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.

Rep. Robert Menendez, New Jersey Democrat and a member of Mr. Ballenger’s subcommittee, called the resolution “an insult to our relations with Mexico.”

For Mexicans, this seems like the latest, and highest, hurdle to leap in the bid for an immigration pact. Known in Mexico as “the Big Enchilada,” the quest for a law granting legal status to Mexicans living and working illegally in the United States has been atop the national agenda since Mr. Fox made it an issue in the 2000 elections.

President Bush also promised immigration reform in his election campaign and a deal seemed likely until the September 11 terror attacks, which swept all other issues off the table.

Mexican migration was largely forgotten until March of this year, when the White House was seeking Mexico’s pivotal vote in the U.N. Security Council debate over Iraq.

Rumors flew suggesting that the Bush administration was offering migration reform in exchange for a “yes” vote. The vote never took place, but President Fox, under intense anti-war pressure at home, indicated Mexico opposed the use of force, leading to widespread fears of economic retaliation from the United States.

Since then, Mexico has worked hard to offer the United States enthusiastic support on security issues, dispatching thousands of soldiers and law enforcement officers to patrol the border. In April, Mexico’s top Cabinet member, Santiago Creel, met with Secretary of Homeland Security Tom Ridge in San Diego to discuss border security and immigration.

This month, Mr. Bush reaffirmed the relationship between the two nations, calling Mexico a friend and sparking new hope for an immigration deal. U.S. Ambassador to Mexico Tony Garza last week said he expected to see congressional action on the issue by the end of the year or the outset of 2004.

For millions of Mexicans on both sides of the border, this latest turn of events over Pemex has dampened expectations considerably, leading newspaper editorial writers and politicians alike to doubt the intentions of U.S. policy-makers.

“If they want first shot at the sale of the petroleum industry, fine,” said Gustavo Carvajal, president of the Foreign Relations Committee in Mexico’s House of Representatives and a member of the opposition Institutional Revolutionary Party.

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