Academic journal article Texas International Law Journal

The Prospect for Further Energy Privatization in Mexico

Academic journal article Texas International Law Journal

The Prospect for Further Energy Privatization in Mexico

Article excerpt

I. "EL PETROLEO ES NUESTRO"

What images flit through your mind when you think of the Mexican oil expropriation? Do you see President Lazaro Cardenas somberly seated before a radio microphone at 10 o'clock on that fateful Friday evening of March 18, 1938, commencing the announcement that shook the world? Do you view row after row of Mexican oil workers, marching in annual parades that commemorate the expropriation as a national holiday? Do you glimpse the voluptuous petroleum goddess, presiding in naked exuberance over Mexico City's magnificent monument to the expropriation?

I see all three of those images, but what really sticks in my mind is a fourth image, souvenired from adolescent car trips across the dry, rocky landscape of Coahuila and Nuevo Leon during the early 1940s. There I would be, as empty of water as my car was of gas, praying desperately that the next turn in the endless road would reveal a fountain of miraculous liquids to slake each of our thirsts, when at last that fountain would appear: a PEMEX filling station!

They all looked alike. Each was a big shed with an extended roof over the drivethrough, fronted by a Mexican flag, the PEMEX logo, and an elderly pump whose tall glass dome calibrated a murky liquid of dubious octanes. What I remember best is the slogan of the expropriation. Sometimes it was printed on a cardboard poster in the window, occasionally it was painted across the entire facade, but it always made the same proud assertion: "El petroleo es nuestro." The oil is ours.

Those are the words we must start with if we would understand the cultural dynamics of the Mexican oil expropriation and the prospect, today, for further privatizating of the state monopolies it spawned. What is the "petroleo" that Mexico so proudly declares to be her own? What sovereignty does Mexico assert when she claims that "petroleo" to be "nuestro"? Seeking answers to those questions is a fascinating journey through the history, the actuality, the ambiguities, and the ironies of the energy industry of contemporary Mexico.

II. THE HISTORY

Oil exploration in Mexico began under the Mining Law of 1884,1 which gave surface owners title to subsurface oil, and the Petroleum Law of 1901, which authorized oil concessions on public lands.2 Private subsurface title was repudiated by Article 27 of the 1917 Constitution, which declared subsurface minerals to be the inalienable property of the Mexican nation.3 A 1925 petroleum law4 attempted to make oil operators renegotiate their subsurface titles and existing concessions into new, shorter-term concessions based on Article 27. The operators protested and achieved a 1928 amendment5 of the 1925 petroleum law that confirmed existing concessions in accordance with their original terms.

Meanwhile, the Mexican oil industry boomed from annual production of some 10,000 barrels in 1901 to more than 193,000,000 barrels in 1921, when Mexico was the second most productive oil country, producing one-fourth of the world's oil.6

Over time, relations between the oil operators on the one hand, and oil workers and the Mexican government on the other, became increasingly acrimonious: labor disputes, tax disputes, claims of reservoir damage, and the like. This culminated in a general strike, which the government referred to a federal review board, whose award the oil operators refused to pay. At that point, President Cardenas expropriated the defaulting companies and created Petroleos Mexicanos (PEMEX) to operate a state oil monopoly.7

Notwithstanding its monopoly position, PEMEX continued to use private contractors and sometimes included percentages of production in exploration contracts as part of their compensation, but a 1958 law ended that practice with the rule (still in effect today) that contractors may be paid only in money.8

Mexico's state monopoly in electric energy was born less contentiously. Private producers and distributors entered the market first, but in 1937, President Cardenas created the state-owned Comisi6n Federal de Electricidad (CFE) to serve less affluent consumers. …

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