The North American Institute

Calderon: Pemex Must Be Freed From “Ideological” Prejudice

2009-06-13T14:52:00-06:00

Herald Tribune, June 12, 2009 - “Mexican President Felipe Calderon said state oil company Petroleos Mexicanos must be freed from political and ideological “prejudice” and from interests that have prevented it from remaining in the vanguard in terms of technology and investment. During the inauguration of the 2009 Mexican Petroleum Congress in the eastern state of Veracruz, Calderon said he will try to make sure Mexico once again becomes a world “oil power” because of that industry’s importance in spurring the country’s “growth and development.” Speaking to representatives of more than 100 oil companies from 17 countries, he said the recent decline in the Mexican state oil company’s output and the strides made by its counterparts in other parts of the world have left Pemex in a position of relative backwardness. Compared with other state-run firms, Pemex is the third-largest crude oil producer, the 11th biggest integrated oil and gas company and in 12th place in terms of proven reserves. “Today, thanks to the reform of Pemex (approved in October 2008), we have the chance to improve the company’s exploration and production capacity,” the president said. Calderon last year sought to push a controversial plan through Congress to overhaul Pemex, including allowing the cash-strapped company to take on private oil firms as full partners in the exploration and drilling of new deepwater deposits in the Gulf of Mexico.” Read More.

Are Monopolies Holding Mexico Back?

2009-06-03T19:24:00-06:00

The New York Times, June 3, 2009 - “ When Nafta took effect on Jan. 1, 1994, there was optimism in Mexico that the free trade accord, along with a raft of other market-based measures, would usher in growth and chip away at the country’s social inequalities. That never happened. Average annual growth in the 15 years of the North American Free Trade Agreement has been about 3 percent. What went wrong with those forecasts? For several years now, economists and policy-makers inside and outside the country have been trying to puzzle that out. Now the World Bank has published a book, “No Growth without Equity?,” that summarizes the theories explaining Mexico’s mediocre performance. The book argues that special interest groups, particularly in business and labor, have managed to block changes that would make the economy more efficient and productive in an attempt to preserve privileges built up over decades under Mexico’s closed economy and one-party state. Most important, those groups have frustrated attempts to introduce competition.Surprisingly, Mexico’s transition from a one-party state to a fractious democracy has done little to change this. Powerful interests have been successful at controlling weak government institutions and co-opting political parties.” Read More.

Mexican Factories May Cut Fewer Jobs Than in 2001: Week Ahead

2009-06-01T12:29:01-06:00

Bloomberg, June 1, 2009 - “Export companies in Mexico such as auto-parts maker Delphi Corp. are firing fewer workers this year than during a 2001 recession on optimism that demand will recover from a worldwide economic slump by next year. Delphi, the former unit of General Motors Corp., shuts its 48 Mexican plants one week a month to avoid layoffs as demand for car parts declines. Other companies also are using partial closings and furloughs, which may limit job cuts at export factories this year to about 7 percent of their total workforce, said Cesar Castro, president of the National Council for Maquiladora and Export Manufacturing Industry. “It’s a way to avoid as much as possible the firing of qualified workers, who have a lot of training and are specialized,” said Castro, who manages a Mexican factory for Jabil Circuit Inc. “The companies don’t want to lose them.” Limiting layoffs may help prop up consumer spending as the economy heads for a 5.5 percent contraction this year, according to the Mexican government’s forecast. The government has announced 2 billion pesos ($151.7 million) of direct support to manufacturers to protect jobs amid the global recession that has sapped demand for factory goods, particularly in the U.S., the destination for 80 percent of Mexico’s exports.” Read More.

Value of Mexico’s Crude Exports Down 60 Percent

2009-05-24T19:28:01-06:00

Latin American Herald Tribune, May 24, 2009 - “Mexican state oil company Pemex said that in the first four months of the year the value of its crude exports totaled $6.14 billion, down 60.4 percent compared to the same period of 2008. According to operating results announced in a press release on Thursday, Pemex exported an average of 1.25 million barrels of crude per day in that period, off 15.3 percent from the average exported in the first four months of 2008. The average price of Mexico’s export crude mix was $40.80 per barrel for the first four months of the year, 52.8 percent less than the average price in January-April 2008, prior to the onset of the global economic crisis. For the same periods in question, Pemex produced 2.66 million barrels per day this year, a decrease of 6.89 percent from the 2.85 million barrels of output in 2008. Mexico is facing declining production at its main oil fields even as domestic demand for oil-derived products continues to increase. Read More.

Pemex board headed by ‘supercouncillors’

2009-05-20T12:53:00-06:00

Penn Energy, May 19, 2009 - “Petroleos Mexicanos (Pemex) inaugurated its new board of directors, adding four newly created positions and raising the number of its members to 15 from 11 in line with national oil policy reforms enacted last year.
The four new positions, referred to as supercouncillors, have been filled by Fluvio Ruiz Alarcon, Rogelio Gasca Neri, Hector Moreira Rodriguez, and Jose Fortunato Alvarez Enriquez. The additions are in response to a national energy reform bill passed in 2008 by Mexico’s congress to step up Pemex’s oil production without surrendering public ownership of the state firm. According to a joint statement by Pemex and the Secretaria de Energia (Sener), the role of the new board members is to “guide Pemex in accordance with the best corporate practices of the oil industry.” Any initiatives must win at least two votes from the four new supercouncillors, all of them chosen for their professional knowledge in the oil industry. Ruiz Alarcon, who served as an advisor to leftist Partido de la Revolucion Democratica (PRD) during the energy reform debates of 2008, has degrees in physics and in oil production engineering.Gasca Neri who holds a degree in chemical engineering and extraction industries and served as Mexico’s deputy planning and budget secretary, deputy spending minister, deputy infrastructure minister, and chief executive of state power company CFE Moreira Rodriguez, a former member of the Pemex board, also served as Mexico’s deputy hydrocarbons minister and deputy energy planning and technological development minister, and was Mexico’s representative in the 2005 and 2006 OPEC meetings. He holds a degree in chemical sciences and chemical engineering and a doctorate in chemistry. Alvarez Enriquez has a degree in public accounting and was chief of the public administration ministry’s government audit unit; he also served as head of Pemex’s internal control body.” Read More.

The Crisis Came. Mexico Didn’t Fail. Surprised?

2009-05-13T16:37:00-06:00

The New York Times, May 8, 2009 - “Just for argument’s sake, let’s compare Mexico’s management of the swine flu epidemic that broke out here last month with China’s handling of SARS in 2002. The Chinese initially tried to deny there was an outbreak, were slow to combat its spread and resisted cooperation with foreign investigators. By the time SARS was brought under control, more than 700 people had died. Mexico’s conduct has been different. The authorities may have been slow to identify the threat, but once they did, they quickly notified international health agencies, acted efficiently to prevent the epidemic from mushrooming, and began working closely with the Centers for Disease Control and Prevention in the United States. As of Friday, the death toll was 45. That response flies in the face of recent descriptions of Mexico as a “failed state” that is “on the verge of civil war” — phrases that seem a staple on American talk radio, cable television and political blogs. Apocalyptic language like that is based on the violence of Mexico’s battles with the drug cartels that supply the American market, and with the severity of its economic downturn, which has been complicated by the fact that more than 80 percent of its trade is with the United States. Both trends are indeed playing out, but what they mean for Mexico’s future is far from certain. At any rate, they stand in contrast to a number of fundamental changes that I have seen here over the last month — my first extended stay in this country since a four-year stint as The New York Times bureau chief here ended in July 1990.” Read More

Mexico sees oil bidding in December

2009-05-11T13:36:00-06:00

Reuters, May 11, 2009 - “Work on new contracts that let private oil companies explore for oil in Mexico is on schedule and bids for the first deals should be received by December, a senior executive of state oil company Pemex said on Friday. Mexican law bans private participation in the oil industry but Pemex is keen to bring in international oil companies to help boost falling oil production, which has dipped to its lowest level since 1995. “We’re on track to have a model of the contract ready by the end of June and then we will start having consultations” with industry, Pemex exploration and production chief Carlos Morales told the Reuters Latin American Investment Summit. International oil companies have been quietly watching developments in Mexico due the widely held belief that unexplored areas, such as the deeper waters of the Gulf of Mexico, hold billions of barrels of oil. Private oil companies have been locked out of Mexico since 1938 when the country nationalized the industry. Many Mexicans still oppose allowing foreign firms back in, even under limited terms permitted by reforms enacted last year.” Read More.

With Easy Oil Gone, Pemex Sobers Up

2009-05-08T21:57:01-06:00

Forbes, May 8, 2009 - “After coasting through the ‘80s and ‘90s, the Mexican national oil company is playing catch up to develop the ability to operate in deep water. Thirty years ago, a fisherman saw an oil slick in the shallow waters off the coast of Mexico. The discovery would lead to one of the largest crude reservoirs in the world and a party keg for an impoverished country. Production at Cantarell, as it was named after the fisherman, peaked at more than 2 million barrels of oil a day in 2004 and then began to fall sharply. It is expected to bottom out in three or four years, perhaps between 300,000 and 600,000 barrels a day. Cantarell’s decline has marked the end of an era of easy oil for Petróleos Mexicanos, or Pemex, as the state oil giant is called. Needless to say, Pemex needs to stabilize production, which today stands at 2.7 million barrels of oil a day, down from 3.3 million at its peak. The company, however, is realizing how soft its hands became by coasting through the late 1980s and 1990s, not investing enough in exploration, particularly in deep waters, where the future growth of Pemex rests. “That was not the correct strategy,” Carlos Morales Gil, Pemex’s director of exploration and production, said during a speech here Wednesday at the Offshore Technology Conference. “We cannot stay dependent on one single reservoir anymore, even if it’s very good. That is something that we have to keep in mind every day that we wake up.” It’s impossible not to.” Read More.

Mexico Limits Public Services as Flu Alerts Are Increased

2009-04-30T12:52:00-06:00

The New York Times, April 30, 2009 - “As the swine flu virus appeared in new locations as far apart as Peru and Switzerland on Thursday, Mexicans braced for a national shutdown of offices, restaurants, schools and even the stands of soccer stadiums in an attempt to slow the spread of the disease. In nationally televised speech Wednesday night, Mexican President Felipe Calderón said that, as of Friday, many public services would be closed through Tuesday, encompassing a long holiday weekend. Most government offices and many private businesses will be ordered closed, restaurants, schools and museums will remain shuttered, and spectators will be barred from all professional soccer matches.Churches are expected to be nearly empty on Sunday. Officials in Asia and Europe also scrambled to confront the sickness, but Hong Kong’s chief executive, Donald Tsang, said t hat “pandemic flu will continue to spread and Hong Kong is very likely to be affected.”Senior European health officials prepared for emergency talks Thursday in Luxembourg to mold their own response, and governments in Asia stepped up preparations for a potential pandemic.” Read More.

US Ex-Im Bank okays $900 million loan to Pemex

2009-04-24T17:29:00-06:00

Reuters, April 24, 2009 - “The U.S. Export-Import Bank on Thursday said it had approved $900 million in direct long-term loans for Mexico’s state-owned oil company Pemex to import more than $1 billion worth of U.S. goods and services to help develop oil and natural gas projects. The bank said it authorized a $600 million, 10-year direct loan to Pemex to support the purchase of U.S. exports to be used in projects of PEP (formerly known as the New Pidregas Projects), which consist of 18 natural gas and crude oil exploration sites located on land and offshore at the Bay of Campeche on the northern coast of the Yucatan. It also authorized a $300 million, 10-year direct loan program to support U.S. exports for the Cantarell offshore oil fields located in the Bay of Campeche.” Read More.

On the Bloody Border

2009-04-23T22:52:00-06:00

Time, April 23, 2009 - “ Pedro Rojas is the sort of wealthy Mexican who’s usually in control of his world. “I don’t panic or scare easily,” says Rojas, a business owner and rancher from the Mexican border city of Juárez. But last year narcos, or drug traffickers, moved into his upscale neighborhood--punks in cowboy attire and sparkling pickup trucks buying expensive homes. Rojas and his neighbors were awakened at night or horrified in broad daylight by assault-rifle fire and the screaming of tires as cars raced away after kidnappings. One afternoon, local children watched as a pickup rammed down the door of a house, sparking a gun battle that left four people dead in the street. Out at Rojas’ ranch, the situation was worse. The drug gangs, whose trafficking route for marijuana, cocaine and heroin passes near a cluster of haciendas that includes Rojas’, demanded protection money from the ranchers. When they balked, the gangs burned down the ranch houses, then abducted and executed one of Rojas’ best friends. Since then, the gangs have dumped the severed heads of other victims in front of suburban town halls. So Rojas (not his real name, which he asked to be changed for security reasons) took his family across the Rio Grande to live in an apartment in El Paso, Texas. “I feel fearful, impotent,” he says. Worse, he adds, is the realization that the police in Juárez not only are incapable of stopping gangs but are “working with them. Our police institutions have been overrun by narcos. Changing that will take many years and some very big cojones.” (See pictures from the streets of Juarez.)” Read More.

Pemex Picks Hidalgo Site for $10 Billion Oil Refinery

2009-04-15T14:52:00-06:00

Bloomberg, April 15, 2009 - “Petroleos Mexicanos, the state- owned oil company, picked Hidalgo state, central Mexico, as the site for a 300,000 barrel-a-day oil refinery. The plant, costing as much as $10 billion, will be built in Tula providing Hidalgo secures the necessary land within the next 100 days, Pemex Chief Executive Officer Jesus Reyes Heroles said today at company headquarters in Mexico City. The plant may take more than four years to complete, he said. Pemex is building its first oil refinery in three decades to keep up with rising gasoline demand as more Mexicans buy automobiles. Demand for the fuel in Mexico, which imports about 40 percent of the fuel consumed domestically, may gain 5 percent a year through 2012, according to the Energy Ministry. The plant would boost Pemex’s refining capacity by 19 percent. The company needs about 1,729 acres (700 hectares) for the plant and will build the refinery in Salamanca state if Hidalgo is unable to secure the land, Reyes Heroles said. Pemex also considered Salina Cruz as a potential site, he said.” Read More.

Mexican remittances fall 3 percent in February

2009-04-04T16:39:00-06:00

Forbes, April 1, 2009 - The money Mexicans living abroad sent home fell three percent in February compared to the same month last year, the central bank’s president said Wednesday. Even so, the drop was less than in January, when remittances were down 12 percent compared to January 2008, Guillermo Ortiz said during a news conference.Remittances have been dropping for two reasons: the U.S. recession and a crackdown on illegal immigration that has stemmed migrant flows. The bank reported Wednesday that Mexicans sent back $1.8 billion in February, compared to $1.5 billion in January. Last year was the first time remittances - Mexico’s second largest foreign income source - have fallen year-to-year since the bank started tracking the money 13 years ago. Remittances slipped 3.6 percent to $25 billion in 2008 compared to $26 billion in 2007. Also Wednesday, economists surveyed by the central bank issued a revised forecast that the economy will contract by 3.3 percent, down from the 1.9 percent decline projected last month. The bank expects the Mexican economy to contract between 0.8 percent and 1.8 percent in 2009. Read More.

Mexico head makes UK state visit

2009-03-30T15:13:00-06:00

BBC, March 30, 2009 - “President Felipe Calderon is making the first state visit to the UK by a Mexican leader for almost 25 years. Since taking office in 2006, Mr Caldron has taken on Mexico’s drugs gangs, who are blamed for some 8,000 deaths. But the president is keen to stress that there is more to Mexico than drugs violence, Mexican officials say. Mr Calderon, who is to attend the G20 summit later this week, also wants to say that the world’s 12th biggest economy is a safe place to invest. President Calderon might find a few days at Buckingham Palace as guest of the Queen a welcome change of scene, says the BBC’s Stephen Gibbs in Mexico City. Elected president in 2006, Mr Calderon launched a crackdown on the country’s drugs cartels, deploying more than 40,000 troops. Since then battling the traffickers has occupied much of his time.” Read More.

In Drug War, Mexico Fights Cartel and Itself

2009-03-30T14:33:01-06:00

The New York Times, March 29, 2009 - “An army convoy on the hunt for traffickers rolled out of its base recently in this border town under the control of the Gulf Cartel — and an ominous voice crackled over a two-way radio frequency to announce just that. The voice, belonging to a cartel spy, then broadcast the soldiers’ route through the city, turn by turn, using the same military language as the soldiers. “They’re following us,” Col. Juan José Gómez, who was monitoring the transmission from the front seat of an olive-green pickup truck, said with a shrug. The presence of the informers, some of them former soldiers, highlights a central paradox in Mexico’s ambitious and bloody assault on the drug cartels that have ravaged the country. The nation has begun a war, but it cannot fully rely on the very institutions — the police, customs, the courts, the prisons, even the relatively clean army — most needed to carry it out. The cartels bring in billions of dollars more than the Mexican government spends to defeat them, and they spend their wealth to bolster their ranks with an untold number of politicians, judges, prison guards and police officers — so many police officers, in fact, that entire forces in cities across Mexico have been disbanded and rebuilt from scratch.” Read More.

Energy/International Looking south to the future: Mexico becomes viable option for energy needs

2009-03-27T15:52:00-06:00

Houston Business Journal, March 27, 2009 - “As America looks to solidify its energy supply for the next decade, experts are examining current facts and geopolitical realities.Amid talk of energy independence and replacing oil with alternative energy sources, industry specialists in the short term are focusing on prominent sources of American oil: Saudi Arabia and the politically sensitive Middle East; Venezuela and its controversial president; Russia and its increasingly problematic administration; Nigeria and its civil strife; Canada and its difficult oil sands, once all the rage at $140 a barrel, but now not so much.And there’s Mexico, a strong trading partner and America’s third-largest supplier of imported oil, covering about 11 percent of all oil imported in the United States and 6 percent of all oil consumed here.
But Mexican officials are now trying to address domestic increases in population, automobiles and overall gasoline and electricity demand in the face of four straight years of dwindling production and decaying oilfield infrastructure. Mexico’s flagship field, the Cantarell, is on the way out. Its new hope, the Chicontepec Basin, has plenty of oil — estimated last month by De Goyler & McNaughton to equal about half the reserves in all of Saudi Arabia — but it’s hard to get, which is a problem for Pemex and its aging infrastructure. Fortunately, it’s attractive for others because of pockets of light and super-light crude. To counter the widening gap between domestic demand and supply, the Mexican Congress voted in the fall to open up the nation’s notoriously closed-off oil and gas industry, paving the way for outside companies to sign agreements with Petróleos Mexicanos, or Pemex, the national oil company that ranks among the world’s largest.” Read More.

The Mexican Evolution

2009-03-24T14:49:00-06:00

The New York Times, March 24, 2009 - “AMERICA’S distorted views can have costly consequences, especially for us in Latin America. Secretary of State Hillary Clinton’s trip to Mexico this week is a good time to examine the misconception that Mexico is, or is on the point of becoming, a “failed state.” This notion appears to be increasingly widespread. The Joint Forces Command recently issued a study saying that Mexico — along with Pakistan — could be in danger of a rapid and sudden collapse. President Obama is considering sending National Guard troops to the Mexican border to stop the flow of drugs and violence into the United States. The opinion that Mexico is breaking down seems to be shared by much of the American news media, not to mention the Americans I meet by chance and who, at the first opportunity, ask me whether Mexico will “fall apart.” It most assuredly will not. First, let’s take a quick inventory of the problems that we don’t have. Mexico is a tolerant and secular state, without the religious tensions of Pakistan or Iraq. It is an inclusive society, without the racial hatreds of the Balkans. It has no serious prospects of regional secession or disputed territories, unlike the Middle East. Guerrilla movements have never been a real threat to the state, in stark contrast to Colombia. Most important, Mexico is a young democracy that eliminated an essentially one-party political system, controlled by the Institutional Revolutionary Party, that lasted more than 70 years. And with all its defects, the domination of the party, known as the P.R.I., never even approached the same level of virtually absolute dictatorship as that of Robert Mugabe in Zimbabwe, or even of Venezuela’s Hugo Chávez.” Read More.

Mexico Puts Tariffs on U.S. Goods in Truck Dispute

2009-03-19T15:22:01-06:00

Bloomberg, March 19, 2009 - “Mexico will apply tariffs of 10 percent to 45 percent on at least 90 U.S. products after the U.S. scrapped a test program that allowed Mexican trucks to operate beyond a zone along the countries’ border. Among goods affected by the retaliatory move are some fruits and vegetables, wine, juices, sunglasses, toothpaste and coffee, according to a government statement. Most tariffs are 10 percent to 20 percent, with some produce subject to a 45 percent charge. The tariffs apply to $2.4 billion of goods and take effect tomorrow, Economy Minister Gerardo Ruiz Mateos said yesterday.Talks to defuse the first trade dispute of President Barack Obama’s administration can’t begin until the U.S. has a Commerce Secretary, Ruiz Mateos said. Discussions to resolve the dispute will start once his counterpart, Gary Locke, is confirmed by the Senate, the economy minister said. “We are going to try to put as much pressure as we can on Congress and the administration to work with the Mexicans to develop a program that will work for both,” said Chris Garza, director of congressional relations for the American Farm Bureau, an organization that represents U.S. farmers. The dispute erupted in 1995 after the U.S. refused to implement a cross-border plan agreed to under the North American Free Trade Agreement, citing safety concerns. The rules would have allowed Mexican trucks to haul goods to a U.S. destination and pick up cargo to return to Mexico.” Read More.

Pemex’s Oil Reserves Drop for 10th Consecutive Year

2009-03-18T22:37:00-06:00

Bloomberg, March 18, 2009 - “Petroleos Mexicanos, the state-owned oil company, said crude and natural-gas reserves last year fell for the 10th straight year in a row. Proved reserves dropped to the equivalent of 14.3 billion barrels of oil in 2008, President Felipe Calderon said today. Calderon spoke at a ceremony at the company’s Chicontepec development in Puebla state to commemorate the 71st anniversary of Mexico’s expropriation of foreign oil assets. The decline in reserves comes as output for the Mexico City- based company fell at the fastest rate since 1942 and oil prices plunged more than $100 a barrel from a record last year, slashing $20 billion in potential sales from the company known as Pemex. In 1938, President Lazaro Cardenas seized the assets of companies that later became Chevron Corp. and Exxon Mobil Corp., the world’s largest oil company. Mexico created Pemex later that year, and prohibited private, non-Mexican companies from exploring or producing oil until last October when Congress revised the law. Pemex remains the only domestic refiner. The location of a proposed refinery will be announced by April 15, Calderon said today.” Read More.

PEMEX makes plans for 2009

2009-03-09T14:48:00-06:00

Energy Current, March 6, 2009 - “Looking further into 2009, Mexican state oil company Petroleos Mexicanos (PEMEX) has set an average crude oil production goal of 2,750 million b/d and an average natural gas production goal of 6,450 MMcf/d. The company plans to invest around 208.1 billion pesos (US$13.6 billion) into exploration and production in 2009, 87 percent of its total investment and a 17 percent increase over 2008. In the Cantarell field, the company plans to drill 16 wells, perform 51 major workovers and 27 minor workovers, install dehydrating and desalinization equipment and construct three platforms to drill additional wells. In the Ku-Maloob-Zaap field, PEMEX plans to complete 15 development wells and perform five major and 36 minor workovers. In addition to this offshore work, PEMEX intends to drill over 1,000 wells and perform over 700 wells in onshore regions, primarily Chicontopec. The company’s crude oil production decreased 9.2 percent to 2.8 million b/d in 2008, though natural has production increased 14.2 percent to 6,9219 MMcf/d. PEMEX acquired 5,315 square kilometers (2,052 sq miles) of 2D seismic and 4,276 square kilometers (1,651 sq miles) of 3D seismic data during the fourth quarter of 2008. Much of the 2D seismic data was the result of the Area Perdido project. This surveyed the deepwater Perdido area on Mexico’s maritime border with the U.S. and the Golfo de México B area in the southwest marine basin. Some of the 3D seismic data also corresponded to the Perdido area. During the fourth quarter, PEMEX completed 186 development wells and 22 exploration wells. Many of the development wells were onshore in the Chicontopec region, which PEMEX hopes will boost its production as oil production from the Cantarell field falls.” Read More.