Monday, April 7, 2008

Mexico Needs Energy Reform, Not Blinkered Newspeak

By Patrick Corcoran

Politicians love dumbing complex ideas down to one word or phrase. To take but one example, the entirety of the Iraq debate in the United States often boils down to a choice between alternate slogans, averaging two words – stay the course or withdraw.

Were A Tale of Two Cities the product of a politician, one wonders if it would have lasted beyond the worst of times.

This habit has both benign and malignant side-effects. On the plus side, it makes political celebrities out of obscure Berkeley linguists; on the other hand, lots of subjects require detail and nuance, not a three-word tag. Unfortunately, in the debate over reforming Mexico’s energy industry a handful of road-blockers, led by – who else? – Andrés Manuel López Obrador, are trying to turn a question of immense complexity into a simple yes or no to privatization. 

The privatization hubbub has substituted an ideological litmus test for an actual debate, which is unfortunate because, in the case of Mexican oil, the label is a ridiculous simplification. Rhetorically, it narrows a buffet down to just two options (and poorly defined ones at that): pro-privatization or anti-privatization. Lurking just beneath the surface of the two-pronged label is the idea that those who oppose privatization are the protectors of the national patrimony, while those who favor foreign involvement in the energy sector would presumably sell anything from Chichén Itzá to the Virgin of Guadalupe to Exxon for the right price.

The debate should be about what is best for Mexico, and privatization is a detour. To their credit, the majority of Mexico’s politicians involved in the ongoing debate have taken an honest approach, while the demagoguery has been mostly confined to the margins. The ruling-party consensus seems to be that the national oil firm Petróleos Mexicanos (Pemex) should partner up with outside firms like Petrobras of Brazil, or at least be granted permission to do so. President Felipe Calderón’s team doesn't define this as privatization, rather as just a way to ensure that Mexico’s oil industry doesn’t take any further steps toward oblivion.

The left, with varying degrees of logic, contends that such a move is unnecessary. In stark stylistic contrast to his old boss López Obrador, economist Rogelio Ramírez de la O has argued in recent columns that the cash crisis facing Pemex is rather less serious in this era of $100-barrel oil. While the government’s diagnoses have targeted the need for deep-water exploration, other analysts have suggested that Mexico has unexploited troves in shallow waters, which would presumably obviate the involvement of foreign companies.

Whichever of the above arguments you find more convincing, there is no question that today’s uncertainty damages Pemex. The company may have more freedom of movement than the government claims, but there are some indisputable facts that betray a shaky future: Pemex is the most indebted oil company on the planet; without new exploration, inside of a decade Mexico will be importing oil; and Mexico’s government relies on Pemex for close to a third of its operating budget, which means it is hanging on to a sinking ship.

The legislation that eventually emerges not only must deal with the problems listed above, but it also should reflect something like the popular will, which is a tricky proposition given that so few have a grasp of the particulars. One way to do that would be to create a formal vehicle for consensus, a commission that includes representatives of all ideological stripes, both public officials and private citizens.

A tri-partisan group, an idea I first saw suggested by Demetrio Sodi de la Tijera, would provide a number of benefits. If the members were selected properly, it would turn the issue over to those who know it best. It would give the government political cover, should the group agree that an opening is necessary. It would give Mexicans confidence that the entry of foreign companies was not a boondoggle hatched out in a smoky backroom (a la the 1990s bank privatization, which turned out to be an utter fiasco), but rather an essential move that will ensure the health of Pemex and the Mexican economy.

Energy reform was destined to be contentious, given the centrality of Pemex to Mexico’s history and economy. But the inevitable controversy doesn’t need to be compounded by oversimplification.

The mindless nonsense about privatization is little more than a mantra. Righting Pemex will require a broader vocabulary.

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Patrick Corcoran, a MexiData.info columnist, is a writer who resides in Torreón, Coahuila.