Mexico is coming out of one of the most dramatic reform periods since the creation of the North American Free Trade Agreement (NAFTA). Following the presidential election in July 2012, the new Peña Nieto administration shepherded through Congress a series of radical reforms—the most radical removed the national oil company Pemex (Petróleos de México) from its position as the monopoly supplier of all hydrocarbons in Mexico and guardian of the nation’s subsoil resources.

The reform did not privatize or radically change Pemex’s nature. What it did was expose Pemex to competition while at the same time remove some of the constraints that previously had held it back. By 2012, Pemex’s production had been in decline for eight years, and there was widespread agreement that something needed to be done, even if there was little agreement on what. Yet the compromised nature of the reforms meant that they failed to remove the constraints the company faced. Pemex gained some freedom and flexibility, but not enough, and it remains shackled by high taxes and high debt.

Starting with a historical overview of how Pemex gained its iconic status as the defender of Mexico’s national sovereignty against predatory foreign companies, this paper explains the roots of Pemex’s production decline after 2004 and show how the Peña administration managed to overcome that iconic status and pass energy reform—but in process preserved many of the features that held the company back. It then shows how even though the energy reform was supposed to ease these constraints in theory, the reforms were incomplete in practice. Consequently, it takes a slightly more pessimistic view of the future of energy reform than the current conventional wisdom.