Opinion Archive

What to Make of the Energy Debate Farce

February 20, 2008

The Calderón administration is embarking on its most ambitious legislative project to date: the reform of the legal framework that shackles the Mexican energy sector. The urgency comes from the fact that Mexico’s oil supply is dwindling due mainly to the drying up of Cantarell, once the second-most important oil field in the world, 80km off the coast of Campeche. The consensus among economic liberals is that only private investment and foreign technology (preferably together) can reach the deposits that remain on Mexican territory. President Calderón, a former Secretary of Energy, believes that the looming oil shortage is frightening enough to force the different political parties to forge an agreement that will allow private investment in some areas related to the extraction of fossil fuels. Outright privatization has been ruled out and no one is facing down the ideological ghosts that are at the root of the problem. That could prove to be a fatal mistake.

Worshipping idols

When it comes to money, Mexicans fear foreigners and they don’t trust each other. This insecurity is exacerbated regarding oil because part of this country’s official history extols the virtues of President Lázaro Cárdenas, who stood up to the evil foreign corporations by nationalizing the oil industry. Covetousness regarding oil is so strong that state ownership of this dirty fossil fuel is enshrined in the Constitution. The national myths related to this commodity run so deep that people feel as strongly about it now as they did 50 years ago.

The upshot is that, as things stand today, too many Mexicans are too emotionally invested in the topic for this discussion to generate the best results for the country. “Best” here means getting the most oil out of the ground at the lowest cost and then selling it for the most amount of money. The best result has nothing to do with “sovereignty”, or with unionized overstaffing at a state-run monopoly, or with the manipulation of large amounts of money for political purposes. That is PEMEX today, arguably the most inefficient major oil company in the world.

Nevertheless, political considerations are front and center of the “debate” as it has been proposed. That makes a farce out of the whole discussion. By paying lip service to the totem of state control over oil, members of all three parties are hobbling the debate nearly to the point of irrelevance. Mexico is, today, an internationally competitive, diversified economy that produces about $1 trillion dollars worth of goods and services per year. But the political establishment insists on seeing Mexico as a Banana Republic when it comes to oil. The fact that a commodity could still have such a stranglehold on the imagination of so many Mexicans is alarming and it should be dealt with. Mexicans need to be shown that oil is a product like any other and that keeping it in the hands of politicians breeds inefficiency and corruption.

Unfortunately for a pragmatist like Mr. Calderón, the president is the only one who can lead this difficult discussion. But he must use the presidential “bully pulpit” to tell Mexicans what he wants to do and why. If he wants a public and private solution, he needs to tell us why. If what he really wants is to privatize, he should explain the benefits of privatization versus the drawbacks of state monopolies. Presumably, in the big picture, what Calderón wants is for Mexico to be an economically liberal democracy that is capable of alleviating (not subsidizing) poverty. That’s a vision to be proud of, not one to hide.

Cutting off your nose to spite your face 

So, in many ways the debate is over before it has really begun. The PRD is suspicious of any sort of change, the PAN is afraid of fighting the ideological battle, and a navel-gazing PRI persists in its delusion that it lost the presidency because it abandoned its “nationalist” principles, making it of two minds despite the fact that it knows that the country needs a liberal reform. This is no way to debate the future of a multi-billion dollar industry.

There is an old Russian saying that if you give a Russian a choice between having one good eye, but with his neighbor having two good eyes, or both men being made blind, the Russian would rather be blind than allow his neighbor to be better off. It is exactly this sentiment that currently taints the discussion in the hearts of much of the PRD and the PRI. If we do not engage in the greater debate – if we insist on avoiding the issue of our victim complex and the fears it engenders – no amount of lobbying will produce the laws that the country needs in order to best exploit its natural resources.

For the latest thought-provoking article by Agustin Barrios Gomez please go to our Opinion Column page

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