Mexican lawmakers OK privatization of nation’s oil industry

MEXICO CITY – Despite furious public opposition, the Mexican Senate, Chamber of Deputies and state assemblies this past week approved energy reform legislation that will allow foreign  multinational corporations to  participate in the oil industry for the first time since 1938.  The Senate on Thursday announced that the energy reforms are now permanent.

The measure, spearheaded by right-wing President Enrique Pena Nieto and reviewed and modified by senators from the right-wing National Action Party (PAN) and the Revolutionary Institutional Party (PRI), will allow foreign multinational corporations to explore, drill and sell Mexican oil and gas. In 1938, Mexican President Lazaro Cardenas, after foreign oil companies refused to settle fairly with striking oil workers, nationalized the oil industry, which was then controlled by foreign oil companies that monopolized the sector and siphoned profits out of the country.  Since 1938 Petroleos Mexicanos (PEMEX) has been the state company in charge of extracting, refining and selling Mexican crude oil and gas.  Oil profits have been used by Mexican governments to finance education, health and other public services and build the country’s infrastructure.  

The legislation passed the Senate on Dec. 11 with 95 votes in favor and 28 against, after a long rancorous debate that lasted until midnight.  Opposing the legislation were senators from the center-left Democratic Revolution Party (PRD) and Labor Party (PT).  The bill includes changes  to articles 25, 27 and 28 of the Mexican constitution. Articles 25 and 27 reserve the right of the state to guide economic development through planning that promotes general well being.  Article 28, among other things, says that the country´s natural resources, sky, water and subsoil belong to the people, and excludes foreign companies from exploiting or investing in the country’s oil and energy industries.  

On Dec. 12, the legislation was sent to the Chamber of Deputies where it passed by 353 votes in favor and 134 against. Since then the reform legislation has been sent to state legislative assemblies for approval as any changes to the Constitution require the support of at least 17 out of 31 states. So far,  26 states have supported the legislation.  

Supporters of the energy reform bill contend that it will strengthen the oil sector through greater private investment, increased oil production, cheaper energy and more jobs. But critics charge the legislation amounts to privatization of the oil industry and delivery of oil profits to foreign multinational corporations. It also opens the door to privatization of the electricity sector.  PEMEX will have to compete with powerful multinational corporations for the right to explore and drill for oil.  The public treasury, which is dependent on oil revenues for at least 30% of its revenues, will take a big hit as oil profits will have to be shared with foreign oil companies, critics charge. This will result in cutbacks and austerity measures and increased taxes in the future.   Foreign companies will bring their own employees to the country rather than hire Mexicans, the critics note.

Critics also allege that PAN and PRI governments,  to create  a pretext for privatization and foreign investment, have deliberately weakened PEMEX – the fifth largest oil producer and exporter in the world. The government argues that the state oil company does not have adequate resource to develop Mexico’s oil fields and therefore foreign investment is required.    However, critics point out that the federal government taxes PEMEX at a rate of 90%, reducing the company’s ability to invest in the oil sector.  

The oil sector will also now come under NAFTA, where it will be subject to rules that supersede national laws. The Mexican government will not be able to give preference to national firms for supply contracts and will be vulnerable to lawsuits from foreign companies, under notorious Chapter 11, for alleged loss of profits.  

PAN Senator Javier Corral, the lone senator from his party who voted against the reform bill in the Senate, complained that “none of the platforms of the presidential candidates (from last years elections), including PAN, mentioned the privatization of oil. They do not consider the country´s energy sector. They cover their eyes [PAN and PRI] so they do not see that  transnational corporations are the most predatorial.”  

Former center-left presidential candidate Andres Manuel Lopez Obrador,  leader of the Movement for National Renovation (MORENA),  charged that the energy reform legislation does nothing to build new refineries, create a national petrochemical industry or stop the export of Mexican crude to the U.S. where it is refined and then sold back to Mexico.   

Leading up to the bitter Senate and Chamber of Deputies votes, tens of thousands of members and supporters of MORENA, PRD, PT, and other smaller socialist parties  and the trade union movement staged protest marches in downtown Mexico City, facing off with thousands of heavily armed police. On Dec. 1, MORENA  held a rally in the Zocalo, Mexico City’s main square, that was attended by several hundred thousand.   

Thousands of protesters surrounded the Senate and Chamber of Deputies buildings and tried to prevent PRI, PAN and Green Party representatives from entering and voting. Deputies and senators either had to be brought in by heavily armored buses or conceal themselves as cleaners and maintenance staff to pass through protest lines.  

In the Chamber of Deputies, deputies from the center-left PRD and PT, who were heavily outnumbered, tried to prevent passage of the energy bill  through guerilla tactics. First, they stole the draft bill before it could read. Then they sealed the chamber´s doors to prevent PAN, PRI AND Green Party deputies from entering and voting. One PRD deputy, as a protest, undressed as he spoke out against the bill at the speaker’s podium.  

MORENA, PRD and PT supporters have staged protests in state legislatures to prevent votes in favor of the energy legislation.

Many Mexicans consider oil a sacred resource  that belongs to the nation and are opposed to the PAN-PRI  energy reform legislation. PRI and PAN  also lack widespread legitimacy among the population because of their history of vote-rigging, vote-buying and fraud to prevent the PRD from winning at the ballot box.

Since the 1980s, one Mexican president after another, from Carlos Salinas to Vincente Fox and Fellipe Calderon, have tried to open up the Mexican energy sector to foreign investment but have had to back down because of public opposition.  Current PRI President Enrique Pena Nieto, elected in July 2012, has succeeded where all other Mexican presidents have failed, by ignoring public opinion.   

Opposition forces vow to continue the fight against efforts to privatize the oil industry. MORENA will be posting the pictures and names of all senators, deputies and local legislators who voted for the energy reform legislation in markets and plazas across Mexico. The PRD has submitted a petition with over a million names asking for a referendum on the issue, which is allowed under Mexican law.

Photo: This Mexican PEMEX worker’s helmet reads: “PEMEX, not for sale.” sari dennise CC 2.0