Mexico fails to
capitalize on its oil windfall
By Kenneth
Emmond
A glance at trade figures for the world’s
oil exporters will tell you that a massive redistribution of global income is underway, from the treasuries of oil-importing
nations to those of the exporters.
Sales by oil exporters – countries like
Russia, Norway, and Mexico as well as members of the Organization of Petroleum Exporting Countries (OPEC) – will be
about US$700 billion this year. The International Monetary Fund projects their collective current-account surplus at about
US$400 million.
So much money is pouring into these countries
that deciding how to invest it wisely is a challenge. Spend it on national development? Exploration? A rainy-day fund? Or,
like Venezuela, should it be used to export revolution?
Sadly, instead of sharing this delightful dilemma
Mexico’s energy sector is the sick man of world petroleum.
Despite record revenues, Petroleos Mexicanos
(Pemex), the national oil and gas monopoly, teeters on bankruptcy, its debts equal to its assets, says General Director Luis
Ramirez. Exploration is being cut back even as proven reserves shrink, and Mexico could be an oil importer within a decade.
There’s neither money nor technology to probe the deep waters of the Gulf of Mexico, where geologists believe another
huge oilfield awaits.
What went wrong? How can this trend be reversed?
Put succinctly, the problem is that so many
interests, legitimate or otherwise, tap into Pemex that there’s nothing left for managing for the future.
First in line is government. Far from funding
special projects to move the country forward, Pemex provides about one-third of general revenues – money the government
uses just to operate. That’s like spending one’s inheritance on groceries.
There are individual hands in the till. Stories
abound, with varying degrees of documentation, of sweetheart contracts, unauthorized benefits to senior executives, and famously,
a massive petro-pesos-for-the-PRI mega scandal in 2000.
Pemex has always been a secretive organization,
replete with slush funds and offshore companies that few people know about. There is minimal accountability to monitor the
comings and goings of its billions.
It’s known that millions of liters of
gasoline are siphoned out of the system and sold privately, at an annual cost of about US$2 billion.
One mustn’t forget the union. The interests
of the union leaders are much better cared for than those of the workers, though there’s enough money sloshing around
that union members too get some benefit from Pemex largesse. Romero Deschamps, closely linked to scandal, was recently re-elected
head of the petroleum workers’ union.
Incompetence plays a role. Pipeline maintenance,
for example, was given low priority for many years. The frequent news stories of oil or gas leakages, sometimes involving
injury or loss of life and property, are the legacy of past mismanagement.
Arguably the biggest boondoggle of all is nationalism.
It’s a noble goal, but it’s hard to keep a straight face when hearing politicians declaim that Pemex is the company
of the people and there’s no role whatsoever for outsiders.
These politicians never talk about the implications
of their hardline posture: that deep-water exploration will never be done, that gas exploration might not take place, and
that Mexico’s oil wells might run dry while they’re busy protecting their sovereignty.
Is there hope for rescuing Pemex from this
quagmire? There is, but it will require unprecedented goodwill from politicians who must address five issues.
They must give their national treasure room
to maneuver. They can do this by letting it keep enough revenue to operate as a viable oil company instead of, as billionaire
Carlos Slim says, using it as a miscellaneous cash box.
Meaningful tax reform would reduce politicians’
temptation to deny Pemex a decent return. Labor reform would allow workers to choose leaders with their interests in mind.
A robust anti-corruption program combined with
equally robust audits of the company’s every nook and cranny would help Pemex earn and keep money from every barrel
of oil produced.
A merit-based system for appointing senior
management would provide new opportunities for increasing efficiency.
Perhaps the highest hurdle of all is a more
pragmatic approach to nationalism. Mexico doesn’t have to give up control over its petroleum to allow outside capital
and expertise to help it operate. It might require some hard bargaining, but before it can bargain it needs parliamentary
consensus.
Some of these measures are in the works or proposed
as legislation. Whether they succeed depends on whether the politicians of today and a year from now realize the urgency with
which Pemex needs their support.
——————————
Kenneth Emmond, an economist, market consultant and
journalist who has lived in Mexico since 1995, is also a columnist with MexiData.info.
He can be reached via e-mail at Kemmond00@yahoo.com.
