Last Thursday’s PEMEX explosion that killed 34 people at the company’s headquarters in Mexico City will prove to be a test for the administration of President Enrique Pena Nieto. What caused the blast will ultimately not be as significant as how the administration actually handles the investigation, and works to restructure the government oil giant, either through privatization or purging it of corruption and making an efficient company that benefits Mexico’s 112 million people.
No one knows if the deadly PEMEX explosion that damaged the lower floors of the building was an accident, negligence or sabotage by PEMEX workers, organized crime or leftist rebels. But the PEMEX explosion is not the first of its kind.
PEMEX has a long history of corruption and accidents due to lack of maintenance and oversight. A natural gas plant exploded in 1984 killing 300 people; in 1992 a series of explosions in Guadalajara killed 200 people, and in 2012 an ocean rig exploded killing 30. In 2010 an oil pipeline explosion in Puebla that killed 28 was blamed on criminal gangs, while a 2012 explosion at a natural gas facility near the border in Tamaulipas was said to have been an accident. In 2007 several PEMEX oil and gas pipelines in various states were sabotaged by leftist rebels with the EPR, or Ejercito Popular Revolucionario.
In March, PEMEX or Petroleos Mexicanos—the government owned monopoly, will be celebrating its 75th anniversary. Before PEMEX existed all drilling, refining and export of oil in Mexico was done by foreign companies. In 1937 the newly formed Petroleum Workers Union of Mexico led a strike and filed a lawsuit against the oil companies. The oil companies countersued, but he Mexican Supreme Court ruled in favor of the union. When the oil companies refused to pay, President Lazaro Cardenas ordered the expropriation of all oil companies. Within two months Cardenas formed Petroleos Mexicanos, giving the company exclusive rights to drilling, refining and selling oil in Mexico. From then on, Mexicans have seen oil as their patrimony and a source of pride.
Speculation grows on possible link between PEMEX explosion and privatization
In the mid 1970′s PEMEX made significant oil discoveries and production accelerated, taking Mexico from oil importer to a major exporter. Then came the windfall of the 1979 energy crisis caused by the Iranian Revolution creating a boom for Mexico. But ever since then, it has been downhill for PEMEX. According to Reuters, for decades “Mexican presidents have bled PEMEX’s profits to fund government spending. The oil money finances about a third of the federal budget but Pemex has often been unable to plow enough profits back into modernizing its infrastructure.”
During his presidential campaign, and immediately after taking office in December, Pena Nieto spoke of privatizing some sectors of PEMEX, and has touched on the possibility of turning the oil monopoly into a joint venture or selling shares to the public.
Many Mexicans believe the PEMEX explosion at its headquarters had something to do with the issue of privatization. But regardless of what caused the PEMEX explosion, or which direction the government takes with the oil monopoly, the Mexican people are watching. While PEMEX might be a source of pride for Mexicans it is also a sore spot in the country’s economy. Most Mexicans believe the company could be more profitable if it were better run and corruption was curbed. All this will rest on how the investigation into the explosion is handled. Transparency is a must at a time when Mexicans simply do not trust their government, thanks to a failed war on drugs and the recent Florence Cassez fiasco.
Pena Nieto’s administration and his political party, the PRI, are at a crossroads. They can’t simply sweep this under a rug. What happens with PEMEX will be just as important as to how it is done.
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