Why Americans Should Protect Pemex's Monopoly on Mexico's Oil.

An Appeal to Block the Sale of Mexico's Oil Fields to Outside Oil Companies.

by Theo Johnson

  Americans need to curb their enthusiasm about the proposed end of Pemex's oil monopoly. Currently, Pemex provides the global market 5 billion barrels a day and almost 18.2% of the crude oil the United State's of America consumes. The Crude Oil from Mexico is cleaner to process into energy than the tar sands of Canada, and there are plenty of reasons for us to defend the Pemex monopoly on Mexican Oil. America needs to strengthen its partner, Mexico in order to effectively fight organized crime, educate a vibrant work force and invest in the infrastructure that will bring Mexico into the upper echelon of wealthy democratic countries. The proceeds from Mexican oil are the dominant source of funding for Mexico's government allowing it to offer health services to a far larger portion of the Mexican populace, invest in infrastructure projects and improve the education system to provide a highly trained and optimally skilled for workforce that will drive steady economic growth while maintaining a low tax rate of 12% that is conducive to business investment and healthy household savings. The Greed of Wall Street, the corruption of politicians and short-sighted decision making of the political and business elite on both sides of the border has threatened this equilibrium, potentially causing a harrowing security crisis to worsen along our Southern border.

  As America looks to increase its continental energy independence by increases the output and production of energy on the continent and become an energy exporter to buyers such as China.  This is a praiseworthy goal, that can be achieved by legislative action to end the restriction on American Oil exports.  As Americans, however, we need to seriously consider the potential harm of allowing the proposed fire sale of Pemex oil fields. The 5 billion barrels currently produced is adequate and substantial, and while that output can and should be increased, it should continue to be conducted by Pemex. While the sale of northern Mexican oil fields can yield immense amounts of cash for Pemex, those funds are likely to be squandered by corruption bringing a new group of Mexican millionaires, but little long-term economic growth. There is also expected to be immense push back, possibly even armed resistance, that would inevitably lead to bloodshed at the hands of oil company mercenaries. As these oil fields are purchased, the long-term revenues are going to go into the hands of the American oil companies purchasing the fields. While some jobs would be created, and some wealth would trickle back into the Mexican economy, the Mexican government is going to be robbed of substantial future revenues that are necessary to fund their fight against Organized Crime, the education of their future workforce and investment in vital infrastructure projects to provide for the needs of a growing population. If the federal treasury is deprived of the steady and reliable flow of oil profits then the government will be forced to either take on debts or raise taxes, two actions that will slow economic growth and worsen security conditions as the unemployed join the ranks of strong cartels in desperation.

  Pemex indeed needs help, it needs assistance in management, some technocracy and can do with less corruption and nepotism, but as far state run organizations are concerned, it is a tremendous success and lifeline for a country that needs a well-funded and competent government. I would propose that Pemex instead lease some of its oil fields in exchange for cash and percentage of the proceeds from production, that Pemex then can invest in improved management, technologies and other infrastructure investments designed to increase output. These actions will keep Mexico's oil field's under the people's control, while providing added revenues to diversify and modernize the economy. There is serious need for water in many rural areas that can be provided by large-scale irrigation projects or desalination plants. By improving the education of Mexico's workforce, American companies, especially mid-sized and smaller companies, can benefit from near sourcing to a reliable workforce next door, reducing our dependence on Chinese factories, which provide North America a disadvantage in the event of serious conflict. Mexican's are far more likely than Chinese to buy American products and spend money in the United States, curtailing the damage of the currency bleed that has resulted from purchases by International corporations of Chinese goods and Saudi oil with American Cash spent by American consumers.

  By taking an approach that is designed to strengthen the resources of the Mexican government and its ability to provide security and economic opportunity to its populace, the appeal of cartel life can be reduced and the relatively low tax rates conducive to savings and economic growth can be maintained. The reduction of organized crime, the investment in an educated Mexican workforce and voting public along with a steady output of Mexican oil are vital interests to the United States of America and its people. The proposals of Wall Street and the greed of Mexican politicians, threaten to undo the economic progress that has occurred over the past 20 years, widening the divide between rich and poor, reducing security conditions while strengthening the drug cartels. These are realities that as Americans, we should abhor, and need to work with our amigos in Mexico to prevent. The current proposals to sell Mexican oil fields could in fact, lead to escalated civil strife and violence in Mexico that inevitably injure American security interests. I urge Barack Obama to consider the corruption driving previous proposals and instead publicly take executive action to block the rape of Mexican resources by American oil companies, instead, promoting a technocracy agreement with Pemex where within experts in Security, Management, Oil Extraction and other technological components of modern oil production are provided so that Pemex can increase its output by as much as 2.5 billion barrels with revenues flowing to the Mexican government and into uncorrupted Government initiatives to provide better health, education, security and infrastructure for the Republic of Mexico.   While I am a lover of free markets and laissez fair policy, as a matter of the science of comparative politics, in homogenous populations in countries with energy export capabilities, it is almost always more effective to keep those oil revenues under the control of the state so that the government can provide for advanced health and education services to the populace that result in a reduction of crime, an improved economy and higher standard of living.