July 29, 2008


Mexicans vote to continue their public ownership

By Rick Arnold
Common Frontiers Coordinator*

On July 27 more than one and a half million Mexicans in nine states and the capital city voted on proposed legislation that would see Mexico's nationalized energy sector opened up to foreign investment. Over 80% voted against President Calderon's privatization plans in the first of three consultations, with the next two scheduled for August 10 and 24.   In Mexico City 826,000 people cast their ballots at some 5,600 voting booths.   In the nine participating states, with results still trickling in from remote areas, a similar number of voters had turned thumbs down on the government's pending legislation.

Front and centre in this privatization battle is the future of the publicly owned Petroleos Mexicanos or PEMEX - the crown jewel of Mexico's energy resources. The results of this public consultation confirmed that despite an aggressive and costly media campaign by Calderon's government to convince fellow Mexicans of the benefits of ‘reforming' PEMEX, a majority of Mexicans had not been swayed.   In Mexico City   87% voted 'no' to the first of two questions in the consultation that asked if private capital should be allowed into such areas of government jurisdiction as the exploitation, transport, distribution, storage and refining of the country's hydrocarbons. On the second question related to whether the Mexican Congress should go ahead and approve this legislation, 84% said 'no'.

PEMEX privatization supporters belittled the consultation claiming that there was a lower than could have been expected turnout with irregularities at some of the polling booths. The consultation organizers countered by saying that their stated objective for this first round had always been having a half million ballots cast, and that this civic initiative operating on a shoe string budget was a success.

Background elements

PEMEX's status as a parastatal organism dates back to March 18, 1938 when President Lazaro Cardenas announced his government's decision to expropriate the petroleum industry. This action came in response to the high-handed actions of the foreign oil companies in refusing to comply with Mexican labour laws and in doing their utmost to avoid paying taxes. Massive displays of support for the Cardenas decision in '38 included the memorable 12 th of April women's rally when thousands of items ranging from chickens to valuable jewelry were offered up to the government to help it defray the costs of the expropriation. Public ownership over energy resources is enshrined in the Mexican Constitution.

Any pragmatic politician in a similar position of power to Calderon's might have reconsidered the push to privatize PEMEX after it announced a stunning US$ 25 billion in export revenues in the first half of 2008, a 52% increase over the same period in 2007. Why kill the goose that is laying the golden egg and is filling Mexican government coffers with unexpected cash? Calderon's stubborn commitment to the opening up of this resource to private sector control dates back to his stint as Energy Minister under the previous Fox administration, which was then followed by his run for the Presidency that left him beholden to interests that put him in power.

This current push for energy privatization can be traced back to the NAFTA negotiations in the early 1990s when Mexico demanded and received an exemption from the proportional sharing clause(Canada signed with this clause included thereby becoming an energy colony of the USA). Though Big Oil interests got their wish for greater control over Canada's hydrocarbons after NAFTA was implemented in 1994, they chafed at having had the door slammed shut by Mexico.

Fast forward to May 17, 2001 when the US released the National Energy Policy report prepared by a government task force headed up by US Vice President Dick Cheney (former Chairman and CEO of Halliburton – an oilfield services firm) . "Mexico is a leading and reliable source of imported oil," the Cheney report observes. "Its large reserve base, approximately 25% larger than our own proven reserves, makes Mexico a likely source of increased oil production over the next decade."   This report prepared the ground for the oft repeated argument that Mexican and Canadian oil and gas reserves are part of energy security for North America -   ie to guarantee supply for the USA's voracious appetite for fossil fuels.

The North American Energy Working Group (NAEWG) was launched by the three NAFTA countries in mid-2001 with the avowed aim of fostering cooperation among governments and energy sectors. In 2005 the NAEWG also became part of the Security and Prosperity Partnership of North America (SPP) and has acted as a receptive forum for corporate demands that Mexico remove all ‘barriers' to private sector involvement in that country's energy sector. Calderon had expected to announce that legislation privatizing the energy sector had been passed while at the April 2008 SPP meeting in New Orleans. However, popular sector mobilization closed down the Mexican Congress before the legislation could be voted on.

The need to strengthen a publicly owned PEMEX.

The broad spectrum of opposition to Calderon's plans argue that PEMEX needs to be both re-invigorated and remain under government control. They assert that recent Mexican administrations have treated PEMEX as a cash cow, neglecting to re-invest in the publicly owned enterprise, and point out that no new refinery has been built in Mexico since 1979. They stress that a government owned enterprise can thrive   particularly if efforts are made to retrain PEMEX personnel, as, for example, in equipping Mexican engineers with the necessary knowledge to perform deep water perforations. As conventional oil supplies are depleted, having PEMEX under   government control makes it possible to direct PEMEX to invest in green energy alternatives.

Those defending the public nature of PEMEX challenge the Calderon government's logic that only the private sector can guarantee the future successful exploration, refining and marketing of Mexican oil.   They point out that this proposed legislation goes against the global trend in recent years which has seen state enterprises become the new “Seven Sisters”, surpassing in size and clout those petroleum corporations that in the 1970's controlled 80% of the world's reserves.

What about Canada?

Canadians have only 9 years of proven natural gas supplies and 13 years worth of conventional oil left and are already dependent on imports for almost half the petroleum we consume.

Last June Canadian unions sponsored a trip to Mexico of two energy experts to speak at   public events in Mexico City and Villahermosa. The Canadians shared their cautionary tale of Ottawa's failure to maintain sovereignty over the use of our energy reserves with the Mexican public and media.

As the US Presidential campaign of Barack Obama opens up a re-examination of NAFTA, Canadians must seize the opportunity to reassert control over our own oil and gas resources by demanding the same exemption from the proportional sharing clause as was achieved by Mexico when NAFTA was negotiated.


For more information, please contact:

Rick Arnold, Common Frontiers: Tel. (905) 352-2430;

*Common Frontiers is a multi-sectoral network of Canadian organizations working to forge a different path for trade relations in the Americas.