The Mexican Presidential Elections of 2024 will be historic: the country is all set to elect its first female president.
Earlier this month, Morena, the country’s ruling party formally nominated Mexico City’s Mayor Claudia Sheinbaum Pardo as its candidate to take on Xóchitl Gálvez, an independent senator who caucuses with the conservative National Action Party in the Senate.
In the lead up to these nominations, the candidates have sparred lightly on various issues: while Sheinbaum has focused on the ‘continuity’ of incumbent president Lopez Obrador’s policies, Senator Galvez has heavily criticised the current regime’s weak security strategy, in particular its failure to crack down on the drug cartels.
Nothing unusual there.
What is unusual is how both candidates have, in all these months, steadfastly refused to acknowledge the elephant that’s standing right between the two candidates: Petroleos Mexicanos (PEMEX), which holds the unsavoury title of being the world’s most indebted oil company currently, has liabilities of $110 billion.
In a sign that that the gloves are finally coming off, Senator Galvez has announced her intent to undertake sweeping reforms at PEMEX opening it up to private investment and bringing in a renewables tilt to its business.
Privatization of energy assets has always been a touchy subject in most countries and especially in Central and Latin America where leftist policies still hold sway: Argentina established the YPF as a state-owned oil enterprise in 1922; Mexico nationalized PEMEX in 1938; Brazil nationalized the oil industry in 1953 (creating Petrobras in the process); and Venezuela did it in 1976.
Some of these policies were disastrous for the nations involved (Venezuela got torched in the process) but Brazil did something remarkably different: in 1997, President Cardoso broke the monopoly and forced Petrobras to compete with foreign firms. And later in 2002, President Lula created a system of public-private partnerships.
It’s the Lula-public-private-model for Petrobras that Senator Galvez appears to have in mind for PEMEX.
The oil giant has regularly received cash injections and tax deferrals from the Obrador government and that’s kept it afloat, but these moves are akin to kicking the can further down the road. The current government’s concessions to PEMEX are estimated to be 1% of GDP. This is expected to rise to 1.5% of GDP under the next government.
With its total debt now standing at 8% of Mexico’s GDP, PEMEX wouldn’t be the first state-owned company to make an ungainly transition from being a crown-jewel to an eyesore.
In the absence of any sweeping reforms, the embattled oil-giant has made itself at home.
In a familiar setting.
On a slippery slope.
