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Jerome may get his $100 barrel... from Mexico

by ManfromMiddletown Sat Jul 8th, 2006 at 02:07:46 PM EST

Mexico matters.  

The United States imports more oil from Mexico than Saudi Arabia.

By law, all Mexican oil is exploited by a state owned corportation, PEMEX.  The gradual opening of the Mexican economy to the private sector, has reached a culmination in recent elections with the conservative candidate, Felipe Calderon, fighting accusations that he would privatize PEMEX.  Left opposition candidate Andres Manuel Lopez Obrador (AMLO) included a promise to not privatize PEMEX, focusing on value added products like gasoline and plastics, as part of his 50 Promises, the core of AMLO's polticial program. What's certain is that Mexico's aging fields are in decline, and the skilled trades workers needed to keep Mexican crude flowing oppose any effort to privatize Mexican oil resources, vehemently. And their anger has been targeted at American companies Bechtel and Halliburton percieved as having recevived overpriced contracts from the conservative government.


In recent years, Pemex's professional staff has been rent by protests and purges over the issue of privatization.

"The current management has tried to privatize as much as it could, but the results speak for themselves," said Francisco Garaicochea, a former chief of oil-field technology at Pemex who now leads a left-leaning group of retired company executives, Pemex Engineers Group of the 1917 Constitution. "We have talked with Lopez Obrador's advisers, and we are confident there would be a reversal of Pemex's mistaken strategy, its focus on only exporting raw materials rather than processed petroleum products."

In Tabasco, engineers who have been fired from the company complain that Pemex under the Fox administration has unnecessarily given billions of dollars of service contracts to U.S. companies such as Bechtel, Halliburton and Schlumberger.

"Calderon wants to privatize Pemex, but that's just a recipe for more corruption," said Ricardo Decle, a petroleum engineer who was frog-marched off his workplace by soldiers in 2004 as part of a purge of about 50 dissenting technical staff and is now chief of a group of local Pemex retirees. "In Pemex, there is no transparency, nobody watches over the contracts. For starters, they ask for a 10 percent (bribe) off the top of the price. When anyone complains, they are repressed. This is the way business is done here."

Tabasco, by the way, is the home state of AMLO and the site of a massive protest following a stolen election in the mid 90's in which his supporters occupied oil facilities in Tabasco.

Election expert Sergio Aguayo warns, "if one of the candidates challenges the result, the country could face unrest until the new president's inauguration on December 1."

Election fraud and vote-buying were part of everyday political life in the old Mexico, and perhaps these customs haven't died out completely yet. As a precaution against potential irregularities, the Fox administration has asked the European Union to provide election monitors.

The man who faced an adoring crowd in that downpour in Orizaba has already challenged an election defeat once before. It was in the mid-1990s when Obrador failed to capture a majority of the vote in a bid for the governorship of Tabasco. In protest, he and his supporters occupied the oil fields in Tabasco, ultimately prompting the police to step in and restore order.

La Jornada, a Mexican paper of the left, is reporting today that SENER (Mexican Energy Secretariat), Calderon's former sinecure, was promoting the privatization of PEMEX to foreign investors a full month before his <s>presumed</s> victory in last week's election.

A month before the election, Energy offered private investors oil exploration

Sale offerd solicited for private Mexican investors and foreign porjects for the contruction of electric centers, transport, storage, and distributio  of natural gas

ISRAEL RODRIGUEZ J.

A month before the presidential election, the Energy Secretariat (SENER) began to promote investment "opportunities" in the Mexican energy sector.

The attraction for private capaital, above all international,  is that the petroelectic sector represent 8.4% of GDP, 12.5% of exports, and 1/3 of the country's tax revenues.

By way of the the Investment Promotion Department, SENER put deverse projects for the construction of electric centers finaced through investment, for the transport, storage, and distribution of natural gas.

In the catalouge of invest,ment opportunities, above all in PEMEX, SENER signaled, "817 investment opportunities for oil platforms in the Gulf of Mexico", without identifying by what mechanism, because until now the exploration and explotation for crude are reserved, by consitutional mandate, exclusively for the State.

Although the mainstream press, and President Bush (as well as other world leaders) have congratulated Calderon for his victory, the final outcome is uncertain.

Serious allegations of fraud, including the discovery of ballots dumped in landfills in Mexico City and Veracruz. Irregularities between the initial vote count and the discovery that the official count on the outside of ballot boxes didn't match the ballots inside when boxes where opened, have led to demands for a ballot by ballot recount throughout the country.

AMLO and his team are demanding a ballot by ballot recount in light of these irregularities, and are convocing a rally in the Zocalo in the heart of Mexico City to tell supporters their next move.  Remember that when the election was stolen in Tabasco, AMLO's supporters occupied the oil fields, and the PRD has it's electoral base in the Center and South of the country.  The mainstream press have ignored ample evidence of fraud in Mexican elections, so if things get out of hands be prepared for the condemnation of anti-American leftists provoking the poor.  

And if AMLO and the skilled oil workers shut down the flow of crude from Mexico, be prepared for gas to skyrocket.  And for the possibility that American forces will be called upon to help Mexican military and police retake oil facitilies.

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Bush foe Hugo Chavez is traveling to North Korea possibly to purchase missiles.

Can you say Venezuelan missle crisis?

Even on the short end of the estimated range for a Taepodong 2, most of the Southern US is wihin reach from Venezuela.



And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jul 8th, 2006 at 02:29:20 PM EST
Bush foe Hugo Chavez is traveling to North Korea possibly to purchase missiles.

Can you say Venezuelan missle crisis?

Even on the short end of the estimated range for a Taepodong 2, most of the Southern US is wihin reach from Venezuela.

From a US perspective Chavez wasting money on these missiles is a good thing. They have a high failure rate and even when they do work they're highly inaccurate making them useless against military targets. As far as deterrence against an invasion by threatening to kill large numbers of US civilians in response he'd need a hell of a lot of them to be credible. For that matter any non-guerilla war suited weapons purchases would seem to be a waste of money if intended for defense against the US.  

The only reason anyone (rational) cares about North Korean missiles is that they also have nukes and someday might actually figure out how to put nukes on missiles.  Chavez doesn't have nukes.
 

by MarekNYC on Sat Jul 8th, 2006 at 02:49:18 PM EST
[ Parent ]
How much do you think that a nuclear tipped missile is worth to Chavez?

It serves 2 purposes for North Korea to sell nuclear tipped missles, to put North Korea in  position to prevent US attack, and to earn hard capital.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jul 8th, 2006 at 03:11:12 PM EST
[ Parent ]
North Korea doesn't have nuclear tipped missiles to sell. What it has according to reports are a small handful of nukes, none of them even close to being capable of being put on a missile. It also has missiles, but the only ones that seem to work at least some of the time are the short range ones.
by MarekNYC on Sat Jul 8th, 2006 at 03:18:46 PM EST
[ Parent ]
6-12 warheads.

Also think about what the Saudis did for Pakistan with oil cash......

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jul 8th, 2006 at 03:20:54 PM EST
[ Parent ]
It's also possible he wants to buy a pony.

Any evidence for him being dumb enough to want to buy North Korean missiles? Wouldn't he prefer Chinese?

by Colman (colman at eurotrib.com) on Sat Jul 8th, 2006 at 03:49:29 PM EST
[ Parent ]
I suppose so.

But for the people who invade countries, smoke matters more than fire.  I do thinkt that Chavez has shown an interest in all sorts of weapon platforms.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jul 8th, 2006 at 03:52:42 PM EST
[ Parent ]
China wouldn't seel missiles directly to Chavez...

...tho they might pass some through NKorea, Chine gets money, Nkor gets some hard currency and Venezula gets nukes...
a win/win

The world will end not with a Bang, but with a "do'oh"

by love and death on Mon Jul 10th, 2006 at 05:07:39 PM EST
[ Parent ]
  • one is the distinction between giving access to Mexican reserves to companies other than PEMEX, and privatising PEMEX. These are conflated in the various articles you quote, but are actually quite different. It is absolutely possible to do either without doing the other, with quite different results in terms of incentives for various entities. Opening up Mexican resources to foreign investment is a political hot potato, but might be useful in terms of attracting new investment and bringing in new competences, for instance in offshore exploration and production. It does not mean giving up control on the sector, as it is easy to impose majority stakes for PEMEX in any asset, or tax rules that guarantee that most of the revenues will remain to Mexico. Privatising PEMEX while it is still a monopoly might force it to be more transparent and less corrupt, but it would take away a lot of levers of power for the Mexican government and probably would force more money to go to shareholders. That may or may not be seen as a good thing (improved efficiency and quality of management vs more money going out of the country and less government control (but of the opaque kind) over the company);

  • one is the relationship between PEMEX and the Mexican State, which is a deeply flawed one and a topic worthy of another diary. Several other countries have similar situations (Venezuela with PDVSA, Russia with Gazprom) with companies that provide an overwhelming portion of government revenue, become (or are perceived as) an independent source of power, and at the same time waste money (through corruption and/or incompetence) and are starved of investment by their government;

  • one is the political situation in Mexico, and the fact that a strike in the oil industry today, irrespective of what is actually done with respect to the above, could indeed have a real impact on total oil production and thus on world oil prices;

  • the final one is what the reaction of the US would be to enduring domestic trouble in Mexico, especially if it has an impact on oil production and prices.


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Jul 8th, 2006 at 06:13:19 PM EST
one is the distinction between giving access to Mexican reserves to companies other than PEMEX, and privatising PEMEX.

I think that there's  hard line approach to this because this is hardwired into the Mexican political scene because it's in the Constitution.  I think that there is a huge difference between service contracts where you have American companies working on contract and actual ownership of the fields by foreigners.  The future for Mexico lies offshore, and that requires heavy invetment.

one is the relationship between PEMEX and the Mexican State, which is a deeply flawed one and a topic worthy of another diary. Several other countries have similar situations (Venezuela with PDVSA, Russia with Gazprom) with companies that provide an overwhelming portion of government revenue, become (or are perceived as) an independent source of power, and at the same time waste money (through corruption and/or incompetence) and are starved of investment by their government

This strikes me as a huge problem because Mexico is consistnently at the bottom of OECD countries in tax rates.  Losing the PEMEX revenue stream means losing 1/3 of the country's revenues.  AMLO's plan to move the country out of exporting crude into the plastics sector could have been a real point to develop the economy.  From the automotive sector to things like vinyk siding for houses, Mexican brands could have gained in niche in the world's largest consumer market.

   * real impact on total oil production and thus on world oil prices;

    * the final one is what the reaction of the US would be to enduring domestic trouble in Mexico, especially if it has an impact on oil production and prices.

People on Kos act like I'm the crazy one for thinking that the US would invade another country to protect the free flow of oil, but at least in the Middle East, since the Carter administration this has been US policy. And one of the first companies queued in the line for PEMEX shares in the event of a privatization looks to be the Carlyle group, which has deep links to Bush Sr.  And the National Guard is begining the first rotations on the border this month......

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jul 8th, 2006 at 06:55:02 PM EST
[ Parent ]


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