López Obrador seeks to revive Mexico's oil dream: "It's the best business in the world"

The president of Mexico, Andrés Manuel López Obrador, at a Pemex plant in early 2020. Handout.

/ Reuters

Andrés Manuel López Obrador tries to overcome the stagnation of his energy agenda, paralyzed by the courts, with a new boost to the hydrocarbon sector and Pemex.

The objective of the Mexican president is to rescue the state oil company, which has a debt of 100,000 million dollars, to achieve greater self-sufficiency and break with the model of the past administrations, which consisted of exporting crude oil and importing fuel.

"It is the best business in the world," said the president on Wednesday to defend the purchase of a Deer Park plant in Houston (Texas) for 600 million dollars.

López Obrador's oil dream has become an inalienable political priority, despite the fact that this refinery also accumulates a debt of almost 1,000 million.

More information

• First of all, the energy reform

• The Mexican economy recovers 0.8% in the first quarter of the year

• Pemex finishes buying an oil refinery in Texas for 600 million dollars

The government and the party that supports it, Morena, have dedicated a good part of this year to two reforms that aim to strengthen two state companies, the Federal Electricity Commission (CFE) and Pemex, against private initiative. The president made the electricity and hydrocarbon laws a personal bet, defending them against all odds despite repeated warnings about their economic and environmental impact. The initiatives are now suspended by the courts, which accepted various resources from individuals to stop them, but López Obrador has not given up. The battle for his idea of ​​sovereignty and the ideological dispute with his adversaries largely depend on that project.

The acquisition of 100% of the shares of the Deer Park plant, which Pemex shared with Shell, has also raised doubts about its long-term sustainability. The president, however, has presented it as a milestone for the Mexican economy in times of a pandemic. "I tell you that the economy is very good in the country, we are recovering," he emphasized at the same time that the National Institute of Statistics and Geography (Inegi) reported a recovery of 0.8% of GDP in the first quarter of the year. However, this data also represents a drop of almost 3% compared to the same period in 2020.

“Our adversaries' prognosis failed, they thought we were going to go wrong. It seems incredible, it is incredible that they gamble, they get angry, because foreign investment is coming to Mexico, our adversaries are angry. They talk that we are inventing the data. No. Mexico's economy is growing, the formula that we applied to face the crisis that occurred with the pandemic worked for us, and Mexico's model is recognized worldwide, ”the president said. López Obrador boasts of not having raised taxes or applied gasoline. Even so, the Treasury has recognized that after the federal and local elections on June 6, the government will have to tackle a tax reform.

"We have healthy public finances, that is why this purchase could be made," insisted López Obrador, who has denied that this operation entails new losses for Pemex. “There is no loss, there are no losses, there are no losses, oil is the best business in the world. There were losses when corruption reigned ”. Regarding the Deer Park refinery, he added: “That plant has not had a loss, there have been profits, what they have done is reinvest the profits. But let's see if Octavio explains it ”. Octavio Romero Oropeza, CEO of Pemex, has admitted that “the plant has been making profits throughout all the years, with the exception of last year, which was the covid; There, outside of the pharmaceutical and food stores, I believe that very few in the world had a profit ”. And about the debt, he has recognized,"It amounts to about $ 980 million."

How does Mexico plan to deal with this imbalance? López Obrador has assured that there is "a reserve of resources" that the Government will deliver to Pemex. "With that money, the refinery is bought and the construction of the coker [fuel gas plant] in Tula begins." In his opinion, the State will have recovered the investment "in two or three years." “But that is already done, the financial analysis, specific for this. It is a good business for the country ”, he stressed.

The president, who is about to reach the middle of his six-year term, has already shown signs of wanting to leave his mark on the energy sector at the cost of harming private investment. That is what the consultant David Shields considers an attempt, eminently political, to return to "a golden past, a past that was better, in which he was nationalized." And López Obrador has made it clear this Wednesday at the conclusion of his morning press conference. He has mentioned former presidents Lázaro Cárdenas and Adolfo López Mateos and added: “Look at what López Mateos said, 1960, when he nationalized the electricity industry. That letter is attributed to him, there are those who say he did not write it [...] 'Only a traitor delivers his country to foreigners'. I would say: Mexico is ours, even if the conservatives don't like it, Mexico is ours ”.

That "Mexico is ours" also explains the speech of López Obrador, who has taken advantage of this step to also display a relaxed deal with Washington, despite all the tensions that mark the bilateral agenda.

“We have a very good relationship with the United States Government, President Biden, and authorizations from the United States Government are required.

We are sure that we will not have any problem consuming this purchase for the benefit of our country ”.

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