Monday, November 26, 2007

PEMEX, Mexican Petroleum: Is Privatization In Store?

By Barnard R. Thompson

The expressed hope of President Felipe Calderón, members of his administration and many, if not most, Mexicans is that 2008 can be, will be, a year of reforms.  This of course due to Mexico’s many needs – but too because of a situation made worse today by recalcitrant representatives in Congress during the last administration, a politically unsophisticated past president, and the resulting legislative standstill during most of Vicente Fox’s 2000 to 2006 term in office.

Next year, 2008, is being targeted insofar as conventional wisdom dictates that Mexico’s 2009 midterm elections will not only be contentious, but the results could also produce a makeup in the Chamber of Deputies that might eliminate possibilities for negotiations if structural reform bills are still pending.  As well, there will be a focus towards the 2012 presidential election in the 2009 contests, thus partisan politics can be expected to play a major role during the 2009 to 2012 legislative period.

So the Calderón government is expected to go all out next year, on the legislative front, in an effort to gain needed constitutional reforms, as well as changes in certain outdated or detrimental rules and regulations.

Two of the primary sectors in need of prompt and dramatic change are energy and labor.

While the executive branch of government, namely the president’s office, is expected to submit a comprehensive energy reform package to Congress early next year, members of the Senate’s Energy Committee in the bicameral Congress are already preparing a public hearing process on energy matters, legislative initiatives and reform proposals to begin in January 2008.  And the senators have the added goals of not only delineating energy plans, but too of reaching preliminary accords to guarantee passage of whatever bills can be hammered out.

One of the issues of greatest importance, yet too the most sensitive, is the possibility of private investment – including foreign investment – in the sacrosanct area of Petroleos Mexicanos, PEMEX, Mexico’s state-owned petroleum conglomerate that came into being following the expropriation of oil and gas in 1938.  Always a contentious matter, with fervent sociopolitical opposition from a number of directions, today there may be at least a possibility of opening some areas of involvement related to crude oil and natural gas to private sector participation.

Before going on however, the political makeup of Congress needs to be mentioned.  In the 128-member Mexican Senate there are 52 National Action Party (PAN) senators; 33 with the Institutional Revolutionary Party (PRI); 26 Party of the Democratic Revolution (PRD) members; 16 from three small parties; and one independent.

The lower house, the Chamber of Deputies, has 500 representatives.  The PAN has 207 deputies; PRD 127; PRI 106; Mexican Ecological Green Party (PVEM), and Convergence, 17 each; while smaller parties and one independent total 26 members.

Considering these numbers as they relate to a possible opening to private investment and participation in PEMEX, that could include foreign investors, most analysts and insiders judge that the PRD is sure to continue its opposition to any loss of state ownership or control of PEMEX.  On the other hand, many observers also believe that PAN and PRI members of Congress have already come to the preliminary accord that private investment is necessary for the hogtied giant to rise again, get out of debt and recover.

The PAN and PRI combined vote should be enough to carry related legislation, barring defections and considering the minor party votes the PRI has in its pocket.

Another issue, worked on in vain during the Fox administration, is labor reform.  However, and apparently using work already done, reports are that the Secretariat of Labor and Social Security (STPS) is refining its labor reform proposal anew.  Working on the draft legislation, with the STPS, have been union leaders alongside representatives of business and industry.

Two of the labor reform goals are to make the law more flexible; and to do away with job and workplace discrimination.  As to this latter point, it is recognized that part of the bias is enshrined in Mexico’s Federal Labor Law, and that applicable amendments must be made.

President Calderón has also singled out security, public safety and criminal justice as priority areas for reform in 2008.  In this regard, two of the major needs stated are for an upgraded Penal Code; and oral trials.

Electoral reform is also on the agenda, and work in this area is already underway.  See “Reform Proposals for New, Needed Mexican Election Laws,” by Dr. Jose Enrique Vallarta Rodriguez (MexiData.info, November 26, 2007).

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Barnard Thompson, editor of MexiData.info, has spent 50 years in Mexico and Latin America, providing multinational clients with actionable intelligence; country and political risk reporting and analysis; and business, lobbying, and problem resolution services.  He can be reached via e-mail at mexidata@ix.netcom.com.