on the oil-and-gas sector, Peña Nieto’s plans also end the monopoly held by the national utility CFE. Mexico’s manufacturing and commercial customers currently pay a surcharge for electricity, while residential, agricultural and service industry users’ rates are subsidized.Barclay’s Marco Oviedo, points out: “Mexican industry this year has paid 45 percent more for its electricity than factories in the U.S.”Even though residential customers’ rates are subsidized, they are still, according the Financial Times: “Among the highest in the 34-member Organization for Economic Co-operation and development.”

Francisco Salazar, head of CRE, the country's regulatory energy commission, has called the high price of electricity in Mexico: “a deterrent to investment.”

Reuters reports:About half of Mexico's current electricity is generated from natural gas, up dramatically since 2000, when costlier, dirtier fuel oil was the major electricity fuel.” Despite its vast, albeit inaccessible with Pemex’s current technology, supplies—estimated to be one of the world’s largest shale gas resource bases—Pemex is building pipelines to bring cheap U.S. shale gas into Mexico. The Los Ramones natural gas pipeline will bring natural gas from Texas’ Eagle Ford shale—which extends into Mexico and may be even bigger than the portion on the U.S. side of the border—into Mexico’s industrial heartland. Kilisek believes that it will take years for Mexico to unlock those reserves, “while facing a severe natural gas shortage in the meantime.” He says that by the time the Los Ramones pipeline is finished, “natural gas demand will have already outstripped the pipeline’s capacity.” To meet the demand, Pemex is importing Liquefied Natural Gas at more than five times the price of gas in the U.S.Rafael Ch, an energy researcher with Mexico's CIDAC think tank, says: “The main problem is that we just don't have the capacity to meet our future electricity demand.”

Peña Nieto understands the need to build pipelines to bring the needed supplies into the country.

Meanwhile, in America, we’ve been waiting for five years for the Obama administration to approve the Keystone pipeline. Peña Nieto understands that lower energy costs will help his country be competitive. Obama’s policies have increased electricity prices—both residential and industrial—in the U.S.

Having just spent the past week in Mexico, where I observed many impoverished communities, I am keenly aware of the need for Mexico to lift its standard of living and increase economic growth, which Peña Nieto understands energy can provide. As America’s economic numbers slip, this, too, is a lesson Obama needs to learn.


Biden: 'We May Not Get to 7 Million' by Obamacare Deadline

Vice President Joe Biden acknowledged on Wednesday that it will be hard to reach the target on the number of people signing up for health insurance by a looming March 31 deadline for Obamacare enrollment.

The Congressional Budget Office had originally forecast that 7 million people would sign up for insurance, many with help from subsidies provided under the Affordable Care Act, commonly called Obamacare.

But the program got off to a rough start in October when a website used to shop for insurance plans failed to work for almost two months. The nonpartisan CBO recently trimmed its enrollment forecast for 2014 to 6 million.

Biden, on his way to a Democratic National Committee fundraiser in Minneapolis, spoke with a small group of people in the city who are working to help others sign up for insurance, and thanked them for their work.

"We may not get to seven million, we may get to five or six, but that's a hell of a start," Biden said, according to a pool report of his meeting.

The Obama administration said last week that 3.3 million people have enrolled in private Obamacare health plans between Oct. 1 and Feb 1.

The deadline for 2014 coverage is March 31, and the administration and allied groups are pushing to convince more uninsured people in big cities to sign up.

DHS alerts airlines to possible shoe-bomb jihad threat

  / Townhall Columnist
140219-international-shoe-security-jms-1612_fbdaeda38d96fadf39d0ca34ba0d7682.nbcnews-ux-960-700DHS didn’t say “jihad,” of course. As far as the DHS is concerned, there is no jihad to be concerned about; “right-wing extremists” are much more worrisome. Yet it was not a “right-wing extremist,” but an Islamic jihadist, who several years ago tried to commit mass murder on an airplane with explosives hidden in his shoes.

“Homeland Security Alerts Airlines to Possible Shoe-Bomb Threat,” by Pete Williams and Robert Windrem for NBC News, February 19 (thanks to Kenneth):
The Department of Homeland Security on Wednesday told airlines about a potential new shoe-bomb threat and urged them to pay extra attention to flights from overseas into the United States.
Several officials familiar with the advisory told NBC News that “very recent intelligence” considered credible warns of possible attempts to attack passenger jets using explosives concealed in shoes.
As a result, officials say, airlines will be playing extra attention to passenger shoes on flights to the US from overseas. Those passengers may also experience increased scrutiny in pat downs and full-body screening.
The bulletin to airlines urges screeners to use the explosive trace detection swabs to check shoes that are worn and in carry-on bags.
The officials say the threat information was not specific to any particular airline, country, or time.
There is no indication of a specific plot, they say.
But after assessing the information, the Department of Homeland Security advised airlines earlier Wednesday of the possible threat and urged greater security scrutiny on U.S.-bound flights.
One official described the level of concern over this new information as moderate.
“It’s a reminder that we are under constant threat and an advisory to airlines be on their A game,” said another official familiar with the threat intelligence.
The threat information is unrelated to the Winter Olympics in Sochi, Russia, several officials said.
“Out of an abundance of caution, DHS regularly shares relevant information with domestic and international partners about relevant threat information as we work to meet our mission of keeping the traveling public safe,” the Department said in response to a question from NBC News. “hese types of regular communications are part of that important priority.
“Our security apparatus includes a number of measures, both seen and unseen, informed by the latest intelligence and as always DHS continue to adjust security measures to fit an ever evolving threat environment.”
British national Richard Reid — the “Shoe Bomber” — first raised the specter of such threats just three months after the Sept. 11, 2001 terror attacks when he attempted to ignite bombs hidden in his sneakers on a Paris-to-Miami flight.
Reid was subdued by passengers and crew. He pleaded guilty to terrorism charges in 2002 and is now serving a life sentence at a maximum security federal prison in Florence, Colo.
Since the botched attack, federal security officials have screened the shoes of most airline passengers at security checkpoints.