Tuesday, March 18, 2014

On 76th anniversary of Mexican oil expropriation, Peña Nieto says "the State remains the sole owner of energy"

The "18th of March Brigade" is a reference to March 18, 1938 - the day foreign oil assets in Mexico were seized by president Lázaro Cárdenas, a patriotic hero to millions of citizens

Guadalajara -
On this date in history, Mexican president Lázaro Cárdenas del Río (in office 1934-1940), nationalized Mexico's entire petroleum industry and expropriated all assets of foreign oil companies in the country. The state run oil company, Petróleos Mexicanos, or PEMEX, was born as a result.

Late last year Mexico abandoned its state monopoly over the hydrocarbon industry and opened the monolithic enterprise to foreign capital investment and desperately needed technical partnerships. The required constitutional amendments authorizing such flew through Mexico's federal congress and 32 state legislatures at a breakneck pace, and won president Enrique Peña Nieto praise at home and abroad. Legislation and administrative regulations designed to implement the reforms are now being drafted and debated.

Today Peña Nieto appeared at a huge gathering in Veracruz, a major petroleum producing state, to commemorate both events. Hundreds in attendance were past or present PEMEX employees, whom he called the "heart and soul of the company."

To roaring applause, the president promised "the State is now and always will remain the sole owner of Mexican oil. Our sovereignty will be maintained."

Peña Nieto praised the decision Lázaro Cárdenas made three quarters of a century ago, noting it was intended to protect the nation from foreign exploitation. But he said changes in global energy markets had caused PEMEX "to lose dynamism. We had two choices: to continue down the same old road, or to change PEMEX from top to bottom. If we had not done so, our entire hydrocarbon industry would have been in jeopardy. We would have ultimately become a net importer of oil," the president added.

Peña Nieto called the PEMEX reforms the "most important change in Mexico in the last half century," which will "transform the country's energy sector for the benefit of the entire nation."

He promised that in the years ahead Mexicans will pay less for gas and electricity, and that PEMEX will shed its burdensome bureaucratic overcoat as it takes on more attributes of a private enterprise. The company historically has been used as a cash cow to fund general governmental operations, stripping it of the money needed to extract the estimated 30 billion barrels of oil and 500 trillion cubic feet of natural gas which lie beneath Mexican soil and seas. In September the Mexican Institute of Financial Executives (IMEF) reported that the PEMEX pension fund was insolvent, yet another factor demonstrating the urgent need for changes. Mexico is in full recession, with major pension and social service funds "broke."

"The PEMEX reforms are permitting us to construct a new Mexico, more competitive, more dynamic, for the benefit of future generations. Mexico is converting itself into a prepotent energy power, and developing resources upon which the nation will be able to rely in the years ahead," Peña Nieto said. "And the reforms will generate hundreds of thousands of new jobs in our economy," he added.

The president also noted that as Mexico goes about the capital intensive business of hydrocarbon exploration and extraction, none of its large cash reserves will be at risk. The country has already signed contracts with at least one technically experienced foreign oil and gas partner, in exchange for a percentage of recovered petroleum products. Russians are the first to benefit from PEMEX reforms.

But not everybody supports the PEMEX reforms. Mexico's Left - from the moderate to the extreme - remain bitterly opposed to the de-monopolization of the company, one of the few issues that unites them completely. On Dec. 10 they went to court in a desperate legal effort to derail the constitutional amendments, a move which went nowhere. Two days later the most temperate of the leftist groups, the Democratic Revolution Party (PRD), announced it would no longer cooperate with the legislative agendas of the center right National Action Party (PAN) and the ruling center left Institutional Revolutionary Party (PRI). Exit Stage Left: PRD says "The Pact for Mexico is dead." If that was not enough, PRD expelled two women deputies who voted in favor of the reforms. Not much democracy in "Democratic" Revolution Party.

PRD national chair Jesús Zambrano: "We're not going to just stand around with our arms crossed. We're going to keep working to throw out the energy reforms"

And in Mexico City, Cuauhtémoc Cárdenas - the 79 year old son of the man who nationalized the oil industry 76 years ago today - once again voiced his intransigent opposition to the destruction of the monopoly. Cuauhtémoc, along with other leftist leaders, hopes to repeal the PEMEX reforms in a special plebiscite in 2015. Last September he told a Mexican senate committee, "We're facing the grave reality that the foreign petroleum producers which were expropriated in 1938 - now with new names - may return to manage the industry, and to decide who will be the long term beneficiaries of Mexico's vast hydrocarbon deposits." But his warnings were not enough to stop the legislatively inevitable, and all that his famous father stood for has become but a footnote in Mexican history.

Leftist coalition activists at a Manuel López Obrador rally, May 2012, Mérida's Monument to the Flag

Mar. 19 - An interesting article today in the Mexican press traces the history of foreign oil company involvement in Mexico, which dates to the 19th century. The author leaves dangling the question of whether the PEMEX reforms will lead once again to exploitation of Mexico's natural resources by foreign business interests. La reapropiación petrolera.

Energy reforms and PEMEX
Mar. 27 - Mexican high court tosses leftist lawsuit challenging PEMEX reforms
Feb. 5 - On Constitution Day, far Left pol files criminal complaint against Peña Nieto for treason
Dec. 23 - Mexican energy reforms will lure in $10 billion dollars in immediate investment
Dec. 21 - Mexico's sovereign credit rating upgraded on PEMEX reform news
Dec. 20 - PEMEX reforms are now officially the law
Dec. 19 - U.S. Senate approves transborder oil exploration bill
Dec. 16 - San Luis Potosí puts PEMEX reforms over the top
Dec. 15 - Jalisco and all of Yucatán peninsula approve PEMEX reforms
Dec. 13 - Mexican states rush to endorse PEMEX reforms
Dec. 11 - Mexico's Chamber of Deputies wastes no time, approves PEMEX reforms
Dec. 11 - Mexico's PEMEX: senators open the door to foreign expertise and private capital
Dec. 10 - Mexican leftists go to court to stop PEMEX reforms
Dec. 8 - PEMEX amendments are on the legislative "fast track"
Nov. 30 - As energy reform vote approaches, PRD exits Pact for Mexico
Nov. 3 - Forbes praises Peña Nieto's "courageous" energy policy
Sept. 23 - Energy reform debate opens in Mexican Senate; warnings of foreign takeover of PEMEX
Sept. 21 - "The fix is in" on energy reform, says AMLO: new laws "designed for foreign business"
Sept. 20 - Without energy reform, Mexico will need more than half a century to reach U.S. output

This protester in Guadalajara on Mar. 10 made it clear he didn't like the PEMEX reforms - or anything else EPN is doing. He accused the Institutional Revolutionary Party (PRI) of "selling out the nation."

© MGR 2014. All rights reserved. This article may be cited or briefly quoted with proper attribution or a hyperlink, but not reproduced without permission.

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