AP has an article, Mexico’s president gathers power, pushes reform, on Enrique Peña Nieto’s recent moves,
The moves have built momentum behind what could be his most dramatic and difficult reform – modernizing and drawing foreign and private capital to the behemoth state oil company, a long sacrosanct but increasingly inefficient pillar of the Mexican economy. On Sunday, at a celebration of the 75th anniversary of the nationalization of the Mexican oil business, Pena Nieto said again that he will transform Petroleos Mexicanos. The longtime head of the Pemex union, who had been expected by many to fight any changes but has been the subject of questions about unexplained family wealth, pledged his support.
Pena Nieto says his plan will make Mexico more democratic and competitive in the world economy, and his drive for reform is fueling international confidence about Mexico. Rating company Standard and Poor’s raised the country’s long-term sovereign credit rating from “stable” to “positive” last week, citing optimism about the government’s ability to carry out structural changes. The Mexican peso is stronger against the dollar than it’s been in a year and a half.
Many, including myself, are skeptical, as Pemex has been fossilized (all puns intended) into its current form for decades. Just two days ago, Enrique Peña Nieto himself asserted,
“Pemex will not be sold nor privatized; Pemex must be transformed,” Mr. Pena Nieto said to the applause of unionized oil workers present at the ceremony at a Pemex refinery in central Mexico.
While Pemex’s crude-oil production has fallen to about 2.55 million barrels a day in 2012 from around 3.4 million barrels in 2004, the country has proven reserves of oil and gas totaling 13.87 billion barrels of crude-oil equivalent.
Adam Thomson asks, Pemex turnaround: can it be done? The problems are huge:
- Four divisions, with only one turning a profit, operating as separate companies; 1
- 70,000 employees, huge pension liabilities and crippling union contracts;
- $2billion in losses in the refining division.
Enrique Peña Nieto’s party, the PRI, has symbolized entrenched power, political and economic, at the top. Whether the transformation of Pemex will involve a substantial involvement of foreign capital and technology that would make it more competitive remains to be seen.
For now, however, privatization has been ruled out.
[Post re-edited to comply with FT’s restrictions.]