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Legal transformation

Mexico’s prospects grew even brighter in December 2012 after the election of Mr. Pena Nieto, whose administration, aided by a rare consensus of the country’s major parties, has pushed through a series of sweeping reforms of the country’s calcified labor, education, telecommunications and energy sectors. The labor reforms, for example, aim to reduce the size of Mexico’s “informal economy,” or underground markets, by enabling businesses to more easily hire and fire workers in the formal sector.

Pena Nieto’s administration has focused on major political and energy reforms,” taking on and defeating “sacred cows” such as labor unions and the 1938 ban on foreign oil companies, said Ms. O'Neil. Its accomplishments “have the potential to chip away at Mexico’s many barriers to broader, more inclusive growth.”

Key components of the energy reform, which required amending the national constitution, will permit private contracts for global giants such as Exxon Mobil and BP to explore and drill for oil and gas. The government also will be able to auction oil and gas licenses, mostly for deep-water projects, and collect taxes and royalties for the amount extracted.

“With a stronger domestic economic base and a richer society, Mexico can take advantage of its greatest potential,” said Ms. O'Neil.

Still, she said, Mexico faces “daunting hurdles” such as a high crime rate, corruption, inequality and weak infrastructure.

In an interview with the Council on Foreign Relations for the January/February issue of Foreign Affairs, Mr. Pena Nieto said he was able to secure sweeping reforms that eluded his predecessors by first securing agreement to a “Pact for Mexico” that committed all three of Mexico’s major political parties to the reforms.

“This government has come not to manage, but to transform,” he said, “and that is exactly what has been happening throughout this year.”

With enactment of the energy reforms in particular, he said, Mexico’s economy will revive this year and grow by 4 percent to 5 percent on average in the future.

“The most important changes are about to come” with implementation of the reform laws, he said. “Internal success will allow Mexico to project a different face to, and have a better position in, the world.”