Mexican President Proposes Opening State Oil Company To Private And Foreign Investment; U.S. Corporations Line Up To Return
Mexican President Enrique Peña Nieto and his Institutional Revolutionary Party (PRI) have proposed constitutional changes and legislation that would for the first time since 1938 allow foreign companies to explore for and produce oil in
The president, the PRI, and other parties argue that permitting private and foreign investment is necessary in order to fund the industry’s modernization. At the same time, Exxon, Chevron, and Royal Dutch Shell have expressed their interest in participating in the Mexican oil business. For some this will be a return to the oil fields that they once controlled 65 years ago, before
A Clever Strategy
Peña Nieto has cleverly positioned his party and his proposal, which calls for sharing profits with foreign companies, midway between the conservative National Action Party (PAN), which has called for privatizing the company through the sale of shares or the granting of concessions, and the left-of-center Party of the Democratic Revolution (PRD), which rejects any measures that would open the company to large-scale private and foreign investment. Andrés Manuel López Obrador who was the PRD’s second -place presidential candidate against Peña Nieto in 2012 and has since gone on to form his own political organization, the Movement for National Regeneration (MORENA) also strongly opposes Peña Nieto’s proposal. Peña Nieto’s plan, which will radically transform the Mexican oil industry if it passes, thus appears to be the more moderate of the two alternatives now put before the Mexican Congress.
The president can expect to win enough support not only from his own PRI, but also from the PAN, and probably also from enough PRD legislators to pass the constitutional amendments and new laws that are needed to make his proposal a reality. The Green Ecologist Party (PVEM), which despite its name is a satellite of the PRI and not an authentic Green party, will also support the measure. The leftist Workers Party (PT) of Maoist origin and the middle-class Citizens Movement (MC), which together have only a few votes in Congress, are intransigent opponents who have called the idea of opening up the industry to private, foreign investors “treason.”
Continuing the Neoliberal Trend
The proposal of Peña Nieto continues the neoliberal policies initiated by President Carlos Salinas de Gortari (1988-94) who carried out the privatization of hundreds of the approximately 1,000 state-owned companies that existed when he came to office. Salinas sold off to private and foreign investors, among many other enterprises, the Mexican National Railroads to Southern Pacific and Kansas City railroads—and the Mexican Telephone Company (TELMEX) to a consortium comprising Mexican magnate Carlos Slim, France Télécom, and Southwestern Bell Telephone. After Salinas, the drive to continued privatization stalled, largely because of the tremendous national sentiment in favor of retaining the country’s oil in the government’s hands and the existence of an organized movement against privatization.
Why is Peña Nieto now in a position to procede with privatization where other PRI and PAN presidents have failed? First, Peña Nieto, as we have argued before, is on a roll. Even before becoming president, he succeeded in getting the major opposition parties to join his own in the “Pact for Mexico,” a political compact based principally on a series of political and economic reforms which he then moved ahead to pass. Since being elected president he has succeeded in passing a Labor Law Reform bill, an Education Reform bill, and then a highly contested Telecommunications Reform Bill. He jailed on charges of embezzlement the controversial labor and political leader Elba Esther Gordillo, the head of the Mexican Teachers Union (el SNTE). He has also proposed to give pensions to all Mexican workers over 65 years of age, though that has yet to become a bill. These reforms and proposed reforms have been popular with large sections of the Mexican elite and middle class as well as with much of public at large, giving his administration tremendous momentum at this time.
Second, the left opposition to privatization has suffered a series of defeats. The principal party with a nationalist economic program, the PRD, has seen its candidates Cuauhtémoc Cárdenas and López Obrador go down to repeated defeats in national elections several times (though two of those defeats, one for Cárdenas in 1988 and one for López Obrador in 2006, may have been the result of fraud). The nationalist economic program has been rejected overwhelmingly by the voters.
At the same time, the anti-privatization movement has suffered a defeat. The Mexican Electrical Workers Union (SME) that headed up the National Front against Privatization was virtually destroyed by former President Felipe Calderón of the PAN when he used police and army troops to occupy the Mexican Electrical Company facilities, liquidated the company and fired 44,000 workers in 2009. With the SME preoccupied with fighting for the jobs of the 16,000 members who did not accept their severance, the front has been dormant. Calderón also persecuted Napoleón Gómez Urrutia, head of the Mexican Miners and Metal Workers Union (SNTMMRM), forcing him into exile in
Back to the Future
Mexican oil was once in private hands, the very hands that today desire to return. Oil was first discovered and developed in
So, by the 1920s Mexican oil was in the hands principally of those two and a number of other foreign oil companies. Mexican communities in the Faja de Oro, the Gold Belt along the
The Nationalization of the Oil Industry
The Mexican Revolution of 1910 to 1940 was fought principally over the demand of the peasants for land taken from them over time by the great haciendas, but it was also a nationalist revolution against foreign ownership of the country’s resources and industries. In 1917, the Constitutionalist forces led by Venustiano Carranza called a convention at which the Constitution was rewritten. Article 27 of the new Constitution of 1917 stated that the nation owned the natural resources and held the power to expropriate them, though it required indemnification of the former private owners. President Plutarco Elías Calles ordered the foreign companies to register their properties and limited their concessions to 50 years, but under constant threat of invasion by the
President Lázaro Cárdenas (1934-1940), taking advantage of the European War, finally acted to nationalize the oil industry on March 18, 1938, paying the foreign corporations on the basis of the low estimates of value they had earlier presented to justify their low tax payments. While Soviet Russia had earlier nationalized the
The Power of PEMEX
PEMEX incomes and expenses have always been surrounded by mystery because the highly corrupt corporation has been such a source of embezzlement by politicians, government officials, labor union leaders, and organized crime. PEMEX collects dues for the corrupt and authoritarian Mexican Petroleum Workers Union (STPRM), lets contracts to the union, and makes other payments. Many union officials are involved as individuals in business deals with the company or its officials. Union officials sell union jobs to workers who also become beholden to the officials who hired them.
The most famous recent case of PEMEX and STPRM corruption was Pemexgate, when the PRI illegally ordered the STPRM to support the presidential campaign of Francisco Labastida in 2000. Those accused were not found guilty of the most serious charges, though some were found guilty of electoral fraud; the PRI was fined US$90 million for its role. Company and union officials also work with criminal organizations that siphon petroleum out of the pipelines. How many hundreds of millions of dollars flow out of the oil fields and into the pockets of parasites all along the line may never be known, but the sums must be astronomical.
Peña Nieto’s constitutional and legislative changes opening up