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OpEdNews Op Eds    H2'ed 2/17/14

Fast Track Energy "Reform" Pushes Mexico Closer to Authoritarianism

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Message William Stone

(Article changed on February 19, 2014 at 22:47)

Reversing one of the most courageous and transformative decisions in Mexican history, the 1938 expropriation of foreign energy holdings,   current President Enrique Pena Nieto's government has pushed through an energy "reform" that leaves the country wide open to   massive foreign investment of its lucrative oil resources. Until the early 1980's when the neo-liberal technocrats took control of the country, this expropriation was highly regarded by most Mexicans.   In fact, March 18th, the day that the expropriation took place, became a national holiday when Mexicans celebrated President Lazaro Cardenas defiance in refusing to bow to pressures from countries and corporations particularly from the United States.    It was a source of great pride that these energy resources belonged exclusively to Mexico and Mexicans.

In a matter of five days in December 2013 all that changed.   Appearing to the outside world to be abiding by traditional "democratic" processes, Pena Nieto and his supporters forced energy reform through both legislatures in record time making it seem that the majority of the Mexican people were in favor of this radical "reform".   Nothing could be further from the truth.   The two major opposition groups, Morena (The National Regeneration Movement) and the left of center political party PRD (The Democratic Revolutionary Party) each collected approximately two million signatures of registered voters demanding that a national consultation be held before the energy reform bill could be submitted to congress.   Unsurprisingly, that demand was given no credence.   It could well have been because the "reform s" sponsors realized what the results would be. A national poll conducted by the Centro de Investigación y Docencia Economica (The Center for Research and the Teaching of Economics) revealed that 65% of Mexicans rejected outright any foreign capital investment in the Mexican oil industry.   (El Correo de Oaxaca, January 6, 2014, p.5).   Completely ignoring the will of the Mexican people, the energy "reform" was passed overwhelmingly:   in the Senate 95 to 28 and in the Chamber of Deputies 354 to 134.   These lopsided results occurred after a paltry four days of discussion in the Senate and only 20 hours in the Chamber of Deputies.

With so much popular opposition to this reform, why then didn't the congressional votes reflect that opposition?     First and foremost because of the PRIAN,    the alliance between two of Mexico s strongest political parties, the PRI (The Institutional Revolutionary Party), the party now in power, and the PAN (The National Action Party), the right wing party that ruled Mexico from 2000 to 2012. This alliance represents the wealthiest Mexicans with a close connection to the United States. The PRIAN also garnered the support of two minor parties, the PVEM (The Green Ecological Party of Mexico) and the PANAL (The New Alliance).   It is equally likely that the US$50,000 which was purported to have been given to each legislator who voted affirmatively could well have influence the final results.   (John M. Ackerman, Proceso, December 15, 2013, e p.45).   The two major news sources, TELEVISA and TV Azteca, representing the same moneyed interests as the PRIAN, continually filled the air waves with misleading favorable propaganda.   According to that propaganda, foreign investment would bring an untold number of new jobs to Mexico and would dramatically lower the cost of energy, in particular, gasoline and electricit

Those legislators who voted in favor clearly have short memories.   Despite Mexico's bitter experience with the privatization of its telephone system (TELMEX) which created one of the world s most expensive telephone services as well as the world s richest man (Carlos Slim), persistent assurances of the glories of privatization succeeded in diminishing more widespread opposition. In addition, the energy reform s most vocal opponent, Andres Manuel López Obrador, twice denied the presidency (2006/2012) due to electoral fraud, suffered a severe heart attack which kept him on the sidelines throughout this critical period.

Because Articles 25, 27 and 28 of the 1917 Mexican constitution specifically prohibited foreign investment in Mexican energy resources, the wording of those articles had to be changed before the energy "reform" could become valid.    For the constitution to be legally modified, the legislatures of at least 17 of the 31 states had to approve such changes.   In those states where the PRIAN was in the majority, approval of this 300 page document was rammed through with virtually no discussion or debate.   In some cases, the vote was taken after only 20 minutes. In the State of Querétero, approval came after just 10 minutes. (La Jornada, December 14, 2013, p.1)   Clearly, most of those who voted affirmatively did so without having read, much less pondered, the changes.   But, Pena Nieto and his supporters were in a hurry.   They weren't about to let democracy take its natural course.   They wanted the energy "reform" to be signed, sealed and delivered to their multinational corporate overseers as rapidly as possible.  

It is disconcerting that it was President Enrique Pena Nieto who succeeded in steam rolling the energy "reform" through the Mexican congress when no other neo-liberal president was able to do so.   It is particularly frustrating knowing that Pena Nieto bought his way into the presidency, the PRI having purchased at least three million votes to get him elected.   How that complicated purchase was transacted is described in an article co-written by this author and Kurt Hackbarth published by Op-Ed News on August 20, 2012:   Follow the Money:   Understanding the 2012 Mexican Electoral Fraud. Despite a plethora of convincing evidence revealing the magnitude of this fraud, the Mexican judicial system lined up solidly behind Pena Nieto letting his fraudulent election stand.

It is ironic that Pena Nieto's party, the PRI, is the reincarnation of Lazaro Cardenas party, the PRM, the Mexican Revolutionary Party.   Until the 1980's, the PRI consistently lauded Cardenas energy expropriation as one of that party s most significant and enduring accomplishments.   The neo-liberal ascendency to PRI leadership caused that to change dramatically.   Since the early 1980's, the PRI rarely mentioned March 18 and what it signified.    When it did, it was with hesitancy and/or embarrassment.

Along with Lopez Obrador, one of the strongest opponents of energy privatization has been Cuauhtemoc Cardenas, son of Lazaro Cardenas, who was founder of the PRD, mayor of Mexico City and three times a presidential candidate.   Similar to Lopez Obrador in 2006 and 2012, Chuahtemoc was kept from assuming the presidency in 1988 under suspicious circumstances.   He has compared Pena Nieto's rush to privatize Mexican energy resources to a return to the Porfiriato, the 35 Year Porfirio Daz dictatorship.   (la Jornada, December 10, 2013, p.7) Others have been less charitable accusing Pena Nieto of "betraying" the Mexican people.   John Ackerman, law professor and researcher at the Universidad Nacional de México (UNAM), essayist and columnist goes so far as to call Pena Nieto s actions as "high treason" (Proceso, op.cit., p.45

Privatization is especially puzzling since PEMEX, (Petroleos Mexicanos), the sole Mexican oil producer since 1938, was recently ranked as the third most profitable of 100 major oil companies, right after Indonesia s Z&P and Holland s EBN.. PEMEX profitability was far ahead of Russia s Rosneft and USA s Exxon.  (César Martinez Aznaraz, El Universal, January 7, 2014)   In addition, according to CEPAL, the Economic Commission for Latin America, more oil and natural gas were produced in Mexico since 2012 than in any other Latin American country including Venezuela. (La Jornada, January 31, 2014, p.25)   The reader should note that this information about PEMEX successes was not disseminated by the pro-government media until AFTER the vote in congress.   Throughout the energy debate, the one consistent argument presented for privatization was how incompetent and corrupt PEMEX was.   Mexicans were assured that all that would change with foreign investment.

Mexico's high ranking and unparalleled oil production in Latin America were achieved even though since 1982 the neo-liberal governments have deliberately refrained from investing in PEMEX hoping that its iinevitable decline would strengthen its justification for privatization.   PEMEX achievements occurred despite well publicized incidents of corruption and inefficiency, incidents persistently used to justify privatization. As an indication of how profitable PEMEX resources actually are, PEMEX provided the Mexican treasury with one billion, 17,920 million pesos in 2013 one of the largest amounts recorded in the last 13 years. (La Jornada, January 30, 2014, p.27) To hear the government talk, however, PEMEX was on its last legs and desperately needed foreign investment to move forward.   After realizing how viable PEMEX really is, opening its lucrative oil resources to foreign investors makes little sense unless, of course, privatization advocates benefited personally from that move.

Because the Pena Nieto administration is now poised to sell the "goose that lays the golden egg", it has had to compensate for the loss of future oil revenues.   As a result, new taxes, most highly regressive, have been imposed upon the Mexican people and more are expected.   It was no surprise, then, that inflation has skyrocketed.   During the first two weeks of January, 2014, after the new taxes were implemented, Mexico had the highest inflation rate in four years. The Mexican peso also dramatically declined vis-a-vis the US dollar. (La Jornada, January 24, 2014, p.23).

An area that is particularly suffering from inflation is along the Mexican/US border.   The value added tax (IVA), applied to all goods and services, had been deliberately lower (11%) in cities and towns along the border.   For the rest of the country a 16% IVA was applied.    As of January 1, 2014, however, the border IVA was raised to 16% like the rest of the country. This sudden 5% raise came as a shock and generated an exodus of Mexican shoppers to the United States accompanied by a dramatic   income decline for border businesses. (Enrique Galvan Ochoa,  MVS Noticias con Carmen Aristegui, January 30, 2014.)

Applying additional taxes to Mexico s sagging economy is counterproductive. In 2013, the prediction for Mexico s economic growth (PIB) was revised downward four times.   The last reduction assessed Mexico s actual growth rate at 1.3% down from an initial 3.5%. (CNN Expansion, November 21, 2013)   According to Agustin Carstens, the Governor/Head of the Bank of Mexico there has been a decline in tax collection, public and housing investment, and an overall "deceleration" of spending.   The government's financial decisions were out of "sync" with Mexico s reality. (La Jornada,   February 1, 2014, p. 6). As a reflection of the downward economic spiral, the prices of essential staples in a poor Mexican s food basket (canasta basica) have also substantially increased; a full percentage point above inflation. (El Financiero, October 13, 2013.)      According to El Financiero, at least 25 million Mexicans are so poor that they are unable to purchase the contents of a single canasta basica. (Ibid.)  

Although Pena Nieto inherited many of the problems currently facing Mexico from the Felipe Calderon administration (2006-2012), a growing number feel that the country is worse off now than when Pena Nieto took office in December 2012.   Violence has soared so much that the latest US State Department Travel Warning (January 9, 2014) urges American citizens to avoid 20 of Mexico s 31 states.   Of major concern is the conflict, now bordering upon civil war, in the State of Michoacan. It has become a tinderbox between warring parties; i.e., organized crime (Los Caballeros Templarios) against community self-defense police forces. Recently, Pena Nieto sent in federal and military troops to pacify the situation which some think has only made the situation worse.   Violence in the State of Guerrero is not far behind.  

Yet, if Mexicans only watch and listen to reports from government biased Televisa and TV Azteca and their affiliates, as millions do, they would think that Pena Nieto was the country's savior.   That slanted coverage invariably presents the president in a flattering light.   A balanced assessment of his presidency is totally out of the question.   Only in the national publications La Jornada and Proceso and on the MVS television and radio programs of Carmen Aristegui are any substantive criticisms articulated.  

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I am a retired activist living in Oaxaca, Mexico. Originally from Milwaukee, Wisconsin, I became a Mexican citizen in 2008. Before retiring, I directed a study abroad program for US university students in both Mexico and Chile. I am both (more...)

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