Energy Future

All eyes on Mexico as it opens up energy sector

Anmar Frangoul | Special to
All eyes on Mexico's energy sector

Latin America may be blessed with abundant energy resources, with Venezuela alone having more than 297 billion barrels of oil reserves, but investing in the region's energy industry has proved a risky business.

Several Latin American governments have raised the fears of energy companies and investors by nationalizing energy outfits operating in their countries – regardless of who owns them.

Evo Morales, President of Bolivia, has overseen the nationalization of his country's energy industry, while in 2012 the government of President Cristina Fernández de Kirchner in Argentina nationalized the country's largest oil company,Repsol-YPF, which was majority owned by the Spanish energy company Repsol.

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"The number of political nationalization policies that have gone on in Latin America have been a consistent play through the history of the sector," Robert Perkins, from Platts, said in a report for CNBC's Energy Future. "Those themes are still playing out today."

Where then, should investors look to put their money when it comes to Latin America. In 2014, there is one country everyone is talking about: Mexico.

In December 2013, after decades of state control, Mexican President Enrique Peña Nieto signed a law which enables foreign companies to drill for Mexican oil in partnership with state owned Pemex. The country's oil industry has been nationalized since 1938.

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This policy has resulted in criticism from Mexican opposition figures, who have accused the government of cashing in on the country's resources.

"Making fundamental changes is always challenging," Luis Videgaray Caso, the Mexican Secretary of Finance, told CNBC. "There… [is] some resistance to change. Mexico's energy sector has a lot of potential to create jobs and to lower the cost of energy to families and companies across Mexico. But for that, we need to have investment and we need to have technology that we currently don't have," he added.

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For Xavier Grunauer, progress in the Latin American energy sector will come from innovation.

"What's needed now is basically technology and an appetite for risks," he told CNBC. "It's smaller companies that are able to try and try again and make success. It is this kind of success that I think is probably the next stage that we'll see…in Argentina, Brazil, [and] Colombia," he added.

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