North Looking South
By John Barham, July 28, 2006


Oil: Congressional sparks likely to fly in 2007

Recently, while skimming through the pages of an American business journal, I noticed that the Baker Energy Corporation of Houston, Texas, had been awarded a contract from Grupo Delta for the customization and implementation of a logistics asset management system for PEMEX, the state-controlled oil company. This reminded me that Mexico, the world’s fifth largest oil producer and the third largest supplier to the United States, is a major player in world energy markets, competing with oil companies on the international scene to remain on the cutting edge of resource development and exploitation. Furthermore, it is important to remember that PEMEX revenues make up approximately 33 percent of the Mexican national budget.

In a March column, I pointed out that in order to exploit newly discovered oil fields off the coast of Veracruz and to make up for the decline of Cantarell, formerly Mexico’s largest oil field, PEMEX will need to spend some 20 billion dollars annually over the next 20 years. Furthermore, PEMEX executives have endorsed the possibility of joint ventures with international companies, and President Vicente Fox has even shown himself to be favorably disposed toward partial privatization of PEMEX.

While these proposals would not seem terribly controversial in other venues, the unique position of oil and its importance in Mexican history dictate special consideration for politicians who would hope to successfully navigate the pitfalls that could make or break their legislative agendas. And this is especially true for Felipe Calderón, who at this point is presumably the next president of Mexico.

A former energy minister, Calderón has called for more foreign investment to spur the Mexican economy and has spoken favorably concerning privatizing the energy sector of the economy. Such steps, from the PAN perspective, would be crucial in establishing a free-market system that could successfully participate in the global economy.

Be that as it may, it should be kept in mind that most Mexicans are very much aware that, at the end of the 19th century and the beginning of the 20th century, the international presence in their country with regard to resource development was distinguished by the exploitation of labor and the granting of concessions to American and European corporations that lined the pockets of foreign executives and fattened the accounts of their stockholders. And, since the expropriation and subsequent nationalization of the Mexican oil fields by the Cárdenas regime in the 1930s, Mexico has understandably strictly enforced Article 27 of the 1917 constitution, jealously guarding its natural patrimony from further foreign exploitation.

Much has been made in the Mexican press recently of the distinct possibility that, if a Calderón administration does come to power in December, serious efforts will be made to attract PRI and PRD party members to cabinet posts. In turn, the Calderón administration would expect the favor to be returned in the form of PRI and PRD votes in Congress for the new president’s legislative initiatives. In other words, Calderón, whose PAN will hold 42 percent of congressional seats, would trade cabinet posts for votes.

A quick read-through of history, however, suggests that any Calderón effort to privatize and attract foreign investment to the energy sector will be met with stiff resistance from the left-wing PRI and PRD delegations in Congress, those groups who would be most likely to consider themselves the ideological heirs of Lázaro Cárdenas.

From this perspective, if Felipe Calderón becomes president of Mexico, he might find it politically astute to tread lightly in forging congressional coalitions that could be shaky with regard to their ability to hold fast in the face of the new president’s free-market dogmas.

Hopefully, the new administration will not suffer from a case of political myopia and lose sight of Mexico’s immediate challenges of income inequality, poverty, a relatively weak monetary structure, widespread disdain for the law and the need for modernization throughout much of the economy. And, finally, those whose legislative proposals will tackle these challenges should not ignore one of history’s basic lessons that efforts at change that are not clearly thought out and undergirded with the mortar of popular support often meet their demise in partisan blood-letting based on questionable principles of nationalism.

John Barham, who has had a long career as a professor and administrator in colleges and universities in Alabama, Texas, Saudi Arabia, New York and Missouri, has recently retired from the University of Missouri and is a full-time resident of San Miguel de Allende. He can be reached at barhamjw@yahoo.com.