Mexico Opens Door to Oil Privatization

(Credit: flickr/cc/Shuck)

Mexico Opens Door to Oil Privatization

"Now we can truly say that our country has been betrayed."

Mexico's Senate gave final approval on Wednesday to an energy reform plan that will open the sector to foreign and private investment by multinational oil companies, marking an end to the 75-year-old monopoly of the state-owned oil company Pemex and the beginning of what many have said will be a new wave of corporate exploitation of the country's natural resources.

Mexico's oil revenue has been declining as the country's output decreased by a million barrels per day over the last decade. The move is an attempt to get the sector moving again by encouraging private investment.

This opening of private investment was only made possible by a constitutional amendment that was signed into law in December.

The package of laws approved on Wednesday now only needs to be signed by President Enrique Pena Nieto, who has pitched the reform to a skeptical Mexican public along with a number of other changes meant to boost economic growth. Pena Nieto says the reform will provide as many as two million new jobs in the energy sector.

While Pemex has long been mismanaged by the state, Mexico does not have a history of revenues from privatization trickling down to the general population. And the public will be footing the bill for Pemex's unexplained debt, which political analyst Leo Zuckerman estimates will amount to around $850 for every Mexican citizen.

Almost a third of the Mexican government's revenue currently comes from Pemex, and that revenue contributes 40 percent of what is spent on public education, health care, infrastructure, security and social programs.

Therefore it's not surprising that polls showed that up to 83 percent of the Mexican population was opposed to modifying the constitution before it happened .

According to the LA Times, there are few details publicly available about how Pemex has "spent its money over the years and why it is now heavily in debt." But John Saxe Fernandez and other professors of the National Autonomous University of Mexico believe the opening to private investment was caused by Mexican government officials, and specifically the Ministry of Finance, bowing to IMF and World Bank pressure. According to Saxe Fernandez, between 1990 and 2004, the government took 100 percent of Pemex's revenue and charged them an additional $8 billion. "The objective?" says Fernandez--"In the words of the World Bank: 'take the company to the point of sale.' "

"Now we can truly say that our country has been betrayed," wrote Subcomandante Marcos, then-leader of the Mexican autonomous movement the Zapatista National Liberation Army (EZLN), in a letter written when the constitutional amendment was being pushed through in December. "We have seen this sort of 'disguised plundering' before, this promise of progress through constitutional reform. The only things that have come from these types of maneuvers before are problems, problems like agrarian dispossession that has destroyed the Mexican countryside and it was achieved through lies like these so-called reforms."

On July 31, the blog Mexico Voices reported that former presidential candidate and renowned "moral" leader of the Party of Democratic Revolution Cuauhtemoc Cardenas Solorzano was leading the current effort to put a public referendum on the ballot for next year's election that would allow the constitutional changes to be reversed. ''We already have the signatures and the necessary support; more than 3 million citizens are demanding that the referendum be carried out," he said.

Mexico has the 8th largest shale deposits in the world with 13 billion barrels of recoverable shale oil, potentially making the country ground zero for the next fracking fight, once multinational oil companies are fully let in on the game. Pemex has reportedly already drilled 19 experimental shale oil wells in the Nuevo Leon-Tamaulipas borderlands region in the northeast.

The country's shift to a privatized energy industry stands in stark contrast to the host of Latin American countries that have nationalized their energy sectors over the last few years.

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.