Many Mexicans See Oil as Last Frontier against US Invasion

Julie Watson, AP, April 24, 2008

Even with oil prices at record highs, Mexico’s state-run oil company is managing to lose money. But a presidential plan to fix Petroleos Mexicanos by inviting foreign help is stirring deep-seated emotions over sovereignty—and causing a paralysis that could doom America’s third-largest oil supplier.

Leftist legislators have padlocked the doors of Congress, camping out in the chambers for two weeks in protest. Opponents on the right have attacked them in a national TV ad, invoking images of Adolf Hitler.

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“Calderon is a right-winger who is going to take away our way of life,” said Arriola, 35, pulling her 6-year-old daughter’s pink Barbie suitcase as her family walked with hundreds of protesters. “It’s the same as strangling us because foreign oil companies are exploiters who will enslave us.”

Pemex is rapidly running out of the oil that provides more than one-third of Mexico’s federal budget. Finding more will require drilling thousands of feet below the surface of the Gulf of Mexico—an exceedingly difficult challenge. Nearly everyone agrees that Pemex lacks the capacity to accomplish this without serious reforms.

The trouble is, Mexico’s Constitution bans Pemex from joint ventures with private and foreign companies that have the technology and expertise to find oil in such deep water.

Calderon has backed off the politically explosive idea of changing the Constitution, proposing merely to ease some state restrictions on involvement by private companies.

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But while Mexicans may shop at Walmart and eat at McDonald’s, oil is a birthright. The sentiment dates back to March 18, 1938, when President Lazaro Cardenas kicked out the American and European oil companies that refused to pay union wage demands while reaping Mexico’s oil profits.

Every year on that day, school children learn about the bold eviction of foreign companies, especially those from the United States, whose annexation of half of Mexico’s territory after the 1846 Mexican-American War still hurts.

Women offered their jewelry to help pay to establish the national oil company. Arriola says her grandparents gave their chickens and pigs, and she is hell bent on protecting the company 70 years later.

“We are defending our resources, our patrimony, our dignity,” she said.

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But oil expert Justin Dargin says Mexicans’ passion for their oil could doom the company—and possibly the country.

The national turmoil is keeping anyone from dealing with declining production, leaky pipelines and a lack of technology to tap into potential reserves in the Gulf, where U.S. companies are busily preparing to drill.

Mexico’s Cantarell oil field—discovered in 1976 and one of the world’s largest—is drying up. Pemex reported a 2007 net loss of US$1.48 billion (euro98 billion) this week, as its revenues are drained to fund schools, hospitals and public works. Meanwhile, every other major oil company is reinvesting unprecedented profits in oil exploration.

Mexico could lose its standing as a major oil exporter in five years if it does not find more oil, experts say.

“We’re talking about the vitality of the Mexican state. That’s how important this issue is,”

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For Maria Elena Hernandez, 53, much more is at stake than Mexico’s image, which wasn’t helped when the congressional takeover forced the cancellation of an official state reception for India’s president.

The retired secretary joined demonstrators singing the national anthem to police guarding an office building where legislators have fled in hopes of getting some work done.

“If we let down our guard, the Americans would come in and install their oil workers,” said Hernandez, wearing a white baseball cap and T-shirt emblazoned with “Defend Pemex.” “Soon they would be telling us that we have to pay rent to live here.”

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