I believe every gas station in Mexico is a Pemex.
And most of them look pretty much like this.
Pemex is Mexico's state-owned petroleum company.
Pemex is the second biggest producer in the western hemisphere following the US. Canada is third.
The US imports 72% of its crude oil from Canada, Saudi Arabia, MEXICO, Venezuela and Iraq, in that order. These are the largest providers of crude to the US.
Mexico is the fourth largest crude oil producer in the world; the 11th biggest integrated oil company, 11th in crude oil reserves, 13th in refining capacity and 15th in natural gas production.
Mexico has a triple B (stable) rating from Fitch and S&P and a Baa1 (whatever that means) from Moody's,
Until 2006 it was the biggest company in Latin America.
Its production, reserves (including known, probable and possible), and its sales have been sliding in recent years.
This is of concern to US energy interests because they would like to increase their use of Mexican petroleum in order to lessen dependence on Venezuela and Iraq and other countries considered unstable. American energy companies would also like to get their claws into Mexican oil production like they used to be.
La Torre Ejecutiva de Pemex in Mexico City
Here I would like to insert a personal note. Very little of what I say below has to do with environmental issues which are a huge concern when thinking about global warming and other environmental concerns. Mexico does seem to have a better stance on global warming, expanding alternative energy sources, etc. etc. than the US does, but I do not know how this will play out in the future.
Why is Pemex slipping?
Problems with corruption, inefficiency, and holding on to too much staff; equipment and infrastructure that is sometimes old and not well-maintained, resulting in some large, destructive explosions, leakage and other environmental damage, and lack of certain technical expertise and materials seem to be among the main causes.
When I was getting my Masters in Social Work at Washington University, I had a surprising and excellent course on the life of organizations. I wish I could still remember the professor's name. He was very interested in breaking down false dichotomies: private vs. public, for instance. A BIG for instance. I'm not going to try to summarize the course, but simply want to say that among his points were that size and age could lead to decay and that all organizations needed to have infusions of new people and new ideas from time to time to keep them going. From this perspective, private vs. public does not seem to be issue. However, some nations have constitutions which still undergird their existence and which try at least to direct governments to take into account the good of society. Companies, as far as I know, don't. Anyway...
If you have read anything about Pemex in the US press recently, you will have seen Pemex referred to as something almost sacrosanct in Mexico. A little more glibly, someone referred to it in the same breath as tortillas and mole, as if the Mexicans simply dragged around some stuff with which they identified their culture. But Pemex is a state-owned organization not least because one president in 1938 put his people's interests above corporate interests.The notion of returning any control of Pemex to the hands of the likes of Exxon or BP or Shell is indeed threatening in light of the past.
I think Mexicans are aware of this because they have much more of a sense of their past(s) than most of their neighbors in the United States. But the role of petroleum in their history will (should) be of interest to people in the US as well.
Before it was Mexico, Mexico was part of New Spain in that part of the Spanish empire which had its origins when Hernán Cortés, his conquistadors and some local groups hostile to the Aztecs, finally, after some rough challenges, defeated Moctezuma in Tenochtitlan (later Mexico City) in about 1521.
In 1783 the Spanish crown claimed all "riches extracted from underground" pertained to the Crown, including oil, though oil wasn't much on the radar until the end of the nineteenth and beginning of the twentieth centuries.Spain reserved to itself the right to own or assign ownership of Mexican precious metals, oil, and even land. The crown's exploitation of silver kept the empire going. (This wasn't the case in the Thirteen Colonies where people, not the British Crown, laid claim to their mining finds.) As a result, only the Crown had the right to exploit oil or give permission for others to do it.
The Mexican war of Independence lasted from 1810 to roughly 1824. In 1892 the the independent Mexican government passed a law allowing owners of property to freely exploit "combustible minerals" as long as they had paid their federal taxes. This was during the Porfiriato. Porfirio Díaz, the dictator who so dominated Mexico from 1884 to 1919 that the period is named after him, was a leader whom all capitalists in the 1% loved and would still. He practically gave away Mexico's primary resources and land to Yankees and other foreigners and to some rich Mexicans, including leaders of the Catholic Church. These foreigners plunged in (and plundered), developing infrastructure and exploiting natural resources, but to very little benefit for ordinary Mexicans. So much could be said about this era, but here I will only give you this link to a pretty graphic short summary and this link in Spanish which is an excellent longer summary.
Diaz was the one who first exploited oil, admitting foreign companies to develop the resource. In 1911, Mexican Eagle Petroleum, a British company began to export it. English and American companies came to dominate oil production.
In 1910, the Mexican Revolution erupted and led to Diaz's overthrow. It wasn't an easy or a short revolution, persisting in various forms until the early 1920s. But as factions and presidents rose and fell, the oil industry was relatively unaffected. This is in part because Mexico was afraid of US power. As you can imagine, US businesses had a lot invested in Mexico. The US followed its still-current policy of supporting those who supported US interests and opposing those who didn't. Thus, feeling threatened, the US administration invaded Mexico, first in Veracruz in 1914 and then again from the north 1916-1917, experiences which made Mexicans leery of provoking their more powerful neighbor and its business interests. This is an oversimplification, but I'll let it stand.
Mexico's new Constitution came into effect in 1917. That Constitution, with amendments, is still current today. It contains Article 27 which, along with Article 28, are the articles you hear about when people argue about whether or not Pemex should be opened to private investment. These articles essentially guarantee that the resources of the nation will be managed and used in the public interest. In answer to the passage of Article 27, a number of oil companies formed The Association of Petroleum Producers in Mexico.
Large foreign concerns continued to control Mexican oil throughout the 1920s and 1930s. It wasn't such a profitable business in those years, with early finds showing signs of petering out. Among the companies involved were El Aguilar (Mexican Eagle), Penn-Mex, Mexican Petroleum and South Penn. Royal Dutch Shell gained a controlling interest in El Aguilar in 1919; Amoco (Standard Oil of Indiana) bought Mexican Petroleum in 1932 and sold it as part of a package to Standard Oil of New Jersey (now Exxon) in 1935, and Sinclair gained control of a smaller company, South Penn in 1932.
The 20s and 30s were a time of sliding oil prices not just in Mexico, but internationally as well. The one exception, in Mexico at least, was the discovery of an abundance of oil along the coast of Veracruz in Poza Rica by El Aguilar.
[Poza Rica is below Tuxpan on this map of the State of Veracruz.]
Labor disputes were the immediate cause of expropriation. They occured frequently from 1915 onward until 1938. In 1935 el Sindicato de Trabajadores Petroleros de la República Mexicana, the oil workers union, was formed. The companies were reluctant, for the most part, to even compromise with the unions for a number of reasons, including not wishing to set an example for their holdings in other countries, especially Venezuela where an abundance of oil had recently been discovered. The companies also disputed the figures Mexican government gave for oil company finances saying they couldn't afford to meet labor's demands. They shut down production in places rather than negotiate. you might be interested to know that in 1934 wages in the oil industry in Mexico were about 16 cents an hour (US). I couldn't find (didn't have time to keep searching)wages for oil workers in the US, but mining, manufacturing and construction workers were earning roughly between 49 cents a an hour and 58 cents an hour. In the 1930s the US was in the midst of The Great Depression. I'm not sure how this would affect hourly wages, but it certainly affected employment in general. The disparity between Mexican wages and US wages continues. US and multinational corporations often charge the same or similar prices in Mexico for their products and pay much lower wages than they do in the US. At any rate, apparently, their refusal to negotiate with labor in Mexico paid off for the companies in Venezuela and in other countries.
In 1937 and 1938 the workers and the companies parried with each other, or I should say, "fought." The Supreme Court of Mexico ultimately supported the workers. The companies refused to concede and closed plants. On March 8, 1938, President Cárdenas declared that the oil industries were expropriated so that petroleum riches which were exploited by foreign companies would be returned to the Mexican Nation.
Mexico ultimately paid more than a fair price for the expropriated assets. The nation did not immediately find itself flush with money because of them. But the act was very popular among Mexicans because it threw out of the country what were seen as elements of empire which had for so long controlled their destiny.
Although today the United States is the empire, the workers within the United States are in a relationship with companies that is not dissimilar to that of Mexican workers vs. oil companies. If Ronald Reagan had sided with the air traffic controllers in their strike, or if Obama had decided banks were not "too big to fail" or had sided with homeowners or had interfered with corporate layoffs when companies were making big profits or against Monsanto, whatever, he could have been compared to Lázaro Cárdenas.
Initially Mexico had trouble with oil production and struggled to learn what it needed to know to run Pemex. It managed to find the intellectual resources within the country. The US led a boycott of all Mexican products as a result of the expropriation. The truth is that Mexican exports then went to Germany and Japan. But more important is that in place of exports, Pemex developed its domestic market. The boycott ended in 1942 when the US found that Mexican oil would be useful in the war effort. And I have to add here that Franklin Roosevelt was not unsympathetic to Mexico, though others in the US were.
Pemex has overall been more successful than not. In spite of critics' clamoring (especially those in favor of foreign intervention), it is not in danger of failing. It is no more corrupt than giant US corporations, possibly less so than some. I think the overall consensus is that, as my old professor would say, it is definitely in need of new voices and new ideas: a housecleaning and remodelling. To discuss this aspect in depth is too much for me right now, but I would like to see Mexico consider very carefully whether or not and how to permit enhanced foreign participation in its oil industry. In 1938 Cárdenas put the interests of Mexican citizens in front of those of corporations. I know peso (and dollar) signs are glittering in front of the eyes of some current Mexican politicians (as well as some multinational oilmen). But Mexico, in the long run as well as the short, would do better distancing herself from the international corporate circus.
A very good resource for the history of the petroleum industry in Mexico from 1915 to 1938 and a bit beyond is
The Empire Struck Back: Sanctions and
Compensation in the Mexican Oil
Expropriation of 1938
NOELMAURER
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