On Tuesday, March 18, Mexico marked the 75th anniversary of the nationalization of its petroleum industry – possibly the last time this will be done with any degree of pomp and ceremony.
Once considered a hugely significant date studied in classrooms up and down the country, few Mexicans would even have remembered it this year, were it not for the ongoing debate over the future of state oil monopoly Pemex.
President Enrique Peña Nieto has vowed to modernize Pemex by permitting greater foreign investment, in order to tap into the nation’s considerable oil reserves. However, he is adamant this does not equate to the privatization or sale of the company, as many of his detractors are warning.
“If Pemex is not modernized and current production and consumption trends continue, by 2020 Mexico could become a country with a structural energy deficiency, hence the need to implement reforms to prevent this from happening,” the president explained before attending the Dia de la Expropiacion Petrolera commemoration.Pemex was established by President Lazaro Cardenas, who on March 18, 1938 expropriated the 17 U.S., British and Dutch oil companies operating in the country. The company has since become a “sacred cow” and source of national pride, providing around one-third of the federal government’s annual budget. But Pemex has continually been beset by allegations of corruption, inefficiency and bad management, and has an abysmal safety record.
On January 1, Peña Nieto said Mexico has the equivalent of 13.8 billion barrels in proven oil reserves, enough to ensure production for the next 10 years. Many sector analysts say that the company can only realize its evident potential with massive foreign investment. They argue Mexico should follow the lead of Brazil’s Petrobras, which has thrived since its 70-billion-dollar share sale in September 2010. (Petrobras is now the world’s fourth biggest oil company.)
Peña Nieto is not yet advocating taking Mexico down a similar path but will still find plenty of hardened opposition to his plans, however limited they may seem to hungry foreign investors.
The president may also find himself facing an old adversary as he tries to push the Pemex reforms through Congress. Former Party of the Democratic Revolution (PRD) presidential candidate Andres Manuel Lopez Obrador, now leader of the National Regeneration Movement (Morena), could prove to be the biggest obstacle to reform. In 2008, his followers appropriated both houses of Congress to protest energy reforms that many considered lightweight. He has vowed to fight the proposals with every means at his disposal.