Selling Off and Selling Out: Mexico's Energy Reform

In a move that appears to complete Mexico’s loss of national sovereignty to international capital, the senate has finally passed a sweeping and far-reaching reform of the country’s oil industry. The restructuring is treated with widespread skepticism—polls suggest that about 65-75 percent of the population oppose the initiative.
Peter Watt 12/18/2013

2239 Photo Credit: Huffpost Voces

In a move that appears to complete Mexico’s loss of national sovereignty to international capital, the senate has finally passed a sweeping and far-reaching reform of the country’s oil industry. The restructuring is treated with widespread skepticism—polls suggest that about 65-75 percent of the population oppose President Enrique Peña Nieto’s initiative of privatization and opening up the national company Pemex to foreign multinationals.

The changes are indicative of the commitment of successive administrations to dismantle and tear apart the social contract that was embodied in the achievements of the Mexican Revolution, many aspects of which were protected until the 1980s. Every government since the onset of neoliberal reforms following the 1982 debt crisis has staunchly attacked the more progressive aspects of the post-revolutionary state in favor of privatization, market forces and foreign investment.

The PRI’s latest reform, which was enthusiastically pushed forward with support from the opposition PAN, is deeply unpopular among the population because, since President Lázaro Cárdenas nationalized it in 1938, the petroleum industry has been viewed as a jewel of national sovereignty and economic independence. 

Following the Mexican Revolution and almost two decades of major upheaval, civil war, and violence, the leaders of the nascent one-party state recognized that in order to offset the possibility of further rebellion and revolt, it would have to make some major concessions that favored the interests of the peasants, industrial workers, and middle classes. To a large extent, this was in recognition of the discontent and revolutionary fervor that the dictatorship of Porfirio Díaz had provoked in its heavy-handed and repressive efforts to give Mexico a competitive advantage on the global stage, and in order to compete with other industrialized economies. The campaign of modernization and “scientific” economic progress led by Díaz in the late nineteenth and early twentieth centuries opened up Mexico’s natural resources and supply of cheap labor to French, British, and U.S. investors. The rapid expansion of the railroads was highly beneficial to hacendadoscaciques, mine owners, and capitalists because it opened up what they viewed as virgin territory to capitalist expansion and modernization.

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Yet it had some disastrous consequences for aboriginal peoples living outside the wage economy as defined and protected by the nation state. It forced them off their once communally-owned lands and pushed them further towards the restraints and chains of the capitalist economy via a process of internal colonization. By 1910, for example, a quarter of all arable land was in the hands of the government and private capital. And 95 percent of communal land—the once-revered ejido system—was expropriated. Foreign investors similarly owned 130 of the largest 170 corporations operating in Mexico. Wages were kept low and strikes were met with violent repression, a context that furthered popular anger with the state and the inequalities inherent in capitalist modernization, but that kept international investors—who controlled about 60 percent of the national economy—happy with the status quo. The exclusion of broad sectors of the population from participation in economic and political life, and their consequent disempowerment, set the stage for one of the most important revolutions of the twentieth century.

The agrarian reform, the right to strike and to form unions, universal elementary education, and the nationalization of key sectors of the economy in the wake of the revolution were significant triumphs and helped reverse some of Díaz’s modernizing policies that had set the country so firmly down the route of privatization, foreign investment, and widening wealth disparities.

2243 Source: La Jornada

President Cárdenas’s nationalization of Mexico’s oil industry, in addition to other sweeping popular reforms, was thus a major victory for national sovereignty. It was particularly significant because it was achieved at a time in which the power of European and U.S. colonialism and empire depended increasingly on access to oil, and as such was an affront to their imperial ambitions.

Since the 1980s, however, in a reflection of developments at the global level, protectionism and sovereignty have been increasingly under attack. Contrary to the kind of political rhetoric typically used to justify the sale of national resources to private interests, neoliberal structural reforms have consistently resulted in very low economic growth. Again, contrary to Peña’s inflated claims, that the world’s tenth largest oil producer will now open its doors to foreign giants like Chevron, Exxon, and Shell does not automatically benefit the Mexican population. There is every reason to believe that these companies will behave exactly as they do elsewhere throughout the globe, protecting their own interests and increasing their already massive profits.

It is hardly a secret that Pemex is already blighted by internal high-level corruption, but public ownership at least allows for the pretense of accountability. At present, congress can call upon the director of Pemex to face questioning. As Pemex is in theory answerable to government, congress can hold investigations into corrupt and fraudulent practice. Yet once private foreign oil giants begin shipping crude to their own refineries, even the simulation of accountability is likely to disappear, a situation liable to breed further corruption in favor of the bottom line.

Peña Nieto’s energy reform of the country’s largest national company thus represents an additional weakening of the state’s already feeble democratic functions while empowering and elevating presidential authority. As Diego Valadés, an ex-minister of the Supreme Court notes, the reform will have profound implications for the nature of democratic rule in Mexico because it impedes the state’s ability to control and manage the country’s largest industry and one of its principal sources of revenue. As a result of restrictions outlined in NAFTA, the state will similarly be unable to intervene and expropriate resources under private control. As Valadés points out, this could mean in the future that energy prices will rise and that if and when Mexico faces oil shortages, the state will have almost no leverage with which to appropriate supplies from private companies.

2241 Source: Al Jazeera

The reform is the latest illustration that the neoliberal state will forgo national sovereignty and democracy for increased trade liberalization and authoritarianism. As the state becomes weaker in its capacity to restrain the power and destructive forces of globalization, political power becomes progressively more centralized, repressive and authoritarian. This has also had the effect of neutralizing the mainstream political opposition, which in essence means that the majority of Mexicans have almost no representation within the electoral sphere. Both the PRI and the PAN actively pushed for energy reform, but even the center-left PRD backed Peña Nieto’s Pacto por México, an accord signed by the three major parties that made unfulfilled promises of economic growth and greater democratic freedoms. The strength of the PRD’s subsequent opposition to the most extreme measures of the energy reform was undermined by their naïve capitulation to the two bigger parties by signing Peña’s Pacto.

Meanwhile, protestors have again taken to the streets to voice their frustrations about the continued sale of the country’s rich natural resources to multinational corporations and the fact that there exist almost no channels for voicing legitimate popular grievances within the traditional electoral system, a problem that is accentuated with each step the government takes on the path of neoliberal reform.

The current context is rather analogous to the dictatorial measures imposed by Porfirio Díaz in his crusade for modernization in order to attract foreign investment. Were the Peñistas and other political leaders of the elite more conscious of the country’s history, they might appreciate that each new reform they impose is likely to set the tinderbox of rebellion alight.



Peter Watt teaches Latin American Studies at the University of Sheffield. He is co-author of the book, Drug War Mexico: Politics, Violence and Neoliberalism in the New Narcoeconomy (Zed Books 2012).


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