Autonomy of Management required for Pemex

31-Aug-05

Mexico's petrochemical and refinery units of Petroleos Mexicanos known as Pemex is the main tool of fiscal and monetary policy and a leverage for the country's development. This makes it necessary for Pemex to be state-owned, but experts recommend that some parts of the business like petrochemicals and refinery should be open to private investment. By selling stakes to private investors, Pemex can raise cash and boost output. It is essential for the government to ease six decades of restrictions that have limited foreign investment in the sector and are making Pemex's finances unsustainable. Since most Mexicans consider control of Pemex an issue of sovereignty, selling all or part of the nation's 6 refineries would require approval from Mexican lawmakers, which is unlikely to be granted. Currently, Mexico is the world's sixth-largest oil producer after Russia, Saudi Arabia, USA, Iran and China. Mexico's gasoline imports doubled to US$2.14 bln in 2004 from US$1.03 bln in 2003. Pemex is able to refine less than half of the 3.3 million barrels of crude it produces daily, and is a net importer of refined oil products such as gasoline because it lacks the resources to expand capacity. The government should shield Pemex from politics by appointing professional managers and independent board members. However, in 2000, Mexico's congress had rejected plans to add outside directors to Pemex's board and refused to discuss ways to open the energy industry. Mexico remains the world's only oil exporting nation that bars foreign producers from profiting from the sale of gas and oil. Former President offered to sell as much as 49% of Pemex petrochemical assets to private investors, but failed to attract any bidders because companies rejected a minority partnership with the state in control. Will the state relent to granting needs autonomy of management to Pemex?