MEXICO: ITS ABOUT OIL

2.7.2 MEXICO
Background

Mexico has proven oil reserves of 6.9 bt (1998), which will last for over 39 years at current production rates (1998). Mexico's oil reserves are the largest in the world outside the OPEC community and the seventh largest overall. In 1998, Mexico produced 174.4 mt ranking it as the world's fifth largest oil producer. Oil production will continue on a strong upward trend. Mexico will continue to be one of the major Latin American oil exporters. As demand in the rest of the world grows and production by other countries decreases, Mexico will become a major supplier of crude oil.

Mexico's proven gas reserves are 1.8tcm and rank as the world's seventeenth largest and at current rates of production (1998) are expected to last for just under 52 years. Natural gas production in 1998 was 34.8bcm making Mexico the world's fourteenth largest gas producer.

The oil sector is the main gas consumer, taking 54% of total production, and it is followed by the industrial and electricity sectors, which account for 28% and 15% of the production respectively.

Between 1991 and 1998, the supply of natural gas grew at an annual average rate of 2.76% whereas demand grew at 3.45%. In 1998 domestic consumption exceeded natural gas production.
Control

Pemex (Petróleos Mexicanos), the national oil company, is a state monopoly that was established in 1938. It is the fourth largest oil company in the world and operates all aspects of the oil and gas industry in Mexico through five operating subsidiaries: Pemex Exploration and Production, Pemex Refining, Pemex Gas, Pemex Petrochemicals and Pemex International. Pemex is authorised by the Federal Government under Article 27 of the Mexican Constitution to manage all aspects of the oil industry, including exploration, production, refining, transport, storage, distribution, and the sale of oil. The same attributes apply to the upstream natural gas industry. The national Government holds title to all mineral resources. The transportation, storage and distribution of gas can be carried out under licence by the private sector. The private sector can build, operate and own gas pipelines, facilities and equipment.
Operating Framework

Service agreements and drilling contracts are in operation and form the basis of contractual arrangements for participation in the upstream industry. The service agreement system is also used for distribution, transportation and storage activities and also for construction of infrastructure. Pemex is permitted to pay for the provision of goods or services in cash and not through profit or production sharing arrangements.
Privatisation

Pemex is a state-owned oil company and therefore the company's upstream oil and gas activities have not been privatised.

Pricing and Sales

The Government receives 100% of the proceeds from the sale of oil and gas.
The Energy Regulatory Commission (CRE) establishes the maximum price, terms and conditions for first hand sales of natural gas. The price methodology refers to international market conditions, the place where the sale is performed and the supply alternatives for users. A maximum price cap is in place to limit the power of Pemex, as it is the only national producer of natural gas.
Trade Restrictions

Oil imports and exports are restricted while gas is unrestricted.

Prior to 1995, Pemex controlled the natural gas market. Legislation passed in 1995 permits private foreign and national companies to import and export natural gas.
Fiscal Framework

Income tax and asset tax. Pemex and its subsidiaries are exempt from the payment of income tax and asset tax under the provision of article 4 of the Federal Revenue Law.

With a view towards providing Pemex with a more stable fiscal regime, starting in 1993 a new fiscal regime was established for Pemex. For 1999, according to the new fiscal regime, Pemex, in addition to being subject to the payment of all taxes and contributions set forth by the Ministry of Finance and Public Credit (other than the corporate income tax and the assets tax), must pay the following direct and indirect taxes and duties:

Hydrocarbon Extraction Duty: This duty is paid by Pemex-Exploration and Production only. A rate of 52.3% is applied to the net cash flow which results from deducting all cash expenditures (including operating expenses and capital expenditures) from cash revenues generated by Pemex-Exploration and Production by way of sales of goods and services. Extraordinary Hydrocarbon Extraction Duty: This duty is paid by Pemex-Exploration and Production only. It is calculated on the same basis as the Hydrocarbon Extraction Duty, using a tax rate of 25.5%.

Additional Hydrocarbon Extraction Duty: This duty is paid by Pemex-Exploration and Production only. It is calculated on the same basis as the Hydrocarbon Extraction Duty, using a tax rate of 1.1%.

Hydrocarbon Income Tax: Pemex pays this direct tax on behalf of itself and the Subsidiary Entities. This tax is the equivalent to the regular Income Tax applied to all Mexican corporations, to which Pemex is not subject. A tax rate of 35% is applied to net income (determined in accordance with the Income Law Tax) of each of Pemex and the Subsidiary Entities. Pemex and the Subsidiary Entities may determine this tax on a consolidated basis.

Petroleum taxes and rates are not negotiable, as they are established in the Federal Revenue Law. If the sum of the total tax levied against a company does not reach 60.8% of third party sales revenue, the government increases the tax charge to reach this target.

MEXICO PRIVATIZATION `REFORMS'
Cheney's Pirates: `Stand and Deliver,
Or We'll Sink You'
by Dennis Small
October 17 2003
Electronic Intelligence Weekly.

Consider the following chronology:

Dec. 1, 2000: Vicente Fox is inaugurated as President of Mexico, and promptly announces that he will hitch Mexico's wagon to the U.S. economy. He emphasizes that the maquiladoras (Mexican slave-labor assembly plants, mainly along the U.S. border) will be the driving force of Mexico's GNP growth, which he promises will reach 7% per year. All of this will work, he brags, because his amigo George W. Bush is going to help out.

Jan. 19, 2001: Just a few weeks later, EIR runs a cover-story entitled "The Demise of the Great Importer of Last Resort," in which Lyndon LaRouche warns that the implosion of the "vast U.S. dollar-denominated financial bubble" portends the end of the "intrinsically bankrupt U.S. economy's role as 'importer of last resort' for much of the world." A back-up article in that same feature package documents that "no country in the world is more thoroughly dependent on trade with the United States than Mexico" (90% of all Mexican exports go to the United States), and that the United States is "a market that is about to disappear." Mexico's gamble on the maquiladoras, which "by all rights, must be considered an economic cancer," is a dead-end strategy, EIR advises. (EIR issues this forecast despite the fact that the most recent official data then available, for Oct. 2000, shows that maquiladora employment has just reached a record high of 1.348 million.)

October 2003: Mexico's official statistical agency, INEGI, issues its latest figures, which show that, as of July 2003, maquiladora employment had plummeted to 1.071 million. This represents a 21% drop from its historic high-water mark, achieved in October 2000. Similarly, the number of maquiladora establishments in existence continues its decline down to 3,182, a 15% drop from its corresponding high of 3,763 (see Figure 1).

Who, as Fox was inaugurated, was right? He and his amigo George W. Bush, or Lyndon LaRouche? You would think that would be a "no-brainer," as the saying goes.

And yet, despite this most eloquent of fiascos, the Wall Street and Washington authors of that failed free-trade policy are now trying to convince Mexicans that the only problem is—that they haven't gone far enough with "free market" reforms! This is a carbon copy of U.S. Vice President Dick Cheney's argument about California's electricity deregulation catastrophe, which allowed the state to be bled white by Cheney's energy buccaneers. "We want more, more," they snarl. And in Mexico, as in the case of California, Cheney and Co. are relying, not on reasoned arguments to make their case, but on straight terror tactics and blackmail to achieve their desired results. Witness Arnold Schwarzenegger, the hit-man for Cheney's chicken-hawks.

Mexico: Oil for the Machine

What Cheney et al. are demanding of Mexico, is that it fully deregulate and privatize its energy sector, including the strategic state oil company Pemex. President Fox has repeatedly tried, and failed, to ram this policy through a reticent Mexican Congress. On the most recent such occasion, the Mexican Senate, led by opposition PRI Senator Manuel Bartlett, turned around and passed legislation prohibiting any electricity deregulation or privatization. As for Pemex, the Constitution prohibits its privatization, so no new legislation was required to stop that gambit.

This time around, the City of London and Wall Street, backed by the government of amigo Bush, have told Fox that he must succeed—no excuses. For example, on Sept. 1, the London Financial Times ran an editorial instructing Fox that he must "tell Mexicans ... of the costs of failing to make progress [on reforms]," further specifying that "complacent and inactive cabinet ministers should go." The very next day, a compliant President Fox announced that he was dumping his Energy Secretary, Ernesto Martens, and replacing him with PAN party hack Felipe Calderón, whose assignment would be making Congress go along with Fox's plan.

Fox himself, never a master of subtlety, told a group of U.S. businessmen he met with in New York City on Sept. 25, that if foreign capital is not permitted to invest in Pemex, then "Pemex will leave the country." He explained this stunning statement by noting that the Mexican Constitution prohibits Pemex's association with foreign capital only inside Mexico; but outside, anything goes.

Over the course of September, Fox's team has prepared the requisite legislation for the energy reforms, and his top operators have begun to wheel and deal to get a faction of the opposition PRI party to back his own PAN, in order to approve the reforms. But the real hard-ball tactics are being orchestrated from abroad, as LaRouche's Mexican associates in the LaRouche Youth Movement and the Ibero-American Labor Committees warned in a statement issued on Sept. 29: "The desperate need for liquidity of the bankrupt and dying international financial system, is triggering a new and brutal offensive by the Wall Street bankers and the Synarchist International, represented by the despised U.S. Vice President Dick Cheney, to seize Mexico's national energy sector.... With this new offensive, pressures and blackmail against the Congress will intensify, to force our nation's legislators to submit to the unbalanced demands of President Fox," the statement advised.

Three events of early October came to quickly confirm that warning, ushering in a new stage in economic warfare against Mexico.

First, on Oct. 1, the University of Chicago-trained Finance Minister, Francisco Gil Díz, a hard-nosed free-trade ideologue, testified before Congress and issued an overt blackmail threat. The Fox government was halving its official forecast for 2003 GNP growth, from 3% down to 1.5%. However, Gil Díz offered, if the Congress complied and passed Fox's economic reform package, foreign investment would be "encouraged," and growth next year would rise by at least two percentage points.

Then, on Oct. 2, the financial rating agency Moody's Investors Service announced that it was "considering" cutting its credit rating for Pemex, citing the company's high debt and tax burden. Financial wire service Bloomberg noted laconically that "the report coincided with comments from Finance Minister Francisco Gil Díz," that growth estimates were being cut in half, and that the combined effect of these two announcements led to a plunge in the value of Mexican government bonds, and to a speculative assault on the peso which brought it to 11.3 to the dollar, a record low (see Figure 2).

Lest anyone miss the point about the Moody's release, Bloomberg went on to quote an economist for the Swiss investment bank UBS Warburg: "I see this as an implicit criticism of Mexico's energy policy, which aims to stiff-arm private capital.... It should be a wake-up call." And an analyst for ABN Amro bank broadened the attack: "The [Moody's] statement regarding Pemex can be inferred as a statement on the government of Mexico's creditworthiness."

Pressure Church To Back 'Reforms'

Third, also on Oct. 2, Mexican Government Minister Santiago Creel took the highly unusual step of going to the Basílica of Guadalupe, the most important shrine of Mexican Catholics, which government officials rarely visit. Creel went with the clear purpose of exerting maximum blackmail and pressure on the Catholic Church, for it to back President Fox's proposed economic reforms.

According to the Mexico City daily El Universal, Minister Creel, while at the Bas@aailica, pointedly "spoke about the desire for an electricity reform. He considered his visit to be evidence of the good relations between the State and the Catholic Church, accompanied by his host, the rector of the Basílica Diego Monroy.... He's going to pray for the reforms, members of Santiago Creel's team said in jest."

The reference to purported "good relations" between the government and the Church, is a loaded remark, given the fact that the Attorney General's office is currently investigating the Cardinal of Guadalajara, Juan Sandoval Iñiguez, for alleged drug-money laundering on behalf of Vatican finances. One informed observer characterized Creel's message to the Church as a veiled threat: Play ball with us on the energy reforms, and we'll call off the dogs. Otherwise....

Leading Mexican Church figures, including Cardinal Sandoval, are on record strongly opposing the deregulation and privatization of Mexico's energy sector. Furthermore, the Sandoval affair threatens to unleash religious violence in Mexico, along the lines of the 1926-29 Cristero War (see "Targetting of Cardinal Sandoval Triggers Religious Warfare Potential," EIR, Oct. 10 [see also Sept. 29 EIR press release]). That war also had as a backdrop, an effort by international financial interests, such as the Buckleys, to seize Mexico's oil.

U.S. Presidential pre-candidate Lyndon LaRouche responded forcefully to the reports of Creel's thuggish tactics. "This kind of corruption, where the money-changers are trying to buy the Mexican pulpit, is unacceptable," LaRouche stated. "We trust the Church will side with the people, and not with the usurers.

"We cannot tolerate the idea of the Church being required to sell its soul to the money-changers. Anyone who demands that, should not be allowed in government. That crosses the Church-State division in a way which is intolerable. When you separate the Church and the State, you have to protect the Church. The Church has rights; the right to be free from blackmail from special moneyed interests is part of that," LaRouche concluded.

-----------------------------------

George Shultz Leads Drive To Privatize Mexico's Oil

by EIR Staff October 13, 2006

The LaRouche Youth Movement (LYM) is raising the alarm in Mexico, that George Shultz, the godfather of the Bush Administration, is leading an international drive to steal Mexico's oil. In a leaflet circulating through Mexico, in tandem with the mobilization against privatization called by the actual winner of the Mexican Presidential elections, Andrés Manuel López Obrador, the LYM exposes the latest machinations of the Synarchists against Mexico. The leaflet lays out the dirty plot as follows:

"Felipe Calderón had barely been proclaimed 'President-elect' of Mexico, when one week later, George Shultz, the real architect of the Bush-Cheney government and sponsor of Pinochet and his Chile, had already organized a secret meeting in a little town in Canada, with a select group of financiers, officials of the Cheney-Bush and Vicente Fox governments, and representatives of Calderón's presumed incoming government. They gathered to discuss the privatization of Pemex, the Federal Electricity Commission (CFE), the militarization of the U.S.-Mexico border, and other aspects of what would be Mexico's final surrender to the Anglo-Dutch financial interests and their allies in the Synarchist International.

"This is precisely what U.S. Democratic leader Lyndon LaRouche has repeatedly warned of, namely, that this is the fate the Synarchist bankers have reserved for Mexico in the face of the collapsing international financial system now onrushing.

"The confab was held in Banff, a little tourist town in the Canadian province of Alberta, under the guise of a forum of the member countries of the North American Free Trade Agreement (NAFTA). It was presided over jointly by George Shultz for the United States; former Alberta Prime Minister Peter Lougheed for Canada; and Pedro Aspe of Mexico, the former Finance Secretary of [President] Carlos Salinas de Gortari and current member of the international bankers' network PlaNet Finance, a distinction which he shares with Synarchist banker Felix Rohatyn of Lazard Frères.

"The discussions held between Sept. 12 and 14, included officials from the governments of those three countries, although it was not billed as an official event, as well as such representatives of Felipe Calderón as Arturo Sarukhan, his coordinator of international affairs, and Juan Camilo Mouriño, general coordinator of his transition team.

"To translate what was discussed at this confab into plain language, it is first necessary to explain who George Shultz the fascist really is. This individual partnered with Henry Kissinger during the corrupt Richard Nixon government to, first, in 1971, dismantle the Bretton Woods System created by Franklin D. Roosevelt, thereby paving the way for the globalization process through privatizations and deregulation of the economy, as a way to smash the sovereign nation-state.

"Then, in 1973, Shultz and Kissinger, with the help of Felix Rohatyn, who was then director of ITT, imposed the bloody dictatorship of Augusto Pinochet in Chile, and with the monetarists of the University of Chicago, created the Chile model which the people of that nation still suffer under today.

"Shultz is the true brains behind the Bush and Cheney government. Starting with the campaign in 2000, Shultz organized the so-called Vulcan group, which captured the Bush Cabinet from the very start, and which included Secretary of Defense Rumsfeld, Secretary of State Condoleezza Rice, and other maniacs who have put in place their plan for permanent warfare.

"Since the Salinas era, when the Synarchist program to smash Mexico as a sovereign republic began to escalate, Pedro Aspe has served as little more than the bankers' errand boy, and he continues in that role today. At this event, he pulled together the gang of Mexican traitors that participated in the Banff plot.

"In addition to the Calderón representatives, there were also Vinicio Suro of Pemex; Eduardo Medina Mora of the Public Security Ministry; Gerónimo Gutiérrez, Undersecretary for North America of the Foreign Affairs Ministry; and Mexico's ambassadors to the United States and Canada, Carlos de Icaza and María Teresa García Segovia de Madero, respectively. Jorge Castañeda's half-brother Andrés Rozental served as the Mexican coordinator of the event. And representing Michoacán governor Lázaro Cárdenas was his advisor Carlos Heredia.

"Representatives of Chevron and other international energy groups, along with members of the U.S. government who prepared Cheney's energy plan, joined with Pemex's Vinicio Suro in a forum entitled 'A North American Energy Strategy.'

"The session on security was scheduled to feature U.S. Defense Secretary Donald Rumsfeld, but his presence has not been confirmed, and was perhaps not necessary. But what is known is that there was discussion of relations among the three nations' defense systems, in particular, militarization of the border, immigration, national security, military production, and control of North America's energy reserves.

"Clearly, the international bankers are already celebrating their premature erection results, imagining that with Calderón, they will be able to take Pinochet's Chile and stick it to Mexico.

"Don't let it happen! Those who are promoting the privatization of Pemex, CFE, and the national patrimony of Mexico, are as fascist as their guru George Shultz.

"What Mexico needs are great infrastructure projects to reactivate agriculture and industry, to develop the oil industry as a transition to an economy based on nuclear energy, and to re-nationalize the Bank of Mexico, to take it back from the Synarchist private bankers.

"On October 31, Lyndon LaRouche will give an international webcast to explain the international strategic framework within which Shultz's financial hit-men hope to capture Mexico. You can join it at www.larouchepub.com/spanish at 9 a.m. Mexico time."

The Best-Laid Plans

Clearly, the Synarchist controllers of the Bush Administration had planned this oil grab a long time before the Mexican Presidential election. Indeed, incumbent President Vicente Fox was supposed to be able to implement the privatization of Pemex, but fell flat on his face, because of firm resistance from nationalist sectors within both the PRI and the PRD parties. Now Calderón, a "President" who can hardly show his face in public without facing derision, has been charged with the task by his international controllers.

A task force sponsored by the Council on Foreign Relations (CFR), the Canadian Council of Chief Executives, and the Consejo Mexicano de Asuntos Internacionales (COMEXI, the CFR'S Mexican partner), issued the operant blueprint for the next phase of the destruction of Mexico, Canada, and the United States as independent nations in May 2005, under the title "Building a North American Community." Their aim is nothing less than to establish, by 2010, supranational rule by private interests over the region. As the task force itself asserts, its "central recommendation is establishment by 2010 of a North American economic and security community, the boundaries of which would be defined by a common external tariff and an outer security perimeter." No grand schemes of confederation or union, such as are collapsing in Europe today, are wanted. Rather, the "common economic space" they envision is run by private interests. "A new North American community should rely more on the market and less on bureaucracy," the task force demands.

Task force co-chairs were Boston banker-turned-failed-politician Bill Weld for the United States; Mexico's Harvard-trained Salinas/Rohatyn operative Pedro Aspe; and Canada's John P. Manley, a former senior government official who headed the Public Security and Anti-Terrorism Cabinet Committee after 9/11.

The Canadian Council of Chief Executives (CCCE) played a key role. Composed of the chief executives of Canada's 150 leading business and financial interests, the CCCE took the lead in ramming through the Canadian-U.S. Free Trade Agreement in the 1980s, and NAFTA later.

The task force pivots its policy on establishing common security and economic policies. The three nations' borders are no longer to be their own, but subordinated to the "North American" criteria. By 2010, a "common security perimeter" is to be established, "rethinking management of the borders," merging defense, law enforcement, intelligence, security force training, as well as adopting "common approaches toward international negotiations on the global movement of people, cargo, and vessels," and imposing the same visa and asylum regulations, so that by 2010, there would be "harmonized entry screening and tracking procedures for people, goods, and vessels." Eventually, they insist, "a broader defense structure for the continent" is required.

One of the wildest proposals, is that only people who could "pay the costs for a security clearance" be granted the proposed "North American border pass," allowing expedited passage throughout all three countries.

Placing the citizens of all three countries under the military boot of a North American community, is intertwined with plans to establish unlimited private looting of resources. Their idea, is that NAFTA didn't go nearly far enough. To secure NAFTA'S passage back in 1994, over fierce objections from nationalist forces in all three countries, trade in natural resources, agriculture, and energy was largely excluded. Now, the financiers demand access to them. And, the private sector is key to doing this. A "North American Resource Strategy" must be developed, they argue, to grab resources more efficiently. The great energy grab is the most critical, but "trade in other natural resources, including metals, minerals, wood, and other products, is also central."

Repeatedly, the CFR et al. target Mexico, for failing to carry out "significant reforms in its tax and energy policies" to suit these private interests. Mexico must "reorient its economic policies," "dramatically expanding investment and productivity in the energy sector."

That means changing Mexico's Constitution, whose "restrictions on ownership, which are driven by an understandable [!] desire to see this strategic asset used for the benefit of Mexicans," have "hampered" development of its oil and gas reserves. "The inclination of Mexico to retain full ownership of its strategic resources is understandable," but the (alleged) resulting inefficiencies require "the development of creative mechanisms, especially financial," to get that foreign capital and technology into Mexico's oil sector.

Subscribe to EIW