AMLO Finesses the Oil Issue

March 24, 2018 By 0 Comments

In conjunction with today’s publication of our video Oil!, some thoughts on how Andrés Manuel López Obrador (AMLO) is handling the very delicate issue of Mexico’s petroleum industry.

Oil has been both a blessing and a curse for Mexico. Following the 1938 expropriation of the industry by President Lázaro Cárdenas, the wealth it has produced allowed for the creation of the modern Mexican state. That same wealth, however, also allowed Cardenas’ PRI successors to remain in power for another sixty years through the purchasing of both allegiances and the compliance of the oil workers’ union, whose current leader, Carlos Romero Deschamps, recently made the #2 spot on Forbes’ list of the ten most corrupt in the country. Deschamps, currently a PRI senator, has been the leader of the union since 1996. In Mexico, presidents may come and go but union leaders, like diamonds, are forever.

Which brings us to AMLO. As a progressive admirer of Cardenas, it is no surprise that he has long championed using Mexico’s oil wealth to “foster the industrialization of the nation, create jobs, and become competitive on the world market,” as he stated in his 2004 book Un proyecto alternativo de nación (An Alternative Plan for the Nation), published shortly before his first presidential run in 2006. His stance on private investment in the sector, however, has not been without its equivocations. In the same book, he writes:

But neither should we rule out domestic investors, through transparent mechanisms of association between the public and private sector, participating in the expansion and modernization of the energy industry or related activities, when allowed by the Constitution.

When the Peña Nieto administration part-privatized PEMEX in 2013, AMLO led the movement against it, referring to the so-called “Energy Reform” law as el robo del siglo, or the “robbery of the century” – a phrase that would seem to leave no room for doubt as to his stance. As the 2018 presidential election approaches, however, he has showed signs of softening his stance. The words “nationalization” or “expropriation” are nowhere to be heard, and as recently as this week in an interview with correspondents from the Milenio newspaper, he talked of “reviewing the [privatization] contracts” that have already been awarded and submitting any potential overturning of the energy reform to a referendum. Although his hostility to the measure remained evident, his language as to the measures he would take if elected was carefully modulated.

In part, his caution is understandable. Oil is big business – the biggest business – and governments worldwide have been toppled for threatening its interests (just ask Iran, whose democratically elected president Muhammed Mossadegh was toppled in a CIA-backed coup in 1953 after nationalizing the nation’s oil industry). It is one thing to oppose oil privatization before it happens, and another to do so it now that it’s underway, with giants like Shell and Qatar Petroleum scooping up the lion’s share of the latest contracts for deep-water oil drilling. As these companies have practically unlimited resources to use on litigation, any attempt to roll back the law could be snarled by years and years of court battles. Thus, the Peña Nieto administration – and its financial backers at home and abroad –  are banking on the “reform” having passed the point of being irreversible (the same strategy they are attempting to pursue with the new airport for Mexico City, a project that AMLO also opposes as being an unnecessary boondoggle).

AMLO’s strategy, thus, is to eschew an open confrontation on ideological grounds while instead focusing on reviewing the existing contracts to determine whether they are in the national interest. This strategy has the added benefit of tying neatly in to the overarching “anti-corruption” theme of his campaign. After all, who could be against attacking corruption – or, in this case, contracts awarded through corruption or whose terms, if not illegal, are unfair or one-sided? It is a forensic approach, one more in keeping with a lawyer looking for ways to get out of an unfair deal by finding flaws in the contract than a politician attempting to build a public case against the reform which can then be used as political capital once in office. But AMLO’s approach, with this and a series of other policy fudges that have marked his campaign so far, is “First, win.” The country is in such a dire state of crisis, violence and fraud that his hyper-pragmatism may just be warranted. But it will make governing – and taking the bold steps that he clearly wishes to go down in history for – all the more difficult.