There Will Be Corruption

Posted on July 3, 2008 

There Will Be Corruption: How Oil, Labor, and Government Mix in Mexico

Mexican corruption

Unless one has been in hiding these past few months, the most defining aspect of our daily national life, beyond the inevitable rah-rah of the presidential campaign, has been soaring crude oil prices, manifested in $4 per gallon-plus prices at the retail gasoline pump. Countless explanations can be offered for this turn of events. Yet one in particular merits more attention: corruption in the oil industry south of the border.

For better or worse, Mexico is America’s third-largest foreign supplier of crude oil, right behind Canada and Saudi Arabia. This cauldron of political instability provides us with around 1.25 million barrels a day, a figure down by around 200,000 from a year ago. Corruption, including from within the union representing most oil workers, has a lot to do with the drop — and likely future drops.

It’s been a fact of life for 70 years: Mexico’s oil industry is a state-run monopoly. Back in 1938, in a pique of nationalist fervor, their government, led by President Lazaro Cardenas, expropriated (i.e., stole) the assets of American and Anglo-Dutch petroleum companies against whom Mexican workers were striking. The government quickly reorganized this wealth into an entity called Petroleos Mexicanos, or more simply, Pemex. Just to make sure the company wouldn’t get any ideas about asserting its independence, the government amended its constitution of 1917, granting to itself complete authority over the processing and distribution of oil and natural gas. Each year, believe it or not, Mexicans celebrate the date of this event — March 18 — as a national holiday. It’s called Oil Expropriation Day.

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