Poor Revenue Management Affects Mexico’s Ranking in Resource Governance Index

• Mexico judged “satisfactory” in governance of oil and gas, ranks 17th out of 89 assessments
• Mexico’s mining sector ranked 19th, with a call for improved management of mining revenue
• Restructuring of state agencies and openness to private investment win guarded praise
• Researchers raise concerns over conflicts of interest, risk of corruption and poor environmental safeguards
• Reforms urged for some elements of PEMEX and FEIP governance

MEXICO CITY, 28 June 2017—A global index assessing countries’ oversight of natural resources has delivered a mixed verdict on some aspects of Mexico’s 2013 energy reforms, characterizing as positive efforts to draw in private investment but identifying significant gaps in governance.

The 2017 Resource Governance Index (RGI) is compiled by the Natural Resource Governance Institute (NRGI). NRGI gives Mexico’s oil and gas sector a score of 61 out of 100 points in the index, placing the sector 17th out of 89 assessments in the overall ranking.

The index finds that Mexico is performing satisfactorily in its oil and gas governance – energy reforms since 2013 have opened up the sector to private investment and prompted the restructuring of state agencies.

“Although Mexico has a highly sophisticated institutional framework, there are some striking gaps in the way the country oversees its oil, gas and mining industries,” said Carlos Monge, NRGI’s Latin America director. “There are real problems in Mexico with corruption, violence and state capture. The country has an effective state overall, but these issues spill over into the natural resource sector. We see it in symptoms such as limited disclosure of the interests of public officials in extractive enterprises, and opaque ownership of companies with which the government does business.”

Energy reforms enacted by successive Mexican governments have led to good practice in certain areas such as taxation, bidding processes, budgets and open data, researchers concluded.

“There are effective transparency champions within the central government, and a number of vocal civil society experts pushing for high standards,” Monge added. “Some institutions have not yet reached an adequate level of reporting and accountability. Concerns persist over the state-owned company PEMEX, the Fondo de Estabilizacion de Los Ingresos Petroleros fund and a new, complex revenue sharing system which is still at an early stage of implementation.”

NRGI also raised concerns over social and environmental safeguards – particularly with regard to project closures and resettlement requirements for local communities.

Scored separately from hydrocarbons, the country’s gold mining sector received 60 points, putting it in 19th place globally. In Mexico’s mining sector, information can be difficult to obtain. There is no online data portal, little visibility on licensing and there are major gaps in disclosures on local impact and revenue sharing. The industry, particularly gold mining, has traditionally faced less scrutiny than the oil and gas sector. There are serious concerns over environmental compliance and a lack of disclosure of social impact assessments.

NRGI recommended a number of steps to improve Mexico’s resource governance:

• Publishing the identities of beneficial owners of extractive companies
• Disaggregating payments from mining companies within taxation statistics
• Improving reporting and monitoring guidelines for FEIP
• Enhancing social and environmental disclosures
• Promoting a multi-stakeholder debate on key areas of governance
• Considering reforms to PEMEX, including addressing a lack of independence on the company’s board, restricting its non-commercial activities, and improving disclosure of commodity sale information

In his foreword to NRGI’s global report, former President Ernesto Zedillo Ponce de Leon wrote: “Poor management and corruption can take root anywhere, in countries rich or poor. These scourges cannot be eliminated everywhere, all of the time. But citizens, journalists, legislators, politicians, companies, investors and academics can work to mitigate them, and expose them early on—and that is where the data carefully compiled here by the Natural Resource Governance Institute become so valuable.”

Full results from the Resource Governance Index globally are available at www.resourcegovernanceindex.org

Media enquiries:
Lisa Carrillo
Burson-Marsteller
Lisa.carillo@bm.com
(+52) 55 5351 6571

Lee Bailey Communications Director
Natural Resource Governance Institute (London)
lbailey@resourcegovernance.org
T +44 (0)20 7332 6114
M +44 (0)7823 442 954

Note to editors:

The Resource Governance Index is the sum total of 89 sector-specific assessments in 81 countries (in eight countries NRGI assessed both oil and gas and mining sectors), formulated using a framework of 149 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents.

For each assessment, NRGI has calculated the composite score using the scores of three index components. Two of the components comprise new research based on expert answers to the questionnaire, and directly measure governance of countries’ extractive resources.

The first component—value realization—covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second—revenue management—covers national budgeting, subnational resource revenue sharing and sovereign wealth funds. The index’s third component assesses a country’s enabling environment. This componentdraws on pre-existing research to measure the broader governance context.