Mexico’s energy reform causes hope and despair

Jose Coronado

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For 76 years the Mexican oil and energy industry was run by the state. During those 76 years, the state monopoly proved itself to be the worst section of the Mexican bureaucracy, overlooking huge oil spills, the deaths of workers, aid to drug cartels, corruption, millionaire union leaders and obsolete equipment, among other things.

But how did this problem start? In 1938, Mexican President Lázaro Cárdenas decided that the oil industry should be run by the state to benefit Mexican society. He started a national campaign to support his idea, and with the help of donations from the Mexican people (some of whom even pawned their chickens to contribute to the cause), he was able to pay foreign companies to leave the country.

Cárdenas´ dream of making Mexico a rich country through a state-owned oil industry failed miserably. The country couldn’t make PEMEX (the national energy corporation) competitive, so they were limited to oil extractions; the process of refining oil happened abroad because the state did not have the equipment and refineries to produce gasoline, and no one else could due to the state monopoly. In 1994 the Mexican government began to privatize government corporations, from railroads to soccer teams, but no one mentioned oil and energy.

In 2012, the new government, under President Enrique Peña Nieto, proposed new economic reforms. With Peña Nieto’s new Energy Reform, private companies will be able to come to Mexico and establish refineries and new oil wells; they will also be able to extract energy from renewable sources like the sun and wind. People will be able to choose where they want to buy gas and energy for their houses, since the government will no longer be the only entity that provides these services. The price of gas and energy will decrease, since there will now be competition in the industry.

The reform also brings hope for education: private companies will bring new training courses for Mexican oil workers and universities will offer new petroleum engineering programs. In his book Cuentos Chinos, the Argentinian journalist Andrés Oppenheimer mentions that in Mexico´s biggest university, UNAM, fewer than 100 petroleum engineers graduate per year –– an incredibly low number for a country with such a huge oil industry.

However, a great number of Mexicans are against this reform. The new policies will produce layoffs in PEMEX, since the company has a surplus of workers. Many of these workers, however, represent a phenomenon called ghost workers –– people who appear on the payroll, have never worked in PEMEX and whose checks are going to the pockets of other people. Also, the gas stations will have to fire more than 400,000 workers called dispatchers that work filling tanks and cleaning windshields. Since dispatchers do not exist in the United States outside of Oregon and New Jersey, American companies taking advantage of the Mexican energy sector will build gas stations that will not need them, forcing Mexican gas stations to lay them off to compete.

These are valid concerns. However, a lot of people who hold them still believe that the government should run the oil industry, even though evidence shows that the government has failed miserably. Mexico needs to try a new economic system in order to get the best out of the abundant resources it has. The biggest challenge now is to get rid of the socialist idea that the government can run economic sectors better than companies; decades of socialist governments in Latin America have proven that wrong.

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