Players in Mexico’s Mounting Oil & Energy Reform Debate

Published 19 April 08 01:19 PM
Column 040708 Wall

Monday, April 7, 2008

By Allan Wall

“All the world’s a stage,

And all the men and women merely players.”

William Shakespeare, As You Like It, Act 2, Scene 7.


The Mexican government is gearing up for a big debate over PEMEX, the Mexican state-owned oil monopoly.  Who are the players in this upcoming debate, and what are they likely to do?

Nobody can deny that PEMEX is in big trouble. It’s heavily-indebted, its biggest crude oil source (the Cantarell Field) has peaked, and the company lacks the money and expertise to get at offshore oil in deeper waters. According to PEMEX’s March 25 report, the company has 9.2 years of proven oil and gas reserves.

It’s obvious that reform is needed. But what shape would such a reform take?  To borrow another Shakespearean expression, “ay, there’s the rub” (Hamlet, Act 3, Scene 1).

As a former Energy Secretary, Mexican President Felipe Calderon is well-aware of the PEMEX problem, and has warned that the alternative to PEMEX reform is catastrophe.

The administration’s point man for energy reform is Secretary of the Interior Juan Camilo Mouriño, who has been the target of criticism.

Mouriño’s family owns PEMEX gas station concessions and a gasoline transport business. In 2001 and 2003, Mouriño signed contracts representing the family business while simultaneously serving on an energy committee as a Mexican congressman. Then, in 2004, Mouriño signed a similar contract while serving as Deputy Energy Secretary.  To opponents, these actions invite charges of conflicts of interest.

Georgina Kessel is the administration’s Secretary of Energy, and she has stated that, if the Mexican people reject private money in PEMEX, the government will honor that rejection.   

Meanwhile, Mexican Treasury Secretary Agustin Carstens has pointed out that Mexicans are “addicted to petroleum,” and that government finances have been petrolizadas (petroleumized).  Carstens is absolutely right, as about 40% of the Mexican budget comes from oil, which in turn takes funds away from PEMEX that could be used for oil exploration, exploitation and processing.

Party politics have a lot to do with any proposed energy reform. As no party has a majority in Congress, such a reform can only be brought about by negotiation.  

Ideally the three major parties, the PAN (National Action Party), PRI (Institutional Revolutionary Party) and PRD (Party of the Democratic Revolution), would sit down and hammer out some kind of agreement that they all three could live with.

But, if the PRD won’t get on board it’s possible that the PAN and the PRI could approve an energy reform. Or, and this is also a possibility being explored, the PRI and the PRD could pass an energy reform.

The FAP (Broad Progressive Front), a coalition of the PRD and two other leftist parties, opposes private investment and is calling for a national dialogue on PEMEX to include NGOs, universities and special guests.

The PRD itself is divided, in the midst of a leadership dispute.  However, opposition to a PAN/PRI energy reform could – pardon the pun – energize the party and get feuding party leaders working together to organize street demonstrations against oil “privatization.”

A coalition of governors of oil-producing states (Tabasco, Veracruz, Campeche, Chiapas and Tamaulipas) has announced they’d like to make their own reform proposal.

And PEMEX’s powerful union has to have a say in the matter.

The major opponent to reform is AMLO, Andres Manuel Lopez Obrador, who barely lost the 2006 presidential election and still refuses to recognize the Calderon administration.  AMLO is threatening to direct his scorched earth policy against any sort of PEMEX reform that doesn’t meet his exact specifications, calling forth thousands of protestors.

But what exactly is AMLO’s position anyway? AMLO is against privatization of PEMEX, but that’s not really in the cards anyway, and nobody is proposing it. 

AMLO is on record as opposing any infusion of private money, foreign or even domestic, into PEMEX’s coffers.

So what’s his alternative? That’s the problem – AMLO isn’t even offering a viable alternative, and he show’s no evidence of having thought through the problem.

But opposition to energy privatization is always a great cause in Mexico for calling forth multitudes of protestors. However, do the rank and file demonstrators understand and appreciate the issues?  I doubt it.

Consider such a demonstration I read about several years ago.

In a protest against electrical privatization, protest leaders had manipulated poor Mexicans whose homes didn’t even have electricity into demonstrating against electrical privatization!  Is that bizarre, or what?


Allan Wall, a columnist, recently returned from a tour of duty in Iraq.  He currently resides in Mexico, where he has lived since 1991.



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