A trial in Manhattan federal court may help push Mexico to free its decaying oil industry from the state-owned monopoly known as Pemex, for Petroleos Mexicanos. And that’s good news for both sides of the border, indeed for the whole world.
In the $500 million lawsuit, Pemex alleges that two firms, Germany’s Siemens AG and South Korea’s SK, bribed Pemex officials to win contracts. And a brief presented in the case last week, the Mexican daily Reforma reported, alleged that Cesar Nava was involved in the bribery.
Nava’s not just a top former Pemex executive. In the mid 2000s, he served as chairman of Mexico’s PAN party, then in the middle of 12 years’ control of the presidency. He next became private secretary for Felipe Calderon, Mexico’s president until last winter.
These charges against a top national politician can only further roil Mexico’s growing political debate over Pemex — as will a reported admission by Pemex of “serious” corruption in its ranks and “interference by organized crime.”
Why? Because, while Pemex corruption isn’t unprecedented, the company’s plainly now falling behind what the nation needs it to do. Mexico’s daily oil production has dipped from 3.4 million barrels in 2004 to 2.6 million today. At this rate, the country may become a net importer of oil and gas by the end of the decade.
And that would also starve the government, which gets 40 percent of its revenues from Pemex.
Yet US experts are sure Mexico holds huge deep-water oil and shale-gas reserves, just waiting to be extracted with the new techniques that have created an energy boom in the United States and Canada.
How big? Hard to tell. Mexico’s Constitution gives Pemex exclusive rights to oil and gas exploration along with control of the rest of the energy industry, and it keeps its estimates secret.
Ending the monopoly — or even allowing serious foreign investment — would turn things around. But despite its poor state, Pemex remains a symbol of national pride, 75 years after the state nationalized the oil industry.
Politicians, mostly on the left, vow to stop anyone who’d allow gringo capitalists and other foreigners to exploit their country’s natural treasure.
That dynamic has stymied Mexico’s new president, Enrique Pena Nieto, despite his campaign promises to reform Pemex. After at first hinting he might open the market to competition by amending the Constitution, he later vowed not to sell or privatize Pemex.
In other words, he’s not going to fight the rank-and-file in his own center-left party, the PRI.
But the need for revenue — and the specter of corruption — may allow Pena-Nietto to at least tweak the laws to allow Pemex to partner with foreigners, so that sorely needed investment and know-how at least start to trickle in.
Hundreds of US companies and others, large and small, are waiting in the wings, hoping to cash in on Mexico’s under-tapped resources. Success will make some of them rich — and also help revive and modernize Mexico’s slumping energy market.
And that, in turn, will hasten the day when North America becomes a net energy exporter — weakening regressive powers from Venezuela to Iran, Saudi Arabia to Russia. The global balance of power will never be the same.
Washington can’t do much to push Mexico — any US pressure to free the energy market will only inflame that lefty nationalism and the anti-reform firebrands.
But the trial in Manhattan, by exposing Pemex’s dirty secrets, may change enough Mexican minds that the new reform-oriented president can actually start doing the right thing.
Twitter: @bennyavni