Mexico THA Aff DW

Notes

What is the Transboundary Hydrocarbons Agreement?

USDOS 2-20-2012; US Department of State, U.S.-Mexico Transboundary Hydrocarbons Agreement
http://www.state.gov/r/pa/prs/ps/2012/02/184235.htm Elements of the Agreement

The United States and Mexico jointly announced their intention to negotiate a transboundary hydrocarbons agreement on June 23, 2010, following the Joint Statement adopted by
Presidents Obama and Calderon at the conclusion of President Calderons State Visit to Washington on May 19, 2010.

Upon entry into force, the current moratorium on oil exploration and production in the Western Gap portion of the Gulf of Mexico will end. The Agreement establishes a cooperative process for managing the maritime boundary region that promotes joint utilization of transboundary reservoirs . The Agreement provides a legal framework for possible commercial activities at the maritime boundary and sets clear guidelines for transboundary developments. It establishes incentives for oil and gas companies to voluntarily enter into arrangements to jointly develop any transboundary reservoirs. In the event such an arrangement is not achieved, the Agreement establishes a process by which U.S. companies and PEMEX can individually develop the resources on each side of the border while protecting each nations interests and resources. The legal certainty created by the Agreement will enable U.S. companies to explore new business opportunities and carry out collaborative projects with PEMEX. The Agreement also provides for joint inspections teams to ensure compliance with applicable laws and regulations. Both governments will review all plans for the development of any transboundary reservoirs.

US-Mexico Relations Advantage

1ac cards
First, the plan averts relations disasters from energy disputes in the Gulf BBC News 2/20/12 US and Mexico agree Gulf of Mexico oil cooperation
http://www.bbc.co.uk/news/world-latin-america-17108286 The US and Mexico have agreed to work together to develop deep-water oil and gas fields that straddle their maritime border in the Gulf of Mexico.The deal was signed at a meeting of the G20 group of
industrial and developing countries in Los Cabos, Mexico.US Secretary of State Hillary Clinton said it would ensure responsible energy exploration in the Gulf.Mexican President Felipe Calderon said it would ease Mexican fears that their oil might be appropriated by the US.The deal, negotiated last year, was signed by Mrs Clinton and the Mexican Foreign Minister Patricia Espinosa, with President Calderon acting as a witness.It ends

a moratorium on oil development near the maritime boundary in the western Gulf and sets up a legal framework for companies to develop cross-border fields jointly."These reservoirs could hold considerable reserves that could benefit the US and Mexico alike, but they don't necessarily stop at our maritime boundary. This could lead to disputes," Mrs Clinton said."The agreement we are signing today will help prevent such disputes ," she added.Mrs Clinton also stressed that it would allow US companies to work in partnership with the Mexican state oil company Pemex for the first time. President Calderon said the deal would boost Mexico's energy security and increase revenues from Pemex, which account for about a third
of government income."This agreement was negotiated under the invariable principle of respecting the sovereign rights of each country to its natural resources," he said."Mexico's oil wealth belongs and will continue to belong to the Mexicans," he stressed.Both countries affirmed that the deal would also ensure greater environmental protection - a key concern after

the huge Deepwater Horizon oil spill in the Gulf in 2010. Mexico is a major oil and gas producer but is well behind the US in developing deep water fields in the Gulf.

Second, it sends a key signal of sustainable cooperation Martin 5/3/13 (Jeremy Martin, Duncan Wood, U.S. Should Act Quickly on Transboundary
Hydrocarbon Agreement With Mexico, http://www.worldpoliticsreview.com/articles/12923/us-should-act-quickly-on-transboundary-hydrocarbon-agreement-with-mexico)
On this last issue, it is likely that the

Hydrocarbons Agreement, signed with much fanfare in Los Cabos in February 2012. The agreement creates a framework

Mexican president inquired about the status of the Transboundary

for resolving the thorny issue of ownership of oil and gas reserves that exist acrossor rather underneaththe international border between Mexico and the U.S. in the Gulf of Mexico. This proposed framework would put to rest long-standing

Mexican fears of the efecto popote, or straw effectthe idea that U.S. companies aim to slurp up Mexican oil reserves from across the nations maritime border. The 2012 agreement marked a major shift by providing legal certainty for exploration and production activities near the border, and by allowing for the prospect of long-prohibited joint development of reserves that straddle the Gulf waters of both countries. At its core, the agreement seeks to set up legal guidelines for companies to jointly develop so-called transboundary reservoirs and lift the moratorium on oil and gas exploration and production for roughly 1.5 million acres in the Gulf. Mexico underscored its commitment to the agreement by quickly ratifying it; the Mexican Senate approved the

treaty in April 2012. In the United States, meanwhile, progress stalled for more than a year. But just in time for yesterdays bilateral meeting, the agreement is again under discussion as legislators revive the dormant ratification process, which is good news for those eager to see its approval in the U.S. Indeed, according to the White House, Obama spoke in positive terms yesterday about the recent progress made on the agreement: Both the House Subcommittee on Western Hemisphere Affairs and the House Committee on Natural Resources recently held hearings focused on the challenges and opportunities that approval of the accord would present for the United States. On April 18, a bill was introduced in the House of Representatives that would make way for the approval and implementation of the terms of the agreement. These are all positive steps, and their progress will be monitored closely by U.S. and international observers, especially Mexico. But it bears underscoring that further delay in U.S. adoption of the

agreement makes little sense. The agreement is not an overly polarizing issue domestically: in fact, quite the opposite. Several lawmakers have described it as a win-win for both Mexico and the U.S. As the U.S.

Congress debates the deal, it is worth revisiting the four key reasons the agreement merits an expeditious approval in the coming weeks. First, approval of the deal in the U.S. would be an important sign of bilateral

concord, particularly at the outset of a new administration in Mexico and a second term for Obama. This is important, as it underscores the two nations' increasing ability to work together and conclude complicated agreementsand cooperationon binational issues unrelated to immigration or
crime and drugs. Second, this agreement makes clear that both nations are keenly aware of the energy potential of the Gulf, particularly along the maritime border. But it also firmly establishes the issue of increased regulation

and standards for drilling in a bilateral agreement. Since the April 2010 Macondo accident, the largest oil spill in U.S.

history, the U.S. has been more concerned with drilling safety not just in the U.S. but also in neighboring countries around the Gulf such as Cuba and Mexico. This agreement formalizes interaction in terms of regulation and any

responses to incidents along the maritime border. Third, then-Secretary of State Hillary Clinton was correct to emphasize the commercial opportunity and energy security element of the accord when it was first announced. The agreement provides the possibility for U.S. firms to join with Mexicos national oil company, Pemex, to exploit deep-water oil resources in the Gulf of Mexico along the countries' maritime boundaries. This could provide important opportunities for U.S. companies, including exciting joint venture opportunities with Pemex long thought impossible.

XT Brink
U.S. Mexico relations strained by border securitys ramping up
Public Radio International 6-26-13 (Repost by Enrique Acedevo on Bostons WBUR, host @
Public Radio International, Mexican Journalist Urgest US to Act Cautiously When Beefing Up Border Security, 6-26-13 http://www.pri.org/stories/politics-society/government/mexican-journalist-urges-u-sto-act-cautiously-when-beefing-up-border-security-14211.html)

Some $30 billion would be spent to increase patrols and fencing on the border between the United States in Mexico funding that's viewed as being key to securing enough Republican support for the broader initiative. But Mexican journalist and Univision news anchor Enrique Acevedo argued in an opinion piece for ABC that the U.S.-Mexico border is already one of the most intensely patrolled places on earth, and adding more money for more security, including 700 miles of new fencing, is a bad plan. Acevedo says increased spending over the last two decades has led to migrant deaths steadily increasing, while human trafficking organizations, mostly run by Mexican drug cartels, have seen a boom in business. "Rather than viewing border enforcement as part of a broader strategy, border enforcement became the only strategy to stop undocumented immigrants from coming across the border," he wrote. "This security-based
approach has led to a degradation of the quality of life for once dynamic border communities as well as grave human rights violations." U.S. Sen. John McCain, R.-Ariz.,

speaking to CNN Tuesday morning said this bill would make the U.S.Mexico border the most militarized frontier since the fall of the Berlin Wall. And that's no good, according to Acevedo. Acevedo said the new plan will provide enough money for 40,000 armed border patrol agents, or one roughly every 250 feet if they lined up together at the same time, will only suffocate the border "it won't seal it." "Millions of people live in these border
communities and ... we're going to have one of the most militarized borders in the history of mankind, with a friend and a partner like Mexico," he said. "It's bad on many levels. It's bad for the bilateral relations with Mexico.... It's also going to hurt the environment,

many species will be endangered. And finally, it's going to represent a challenge in human rights." Further, Acevedo says, our history of border patrols show only limited success, decades gone by and billions of dollars spent, with the biggest dent in border crossings coming from the 2008 economic collapse. "That has been the only time in the last 40, 50 years where we've had an actual reduction ... of illegal immigration into this country," he said. Acevedo says the better way to handle immigration is to look at the economy in general and U.S. employers specifically to try and make it
so immigrants are less interested in risking so much to come here.

U.S. Mexico relations are one the brink

Laura Carlsen 11 (holds a B.A. in Social Thought and Institutions from Stanford University
and a Masters degree in Latin American Studies, also from Stanford and works for Center for International Policy, US Mexico Relations Back on Track in the Wrong Direction, Americas Program, 4-3-11 http://www.cipamericas.org/archives/4068)

The presidential meeting this week between Mexicos Felipe Calderon and Barack Obama looked from the outside like a hastily arranged exercise in damage control. But while most analysts emphasized the tensions between the neighboring nations going into the meeting, the real crisis behind the visit was the failure of

what the two leaders most strongly agree on: the war on drugs south of the border. Following a lengthy closed meeting, the presidents stood before the cameras to reaffirm their mutual commitment to a war that has cost 35,000 Mexican lives since 2007, with the death toll rising by often 50 homicides a day. Obama affirmed the U.S. strategy of increased engagement in the Mexican drug war, stating We are very mindful that the battle President Calderon is fighting inside of Mexico is not just his battle, its also ours. He promised to deliver $900 million this year of funds appropriated under the Merida Initiative, a security agreement launched in 2007 by the George W. Bush administration and extended indefinitely under Obama. The bi-national

relationship suffered some serious blows in the weeks preceding Calderons Washington visit. The release of thousands of Wiki-leaks cables between the U.S. Embassy in Mexico City and the State Department revealed U.S. officials deep concerns regarding the Mexican governments capacity to carry out its high-risk war on drug cartels and wavering public opinion. Cable 10MEXICO83, for

example, states that the GOMs (Government of Mexicos) inability to halt the escalating numbers of narco-related homicides in places like Ciudad Juarez and elsewhere has become one of Calderons principal political liabilities as the general public has grown more concerned about citizen security. The cable cites official corruption, inter-agency rivalries, dismal prosecution rates and a slow and risk averse Mexican army. In an interview with El Universal, Calderon responded angrily, calling the statements exaggerated, the ambassador ignorant and citing a lack of inter-agency coordination within the United States. Continued releases of the cables by the Mexican daily La Jornada promise more embarrassments for both governments in attempting to portray a confident and united front in the drug war. Tensions also followed the assassination of Jaime Zapata, a U.S. Immigration and Customs Enforcement agent in San Luis Potos on Feb. 15. Although the Mexican government has arrested the alleged attackers members of the Zetas drug cartelthe incident highlighted the risks of the drug war cooperation and the power of the cartels. The Mexican governments contradictory statements on what happened and the armys absurd hypothesis that the assassins did not know they were attacking U.S. agents (the agents car bore US diplomatic plates) only deepened perceptions of a

lack of transparency. Within Mexico, the incident heightened fears that the U.S. government would demand more direct

involvement, in particular a lifting of the ban on foreign agents bearing arms within Mexican territory. A recent spate of comments from high-ranking U.S. officials served to fan the flame of distrust of the U.S. government. Sec. of Homeland Security Janet Napolitanos speculated out loud of possible links between Mexican drug cartels and Al Qaeda, and Undersecretary of the Army Joseph Westphal characterized organized crime in Mexico as an insurgency, while openly raising the specter of US troops being sent in. Mexican columnists and anti-militarization activists have intensified criticism of U.S.

growing involvement in the countrys national security. These tensions arise from the commitment of both governments to deepen and reinforce a military alliance based on a drug war that is rapidly losing the support of their populations and proving itself counterproductive.
The central concern of the presidential summit wasnt the relatively superficial frictions between the countries, but the des ire to bolster the beleaguered drug war. Despite talk of a deteriorating relationship, in fact the Calderon and Obama administrations are overseeing the birth of historically unprecedented cooperation between the two nations. The problem is that nearly all of that cooperation centers on the severely flawed approach to confront transnational drug-trafficking. The Mexico City US Embassy has expanded into a massive web of Washington-led programs and infrastructure. The controversial Merida Initiative, up for another round of funding in Congress, has allocated more than $1.5 billion to help fight Mexicos drug war with devastatingly negative effects. In addition to the rise in violence, the binational relationship, which should be multi-

faceted and focused on peaceful co-existence, has been hijacked by proponents of a war model to

reduce illicit drug flows to the U.S. market and confront organized crime where it is most powerfulin brutal battle. The Pentagon is thrilled with its open access to the Mexican security apparatus and the Calderon governmententering election modeneeds the political and economic support for its flagship war policy. But the new relationship forged in war rooms is bad

news for the Mexican people. Polls now show that the majority of the population does not believe its government is

winning the war on drugs and feels the social costs are too high. A new movement called No More Blood has taken hold throughout the country and regions like Ciudad Juarez, where militarization has been heaviest and not coincidentally violence has taken the highest toll, have seen the rise of grassroots movements to defend human rights, call for an end to militarization and put forward alternative strategies. Among their demands is to re-channel scarce resources away from the attack on cartels to address social needs, restore the armed forces to their constitutional mandate of national defense, and end impunity for crime by fixing the judicial and public security systems and attacking government corruption. Its also bad news for the U.S. public. Opening up a war front in Mexico has not only destabilized our closest neighbor, but also drains resources needed in U.S. communities. The government-funded contracts granted to Blackwater and Blackhawk to fight Mexicos war could be used for schools in crisis. With an on-going economic crisis and two wars across the ocean, the prospect of long-term involvement south of the border hurts all but the flourishing war economy.

US-Mexico Relations down

US Mexico Relations are distant Sandra Dibble Miami Herald Writer 3/7/11 Former Mexican president sees U.S.-Mexico
relations as cold, distant http://www.utsandiego.com/news/2011/Apr/07/former-mexican-president-sees-us-mexicorelations-/ Former Mexican President Vicente Fox spent Thursday on the University of San Diego campus, where he delivered a speech titled, Advancing U.S.-Mexican Relations in the 21st Century. He spoke about immigration, security, drug trafficking, economic cooperation and the development of
his Centro Fox research center in his home state of Guanajuato, which also houses his presidential library Mexicos first. The following are excerpts from his talk, remarks made at a news conference and a separate interview with The San Diego Union-Tribune at the Trans-Border Institute. Fox's visit was sponsored by the Trans-Border Institute and the Center for Community Service Learning.Q: How do you see the U.S.-Mexico relationship? A: Its

cold, its distant, its beginning to be conflictive. It never has happened before that a U.S. ambassador to Mexico resigned, or he was resigned. ... We have a big black cloud on the future of this relationship. Were not having a vision of the future and where we should go.

US Mexico Relations are Strained Over Drugs E. EDUARDO CASTILLO, Associated Press 2/22/11 Mexico President: US Doesn't Help
Enough in Drug War http://cnsnews.com/news/article/mexico-president-us-doesnt-helpenough-drug-war
Mexican President Felipe Calderon says the U.S. government isn't doing enough to help Mexico in its fight against drug cartels.He

also isn't happy about U.S. diplomatic cables that he contends wrong ly criticized Mexico's antidrug strategy, saying U.S.-Mexico relations were strained after the documents were made public by WikiLeaks."I have found cooperation on this matter with President (George W.) Bush and with President (Barack) Obama, but obviously institutional cooperation ends up being notoriously insufficient," Calderon told
the Mexican newspaper El Universal in an interview published Tuesday.Calderon said the U.S. government should help by reducing drug use in the United States, the biggest consumer of illegal drugs in the world, and by stemming the flow of automatic rifles to

can Americans cooperate? By reducing drug use, which they haven't done," Calderon said. "And, the flow of weapons hasn't slowed, it has increased."
Mexican drug gangs."How

US-Mexico Relations Impacts

Drug Cartels
US-Mexico relations key to battling drug cartels
Tyler Keefe and Valentina Perez 12 (authors @ Harvard University Institute of Politics, The War On Mexican Cartels: Options for US and Mexican Policy Makers, September 2012, http://www.iop.harvard.edu/sites/default/files_new/research-policypapers/TheWarOnMexicanCartels.pdf)
In combination with law enforcement agencies, the

U.S. military and the intelligence community have been playing key roles in the fight against the cartels. In August 2011, the United States posted small numbers of CIA operatives and civilian military employees to Mexico to assist with intelligence collection, training, and operational planning. These efforts are being made to get around Mexican laws that prohibit foreign

military and police from operating on its soil, and to prevent advanced American surveillance technology from falling under the control of Mexican security agencies with long histories of corruption.89 Despite current efforts by the United States to assist with the Mexican Drug War, the violence is increasing and the cartels are gaining ground. The United States must reassert

its efforts in order to roll back the influence of the cartels and end their reign. We advise a two front approach to combatting the cartels: reducing the large demand for drugs in the U.S., and collaborate with the Mexican government to target the cartels in Mexico.

Good relations are needed to cooperate when dealing with drug cartels
Clare Ribando Seelke 13 (Specialist in Latin America @Congressional Research Office, Mexicos New Administration: Priorities and Key Issues in U.S.-Mexican Relations 1/16/13 http://www.fas.org/sgp/crs/row/R42917.pdf)
Upon his inauguration, President Pea Nieto

broad pillars: reducing violence; combating poverty; boosting economic growth; reforming education; and fostering social responsibility. He then signed a Pact for Mexico agreement with the leaders of the PAN and leftist Party of the Democratic Revolution (PRD) containing legislative proposals for implementing an agenda that includes energy and fiscal reform. Although the pact may ease opposition in Mexicos Congress, Pea Nieto could face other constraints such as violence perpetrated by

announced a reformist agenda with specific proposals under five

Mexicos powerful criminal organizations and the performance of the U.S. and global economies. Some analysts maintain that the prospects for reform under this administration are good, while others are more circumspect. U.S.Mexican relations grew closer during the Felipe Caldern Administration (2006-2012) as a result of the Mrida Initiative, a bilateral security effort for which Congress has provided $1.9 billion. Some Members of

Congress may be concerned about whether bilateral relations, particularly security cooperation, may suffer now that the party controlling the presidency has changed. Although the transition from PAN to PRI rule is unlikely to result

in seismic shifts in bilateral relations, a PRI government may emphasize economic issues more than security matters. President Pea Nieto has vowed to continue U.S.-Mexican security cooperation, albeit with a stronger emphasis on reducing violent crime in Mexico than on combating drug trafficking; what that cooperation will look like remains to be seen. He has also expressed support for
increased bilateral and trilateral (with Canada) economic and energy cooperation.

Relations key to US funding, drones, training of police forces against drug cartels
Jorge Dominguez and Rafael Castro 10 (editors of Contemporary US-Latin American Relations: Cooperation or Conflict in the 21st Century?, Chapter 2, published 2010 by Routledge Taylor & Francis Group in New York and London)
President Calderons objective was plain: the state must exercise its monopoly of force. He deployed 27,000 troops within eleven Mexican states to achieve this objective instead of continuing to rely on law enforcement agencies.

Calderon ordered Mexican security forces to intensify their cooperation with their US counterparts. Within the opening months of the new administration, as a result of systematic investigations, 284 Federal

Preventative Police and Federal Investigative Agents were dismissed, including all thirty-four regional PFP coordinators; thousands

of other Mexican officials were also dismissed for drug traffic-related corruption. The

US government responded eagerly. Cooperation with the Mexican Navy increased. US agencies trained thousands of Mexican law enforcement agents in 2007, Calderons first year in office. As the US Department of State put it in its official report for 2007, The Calderon Administrations courage, initiative and success have exceeded all expectations, in
particular celebrating its using the military to re-establish authority and counter the cartels firepower. Bush and Calderon met in Merida in March 2007. They expanded bilateral and regional counter-narcotics and security

cooperation. US and Mexican officials met behind closed doors over several months to craft Plan Merida. On May 22, 2007, Mexicos full draft proposal called for the exchange of intelligence and focused on US support for training Mexicans. Mexico insisted that no US troops would enter Mexican territory, nor would US civilian agents participate in operations in Mexico. On October 22 2007, the two governments issued their first public joint statement, announcing the multiyear Plan Merida to assist Mexico and Central American countries to combat drug trafficking and other criminal organizations.

Terorrism
Terrorists are entering through the US Mexico border by way of human smuggling
Nathan Whitfield 11 (Naval Postrgraduate on US-Mexican Security, TRAVELING THE TERROR HIGHWAY: INFILTRATION OF TERROR OPERATIVES ACROSS THE U.S.MEXICO BORDER, December 2011, http://www.dtic.mil/dtic/tr/fulltext/u2/a556477.pdf) Far more sinister than individuals seeking higher paying jobs or a better quality of life, terrorists seeking to conduct destabilizing attacks on U.S. soil could exploit these well-established human trafficking routes to gain undetected entry into the U.S. With so much attention focused on our endeavors to
defeat terrorists in Iraq, Afghanistan, and other foreign countries, we forget that conducting a dramatic attack in the U.S. continues to be a top operational goal for transnational terrorist organizations.5 In many senses, immigration is the indispensable asymmetric weapon, making America not only a target for terrorism, but also an ideal staging ground for such attacks.6 Despite significant successes in border and immigration enforcement, only

the U.S. Border Patrol (USBP).7 With such a large number of personnel potentially slipping across the border undetected, there exists the distinct likelihood that terrorist operatives could be successfully smuggled into the U.S. across the U.S.-Mexico border. Terrorist organizations possess three options for developing terror networks within a country. First, they can legally infiltrate operatives through visa or asylum programs, who then melt into the host country population. Second, terrorists can illegally infiltrate operatives. Illegal infiltration can be achieved by two methods: utilizing fraudulent documents or taking advantage of corrupt authorities to cross at traditional ports of entry. Alternatively, terrorists can illegally cross the border in between traditional ports of entry. The first method carries the

1030% of illegal immigrants are detained by

inherent risk that fraudulent documents may be detected and the potential operative subsequently detained by law enforcement. For its part, illegal entry between ports of entry also carries risks, however, it has the advantage of keeping the operative anonymous and hidden from law enforcement. Finally, and in combination with the first two methods, a homegrown terrorist operative can be developed. Homegrown operatives are assimilated citizens who possess rights and often lack any distinguishing features or history that would identify them to law enforcement. All three options offer distinct advantages and disadvantages. While this thesis will present evidence of homegrown terror operatives, its main focus will be to investigate the potential for illegally infiltrating operatives between traditional ports of entry as a means to establish terror networks and activities within the U.S.

Border Cooperation
Relations key to border cooperation
Sarah M. Shore 11 (@the Foreign Policy Assosciation, Great Decisions 2012 Preview: US and Mexico, 11/22/12 http://www.fpa.org/features/index.cfm?act=feature&announcement_id=92)

From border security and immigration to trade and investment, Americans see the impact of the U.S.-Mexico relationship on a daily basis. Despite deeply ingrained links between the two nations, the relationship has been marked by significant rough patches. A growing fence, patrol agents and violence along the border underline wavering economic and political partnerships. No U.S. president visited Mexico between 1979 and 1998. As relations today continue to oscillate, the Mexican-American community becomes only more important. At 10% of the U.S. population, Mexican-Americans comprise the majority of the Hispanic community, which at 16%
is the largest minority in the country. Economically, Mexican immigrants have been and continue to be a key part of the American workforce. Today Mexico is in the midst of a dangerous drug war, how will the U.S. aid its neighbor to

the south? What is the future of U.S.-Mexican relations?

Latin American Relations

Relations are strategically key
Stratfor Global Intelligence 13 (Global Awareness and Guidance program and think-tank based in
Texas, Evolving Us-Mexico Relations and Obamas Visit, 5/2/13 http://www.stratfor.com/analysis/evolving-us-mexico-relations-and-obamas-visit)

When U.S. President Barack Obama travels to Mexico on May 2, he will arrive amid a period of sweeping transformation in the country. Embroiled in myriad political battles and seeking to implement an extensive slate of national reforms, Mexican President Enrique Pena Nieto's administration has been focused almost solely on internal affairs. Meanwhile, after years of delay, the U.S. Congress has been debating gun control and immigration reform -- two issues of serious interest to the Mexican government. U.S.-Mexican relations are strategically important to both countries, and Mexico's period of transition has created opportunities for each to reshape the partnership . And although U.S. media attention has focused primarily on bilateral security issues ahead of Obama's visit -namely cooperation in Mexico's drug war -- the Pena Nieto administration is working with Washington to reorient the cross-border conversation to one centered primarily on mutual economic possibility.

Decisions between US and Mexico affect Latin America

Michael Shifter 08 (prof @ Miller Center of Public Affairs at the University of Virginia, US Latin American Relations: Recommendations for the New Administration, 10/27/08 http://www.thedialogue.org/page.cfm?pageID=32&pubID=1625)
Regardless of how one comes down on the issues of Cuba, immigration, drugs, and trade, the paternalistic impulse on the part of the United States has been unmistakable. Latin Americans find this tutorial attitude extremely irritating, and their objections have prompted a more collegial tone from the United States in certain cases. Unfortunately, it is still manifest in a variety of ways, from the overall diplomatic style to specific policies like drug cooperation decertification or suspending military training for countries that do not sign agreements that exempt US soldiers from prosecution under the International Criminal Court. While

domestic politics is never completely divorced from foreign policy, it has an inordinate and particularly distorting influence on Latin American policy. Hardliners and liberals alike rarely consider the effects policies and statements will have on US-Latin American relations or the ultimate impact for US interests. The decision to build a wall along the US-Mexico border, for example, may have been politically expedient but was deeply insulting, not only to Mexico, but to the entire region. Close to the top of the list of foreign policy
priorities for the next US administration should be addressing the security challenge in Mexico. President Bush was right when he said at the White House on September 5, 2001 that Mexico

was our most important relationship. The reasons for Mexicos significance are obvious: the countrys 2,000 mile border with the United States, the robust trade relationship under the 1994 North American Free Trade Agreement, the high levels of tourism and immigration, the environment, and an array of other important bilateral issues. These deepening connections are the product of dramatic
shifts of technology and capital, reduced trade barriers, and remarkable cultural intermingling. The interplay of global forces and national trends has shaped two other central traits in Mexico. The first is its increasingly open, competitive and democratic politics. It has been nearly a decade since Mexico witnessed the alternation in power to the National Action Party (PAN) after seven decades of rule by the Institutional Revolutionary Party (PRI). As in all such situations, the country is a blend of the old and the new, but the overall tendency is toward greater give-and-take and less authoritarian control. The second trait is markedly less benign, an example of a far darker side of globalization. Mexico has increasingly become a main locus of organized crime, principally fueled by drug trafficking, with deadly consequences. Because of this pernicious phenomenon, there are now nearly 3,000 murders per year in Mexico, more than in Iraq. The rule of law is at serious risk as many towns are being overtaken by mafias that penetrate all realms of the state and society. The Mexican government is having difficulty asserting its authority. Sensing growing frustration amid a deterioration of the situation, President Felipe Calderon has turned to the countrys army to address the problem , though this approach involves considerable risks and has yielded limited results thus far. Fragile and often corrupt institutions like the Mexican police and courts help account for the dire situation. Displacement of the drug trade and the brazen conduct of agile criminal networks also form a large part of the explanation. With its high demand for drugs and stubborn unwillingness to control the flow of small arms, the United States is hardly an idle bystander in Mexicos security crisis. Through the Mrida Initiative, the United States has offered $1.4 billion in training and equipment over the next three years, which may help mitigate the deleterious effects and help avert the worst-case scenario. A long-term solution to overcome this profound and pervasive problem, however, will require deeper cooperation along with more systematic and imaginative policies. Mexico is being overwhelmed by threats to its democratic governance, but the situation in much of Central America and the Caribbean may be even more combustible. Many states in this vulnerable sub-region have scant capacity to contend with the organized crime and drug trafficking contributing to enormous insecurity. In Guatemala, Central Americas largest country, conditions are particularly unsettling, as mafias operate largely unchecked. They are similarly active in much of the Caribbean, where governments are at a great disadvantage compared to well-organized and well-financed criminal gangs. Transnational forces have strengthened in recent years, thanks to the unencumbered transportation accompanying globalization. Street crime is also rampant in such countries as El Salvador, which registers the highest homicide rate per capita of any country in the world. Indeed, there are an estimated 100,000 maras or gang members operating in Central America. Making matters worse, Central America and the Caribbean are being battered by the current financial and economic crisis in the United States, including sharp declines in remittances, tourism and investment. Higher fuel and food costs have also put tremendous strain

on already tight fiscal situations, contributing to a perfect storm of economic vulnerability. As a major oil producer, Mex ico is better equipped to absorb such shocks. The 2005 Central American Free Trade Agreement (CAFTA), which also includes the Dominican Republic, opened up markets and facilitated greater investment flows but also failed to stem mounting economic pressure and social dislocation. As

a result, governments in the region are seeking to maintain the benefits of ties to the United States while trying to take advantage
member of Petrocaribe, an arrangement in which Venezuela provides discounted oil to some 19 cash-strapped governments. For America and much of the Caribbean, the United States remains the central reference point and the dominant actor. The

of alternative trading arrangements. Nicaragua, a signatory of CAFTA, is also a founding member of the Bolivarian Alternative of the Americas (ALBA), inspired and organized by Venezuela. Honduras decided to join in 2008. Costa Rica, hardly ideologically sympathetic to Venezuela, has become a

highly sensitive to what happens in the United States, benefiting in good times and suffering during economic
political subordination and control. On

Mexico, Central sub-region is

downturns. The United States is the main trading partner, and despite ebbs and flows in remittances and migration, it is doubtful that the shift towards deeper economic and cultural integration will be reversed over time. Such underlying, long-term trends, however, do not necessarily translate into

the contrary, those countries geographically closest to the United States are joining the rest of Latin America in increasing their distance and independence from decisions made in Washington. Many countries of Central America and the Caribbean are pursuing economic and political relationships with Venezuela, an adversary of the United States. Despite being so inextricably intertwined, Mexico has become an influential global player far more autonomous from the United States.

Nuclear Proliferation
Relations with Mexico is key to denuclearization agenda
Michael Hamel-Green 12, ("Regions That Say No: Precedents and Precursors for Denuclearizing Northeast Asia", Nautilus Institute for Security and Stability, NAPSNet Special Reports, June 05, 2012, http://nautilus.org/napsnet/napsnet-special-reports/regions-that-say-no-precedents-and-precursorsfor-denuclearizing-northeast-asia/)

In Latin America, the relevant body is the Agency for the Prohibition of Nuclear Weapons in Latin America based in Mexico. In Southeast Asia, the Southeast Asian NWFZ Commission is

coordinated through the ASEAN Secretariat in Jakarta, Indonesia. In Africa, the recently established organization is the African Commission on Nuclear Energy (ACONE) based in Pretoria, South Africa. In practice, some of the most successful zones in terms of current universal adherence and universal recognition and ratification by nuclear weapon states did not, in fact, attract initial adherence by all parties. The Latin American Tlatelolco Treaty, for example, has secured universal

adherence from all Latin American states and universal ratification of its negative security protocols by the five recognized nuclear weapon states. However, at the time of negotiations, 1963-67, the political conditions did not make it feasible to expect all regional states to immediately ratify the zone. While five Latin American states, Brazil, Mexico, Chile, Bolivia and Ecuador initially proposed negotiations on the zone in 1963, following the 1962 Cuban Missile Crisis, other states were not so enthusiastic. As Redick notes, Argentina argued at the time that such a treaty might freeze Latin American states into a permanent state of inferiority, and, as itself a country seeking to develop the entire nuclear fuel cycle,

might adversely affects its own options for developing nuclear weapon capability. The zone looked even less likely to be successfully established when a military coup in early 1964 replaced the civilian government in one of the main and most influential proponents of the zone, Brazil. The new Brazilian military regime of General Castelo Branco was much more ambivalent about the zone, and moved towards a closer alignment with the United States while expressing reservations about aspects of the proposed zones, including the question of peaceful nuclear explosions. When the negotiations for the treaty concluded in 1967, both Brazil and Argentina (both now under military regimes following the 1966 Argentina military coup) declined to bring the treaty into force for their countries, and were not to do so for over two decades. Following a lengthy process of confidence-building on nuclear issues that was facilitated by the Tlatelolco Treaty framework, and by bilateral discussions that culminated in the 1991 Brazilian-Argentine Agency for Accounting and Control of Nuclear Materials (ABACC) agreement, both Brazil and Argentina finally brought the treaty into force for their territories in early 1994. Cuba was to be an even longer hold-out state, not bringing the

treaty into force for its territory until 2002. In the case of the Treaty protocols, there was similarly no immediate ratification of the protocols by the relevant nuclear weapon states. Britain
was the first to ratify these in 1969, the US followed in 1971, China and France in 1974, and Russia in 1979. In all it took over a decade to achieve universal recognition for the protocols, and over three decades to achieve universal adherence amongst all zonal states. There are some relevant parallels here for the Northeast Asian region. Nuclear weapon proliferation had

already occurred prior to the NWFZ negotiations in the form of the 1961-62 Soviet deployment of short and intermediate range nuclear weapons in Cuba. Following the 1964 and 1966 military coups in Brazil and Argentina respectively, potential horizontal nuclear proliferation was also a very real possibility given the emerging nuclear capabilities in both countries and their military regime aspirations to keep nuclear weapon options open. In Northeast Asia, nuclear weapon proliferation has already

occurred in the form of North Koreas testing of two nuclear weapons, and acquisition of enrichment facilities that could lea d to production of over 100 nuclear warheads. Other countries in the region, such as South Korea, Taiwan, and Japan have nuclear industries that could provide future capacity for nuclear weapon production, with two, South Korea and Taiwan, already having in the past conducted nuclear weapons related research. As in the case of Brazil, Argentina, and Cuba, one could expect North Korean initial reluctance to join a nuclear free zone now that the North Korean regime has demonstrably acquired nuclear weapon capabilities; but equally, North Korea may well be encouraged to join such an arrangement through the initial establishment of such a zone and comparable Tlatelolco-style mechanisms for subsequently bringing the treaty into force. In the case of Brazil

and Argentina, it is noteworthy that fellow regional states, led particularly by Mexico, did not abandon or despair of the NWFZ concept but engaged closely with the Brazilian and Argentinian military regimes, integrated some of their specific concerns into the Tlatelolco Treaty, and developed an innovative entry-into-force mechanism (Article 28 under the original treaty, Article 29 under the current amended treaty) that permitted each regional state to join at a later date.

Organized crime
Relations key to steer new approach to solve organized crime Stratfor 13
Stratfor, Works For Forbes, U.S.-Mexico Cooperation Against Cartels Remains Strong, 5/16/2013, http://www.forbes.com/sites/stratfor/2013/05/16/u-s-mexico-cooperation-againstcartels-remains-strong/ Aside from the political struggles, the Mexican government still faces very real challenges on the streets as it attempts to quell violence, reassert control over lawless areas and gain the trust of the public. The holistic plan laid out by the Pena Nieto administration sounds good on paper, but it will still require a great deal of leadership by Pena Nieto and his team to bring Mexico through the challenges it faces. They will obviously need to cooperate with the United States to succeed, but it has become clear that this cooperation will need to be on Mexicos terms and in accordance with the administrations new, holistic approach .

US-Mexico cooperation is critical to solve organized crime and border security unilateral U.S. efforts are doomed to fail. Mares and Cnovas 10
David R. Mares, University of California, San Diego, and Gustavo Vega Cnovas, El Colegio de Mxico. The U.S.-Mexico Relationship: Towards a New Era?. The project is co-sponsored by the Center for U.S.-Mexican Studies, the Mexico Institute of the Woodrow Wilson Center, El Colegio de la Frontera Norte, and El Colegio de Mxico. January 1, 2010. http://usmex.ucsd.edu/assets/024/11646.pdf In other words, the US and Mexico are in this struggle against crime together. The public in both countries demand that the border be better secured in both directions against the drugs, money, weapons and individuals feeding this crime. Despite the frustrations many on the US side feel as they read sensationalist press accounts, there is no way of fixing the border that can provide security for the US without also providing it for Mexico. The expectation by some that the US can seal the border against illicit entry of goods and individuals is simply impossible. Even making significant progress toward it would impose economic and social costs on Mexico that would create an even more desperate situation south of the border, thereby producing even greater threats to US national security. The two countries can either address these demands for security
in a more effective manner (and that means doing many things differently) or divert significant human and capital resources from meeting the

Although the levels of violence have declined in 2009 their continuation at historically high levels indicates that the level of trans-national cooperation between the Mexican and the United States governments is not optimal in this area.
economic challenges of globalization into an ineffective search for security from crime.

Failed States
Relations are key to prevent Mexico from becoming a failed state Dresser 9
Denise Dresser, LA Times, a contributing writer to Opinion, is a columnist for the newspaper Reforma, Reality check for U.S.-Mexico relations, January 15, 2009, http://articles.latimes.com/2009/jan/15/opinion/oe-dresser15 On Monday, President-elect Barack Obama and Mexican President Felipe Calderon engaged in a time-honored tradition: At the outset of a new U.S. administration, the American president meets the Mexican head of state before all others. Obama and Calderon got the chance to look into each other's eyes and speak about the importance of U.S.-Mexico relations -- the diplomatic equivalent of new neighbors meeting over a cup of tea. Now it's time to move beyond etiquette and face hard facts. Mexico is becoming a lawless country. More people died here in drug- related violence last year than were killed in Iraq. The government has been infiltrated by the mafias and drug cartels that it has vowed to combat. Although many believe that Obama's greatest foreign policy challenges lie in Afghanistan or Iran or the Middle East, they may in fact be found south of the border. Mexico may not be a failed state yet, but it desperately needs to wage a more effective war against organized crime, and it must have the right kind of American help and incentives to succeed. Over the last decade, the surge in
drug trafficking and Calderon's failed efforts to contain it have been symptomatic of what doesn't work in Mexico's dysfunctional democracy. In

Only a few months ago, top-level officials in the Public Security Ministry were arrested and charged with protecting members of Mexico's main drug cartels. Calderon's promises to "clean up the house" have not gone far enough. As George Orwell wrote, "People denounce the war while preserving the type of society that makes it inevitable." The Mexican president, who is seeking a stronger "strategic" relationship with the United States, surely
2007, violence related to the drug trade resulted in more than 2,000 murders in Mexico, and in 2008, the toll was more than 5,000. told Obama on Monday that the heightened level of violence was a result of government efficiency in combating drug cartels. In that view, the rise in street "executions" is evidence of a firm hand, not an ineffectual one.

Mexican state failure triggers escalating warsdraws in the US Debusmann 9 senior World Affairs columnist
Bernd, Among top U.S. fears: A failed Mexican state New York Times, January 9 2009, http://www.nytimes.com/2009/01/09/world/americas/09iht-letter.1.19217792.html What do Pakistan and Mexico have in common? They figure in the nightmares of U.S. military planners trying to peer into the future and identify the next big threats. The two countries are mentioned in the same breath in a justpublished study by the United States Joint Forces Command, whose jobs include providing an annual look into the future to prevent the U.S. military from being caught off guard by unexpected developments. "In terms of worst-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico," says the study - called Joint Operating Environment 2008 - in a chapter on "weak and failing states." Such states, it says, usually pose chronic, long-term problems that can be managed over time. But the little-studied phenomenon of "rapid collapse," according to the study, "usually comes as a surprise, has a rapid onset, and poses acute problems." Think Yugoslavia and its disintegration in 1990 into a chaotic tangle of warring nationalities and bloodshed on a horrific scale. Nuclear-armed Pakistan, where Al
Qaeda has established safe havens in the rugged regions bordering Afghanistan, is a regular feature in dire warnings. Thomas Fingar, who retired as the chief U.S. intelligence analyst in December, termed Pakistan "one of the single most challenging places on the planet." This is

States. Mexico's mention beside Pakistan in a study by an organization as weighty as the Joint Forces Command, which controls almost all conventional forces based in the continental United States, speaks volumes about growing concern over what is happening south of the U.S. border. It added: "Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."
fairly routine language for Pakistan, but not for Mexico, which shares a 2,000-mile, or 3,200-kilometer, border with the United

Latin American Stability

Relations solve Latin American instability and wars
Baeza and Langevin 9 Gonzalo Baeza and Mark Langevin, Ph.D, The Convergence We Need? March 31, 2009, http://www.unc.edu/depts/diplomat/item/2009/0103/comm/baezalangevin_convergence.ht ml
Aside from the structure of consultations and coordination, all the documents under review advocate special attention to Mexico and Brazil. The Inter-American Dialogue predicts that Mexico poses the toughest challenges and greatest opportunities for

productive cooperation in the hemisphere , while the CFR report observes that Security cooperation is becoming increasingly central to U.S.-Mexico relations. The CFR report, WOLA, the Brookings commission, and the Dialogue all confirm that Mexico is pivotal for resolving the immigration debacle, confronting the rising problems of drugs and violence in the region, and pushing forward economic development initiatives.

Latin American wars go global even absent escalation, they collapse hegemony and encourage counterbalancing
Rochin, Professor of Political Science, 94 James, Professor of Political Science at Okanagan University College, Discovering the Americas: the evolution of Canadian foreign policy towards Latin America, pp. 130-131
While there were economic motivations for Canadian policy in Central America, security considerations were perhaps more important. Canada possessed an interest in promoting stability in the face of a potential decline of U.S. hegemony in the Americas. Perceptions of declining U.S. influence in the region which had some credibility in 1979-1984 due to the wildly inequitable divisions of wealth in some U.S. client states in Latin America, in addition to political repression, underdevelopment, mounting external debt, anti-American sentiment produced by decades of subjugation to U.S. strategic and economic interests, and so on were linked to the prospect of explosive events occurring in the

hemisphere. Hence, the Central American imbroglio was viewed as a fuse which could ignite a cataclysmic process throughout the region. Analysts at the time worried that in a worst-case scenario, instability created by a regional war, beginning in Central America and spreading elsewhere in Latin America, might preoccupy Washington to the extent that the United States would be unable to perform adequately its important hegemonic role in the international arena a concern expressed by the director of research for Canadas Standing Committee Report on Central America. It was feared that such a predicament could generate increased global instability and perhaps even a hegemonic war . This
is one of the motivations which led Canada to become involved in efforts at regional conflict resolution, such as Contadora, as will be discussed in the next chapter.

Drug Trafficking
Cooperation is crucial to stop drug trafficking Bowman 10
Laurel Bowman, VOA News, July 20, 2010, Experts Say US and Mexico Must Work Together to Battle Mexican Drug Cartels, http://www1.voanews.com/english/news/americas/Experts-SayUS-and-Mexico-Must-Work-Together-to-Battle-Mexican-Drug-Cartels-98880554.html "Unfortunately, these drug cartels, they have enormous amount of resources at their disposal," said P.J. Crowley. "They can buy any kind of capability they want. But we are determined, working with Mexico, to do everything in our power to reduce this violence." In Washington Tuesday, experts gathered to discuss steps the United States and Mexico should take moving forward. Matt Bennett is Vice President of Third Way, a self-described moderate think tank. It hosted the event. "It is not just a Mexican problem," said Matt Bennett. "Guns and money are flowing from the United States south and fueling this problem and drugs are traveling north " "It's a mutual responsibility between the U.S. and Mexico," said Henry Cuellar. "We cannot let Mexico fail."

US- Mexico key to fighting drugs CFR 11 (Council on Foreign Relations, independent nonpartisan membership organization think tank and
publisher, 3-29-11, http://www.cfr.org/mexico/us-mexico-must-increase-cooperation-confront-drug-war-argues-cfrreport/p24514)
Mexico is in the midst of a worsening security crisis, warns David A. Shirk, director of the Trans-Border Institute at the University of San Diego in a new Council on Foreign Relations (CFR) Special Report. Explosive clashes and territorial disputes

among powerful drug trafficking organizations (DTOs) have killed more than thirty-five thousand people since President Felipe Caldern took office in December 2006. Estimates place the profits from the drug industry at $30 billion per yearabout 3 to 4 percent of Mexico's GDP. Shirk stresses that the United States is not immune from the effects of this drug trade. The February 2011 killing of a U.S. immigration and customs agent signals that U.S.

law enforcement officials are now in the crosshairs. Tensions between Washington and Mexico City flared up in the wake of th e recent Wikileaks scandals. Cables criticizing Mexico's handling of the drug cartels resulted in Carlos Pascual, U.S. ambassador, resigning. However, the United States remains the world's largest consumer of illegal drugs. It is also the

world's largest supplier of weapons, which fuel the drug war in a more direct way. Shirk notes that

despite the most dismal assessments, the Mexican state has not failed, nor has it confronted a growing insurgent movement. In addition, Mexico has made impressive efforts to improve the transparency and credibility of elections, protect the rights of indigenous people, strengthen judicial independence, and even investigate past government abuses. In The Drug War in Mexico: Confronting a Shared Threat, Shirk points out that the United States has much to gain by helping strength en its southern neighbor and even more to lose if it does not for the following reasons. - The weaker the Mexican state, the greater difficulty the United States will have in controlling the nearly two-thousand-mile border. As the dominant wholesale distributors of illegal drugs to U.S. consumers, Mexican traffickers are also the single greatest domestic organized crime threat within the United States. Economically, Mexico is an important ally for the United States. It is the third-largest trade partner, the third-largest source of U.S. imports, and the second-largest exporter of U.S. goods and services. Trade with Mexico benefits the U.S. economy, and the market collapse that would likely accompany a deteriorated security situation could hamper U.S. economic recovery. - Mexican stability serves as an anchor for the region. Given the fragility of some Central American and Caribbean states, expansion of DTO operations and violence into the region would have a gravely destabilizing effect. - If the security conditions in Mexico were to worsen, a humanitarian emergency might lead to an unmanageable flow of people into the United States. It would also adversely affect the many U.S. citizens living in Mexico. Shirk recommends a three-pronged approach for U.S. policy that can

help Mexico overcome its security crisis. - Enhance and consolidate the mechanisms for bilateral and multilateral security cooperation in Mexico and Central America. - Focus on U.S. drug demand, firearms, and money laundering at home, and direct greater assistance for institutional and economic development, such as educational and judicial reform. - Work toward drug policy adaptation that includes alternative approaches to reducing the harms caused by drugs.

US needs to work with Mexico to control escalating drug violence CNN 10 (CNN, 10-16-12, Clinton: US can do more to help Mexico fight drug cartels,
http://www.cnn.com/2010/POLITICS/10/16/clinton.drug.cartels/index.html)
Secretary of State Hillary Clinton said the U.S. can do more to help Mexico battle drug cartels that have started operating more like terrorists and insurgent groups. "It is one of my highest priorities," Clinton said Friday during a speech in San Francisco at the nonpartisan Commonwealth Club. "This is one of the most difficult fights that any country faces today. We saw it over the last couple of decades in Colombia." "We are watching drug traffickers undermine and corrupt

governments in Central America, and we are watching the brutality and barbarity of their assaults on governors and mayors, the press, as well as each other, in Mexico," she added. Clinton said the U.S. can do more than sending the Blackhawk helicopters it promised Mexico. She said the U.S.
is helping Mexico create an anonymous tipline to report drug cartels. However, she said, it can also help Mexico rebuild its criminal system and train its police force. She likened recent drug cartel violence to terror groups. "For the first time, they are

using car bombings," Clinton said. "You see them being much more organized in a kind of paramilitary way." Clinton's remarks come the same week she discussed the U.S. effort to find David Hartley, an American
believed to have been shot by drug bandits on the border of Mexico and Texas.

US coop needed for effective Mexican drug policy Forbes 13 (Forbes, 5-6-13, U.S.-Mexico Cooperation Against Cartels Remains Strong,
http://www.forbes.com/sites/stratfor/2013/05/16/u-s-mexico-cooperation-against-cartels-remains-strong/)
Certainly the U.S. government was very involved in the Calderon administrations kinetic approach to the cartel problem, as s hown by the very heavy collaboration between the two governments. The collaboration was so heavy, in fact, that some incoming Pena Nieto administration figures were shocked by how integrated the Americans had become. The U.S. officials who told Dana Priest they were uncomfortable with the new Mexican governments approach to cartel violence were undoubtedly among those deeply involved in this process perhaps so deeply involved that they could not recognize that in the big picture, their approach was failing to reduce the violence in Mexico. Indeed, from the Mexican perspective, the U.S. efforts have been focused on

reducing the flow of narcotics into the United States regardless of the impact of those efforts on Mexicos security environment. However, as seen by the May 1 arrest of Coronel, which a Mexican official described as a
classic joint operation involving the U.S Drug Enforcement Administration and Mexican Federal Police, the Mexican authorities do intend to continue to work very closely with their American counterparts. But that cooperation must occur within the

new framework established for the anti-cartel efforts. That means that plans for cooperation must be presented through the Mexican Interior Ministry so that the efforts can be centrally coordinated. Much of the current peer-to-peer cooperation can continue, but within that structure. As in the United States, the

law enforcement and intelligence agencies in Mexico have terrible problems with coordination and information sharing. The current administration is attempting to correct this by centralizing the anti-cartel efforts at the federal level and by creating coordination centers to oversee operations in the various regions. These regional centers will collect information at the state and regional level and send it up to the national center. However, one huge factor inhibiting information sharing in Mexico and between the Americans and Mexicans is the longstanding problem of corruption in the Mexican government. In the past, drug czars, senior police officials and very senior politicians have been accused of being on cartel payrolls. This makes trust critical, and lack of trust has caused some Mexican and most American agencies to restrict the sharing of intelligence to only select, trusted contacts.

Centralizing coordination will interfere with this selective information flow in the short term, and it is going to take time for this new coordination effort to earn the trust of both Mexican and American agencies. There remains fear that consolidation will also centralize corruption and make it easier for the cartels to gather intelligence. Another attempt at command control and coordination is in the Pena Nieto administrations current efforts to implement police consolidation at the state level. While corruption has reached into all levels of the Mexican government, it is unquestionably the most pervasive at the municipal level, and in past government operations entire municipal police departments have been fired for corruption. The idea is that if all police were brought under a unified state command, called Mando Unico in Spanish, the police would be better screened, trained and paid and therefore the force would be more professional. This concept of police consolidation at the state level

is not a new idea; indeed, Calderon sought to do so under his administration, but it appears that Pena Nieto might have the political capital to make this happen, along with some other changes that Calderon wanted to implement but could not quite pull off. To date,

Pena Nieto has had a great deal of success in garnering political support for his proposals, but the establishment of Mando Unico in each of Mexicos 31 states may perhaps be the toughest political struggle he has faced yet. If realized, Mando Unico wi ll be an important step but only one step in the long process of institution building for the police at the state level. Aside from the political struggles, the Mexican government still faces very real challenges on the streets as it

attempts to quell violence, reassert control over lawless areas and gain the trust of the public. The
holistic plan laid out by the Pena Nieto administration sounds good on paper, but it will still require a great deal of leadership by Pena Nieto and his team to bring Mexico through the challenges it faces. They will obviously need to cooperate with

the United States to succeed, but it has become clear that this cooperation will need to be on Mexicos terms and in accordance with the administrations new, holistic approach.

Iran Influence
US losing Latin America to Iran Berman 12(Ilan Berman, Vice President of the American Foreign Policy Council in Washington, Middle East
Quarterly, Iran Courts Latin America, http://www.meforum.org/3297/iran-latin-america)

Outreach to Latin America is seen by the Iranian regime first and foremost as a means to lessen its deepening international isolation. Since 2003, when its previously clandestine nuclear program became a pressing international issue, Tehran has sought to mitigate the mounting political and economic restrictions levied against it by the United States and its allies through intensified diplomatic outreach abroad. Due to its favorable geopolitical climatetypified by vast ungoverned areas and widespread anti-AmericanismLatin America has become an important focus of this effort. Over

the past decade, the regime has nearly doubled the number of embassies in the region (from six in 2005 to ten in 2010) and has devoted considerable energy to forging economic bonds with sympathetic regional governments.[2] Far and away the most prominent such partnership has been with Venezuela. Since Hugo Chavez became president in 1999, alignment with Tehran has emerged as a cardinal tenet of Caracas's foreign policy. The subsequent election of Mahmoud Ahmadinejad to the Iranian presidency in 2005 kicked cooperation into high gear with dramatic results. Today, the two countries enjoy an extensive and vibrant strategic partnership. Venezuela has emerged as an important source of material assistance for Tehran's sprawling nuclear program as well as a vocal diplomatic backer of its right to atomic power.[3] The Chavez regime also has become a safe haven and source of financial support for Hezbollah, Iran's most powerful terrorist proxy.[4] In turn, Tehran's feared Revolutionary Guard has become involved in training Venezuela's secret services and police.[5] Economic contacts between Caracas and Tehran likewise

have explodedexpanding from virtually nil in the early 2000s to more than $20 billion in total trade and cooperation agreements today.[6] Just as significantly, Venezuela has served as Iran's gateway for further economic and diplomatic expansion into the region. Aided by its partnership with Caracas and bolstered by a shared anti-American outlook, Tehran has succeeded in forging significant
strategic, economic, and political links with the regime of Evo Morales in Bolivia and Rafael Correa in Ecuador. Even Iran's relations with Argentina, where Iranian-supported terrorists carried out major bombings in 1992 and 1994, have improved in recent times, as the government of President Cristina Fernandez de Kirchner has hewed a more conciliatory line toward Tehran.[7] It would be a mistake, however, to view these contacts as simply pragmaticor strictly defensive. The Iranian regime's sustained

systematic outreach to regional states suggests that it sees the Western Hemisphere as a crucial strategic theater for expanding its own influence and reducing that of the United States. Indeed, a 2009 dossier prepared by Israel's Ministry of Foreign Affairs noted that "since Ahmadinejad's rise to power, Tehran has been promoting an aggressive policy aimed at bolstering its ties with Latin American countries with the declared goal of 'bringing America to its knees.'"[8] This view is increasingly shared by the U.S. military: In its

2010 report on Iranian military power, the Office of the Secretary of Defense noted that "Iran seeks to increase its stature by countering U.S. influence and expanding ties with regional actors" in Latin America.[9] To this end, Tehran is ramping up its strategic messaging to the region. In late January, on the heels of Ahmadinejad's very public four-country tour of Latin America, the Iranian regime formally launched HispanTV, a Spanish-language analogue to its English-language Press TV channel.[10] The television outlet has been depicted by Ahmadinejad as part of his government's efforts to "limit the ground for supremacy of dominance seekers"a thinly-veiled reference to U.S. influence in the Western Hemisphere.[11] As Ahmadinejad's statement indicates, Tehran is pursuing a strategy that promotes its own ideology and influence in Latin America at Washington's expense. In this endeavor, it has been greatly aided by Chavez, who himself has worked diligently to diminish U.S. political and economic presence in the region under the banner of a new "Bolivarian" revolution. Since the start of the international crisis over Iran's nuclear ambitions nearly nine years ago, it has become an accepted belief that Tehran's atomic program is now largely self-sufficient and that its progress is, therefore, largely inexorable. This, however, is far from the truth; in fact, the Iranian regime currently runs a considerable, and growing, deficit of uranium ore, the critical raw material needed to fuel its atomic effort. According to nonproliferation experts, Tehran's indigenous uranium ore reserves are known to be both "limited and mostly of poor quality."[12] When Shah Mohammed Reza Pahlavi mapped out an ambitious national plan for nuclear power in the 1970s, his government was forced to procure significant quantities of the mineral from South Africa. Nearly four decades later, this aging stockpile has reportedly been mostly depleted.[13] As a result, in recent years, Tehran has embarked on a widening quest to acquire uranium ore from abroad. In 2009, for example, it is known to have attempted to purchase more than 1,000 tons of uranium ore from the Central Asian republic of Kazakhstan at a cost of nearly half-a-billion dollars.[14] In that particular case, deft diplomacy on the part of Washington and its European allies helped stymie Tehran's effortsat least for the time being. The Iranian quest, however, has not abated. In February 2011, an intelligence summary from a member state of the International

Atomic Energy Agency reaffirmed the Islamic regime's continued search for new and stable sources of uranium to fuel its nuclear program.[15] This effort has recently focused on two principal geographic
areas. The first is Africa where Tehran has made concerted efforts to engage a number of uranium producers such as Zimbabwe,

Senegal, Nigeria, and the Democratic People's Republic of Congo.[16] The second is Latin

America where Tehran now is exploring and developing a series of significant resource partnerships. The best known of these

partnerships is with Venezuela; cooperation on strategic resources has emerged as a defining feature of the alliance between the Islamic Republic and the Chavez regime. The Iranian regime is currently known to be mining in the Roraima Basin, adjacent to Venezuela's border with Guyana. Significantly, that geological area is believed to be analogous to Canada's Athabasca Basin, the world's largest deposit of uranium.[17] Bolivia, too, is fast becoming a significant source of strategic resources for the Iranian regime. With the sanction of the Morales government, Tehran is now believed to be extracting uranium from as many as eleven different sites in Bolivia's east, proximate to the country's industrial capital of Santa Cruz.[18] Not coincidentally, it is rumored that the now-infamous Tehran-Caracas air route operated jointly by Conviasa, Venezuela's national airline, and Iran's state carrier, Iran Air, will be extended in the near future to Santa Cruz.[19] Additionally, a series of cooperation agreements concluded in 2010 between La Paz and Tehran have made Iran a "partner" in the mining and exploitation of Bolivia's lithium, a key strategic mineral with applications for nuclear weapons development.[20] Iran even appears to be eyeing Ecuador's uranium deposits. A $30 million joint mining deal concluded between Tehran and Quito back in 2009 has positioned the Correa regime to eventually become a supplier for the Islamic Republic.[21] Regional experts note that Iran's mining and extraction efforts in Latin America are still comparatively modest in nature, constrained by competition from larger countries such as Canada and China and by Tehran's own available resources and know-how.[22] However, the region is unquestionably viewed as a target of

opportunity in Iran's widening quest for strategic resourcesboth because of its favorable political operating environment and because states there (especially Bolivia) represent unknown quantities in terms of

resource wealth. This raises the possibility that Latin America could emerge in the near future as a significant provider of strategic resources for the Iranian regime and a key source of sustenance for Iran's expanding nuclear program. Tehran's formal political and economic contacts with regional states are reinforced by a broad web of asymmetric activities throughout the Americas. Illicit financial transactions figure prominently in this regard. Over the past several years, Tehran's economic ties with Caracas have helped it skirt the sanctions being levied by the international community as well as to continue to operate in an increasingly inhospitable global financial system. It has done so through the establishment of joint companies and financial entities as well as the formation of wholly Iranian-owned financial entities in Venezuela and the entrenchment of Iranian commercial banks there.[23] Experts note that this financial activity exploits an existing loophole in the current sanctions regime against Tehranone that leverages the freedom of action of Venezuelan banks to provide the Islamic Republic with "an ancillary avenue through which it can access the international financial system despite Western pressure."[24] Tehran is also known to be active in the region's ubiquitous gray and black markets as well as its free trade areasoperating both directly and via its terrorist proxy Hezbollah.[25] Most notoriously, these include the so-called "Triple Frontier" at the crossroads of Argentina, Paraguay, and Brazil as well as Venezuela's Margarita Island. The Iranians also boast an increasingly robust paramilitary presence in

the region. The Pentagon, in its 2010 report to Congress on Iran's military power, noted that the Qods Force, the Revolutionary

Guard's elite paramilitary unit, is now deeply involved in the Americas, stationing "operatives in foreign embassies, charities and religious/cultural institutions to foster relationships with people, often building on existing socioeconomic ties with the wellestablished Shia Diaspora" and even carrying out "paramilitary operations to support extremists and destabilize unfriendly regimes."[26] This presence is most pronounced in Bolivia. Tehran has been intimately involved in the activities of the Bolivarian Alliance for the Americas (ALBA) since the formation of that Cuban- and Venezuelan-led geopolitical blocwhich also encompasses Ecuador, Bolivia, Nicaragua, and a number of other nationsin the early 2000s. As part of that relationship, Tehran reportedly provided at least some of the seed money for the establishment of the bloc's regional defense school situated outside Santa Cruz. Iranian defense minister Ahmad Vahidi reportedly presided over the school's inauguration in May 2011, and Iran an ALBA observer nationis now said to be playing a role in training and indoctrination at the facility.[27] Regional officials currently estimate between fifty and three hundred Iranian trainers to be present in Bolivia.[28] Notably, however, a personal visit to the facility by this author in January 2012 found it to be largely unattended.

Mexican Econ Advantage

1ac Mexican Economy

TBA will lead to US advancing Mexican oil development Smart Energy Universe 12 (Smart Energy Universe, Civilian Group of Scientists, 2012,
http://www.smartenergyuniverse.com/regulatory-update/13077-u-s-mexico-transboundary-hydrocarbonsagreement)
PEMEX leaders plan to raise production to 2.7 mbd in 2013 and 3 mbd by 2017, requiring up to $38 billion annually in investment. Near term growth is expected to come primarily from Chicontopec, a highly complex unconventional onshore project that is subject of great hope and scorn. Despite years of development and reportedly $5 billion in investment, the project is well behind expectations and currently only 70,000 barrels per day are produced, which puts claims of near-term growth in serious doubt. Over the longer-term PEMEX has set a goal to increase production to 3.3 mbd by 2024. Achieving that goal will require significantly more new production than the difference between the 3.3 mbd goal and todays 2.6 mbd given expected large declines in KMZ. Field decline emphasizes the urgent need for Mexico to have several new projects in the pipeline in order to maintain and boost production. Skepticism of PEMEXs ability to compensate for declining fields has led to some dire forecasts. The U.S. Energy Information Administration has estimated that Mexico will be a net importer of oil by 2020,4 thus also raising concerns about impacts on its balance of trade. Dealing with this challenge is complicated by the fact that PEMEX is as much a bureau of the government as it is a company. In defiance of conventional business sense (of both private companies and state oil companies), multiple Ministries and a politically appointed Board of Directors make key decisions, including deciding the amount and direction of investment in exploration and development of future production. While oil provides vital government revenue, lack of natural gas development threatens to stunt Mexican industry. It is reported that parts of Mexico could face natural gas shortages in the coming year. Meanwhile, Mexico sits on a sea of unconventional natural gas reserve. The United States government estimates that Mexico has one of the largest shale gas reserves in the world at more than 680 trillion cubic feet (tcf) of technically recoverable reserves, although Mexico itself uses estimates as low as 140 tcf. Much of that shale gas is thought to be contained in an extension of the Eagle Ford formation that is already producing in Texas. PEMEX reportedly has drilled just a handful of exploratory wells, and with prices being held down by the United States gas boom, it has little economic incentive to invest heavily in shale in its own right, let alone the opportunity cost of that capital compared to much more lucrative oil. Absent natural gas pricing reform, it is unlikely that PEMEX will choose to invest heavily into shale gas. Developing Mexicos shale gas reserves, as with

technologically challenging new oil frontiers, will requireenergy reform to galvanize private investment, technology, and expertise. At the same time, an additional level of government capacity building will be useful to aid official understanding in the geology, economics, and environmental protections necessary for shale production. The Transboundary Agreement (TBA) provides a bilateral basis upon which both countries can develop the legal framework necessary for joint production of oil and natural gas reserves that extend across our national maritime borders in the Gulf of Mexico. Secretary of State Hillary Clinton and Mexican Minister of Foreign Affairs Patricia

Espinosa Cantellano signed theTransboundary Agreement (TBA), officially called the Agreement between the United States of America and the United Mexican States Concerning Transboundary Hydrocarbon Reservoirs in the Gulf of Mexico, on February 20, 2012, at Los Cabos, Mexico. It is widely acknowledged in both capitals that the TBA negotiations moved quickly in order to be completed in time for the ratification in Mexico prior to 2012 Congressional elections. Both PAN and PRI political leaders used their influence to gain support for the TBA, which the Mexican Senate ratified. In the United States, the TBA stalled within the Obama administration despite support by key officials in the Departments of State and Interior. Prior to completing the agreement, the Departments of State and Interior participated in Senate Foreign Relations Committee briefings to discuss status of the negotiations; however, there was no consultation on specific text. An executive agreement would not require the two-thirds vote necessitated by a treaty, but instead it would be approved in the same form as a statute, requiring passage by majority in both the Senate and the House of Representatives. Legislation approving the agreement, necessary implementing authorities, and clarifications regarding certain provisions of the TBA could be subject to amendment, including by items unrelated to the TBA itself, thus possibly miring the TBA in other political fights. Regardless of whether Congress considers the TBA as a treaty or executive agreement, Congressional hearings and thorough examination of the TBA and its implementing legislative proposals are needed. So far the Obama administration has declined to officially submit its proposed implementing legislation to the committees of jurisdiction for action through regular order. The centerpiece of the TBA is the mandate to establish so-called unitization agreements by which companies licensed by the United States and Mexicos state oil company PEMEX would jointly develop

oil and gas reservoirs that have been discovered to extend across the maritime boundary. In effect, unitization agreements would work similarly to more well-known production sharing agreements (PSAs), whereby companies involved will jointly develop a project in order to spread risk given that deep water developments will cost billions of dollars each. Given PEMEXs lack of experience in deep water, the most likely outcome is that IOCs licensed by the United States would operate the developments and utilize infrastructure based on the United States side of the border, which is more extensive than that of Mexico near to the area of operation. However, the United States does have an interest in PEMEX gaining expertise in operation in deep water in

order to improve the integrity of potential PEMEX operated developments exclusively in Mexican territory. A key difference between the unitization agreements envisioned under the TBA and traditional PSAs is

that physical barrels produced will be allocated to the legal jurisdictions of the United States and Mexico, presumably in proportion to the amount of reserves found on their respective sides of the border. The TBA would unlock the maritime border region from moratoria, thereby offering long-term opportunities to increase U.S. domestic production. The TBA further contains

requirements of data sharing and notification of likely reserves between the United States and Mexico, opening the opportunity for increased government-to-government collaboration on strategic energy policy choices. On issues of environmental protection and safety, the TBA envisions that the U.S. and Mexico in the geographic area under the agreement will have common standards and that regulators from both countries will have access to oil and gas development facilities with the ability to order shutdowns in both jurisdictions if necessary. The Obama administration contends that means that Mexican environmental and safety standards, and enforcement, willhave to rise to U.S. levels. There is no guarantee that passage of the TBA will precipitate systemic improvement in Mexican environmental and safety enforcement, but any improvement is welcome by the Mexican safety regulator and should be welcomed in the United States given possible impacts of a spill on U.S. economic interests and quality of life. There is reason to believe that the TBA can receive broad bipartisan backing in Congress. It would benefit bilateral relations, promote domestic oil production, and improve environmental protections in the Gulf of Mexico. Power sector reforms

prompted by NAFTA demonstrate that a trilateral effort can have major results. Most importantly, key leaders from both the PRI and PAN in Mexico City are interested in making progress. Recently, President Pen a Nieto wrote: Together with the United States and Canada, [energy shifts] may well contributeto guaranteeing North American energy independence something from which we would all greatly benefit.

US safety regulations and assistance can help Mexico with TBA Martin and Wood 5-13 (Jeremy Martin, Writer from the Institute of Americas at the University of
California San Diego, Duncan Wood, Director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, 5-3-13, WPR, U.S. Should Act Quickly on Transboundary Hydrocarbon Agreement With Mexico)
At its core, the agreement seeks to set up legal guidelines for companies to jointly develop so-called transboundary reservoirs and lift the moratorium on oil and gas exploration and production for roughly 1.5 million acres in the Gulf. Mexico underscored its commitment to the agreement by quickly ratifying it; the Mexican Senate approved the treaty in April 2012. In the United States, meanwhile, progress stalled for more than a year. But just in time for yesterdays bilateral meeting, the agreement is again under discussion as legislators revive the dormant ratification process, which is good news for those eager to see its approval in the U.S. Indeed, according to the White House, Obama spoke in positive terms yesterday about the recent progress made on the agreement: Both the House Subcommittee on Western Hemisphere Affairs and the House Committee on Natural Resources recently held hearings focused on the challenges and opportunities that approval of the accord would present for the United States. On April 18, a bill was introduced in the House of Representatives that would make way for the approval and implementation of the terms of the agreement. These are all positive steps, and their progress will be monitored closely by U.S. and international observers, especially Mexico. But it bears underscoring that further delay in U.S. adoption of the agreement makes little sense. The agreement is not an overly polarizing issue domestically: in fact, quite the opposite. Several lawmakers have described it as a win-win for both Mexico and the U.S. As the U.S. Congress debates the deal, it is worth revisiting the four key reasons the agreement merits an expeditious approval in the coming weeks. First, approval of the deal in the U.S. would be an important sign of bilateral concord, particularly at the outset of a new administration in Mexico and a second term for Obama. This is important, as it underscores the two nations' increasing ability to work together and conclude complicated agreementsand cooperationon binational issues unrelated to immigration or crime and drugs. Second, this agreement makes clear that both nations are keenly aware of the energy potential of the Gulf, particularly along the maritime border. But it also firmly establishes the issue of

increased regulation and standards for drilling in a bilateral agreement. Since the April 2010 Macondo accident, the largest oil spill in U.S. history, the U.S. has been more concerned with drilling safety not just in the U.S. but also in neighboring countries around the Gulf such as Cuba and Mexico. This agreement formalizes interaction in terms of regulation and any responses to incidents along the maritime border. Third, then-Secretary of State Hillary Clinton was correct to emphasize the commercial opportunity and energy security element of the accord when it was first announced. The agreement provides the possibility for U.S. firms to join with Mexicos national oil company, Pemex, to exploit deep-water oil resources in the Gulf of Mexico

along the countries' maritime boundaries. This could provide important opportunities for U.S. companies, including exciting joint venture opportunities with Pemex long thought impossible.
Finally, the agreement is relevant and worthy of attention in both the U.S. and Mexico because of the important role of Mexican oil in the U.S. energy security equation, and the importance of the U.S. market for Mexican oil exports and revenue. During her remarks at the signing ceremony, Clinton called the agreement part of a commitment to improve energy

security for both countries and to ensure safe, efficient, responsible exploration of the oil and gas reservoirs in the Gulf of Mexico. This last point has echoed throughout the congressional hearings on the topic,

while members of Congress from both parties and from across the country have focused on the importance of collaboration with our neighbors, shared technology and the opportunity to boost energy security on both sides of the border.

PEMEX growth is key to long-term Mexican diversification away from oil Laurence Iliff and David Luhnow 13(Iliff is the Mexico correspondent for the Wall Street Journal, Dow Jones
Newswire, Dalls Morning News, and graduate of the Universidad Nacional Autonoma de Mexico and University of California and Luhnow serves as the Wall Street Journals Latin American Buereau Chief and recently won the Columbia University Cabot Journalism Award on Latin American Caribbean Reporting. Mexico Moves on Energy in Economic Reset, WSJ, 2/13/13, http://online.wsj.com/article/SB10001424127887324162304578302343638712694.html) "Obviously, our challenge is we years, but I do see this

need to deliver on the pending reforms and governing responsibly over the next as a very good opportunity for Mexico to retake a path of higher productivity and higher economic growth," he said. Mexico's conservative opposition, the National Action Party, largely favors a

broader opening of the energy business to private investment, while the leftist Party of the Democratic Revolution has proposed a more limited opening for areas like refining. Mr. Newman believes Mr. Pea Nieto may well deliver a broad-

ranging reform. "I don't think the prospects for reform have been this strong in Mexico in over 20 years," Mr. Newman said. The son of a former energy minister, Mr. Lozoya has had a tough start as head of Mexico's largest

company, which had 2011 sales of $111 billion. An explosion at a Pemex office building at the company's Mexico City headquarters last month killed 37 workers. The company said the blast was caused by a buildup of methane in the building's cellar, but doesn't yet know what caused the gas to accumulate. The investigation, led by the country's attorney general's office, will take a few more weeks, Mr. Lozoya said. "We are in mourning, but we're standing and looking forward, and working on our modernization plans," said the executive, who is the grandson of a revolutionary general and politician. He pointed

to the shale-gas revolution in the U.S., along with deep-water and heavy oil, as examples of how Mexico can benefit from new technologies that boost energy output, lower prices and create jobs. Mexico may hold the world's fourth-biggest reserves of shale gas, according to the U.S. government. But Pemex has drilled only a few wells and not produced any gas. "Mexico ought to be producing more of its own gas, and eventually exporting it," Mr. Lozoya, a lawyer and economist who got his master's degree in public policy at Harvard said. "Clearly the geology that you have in some parts of the U.S. extends into Mexican territory. So it's a matter of just investing and getting it done." Mr. Lozoya also envisions Pemex acting as a lever of development for the economy, spurring the development of a stronger oil service sector and promote new industries like ethanol. "It is important we support medium-size companies, together with programs from national development banks, so they can access credit and be suppliers to Pemex, and make sure over the next few years that we develop a strong oil-servicing industry in Mexico that can grow and be regionally competitive," he said, speaking in English.

TBA will increase Mexico production from US assistance Wood 10 (Duncan Wood, Mexico Institute at the Woodrow Wilson International Center for Scholars, 2010,
Growing Potential for US Mexico Energy Cooperation, p.3-4, http://wilsoncenter.org/sites/default/files/wood_energy.pdf)
As noted above, the history of cooperation between the United States and Mexico on oil issues has been limited by the historical sensitivity of Mexicos government and people to any hint of interference from the U.S. in what has traditionally been seen as a central element in the nations sovereignty. Nonetheless, recent years have shown a softening on this sensitivity, in part due to

generational change, in part due to political change, and in part due to the success of negotiating a Transboundary Hydrocarbons Agreement in 2012. That agreement laid out a framework for determining the management and exploitation of crossborder oil reserves, and was hailed as a positive development. It was quickly ratified in the Mexican Senate, but is has yet to be ratified in the United States, and so has not yet come into force. Before moving on to discuss new areas of cooperation, it is important that this existing agreement is ratified. It is widely expected that the government of Enrique Pea Nieto will present an energy reform initiative to the Mexican Congress early in 2013. While it is still unknown how ambitious that reform proposal will be, it is thought that the government will present an initiative that will be aimed at opening the sector to

greater levels of private participation in refining, petrochemicals and even in exploration and production. Such an opening will of course offer significant possibilities for foreign as well as Mexican firms, and will also open the door to new areas of technical and regulatory collaboration between the two countries. Mexicos energy establishment, and increasingly it seems, the government, hope that private investment will occur in unconventional hydrocarbons sector. For Mexico the most interesting plays in the future will be found in the deep waters of the Gulf of Mexico, in the as yet untapped shale reserves that are found throughout the east of the country, and in the geologically-complex fields of Chicontepec, where Pemex has been consistently failing to meet production targets over the past four years. The application of cutting-edge technologies and techniques from U.S. firms would likely be important in all three of these areas, and the experience of American firms in shale plays would provide them with an advantage in the event of an opening in that area. Of particular interest in thisregard is the experience of U.S. firms in the hydraulic fracturing (fracking) business. The ability to extract shale oil and gasin areas that suffer from water shortages (such as Texas) will be crucial to developing shale resources in Mexico, particularly in the north of the country. In fact existing knowledge of the geological characteristics of the Eagle Ford formation will also be crucial in exploiting its oil and gas reserves in Coahuila, where
the formation extends. One Mexican company, Alfa, has already worked extensively with U.S. partners in the shale industry north of the border, and we can expect higher levels of private sector collaboration to develop. Beyond exploration and production, the pressing need for infrastructure stands out as an area with high potential for bilateral collaboration. First, it is vital that large scale construction of gas pipelines occurs, both within Mexico and across the border. Within Mexico, the Calderon administration identified the need for multi-billion dollar investments in the creation of a truly national gas pipeline network: at the present time the majority of western portion of the country lacks access to natural gas. Secondly, as was made painfully clear to a number of private sector industrial consumers during 2012, during times of short supply, the country lacks the capacity to import extra supplies of gas from the United States due to the limitations of the cross-border pipeline network. In 2012 this led to complaints from companies that they were unable to secure stable and sufficient supplies of gas for their manufacturing processes . The

second deficit in energy infrastructure can be found in the refining sector. The much-publicized efforts
of the Calderon administration, announced in January 2009, to build a new refinery at Tula in the state of Hidalgo that was designed to process up to 300,000 barrels a day of Mexican heavy crude have thus far come to nothing. The project has been repeatedly delayed, first due to problems in securing the land, then due to bureaucratic problems and political wrangling. At the same time, Mexicos dependence on imported gasoline has increased in line with rising demand. Mexico therefore needs to find a

solution to this issue in the near future, and one option that presents itself is the example of the Deer Park refinery complex in Texas where since 1993 Pemex and Shell have worked together in a joint venture
to refine 340,000 barrels a day of crude oil. Part of the production of the refinery heads back to Mexico and has become an important source of income for Pemex as well as helping to satisfy the countrys need for refined products. Lastly, Mexicos

petrochemicalsector is in urgent need of investment. For many years now the industry has languished due to a

lack of funds and a lack of direction from the government. Despite encouraging signs of new investment interest in recent months, the major Mexican petrochemicals project of the last few years, Ethylene XXI, has suffered repeated delays. When completed in 2015, the project will be a private petrochemical complex for the production of polyethylene, producing up to one million tons of polyethylene, and replace up to $2 billion worth of imports resulting in the creation of thousands of jobs. But the prospect of

huge supplies of cheap gas from Mexico and the U.S. shale gas industry offers the tantalizing prospect of turning Mexico into a production and export base for these products, and there will be a major opportunity for joint ventures with foreign firms.

TBA allows for US to increase Mexican production and safety Brown and Meachem 13 (Neil Brown and Carl Meachem, Senior Advisor at Goldwyn Global
Strategies and Director of CSIS, The Hill, 6-5-13, Time for US- Mexico Transboundary Agreement, http://thehill.com/opinion/op-ed/303739-time-for-us-mexico-transboundary-agreement)

The United States-Mexico Transboundary Agreement (TBA) would enable cooperation between our two federal governments and our companies to unlock the potential for oil and natural gas reserves

that extend across our Gulf of Mexico maritime boundary. Congressional approval of the TBA would enrich U.S.-Mexico relations in the near term while laying the foundation for improved energy security and enhanced environmental protection for the Gulf Coast. Bilateral relations with Mexico have

improved dramatically in recent years, yet energy cooperation has lagged. Oil holds a privileged position of national pride and constitutional protection in Mexico, historically putting it off limits for domestic reform and bilateral cooperation with the U.S. The TBA is, therefore, more than just an energy agreement. Its approval by the Mexican government is a political statement opening a window to richer relations. While the area under future jurisdiction of the TBA could provide incremental domestic

oil production, a far greater prize for the U.S. oil portfolio is the prospect of more reliable oil trade with our ally Mexico. The TBA would, for the first time, allow oil majors to work in joint production arrangements with PEMEX and support the confidence building necessary to enable those arrangements more widely in Mexico. That is not only good for oil major shareholders, it is good for our

nations energy security. Even as U.S. domestic oil production increases, the sources of our imports remain critical for economic stability and national security flexibility. Recently, Mexico was supplanted by Saudi Arabia as our second largest foreign oil source after Canada. Mexican oil production has dropped by more than a quarter over the last decade, and U.S. refiners geared for heavy oil had to look elsewhere to make up the difference. Canadian heavy crude production is increasing in the countrys oil sands region, but pipeline infrastructure is insufficient. Therefore, in effect, the U.S. has had to increase imports of Middle East crudes in order to make up for shortfalls in Mexico. The TBA alone will not structurally reverse Mexicos oil decline, but it is likely a necessary first step along that path. Regardless of TBA approval, Mexicos PEMEX will continue its deepwater

exploration near the U.S. border. With memories of Deepwater Horizon still fresh, it is worrisome that Mexicos oil safety regulator, known as CNH, has almost no capacity to provide independent on-site inspections. All facilities operating under the TBA would be subject to U.S. inspectors with the ability to stop operations. Moreover, U.S. and Mexican regulators would work hand in hand, offering support for more systematic improvement. Given the foreign policy, energy security, and environmental benefits of the TBA signed in February 2012, it is
disappointing that the Obama administration has delayed taking steps necessary for Congress to approve the agreement. That delay does not make it any less important for Congress to approve the agreement soon. Congress has a critical role in clarifying certain provisions of this international agreement. Dispute resolution mechanisms warrant particular attention. Already, it has been mistakenly argued that the TBA requires greater secrecy in payments of oil deals, encouraging an effort to exempt the agreement from the Cardin-Lugar transparency law. No such secrecy is required by the TBA, which subordinates its confidentiality rules to domestic law. The longer the TBA sits on the shelf, the more likely it will be hamstrung as a proxy for more rancorous energy disputes. Prompt Congressional activity could be a useful vote of confidence in the upcoming domestic energy sector reform in Mexico. Mexico needs new oil production from more complex fields to counterbalance its declining fields, let alone increased production. Leaders in Mexicos two largest political parties know that under current capital and management constraints,

PEMEX alone is extremely unlikely to turn Mexicos oil and natural gas abundance into prosperity for the Mexican people. International oil majors are needed, but that will take political courage. Congressional approval of the TBA would tangibly demonstrate that the U.S. government and our companies are willing partners. That is good for Mexico and for the U.S.

Mexico production down

Mexican crude oil production and exports are declining Reuters 7/8/13 (UPDATE 1-Mexico oil output slumps to near two-year low in May
Fri Jun 28, 2013 6:35pm EDT )
(Reuters) - Mexican

crude oil production slid to its lowest level in nearly two years in May, while exports were their weakest in more than two decades, official data showed on Friday. Crude output at state oil monopoly Pemex, which President Enrique Pena Nieto has pledged to reform in the coming months, fell to 2.51 million barrels per day (bpd) in May, its lowest level since September 2011, according to the company's data. Oil exports dropped to 1.03 million bpd, the lowest level of crude shipments since the national energy information system began publishing monthly export figures in 1990. Pena Nieto plans to boost production at Pemex by attracting
private investment to the company, though he faces opposition from traditionalists who have accused him of planning to sell out the industry to foreign oil majors. Pemex has been a source of Mexican pride since the government nationalized the industry in 1938, and reform of Pemex has long been fraught with difficulties. The government aims to present its Pemex plan by September and officials say it is likely to contain a blueprint to allow profit-sharing between Mexico and private firms in exchange for the latter taking on exploration and production risks. Mexico, the world's No. 7 oil producer, has seen output drop

steadily from a peak of 3.4 million bpd in 2004. Over the same period, export volumes are down by over a third. Pemex officials did not immediately returns calls seeking comment on the May output and export figures. If the country cannot find and exploit new discoveries to replace declining output at its largest, aging fields, Mexico risks becoming a net importer of crude within a decade.

Mexicos oil production is declining and key to the economy Landers 13 (Jim Landers, Dallas Morning News Columnist, 4-8-13, Mexicos Struggling Oil Industry,
http://www.dallasnews.com/business/columnists/jim-landers/20130408-jim-landers-mexicos-struggling-oilindustry.ece)
President Enrique Pea Nieto

intends to tackle the vexing problem of how to restore Mexicos oil and natural gas production without letting any of that petroleum fall into the hands of foreign companies. Last month, Pea Nietos

Institutional Revolutionary Party (the PRI) amended its charter to allow foreign participation in Mexicos oil sector. The president assured Mexico that Petrleos Mexicanos (Pemex), the national oil company, would not be privatized. But throughout last years presidential campaign, and in the pact he signed after taking office with Mexicos other two major parties, Pea Nieto has emphasized the need for energy reforms. Its easy to see why.

Mexicos oil accounts for a third of the federal budget, but production has dropped by more than a fourth since 2004. In 2011, Mexico earned $49.4 billion exporting crude oil but paid $9.17 billion to import gasoline. With rising demand and falling production, Mexico could be a net importer of oil by the end of the decade. The petroleum business is booming in Texas but slumping in Mexico. Natural gas is selling in a glutted U.S. market for little more than $3 per thousand cubic feet, while Mexico is importing liquefied natural gas from Nigeria for $20 per thousand cubic feet. Mexico should have abundant resources of shale gas and deep-water oil. But Pemex, which has a monopoly on developing Mexicos oil and gas, is struggling. The company lacks capital, technology and staff expertise.

Mexico Production Down and Oil Key to Economy Ferdman 13 (Roberto A. Ferdman, Editorial Intern at Quartz, 5-17-13, A state run monopoly is killing
Mexicos chances of oil independence, http://finance.yahoo.com/news/state-run-monopoly-killing-mexico210925580.html)

Any time a single company is responsible for nearly 10% of a countrys GDP, its a problem. Thanks to a lack of competition, Pemex, the Mexican oil company responsible for producing all of the countrys oil, has seen

production fall steadily over the past decade. Its a monopoly, man Since Pemex was nationalized 75 years ago, it

has enjoyed complete reign over Mexicos oil production. According to the Mexican constitution, Pemex has exclusive rights to: explore, exploit, refine and process crude oil and natural gas; produce basic petrochemicals and liquid petroleum gas; and carry out firsthand sales of such hydrocarbon products. Could it really be a coincidence that two of Mexicos slowest growing sectorsoil and electricityare also its least competitive? Mexicos oil production has fallen every year since 2009. As comparatively inefficient as Pemex looks in the chart below, its even more inefficient today. Pemexs

oil production hit an eight-year low in 2012. Crude oil production has been falling in Mexico since 2004, led by tumbling output from Pemexs largest oil field Cantarell, which is located offshore in the Bay of Campeche. As three of the companys four main subsidiaries have made large financial losses, falling profits and productivity have followed, and are forcing the company to rely on more external borrowing to finance its investments. The company hasnt turned a profit since 2006. Whats worse is the Mexican governments unhealthy dependence on oil revenues: Pemex provides the government with roughly 40% of its budget. Opening up the oil market to private competition could mean slicing off a chunk of Mexicos fiscal revenues.

Mexico oil production declining Addison 12 (Velda Addison, Associate Editor at Hart Energy Publishing, 7-27-12, Pemex Reports Production
Declines, http://www.epmag.com/Production/Pemex-Reports-Production-Declines_104286)

Despite E&P projects that exceeded expectations, most notably the prolific Kunah-1 well, the showings werent enough to help lift Pemex from a net income loss of about US $723 million so far this year, compared to last years first half (1H). Crude oil production decreased slightly, but natural gas production dropped even more when the Mexican national oil company compared statistics for the 1H 2012 to the same period last year. Crude oil production dropped to 2,538 b/d from 2,565 b/d last year, while natural gas production sank to 5,708 MMcf/d compared to 6,052 MMcf/d.

PEMEX failing
Without enough foreign investment, PEMEX is faltering
The Economist 7/13/13 (Choose Pemex Over the Pact, The Economist, 7/13/13 http://www.economist.com/news/leaders/21581730-successful-cross-party-pact-has-brokencongressional-gridlock-it-must-not-become-obstacle-) Pemex, the sickly, state-owned oil and gas monopoly, is cocooned in a nationalist mythology. Since the expropriation of the foreign oil companies operating in Mexico in 1938, national ownership and management of energy reserves has been promoted as a central pillar of anti-gringo sovereignty. Pemexs monopoly is enshrined in the constitution, and any attempt to break it up causes outrage. Given the mixed record of market reforms in Mexiconot least the sale of the public phone monopoly to Carlos Slimscepticism is understandable. But even Cuba now has a more open energy market than Mexico. Two big reforms are needed. An amendment to the constitution to allow private exploration and drilling in oil and gas fields would bring in foreign investment. At the same time, the value-added-tax base should be broadened, to allow the government to stop milking Pemex. The national cash-cow currently contributes about a third of the governments income, leaving little to invest. Pemexs poverty, and the absence of foreign investment, have prevented Mexico from unlocking its vast deep-water potential, as Brazil has done. If implemented properly, energy reform could add more than one percentage point to Mexicos annual GDP growth.

Mexico could become a net importer instead of a producer without enough investment
James Barnes (Fellow@Baker Institute for Public Policy, April 29th, 11
Oxford Baker Join Reports On Mexico Energy, http://www.bakerinstitute.org/publications/EF-pub-BarnesBilateral04292011.pdf)
The US Department of Energy, among others, projects that Mexico

may soon become a net importer of oil. The proximate cause: a sustained decline in production, associate with the exhaustion of existing major fields and slow progress in exploiting new ones. Reasons for this state of affairs include insufficient investment, inadequate technology, and the inefficiency of Mexicos oil monopoly, Pemex.

A2 No Reform
Nieto wants PEMEX to have foreign investment it would help grow Mexicos economy
Shelly Schwartz, (Specialist @ CNN, 9/18/12, CNN How Mexicos Oil Industry Could Benefit US investors, http://www.cnbc.com/id/49024104)
The political agenda of incoming Mexican president Enrique Pena Nieto has profound implications for Latin Americas second largest economy, including new labor laws, fiscal restructuring to broaden the tax base, and a take-no-prisoners stance against the drug cartels. But no industry, arguably, stands to be potentially transformed the way the energy

sector does. Pena Nieto, who takes office Dec. 1, vowed during his campaign to push for further private sector participation in the state-owned oil and gas monopoly, Petroleos Mexicanos, or Pemex. Pemex, a major source of revenue for the Mexican government, was partially deregulated in 2008, allowing private and foreign companies to bid on projects for the exploration and production of natural gas and oil refining. It still limits their ability to share risk, however, or share in the potential upside of any oil finds. Pena Nietos reform initiative would open Pemex to further private sector investment and potentially even list the company as a publicly traded stock down the road, a la Brazils semipublic energy company Petrobras , which was deregulated in 1997 and began selling shares in 2010. If he succeeds, it would have huge beneficial effects for Mexico's economy, says Shannon ONeil, senior fellow for Latin America studies at the Council on Foreign Relations. The most obvious is an increase in foreign direct investment in the energy sector itself. But the benefits would spread to infrastructure more broadly, to services, and would lower the energy costs for companies in general improving competitiveness. Oil contributes to roughly one-third of Mexicos total federal budget. Pena Nieto has publicly

stated that energy deregulation is necessary to provide Pemex the capital needed for deepwater oil exploration and technology upgrades. Indeed, crude oil production at Pemex, the worlds fourth-largest oil producer, has been falling for the last eight years despite abundant reserves. And economic growth has caused energy demand to outpace the countrys ability to generate supply. The reform that happened a few years ago under [current Mexican president Felipe] Calderon opened up space forservice companies, but a more fundamental reform is necessary to bring in the major [energy companies] for exploration, production, and potentially distribution, says ONeil. Thus far, only oilfield-services companies are getting a piece of the pie.(More:Crime Explodes but an Economy Booms) In May, engineering firm McDermott International in Houston was awarded a Pemex contract to construct an offshore drilling platform for oil exploration and production. And Houston, TX-based Schlumberger won a contract in June to develop oil fields in Northern Mexico with U.K.-based Petrofac. Chevron in San Ramon, Calif., Baker Hughes of Houston, TX and Halliburton of Houston, are also reportedly making bids for rights to develop offshore oilfields in the Gulf of Mexico. The opportunity for growth, as deregulation takes shape, is not lost on New York investment firm Morgan Stanley Private Equity, which announced in January it was working with former Pemex CEO Jesus Reyes Heroles to identify drilling and oil services companies that are ripe for investment. It plans to invest between $35 million and $110 million in each of Mexicos most promising energy companies. More private capital on its way? In its Mexico Equity Strategy report in June, Morgan Stanley Research Latin America says it would not be surprised to see several rapid initiatives that would welcome private capital into the gas

exploration, pipeline construction and downstream areas going forward, namely the opening of shale and conventional gas exploration, further deregulation of the selling and distribution of petrochemicals, and development of pipelines and energy distribution.These reforms will likely produce both significant business development and investment, major changes to many industries and some
inflation, the report points out.

No Deepwater Drilling
Mexico is Failing at Deepwater Drilling Now
Common Dreams Staff, 3/3/12 Mexico's Deepwater Drilling Plans Spell Doom http://www.commondreams.org/headline/2012/04/03-6?print Plans to begin deep-water drilling in the Gulf of Mexico by Mexico's state owned oil company have environmental fears flying.The plans of the company, Pemex, involve drilling wells into more than 9000 feet of water -- depths at which the company has no experience drilling. In contrast, the depth of the Deepwater Horizon well was about 5,100 feet when the explosion happened.The case of an oil spill resulting from the deep-water drilling would represent another scenario of privatizing profits while socializing risk; the taxpayers would end up paying a great portion of the claims and cleanup costs.

Mexico is failing at deepwater drilling now

Nick Parker 12 (Reporter/Producer @ CNN from Mexico City, Mexico Looking at Risky Deep Water Oil, CNN 10/24/12, http://edition.cnn.com/2012/09/25/business/mexico-deep-water-oil)

Much of Mexico's remaining oil wealth lies thousands of meters below the surface of the Gulf of Mexico. The question is: how to get at it. When state monopoly Pemex discovered its 'Supergiant' oil fields in the 1970s, they were found in barely 100 meters of water. At the time, they were the envy of the world and made Pemex one of the biggest oil producers. But since 2004, production has declined by nearly one million barrels a day as reservoirs dwindle. To compensate for the aging Supergiants, Pemex must now exploit resources at depths of up to 3,000 meters -- where they estimate there may be
some 29 billion barrels of oil. There's a vast area of the Gulf of Mexico to explore and the size of the task is really brought into focus when you visit an exploration rig. After a 20-minute helicopter flight over an endless expanse of shimmering ocean, a lone platform can just be seen on the horizon. Pemex has only three exploration rigs available to explore hundreds of

thousands of square kilometers and to probe the subsoil they must drill wells which take around 100 days to complete. Progress is painfully slow compared to the United States. "The U.S. has a contract scheme which allows private investment, which allows concessions," says Carlos Ramirez of the Eurasia Group, a risk assessment organization. "So there is a lot of activity coming from the big oil companies. In Mexico, that's not the case so Pemex has to do it by itself, with its own resources. And the resources Pemex has are limited." This is the root of the Mexico's dilemma. When the government expropriated the
country's reserves in 1938, the principle of national ownership of oil was enshrined in the constitution. Pemex is forbidden from entering into production sharing agreements (PSAs) with multinational companies, which would see a BP or ExxonMobil share the exploration risks in exchange for a stake in the oil discovered. Private investment in the company is also prohibited, so a partial IPO -- along the lines of Brazil's Petrobras -- is out of the question. Pemex has so far invested some $3.8 billion in its

Deep Water exploration, which many analysts say is not enough.

A2 SQ Solves
Mexico lacks the investment and resources to succeed in deepwater drilling
Meghan O Sullivan 12 (Jeane Kirkpatrick Professor of Practice on International Affairs and Senior Fellow @ Harvard and senior fellow at the Council on Foreign Relations, Mexico Oil Reforms are Vital to Both Sides of the Border, Council on Foreign Relations, 7/30/12 http://www.cfr.org/oil/mexican-oil-reforms-vital-both-sides-border/p28770) In recent days a coalition of Mexican advocacy groups has been protesting in front of Televisa, the country's largest TV network, to contest the legitimacy of President-elect Enrique Pena Nieto's July 1 victory. These protests are the second in a string of such demonstrations scheduled before Pena Nieto takes office in December. They bode ill for Mexico's near-term political future, pointing to a rocky transition at a time when the challenges facing the country are anything but modest. Americans might assume that tackling the drug trade that has resulted in more than 47,000 deaths since 2006 would top the agenda. But a strong case can be made that energy reforms are at least as urgent, for if Mexico can't stem its sharply deteriorating

energy situation, its ability to tackle other systemic problems will be severely compromised. Despite some recent progress in diversifying its economy, Mexico still relies on oil for 30 percent of its fiscal revenue. Yet oil production has plummeted from 3.4 million barrels a day in 2004 to 2.5 million in 2011, with most experts predicting a continuing decline over the next decade. Absent changes, Mexico could be a net importer of oil by 2020, ceasing exports to the U.S. altogether. Oil
Reserves This assessment might sound odd to Americans who are getting used to the idea that their energy future is brightening significantly on account of burgeoning resources at home and among their neighbors. There is no question that Mexico, with

the 12th-largest oil reserves in the world, has the geological resources to maintain and even improve its ranking as the eighth-largest oil producer. Equally striking is Mexico's recently acknowledged endowment of shale gas. Not surprisingly, the prolific formations in Texas do not end at the border; Mexico is thought to have the fourth largest deposits of shale gas in the world, after Argentina, China and the U.S. But, as is often the case, politics trump natural endowments in determining the energy profile of a geological giant. Mexico's constitution makes it illegal for foreign companies to develop the country's natural resources; Petroleos Mexicanos, the national oil and gas company known as Pemex, holds the exclusive ability to explore and bring to market vast petroleum reserves. Pemex, however, doesn't have sufficient capital and technology to do so, and is burdened by a bloated bureaucracy and persistent interference by the state. Without significant reform, Pemex won't be up to the task of reversing Mexico's energy decline.

Oil Production Down

Mexican Oil Production Is Falling Steve Hargreaves 8/17/12 Mexico's big oil problem
http://money.cnn.com/2012/08/17/news/economy/mexico-oil/index.html Mexico, one of the largest suppliers of oil to the United States, has a big problem: Its production of crude is falling fast. In 2008, the country's production peaked at 3.2 million barrels a day, according to the U.S. Energy Information Administration. Last year, it didn't even produce 3 million a day. The reason: aging oil fields and years of underinvestment.Industry experts say Mexico could revive production if it allowed more investment from international oil companies. But under current policy, EIA says Mexico will have to start importing oil by 2020.For the United States, the decline in Mexico's oil industry

means it will likely be buying more oil from Canada and Saudi Arabia, the No. 1 and No. 2 sources of U.S. oil imports. Mexico is now third. And because oil is a global market, any drop in production one place could mean higher

prices worldwide.The loss of Mexico's current exports of about 1 million barrels a day would be greater than the amount lost due to sanctions on Iran -- albeit over a longer time period.Many experts blame the
structure of Mexico's oil industry for the decline.Mexico nationalized its oil industry in 1938. Since then companies such as Exxon Mobil, Royal Dutch Shell and BP have been prohibited from taking a meaningful stake in the country's oil operations. The state oil giant, Petroleos Mexicanos, or PEMEX, has run the show. PEMEX is one of the largest companies in the world, and provides the Mexican government with 32% of its revenues, according to the EIA.But oil exploration requires big investments

and Mexican lawmakers have long resisted giving the firm the money it needs to go out and find new sources of crude.

Mexico Oil Production is Falling Behind

U.S. Energy Information Administration 5/9/13 Mexico Deals With Declining Crude Oil Production http://agfax.com/2013/05/09/mexico-deals-with-declining-crude-oil-production/
Since reaching a peak of nearly 3.4 million barrels per day in 2004, Mexicos crude oil production has declined each year (Figure 1), although at a slower rate since 2010. Much of the production declines are the natural result of aging fields, particularly Cantarell and other large offshore fields. Petroleos Mexicanos (Pemex), the state-owned oil company, is the sole oil operator in the country, and the Mexican constitution prohibits foreign ownership and investment in the exploration, production, refining, and marketing of the nations hydrocarbon resources. Earnings from the oil industry, including taxes and direct payments from Pemex, accounted for 34 percent of total government revenue in 2011.In an effort to reverse the declining production, the Mexican government

passed the 2008 Energy Reform to create incentive-based service contracts with foreign oil companies. Under the new arrangement, Pemex retains ownership of the crude oil produced and provides a fee-per-barrel rate to encourage technological innovation that would increase production. Since passing the 2008 Energy Reform, Pemex has entered into a handful of

partnerships, but has yet to attract major international oil companies. The projects so far have been concentrated in lower-risk production areas, where a relatively high recovery rate is likely.Falling crude oil production in Mexico has contributed to lower crude oil exports both to the United States and the rest of the world (Figure 2). From 2003 to 2012, the United States received roughly 80 percent of Mexicos crude exports.
Despite the declining export volumes, this ratio has stayed fairly constant. Increasing production in the United States has offset some of the demand for light sweet crude oil imports from countries other than Mexico, but has not yet affected the U.S. demand for Mexican crude, which is primarily heavy.

Mexican oil production is falling, and the effects will be severe

Jude Clemente 08 (Technical writer and Energy analyst @ Department of Homeland Security with
B.A. in Political Science from Penn State University and an M.S. in Homeland Security, Above Ground Constraints on Mexicos Oil Production, Peer-reviewed paper from Penn States Research Project on North American Energy Supply, November 2008, http://www.academia.edu/952498/Above_Ground_Constraints_on_Mexicos_Oil_Production)

The irreversible decline of Mexicos Cantarell field has been the subject of a steady stream of discussion in both OGJ and the industry in general. There is a broad consensus that Mexican oil production levels are at serious risk, with concomitant implications for international oil markets. For the most part, Mexico itself, currently the worlds sixth largest oil producer. Consider these overriding issues: Revenues from these oil exports are the primary pillar of Mexicos drive toward modernization and economic growth. In fact, funds from the state-owned oil company, Petrleos Mexicanos (Pemex), comprise over 40% of the Federal budget. Cantarells production has declined from about 2.1 million barrels per day (b/d) in 2006 to 1.12 million b/d so far in 2008 (OGJ Online, Dec. 11, 2006 and Aug. 22, 2008). Pemex officals believe production at Cantarell will average an annual decline of about 14% per year in the coming years. Cantarell has generally accounted for more than 50% of Mexicos production since 2000, and not coincidently, Mexico has exported the majority of its oil during that time over 80% going to the United States. Given this situation, the socioeconomic consequences of a decrease in oil production for Mexico would be profound indeed. As Wertheim has noted: so the decline of oil output could leave the country with a nightmarish budget crisis , (OGJ Online, Dec. 11, 2006). As the erosion of Cantarells output relentlessly proceeds, the pressure on Mexicos oil industry to somehow offset the decline intensifies. A nitrogen injection program earlier in the

however, analysts have focused on what a drop off would mean for the United States since as much as 16% of our crude imports have come from our southern neighbor. Less attention has been paid to what Cantarells decline means for

decade increased production for several years, but such stimulation techniques have limitations and simply extract oil from the ground at a faster rate. Thus, the search is on to find and develop new fields that will not only replace

losses from Cantarell, but ultimately will allow Mexican production to resume its once upward trajectory. It is increasingly clear, however, that a hard and different road lies ahead. Two to develop strategic alliances with technologically sophisticated international oil companies. David Shields, an independent oil analyst and the author of several books on Pemex, has pointed out that a systematic refurbishment and expansion of infrastructure along the entire energy supply chain is needed. Further, Shields has

leading experts on Mexicos oil situation have stressed that business as usual will not enable the country to get where it needs to go in terms of oil production. George Baker, publisher of Mexico Energy Intelligence, has indicated Pemex must be permitted

emphasized that the overwhelming emphasis on production at Pemex must be balanced by more attention to exploration if the country is to have any hope of meeting long-term goals. These changes will require significant attitudinal and behavioral modification on the part of many of the countrys leaders. The 2008 energy reform bill debates are not offering much hope thi s will occur. Mexico is still coming to grips with the stark reality of replacing one of the largest, most prolific, and readily accessible oil fields in the world. The dashing of hopes relating to Noxal 1 demonstrates the scope of the problem. In March, 2006, then-President Vicente Fox claimed that Mexico was opening a new chapter in oil exploration with the discovery of Noxal 1 in the deepwater of the Gulf of Campeche. The reservoir supposedly contained 10 billion barrels of oil. Subsequent tests, however, designated it as a modest find and certainly not the game changer Fox portrayed it to be. Despite this disappointment, Pemex officials have expressed confidence that two other oil systems will be able to compensate for the terminal decline of Cantarell. The Chicontepec

Basin and Ku Maloob Zaap (KMZ) collectively are estimated to hold 53% of Mexicos known reserves and 72% of non-Cantarell reserves.i While these regions will require extensive capital expenditures, sophisticated technology, and take time to develop , they appear to be Mexicos greatest windows of opportunity over the next decade to compensate for Cantarells terminal decline. Unfortunately, there is a growing likelihood that even if the key technical challenges are tractable, above ground issues internal to Mexico will constrain future production and limit exports. Cambridge Energy Research Associates (CERA) contends that the greatest threats to global production increases are not
below ground but rather from the human condition of politics, economics, regulation, and a sheer hesitancy to proceed.

Oil production is falling steadily a precipitous decline will occur in the status quo
David Alire Garcia 6/5/13 (reporter @ reuters, graduate of Harvard University and correspondent in Mexico City,
Insight: Clouds Gather over Mexicos Proclamation of a New Oil Dawn, Reuters, 6/5/13 http://www.reuters.com/article/2013/06/05/us-mexico-oil-insight-idUSBRE9540ZB20130605)

The vast Ku Maloob Zaap oil field is the jewel in the crown of Mexico's oil industry, pumping one in every three barrels of crude the country produces, at some of the lowest costs in the world. But behind the luster, state oil monopoly Pemex

quietly expects a gloomier future for the aging field, leaving a big gap in supply and casting serious doubt on its public proclamations of a new era of oil growth. In the main control center on the KU-S platform, a 12,500-

tonne tangle of tanks and pipes at the heart of Ku Maloob Zaap, monitors flash real-time data showing how much crude is being sucked up from deposits two-thirds of a mile below the ocean floor in the 58-square-mile (150-sq-km) field. Workers beam when talking about the platform, the hub for a network of 173 shallow water wells that produces crude for the equivalent of only about $6 a barrel. They tout a five-year streak without an accident; a hotel for visitors; even a gym for the 116 workers who live here above the glittering waters of the Bay of Campeche. What they don't discuss - and what Pemex would rather avoid talking

about - is that in a few years, production here is expected to begin a precipitous decline. In

February, Pemex said it expected Ku Maloob Zaap's output to hold steady at 850,000 barrels per day (bpd) through 2017. Since then, Pemex CEO Emilio Lozoya has repeatedly declared that Mexico, the world's seventh-largest oil producer, is

making a comeback. "Production is not declining. It is actually beginning to rally," he said recently, referring to total national output. "This is big news for our country, and something that is not necessarily known to the public." But many analysts question that scenario. A closer look at Ku Maloob Zaap helps explain why. In a presentation at Rice University in Houston, Texas, early last year, Lozoya's predecessor, Juan Jose Suarez Coppel, estimated production at the giant offshore oilfield, whose Maya name means "good nest of coals," will fall 60 percent by 2023. Pemex officials initially declined to comment on the estimate until Reuters showed them the Rice presentation. At that point they confirmed that the forecast still stands. Even a cursory examination of Pemex's own figures underlines why oil analysts do not share Lozoya's confidence. Mexico's average annual crude production has been edging down for years. At the outset of 2013, average first-quarter oil output sank to 2.54 million bpd, its lowest level since 1990. The data and the forecasts highlight a disconnect between Pemex's optimism and the reality at fields like Ku Maloob Zaap. Two-thirds of fields are already in decline,
and Lozoya's latest forecast for a 20 percent rise in output to 3 million bpd over the next five years is premised on production from some that have yet to be developed, analysts say. For many, it sounds all too familiar. Just a few years ago the giant

Cantarell field was thought to be a stalwart; output has now plunged to one-tenth of 2004 levels, a shockingly abrupt decline that caught world oil markets off guard. "Production is going to fall and there's nothing obvious that will replace it," said Dave Pursell, an oil analyst with Houston-based energy development bank Tudor Pickering Holt, who worked on reservoir studies in Mexico in the 1990s.

Oil K2 Econ
Lower oil revenues cant be filled in
The Economist 4/6/13 (Mexicos New President: Working through a Reform Agenda, The
Economist, Print Edition 4/6/13, http://www.economist.com/news/americas/21575768-enriquepe%C3%B1a-nieto-has-set-furious-pace-he-will-be-judged-implementation-well)

A bigger test of the Pact will come after the elections, when Mr Pea is due to publish his next proposal, a combined fiscal and energy reform designed to realise the enormous potential of Mexicos oil and gas reserves. The country does not make the most of these: half its oil is in deep waters, of which Pemex, the state-owned oil and gas monopoly, has little experience. The states milking of Pemexs profits has left it unable to invest in the necessary technology. To wean itself off oil revenue the government will have to raise taxes, probably applying value-added tax to food and medicine. The PRI changed its party constitution last month to allow this. But polls show overwhelming opposition to taxing those essentials.

Absent increased oil production, Mexicos economy and security would be unstable
John Collins Rudolf 11 (journalist @ the New York Times, Washing Post, and National Review Institute Mexico Oil Exports Could End Within Decade, Report Warns, Green, New York Times, 4/29/11 http://green.blogs.nytimes.com/2011/04/29/mexico-oil-exports-could-end-within-decade-reportwarns/)

Mexico, the third-largest supplier of foreign oil to the United States, could lose the capacity to export crude altogether within a decade without major new investments in exploration and production, warns a research group report released on Friday. The countrys shift from exporter to importer would deal a severe blow to Mexicos federal government, which depends on oil sales for roughly a third of its budget,
said the report, a two-year investigation by researchers with the James A. Baker III Institute for Public Policy at Rice University in Houston. A shift toward oil importer status would be a severe burden on the Mexican government and

curb its ability to provide important services, both related to social programs and internal peace and security, it states. Production by Pemex, the national oil company, has fallen 25 percent from its
peak in 2004, while internal demand has climbed, sharply curtailing the amount of crude available for export. The drop in supply is largely due to steep declines at Cantarell, an aging super-giant field formerly responsible for the bulk of Mexicos oil output. Much of the countrys undeveloped oil reserves, meanwhile, are found in complex formations on land or in the deep waters of the Gulf of Mexico, necessitating a high level of technical expertise and investment to exploit. It would appear that the days of easy oil are over for Pemex, the report notes.

Lack of oil means Mexican economic collapse

Clifford Krauss and Elizabeth Malkin 10 (Latin America correspondents @ The New York Times, Mexico Oil Politics Keep Riches Just Out of Reach, New York Times,3/8/10 http://www.nytimes.com/2010/03/09/business/global/09pemex.html?pagewanted=all)
The national oil company created after the 1938 seizure, Pemex,

is entering a period of turmoil. Oil production in its aging fields is sagging so rapidly that Mexico, long one of the worlds top oil-exporting countries, could begin importing oil within the decade. Mexico is among the three leading foreign suppliers of oil to the United States, along with Canada and Saudi Arabia. Mexican barrels can be replaced, but at a cost. It means greater American dependence on unfriendly countries like Venezuela, unstable countries like Nigeria and Iraq, and on the oil sands of Canada, an environmentally destructive form of oil production. As you lose

Mexican oil, you lose a critical supply, said Jeremy M. Martin, director of the energy program at the Institute of the Ameri cas at the

University of California, San Diego. Its

not just about energy security but national security, because our neighbors economic and political well-being is largely linked to its capacity to produce and export oil. Mexico probably still has plenty of oil, especially beneath the deep waters of the Gulf of Mexico, but Pemex lacks the technology and know-how to get it out. Inviting foreign companies into the

country to help is one of the touchiest propositions in Mexican politics. As the Mexican government struggles to find a way forward, production keeps falling. The basic problem is simply that Mexicos readily accessible oil is used up pretty much the same thing that happened to the United States when production began falling in the 1970s. Output from Mexicos giant Cantarell field, in shallow waters near the eastern shore, has plunged by 50 percent in recent years. Output at the countrys other large field is expected to begin falling in the next year or two. Historically, oil has supplied 30 to 40 percent of the Mexican governments revenue. Confronting a potential calamity, President Felipe Caldern has pushed through the strongest reforms he can defend politically, in hopes of attracting foreign investment. But he dare not do anything that would appear to reverse the 1938 nationalization. Even the modest reforms he has managed to pass are being challenged in court. Officially, the government is optimistic that Mexico can reverse its decline as an oil-producing nation. But its efforts so far have yielded more rhetoric than oil. Last year, on the day celebrating the 1938 seizure, the presidents helicopter landed in a hilly oil field outside this farming town. He announced that a new era of Mexican gushers would dawn soon. Under this soil, Mr. Caldern told thousands of oil workers, lay the richness that could propel development in our country and help Mexico accelerate our path to progress and well-being. He promised that 20 wells would be spurting crude very soon from the ground on which he stood. Almost a year later, only three wells were pumping on a recent afternoon. Eleven had been shut after producing little or no oil. In fact, the effort to develop the geologically challenging Chicontepec field here, near the gulf coast, is deteriorating into an embarrassing disaster for Pemex, the latest in a string of them. In all, Mexican oil output has dropped from just short of 3.5 million barrels a day in 2004 to a projected average of 2.5 million barrels this year. Mexican oil exports to the United States, now 1.1 million barrels a day, have fallen by

nearly a third in the last six years. The United States Energy Department projects that Mexican production will decline

by an additional 600,000 barrels a day by 2020; combined with growing domestic demand, that would probably make the country an oil importer. In the last two years, Mexico provided about 12 percent of all crude oil imports to the United States, supplying about 8 percent of the total oil used by American refineries, according to the Energy Department. Pemex officially Petrleos

Mexicanos is the most important company in Mexico, employing 140,000 people. Oil money is used for everything from building schools to fighting the war against drug cartels. The fact that Mexicos production is rapidly declining could potentially cause a financial crisis not only for Pemex but for the government, said Enrique Sira, the Mexico director of IHS Cera, an
energy consulting firm.

Oil is key to the Mexican economy and infrastructure

Nick Parker 12 (Reporter/Producer @ CNN from Mexico City, Mexico Looking at Risky Deep Water Oil, CNN 10/24/12, http://edition.cnn.com/2012/09/25/business/mexico-deep-water-oil)

For Mexicans, Pemex is more than just an oil company. It is the only supplier of subsidized gas to motorists around the country. And more importantly, it paid for many of the roads they drive on -- as well as schools, hospitals and much of the nation's infrastructure. Pemex's earnings account for 35% of the Federal budget. Deep water drilling is notoriously difficult. At depths of 3,000 meters, temperatures are so low that oil can freeze as it leaves the subsoil and equipment must be able to withstand strong currents. It raises memories of the Deepwater Horizon disaster along the U.S. Gulf coast, which Morales says has cast a shadow. "It made us a lot more aware of the issues. We are in tough environments, no doubt.
They have to make you think of the risks. You have to evaluate the worst case scenarios before going into the decision of drilling a well. You have to design your well perfectly." This month's deadly gas explosion at a Pemex processing

center underlines the ever-present risk of industrial accidents in the energy industry. So with the obvious
need for more expertise and capital, what are the prospects of a landmark constitutional amendment? Mexico's President-Elect Enrique Pena Nieto campaigned on a pledge to reform the energy sector and aides say he will tackle this in early 2013.

Continued oil production decline would lead to fiscal instability

OECD, 5/7/13 (Organization for Economic Cooperation and Development, OECD Warns Mexico on
Oil Dependence, United Press International, 5/17/13 http://www.upi.com/Business_News/EnergyResources/2013/05/17/OECD-warns-Mexico-on-oil-dependence/UPI-49691368786702/)

Mexican President Enrique Pena Nieto said overhauling the country's energy sector is a top priority for his administration. Reforms under consideration include letting national oil companies partner with their foreign

counterparts to open the country to new investments. U.S. lawmakers this week passed legislation that would open the Gulf of Mexico border with Mexico to energy explorers. Oil made up about 16 percent of Mexico's export earnings in 2011 and the industry accounted for more than 30 percent of the government's revenue, the U.S. Energy Department's Energy Information Administration reports. "While fiscal policy continues to be prudent,
public debt has increased during the recession, as in other countries, and the government budget is overly dependent on oil," a review from the Organization for Economic Cooperation and Development states. "The risk of decline in oil output,

the absence of energy reform, is a threat to fiscal stability." The U.S. Energy Department said natural gas imports increased 21 percent last year to 2.1 billion cubic feet per day year-on-year. Though Mexico is one of the 10 largest oil producers in the world, its production has declined steadily since 2004.

in

Increased oil production is key to long-term economic growth

Laurence Iliff and David Luhnow 13(Iliff is the Mexico correspondent for the Wall Street Journal, Dow Jones Newswire, Dalls Morning News, and graduate of the Universidad Nacional Autonoma de Mexico and University of California and Luhnow serves as the Wall Street Journals Latin A merican Buereau Chief and recently won the Columbia University Cabot Journalism Award on Latin American Caribbean Reporting. Mexico Moves on Energy in Economic Reset, WSJ, 2/13/13, http://online.wsj.com/article/SB10001424127887324162304578302343638712694.html)

For decades, Mexico's energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state
monopoly Petrleos Mexicanos to a different end: cheaper energy, said Pemex CEO Emilio Lozoya. In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Pea Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that oil firms, for 35% of government spending, leaving the company with little left over to invest in areas like natural gas. Private companies, meanwhile, are largely barred from investing thanks to Mexico's nationalistic energy laws. The result now is

could drive a more competitive economy. Now, the Mexican government relies on Pemex, one of the world's biggest an energy-rich country where companies often pay higher prices for energy than elsewhere. Mexico has large reserves of natural gas, for instance. But since Pemex doesn't invest enough in gas, the country imports gas from the U.S.raising costs to Mexican firms as they try to compete with global players like China. "Energy ought to be looked at on a competitive basis and not as a foreign-exchange generator,"
Mr. Lozoya said, pointing to a prospective investment boost in industries ranging from gas to petrochemicals to fertilizers. Complicating matters, Mexico's oil output has slipped to 2.55 million barrels a day from a peak of 3.4 million in 2004, as easy oil in the Gulf is replaced by more difficult reserves of deep-water oil and heavy oil onshore. To boost production, the

company will need more money, technology and know-how. Changing Mexico's energy laws is widely seen
years. For

as an important test for a country that captured the imagination of investors for linking its economy in a free-trade deal with the U.S. in the mid-1990s, but which saw its star dim to other emerging markets like China and Brazil in recent

Mexico, beset by drug violence the past few years, such a move would send a powerful signal to investors, likely driving billions in foreign investment, economists say. "This is all about regaining the reform momentum, and you don't see that that often in emerging markets today. Taking on those taboos, and those changes, it would re-establish the Mexican narrative as a reformer and be very positive," said Gray Newman, chief economist for Latin America at Morgan Stanley MS +0.45% .

Mexico Too Reliant on Oil

Mexican Economy Is Too Reliant on the Oil Industry OECD, 5/17/13 OECD Warns Mexico on Oil Dependence
http://www.upi.com/Business_News/Energy-Resources/2013/05/17/OECD-warns-Mexico-onoil-dependence/UPI-49691368786702/ Mexico is too dependent on oil and environmental degradation has accounted for a drop in gross domestic production, the OECD said.Mexican President Enrique Pena Nieto said
overhauling the country's energy sector is a top priority for his administration. Reforms under consideration include letting national oil companies partner with their foreign counterparts to open the country to new investments.U.S. lawmakers this week passed legislation that would open the Gulf of Mexico border with Mexico to energy explorers.Oil made up about 16 percent of Mexico's export earnings in 2011 and the industry

accounted for more than 30 percent of the government's revenue, the U.S. Energy

Department's Energy Information Administration reports."While fiscal policy continues to be prudent, public debt has increased during the recession, as in other countries, and the government budget is

overly dependent on oil," a review from the Organization for Economic Cooperation and Development states. "The risk of decline in oil output, in the absence of energy reform, is a threat to fiscal stability."The U.S. Energy Department said natural gas imports increased 21 percent last year to
2.1 billion cubic feet per day year-on-year. Though Mexico is one of the 10 largest oil producers in the world, its production has declined steadily since 2004.

K2 Certainty
The plan is key to legal certainty in the drilling industry Nick Snow, Washington Editor OGJ 2/20/12 US, Mexico sign Gulf of Mexico transboundary
agreement http://www.ogj.com/articles/2012/02/us-mexico-sign-gulf-of-mexicotransboundary-agreement.html The US and Mexico have signed an agreement allowing exploration and development of oil and gas resources along the two countries maritime boundary in the Gulf of Mexico. The accord, which still requires legislative approvals in both countries, makes US Outer Continental Shelf acreage with potentially 172 million bbl of oil and 304 bcf of gas available for leasing, US Sec. of the Interior Ken

Salazar said.This agreement removes uncertainties which have kept US operators from exploring nearly 1.5 million acres of the US [OCS], he told reporters by teleconference from Los Cabos, Mexico, where US Sec. of State Hillary R. Clinton and Mexican Foreign Minister Patricia Espinosa signed the agreement. Thats an area larger than the state of Delaware. Its the culmination of many years of hard work and is the outgrowth of many meetings we have held in Mexico and the US the last couple of years.Under the agreement, US companies and Mexicos state-run Petroleos Mexicanos (Pemex) can voluntarily agree to jointly develop reservoirs that cross the boundary. If a consensus cant be reached, it provides a way for US producers and Pemex to develop resources on their respective sides while protecting each nations interests and resources. No US company wanted to develop close to

the transboundary because of this uncertainty, Salazar said. Each nation will continue sovereignty and its own regulatory system in its own territory.We believe that because of the structure of this agreement, theres a strong incentive toward voluntary unitization, added Tommy
P. Beaudreau, US Bureau of Ocean Energy Management director, who also participated in the teleconference. It was reached in consultation with both US operators and Pemex. BOEM will offer leases along the mariti me boundary will be offered for the first time at a sale scheduled for June, he said. The agreement also provides for joint inspections of facilities developing transboundary reservoirs, as well as reviews of development plans and oil spill containment capabilities, according to Salazar. US companies can now move forward with legal certainty which has

been missing in this area, he said.A significant part of the agreement is that were moving forward jointly with Mexico, which is beginning to move into deeper waters, to develop protocols by sharing information and helping it make sure that its development occurs as safely as possible, the secretary continued. Pemex has been exploring the possibility of working with Helix to use the rapid spill responsive capability it developed for the gulf. US President Barack Obama and Mexico President Felipe Calderon committed in May 2010 to reach this agreement, which replaces an earlier accord that imposed a moratorium on both sides of the boundary through 2014. Since that time, representatives from DOI and DOS as well as Mexicos energy and foreign ministries worked on the matter.

A2 Dutch Disease
Oil decline does not wean Mexico off oil it would cause a crash
Senate Committee on Foreign Relations 12 (OIL, MEXICO, AND THE TRANSBOUNDARY
AGREEMENT A MINORITY STAFF REPORT PREPARED FOR THE USE OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS Second Session pg. 3-5, Congress, 12/21/12)
Mexican hydrocarbon resources belong to the Mexican people. Popular enthusiasm and national pride is attached to those resources, and many

Mexicans directly depend on the existing oil industry for their livelihood and business interests. Crossing into the territory of energy sector reform requires political courage on behalf of Mexican politicians. The United
States government emphatically recognizes the privileged position of oil in Mexicos politics. Nonetheless, the United States has direct interests in the future of oil and natural gas in Mexico. Most important among U.S. interests is enhancing the prosperity of the Mexican people. With strong cultural ties and a shared border, the U.S. benefits when Mexico grows. Petroleos Mexicanos (PEMEX) has successfully staved off years of decreasing oil production and discovered deep water resources, but it has not been able to meaningfully increase production beyond its zone of comfort in shallow water. Without reform, Mexicos oil resources will not be developed i n a way that translates into a higher quality of life for Mexicans. Mexico is a reliable supplier of oil to the United States. The question for U.S. policymakers is what volumes Mexico will be able to export in the future.

Mexican production dropped by more than a quarter in the last decade, leaving U.S. refiners on the Gulf Coast

geared for heavy oil having to look elsewhere. Venezuelan heavy oil production has also collapsed. Canadian heavy crude production is increasing in the oil sands region, but pipeline infrastructure is insufficient. Therefore, in effect, the U.S. has had to increase imports of Middle East crudes in order to make up for shortfalls in Mexico. Understanding the likely trajectory of reform in Mexico is necessary to appropriately plan for future volumes and types of crude oil traded with the United States, which also will have broader implications for U.S. security and economic growth. Mexican energy reforms will determine to what extent Mexico will be part of future U.S., and North American, energy security. Progress, but can it last? A snapshot of Mexicos oil sector Mexico has a long history of oil production and has prospects for a bright future as an oil power, but su ch an outcome is not guaranteed. Mexico sits atop significant amounts of oil estimated at 10.4 billion barrels of proven reserves, but that number could more than double when unconventional and deep offshore reserves are fully proven. The large unconventional Chicontopec area alone is estimated to hold up to 17.7 billion barrels. Turning

Mexicos oil resources into prosperity for the Mexican people is a tremendous challenge for PEMEX, its 100% state-owned national oil company established in 1938 after international oil companies were expelled.3 Mexican oil production relies primarily on a few major fields, the largest of which (Cantarell) is in steep decline. Oil production in Mexico peaked in 2003 at about 3.4 million barrels per day (mbd), falling to 2.6 mbd in
2010. That precipitous fall is due primarily to the estimated 75% decline in production from the massive Cantarell field from its peak. In recent years, Cantarells decline has been compensated for by the Ku-Maloob-Zaap (KMZ) fields; however, many analysts doubt the longevity of current production in those fields. Large increases in direct and third-party investment in recent years has enabled PEMEX to halt net decreases in production, at least temporarily. Importantly, PEMEX also now reports achieving a 100% replacement rate for reserves, improving prospects for continued production. Increased investment also has led to discoveries of large new deep water resources at Trion, Supremos, and Maximino, achievements of which PEMEX officials are justifiably proud. Several interlocutors credited energy reforms passed in 2008 for enabling those finds by giving PEMEX more flexibility to partner with international companies on a service contract basis, building on the shift to reliance on contracting services to enable investments stretching from the late 1990s. PEMEX leaders plan to raise production to 2.7 mbd in 2013 and 3 mbd by 2017, requiring up to $38 billion annually in investment. Near term growth is expected to come primarily from Chicontopec, a highly complex unconventional onshore project that is subject of great hope and scorn. Despite

years of development and reportedly $5 billion in investment, the project is well behind expectations and currently only 70,000 barrels per day are produced, which puts claims of near-term growth in serious doubt. Over the longer-term PEMEX has set a goal to increase production to 3.3 mbd by 2024. Achieving that goal will require significantly more new production than the difference between the 3.3 mbd goal and todays 2.6 mbd given expected large declines
in KMZ. Field decline emphasizes the urgent need for Mexico to have several new projects in the pipeline in order to maintain and boost production. Skepticism of PEMEXs ability to compensate for declining fields has led to some dire forecasts. The U.S. Energy Information Administration has estimated that Mexico will be a net importer of oil by 2020,4 thus also raising concerns about impacts on its balance of trade. While not investigated on this StaffDel, that situation highlights the need for more attention to demand management policies and continued reform of fuel subsidies.5 Mexico needs a diverse portfolio of future oil projects with staggered capacities over time. PEMEX leaders have identified such a set of oil development projects, including deep offshore and the Chicontopec unconventional area, each of which are complex undertakings with high potential, forming a growth strategy to complement conventional shallow offshore projects and investment in enhanced recovery at previous wells. Some observers point out that privatization of the sector would bring competition and private investment; however, that prospect is so remote as to be non-existent and not under even speculative consideration. Therefore, the question is what PEMEX can achieve on its own or in partnership with international companies. Most interlocutors are skeptical of PEMEX having the capital or expertise necessary to develop deep offshore fields, and, probably, the unconventional reserves at Chicontopec. Analysts point out that PEMEX took over 15 years and more than 20 wells to discover the most recent deep water finds. Moreover, deep water requires massive investments over many years, and even the worlds largest international oil companies ( IOCs) partner with one another to generate capital and spread the risk of such investments. PEMEXs capital limitations are further complicated by the companys large debt burden. On the other side, proponents of PEMEXs ability argue that they have gained expertise and dramatically lessened the risks implicit in development. PEMEX likely could develop a deep offshore project by buying technology and expertise through very generous service contracts with many of the same companies with which the IOCs contract. However, under current capital and management constraints,6 PEMEX alone is extremely unlikely to have the resources necessary to undertake multiple massive deep offshore developments while also investing in conventional oil production. Moreover, while some technology can be purchased through service contracts, project management expertise to run that type of project is not easily acquired. Therefore, the decision on whether IOCs should be granted access individually or in partnership with PEMEX to develop oil in Mexico depends on how much oil the Mexican Government wants produced and over what span of time. Interlocutors did not indicate that the expectations of either of the largest political parties or the Mexican public are conducive to the long time horizons it would take for PEMEX under current conditions to fully develop Mexicos oil. Dealing with this challenge is complicated by the fact that PEMEX is as much a bureau of the government as it is a company.

In defiance of conventional business sense (of both private companies and state oil companies), multiple Ministries and a politically appointed Board of Directors make key decisions, including deciding the amount and direction of investment in exploration and development of future production. It is not clear that all board members put the interests of the company, and hence future finances for the Mexican state, at the forefront of decision making. Having politicians with multiple constituencies (including the petroleum workers union and companies that thrive off the oil supply chain) and shortterm political considerations often make essential decisions is incompatible with the long-term planning needed in the oil sector. However, precisely

because PEMEX can be a useful tool for political goals, achieving fundamental structural change is very difficult. In sum, the authors agree that reform must happen to sustain and robustly grow Mexican oil production. The stakes of doing so are high for the Mexican Government. PEMEX directly provides 40% of government revenues, including significant resources transferred to the individual Mexican states. Decreased oil production has, thus far, been offset by higher than average global oil prices, but no government budget should rely so heavily on volatile commodity markets. While some commentators have argued that the budgetary pain of falling production would be useful to wean the budget from PEMEX, such a prospect could have wide repercussions on all programs funded in the Mexican budget, from poverty alleviation to the rule of law, let alone broader economic growth.

Increased production leads to an economic boost and one day Mexico will wean itself off oil
David Frum 13 (Special Assistant to President George W. Bush, Contributor @ CNN and Contributing Editor @ Newsweek. Peak Oil Doomsayers Proved Wrong CNN, 3/4/13, http://edition.cnn.com/2013/03/04/opinion/frum-peak-oil)
For all practical purposes, the world's supply of oil is not finite. It is more like a supermarket's supply of canned tomatoes. At any given moment, there may be a dozen cases in the store, but that inventory is constantly being replenished with the money the customers pay for the cans they remove, and the more tomatoes that customers buy, the bigger an inventory the store will carry. Someday, of course, consumers will decide they want less oil at the current price. Someday we may move

beyond oil altogether. When that day comes, the investment will stop -- and nobody will ever know or care how much oil remains in the ground. Adelman's assessment is being corroborated once more, this time in Mexico. Mexican oil production has been declining over the past decade, mostly because of under-investment and mismanagement by the state oil monopoly, Pemex. (On January

31, a deadly tragedy reminded the world of Pemex's troubles when a methane leak in a Pemex building in downtown Mexico City exploded, killing more than 30 people and injuring 120 others.) In October, Pemex announced discovery of a big new field in the Gulf of Mexico. Newly elected Mexican President Enrique Pena Nieto is urging his country to amend

its constitution to allow foreign investment in Mexican oil fields. Experts assess that opening the Mexican oil industry to global investment will revive Mexican oil production and boost Mexico's economic growth by potentially 2 points a year. Nieto's PRI party -- the

very party that nationalized Mexican oil 80 years ago -- is expected to vote this weekend to approve the new policy. Meanwhile, the International Energy Agency is warning oil markets to ready themselves for a "flood" of cheap oil from Iraq. Last year, Iraq for the first time exceeded pre-1990 oil production. The agency expects Iraq eventually to overtake Russia as the world's second-largest oil exporter. In 1972, the year of the famous "Limits to Growth" report by the Club of Rome, the world produced about 55 million barrels of oil per day. In 2011, the world produced almost 80 million barrels. If today's prices hold, many experts expect production of 90 million barrels by decade's end. Our oil problem is not that "we're running out." Our oil problem is that we're producing so much of the stuff that we are changing the planet's climate. Yet on the environmental front too, there's reason for optimism. One of the technologies developed by the oil industry -- fracking -- has made available vast new supplies of cheap natural gas. Gas has become so cheap that it can be substituted for coal as an electricity-generating fuel. In just eight years, coal's share of the U.S. electricity market has tumbled from one-half to one third -- and still falling. Gas emits only half the carbon per unit of energy of coal. The transition from coal to gas explains why U.S. carbon emissions declined 8% from 2011 to 2012, reaching the lowest level since 1992. Soon the United States and Canada will be producing so much gas that they can export it to Europe, perhaps also to China, helping to cut carbon emissions in those economies as well. No, it's not the answer to everything: Gas still emits

carbon. But it's an improvement -- and that's how progress comes. Instead of fantasizing about catastrophes (running out of oil) and miracles (a rapid transition to solar power), our energy thinking needs to emphasize the achievable and the incremental. Convert from coal to gas. Tax gasoline to induce people to live closer to work and to buy more fuel-efficient cars. We can enjoy a rising quality of life with declining energy inputs. Put us on the path to the right kind of "peak oil" -- and peak carbon -- the peak that comes, not because we find less and less, but because we want less and less.

Energy reform is key to weaning off oil in the long-term attracts investors and creates stability
Jose Enrique Arrioja and Nacha Cattan 6/6/13 (contributing writers @ Bloomberg, Pemex ProfitSharing Mulled in Energy Deal, Diplomat Says, Bloomberg, 6/6/13 http://www.bloomberg.com/news/2013-06-06/mexico-weighing-profit-sharing-in-oil-overhaulambassador-says.html)

Mexican President Enrique Pena Nietos administration is weighing profit-sharing contracts for companies that invest in the countrys state-controlled oil industry, said Eduardo Medina Mora, the ambassador to the U.S. Allowing profit-sharing agreements is one of several routes that could be followed in the energy overhaul proposal that the government is drafting to submit to Congress in the second half of the year, Medina
Mora said today. Opening the industry to more private investors would require changing the constitution, he said. issue. Hes pursuing tax and energy overhauls to help wean the government off oil sales that fund

a third of the federal budget and restore output at state-owned Petroleos Mexicanos after Mexicos biggest oil discovery, Cantarell, collapsed over the past decade. We have to provide certainty to players, to economic agents that would participate in this market, Medina Mora said in an interview at Bloombergs headquarters in New York. It would very much help to have a constitutional amendment to do that. Production Declines Mexican law currently prohibits Pemex, as Petroleos Mexicanos is known, from profit-sharing agreements with other companies for exploration, extraction and refining. Pemex, which was founded after Mexico
expropriated assets from U.K. and U.S. companies and changed its constitution in 1938, is looking to reverse a drop in production that reached an eighth consecutive year in 2012. Pena Nietos Institutional Revolutionary Party in March voted to end its opposition to taxing a tax initiative to raise revenue. He already signed a bill to improve education by making teachers more accountable for performance, and last year as president-elect helped pass a labor-system overhaul designed to boost productivity. The PRI, as the party is known, also worked with major opposition parties earlier this year to approve an initiative increasing competition in telecommunications and broadcasting and strengthening government regulation of the industries.

food and medicine, giving the president the option to propose such a strategy in

Mexican Econ Impacts

Illegal Immigration
Mexican economic boom causes decrease in immigration to U.S. Bridges 6/7/2013 (Eunice Bridges, Immigration reform too late to fix one big problem,
studies say, http://www.lexisnexis.com.proxy.lib.umich.edu/lnacui2api/results/docview/docview.do?docLi nkInd=true&risb=21_T17836730304&format=GNBFI&sort=BOOLEAN&startDocNo=1&results UrlKey=29_T17836730308&cisb=22_T17836730307&treeMax=true&treeWidth=0&csi=8149& docNo=8)
Yet the

two recent studies suggest that economic and demographic trends in Mexico are already changing the dynamics of the American migrant-worker system. In the longer term, the increasing urbanization and prosperity of the Mexican middle class will dramatically diminish the abundant, very cheap Mexican farm labor that has flooded across the southern border for decades to harvest the crops of America. "The longstanding assumption that the region has an endless supply of lesseducated workers headed for the US is becoming less and less accurate when it comes to Mexico ; and in the years ahead, it is also likely to become less accurate first for El Salvador and then Guatemala," says the executive summary of the report released Monday by the Migration Policy Institute and the Woodrow Wilson International Center for Scholars. The second study agrees with the first and connects the trend directly to issues at the heart of immigration reform. "This [trend] means that immigration policy will cease to be a solution to the US farm labor problem in the long run and probably sooner. In fact, we already may be witnessing the start of a new
era in which farmers will have to adapt to labor scarcity by switching to less labor-intensive crops, technologies, and labor management practices," according to the University of California study released in March. Together, the two studies reinforce statistically what experts have been cataloging anecdotally since the 1980s, pointing to several reasons for the historic drop in cheap Mexican farm labor. As incomes in Mexico have risen, workers have shifted out of farm work into

other sectors. Mexico's farm workforce fell by nearly 2 million - 25 percent - from 1995 to 2010, and its per capita income now exceeds $15,000 per year. "Moving away from farm work as your income rises, reflects a

pattern seen in many other countries," says Edward Taylor, one of the authors of the University of California report. Fertility rates have changed dramatically - down from a norm of seven children per woman in 1970 to just over two today. Rural education

has also improved dramatically. The average schooling for rural Mexicans 50 or older is 4.9 years, but for those in their
20s it is 9.7 years. "Better educated children eschew farm work in Mexico," says Mr. Taylor. These developments could help proponents of immigration reform dull some criticism of the plan. "This study suggests that the level of illegal

immigration will never return to its prior levels," says Steven Schier, a political scientist at Carleton College in Northfield, Minn., referring to the University of California research. "That may serve to reduce the heat

surrounding the issue and prompt Washington to address the problem with legislation for the first time in decades." But groups against immigration say the studies show the need to focus on other ways of getting US food harvested. "American agriculture's reliance on low-wage foreign labor has impeded capital investment in technology that would have made it more efficient and competitive," says Ira Mehlman, national spokesman for the Federation of American Immigration Reform. "There are machines that can do many agricultural jobs much more efficiently and mor e cost effectively. Our government should have policies in place that incentivize that sort of capital investment in efficiency, not policies that perpetuate exploitative inefficiency." More broadly, the research helps clarify the questions Congress ought to be asking, many say. "This ... raises a series of questions for policymakers and those in the agricultural industry," says Catherine Wilson, an immigration specialist at Villanova University. "First, given the increasing trend of Mexicans moving into nonagricultural occupations, how can the US secure a steady and reliable flow of workers in the agricultural industry? And second, does comprehensive immigration reform legislation provide a time-sensitive and effective response to this phenomenon?" The answers to those questions could push the US toward working with illegal immigrants already in the country, some say. "The boom in Mexican immigration is over. Mexico's rural sector is declining,

labor force growth is decelerating, Mexico is becoming an aging society, its middle class is expanding, and incomes are rising," says Douglas Massey, a sociologist at the Woodrow Wilson School of Public and International Affairs at Princeton University in New Jersey. "The critical need at this point is
some kind of legalization for those already here."

Oil Dependence Advantage

1ac Oil Dependence

Advantage ____ is Oil Dependence The US is dependent on the Middle East for oil Makan 13, staff writer (Ajay, US Dependence on Middle Eastern Oil Grows, Feb 26th,
Restoring Liberty, http://joemiller.us/2013/02/us-dependence-on-middle-eastern-oil-grows/ )//XG The US was more reliant on the Middle East for its oil imports last year, underscoring the critical importance of the politically unstable region for the country despite the growing energy independence its shale gas revolution is bringing. That domestic production boom has triggered intense debate

over whether the US would still guard the worlds critical sea lanes, such as the Strait of Hormuz in two decades tim e or whether China, whose dependence on Middle Eastern crude imports is rapidly rising, would replace it. However, recent oil import

trends from the Gulf region suggest why the US might continue to play a critical security role in the region. While domestic production increased the most in 150 years last year, Washington will confirm later this week that oil imports from the Gulf region continued to rise. By the end of November the US had already imported more than 450m barrels of crude from Saudi Arabia, more than it imported from Riyadh in the whole of 2009, 2010 or 2011, according to figures from the US energy department. For the first time since 2003, Saudi imports accounted for more than 15 per cent of total US oil imports. The Gulf as a whole accounted for more than 25 per cent, a nine-year high. Other Gulf exporters are also seeing unusually strong US demand. By the end of November, Kuwait had shipped more oil to the US than in any year since 1998. Analysts
are expecting annual figures to be released later this week to confirm the trend seen up to November.

THA implementation reduces reliance on Middle Eastern oil House Committee on Natural Resources 13 (House Committee on Natural Resources, 627-13, House Votes to Approve Transboundary Hydrocarbons Agreement with Mexico , http://naturalresources.house.gov/news/documentsingle.aspx?DocumentID=340794)
Today,

the House of Representatives passed H.R. 1613, the Outer Continential Shelf Transboundary Hydrocarbon Agreements Authorization Act, with a bipartisan vote of 256-171. This legislation, sponsored by Rep. Jeff Duncan (SC-03), would approve and implement the terms of the U.S. Mexico Transboundary Hydrocarbons Agreement, signed by the Obama Administration in 2012, that governs the development of shared oil and natural gas resources along the U.S. Mexico maritime border in the Gulf of Mexico. The bill would open up nearly 1.5 million acres in the Gulf of Mexico that is
estimated to contain as much as 172 million barrels of oil and 304 billion cubic feet of natural gas. This would expand U.S. energy production, create new American jobs, lower energy prices, and generate tens of millions of dollars in new revenue. The bill would also put into place an important and transparent framework for future implementation of similar transboundary hydrocarbon agreements with other nations. By passing this Transboundary Agreement, the House has furthered its

commitment to create jobs though energy. This legislation implements a first of its kind agreement with the government of Mexico to develop shared resources located between our two countries in the Gulf. The legislation also opens roughly 1.5 million acres in the Gulf of Mexico for production, and would oil and 304 billion cubic feet of natural gas, a considerable amount that will lessen our dependence on Middle Eastern sources of oil. The agreement also prioritizes safety by requiring that all operations

help create American jobs and grow our economy in the process, said Rep. Jeff Duncan (SC-03). According to the Bureau of Ocean Energy Management and the U.S. State Department, these areas are estimated to contain 172 million barrels of

in the region conform to U.S. safety standards, and establishes a framework for possible future arrangements with other neighboring countries like Canada. Simply put, this legislation is a win-win for our country, and I am proud that it received strong bipartisan support.

The plan would turn North America into an energy superpower Collins, Jennifer, a Marketplace reporter 5/2/13 As Obama visits Mexico, the slippery topic of oil
comes up http://www.marketplace.org/topics/world/obama-visits-mexico-slippery-topic-oil-comes)

President Barack Obama is in Mexico today, meeting with that countrys leader Enrique Pea Nieto. Theyll be talking immigration, border security and trade. But analysts say their conversation will likely turn to one touchy topic: Oil and gas reserves in Mexico. Twenty years after the North American Free Trade Agreement, Mexicos oil reserves have remained closed to U.S. investment, but that may soon be changing. Theres pretty much one brand of gasoline youll see in Mexico: Pemex, the state fuel monopoly. But Pemex is in trouble. Mexicos oil production has been dropping, and in less than 10 years, the country could be importing more oil than it exports.Analysts say the fossil fuel reserves are there. Mexico remains one of the worlds top 10 oil producers. There could also be tens of billions of barrels in untapped deep-sea oil reservoirs. The country has, The proven fourth largest shale gas reserves in the world, said Michael Shifter is president of Inter-American Dialogue. Shifter said Pemex lacks the technology to tap those reserves. International companies have the expertise, but Mexicos constitution prohibits joint ventures in the sector. Shifter said reforms maybe on the way.I think if there are joint ventures, U.S. companies would be very attracted to the opportunities in Mexico, he said.Arturo Sarukhn, who was Mexican ambassador to the U.S. until January, said he expects Mexico to introduce oil and gas reforms in July or August this year.This is a big strategic game changer, said Sarukhn, who is now the chairman of Global Solutions, a consultancy within the Podesta Company.He said those joint ventures could change the oil and gas game globally.By bringing Mexicos energy assets to the table, overnight Canada, Mexico and the United States become the largest producer of oil on the face of the earth, far outstripping Saudi Arabia, he said.

Dependence on the Middle East threatens the US and world economy, allows Iranian nuclear proliferation, and forces the US to strike Iran Hannah 12 (John Hannah, political pundit and advisor who served as a national security aide to former Vice
President Dick Cheney, Energy insecurity: How oil dependence undermines America's effort to stop the Iranian bomb, http://shadow.foreignpolicy.com/posts/2012/10/12/energy_insecurity_how_oil_dependence_undermines_america _s_effort_to_stop_the_irania?wp_login_redirect=0)
Let's face it. Ensuring

the free flow of oil has been the main driver of American strategy in the Middle East for decades. Our nation's economic wellbeing depends on a well-supplied global oil market, and countries in the Middle East account for a significant portion of the world's production. The cartel they dominate, OPEC, today controls between 30 and 40 percent of the international market while possessing the vast majority of the world's proven reserves. As a result, America and the global economy are incredibly vulnerable to what happens in the region. Every U.S. recession but one since World War II has been preceded by an oil price shock. And in the majority of cases, those shocks have been triggered by events originating in the Middle East. Think
the 1973 Arab oil embargo, the 1979 Iranian revolution, or Saddam's 1991 invasion of Kuwait. But you don't have to go back that far to appreciate the problem we face. Last year's revolution in Libya, along with broader unrest across

the Arab world, sent oil prices skyrocketing. Ditto Iran's threats in January to blockade the Straits of Hormuz. And concern about an eventual war with Iran continue to impose a significant risk premium on global prices, a reality Americans confront every day at the gas pump. Even short of tipping the economy back into recession, the effects of this kind of price volatility are highly negative: our trade deficit rises; disposable income and consumer spending decline; and economic growth takes a significant hit. Concerns about oil prices have often badly distorted

U.S. policy toward the Middle East. The most acute example is the effort to pressure Iran to give up its nuclear weapons ambitions. U.S. policymakers have long known that the most effective step we could take against the mullahs is to cut off Iran's oil sales and starve them of the enormous revenues they need to keep their repressive regime afloat. Yet for years, first President Bush and then President Obama fiercely resisted sanctioning the Islamic Republic's petroleum sector. The reason? Because they quite legitimately feared that removing Iranian crude from the market would disrupt global supplies and trigger a devastating price shock. Only in late 2011, with Iran rapidly approaching the nuclear threshold, did Congress finally steamroll the administration by forcing through legislation that targeted Iranian oil. Even then, implementation of the sanctions was watered down. The administration was given a six-month grace period to assess the possible impact that sanctions would have on the global oil market.
And rather than demanding that customers of Iranian oil end their purchases entirely, countries were granted waivers from U.S. sanctions if they only "significantly reduced" their buy -- which in practice required them to cut back between 15 and 20 percent. While the U.S. effort, together with complimentary EU sanctions, have no doubt had a major effect on Iran's economy -- reducing its oil exports by as much as 50 percent -- a full embargo would have been far more impactful and the obvious course of action for Washington to pursue if not for the countervailing concern about oil markets. In the meantime, the Iranian regime continues to pocket perhaps $3 billion per month from the million or so barrels of oil that it still exports daily, all the while pressing ahead with its nuclear program. America doesn't have a higher national security priority than stopping the

world's most dangerous regime from going nuclear. And yet the sad reality is that our dependence on oil has for years, and to our great peril, systematically deterred us from fully deploying the most powerful tool in our arsenal -- all-out sanctions on Iran's petroleum sector -for resolving the crisis peacefully. Not surprisingly, that underlying logic applies in spades when it comes to any discussion about the possible use of force against Iran, where predictions of oil spiking to an economy-crippling $200 per barrel are commonplace. The fact that our oil vulnerability has put such severe constraints on our freedom-of-maneuver to address the most pressing national security threat we face is deeply troubling. The big question is whether
we can do anything about it. Admittedly, history doesn't offer much reason for optimism. For almost 40 years, successive U.S. presidents have promised to tackle the problem with very little to show for it.

XT Dependence Now
US heavily relies on Middle East oil export Krauss, 12, a correspondent for The New York Times (Clifford, US Reliance on Oil From
Saudi Arabia Is Growing Again, August 16th, New York Times, http://www.nytimes.com/2012/08/17/business/energy-environment/us-reliance-on-saudi-oilis-growing-again.html?pagewanted=all&_r=0) //XG
HOUSTON The

United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow. The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular. This
reversal is driven in part by the battle over Irans nuclear program. The United States tightened sanctions that hampered Irans ability to sell crude, the lifeline of its troubled economy, and Saudi

Arabia agreed to increase production to help guarantee that the price did not skyrocket. While prices have remained relatively stable, and Tehrans treasury has been squeezed, the United States is left increasingly vulnerable to a region in turmoil. The jump in Saudi oil production has been welcomed by Washington and
European governments, but Saudi society faces its own challenges, with the recent deaths of senior members of the royal family and sectarian strife in the eastern part of the country, making the stability of Saudi energy and political policies uncertain. The United States has had a political alliance with the Saudi leadership that has lasted for decades, one that has become even more pivotal to Washington during the turmoil of the Arab spring and rising hostilities with Iran over that nations nuclear program. (Saudi Arabia and Iran are bitter regional rivals.) The

development underscores how difficult it is for the United States to lower its dependence on foreign oil especially the heavy grades of crude that Saudi Arabia exports even as domestic oil production is soaring. It is a development that has alarmed conservative and liberal foreign policy experts alike, especially with oil prices and
Mideast tensions rising in recent weeks. At a time when there is a rising chance of either a nuclear Iran or an Israeli strike on Irans nuclear facilities, we should be trying to reduce our reliance on oil going through the Strait of Hormuz and not increasing it , said Michael Makovsky, a former Defense Department official who worked on Middle East issues in the George W. Bush administration. Senior Iranian officials have repeatedly threatened to close the Strait of Hormuz, the narrow neck through which most Gulf oil is shipped, and the Iranian navy has held maneuvers to back up the threats. Most analysts say it is doubtful the Iranians would take such an extreme measure because that would block exports vital to the countrys economy, but the United States Navy has been preparing for such a contingency. Many oil experts say that the increasing dependency is probably going to last only a couple of years, or until more Canadian and Gulf of Mexico production comes on line. Until we have the ability to access more Canadian heavy oil through improved infrastructure, the vulnerability will remain, said David L. Goldwyn, former State Department coordinator for international energy affairs in the Obama administration. The potential for an obstruction of the Strait of Hor muz therefore poses a physical threat to U.S. supply as well as a potential price shock on a global level. Obama administration officials said they were not overly worried for several reasons. In the event of a crisis, the United States could always dip into strategic petroleum reserves; domestic production continues to climb; and Gulf of Mexico refineries could be adjusted to use higher-quality, sweeter crude oil imported from other countries. There are going to be tensions in the Middle East whether that oil is going to the United States or going to somewhere else, said Adam Sieminski, administrator of the Energy Departments Energy Information Administration. And if oil prices go up because of a problem in the Middle East, that causes a problem for the world in general and not one that is specific to the United States. In

the United States, several oil refining companies have found it necessary to buy more crude from Saudi Arabia and Kuwait to make up for declining production from Mexico and Venezuela, insufficient pipeline
can get the best price, said Bill Day, a spokesman for Valero Energy, the largest domestic refiner. The

connections between the United States and Canadian oil sands fields, and the fallout from the 2010 BP disaster, which led to a yearlong drilling moratorium in the Gulf of Mexico. As refiners, we buy from wherever the supply is readily available and where we

United States imported a daily average of more than 1.45 million barrels of Saudi crude over the first five months of this year, compared to a daily average of roughly 1.15 million barrels over the same period last year, according to Energy Department estimates. Similar
changed from the end of last year. But the big change came in imports from

increases have come from Kuwait and Iraq, even while total OPEC and non-OPEC imports declined. The United States has imported little Iranian oil in recent years. In recent years, United States oil imports have been trending lower, although total imports are little

the Persian Gulf, spiking to 2.6

million barrels a day in May from 1.9 million barrels a day last December, now roughly 23 percent of total imports, compared with about 17 percent before.

Oil Dependence Impacts

Terrorism
Middle East Oil Reliance Harmful
Chris Friend Writer at Newsmax 9/24/12 Oil Dependence Fuels Middle East Problems http://www.newsmax.com/Freind/Oil-Dependence-Mideast-Muslim/2012/09/24/id/457331 //ZC
Its no secret that Americans are their favorite targets. Just in the last week, they executed the American ambassador to Libya, stormed numerous embassies, and forced U.S. troops in Afghanistan to pull back because they are being attacked by the very people they had trained. So what does America do to mitigate this threat? Everything except the only thing that will free us from our bondage, and that is to become energy independent.Has it dawned on either party that this latest episode of Middle Eastern Terror Theatre has been brought to us by the very people whom we have sworn allegiance to by prostrating ourselves at the altar of Islamic Crude Oil? Petroleum and natural gas are the most valuable substances on Earth, the lack of either would send our economy into collapse. Yet despite having the worlds largest reserves, America continues to ignore that Godsend, instead choosing to rely on, and pay top dollar to, the very same people who are rioting because a spoof film doesnt depict Muhammad favorably.Ironically, these fundamentalists are funded by the United States, through both foreign aid and trillions of American petro dollars the greatest transfer of wealth in history. The only thing more infuriating is the total lack of awareness among our elected officials, both presidential candidates, and the media. So more Americans will die trying to extinguish these flames that surely will reignite, and the real issue will not be addressed, let alone solved. Heres what can be done to avoid a future conflagration: 1) Admit the truth. We are only involved because of our dependence on Middle Eastern oil barons to keep the crude spigots open. And since that flow of petroleum must be unimpeded, we are forced to maintain large diplomatic and military presences in that region, making us viewed as occupiers and swelling Islamic resentment.Heres a novel idea: if we drilled more domestically, we wouldnt be bent over the Middle East oil barrel, and therefore, wouldnt give a hoot about those countries. Evidence? Where was America when millions were massacred in the 1994 Rwandan genocide? Not in Rwanda, because it has no oil. Ditto for most conflicts. End of story.

War
US dependency on oil makes oil conflict likely and support oppressive regimes Cavell 12 (Colin S. Cavell, Ph.D. in political science ,former Assistant Professor at the University of Bahrain, 411-12,AMERICAS DEPENDENCY ON MIDDLE EAST OIL, http://www.globalresearch.ca/america-s-dependencyon-middle-east-oil/30177)
Though the

U.S. is a top producer of crude oil, its current rate of petroleum consumption is between 18 and 19 million barrels of oil per day, and its domestic production cannot handle the demand, hence its reliance on imported oil. As President George W. Bush stated in his 2006 State of the Union Address to the nation: Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world (January 31, 2006). From the mouth of the nations top leader, the U.S. suffers from
an addiction. Most modern machinery runs on oil and its utility is seen in everyday products from plastics to cosmetics, from paint to lubricants, and, most especially, as a source of fuel for the modern combustion engine. Over time, to feel normal, the addict develops an ab normal psychological dependency on the addictive substance and will utilize any means to obtain the drug in spite of cultural or moral restraints. In

the case of oil, this abnormal dependency has led the United States to engage in bribery and corruption to obtain oil, from control of markets to the exclusion of countries from such commerce, from the overthrow of regimes deemed belligerent because of their attempts to take control of their own oil resources to outright murder, assassination, and war. Indeed, few Americans today doubt that the recent eight-year
war on Iraq (2003-2011) was conducted primarily to obtain oil. And this is why veteran scholar on the politics of oil, Dr. Michael Klare, concludes in a recent article that: the

Strait of Hormuz will undoubtedly remain the ground zero of potential global conflict in the months ahead (January 31, 2012). When a U.S. President refers to the necessity to import oil from unstable parts of

the world, what he means is that some regions of the world are asserting their sovereign right to control their natural reso urces, e.g. oil, and they are neither subordinate nor answerable to the U.S. government, especially as regards how much oil is produced and available for purchase on world markets and how much they wish to charge for this oil hence, the nomenclature of instability. With the recent American military departure from Iraq, it is becoming evident that the days of kowtowing to U.S. military dictate are over. Hence, there will be many unstable areas in the world in the years to come. Given

an ever-increasing demand for oil, because of its addiction, and given its limited domestic sources of crude oil, the U.S. will remain dependent on imported oil well into the future. U.S. policymakers, by their past and present actions since the end of WWII in pursuing this addiction, have apparently concluded that the nations interest in oil and other strategic resources outweighs the nations avowed values to support democracy.

A2 Offcase Arguments

A2 Enviro DA
Plan is key to standardize safety procedures
John M Broder / Clifford Krauss 2/20/12 U.S. in Accord With Mexico on Drilling http://www.nytimes.com/2012/02/21/world/americas/mexico-and-us-agree-on-oil-and-gasdevelopment-in-gulf.html?_r=0
The United States and Mexico reached agreement on Monday on regulating oil and gas development along their maritime border in the Gulf of Mexico, ending years of negotiations and potentially opening more than a million acres to deepwater drilling. The agreement, if ratified by Mexican and American lawmakers, would for the first time provide for joint inspection of the two countries rigs in the gulf. Until now, neither was authorized to oversee the environmental and safety practices of the other, even though oil spills do not respect international borders.Each of the nations will maintain sovereignty and their own regulatory systems, Ken Salazar, the interior secretary, said from Los Cabos, Mexico, where the agreement was completed. But what this signifies, and what may be the most significant pa rt of the agreement, is that were moving forward jointly with Mexico to ensure we have a common set of safety protocols.As the Mexicans move into deepwater development, Mr. Salazar said, we want to make sure its done in a way that protects the environment and is as safe as possible.The Transboundary Agreement, as it is called, will make up to 1.5 million acres of offshore territory claimed by the United States available for leasing as early as June, though the leases will not become active until a pact is ratified. The Interior Department estimates that the area contains as much as 172 million barrels of oil and 300 billion cubic feet of natural gas, relatively modest amounts by the oil-rich gulfs standards.

A2 T Economic Engagement
The plan increases US-Mexico energy trade Daniel Simmons 3/30/13 Writer for the Times U.S.-Mexico Transboundary Hydrocarbons
Agreement: A Rare Victory for Oil and Gas in the Obama http://www.masterresource.org/2013/04/u-s-mexico-transboundary-hydrocarbonsagreement/#sthash.qT19SjJC.dpuf The energy trade between the United States and Mexico is growing, especially for Americas finished petroleum and natural gas exports. Mexicos heavy oil production is falling, but that means more spare refining capacity on the Gulf Coast if Canadian oil sands can be transported to the Gulf Coast. The Gulf of Mexico is one of the most prolific hydrocarbonproducing areas for both the United States and Mexico. Oil production, especially in deepwater on the U.S. side of the border, has moved closer to the U.S.-Mexico maritime border in recent years. Until last year, however, there was no agreement on how to divide resources between the United States and Mexico for resources that straddle the border.

The plan is the most relevant issue in US-Mexico trade Collins, Jennifer, a Marketplace reporter 5/2/13 As Obama visits Mexico, the slippery topic of oil
comes up http://www.marketplace.org/topics/world/obama-visits-mexico-slippery-topic-oil-comes)

President Barack Obama is in Mexico today, meeting with that countrys leader Enrique Pea Nieto. Theyll be talking immigration, border security and trade. But analysts say their conversation will likely turn to one touchy topic: Oil and gas reserves in Mexico. Twenty years after the North American Free Trade Agreement, Mexicos oil reserves have remained closed to U.S. investment, but that may soon be changing. Theres pretty much one brand of gasoline youll see in Mexico: Pemex, the state fuel monopoly. But Pemex is in trouble. Mexicos oil production has been dropping, and in less than 10 years, the country could be importing more oil than it exports.Analysts say the fossil fuel reserves are there. Mexico remains one of the worlds top 10 oil producers. There could also be tens of billions of barrels in untapped deep-sea oil reservoirs. The country has, The proven fourth largest shale gas reserves in the world, said Michael Shifter is president of Inter-American Dialogue. Shifter said Pemex lacks the technology to tap those reserves. International companies have the expertise, but Mexicos constitution prohibits joint ventures in the sector. Shifter said reforms maybe on the way.I think if there are joint ventures, U.S. companies would be very attracted to the opportunities in Mexico, he said.Arturo Sarukhn, who was Mexican ambassador to the U.S. until January, said he expects Mexico to introduce oil and gas reforms in July or August this year.This is a big strategic game changer, said Sarukhn, who is now the chairman of Global Solutions, a consultancy within the Podesta Company.He said those joint ventures could change the oil and gas game globally.By bringing Mexicos energy assets to the table, overnight Canada, Mexico and the United States become the largest producer of oil on the face of the earth, far outstripping Saudi Arabia, he said.

A2 T Only Trade Promotion

The Transboundary Hydrocarbon Agreement increases engagement and energy trade
Department of State 12 (US- Mexico Transboundary Hydrocarbon Agreement: Factsheet, Office
of the Spokesperson, US Department of State, 2-20-12, http://www.state.gov/r/pa/prs/ps/2012/02/184235.htm)

The United States and Mexico today signed an agreement concerning the development of oil and gas reservoirs that cross the international maritime boundary between the two countries in the Gulf of Mexico. The Agreement is designed to enhance energy security in North America and support our shared
duty to exercise responsible stewardship of the Gulf of Mexico. It is built on a commitment to the safe, efficient, and equitable exploitation of transboundary reservoirs with the highest degree of safety and environmental standards. Elements of the Agreement The United States and Mexico jointly announced their intention to negotiate a transboundary hydrocarbons agreement on June 23, 2010, following the Joint Statement adopted by Presidents Obama and Calderon at the conclusion of President Calderons State Visit to Washington on May 19, 2010. Upon entry into force, the current moratorium on oil exploration and production in the Western Gap portion of the Gulf of Mexico will end. The Agreement establishes a cooperative process for managing the maritime boundary region that provides a legal framework for

promotes joint utilization of transboundary reservoirs. The Agreement possible commercial activities at the maritime boundary and sets clear guidelines for transboundary developments. It establishes incentives for oil and gas companies to voluntarily enter into arrangements to jointly develop any transboundary reservoirs. In the event such an arrangement is not
achieved, the Agreement establishes a process by which U.S. companies and PEMEX can individually develop the resources on each side of the border while protecting each nations interests and resources. The legal certainty created by the Agreement will enable U.S. companies to explore new business opportunities and carry out collaborative projects with PEMEX. The Agreement also provides for joint inspections teams to ensure compliance with applicable laws and regulations. Both governments will review all plans for the development of any transboundary reservoirs. Further Growth in the Bilateral Energy Relationship: This

Agreement has been a catalyst for increased engagement between our respective safety regulators for the oil and gas sector. That engagement is expected to deepen in the years ahead as we work together to exercise responsible stewardship of the Gulf of Mexico. Mexico is consistently one of the top three to explore ways to further develop the potential of this important energy trading relationship. With its focus on renewable energy, energy fficiency, adaptation, market mechanisms, forestry and land use,
green jobs, low carbon energy technology development and capacity building, the Bilateral Framework has supported work on common emissions standards for heavy vehicles, closer integration of electricity grids and development of solar and wind energy generation plants in the border region.

exporters of petroleum to the United States. It ranked second behind Canada in 2010 with exports to the United States of 1.3 million barrels per day. The United States and Mexico launched the Bilateral Framework on Clean Energy and Climate Change in April 2009

The Agreement ties our energy trade closer

Daniel S. Simmons 13 (expert on energy @ Institute for Energy Research, Before The Subcommittee On Energy And Mineral Resources Committee On Natural Resources Hearing On U.S.-Mexico Transboundary Hydrocarbon Agreement And Steps Needed For Implementation, Released by the Institute for Energy Research, 4-25-13, http://docs.house.gov/meetings/II/II06/20130425/100755/HHRG-113-II06-Wstate-SimmonsD20130425.pdf)
The energy

trade between the United States and Mexico is growing, especially for Americas finished petroleum and natural gas exports. Mexicos heavy oil production is falling, but that means more spare refining capacity on the Gulf Coast if Canadian oil sands can be transported to the Gulf Coast. The energy and economic welfare of the United States and Mexico are intertwined by our shared geography, geology, and peoples. The Transboundary Hydrocarbon Agreement will help to tie our countries together and grow our economies. North America does not lack energy resources, but what we do lack, at times, is the necessary political will that could
lead to greater economic growth and prosperity.

A2 Russia Oil DA
Russia not dependent on oil Skolkovo James Melik BBC Reporter, 7/4/12 Russia Moves to Diversify Economy With Energy
Projects http://www.bbc.co.uk/news/business-18622834 Twenty miles west of Moscow, a new technology race, rather like the space race of the 1960s, is opening up.In the area of farmland, Russia is trying to build its own version of Silicon Valley - the Skolkovo Innovation Centre.It is part of the government initiative to divert the country away from its economic dependence on oil and gas and towards a new kind of industry.It has been a key policy for Dmitry Medvedev, the man who was Russia's president until he was replaced by Vladimir Putin at the beginning of May 2012.The Skolkovo project is widely
criticised in Russia and construction work has still not started in earnest more than two years after the proposals was announced.Another aim of this proposed technology drive is to keep clever Russians in the

country, along with their money-making ideas, rather than them leaving because they are fed up with corruption and the weight of bureaucracy.

Russian Economy is Decelerating Now Mark Adomanis 4/17/13; writer for Forbes, Masters from Oxford, Russia's Economy Is
Rapidly Slowing And The Kremlin's Options Are Limited http://www.forbes.com/sites/markadomanis/2013/04/17/russias-economy-is-rapidly-slowingand-kremlins-options-are-limited/ Russias economy is probably not, as Ksenia Yudaeva, Russias representative to the Group of 20 nations told Bloomberg the other day, already in recession, but its economy is clearly decelerating: growth for 2012 as a whole was 3.4%, but in the 4th quarter of 2012 it was only around 2.1% and provisional estimates of growth in the 1st quarter of 2013 are only around 1.1%. The economic slowdown is so significant that it has already been reflected in the Economy ministrys 2013 growth forecast, which was recently slashed from 3.6% to 2.4%. Before proceeding further it seems worth noting that

the initial forecast of 3.6% wasnt bizarrely optimistic or unrealistic: the IMFs 2013 projection for Russia was actually marginally higher at 3.7%, and other forecasts generally had Russia in the 3.5% range of unspectacular but reasonable growth.So what changed? Well one thing that a lot of different outlets seem to agree on is that external demand (i.e. Europe) is having a major i mpact. HeresReuters: Russias GDP grew at around one percent in the first quarter, weighed down by lacklustre investment and a

decline in exports of strategic commodities such as natural gas that were hit by a slump in the European market.Heres the same WSJ article I quoted earlier: The Economy Ministry said weakness across a broad range of sectors lay behind the cut in the forecast. Exports are stagnating amid weaknesses in Russias main market, Europe, where Russian natural gas is facing newfound competition.And heres another Bloomberg article:Russias $2 trillion economy is growing at the weakest pace since a 2009 contraction as Europes debt crisis curbed exports and prompted companies to trim investment

Europe is, and has always been, Russias main trading partner. China and other East Asian countries have been rapidly growing in importance, and China is now Russias single largest trading partner, but the fact is that the Eurozone countries are, collectively, far more important. Heres a quick graph of Rosstat trade data that ought to make the extreme importance of Russias relationship with the Eurozone very clear:And its hardly news that the Eurozone is in pretty deep trouble. Its economy shrank by 0.6% in 2012 and the predictions for 2013 are resoundingly grim, with expectations of either stagnation or continued recession. In fact, when you consider just how abysmal the EUs performance over the past seven years has been, whats amazing is how little of an effect it has had on Russias economy. Heres a chart of World Bank data that shows whats happened to Russian and Eurozone GDPs since 2006:Russia has (until now) rebounded reasonably well from the financial crisis while the Eurozones performance has been nothing less than a catastrophe. Now perhaps its possible for a country to enjoy sustained growth while its most important trading partners are all wallowing in endless austerity-driven recession, but I dont think its a surprise, and in fact is entirely predictable, that Russia is being adversely impacted by Europes epochal economic failure. What surprises me is how long its taken. Perhaps Im narrow-minded, but I

really fail to see how, in any realistic shortterm scenario, Russia can flourish while the Eurozzone is coming apart at the seams. In the long-term I

suppose Russia can re-balance towards Asia, but that will require many years of painstaking investment in transport and energy infrastructure, not modest tweaks in state policy.

No link uniqueness Venezuela Kejal Vyas MarketWatch Writer 3/24/13 Venezuela's PdVSA Gets $1 Billion Credit Line
From Schlumberger http://online.wsj.com/article/SB10001424127887323975004578503851574013678.html MORICHAL, VenezuelaState energy monopoly Petroleos de Venezuela SA, or PdVSA, will receive a $1 billion revolving credit line from oil-service provider Schlumberger Ltd. (SLB), the South American country's oil minister said Friday.Oil Minister Rafael Ramirez said that the funds will go toward financing oilfield services and infrastructure development plans between PdVSA and Schlumberger in Venezuela's vast Orinoco heavy oil belt, the heart of the resourcesrich country's plans to sharply raise its crude production in upcoming years. Venezuela's output sits near 3 million barrels a day, according to PdVSA, and it plans to reach 4 million over the next few years.Mr. Ramirez, flanked by Schlumberger Chief Executive Paal Kibsgaard, looked to quash speculation from earlier this year that PdVSA's partner was growing impatient with delayed payments and could scale back on its operations."Some media was saying that Schlumberger was leaving the countryWe have to try to refute these things," Mr. Ramirez said, attributing the rumors to a media "war" against his government.Friday's deal is the latest in a series of financing schemes struck by PdVSA and its partners, ranging from Russia's Rosneft (ROSN.RS) to China National Petroleum Corp., as it looks for cash to meet its growth plans.Mr. Ramirez also said that he expects to sign Monday a separate and previously announced $2 billion loan deal with Chevron (CVX) to increase production at the Petroboscan joint venture between PdVSA and the U.S. oil major.PdVSA's debts with service providers grew some 35% to around $16 billion in 2012. Mr. Ramirez has justified the increasing debt as signs of a company that is growing.Mr. Kibsgaard earlier this year cited "collection issues," while saying that the company would "temporarily" cut back on activity in Venezuela. But he then said in a statement that both parties had resolved their differences after holding meetings and had agreed on a payment plan.On Friday, Mr. Kibsgaard said he toured projects in the Orinoco region for the first time and reaffirmed his company's commitment to continue working in Venezuela. Schlumberger has had a stake in the country for around 80 years, and "we plan to be here for the next 80 years, as well," he told reporters at Venezuela's heavy oil upgrader facility Petromonagas."We have a clear view now of what is required in terms of technology, expertise and work capacity to support PdVSA as we continue to drive production going forward," said Mr. Kibsgaard.