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
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.
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
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
Published on May 1, 2010