Good news about PEMEX & Mexico

Silvio Canto, Jr.
It started out as a very bad week for US-Mexico relations when Rafael Caro-Quintero was released from prison early.    We were clearly blindsided by that.  I'm not even sure how much President Pena-Nieto knew of this release.  It's not helpful as they say.  We hope that this is not an example that Mexico is going backwards on prosecuting the other "Caro-Quinteros" sitting in jail.

The other news is indeed good, frankly excellent.  It looks like Mexico is finally going to take a serious look at modernizing PEMEX

The #1 problem is that PEMEX is an institution of the past.  It has done "muy poco" (very little) to find oil or distribute gasoline in Mexico.  

PEMEX's headquarters are located in a very tall building in Mexico City.   It is a statue to corruption, one-party rule and the arbitrary nature of a large bureaucracy that can make or break your business. Just ask any Mexican who is not on PEMEX's payroll!

I've had a few Mexican friends use other words to speak of PEMEX but they are not suitable for a PG post. 

The change has been coming for years and glad to see that President Pena-Nieto is willing to reform one of his party's sacred cows.  He is shaking up a "sacred cow" created by President Cardenas, one of the PRI's legendary figures. 

How significant is this change?  Imagine President Obama calling for "privatizing Social Security" or blowing up the teachers' unions with school choice.

This is a huge step by President Pena-Nieto and many in his party will scream "traidor" (traitor) and accuse him of selling out to foreign investment.

However, Mexico had little choice.  The motivation behind the move is reality:

"Mr. Pena Nieto's goal, like those of presidents before him, is to recharge Mexico's economy by tackling areas that analysts agree hinder its expansion, which has averaged just 2.2 percent a year since 2001, according to the Organization for Economic Cooperation and Development.

Perhaps the worst of those is the creaky energy sector. Demand for energy in the country is growing so fast that Mexico could turn from an energy exporter to an energy importer by 2020, the government says.

Already, Mexico must import almost half its gasoline, mostly from the United States. Mexican companies pay 25 percent more for electricity than competitors in other countries, the government says. Although Mexico has some of the world's largest reserves of shale gas, it imports one-third of its natural gas."

PEMEX has failed as an energy company, as any serious Mexican will tell you off the record.  I recall speaking to some Mexican politicians who attended a US-Mexico trade show in Dallas.  We sat down for coffee and all 3 of my Mexican friends, elected politicians, told me that PEMEX had to be reformed. 

We repeat that this good news from Mexico. 

It will bring foreign investment to Mexico, i.e. more jobs!

It will create more demand for engineers and technical people in Mexico.  This is going to be huge for US universities like our Texas A&M and other engineering schools that already have close relationships with Mexican schools.

Best of all, it's good news because it proves once again that government can not run natural resources or anything else.

I think that there is an ObamaCare lesson in what we are watching with Mexico & PEMEX.   

P.S.  The readers may enjoy my chat about this with Allan Wall!


It started out as a very bad week for US-Mexico relations when Rafael Caro-Quintero was released from prison early.    We were clearly blindsided by that.  I'm not even sure how much President Pena-Nieto knew of this release.  It's not helpful as they say.  We hope that this is not an example that Mexico is going backwards on prosecuting the other "Caro-Quinteros" sitting in jail.

The other news is indeed good, frankly excellent.  It looks like Mexico is finally going to take a serious look at modernizing PEMEX

The #1 problem is that PEMEX is an institution of the past.  It has done "muy poco" (very little) to find oil or distribute gasoline in Mexico.  

PEMEX's headquarters are located in a very tall building in Mexico City.   It is a statue to corruption, one-party rule and the arbitrary nature of a large bureaucracy that can make or break your business. Just ask any Mexican who is not on PEMEX's payroll!

I've had a few Mexican friends use other words to speak of PEMEX but they are not suitable for a PG post. 

The change has been coming for years and glad to see that President Pena-Nieto is willing to reform one of his party's sacred cows.  He is shaking up a "sacred cow" created by President Cardenas, one of the PRI's legendary figures. 

How significant is this change?  Imagine President Obama calling for "privatizing Social Security" or blowing up the teachers' unions with school choice.

This is a huge step by President Pena-Nieto and many in his party will scream "traidor" (traitor) and accuse him of selling out to foreign investment.

However, Mexico had little choice.  The motivation behind the move is reality:

"Mr. Pena Nieto's goal, like those of presidents before him, is to recharge Mexico's economy by tackling areas that analysts agree hinder its expansion, which has averaged just 2.2 percent a year since 2001, according to the Organization for Economic Cooperation and Development.

Perhaps the worst of those is the creaky energy sector. Demand for energy in the country is growing so fast that Mexico could turn from an energy exporter to an energy importer by 2020, the government says.

Already, Mexico must import almost half its gasoline, mostly from the United States. Mexican companies pay 25 percent more for electricity than competitors in other countries, the government says. Although Mexico has some of the world's largest reserves of shale gas, it imports one-third of its natural gas."

PEMEX has failed as an energy company, as any serious Mexican will tell you off the record.  I recall speaking to some Mexican politicians who attended a US-Mexico trade show in Dallas.  We sat down for coffee and all 3 of my Mexican friends, elected politicians, told me that PEMEX had to be reformed. 

We repeat that this good news from Mexico. 

It will bring foreign investment to Mexico, i.e. more jobs!

It will create more demand for engineers and technical people in Mexico.  This is going to be huge for US universities like our Texas A&M and other engineering schools that already have close relationships with Mexican schools.

Best of all, it's good news because it proves once again that government can not run natural resources or anything else.

I think that there is an ObamaCare lesson in what we are watching with Mexico & PEMEX.   

P.S.  The readers may enjoy my chat about this with Allan Wall!