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April 10, 2008 Chevron Corp, a member of the North American Competitiveness Council, has “submitted proposals to tap oil and natural-gas reserves in Mexico amid declining output from the second-biggest crude-producing nation in the Western Hemisphere,” according to Bloomberg this week. “The biggest problem in Mexico is Pemex,” said Ali Moshiri, who overseas Chevron’s operations in Latin America. “Pemex needs to be more pro-active and say, ‘We have a lot on our plate and we need help.’ The constitution needs to be modified to reflect today’s environment.” Unlike Canada’s relatively integrated, market-oriented approach to the tar sands, Mexico’s energy industry is owned by the State and protected under the constitution. Deregulating or privatizing the Mexican energy industry would require major constitutional reforms, creating a political firestorm in the country. The NACC, in its 2007 report to SPP leaders, saw this as the “single biggest challenge to maximizing the benefits of integration.” The objective of the SPP is to bypass the Mexican constitution in order to open up the Mexican energy sector to private investment and reorient it to suit the market (i.e. send more oil north to the U.S.). Proper democratic debate would no doubt result in a negative political outcome for oil executives, several of which sit on the NACC. So, like much of the SPP process, Mexican officials are proceeding with incremental administrative changes that don’t require legislative approval. In addition, the NACC recommends a benchmarking exercise to help expose inefficiencies and highlight the huge economic benefits to Mexico’s energy sector of trade liberalization. Teresa Healy, a researcher with the Canadian Labour Congress, noted in a 2007 report that the NACC wants governments to circumvent the Mexican constitution, which protects energy resources, by pushing liberalization of the trade, storage and distribution of refined products, and by making organizational and governance changes to PEMEX, Mexico’s state owned oil company. A second strategy is to embarrass PEMEX into liberalization by very publicly highlighting real or perceived performance and governance problems, thus encouraging private solutions in the public’s mind. As an example of what this might look like, the private health insurance industry is attempting a similar strategy in Canada to encourage provinces to embrace private clinics as a solution to the perceived problem of long wait times. The public relations attack is apparent in Moshiri’s comments to Bloomberg: “If you look at Latin America as a whole, Mexico has been way behind any other countries, including Venezuela, which at least is open for us to do business in. In Mexico, we don't even have access to exploration, not even high-risk exploration, or production.” But the Mexican government of Felipe Calderon is also actively encouraging more private involvement with PEMEX. “While Mexico has only drilled six oil wells in recent years, on the U.S. side of the Gulf of Mexico, 167 wells are drilled each year,” claimed a Mexican energy department report earlier this year. “As a result, Pemex needs to work with other companies to develop diverse activities... and to obtain better equipment and maximize the country's oil income.” The CEOs of the NACC are still the only non-governmental consultative body providing input into the SPP through the North American Energy Working Group, and their intentions are clear. In the case of energy, what they want is a fast-tracked continental integration policy – constitutional protections be damned.
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