- The Washington Times - Saturday, May 17, 2003

MEXICO CITY — Mexicans are in an uproar over reports that the U.S. Congress wants to tie the approval of a long-delayed immigration accord to their most sacred cow — the state-owned oil monopoly.

The House International Relations Committee passed a non-binding “sense of Congress” resolution earlier this month calling for the opening of the notoriously inefficient Petroleos de Mexico, popularly known as Pemex, to foreign investment as a necessary condition for an immigration deal.

Pemex is the single-largest taxpayer in Mexico, bringing in more than $40 billion in 2001, and one of the nation’s largest employers. And for 65 years, it has been a state-owned monopoly with exclusive rights to drill, refine and sell the oil found in Mexico’s rich deposits.

The company is a source of pride, considered an important part of the national patrimony. But it is also a font of corruption and mismanagement. Most recently, Pemex and its union — the nation’s most powerful with 92,000 members — have been linked to illicit campaign contributions.

Rep. Cass Ballenger, North Carolina Republican and chairman of the subcommittee on the Western Hemisphere, drafted the resolution, writing that Pemex is “inefficient, plagued by corruption and in need of substantial reforms and private investment.”

Few Mexicans would challenge the need for reform, but critics here cite Federal Election Commission records showing that four of Mr. Ballenger’s 2002 campaign contributors are in the oil sector, including his biggest donor, the Texas-based refinery Trigeant Petroleum.

In response to a public outcry, Mexican President Vicente Fox said last week that Pemex “hasn’t been nor will it be for sale.”

The remarks represent a reversal for Mr. Fox, who has in the past called for opening Pemex to some private investment. That stand came under sharp criticism from opposition political parties, which categorically oppose privatizing Pemex.

The Mexican government relies so heavily on tax revenue from Pemex that the company is always short of funds for re-investment.

Huge oil and gas deposits remain undeveloped because of the lack of modern equipment. As a result, Mexico must import as much as 20 percent of its natural gas.

Corruption also hampers Pemex. Its former director, Rogelio Montemayor, is in Houston awaiting extradition on charges of funneling $50 million in company funds into the failed 2000 campaign of Institutional Revolutionary Party presidential candidate Francisco Labastida.

Both Mexican and foreign political and economic analysts have suggested private investment could help Pemex to grow, but Mexico’s constitution forbids giving Pemex revenue to foreign companies.

Of the top five oil producers in the world, Pemex is the only one that doesn’t have foreign investment participation, making it, from a business point of view, an untapped resource in and of itself.

Still, some wonder what Pemex’s evident troubles have to do with the unresolved immigration issue.

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