MEXICO CITY – Flash back to October 27th, 2006. American photojournalist Brad Will is splayed out on a sidewalk in Oaxaca, Mexico, mortally wounded by the pistoleros of rogue governor Ulisis Ruiz during tumultuous street battles in that southern city. His killers have never been prosecuted.
Now fast forward to this past January 10th. Manlio Fabio Beltrones, the unctuous leader of the once-ruling (71 years) PRI party faction in the Mexican Senate, announces to a gaggle of reporters that the PRI is prepared to back President Felipe Calderon and his right-wing PAN in passing an “energy reform” package that would permit transnational corporations to generate 49% of the nation’s electricity and open PEMEX, the state petroleum monopoly expropriated from its Anglo-American owners in 1938 and nationalized by President Lazaro Cardenas, to such oil titans as Exxon, British Petroleum, and Shell. Beltrones’ personal preference to initiate the proposed “association of private capitals”: Petrobras, the Brazilian national oil company which opened itself to private investment back in 1997 and which has extensive experience in deep water drilling.
What is the connection between these two apparently unconnected events? Just this: the cover-up of Brad Wills’ death smoothed the way for the PRI-PAN partnership to privatize PEMEX.
Although his killers were plainly identified as plainclothes police on Ulisis’s payroll, Wills’ inconvenient death was ignored by then-president Vicente Fox despite demands by human rights and journalist protection organizations for a full investigation of the killing, one of 26 perpetrated by Ruiz’s death squads between August and October of 2006. Fox’s successor, Felipe Calderon, followed suit and stonewalled an inquiry into Wills’ murder. Similarly, the U.S. Embassy in Mexico never sought justice for a slain citizen despite the personal pleas of the dead man’s family.
Why such studied indifference?
Because holding Governor Ruiz, a prominent PRIista, accountable for the killing(s) would have upset the burgeoning alliance between the PRI and the PAN to ratify Calderon’s legislative agenda, the most pertinent item of which was “energy reform” i.e. the privatization of PEMEX.
Embassy inaction on Brad Wills’ murder followed the same logic. As U.S. ambassador, Bush crony Tony Garza is charged with representing U.S. interests in Mexico and Washington’s interest in opening up Mexican oil to U.S. transnationals far outweighs its interest in bringing the killers of a freelance anarchist reporter to justice. The U.S. has long contemplated a North American Energy Alliance that would guarantee access to Mexican and Canadian reserves.
To this end, Washington has played an active role in facilitating the impending privatization of Petrolios Mexicanos. Over the past months, U.S. transnationals and their associates in government have orchestrated an extraordinary campaign to hoodwink Mexicans into swallowing the lie that PEMEX is hopelessly broken and must be opened to private capital forthwith for the salvation of the Fatherland.
Last July, ex-Federal Reserve czar Alan Greenspan was beamed into Mexico for a teleconference with the nation’s most exalted business council to deliver an ultimatum: if PEMEX was not fixed quickly, the country faced fiscal crisis. Indeed, the petroleum giant (the 11th largest on the planet) generates 40% of Mexico’s total budget and 100% of a social budget that keeps 70,000,000 Mexicans who live in and around the poverty line, in relative quiescence. By “fixing” PEMEX, Greenspan meant privatizing it.
It should be noted that Alan Greenspan is an expert on fiscal crises – his monetary policies just helped to tripwire such a crisis in his own country, the sub-prime disaster.
The Greenspan game plan was echoed December 13th in a memo issued by the International Monetary Fund urgently counseling legislation to allow private capital into PEMEX before the government went broke. Garza’s embassy chimed in the next day, warning of massive capital flight if the Mexican Congress did not pass Calderon’s “energy reform” package. On December 19th, The Economist, which ironically was founded on the fortune reaped by Anglo oil companies in Mexico that eventually became British Petroleum, opined that “the obvious solution to the disaster of PEMEX is to privatize.” Finally, the U.S. Department of Energy delivered the death knell on January 9th: the lack of investment in PEMEX’s Exploration and Exploitation (PEP) division spelled energy catastrophe – not a good sign for Washington’s North American Energy Alliance strategy. On January 10th, the PRI came on board to back Calderon’s “energy reform.”
Despite the Jeremiads, the putsch for privatization has lost considerable steam globally. In fact, a moderate swing to nationalization seems to be in process. Amidst prognoses of irreparable damage to the Venezuelan economy, Hugo Chavez renationalized sectors of PDVSA, the state oil company, and ran a 12% surge in domestic growth in 2007 in spite of it. Bolivia has renationalized natural gas production and Ecuador is on the brink of doing so. The most successful renationalization has been in Putin’s Russia where Gazoprom and Yukos became major world players overnight.
According to Mexican strategic resource writer Alfredo Jalife, 32% of the world’s petroleum supply is in the hands of private transnationals, 20% is nationalized or in the process of being renationalized, and the rest is held by mixed state-private corporations.
But despite their exaggerated anguish at an energy meltdown if PEMEX is not privatized, the doomsayers do have a point: Petrolios Mexicanos is in deep doo-doo. Daily accidents such as the unquenchable fire that took 21 workers’ lives on a Caribbean oil platform and contaminated surrounding waters last fall, pipeline bombings by the guerrilla Popular Revolutionary Army, and the failure to modernize infrastructure – no new refinery has been built in 20 years – is stark evidence of corporate corrosion.
Despite 100-weak-dollar-a-barrel prices (Mexican light crude tops out around $80 USD these days) that generated $2.3 billion in enhanced revenues during the first ten months of 2007, lack of refining capacity forces PEMEX to shell out $5 billion Yanqui dollars each year to import 40% of its gasoline needs – which is to say that for every $1 of the increased revenues PEMEX takes in, two bucks go out for gas.
Calderon’s solution? The so-called “Gasolinazo”, the President’s gift to the driving public on January 6th, the Day of the Kings (Mexican Christmas), that will increase prices at the pump incrementally each month indefinitely. Increased transportation costs are expected to impact food prices across the board.
But the bad news doesn’t stop there. The big battle over Mexican oil is really a battle over crumbs. If U.S. Department of Energy calculations are on target, Mexico only has 12.9 billion barrels in proven reserves, depletion of which could turn PEMEX into a net importer by 2018 if no new petroleum sources are uncorked before then – although Mexico is the sixth largest international oil producer, it has only 1% of the planet’s proven reserves.
With the Cantarell field in the Sound of Campeche, the magnum star of offshore production that has motored PEMEX since the 1990s, just about tapped out, the clock is ticking. To exacerbate this doomsday scenario, Mexico is pumping out what it has left at a record clip to capitalize on the booming barrel price – PEMEX now produces about 3.2 million barrels daily, fully 1.7 million of which are sent up the Gulf to the U.S., an export platform that is accelerating depletion and subsidizing Washington’s wars around the world.
Given this bleak picture, most experts concur that the only place PEMEX can go to drill for new reserves is deep water, five miles down in the Gulf of Mexico. The only catch is that Petrolios Mexicanos does not have deep water drilling capacity. That’s where Petrobras, as contemplated in the PRI/PAN privatization scheme, would come in handy.
What exactly constitutes privatization? Auctioning off the corporation from the top
to the highest bidder or selling it off piece by piece from the bottom? During 35 years of oil boom and bust, PEMEX has systematically dismantled its Exploration & Exploitation division and handed it over to transnational subcontractors, emphasizes Autonomous National University researcher John Saxe- Fernandez who heads up the UNAM’s Strategic Resources Institute. At the top of Saxe-Fernandez’s list of prominent subcontractors is Halliburton with 159 PEMEX contacts since 2000 worth $1.2 billion USD – Halliburton moved into Mexico in the 1990s during the development of Cantarell when Dick Cheney was CEO.
But subcontracting out choice contracts goes back generations. George Bush pere partnered with PEMEX director Jorge Serrano (who later went to jail) in Zapata Offshore, a drilling outfit that operated in the Sound of Campeche in the 1970s. Today, virtually every major transnational driller has a piece of the Mexican action.
A recent daily La Jornada investigation by energy reporter Israel Rodriguez revealed the signing of a series of secret “pre-privatization” covenants to exploit Mexican fields with Shell (the mysterious “Project Margarita”), Exxon, Petrobras, Nexen (Canada), and StatsOil (Norway.) The contracts, accessed through Mexico’s Freedom of Information Act, contained clauses whose contents cannot be divulged for the next five years.
The PRI/PAN energy scam is currently being hatched in the Mexican Senate’s Energy Commission chaired by Francisco Labastida, a former secretary of energy (as is Calderon) and the PRI’s losing presidential candidate in 2000. Those who have gotten a peek at the details label the energy reform legislation “privatization lite” with foot-in-the-door measures that will allow for the “association of private capital” in such areas as pipelines and refineries. The legislation stops short of amending the Mexican Constitution’s Article 27, which stipulates that the petroleum belongs to the nation.
Skirting a constitutional amendment will deny ammo to AMLO – leftist Andres Manuel Lopez Obrador, who many believe was swindled out of the presidency in 2006 and who has emerged as the leader of the fight against privatization. This January, Lopez Obrador announced formation of a cross-party Movement In Defense of Petroleum whose battle cry is “Mexico is not for sale!”
The ex-presidential candidate proposes that PEMEX can raise sufficient revenues without opening itself up to private investment by simply cleaning house – the corporation has long been riddled with corruption, bribe-taking, kickbacks and rampant dirty dealing. For decades, the PRI siphoned off millions to finance its electoral campaigns – in 2000, $110 million USD in PEMEX funds were funneled through the gangster-ridden petroleum workers union into Labastida’s campaign coffers, the so-called “PEMEXgate” scandal.
AMLO has also long advocated the construction of three new refineries to offset the escautf8g cost of importing gasoline which he tags “an absurd situation” for the world’s sixth largest oil producer.
In the opposite corner, Lopez Obrador’s archrival Felipe Calderon insists that opening PEMEX to private capital will somehow make Petrolios Mexicanos “more Mexican” (“more productive, more competitive, more Mexicano.”)
“To hand over our natural resources to foreign powers is an act of treason,” AMLO responds, quoting the man who expropriated and nationalized Mexico’s petroleum in 1938, President Lazaro Cardenas. Lopez Obrador’s defense of Mexican oil will be a first test for the grassroots base the leftist has been cultivating since the tainted 2006 election and is sure to frame the next round of his ongoing bout with Calderon and his allies. AMLO, who in the past has been able to mobilize millions, is calling for nationwide protests this March 18th, the 70th anniversary of Cardenas’s expropriation.
Petroleum is a patriotic fluid here. Expropriation of the oil industry from the “extranjeros” (foreigners, literally “strangers”) was the high point of revolutionary nationalism in Mexico. But in a globalized world, the coming battle around the privatization of PEMEX is not just a Mexican matter anymore and, indeed, has far-reaching implications for the future of neo-liberalism in the Americas.
Sprawled in the Oaxaca street, the life blood leaking from him, the last thing Brad Will could have imagined is that in death he would become an accidental pawn to the transnationals’ ambitions to privatize Mexican oil. Tragically, in the end, that may be Wills’ most significant legacy.
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