Spiga

Whats wrong with Mexico?

Sales by oil exporters — countries like Russia, Norway, and Mexico as well as members of the Organization of Petroleum Exporting Countries (OPEC) — will be about US$700 billion dollar this year. The International Monetary Fund projects their collective current-account surplus at about US$400 million.

Despite record revenues, Petroleos Mexicanos (Pemex), the national oil and gas monopoly, is teetering on bankruptcy, its debts equal to its assets, according to General Director Luis Ramíirez. Exploration is being cut back although proven reserves are shrinking at an alarming rate. Mexico might be an oil importer within a decade. There is neither money nor technology to probe the deep waters of the Gulf of Mexico, where geologists believe another huge oilfield awaits them.

First in line is government. Far from funding special projects to move the country forward, Pemex provides about one-third of general revenues — money the government uses just to operate. That's like spending one's inheritance on groceries.

Pemex has always been a secretive organization, replete with slush funds and offshore companies that few people know about. There is minimal accountability to monitor the comings and goings of its billions of dollars.

Meaningful tax reform would reduce the temptation for politicians to deny Pemex a chance for a decent return. Labor reform would allow workers to choose leaders with their interests in mind, instead of those of a political party.

A robust anti-corruption program combined with equally robust audits of the company's every nook and cranny would help Pemex earn and keep money from every barrel of oil produced.

A merit-based system for appointing senior management would provide new opportunities for increasing efficiency.

Perhaps the highest hurdle of all is a more pragmatic approach to nationalism. Mexico doesn't have to give up control over its petroleum resources to allow outside capital and expertise to help it find and develop reserves. It might require some hard bargaining, but before it can bargain it needs parliamentary consensus.

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