Pedro Joaquín Coldwell, the energy minister, announced that should the energy reforms be approved without amendments, there will be gas stations in the market that do not belong to Pemex. He went on to explain that this would allow companies that have access to refineries locally, such as Shell and BP, to commercialise their products, with the aim of injecting much needed competition that will adjust prices and increase choice and quality for Mexican consumers.
Meanwhile, the international press has been chipping into the energy reform debate in the past week, starting with the LA times, whose headlines included ‘Helping Pemex Help Mexico’. The article stated the importance of the role that Pemex plays on the health of the national economy. The Washington Post followed swiftly with an article on Pemex’s need for international help. Both papers pointed out the need for Pemex to be transformed into an organization driven by efficiency through transparency and an adherence to a corporate tax structure, which imply the introduction of fiscal reforms.
As was discussed in our previous post, it is clear that Mexico’s oil dependent economy has long relied on the outcome of one single company: Pemex. As any financial consultant will argue, putting all your eggs in one basket is not the savvy way to spread out risks. Portfolio diversification has been the traditional way to ensure that risks are distributed among different sources, enabling a company’s investments to yield profit even when one of the elements in it is experiencing a downturn. Mexico’s government is looking at ways to diminish volatility within each of the elements of its investment portfolio: by transferring some of the responsibilities to other sectors of the economy – or even other players within the same sectors – Mexico’s economic health can be better preserved for years to come.
While there is mounting criticism from the international press about the way Pemex is currently run, the key decisions makers in Mexico face a headache in terms of being able to implement realistic changes to the NOC, as they try to reach a consensus among the different political parties. The ever present leftist political figure Andrés Manuel López Obrador grabbed the headlines this week again, countering the arguments made by the current administration and PAN for change by leaking an official Pemex document through his Twitter account. The 35 page long document includes financial statements of the NOC, its fiscal regime, the country’s hydrocarbon reserves and future projections. Key facts highlighted were Pemex’s position as 13th in the rankings in America in terms of earnings, with a reported figure of USD 126.6 billion per year, and in 34th position globally. The document reportedly states that the company earnings are equivalent to those of the top 5 companies in the IPC.
Pemex’s image abroad is far from perfect, and the lack of cooperation between political parties only serves to further taint the reputation of Pemex as a disorganized, corrupt and inefficient company. Right now it would be difficult to argue that all these labels are unjustified. And the growing international criticism aimed at Pemex’s perceived inertia will be impossible to defend if Mexico does become a net importer of fossil fuel, which is not an unlikely scenario unfortunately. Whether the current administration are in the position to make the right choices to address these concerns remains to be seen.