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Mexico’s Pride, Its Oil, May Reopen to Big Multinationals Mexico’s Pride, Its Oil, May Reopen to Big Multinationals
(35 minutes later)
CIUDAD DEL CARMEN, Mexico — Every gas station in Mexico is stamped with the green-and-white logo of the state-owned oil monopoly, the economic lifeblood of the government. Oil Expropriation Day, commemorating the day Mexico seized control of the industry from multinational corporations in 1938, is celebrated with speeches and even parades in some towns. An old song, “The Oil Worker Hymn,” credits oil with “saving our fatherland.” CIUDAD DEL CARMEN, Mexico — Every gas station in Mexico is stamped with the green-and-white logo of the state-owned oil monopoly, the economic lifeblood of the government. Oil Expropriation Day, commemorating the day Mexico seized control of the industry from foreign companies in 1938, is celebrated with speeches and even parades in some towns. An old song, “The Oil Worker Hymn,” credits oil with “saving our fatherland.”
But now, President Enrique Peña Nieto, in what could be the biggest economic change in two decades, is on the verge of rewriting the Constitution to open Mexico’s oil, gas and electricity industry to private investment — a provocative move expected to lure foreign oil companies and expand North America’s energy supply while testing the storied grip oil has had on Mexico’s soul. But now, President Enrique Peña Nieto, in what could be the biggest economic change in two decades, is on the verge of rewriting the Constitution to open Mexico’s oil, gas and electricity industry to private investment — a provocative move expected to lure international oil companies and expand North America’s energy supply while testing the grip oil has had on Mexico’s soul.
“We must defend our oil,” Cuauhtémoc Cárdenas, a three-time presidential candidate and son of the revered president who nationalized the oil industry, declared in a recent television advertisement. The state oil company, he said, “is a business belonging to all Mexicans, and we must not allow it to go private.” “We must defend our oil,” Cuauhtémoc Cárdenas, a three-time presidential candidate and son of the president who nationalized the oil industry, declared in a television advertisement. The state oil company, he said, belongs “to all Mexicans, and we must not allow it to go private.”
The legislation, which won final congressional approval on Thursday afternoon, declares that Mexico still owns its oil. But it allows private companies to drill for oil and natural gas in partnership with the state monopoly, called Pemex, or on their own, returning international oil companies to territory they were kicked out of 75 years ago. The legislation, which won final congressional approval Thursday afternoon, declares that Mexico still owns its oil. But it allows private businesses to drill for oil and natural gas in partnership with the state monopoly, called Pemex, or on their own, returning international oil companies to territory they were kicked out of 75 years ago.
In a country where controlling oil is often equated with sovereignty and national pride, the plan has set off furious debate. But while demonstrations helped thwart a more tepid attempt to open up the industry in 2008, they were not effective this time — though there were some colorful moments. In a country where oil is often equated with sovereignty and national pride, the plan has set off furious debate. But while demonstrations helped thwart a more tepid attempt to open up the industry in 2008, they were not effective this time — though there were some colorful moments.
As the lower chamber raced to give preliminary approval in the early hours of Thursday, one leftist lawmaker opposed to it stripped down to his black underwear to suggest symbolically that the country was giving away its most treasured resources. The change must now be ratified by just over half of Mexico’s states before it becomes law, but Mr. Peña Nieto’s party controls a majority of them. As the lower chamber argued, one leftist lawmaker stripped down to his black underwear to suggest symbolically that the country was giving away its most treasured resources. The change must now be ratified by just over half of Mexico’s states before it becomes law, but Mr. Peña Nieto’s party controls a majority of them.
The stated goal is to stimulate Mexico’s sliding oil production and vault the country into the developed world by tapping vast pockets of oil and natural gas deep under the earth and sea. Foreign oil companies have long been eager to gain access to Mexico’s oil and have quietly lobbied the government to open up for years, while Pemex, short for Petróleos Mexicanos, is known for inefficiency at best and corruption at worst. The stated goal is to stimulate Mexico’s sliding oil production and vault the country into the developed world by tapping vast pockets of oil and natural gas deep under the earth and sea. Foreign oil companies have long been eager to access to Mexico’s oil and have quietly lobbied the government to open up for years, while Pemex, short for Petróleos Mexicanos, is known for inefficiency at best and corruption at worst.
“They know Mexico; they have been waiting for a long time for a true opportunity,” Jeremy M. Martin, director of the energy program at the Institute of the Americas, said of international oil companies. “They have been waiting for a long time for a true opportunity,” Jeremy M. Martin, director of the energy program at the Institute of the Americas, said of international oil companies.
The energy overhaul is the centerpiece of a series of changes Mr. Peña Nieto has pushed through this year with mixed results, including an effort to break up telecommunication monopolies, raise taxes and weaken the teachers union grip on faltering public schools. His Institutional Revolutionary Party — which nationalized the industry in the first place, setting Mexico on its course toward industrialization — joined with conservative lawmakers who have long wanted the energy changes, casting off a politically weakened left. The energy overhaul is the centerpiece of a series of changes Mr. Peña Nieto has pushed through this year with mixed results, including an effort to break up telecommunications monopolies, raise taxes and weaken the teachers union hold on faltering schools. His Institutional Revolutionary Party — which nationalized the oil industry in the first place, setting Mexico on its course toward industrialization — joined with conservatives who have long wanted the changes, casting off a weakened left.
Opinion polls suggest Mexicans are growing impatient with Mr. Peña Nieto’s agenda and do not yet feel any benefits from it, as economic growth has slowed and the violence he promised to tackle persists largely unchecked. Opinion polls suggest Mexicans are growing impatient with Mr. Peña Nieto’s agenda and do not feel the benefits, as economic growth has slowed and the violence he promised to tackle persists largely unchecked.
But he is banking that a change in energy policies will inject new life into the economy. Other presidents have failed in taking on the oil monopoly, a lifeblood to government coffers and a touchstone for the left. But he is banking that the energy changes will inject new life into the economy. Other presidents have failed in taking on the oil monopoly, a lifeblood to government coffers and a touchstone for the left.
“Oil has symbolic power in Mexico that it does not have in every oil country,” said Noel Maurer, a Harvard Business School political economist who has studied the industry. “Mexico has built up national mythologies that ‘the oil is ours.’ It’s like a flag-burning issue.” “Oil has symbolic power in Mexico that it does not have in every oil country,” said Noel Maurer, a Harvard Business School political economist. “Mexico has built up national mythologies that ‘the oil is ours.’ It’s like a flag-burning issue.”
Polls still show a large majority of Mexicans generally oppose foreign investment in oil but the passions may be fading. While schoolchildren are still taught about the nationalization, it is covered in just a page in the standard fifth-grade history textbook.Polls still show a large majority of Mexicans generally oppose foreign investment in oil but the passions may be fading. While schoolchildren are still taught about the nationalization, it is covered in just a page in the standard fifth-grade history textbook.
Even here in Ciudad del Carmen, where the discovery of one of the world’s largest oil fields at the end of the 1970s propelled the country to the top ranks of oil producers and turned this fishing village into a prominent oil town, the “it’s ours” passion has dwindled.Even here in Ciudad del Carmen, where the discovery of one of the world’s largest oil fields at the end of the 1970s propelled the country to the top ranks of oil producers and turned this fishing village into a prominent oil town, the “it’s ours” passion has dwindled.
Foreign-run contracting companies are already ubiquitous here, providing a variety of support services to the offshore platforms and nearby wells. A common complaint is that the benefits of sovereign oil have been oversold. Foreign-run contracting companies are already ubiquitous here, providing a variety of services to the offshore platforms and nearby wells. A common complaint is that the benefits of sovereign oil have been oversold.
“I laugh when I hear those arguments, ‘it’s our oil,’ ” said Enrique Sánchez, an engineer for a Pemex contractor. “I am still waiting for my payment.”“I laugh when I hear those arguments, ‘it’s our oil,’ ” said Enrique Sánchez, an engineer for a Pemex contractor. “I am still waiting for my payment.”
New malls, housing developments and big-box stores speak to the boom that oil exploration has provided, but many of the jobs have come from service contractors that pay well below wages at Pemex, where a powerful union controls jobs and many speak of having to pay off leaders for entree. New malls, housing developments and big-box stores speak to the boom that oil exploration has provided, but many of the jobs have come from service contractors that pay less than Pemex, where a powerful union controls jobs and many speak of having to pay off leaders for entree.
The contractors’ orange jumpsuits and hard hats, in contrast to the yellow of Pemex, are far more visible on the streets, and skepticism among those workers runs deep that the new energy law will fundamentally alter their lives. The contractors’ orange jumpsuits and hard hats, in contrast to the yellow of Pemex, are far more visible on the streets, and skepticism about the new law runs deep.
“The rich will get richer,” said José Luis Gutiérrez, an oil platform welder preparing for another 14-day shift at sea. “It is our pride, our heritage, but up to now the poor are still poor, so we are going to see if the reform changes anything. The fear is it won’t.” “The rich will get richer,” said José Luis Gutiérrez, an oil platform welder preparing for another 14-day shift at sea. “It is our pride, our heritage, but up to now the poor are still poor.”
Two decades after Mexico sold off banks and the telephone monopoly, Mexicans pay more for credit and phones service than other Latin Americans, and they suspect they will pay more for gas under the new law, too. Two decades after Mexico sold off banks and the telephone monopoly, Mexicans pay more for credit and phone service than other Latin Americans, and they suspect they will pay more for gas under the new law, too.
The government and oil industry analysts say Pemex cannot go it alone any longer. The urgency stems in part from the energy revolution in the United States, where cheap energy is helping American businesses.The government and oil industry analysts say Pemex cannot go it alone any longer. The urgency stems in part from the energy revolution in the United States, where cheap energy is helping American businesses.
Mexico’s oil production has declined by 25 percent from its 2004 peak, to just over 2.5 million barrels a day. Pemex is spending more to pump less: investment has more than doubled in the same period to more than $20 billion a year.Mexico’s oil production has declined by 25 percent from its 2004 peak, to just over 2.5 million barrels a day. Pemex is spending more to pump less: investment has more than doubled in the same period to more than $20 billion a year.
Mexico has abundant oil and natural gas reserves but they are harder and more expensive to reach, far below the waters of the Gulf of Mexico and trapped in shale deposits deep below the earth. New technology has unlocked those unconventional sources of oil and gas around the world, particularly in the United States, but Pemex has not kept pace. Mexico has abundant oil and natural gas reserves but they are harder and more expensive to reach, far below the waters of the Gulf of Mexico and trapped in shale deposits deep below the earth. New technology has unlocked those sources of oil and gas around the world, particularly in the United States, but Pemex has not kept pace.
It is an appendage of the Mexican government, heavily taxed to fund as much as 40 percent of the national budget. To keep that money flowing, almost all of its investments have gone to pumping crude for export. It is also an enormous source of patronage, creating fortunes for contractors with the right political connections, including the union. It is an appendage of the Mexican government, heavily taxed to fund as much as 40 percent of the national budget. To keep that money flowing, almost all of its investments have gone to pumping crude for export. It is also an enormous source of patronage, creating fortunes for contractors with political connections, including the union.
The union leader, Carlos Romero Deschamps, is a senator and a very rich man whose spending extravagances and those of his children regularly make headlines here. The legislation ejects the union from the Pemex governing board but maintains other privileges.The union leader, Carlos Romero Deschamps, is a senator and a very rich man whose spending extravagances and those of his children regularly make headlines here. The legislation ejects the union from the Pemex governing board but maintains other privileges.
Some on the left worry that as more efficient foreign companies move in, Pemex may ultimately lose control over a growing share of Mexico’s oil and gas reserves.Some on the left worry that as more efficient foreign companies move in, Pemex may ultimately lose control over a growing share of Mexico’s oil and gas reserves.
“Pemex needs major surgery, not euthanasia,” said Graco Ramírez, the leftist governor of the state of Morelos.“Pemex needs major surgery, not euthanasia,” said Graco Ramírez, the leftist governor of the state of Morelos.
This city is already creaking under the growth, but a gold-rush mentality in anticipation of the new law is setting in.This city is already creaking under the growth, but a gold-rush mentality in anticipation of the new law is setting in.
“They’re already building three hotels and many more people from other countries will be coming in,” said Nelson de Ganzer, who owns three Brazilian restaurants in town and has seen a surge of foreign workers come in. “This will be big for Mexico.”“They’re already building three hotels and many more people from other countries will be coming in,” said Nelson de Ganzer, who owns three Brazilian restaurants in town and has seen a surge of foreign workers come in. “This will be big for Mexico.”

Randal C. Archibold reported from  Ciudad del Carmen and mexico city, and Elisabeth Malkin from Mexico City. Clifford Krauss contibuted reporting from Houston.

Randal C. Archibold reported from Ciudad del Carmen and Mexico City, and Elisabeth Malkin from Mexico City. Clifford Krauss contributed reporting from Houston.