While it is hard to point a finger at exactly what has led to the violence and poverty plaguing Mexico within the past few years, serious changes need to be made to avoid complete state failure. One such target area should be in facilitating the economic turnaround for Petroleos Mexicanos, or Pemex, Mexico’s national oil company.
The oil giant has held a monopoly on the country’s oil and gas sector since its creation in 1938. It wasn’t until 2013, under the reforms introduced under Mexican President Enrique Pena Nieto, that the company was partially privatized. Despite these changes, the company have yet to see the drastic results it was hoping for. Three years later, after reporting consecutive losses, Pemex appointed its new CEO Jose Antonio Gonzalez Anaya, who has publicly expressed Mexico’s struggles with entering the competitive foreign oil market. A combination of national pride, public distrust in the private sector and fear of oil scarcity has led to citizen disapproval on the kinds of changes being made to the company.
There is still hope for Pemex, though. The first step should be in setting its long-term focus on weaning off direct action from the Mexican government. According to the Pew Research Center, a 2015 poll found that 66 percent of Mexican citizens believe the economy is bad. This statistic paired with the overall declining public approval of Pena Nieto presidency, has left many disillusioned with the state of the country and its future. Much like a mom letting her child go off on its first day of school, the government needs to serve as a guiding rather than a controlling force when it comes to decisions being made within the company. While critics point out that matters have only gotten worse since the energy reform, part of Pemex’s struggles are the symptoms of transitioning from a former state-controlled industry.
Contrary to popular belief, Pemex did not completely privatize. Only four-fifths of Pemex’s resources are up for sale. While it is a still a majority, keep in mind that the government still serves as a hand that can move decision-making processes within the company. Mexico needs foreign investment and competition. However, from an investor’s point of view, it is understandable how the company’s losses and increasing debt accumulation can leave potential partners skeptical. This is why initiatives should be taken toward regaining credibility internationally while promoting Mexico’s stake on resources in the Gulf of Mexico.
A thriving Pemex can lead to a better outlook for Mexicans as a whole. If Pemex can successfully stabilize, then the government can work on investing more into the country’s social programs. With the poverty that sweeps parts of the country, job creation must be a priority. Political corruption notwithstanding, the financial insecurity that some citizens face has contributed to driving individuals toward the illegal drug trade business and given rise to ongoing cartel violence.
Pemex’s success can be the Mexican government’s success, but it has to be willing to let go. Considering that the company supports a large chunk of government spending, Mexico cannot afford to gamble with the company’s future any longer. It is time for results.