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US, Mexican Governments Vying for Mexican Oil

DeSmog Blog Research Fellow Steve Horn’s recent revelations about Hillary Clinton’s State Department and Mexico’s energy reform represent a clear case of transnational accumulation through dispossession. Accumulation through dispossession does not happen overnight, but is a slow, grinding process of capital peeling back the gains made by people in prior struggles. It’s when the elites leverage corrupt transnational capital and bureaucratic networks so the “market” works for their interests. Every time a commons is made, a capitalist is somewhere thinking of how to steal it.

What has also been disconcerting about the revelations is a rejection of their validity by those involved. Mexican Energy Secretary, Joaquín Coldwell, dismissed them as “unhinged from reality” and stated that “energy reform was 100% Mexican”. In a comment to Steve Horn, the US Commercial Service stated that “Mexico’s sweeping energy reforms were entirely made in Mexico.” The comment was given after questions were raised by Steve Horn about the U.S.-Mexico Oil and Gas Business Exporting Conference, where industry, politics, and academia got together to exploit Mexican energy privatization. This flat out rejection is naïve. Let’s think rationally about this:

1. Does the US Government have a longstanding policy supporting Mexican energy sector privatization? Yes! Not only that, but there is historical continuity of that policy regardless of political party in power, as shown by both Horn’s investigation and this one.

2. Has the Mexican government, especially under the Institutional Revolutionary Party (PRI) and the National Action Party (PAN), supported Mexican energy sector privatization? Yes! And now included in this is also the Party of the Democratic Revolution (PRD), putting a solid neoliberal, austerity block in control of the Mexican Government.

3. Are their transnational capitalist interests in both Mexico and the US that would benefit economically from the privatization of PEMEX? Yes! And in Horn’s investigation, also there are high-level public-private functionaries that have also benefitted from exploiting their positions.

What follows is further evidence to support these claims.

The US’s Mexican Embassy (USME) cable 08MEXICO2184 demonstrates, on July 15th, 2008 Under Secretary Jeffrey visited with “officials from the Mexican Secretariats of Finance (Hacienda), Agriculture (SAGARPA), and Energy (SENER), as well as the head of Petroleros Mexicanos (PEMEX), the state oil company.” At the meeting, “Jesus Reyes Heroles, Director General for PEMEX, was one of several officials to express his gratitude that the [United States Government] has kept out of the current energy debate” in public. He goes to explain that “energy discussions are extremely political given [a history of US imperialism and intervention in Mexico’s affairs, along with the links between national sovereignty, the Mexican Revolution, and economic self-determination]”. The cable ends by recommending “to stay out of the picture for the next few months” as a way to aid, at that time, Calderon’s backdoor energy privatization schemes.

After this cable, on Oct. 29th, 2008 the USME (08MEXICO3210) wrote another cable with a subject line declaring Mexico’s 2008 energy reforms as not going far enough; “MEXICAN CONGRESS APPROVES TEPID ENERGY REFORM PACKAGE”. So, as soon as Calderón’s backdoor energy privatization scheme was passed into law, the USME was already predicting that “Economic necessity may require the GOM and the Mexican Congress to debate a second, deeper energy reform package after the summer 2009 Congressional elections – even if the opposition parties gain seats in Congress.” “Mild” as Calderón’s backdoor privatization scheme was seen, it still illicited enthusiasm from “international companies” according to Deputy Secretary Gabriel from the US’s London embassy in a cable dated January 20th, 2009 (09LONDON139). Even with the enthusiasm, a January 8th, 2009 US Mexican embassy cable (09MEXICO42) states:

“However, the Calderon Administration made a political decision not to tackle the sacrosanct Constitutional prohibition on private sector investment. As a result, the reform does not address the most pressing issue facing Pemex – declining production. To explore and develop Mexico’s more costly, difficult but promising fields – especially deepwater – Pemex needs to diversify risk, attract private investment possibly through joint ventures and access the technological capabilities and expertise of the international oil companies.”

Obviously, the US Government has some official line, which they declared in another US Mexican Embassy cable, 08MEXICO209, is “to squelch some of the more nationalistic proposals that have arisen in the debate.”

It was just before Calderon’s backdoor privatization period that the US Mexican embassy was developing an internal rhetoric of inevitability about privatization. That is, if you read cable 06MEXICO6783 from Dec. 6th, 2006, it offers no other alternative to the troubles PEMEX faces than privatization, with the Mexican opposition protests as just “[threats to] the chances of reform”. Or in US Mexican embassy cable 06MEXICO5810 from Oct. 12th, 2006, when it states “Pemex’s success in deep-water will depend on changes to Mexico’s constitution that would allow partnerships with third parties, a far from certain outcome despite bold statements from Pemex management.” The US Government definitively has an official position on Mexican energy privatization.

Since the Fox presidency the Mexican Government (continuously under PRI or PAN rule) has had an unofficial privatization policy. US Calgary Consulate cable 05CALGARY577 from Oct. 3rd, 2005 reporting on a Fox visit to Alberta, Canada stated that Fox “reiterated his support for NAFTA, presenting his plan for expanding the organization’s role, including a new provision for energy.” As well, in the same cable, Mexican Trade Consul in Calgary, is noted to have said that it is “painful to let Mexico’s resources sit in the ground if oil belongs to all Mexicans” and that ““interpretation” of certain wording within the Mexican Constitution will play an important role in determining how “private” investment rather than “foreign” investment could occur in Mexico.” From this cable, and what occurred afterwards, it is quite clear that the upper-echelons of political power in Mexico have had a clear privatization agenda since at least the Fox administration, one they have included in dialogues with their NAFTA partners.

Furthermore, following an argument developed by Mexican geopolitical analyst and La Jornada columnist, Alfredo Jalife-Rahm, since the beginning of the Bush administration’s first term, the US Government has worked on trinational policy discussions with Canada and Mexico, involving both the public and private sectors of elite power that in part was centered on remodeling the Mexican energy sector. Some of this “dialogue” was done under the auspices of the Security and Prosperity Partnership of North America (SPP), begun on March 23rd, 2005 by then-US President George W. Bush, then-Canadian Prime Minister Paul Martin, and then-Mexican President Vicente Fox. The SPP was meant to fulfill goals laid out in prior policy documents. Because of this, it is also important to account for the policy papers and positions of top think tanks, such as Council on Foreign Relations and the Center for Strategic and International Studies, influencing these policies.

At the beginning of Bush’s first administration, the Center for Strategic and International Studies published a study in 2001, “New Horizons in U.S.-Mexico Relations – Recommendations for Policy Makers: A Report of the U.S.-Mexico Binational Council”, co-sponsored in part by the University of Texas at Austin, in which they call for “facilitating direct foreign investment and liberalizing market structures in all three countries”. The document states further that:

“The liberalization of Mexico’s energy market might include encouraging foreign direct investment in upstream oil and gas exploration and production with innovative service contracts between private companies and Pemex. Companies that invest in drilling and production would be compensated with performance-based contract payments in kind or payments in cash based on the amount and market value of the hydrocarbons produced. Pemex would remain the sole owner and producer of the hydrocarbons.”

Statements are not made clearer than that in calling for privatization. And while PEMEX would remain the sole owner and producer in this situation, Mexico would become secondary to foreign direct investment, to transnational corporations. The privatization sentiment is the neoliberal sentiment, one echoed throughout the echelons of power globally, “Privatize the Commons”.

In a 2007 North American Competitiveness Council (NACC) report, a “private” (revolving door) sector organization initiated by the Security and Prosperity Partnership of North America, wrote that Mexico should “liberalize trade, storage, and distribution of refined products”. As the Congressional Research Service pointed out about NACC working group energy proposals, they were based on only “private sector cooperation”, which does not leave much room for a para-state firm like PEMEX. The Council on Foreign Relations in a 2005 statement, “Creating a North American Community”, calls for Mexican development to be based on “[attracting] investment” and connecting “to the markets in the north”. And while they call for “respecting each country’s individual policies and priorities”, this is called for within the liberalizing framework of NAFTA, completely contrary to the idea of a nationalized oil company or the free movement of peoples.

Understanding this recent historical context, it is no surprise then that Enrique Peña Nieto continues to receive the support, both rhetorical and financial-military, of the US Government. Before the 2012 Mexican presidential elections, Peña Nieto wrote in an op-ed for the Washington Post that “in NAFTA we have a solid foundation to further integrate our economies through greater investments in finance, infrastructure, manufacturing and energy.” He was exactly what every post-2000 US administration was looking for, and in line with the Mexican elites economic and political interests. And Peña Nieto is just another part of a long-term trend towards privatization that has been in the works since right when Lázaro Cárdenas proposed nationalization of Mexico’s oil industry in 1938, when it was just a demand in the streets made by workers wanting to actualize Articles 25, 26, and 27 of the Mexican Constitution. Capital’s battle with the people is never ending.

Knowing as much, the question ‘why deny Mexican energy privatization’s transnational ties?’ is easily understood. What politician wants to be seen turning over what everyone thinks is a corrupt, but necessary organization through a transnational corrupt privatization scheme that is seen as an attack on national sovereignty and destruction of the Mexican commons? And as Francine Kiefer and Howard LaFranchi pointed out in The Christian Science Monitor in 2001, “Much of the Mexican press continues to assume that America’s friendship with Mexico is largely driven by a desire to gain control of the country’s oil and gas.” Indeed.

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Andrew Smolski is a writer and sociologist.

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