Yesterday morning, the “Privatizing Energy Reform Forum” (organized by Adán Augusto López Hernández, PRD senator from the state of Tabasco) took place in the inner conference halls of the new Reforma building of the Mexican Senate. The speakers (which included former Mexico City Mayor Alejandro Encinas and noted energy scholar Dr. Claudia Sheinbaum) represent a comprehensive cross section of the political opposition to the upcoming energy reform bill supported by Mexican President Enrique Peña Nieto, which is expected to be unveiled in time for the fall congressional ordinary session beginning in September. Before the lectures began, a handout was distributed to the attendees which included the message translated below:
“We will defend the oil and the economy of Mexican families!
Mexico is currently going through the greatest political, economic, social and security decadence of its history. This is due to the fact that, for the last 30 years, its government has been sacking the nation’s goods and stripping Mexicans of their rights. Under the pretext of modernization, we have witnessed the privatization of banks, airlines, sugar mills, harbors, airports, mines, highways and other public enterprises. Once in private hands, they went bankrupt and the government had to rescue them with funds from the public treasury. By privatizing over a thousand national companies, the Mexican state has obtained US$30 billion, but spent US$90 billion in their subsequent bailouts. We are still paying for the banking industry’s rescue and now they want to impose on us, from the federal government, the surrender of the oil industry and its huge profits to foreign companies. Pemex is the most bankable company in Mexico and the federal government says it will not sell or privatize it. But it is not necessary to sell the facilities of a public company to privatize its activity. For example, not a single bolt belonging to the Federal Electricity Commission (CFE or Comisión Federal de Electricidad) has ever been sold, but half of the country’s power generation is already produced by foreign private companies; in order to maintain their business they charge elevated rates. That is what they now want to do with oil. Every year the country obtains MX$1.25 trillion from oil, which is roughly equivalent to US$100 billion. This represents [almost] 40% of the national budget. In other words, when a school is built, 40% of the money comes from oil; when we edify a hospital, 40% of the resources come from oil; when we pay teachers and doctors from the ISSTE or the IMSS, 40% of their salaries come from oil; in this same fashion, 40% of public employees’ pensions come from oil. It is with this same oil money that we pay for 40% of public school textbooks, public housing and water distribution. Oil finances the tranquility of Mexican families, and it is the foundation of our economic independence. If oil wealth is surrendered to private companies, even partially, public finances would stop receiving over a third of its income. Who is going to pay for these missing funds? The members of the lowest social strata, because the government will increase taxes while still allowing important businessmen to evade the payment of their fiscal contributions. This is why they want to increase the VAT (Value Added Tax) from 16 to 19%, and apply it to medicines, food, books, public transportation, school tuition and housing; this would be a severe blow to the economy of a majority of Mexican families, since 90% of their income is spent on these items. It is inevitable that the privatization of oil will lead to the increase of taxes. Foreign companies only have the desire to acquire the great profits generated by oil, and they will not invest in Mexico’s progress. When they were the owners of Mexican oil they did not pay taxes and gave miserable salaries to their workers. Oil is the country’s main source of wealth and the last industry that is still in the nation’s hands. Everything else has been surrendered to private companies, both national and international. If oil profits are privatized, taxes would increase but also unemployment, poverty and violence. Consequently, the future of millions of young Mexicans would be compromised. We summon the Mexican people to defend oil for the nation and the families’ economy, through information, organization and peaceful mobilization. No to oil privatization! No to the increase of the VAT! Everybody to the Mexico City Zócalo on September 8th at 10 o’clock, with Andres Manuel López Obrador!
Mexico, July 2013″
The first declamations (which included a speech by noted engineer and energy expert Javier Jiménez Espriú) echoed some of the sentiments expressed in this statement by focusing on the historical context of the Mexican oil industry and the evolution of its public ownership. Speakers tended to refer to the creation of Pemex subdivisions in 1988 as a “fragmentation” or “quiebre” that had a profoundly negative effect on Pemex. They also proposed that the prioritization of production increase reflected by the “overexploitation” of Cantarell and the 2008 energy reform was in fact enacted as a nod to foreign private interests rather than national needs.
Espriú argued for the unconstitutionality of the ISCs and MSCs, and compared several international cases of public oil companies opening themselves to private sector participation; he concluded that none of them, with the possible exception of Norway’s Statoil, benefited from said private involvement. Espriú was also the first to mention an “alternative national energy project” which would not open up the national oil and gas industry to further private engagement and prioritize the development of renewable energy sources and the public downstream sector, with an emphasis on the construction of new refineries. These ideas were reiterated by subsequent speakers.
A common thread throughout most of the lectures was the assertion that the only arguments in favor of mainstream energy reform were Pemex’s lack of funding and technology, which were both flatly and constantly denied by the speakers; Dr. Sheinbaum went as far as to call the idea that Pemex lacked technological potential “an insult to Mexican engineer, technicians and workers”. However, Encinas did concede that Pemex’s fiscal regime was “infamous”.
It was also Dr. Sheinbaum that referred to the inherent “schizophrenia” of current energy reform discourse, pointing out that the production target of the national energy plan was a lot higher than the production target of the national global warming plan, which calls for a decrease in crude oil production and consumption of hydrocarbon-derived products in accordance with international agreements and environmental concerns.
The speakers acknowledged the criticisms that the political opposition to energy reform tends to receive; they responded to the alleged accusations of “dogmatic nationalism” with counter-accusations of “dogmatic neo-liberalism”. Encinas underlined this point by claiming that the legislative debate that was coming in September was “political and ideological, not technical”. He then made fun of the common accusations of “nationalist nostalgia” by implying that the “real nostalgics” were those who voted for Enrique Peña Nieto expecting a return of the political stability and growing economy of the PRI’s heyday.
It remains to be seen whether this political opposition will be translated into a cohesive and detailed alternative energy reform bill or be reduced to legislative obstructionism come September. It also remains to be seen whether the premises that this hypothetical project would be based on (including the arguably protectionist ones) represent a benefit or a detriment to both the future of the Mexican oil and gas industry and the future of Mexico’s energy sustenance.