Petroleos Mexicanos, or Pemex, is the Mexican petroleum industry that was established in 1938. In 2014 this monopoly was ended by Mexican president Enrique Pena Nieto through the Mexican energy reform act. Although the de-monopolization of the industry was expected to benefit Mexico as a whole, it has been criticized for it's failure.
Historical Background
Pemex was established in 1938 when oil exploration began in Mexico. It soon became the country's largest source of oil, as well as the country's biggest exportation good. Within twenty years the oil industry began expanding it's oil explorations to the rest of the country. With so much oil production, the US attempted for many years to be part of the exploration and exportation. The Mexican government refused to allow the US in, and in the 1950's the Mexican oil industry of Pemex became a monopoly. After much criticism and disagreement, president Enrique Pena Nieto denationalized the monopoly in 2014. [1]
Criticisms
Ixtoc I oil spill
In 1979 one of the largest oil spills in history occurred in the Gulf of Mexico by Pemex. Long term effects of the spill caused reproductive harm in local species. Pemex had to pay $100 million to clean up. However as a national monopoly, it used its position to claim sovereign immunity to avoid lawsuits. [2]
Corruption
The most recent scandal regarding corruption was in 2015 when Pemex faced a lawsuit for illegally asking for money and illegal contracts. [3]
Energy reform act
In 2014 president Pena Nieto signed the Energy Reform Act, which would denationalize the Mexican monopoly of petroleum. Pemex would now allow foreign investors into the industry. While this act was aimed to increase the economy and boost production, it has not all been positive. [4] However, two years after the energy reform, and still almost no investors have attempted to invest in the industry. The biggest issue is that oil is so cheap, and potential investors are not willing to invest large sums of money into an industry that may not make the money back fast. [5]
Reasoning
There is much desperation for new investments considering Pemex is currently $7 billion US dollars in debt. [6] Pemex's history of corruption and it's negligence regarding oil spills and clean up have left the public in shock and angered. The distrust Mexico's citizens have for their government is only reinforced by the way the monopoly has behaved in the past. For the sake of the economy, environment and Mexican citizens, a reform had to be made. However, based on the criticisms of President Pena Nieto's energy reform act, we are left wondering what else can Mexican government officials do to improve the oil industry.
References
Pemex. Web 2016. http://www.pemex.com/en/about-pemex/history/Paginas/default.aspx
Wikipedia Web Feb 2016 https://en.wikipedia.org/wiki/Ixtoc_I_oil_spill
Telesur Jun 2015 http://www.telesurtv.net/english/news/Mexican-State-Run-Oil-Company-Pemex-Involved-in-a-Fraud-Scandal-20150708-0001.html
Reuters Aug 2014 https://www.reuters.com/article/us-mexico-reforms-idUSKBN0GB26R20140811
Bloomber Feb 2016 http://www.bloomberg.com/news/articles/2016-02-22/that-didn-t-work-as-planned-pemex-monopoly-ends-then-oil-tanks
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