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Special 092809 Baker


Monday, September 28, 2009


Mexico: Judicial Abuse Charges against LPG Conglomerate


By George Baker


(Mexico Energy Intelligence® Update 1, September 21, 2009)


The situation on the battleground where LPG (liquefied petroleum gas) interests use their access to power and public institutions to harass natural gas distributors in Mexico is more or less the same as indicated in our report MEI 651 that was published six years ago, in August 2003: It is still common that local officials—including the police—are employed to harass and obstruct the legitimate business rights and interests of natural gas distributors.


In Mexico City and Guadalajara, where the opportunity to expand service is the greatest for NG distributors, local officials routinely deny permits and act in arbitrary ways in relation to granting permits and the scheduling of inspections. It has been reported also that on occasion police elements have been sent to close down a NG work site.


These facts are intimatelyand painfullyknown to NG distributors (also to Mexico's Energy Regulatory Commission, which finds itself unable to help), but the general public in Mexico is blissfully ignorant of this tense situation.


With few exceptions, the Mexican press has chosen to ignore the problem. One publication that has carried out extensive investigative journalism of the business practices of LPG monopolies was met by a counterattack of lawsuits that sought damages for defamation ("daño moral").


In response to lawsuits, filed mainly by subsidiaries of the LPG conglomerate GRUPO Z, based in Guadalajara—the site of an Olympian struggle for market dominance of the lucrative residential market—some local courts have ruled against the publication. The 13th Magistrate in the civil court of Guadalajara has been particularly favorable to the claims of GRUPO Z.


On September 12, 2008, the journalists appealed to the National Commission on Human Rights (www.cndh.org.mx), which a year later, on September 14, 2009, issued a ruling that criticized the findings and evidentiary procedures of the local judges. A letter with recommendations of that date was sent to the chief of the state supreme legal tribunal and to the director general of Pemex. It was recommended that state legal authorities carry out an investigation of possible abuses in the application of justice, and that procedures be put in place to prevent such abuses in the future.


It was observed that Pemex has no procedures to guarantee that the granting—or withholding—of advertising would not be used as a mechanism to influence editorial content.


The press office in Pemex (and other government offices as well) closely monitor the national and international reporting on Pemex, and journalists and others who are critical of "the system" (as the set of unwritten practices during the PRI era was called). On one occasion, in the early 1990s, an analyst was told by an official in the Pemex press office that he had been the writer who had been the most critical of Pemex practices during the preceding year.)




1. The authority of the Human Rights Commission to influence Pemex conduct is limited. Indeed, in relation to the Commission's recommendations concerning the Usumacinta platform accident of October 2007, in which 22 workers died, Pemex flatly rejected the recommendations (Boletín 058, Mar. 13, 2009).



2. The problem of judicial abuse in Mexico arises primarily in relation to the Mexican legal stratagem known as the amparo: it is an order obtained by a judge that suspends the action ordered by an agency of the government or suspends the findings or sanctions to be applied in a civil or criminal case.


3. The obtaining of this form of what is sometimes called "retail justice" is by means of illicit payments to the judicial agents or their representatives. This fact is universally known in Mexico and abroad; but it seems that the government has never prosecuted a case of such abuse, nor has the Mexican press documented one.


4. The reports by Contralínea and Fortuna against the irregular and illegal business practices of GRUPO Z exposed even more of its irregular and illegal practices: namely, the buying off of judges to issue warrants (for the arrest of the editor in one instance) favorable to the litigants.


5. Of all of the above, the CNDH is silent. Its language is cautious: the Jalisco supreme tribunal is enjoined to "investigate," and, where warranted, take "disciplinary" measures.


6. The problem with passing the ball to authorities in Jalisco is that the problem is national; but it may be the case that the legal authority of the Commission does not extend to calling for a change in the law or in national political institutions.


7. The editor of the magazines complained that, in effect, he has been blackballed by Pemex, that is, arbitrarily excluded from being awarded advertising contracts as yet another means to influence the editorial content of the magazines.


8. This entire topic is apparently so scary to the Mexican media that even the editorially brave (if often misguided, at least in relation to energy policy) daily La Jornada took notice of the recommendations of the Commission in relation to the complaints of the journalists and publisher of CONTRALÍNEA and FORTUNA (9/20/09). But the newspaper did not interview the journalists, the publisher or in any way commit to the possibility that the alleged abuses are not only true but widespread.


9. This entire situation makes the operating environment for investors in natural gas distribution risky, as, in effect, the Mexican press is pledged to silence in relation to abuses of law, policy and human rights.




Gas Distribution in Mexico: LPG vs. Natural Gas


Mexico Energy Intelligence®, published 8/23/2003


This report examines the ongoing struggle by natural gas distribution companies (LDCs) to extend their pipeline system within their franchise areas in the face of local neighborhood opposition believed to be organized by LPG distributors. In relation to public policy, the report notes the lack of public education at the local level related to matters of energy policy, such as the advantages of natural gas compared to LPG.




SUMMARY   pg. 1

English   1

Spanish   1



Gas distribution and culture in Mexico   2

Privatization of natural gas distribution systems   3

Public tenders for natural gas distribution franchises   4

Public education in energy policy   4

Fair trade oversight   5

Market structure   5


Types of incidents faced by natural gas LDCs   6

LDC progress in gas installations 5-year report   7

Future of LPG regulations   8

Family and social costs of LPG service   8

Reactions of natural gas distributors to LPG competition   9


CRE bid criteria   9

Public education in energy policy   10


Appendices   12

Fig. 1 LPG consumption per capita by region in 2001   12

Fig. 2 LPG and Natural gas in residential market, 1995-2001   13

Fig. 3 Cost elements of LPG residential service   14

Related reports   15

Product notes and disclaimer   16


(MEI 651 Gas Distribution in Mexico: LPG vs. Natural Gas, published 8/23/2003)



George Baker is the director of Energia.com, a publishing and consulting firm based in Houston.  He can be reached via e-mail at g.baker@energia.com.