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a heritage to the Mexican people. However, oil

legislation dates back to Article 123 of the

reserves are currently declining very rapidly,

Constitution of 1917. Some benefits that this

and Pemex does not own the proper capital or

document affords to workers include paid

equipment to fund further investments in oil

20-day vacations per year, three months of

fields. Moreover, foreign investment is strictly

severance compensation for certain layoffs,

prohibited in this sphere. Estimates show that

profit-sharing incentives, bonuses, and little

Mexico’s petroleum reserves will deplete in

to no room for pay-by-the-hour (part-time)

about 3 years, unless deep oil targets, like the


All too often, Mexican proworker

Cantarell and Chicontepec fields, are exploited.

laws are too taxing for a firm to incur, thus

The Pemex issue comprises one of the





encouraging illegal employment or at times,

most complex public debates in Mexico.


“...a small hiccup in the American business cycle can induce pneumonia in Mexico’s export-dependent economy” no employment at all in order to avoid

frequently revolves around the government

sanctions from powerful union leaders.

budget (Pemex typically pays for about 40% of

Another significant challenge Mexico faces

the government’s operating budget in taxes),

in its efforts to subdue its disproportionately

issues with the reinvesting of funds back into

large underground eco-nomy is participation

the firm, workers’ salaries, and a potential

in organized crime.

Last year, the U.S.

interest in privatization.

Pemex is ranked as

Department of Defense estimated that nearly

the world’s tenth largest oil company.




the rest of Mexico’s issues, it will necessitate

involved in two of Mexico’s major drug cartels.

a timely decision of tremendous national and

These figures are especially troubling, since

international scope.




these mob “foot soldiers” nearly approach the

During this critical point in Mexico’s

size of the full Mexican army (a corps of about

development, the United States should be


It is important to also note that

willing to transcend the role of the hopeless

apart from the terrorism and violence that

spectator. It is a little-known fact that more

criminal groups exert, cartels also represent

than 90 percent of confiscated weapons

an enormous fiscal cost.

Proceeds from

used in illegal criminal activity in Mexico

bribes, extortions, and other associations with

can be directly traced to American sellers-

corrupt officials among indirect players are

smugglers (firearms are not legally available

not taxable.

for sale in Mexico).

By virtue of Mexico’s

Finally, Mexico’s energy situation presents

geography and due to its tremendous role

a time-bomb for a new crisis in the near

as a trading partner and a national security

Petróleos Mexicanos (Pemex) is the

ally, the United States should seek Mexico’s

state-owned petroleum company in Mexico.

prosperity—its ensuing transformation from a

Since its inception in 1938, Pemex has been

developing to a developed status economy—

perceived as a source of national pride and as

as a mutual interest. iBR


i n t e r n at i o n a l bus i n ess r e v i e w


International Business Review - Spring 2010  
International Business Review - Spring 2010  

The Spring 2010 edition of the IBR.