01/16/2008
From: Nancy Harkey, Ph.D. and Professor Emeritus
Mexico’s greatest single source of wealth is its access to rich fields of oil. But its greatest boondoggle is its mismanagement of this asset.
The Los Angeles Times business section has just published a lengthy report on Pemex, the state-owned petroleum Company that has been watching its shallowest, most easily accessed fields decline fairly rapidly, while doing nothing to locate the new, rich fields known to exist in the Gulf of Mexico.
At a high point in 2004, production was about 2 million barrels per day, but more recently has declined to about 1.46 million barrels: "a very serious loss." [Woes Mount For Mexico’s State Oil Titan, By Maria Dickerson, Los Angeles Times, January 2, 2008]
Why? The proximate reason is that these fields are deep and will require high levels of technology and expertise, as well as large amounts of capital that Pemex does not have.
More distant reasons involve the fact that the government takes an inordinate amount of revenue in taxes from Pemex. The Times reports that from sales just under $100 billion dollars for 2006, the government took $54 billion in taxes thereby profoundly weakening the goose that lays its golden egg.
Other explanations include Mexico’s decision to nationalize Pemex and thus removed from the influences of such American companies as Standard Oil.
One consultant firm comments that Pemex is thus much more than an oil company; it is a powerful symbol of Mexican national sovereignty. As a result, privatization is considered to be politically impossible.
According to the Times, Pemex is $52.3 billion in debt and is therefore the most-indebted oil company on the planet. This makes bailout from outside capital loans out of the question.
The core financial resource of Mexico is in deep trouble. Its assets are necessary for the continued development of roads, schools etc. but its income is dropping drastically.
What is politically possible, of course, depends on the countervailing pressure on Mexican politicians. Ideally that would come from the U.S. by forcing Mexico to face up to its domestic problems
Instead, the U.S. continues to supply jobs, education, housing and medical care to millions and millions of Mexican immigrants. So the need for Mexico to act responsibly on behalf of its citizens is correspondingly reduced.
And so it goes…the more we do for Mexico, the less it does for itself.
Harkey’s mother emigrated from Scotland and her father from Norway. Her specialty at California State University at Pomona was biological psychology. Harkey describes herself as "a political conservative on most issues with first hand experience in how painful that can be in the academic setting."
Since her retirement, Harkey has published, with her daughter, a two- book set on effective parenting titled Raising CuddleBugs and BraveHearts, Volume I and Volume II (website here.)
Previous letters from Harkey about bedbug infestation in southland Los Angeles and using environmental impact laws as a tool to fight illegal immigration are here and here.
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