Today's Opinions, Tomorrow's Reality 

Exploitation's Favorite Face

By David G. Young

Mexico City, December 1, 2013 --  

Mexicans fear being sold out to foreigners over oil. Sadly, Pemex has sold them out already.

For the thousands of protesters gathering today to rally against foreign involvement in Mexico's oil industry1, patriotism was probably far more of an issue than economics. The oil industry here was nationalized in the 1938, in reaction to American companies controlling Mexico's national resources. Mass protests show that 75 years on, nationalist sentiment on oil remains strong.

But Mexicans worried about their national pride would be wise to consider that they are now being exploited by their own countrymen. Pemex, as the national oil monopoly is known, provides jobs and pensions for the 150,000 people lucky enough to work for the giant2, yet produces fat less oil per worker than American oil companies.3 Mexicans probably have been willing to ignore its inefficiency because it bankrolled the federal government for most of the last century. Even as recently as 2011, it accounted for 38 percent of government revenues.4

But times are changing. Mexico's oil production has dropped 20 percent in the past decade5, a trend that shows no signs of stopping.

The simple truth is that Pemex mismanages Mexico's oil and natural gas wealth, ignoring future drilling needs in in order to fund the government and meet its bloated payroll today.

As a result, natural gas prices in Mexico have failed to drop like those north of the border (where a fracking boom has boosted production), meaning Mexicans pay more for energy than they should. The slothful monopoly shows no signs of applying innovative technologies, and continues to suck petroleum out of the ground the easy, old-fashioned way.

In response, President Enrique Pena Nieto proposes amending the constitution to allow giving foreign oil companies the ability to develop hard to extract oil fields, in return for a share of the revenue. This is too much for the protesters, who see this as betraying the oil nationalization.

Opponents are right to be worried about sleazy multinational oil companies striking shady deals with corrupt government and Pemex officials. Strong transparency might help limit corruption, although it won't alter the strong financial incentive to find a way.

Unfortunately, the opposition goes far beyond these legitimate concerns. Its strong nationalist bent is reminiscent of destructive know-nothing populist movements like America's Tea Party or Argentina's Peronists. Exploitation must be fought wherever it is found, be it in a greedy foreign multinational corporation, or in a slothful government monopoly. One exploiter have a leader with an American face and the other by a Mexican one. Either way, the nature of the abuse remains the same.


1. Los Angeles Times, After President's First Year, Mexico Still a Mess by Many Measures, December 1, 2013

2. Pemex, Security and Exchange Commision 20-F Filing, February 2013

3. Economist, Unfixable Pemex, August 10, 2013

4. Slate, The Easy Energy is Gone, November 12, 2013

5. Economist, Make or Break for Pena Nieto, November 23, 2013