Mexican Oil
Preston, Julia
The Mexican oil bonanza began in 1976 when the new President, Jose L6pez Portillo, went exploring with nothing more than his fountain pen. Mexico was laboring under a huge $28 billion...
...Last January, the Texas Industrial Commission revealed that four Texas drilling contractors could earn $5 billion in ten years putting up 120 rigs for PEMEX...
...Huddling behind these trade figures are the peasants who make up 48% of Mexico's 66 million people...
...In recent years, millions have been squeezed out of farming into unemployment, due to the lack of state aid for Agrarian Reform lands to increase productivity...
...WHAT EQUIPMENT...
...NEW DEAL But the diplomatic sparring concealed the large and lucrative oil deal already falling into place between PEMEX and the U.S...
...PEMEX refining plants are strained to capacity with the push to corner part of the U.S...
...WHO GETS GAS...
...So when Jimmy Carter visited Mexico on February 14th, L6pez Portillo could boldly warn him to try no "surprise moves and sudden deceit or abuse...
...And the oil bonanza promises to replace Mexico's Institutionalized Revolution as the national spectator sport, where few play and many look on...
...PEMEX has said it can sell at home or "flare" (burn off) the gas indefinitely...
...Mexico's credit-rating rose as its oil reserves did...
...On April 1, Mexico temporarily raised its crude price 23% to $17.10 per barrel, or about 30c above the price for comparable OPEC crude...
...influence unknown since the 1938 NACLA Reportupdate * update update * update nationalization, L6pez Portillo has also announced plans for the utilization of petropeso earnings that will extend the bonanza principally to foreign and Mexican industrial investors with little transfer of resources to peasant and working class Mexicans...
...The big loser in the plan is agriculture...
...The notorious Mexican prestanombre, a Mexican partner who lends his name to a venture created and controlled by foreign capital is today a highly solicited figure in the petroleum sector...
...The debate in the Carter Administration is whether to press the advantage of power (the United States buys 71% of Mexico's exports, provides about 60% of its foreign loans and is Mexico's only large proximate market for petroleum sales) in an attempt to drive down Mexican petroleum prices, or to grant concessions on trade and immigration to shore up the longterm friendliness and political stability of the southern neighbor...
...The results were spectacular...
...In order to procure ransom, L6pez Portillo commanded PEMEX, the state oil monopoly, to break out reserves which the staunchly nationalist agency had long concealed from foreign eyes, and to redouble exploration...
...Proven petroleum reserves, now at 40.1 billion barrels, have increased by 600% in just over two years, advancing Mexico to sixth in the world in holdings...
...PETROPRESSURE ON But ventilating big oil reserves to take off the financial heat may only subject the Mexican Government to a new blast of foreign pressure...
...The gas was to be delivered through an 830-mile, $1 billion pipeline, under construction by PEMEX, from southern Mexico to the border with Texas...
...Though apparently a gesture of defiance against U.S...
...Now, particularly with the crude shortages following the revolution in Iran, our non-OPEC neighbor is a prime candidate to become a strategic oil supplier for the United States...
...In the past, though business was good, private investment tended to employ more machines than Mexicans and exports competed weakly on world markets...
...demand...
...Since food imports are directed to the cities, twothirds of the rural population suffers chronic malnutrition...
...duce 10 million barrels per day by the late 1980s, it appeared a disappointment when L6pez Portillo confirmed in January that Mexico will stick to its originally projected 2.25 million barrels through 1982...
...Billions of barrels of petroleum ooze under the surface of its southeastern region and out into the Gulf of Mexico, while its northern deserts are honeycombed with natural gas pockets...
...Most of the new Mexican petroleum infrastructure is being built by U.S...
...TRAVELING ROOM ONLY For the next decade at least, many Mexican workers will have little choice but to continue their forced marches into the cities and northward into the United States in search of a livelihood...
...The strategy is contained in an 11-year Industrial Plan published in mid-March...
...PLAN FOR PROFITS In addition to exposing Mexican petroleum to a degree of U.S...
...PEMEX promised to diversify its customers, and widely publicized a recent agreement to sell 100,000 barrels of crude per day to France...
...Formerly, L6pez Portillo had proclaimed self-sufficiency in both fuel and food to be the priorities of his Presidency...
...Even as the bonanza goes into full swing new jobs in 1979 will fall 200,000 short of the 800,000 needed annually just to match population growth...
...Although starving agriculture of funds, the Plan provides little cure for the epidemic of subemployment which now affects 4 7% of MayMJune 1979 the Mexican workforce...
...As a result, Mexico today hosts among the richest rich and the poorest poor in Latin America...
...The jobs are to be created in heavy industry and in new manufacturing expected to spring up as Mexican exports grow...
...the Mexican President also dodged any hard negotiations on petroleum sales...
...pressure, the effect will be to drive off nonAmerican buyers who have to pay 44 additional transportation costs...
...In 1979, the land of the corn tortilla will spend $900 million to import maize and other cereals...
...But PEMEX is stuck with a huge pipeline investment, selling gas to a glutted domestic market for under 50c...
...Production of basic foodstuffs in Mexico hasn't significantly improved since 1971...
...petroleum industry: *HOW MUCH...
...last year it barely matched the population growth of 3.4...
...firms...
...The new crude is light and clear, and the new wells give remarkable yields...
...Mexico was laboring under a huge $28 billion public foreign debt, and facing three years of austerity under the stern eye of the International Monetary Fund...
...pressure, it does control a sophisticated oil industry that is vertically integrated from the well-head to the pump...
...Continued privileged access to Mexican oil will simply cost the U.S...
...But a simultaneous deal to provide Dow Chemical 180,000 barrels per day for its Texas refineries went unmentioned...
...After the CIA estimated that Mexico could pro43 MEXICAN OIL SOLD OUT GAMEupdate * update . update * update Migrant Laborers: Mere spectators in Mexico's oil boom...
...But now he has administered the last rites to the Agrarian Reform, and will put petropesos to buying imported food...
...the Plan thus replicates the essential development formula operative in Mexico for four decades...
...companies of natural gas worth $1.9 billion a year, because the Mexican product was 44c higher than a similar Canadian import...
...WHO BUYS...
...While Mexico is economically dependent on the United States and therefore vulnerable to U.S...
...In fact, Mexican exports will have increased twelvefold in four years...
...Late in 1977, Department of Energy Secretary James Schlesinger vetoed a proposed sale by PEMEX to six U.S...
...In 1979, PEMEX will import 75% of its equipment, almost entirely from the U.S...
...WHAT PRICE...
...a little more...
...Today, in spite of a trade deficit which increased 60% in 1978 (to $2.1 billion), foreign banks which balked in 1976 are oversubscribing loans to Mexico-worth a projected $9 billion this year alone...
...Negotiations over gas have now reopened, and will probably end in Mexico winning a slightly higher, face-saving price which would soon be matched by the world market due to inflation...
...It calls for massive government incentives to encourage private investment in basic capital goods industries, like petrochemicals, steel and automobiles, which are to be spread out in eleven new, decentralized industrial zones...
...PEMEX's rush to export left Mexican industry unable to meet its demand for capital goods (though in the past coordination with Mexican industry was a strict PEMEX policy...
Vol. 13 • May 1979 • No. 3
