Stiff test on Mexico Oil Reform

By Saimah Hanif

Correspondent, SAM Daily Times

One of the big economic issues of Mexico’s presidential election is what to do with Mexico’s state-owned oil company, known as Pemex. Three of the four candidates – including Enrique Pena Nieto, who’s well ahead in the polls – want to reform Pemex to make it easier for foreigners to invest in the company.

There are some things in Mexico which aren't meant to be touched. And this might be another. Pemex is Mexico’s oil monopoly and a source of national pride.

Water deliverer Victor Rodriguez said, "It’s a company for Mexicans, no.”

For Victor Rodriquez, Pemex belongs to all Mexicans. And the constitution agrees – it says the country’s oil wealth is for Mexicans and only Mexicans.

But now this Mexican – the man who looks likely to be the country’s next leader – wants to open Pemex up to private investment.

Energy industry consultant David Shields said, "His idea, I think, is to make Pemex more of a company and less of a government office. And that is in order to make it competitive to get better results from the company."

Because at the moment, Pemex is producing less and less oil, which is a problem for Mexico because the oil producer pays about a third of the country’s taxes.

Shields said, "If Pemex can make a profit after tax and if it can work more like a company, then it could actually go onto the stock exchange, as does Petrobras in Brazil."

And he thinks that can only happen with the help of private investment, including foreign investment. An idea that wouldn’t please Victor Rodriguez or others.

Shields said, "There are lots of vested interests at Pemex, including the oil workers union, fuel distributors, contractors, suppliers, and these people, since they have business under the current system, they don’t want a different system."

But some Mexicans do want Pemex to change.

Teacher Jose Cocho said, "Pemex, for me, has great opportunities if they would only let foreign investors get into it. It’s running with very old technology, it doesn’t have the budget there’s a lot that it could do."


Reporter: "The second-placed candidate in the elections is keener to keep Pemex in public hands, and what happens to the company is a question which looks likely to continue dividing the country beyond the vote on Sunday."