In a speech to his party on Tuesday, Cuauhtémoc Cárdenas, the founder of the PRD, called for constitutional reform in order to turn Pemex into “a true state enterprise, with full autonomy of its management and budget.” He argued that constitutional reform was a necessary step in achieving this, stating that two articles of the constitution would need to be amended: 25 and 28, related to national economic activity and monopolies respectively.
Cárdenas also called for the reform of the so-called Pemex Law of 2009, in order to establish full autonomy for the business activities of Pemex, from reserves to refining. Cárdenas made a point of saying that Pemex should be able to hire and fire executives and restructure its organization in the same way as a private sector company. Although Cárdenas advocated greater budgetary autonomy for Pemex, he did not deal specifically with his plans for the future tax situation for the national oil company in his speech.
Whilst any suggestions regarding the full privatization of Pemex remain taboo in Mexico, now all three of the main political parties in the country are talking about making Pemex more efficient and productive by opening it up more to the private sector, and bringing in changes to help the company operate more efficiently at the same time as maintaining its status as a state-owned company.
In an interview conducted this week for Mexico Oil & Gas Review 2013, Juan Carlos Zepeda Molina, President of the CNH, spoke at length about the various factors that have to be weighed up when discussing energy reform. He believes that there are three overlapping areas that need to be weighed up, considered, and balanced against each other in order to create a sector that operates as effectively as possible.
The first of these three circles of discussion revolves around making Pemex more like a company. Zepeda Molina notes that:
“Right now, the Mexican Constitution states that Pemex is not a company, it’s a government office. In Spanish we call it: organismo descentralizado, which means that it has some technical autonomy to do its job, but many other things are constrained and controlled by the government, because technically it is a part of that government. Since Pemex is not a company, it doesn’t have capital; it doesn’t have shares; it doesn’t have shareholders. When you don’t have shareholders, you don’t have anyone to ask for results. You don’t have any real mechanism for accountability. If you don’t have shareholders, you don’t have people that would really feel the pain in their pockets if the company does badly.”
Zepeda Molina believes that any discussion of how to make Pemex a better company has to start here, by talking about how to create some autonomy for Pemex and make it behave more like a private sector entity. He also believes that along with this comes a discussion about Pemex’s budget, and whether the company should have autonomy in its budgetary decisions. There also needs to be a discussion about the tax regime and debt management for the company.
The second circle that Zepeda Molina believes needs to be discussed is related to the private sector, and how Pemex interacts and contracts with third parties. Some of the big questions around this topic are:
“Should Mexico be as open in the same way as the US and Brazil in terms of contracting, where different companies operate concession contracts? Or should Mexico be more open to advanced contracts, like production sharing contracts? The big question is which contracting model is best suited to the Mexican situation, or whether it would be better to keep the model that we currently have.”
The third and final topic for discussion regarding energy reform is which institutional arrangement would be the best for Mexico. Finding the correct roles for the president, congress, senate, and the ministry of finance, the CNH and the ministry of energy is a priority, according to Zepeda Molina, and the key to balancing the sector.
In the coming weeks and months, it seems very likely that there will be proposals for reform of the oil and gas sector from all the main political parties, spurred on by Cárdenas’ speech this week. The best of these plans will address all three of the key topics needed for meaningful energy reform.