Teaching Comparative Government and Politics

Tuesday, August 06, 2013

The PRI reforms Pemex?

How do you go about changing the political culture, the constitution, and an institution all at once?

Mexico's president on dangerous ground as he pushes Pemex reform

If Mexico had a crown jewel, it would be the giant state oil monopoly Petroleos Mexicanos, or Pemex. Year after year, it has poured billions of dollars into the state treasury, historically paying for schools, hospitals, dams, highways, ports and more.

The seizure of foreign oil companies 75 years ago that created the company is a cause for annual celebrations affirming Mexico's fierce sense of independence from outside interference.

Yet even as the country's new president, Enrique Peña Nieto, credits Pemex with building the nation, his administration acknowledges that the notoriously inefficient conglomerate is in trouble: If it is not opened to private and foreign investment, Mexico, the world's ninth-largest oil producer, will become a net energy importer by 2020, officials say.

As Peña Nieto moves ahead with a plan to overhaul Pemex, he is navigating the most perilous political minefield of his young presidency. He is toying with taboos and challenging revered perceptions surrounding the nation's top revenue earner. And he is meeting with impassioned opposition…

The government and industry experts contend that Mexico needs advanced technical expertise from outside companies to find and retrieve oil and gas from deep water and shale-rock formations that are believed to hold more than half the country's estimated 14 billion barrels of reserves.

But "Pemex is not allowed … to choose associations … to reduce the level of risk that you run" in deep-water exploration, Carlos Morales Gil, Pemex director of exploration and production, said in an interview. "What Pemex needs is budget autonomy and flexibility" to form joint ventures, he said.

Making that possible could require changing the constitution, and that could prove a bruising battle for Peña Nieto. The matter is so sensitive, so wrapped up in Mexico's ability to assert its independence from foreign meddling, that when Peña Nieto, speaking in London, suggested that the other major political parties had already agreed to reform, several politicians back in Mexico went ballistic.

Yet the problems plaguing Pemex are legendary. With corruption, poor management, a union that demands enormous benefits and a corporate structure that fosters duplicate jobs, Pemex is a model of how not to run an oil company…

For Peña Nieto and his Institutional Revolutionary Party, or PRI, the challenge is to reverse an allegiance to the very myths of nationalism and identity that built and sustained the party for seven decades of nearly unchallenged rule. Energy reform was a centerpiece of Peña Nieto's presidential campaign platform last year. He now appears confident he can muster unity within his party to support his initiative and expect backing from the conservative National Action Party, or PAN…

As compelling as the argument is for reform, the opposition is just as vehement.

"No, no, definitely no," said Jesus Zambrano, head of the PRD. Peña Nieto, he said, seems willing "to sell the golden eggs and the goose that laid them!"

Cuauhtemoc Cardenas, a founder of the PRD, is the son of none other than Lazaro Cardenas, the Mexican president widely regarded as a hero for nationalizing the oil industry. The younger Cardenas has announced his opposition to the "privatization" of Pemex.

"They must tell us why they want to privatize," Cardenas, a former presidential candidate, said. "They must give us figures; tell us where the money is lacking; why; why they can't get loans." The constitution, he said, must not be rewritten…