Mexico’s Looming Oil Battle: Bid to Bring in Foreign Investment Sparks Protests

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Eduardo Verdugo / AP

Mexico's President Enrique Peña Nieto announces a proposal that would allow private firms to participate in the country's oil industry in Mexico City on Aug. 12, 2013

To get a sense of the deep emotions linked to oil in Mexico, travel up the capital’s imperious Reforma Avenue to the towering petroleum monument. Using 14 tons of bronze, the statue portrays huge, muscular oil workers in heroic poses beneath an Amazonian woman, in a style that melds Mexican muralism with Soviet brutalism. An 18-m obelisk above marks the year 1810, when Mexico rebelled against imperial Spain, and the year 1938, when then President Lázaro Cárdenas announced the expropriation of oil from American and British companies, uttering the iconic phrase: “The petroleum is ours.” In a country that still smarts from centuries of colonial exploitation, the statue is a giant symbol of a nation finally asserting its sovereignty.

So it is unsurprising that as President Enrique Peña Nieto proposes the biggest shake-up to energy laws since then — advocating that international oil companies be allowed new profit-sharing contracts to exploit Mexico’s oil — it has provoked a ferocious debate. The bill advocates a change in Mexico’s constitution, which currently prohibits companies any share in Mexico’s coveted oil wealth. On one side, the centrist Peña Nieto argues it is imperative that the nation overhauls its oil industry to dig into reserves hidden in the Gulf of Mexico and turn around production from 2.5 million barrels a day to 3 million a day by 2018. Under the state monopoly Petróleos Mexicanos or Pemex, oil production has been steadily declining amid accusations of corruption and waste. The energy bill that Peña Nieto presented this month is the centerpiece of a series of reforms also touching labor, education and fiscal laws, which have been cheered on by foreign investors.

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On the other hand, the leftist opposition has accused Peña Nieto of trying to sell out the nation and rob the people of its greatest asset. This debate will not just be played out in the halls of Congress, the opposition promises, but on the streets, where mass marches and blockades are being planned for late August. “The reform means more jobs for the big oil companies in the United States and Europe but not for Mexicans,” says Ricardo Galindo, a construction engineer demonstrating against the bill outside the Pemex offices on Friday. “Our resources have been stolen for centuries. Now they want to take the most valuable thing we have.” As the reform gains momentum, the clash could become more and more heated. “It is just going to get nasty,” says Mexico City–based oil analyst David Shields. “There are people on the left who really want to pick a fight.”

Even before major protests, the opposition has already pushed Peña Nieto to act defensively, Shields says. The bill itself is short and ambiguous, leaving most of the details to secondary laws, which would be needed to regulate the reform. This blunts the critiques of detractors, but disappoints oil companies who want clear indications of what will emerge. Many oil entrepreneurs had also hoped the law would permit buying up actual petroleum — rather than just shares in the profits.

Still, if passed, the proposed changing of the constitution’s language on oil rights would be a real coup for Peña Nieto, especially compared with the little that was accomplished by previous administrations also promising oil reform. Billion-dollar investments from the big names in Houston and London are expected to follow. Mexico is the third largest supplier of oil to the U.S. after Canada and Saudi Arabia and has almost 14 billion barrels in proven reserves.

Such foreign interest in the nation’s black gold is anathema to Mexico’s left. Andrés Manuel López Obrador, who came second in the past two presidential elections, has called the reform “the theft of the century,” and said Peña Nieto is “a traitor to the patria.” He has called for a mass rally in the heart of Mexico City in the coming weeks, where he says supporters will decide on what actions to take. In the past, López Obrador has been able to bring hundreds of thousands onto the streets, but it will be seen how much influence he still has. López Obrador also commands support in his native Tabasco, an oil-rich state in the south, where he led the occupation of petroleum fields in protests in the 1990s.

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Peña Nieto, who brought the Institutional Revolutionary Party (PRI) back to power in December, has been at pains to invoke its legacy, frequently quoting the oil nationalist Cárdenas, another PRI President, when promising the bill won’t break with the country’s tradition of oil nationalism. “The spirit of this reform recuperates the past to conquer the future,” Peña Nieto said in a televised announcement. But former presidential candidate Cuauhtémoc Cárdenas, Lázaro Cárdenas’ leftist son, is opposed to Peña Nieto’s move and has called for a referendum on the reform, which would present a tough challenge for the government. A recent survey commissioned by Mexico’s Congress found that 55% of respondents said foreign investment in oil was an attack on Mexico’s sovereignty.

It has yet to be seen how effective protests will be. Within days of Peña Nieto presenting the bill, demonstrators had gone to Pemex buildings in several cities. However, Raúl Benítez, a specialist on security and conflict, predicts that marches may be loud but won’t be that big. “There will be a nucleus of protesters but many others will not take part,” Benítez says. “The left is very divided at the moment.”

Still, recent history has shown how protesters around the globe can often unite very fast on a single contentious issue. Among those who have promised to fight oil reform is a group of teachers who have been blocking roads in protest at the education reform, which they fear will force some of them out of work. (The government says it is trying to improve education with a universal evaluation system). Minervino Moran, who has led teacher blockades of a major highway from Mexico City to Acapulco, says they will also block roads and possibly occupy government buildings in protest against the energy bill. “Our country is converting into a new colony, principally of the United States,” Moran says. “We have to defend our sovereignty.”

Despite these cries, Peña Nieto can likely pass the bill through Congress with the support of the conservative National Action Party (of former President Felipe Calderón), and ignore leftist lawmakers. However, key dates like when Congress votes on the law, likely this fall, could provide flash points for demonstrations outside the chamber.

To try and dampen a populist backlash, the Peña Nieto government has launched an extensive advertising campaign with the message that profit sharing will improve Pemex without compromising national interests. “The oil will still be ours, and we won’t give it away to anybody,” a presenter says in one spot above cheerful music and pictures of oil rigs. “And we will use the most advanced technology in the world so Mexicans have more petroleum.” The spot ends with the sun setting on a Mexico gleaming with electric light. Peña Nieto has a long way to go — and many more battles to fight — before that vision has a chance of being realized.

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