Just kidding. Thought that would get your attention is all. This is going to be about Mexico's giant oil company, PEMEX and the need to reform it and the heated controversy about just how to do it. I don't think either McCain or Obama has weighed in on the subject.
First, a little background.
A couple of days ago, Nicholas Kristoff bemoaned the dwindling amount of foreign coverage in the US in a post on his blog in the NY Times. I put my two cents in on the lack of coverage of Mexico. A bit later, someone posted a response to my post:
I agree that we need more reporting from Mexico. There are many questions I have…. Why the Mexican people don’t expect more from their government. How it is that Mexico has tremendous natural resources, but the wealth disparity is much worse than in the US. How Carlos Slim can be one of the world’s richest people. Why Mexicans don’t demand more taxation on the rich so that (among other things) civil servants can get better pay and not rely on bribes. How Mexicans are seemingly not upset at remittances being the #2 source of foreign earnings, behind only oil. Speaking of oil, why they still don’t allow foreign investment in the industry. Why Mexico won’t allow me to buy a house on the shore, while they insist that Mexicans have the right to live in the US illegally.
Now, you might think I’m racist or anti-Mexican. I’m not. I’m all for a better Mexico, and I speak enough Spanish to handle myself OK there. But their main problems are home-grown, and not caused by the U.S.
These are good questions that Americans would really benefit from knowing the answers to. Many of the answers aren't simple or even clear, of course, but I thought I'd give it a go. I will try to present as much material by Mexicans as I can.
I'll start with the topic of Pemex and probably provide lots more information than the writer of the above post was looking for.
Mexico, via Pemex, supplies the third largest quantity of petroleum to the United States after Canada and Saudi Arabia. Here's a chart, supplied by the US Government's Energy Information Service which shows the 15 top suppliers.
Crude Oil Imports (Top 15 Countries)
(Thousand Barrels per Day)
Country Monthly average YTD 2008
CANADA 1,889
SAUDI ARABIA 1,531
MEXICO 1,207
VENEZUELA 998
NIGERIA 1,053
IRAQ 670
ANGOLA 468
ALGERIA 329
BRAZIL 209
KUWAIT 227
COLOMBIA 184
ECUADOR 194
RUSSIA 86
LIBYA 73
EQUATORIAL GUINEA 58
You'll notice that Mexico is no faint third place provider, but a great big one. (You'll also notice, one, that Nigeria is overtaking Venezuela. I don't know enough about all this to do more than hazard a guess that hostility to Hugo Chavez's regime may have something to do with it. But Nigeria is no great shakes as a reliable oil partner as far as I know; and, two, that the only mid-Eastern country in the top five is Saudi Arabia and that among the top 15, the only mid-East providers are Saudi Arabia, Iraq and Kuwait.)
Pemex is ranked 15th most admired oil refining company in the world. It is the world's fifth largest oil exporter and holds 34th place in the Fortune Five Hundred.
Yet at the moment it is a troubled company. It is openly acknowledged that it is rife with corruption, oil revenues have been falling, and so have supplies. Foreign companies have been scratching at the gates demanding privatization so they could get their teeth into it. Currently, conservative Mexican president Felipe Calderón has put reform measures on the table which include some privatization. The PRI, the second biggest party in Mexico and arguably still in some ways the most powerful, has offered amendments but is supportive, and the PRD has risen from the ashes under the leadership of Andrés Manuel López Obrador to rally support against any privatization whatsoever.
Here, before we go further, I want to lay my biases out in the open. Today, many large-scale economic policy arguments generally are framed as pro-privatization vs. pro-nationalization . For the past twenty or thirty or so years, pro-privatization champions have often won out because they are the most powerful. They are being challenged with increasing success. But the Pemex debate is being framed in these terms. It is a government corporation, therefore its problems have to do, according to its critics, with government being a bad manager. Private enterprise will be more efficient, etc. etc. I wish the critics would remember ENRON, if nothing else. I think that the problem isn't government vs. free enterprise but rather the corruptibility of people. Large, powerful organizations subject to little oversight, regardless of their category, tend to become corrupt if they weren't corrupt to begin with. Companies like Blackwater and Halliburton, one suspects, were corrupt or corruptible to begin with. I don't know but I suspect that in the old Soviet Union there was a lot of corruption in government-owned monopolies. The more people can justify to themselves their corruption, the more corruption there will be.
The real challenge for Pemex is to reform, not to replace government structure with private, for-profit structure. The choice is to find tools, private or government or a mix, that will do that. Private doesn't have to mean for profit behemoths. It could be NGOs attached to, say, universities. Or whatever.
But there's more to the story. That Pemex is a nationalized industry and that so many people feel so strongly about it staying that way is due in large part to how it arose in the course of Mexican history. Stay tuned....