- The Washington Times - Thursday, March 15, 2007

Mexican President Felipe Calderon, elected on a platform of strong free-market reforms, made clear at a joint press conference with President Bush this week that one reform is completely off the table: selling off the inefficient state-owned energy giant Pemex.

The two presidents “did not discuss the issue of oil because this has something to do specifically with Mexicans,” Mr. Calderon told reporters Wednesday. “This is a Mexico issue. We will not privatize a company that belongs to Mexicans.”

Economists and oilmen alike say the issue of Pemex — and the central place it holds in Mexico’s national identity — has become the elephant in the room in discussions these days of spurring Mexican economic growth.

Both Mr. Bush and Mr. Calderon strongly endorsed the idea that domestic growth in Mexico is critical to solving tensions over illegal migration to the United States. The more jobs and economic outlets there are in Mexico’s poorer regions, the less pressure there will be to head north.

Mr. Calderon gave a personal illustration of the scope of the problem in his press conference with Mr. Bush, acknowledging that he himself has close relatives who have gone to the United States in search of work. He told reporters they were farm laborers, and he could not say if they had entered the United States legally.

“We can truly stop [illegal] migration by building a kilometer of highway in [southern Mexico] than by building 10 kilometers of walls on the U.S.-Mexico border,” the Mexican president said Tuesday at the outset of Mr. Bush’s Mexico stay.

Pemex, a state-owned monopoly since 1938 and an indispensable source of revenue for government coffers, faces increasing cost and investment problems in a harshly competitive global oil market.

Rex Tillerson, Exxon Mobil Corp. chairman and chief executive officer, told a Council on Foreign Relations briefing in New York last week that Pemex’s status was a “highly emotional” issue in Mexico, but one that was keeping the underperforming company from attracting foreign money and talent.

“The nationalization of the oil industry is still a national holiday celebrated with a lot of pride,” Mr. Tillerson said. “I think it’s going to take some time for the political leadership of Mexico to help the Mexican people understand why it is in their national best interest to create a framework that allows foreign participation.”

Oil analysts say a recent drop in crude production from the massive Cantarell oil field, one of the world’s largest, is a cause for concern.

Pemex Chief Executive Officer Jesus Reyes Heroles told reporters last month that production from Cantarell is likely to fall 12 percent this year, and Mr. Tillerson said Pemex doesn’t have the technology or financial muscle to explore promising offshore fields.

Mexico’s economy overall is a mixed bag.

Growth in gross domestic product hit 4.8 percent last year, the highest since 2001. Major U.S. firms like Hershey Co., Wal-Mart and General Motors are investing in Mexico, taking advantage of the North American Free Trade Agreement to export back to the United States.

Official unemployment is less than 4 percent, but analysts say there is considerable underemployment plaguing the economy.

Ten Mexicans made the recent Forbes magazine list of the world’s billionaires, topped by telecommunications magnate Carlos Helu Slim, whose $49 billion fortune — equal to 6 percent of the country’s GDP — puts him within striking distance of Americans Bill Gates and Warren Buffett.

But 45 percent of the Mexican population lives in “moderate” or “extreme” poverty, especially in underdeveloped southern states, which supply the bulk of the Mexican illegal aliens heading to the United States.

One million young Mexicans enter the work force each year. Alan Wall, an analyst with MexiData.Info, an Internet publication that tracks the Mexican economy, estimated that a third of the new workers find jobs, a third go into the “informal economy” and a third head to the United States to find work.

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