Sunday, October 08, 2006

Calderon courts controversy as talk of privatizing Mexico's oil industry resurfaces.


Mexico Leftist Threatens Energy Reform Protests (Reuters)
Group Created to block energy privatization (
Mexicans oppose privatization (Prensa Latina)

“In the Nation is vested the direct ownership of all natural resources… [including] petroleum and all solid, liquid, and gaseous hydrocarbons…”
--Constitucion Politica de los Estados Uinidos Mexicanos [Const.], as amended, Titulo Primero, Articulo 27, Diario Oficial de la Federacion [D.O.], 20 de Enero de 1960.

The general public – and defeated presidential candidate Lopez Obrador – have expressed fears that president-elect Calderon will seek to privatize Mexico’s nationalized oil industry. The subject is a sensitive one because the nationalization of the nation’s oil resources in 1938 is a point of national pride in Mexico. At that time, Mexican oil had been under the control of foreign corporate entities, including British and U.S. interests. The expropriation of the oil fields and subsequent formation of PEMEX (Petroleos Mexicanos) was celebrated by Mexicans as a victory for the nation in ensuring that Mexico would control – and enjoy the benefits of – her natural resources. In fact, an amendment to that effect was added to the Mexican Constitution in 1960 (see above).

On the other hand, PEMEX has been criticized by those who support privatization as inefficient, suffering from chronic mismanagement and even corrupt. These critics, including U.S. interests, argue that PEMEX would benefit from privatization. While stopping short of all-out privatization, Calderon has expressed interest in opening up the possibility of joint ventures; currently such deals involving the energy sector are not legal in Mexico.

All the same, public opinion in Mexico has continued to oppose giving up “the national patrimony” to private interests. Despite the dominance of Calderon’s political party (PAN) in the Mexican legislature, it is unlikely that policies or legislature seeking to allow even partial privatization will be easy to pursue. Lopez Obrador has already threatened to launch another string of protests should Calderon seek to privatize the energy sector. Likewise, over 300 Mexican social organizations have formed la Frente Nacional en Defensa de la Soberania Energetica (The National Front in Defense of Energy Sovereignty).


Given the rash of corporate scandals in the United States over the last several years (e.g., Enron, 3Com, etc.) is it accurate to assume that private enterprises are any less prone to corruption and in efficiency than public enterprises?

Government’s role as regulator creates special problems and/or challenges when dealing with nationalized industries. Is there an effective, transparent way for government to regulate itself in this situation, or is the conflict of interest involved in being both the regulator and the regulated insurmountable?


Information on the expropriation of the oil fields in 1938 under the Cardenas administration.

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