The energy reform: A great loss and a betrayal

The energy reform engineered in Mexico should be understood as part of the steamroller advance of capitalist privatization and extractivism. Even massive resistance from the Mexican Left, couldn’t prevent it being passed or enacted. The task now facing the country’s citizens, particularly the indigenous peoples whose vital lands will be affected, will be colossal.

Jorge Alonso

On the last day of 2013, a notice of bereavement appeared in a national newspaper signed by writer Elena Poniatowska, among others. Promoted by playwright Jesusa Rodríguez, it summed up the new constitutional reform on energy as follows: “We deeply regret the death of democracy and handover of sovereignty, consummated by a group of criminals that came to power with no legitimacy whatsoever and is trying to perpetuate itself at the expense of selling underground riches to the national oligarchy and transnational predators. We join in the grief overcoming millions of Mexicans at this grim hour of our history. We will continue to fight to rescue Mexico and for our right as Mexicans to forge our own destiny.”

That very same day the Zapatistas were celebrating 20 years of struggle. Historian Adolfo Gilly, who was attending the event, informed the participants that the holders of power had just “finished destroying article 27, opening wide the door to privatizing the nation’s oil and natural resources to the neighboring military power [the United States], delivering up our strategic resources to its military machinery. So the oil companies will return with their white guards, their soldiers and private police, their enclaves, spies, lawyers, politicians and imperial arrogance. The United States and its military machinery just won the equivalent of an Iraq war in Mexico, but without a shot fired and right on the other side of its border.”

They got what they wanted

In the 19th century, Mexico lost half its territory following a war. Now, the rightwing political class has handed over the country’s oil, mineral and hydrological wealth, destroying the present and mortgaging the future of what was left to us as a nation. So it’s obvious that those governing are the big transnational corporations while the governments of the day are their servile errand boys.

In 1938 things were different. Lázaro Cárdenas, a President with popular support, nationalized oil, using it as leverage for national development. Unfortunately, the corrupt state party, the Institutional Revolutionary Party (PRI), squandered this important resource, fostering a voracious, anti-democratic trade union leadership and leaving the state enterprise to founder. Although this could have been remedied with true democratization and by purging the oil company, the current government preferred to open the doors to what remained by signing the free trade agreement with the United States. Instead of taking stock of the disaster that agreement represented for the impoverished majority, it chose to follow the path to boundless riches for a few at the expense of misery for the masses.

For many years the international bodies and transnational corporations that drove neoliberal globalization pressured the Mexican State to stop protecting its oil riches. With federal governments held by the National Action Party (PAN), they were confident they could secure this opening, but the PRI, by then in the opposition, together with leftwing political parties, prevented it.

When the PRI retook the presidency last year, the pressure increased and the corporations finally achieved what they had been after for so long. President Peña Nieto sent an energy bill to the Senate on August 12 that proposed to abolish the ban on the State signing oil contracts with private individuals, remove the nation’s exclusive power to engage in oil exploitation, stop the State being the only body to conduct that exploitation and eliminate the nation’s exclusive power to generate, conduct, transform, distribute and supply electricity for public service.

The presidential bill was intended to get rid of the nation’s mandate to benefit from the natural assets and resources required to conduct, transform, distribute and supply electricity, instead allowing the State to enter into contracts with others for this purpose. It would remove oil and other hydrocarbons, base petrochemicals and electricity from the strategic areas under exclusive state control. With this bill the State would give up ownership, direct control and the right to exclusive and comprehensive hydrocarbons exploitation.

It could undermine the
entire economic system

On hearing about the bill, the Center for National Strategic Studies warned that energy is not an economic sector, but rather the basis of Mexico’s entire economic system, with strategic importance in determining the nation’s economic, political and military spheres. It reminded the public that oil taxes had subsidized the public coffers, with a contribution varying between 30% and 50%, that the export of surplus petroleum offset the country’s trade deficit and sustained 90% of the Bank of Mexico’s reserves with which the exchange rate and monetary policy are formulated and sustained.

The Center urged the legislators not to pass a bill that would seriously damage the economy and national sovereignty. It pointed out that the bill had no technical grounding to allege the national oil company’s incapacity or lack of profitability. It argued that the bill responded to the interests of the United States and its financial energy corporations and not to Mexican interests and that passing it would strip Mexico of its hydrocarbon reserves and transfer to foreign private ownership the investments made for so many years by Mexicans to exploit hydrocarbons and electrify the country. Its approval would make Mexico dependent on foreign governments and corporations for its energy needs and would hinder its sovereign transition towards renewable energy.

It further warned that if the bill was passed, foreign investors would be under no obligation to transfer technology, use national suppliers or ensure a certain percentage of national content. Nor would they pay tax in Mexico because international treaties prevent double taxation. It warned that all this would lead to economic stagnation, worsen the inequality in Mexico, increase the country’s deindustrialization and make it impossible to retain foreign currency from energy exports to bolster the Bank of Mexico’s reserves. In contrast to what the government was promising, the Center argued that there would be no way to reduce fuel prices and electricity rates and that, in sum, implementing the bill would imply a serious historical reversal for Mexicans.

Social and union opposition

The National Union of Workers and the Broad Social Front denounced Peña Nieto’s proposal and the virulent campaign the government and powerful media were running, making promises impossible to keep. They criticized the use of oil proceeds for the government’s running costs for years. They stated their opposition to privatizing strategic natural resources on the grounds that, because they are public assets, they should be put at the service of the country and not just of a few. They demanded the use of natural resources to guarantee the country’s energy security and reinstatement of the national petroleum industry’s operational structure as well as changes in the oppressive tax regime imposed on it.
They called for action against the looting of national energy resources by public officials, contractors, corrupt leaders and organized crime. They proposed that the country be reindustrialized, that there be authentic trade unions and that energy transformation be encouraged based on a real strategic plan that promotes the use of clean energy.

At the end of August, a hundred or so trade union and grassroots organizations met to examine how they could organize to defend Mexican oil, electrical energy and water. They were the same organizations that, remembering the nationalization of oil, had sent out a call last March to rescue the nation, warning that Mexico was in danger of ceasing to be a free and sovereign nation.

A proposal put together
in the United States

We mustn’t forget what happened in 2012, when the US Senate Committee on Foreign Relations discussed a report on Mexican oil. Historian Ilán Semo’s public review of this document concluded that the proposal Peña Nieto submitted to the Mexican Senate in August 2013 had been prepared abroad. For the United States, oil found on Mexican soil constitutes an issue of its national security.

Semo accepted that the way PEMEX had been managed did no more than preserve a predatory bureaucracy, but also pointed out that privatization of Mexico’s banking and telecommunications had ended up just as predatory, if not more so. The solution to the PEMEX problems, however, isn’t to hand over sovereignty but to change the relationship between PEMEX and the State. Even Nobel economics prize winner Joseph Stiglitz recommended that Mexico safeguard ownership of its oil.

“Let them ask all of us”

Honoring his father, General Lázaro Cárdenas, who had nationalized oil, Democratic Revolutionary Party (PRD) leader Cuauhtemoc Cárdenas argued that President Peña’s proposal would take the country back to the regime that existed before this expropriation, since it would open up the possibility that previously expropriated companies would return to manage the country’s oil reserves and oil fields. He invoked article 35 of the Constitution which sets out the possibility of holding referenda on issues of national importance if called by 2% of the voter registration list. If this figure were reached, referendum on energy reform would have to be held in the next federal elections, in 2015.

In late August a massive march went from the Ángel de la Independencia to the corner of 20 de Noviembre and Venustiano Carranza, given that the Zócalo had been taken over by an encampment of dissident teachers. On the march, intellectuals, political leaders, grassroots and trade organizations called for unity to defend national oil, electricity, education and sovereignty.

Meanwhile, Cárdenas started a signature-collecting campaign to support the referendum with the slogan “Oil belongs to all of us, let them ask all of us.” He also went to the debates on oil organized by the Senate and iagain warned that Mexico was facing the immensely serious outcome that companies expropriated in 1938 would return under different names, would again be the ones to decide how extraction would be managed and again be the main beneficiaries of exploiting the hydrocarbon deposits.

A senator from the Work Party complained that the debate had been a sham, since the promise to listen to everyone’s voice had been a farce. A specialist on oil issues, Javier Jiménez Espriu publicly stated that he had refused the invitation to take part in these debates because he was unwilling to be part of an opera in whose libretto the ending had already been decided.

It will be the blood of Mexico

On September 8, Andrés Manuel López Obrador, who led the struggle for the National Regeneration Movement (MORENA) to become a political party, organized a huge mobilization in defense of oil and the popular economy to prevent constitutional reforms that would hand over oil revenue to foreign corporations. Halfway through that same month informative meetings were held in the municipalities.

Although López Obrador also proposed a national march from the Ángel de la Independencia to the Zócalo for Sunday, September 22, it wasn’t possible to reach the square because the government had set up a storage center there for people affected by the hurricanes. Instead, the march ended at the Columbus bandstand, where he and Cárdenas made public calls to organize peaceful civil resistance. López Obrador challenged the President to submit his energy reform to the referendum and stressed that if he took Mexico’s oil away from it, it would be the same as letting the country bleed to death. Before thousands of people he criticized the government’s narrow-minded attitude toward the dissatisfaction generated by this reform.

Resistance and analysis

A third huge march against the reform took place on October 6, called by MORENA. On it, López Obrador urged the President to confirm or deny whether he had come to an agreement outside the country with foreign oil companies. Behind the government’s privatization proposal there was a pact to betray Mexico. All along the Avenida Reforma 80 stalls similar to oil barrels were set up for people to deposit their signatures demanding a referendum.
With private industry expressing its support for the reform, the fight went on. Writer John Saxe-Fernández considered it a historic irresponsibility to dismantle nationalized oil. Indigenous lawyer Francisco López Bárcenas asked if Mexicans would allow the opening up of a path to extend the pillage of the country, indicating that there were other alternatives to correct the widespread deficiencies and vices in the oil industry.

At the end of October, after three huge protest meetings were prevented from reaching the Zócalo, López Obrador was
at last able to hold a rally in this emblematic square. He asked opposition senators to form a bloc that would at least temporarily halt the energy reform, creating time for a referendum in which Mexicans could say whether or not they agree with privatizing oil.

Academics from the Autonomous National University of Mexico published a document expressing their concern about the reform, which strips the national oil industry of its strategic character, given that the government is eliminating state exclusivity in it. The analysis revealed that the proposed reform is devoid of any arguments corresponding to the magnitude of the proposed changes. The authors insisted that constitutional modifications should be decided based on sufficient knowledge of the specific forms the energy policy would adopt. They sounded an alarm on the discretionary nature the permits and concessions would have, which would open the door to opacity and corruption. Instead they urged an energy reform that would guarantee a sufficiently diversified supply of sustainable and secure sources to ensure the country’s wellbeing.

US military needs

Cárdenas, López Obrador, Saltillo’s Bishop Raúl Vera, sociologist and political critic Pablo González Casanova, Adolfo Gilly and various other distinguished figures sent a letter to the legislators warning that the future of the next generation, stripped of their resources, was at risk. Considering that this involved the crime of betrayal of the homeland, they exhorted the legislators to act with a sense of patriotism and not turn their backs on the nation’s interests.

Gilly made a call to all people, regardless of belief, ideology or political and social position, to unite to avoid the pillage of the nation promoted by the government and the oil corporations, handing over Mexican sovereignty to US military interests and needs. He stated that the energy reform puts Mexico’s development as a free and independent country at risk and constitutes an act even more serious than that of handing over Texas in the 19th century. He pointed out that because the United States is a powerful nation permanently at war in a world where its rivals are multiplying, it more than ever needs to extend its strategic domination over the territory of its southern neighbor. Giving it the keys to Mexican oil, mineral and territorial wealth would only add to the financial and media subordination already underway, completing a project of sellout and submission by Mexican governments.

Oil companies warned

In other fora for discussing the energy reform promoted by his party, Cárdenas emphasized that the reform was also illegitimate because the PRI’s presidential candidate had proposed noy constitutional changes in the campaign that would permit a return of the foreign oil companies. Trusting that a referendum would throw out the changes to the Constitution on the matter of energy reform, he demanded that the government present the proposals for secondary laws on this issue, so it would be possible to see the scope of the reform being suggested.

Porfirio Muñoz Ledo, one of the founders of the PRD, stated that the presidential bill would leave Mexico a permanent supplier of crude oil. The Dominican priest Miguel Concha emphasized that it would place Mexicans in the hands of those who have no interest in benefiting or protecting the country’s economy, resulting in the most fundamental loss of a sense of nationality.

López Obrador sent letters to the heads of the 10 most important foreign oil companies in the world warning them that, should the energy reform be passed, any agreement they might make with Peña’s government wouldn’t be legitimate because the oil doesn’t belong to the government or even to the State, but to the people and the nation. He reminded them that the reform does not have the support of Mexicans. Leftwing legislators also sent letters to transnational companies interested in investing in oil exploitation to warn them there would be a national referendum to revoke privatization of Mexican oil.

PRI-PAN pact of betrayal

Analyst Jorge Eduardo Navarrete called attention to a notice appearing in The Wall Street Journal stating that the PRI government and PAN leaders were in negotiations to extend the energy reform even further and enable the State to share oil production and grant license agreements to access shale gas deposits and deep water deposits of crude oil.

Researcher Arnaldo Córdova specified that while the PRI wanted the opening up to be gradual, the PAN wanted it to be immediate and tota. He noted that the PAN was winning this argument, from which the Left had been excluded.

More resistance and more analysis

In early November, the Patriotic Union for the Rescue of the Nation, a grouping of artists, unions, politicians, civil society and human rights organizations, held another demonstration against the energy reform in Mexico City. They outlined resistance actions and peaceful civil disobedience to prevent the reform going forward.

Mid-month the PRD held yet another huge rally in the Zócalo. There, Cárdenas said the government’s promises had no foundation. While it was being said that the reform would bring more jobs because 3.5 million barrels of oil would be produced, this figure was actually reached in 2004 without the growth of either the economy or employment. He also warned that private companies would exhaust the deposits, because they were only interested in extracting the greatest amount of oil possible without looking after the reserves.

Diego Valadés, a constitutionalist, stated that among the presidential bill’s problems were placing policy and decisions exclusively in the hands of the executive branch, giving the President excessive powers without taking either Congress or society into consideration. Contradicting official propaganda, he warned that if the bill were approved there would be more poverty, a bigger deficit in public services and more wealth for individuals at the cost of society’s resources.

Disagreements on the
referendum’s eligibility

At the PRD rally Cárdenas announced that 1.2 million of the 1.63 million signatures needed to call a referendum had already been collected. Meanwhile, in October the President’s office had rejected holding a referendum on the reform.

The PRI and PAN say the reform isn’t eligible for a referendum because it deals with issues that involve state revenue and spending. Nonetheless, constitutional law experts have stated that article 35 of the Constitution allows a referendum because oil and hydrocarbons are fundamental items of the Mexican economy. The energy reform goes further than fiscal matters and is an issue of national security. The Constitution only restricts the law on revenue and the spending budget, not on the issue of oil profits. Nonetheless, there are those who recall that, thanks to the free trade agreement, Mexico will have to pay compensation to foreign companies if it affects future profits.

A crime against the homeland

On November 22, Bishop Raúl Vera, Pablo González Casanova, journalists and intellectuals published an open letter to the President in which they said they foresaw a risk that Mexico would be destabilized from without in order to provoke foreign intervention. They urged him to withdraw the unconstitutional energy reform bill because it undermines political decisions reserved exclusively for the people’s sovereignty.

At the start of December, López Obrador led a massive meeting in the Zócalo, at which he invited his followers to surround the legislative precinct to try and prevent the reform being passed. A text sent by writer Elena Poniatowska, who had just learned she had been awarded the Cervantes Prize, was read, in which she called the energy reform a trap of the “new PRI” and remarked that the only thing still lacking was the legalization of corruption. The academic Gilberto López y Rivas, warning that the collaborating oligarchy’s legislative machinery was ready to pass the constitutional reforms demanded by transnational capital to get hold of energy riches that belonged to Mexico and its people, called it “a crime against the homeland.”

Despite all the opposition,
the reforms are passed and enacted

In the second week of December, despite all these protests, sieges of the legislative and repeated arguments, the alliance between the PRI senators and their satellite parties with the PAN voted to change the constitutional system on the subject of hydrocarbons.

The official propaganda was focused on the progress in changing article 27 of the Constitution, but articles 25 and 28 ended up changed as well, allowing shared service, utility and production contracts and concessions benefitting foreign companies. With the changes, oil refining, basic petrochemicals, natural gas processing and electricity generation ceased being strategic activities. Private industry may now enter these businesses with a wide range of contracts and permits equivalent to public concessions. The executive branch has been granted discretionary powers to identify areas of national land for exploitation by different companies.

One PAN Senator voted against the bill in the name of the country’s energy security, arguing that a license is the same as a concession. He said those passing the reform refused to see the predatory nature of transnational companies.

Leftwing legislators explained that the reforms didn’t specifically privatize the state enterprises but turned them into empty shells so they would fail by obliging PEMEX and the Federal Commission of Electricity to compete at a disadvantagee with transnationals. They also warned that the amendments enabled foreign mining companies to exploit gas as well.

Columnist John M. Ackerman called for a stop to the pillage, since the energy reform made it clear the political class wants to get rich by giving the black gold to the transnationals, given that complicit politicians and officials will get a good slice of this generous give-away.

The United States applauds

Private enterprise expressed its glee over the passing of the reform, which the PRI and PAN interpreted as a victory. The US press made much of the fact that it had gone even further than what was hoped for in opening up to foreign capital. The US government and oil companies also applauded. Although Washington might have preferred the reform to state expressly that concessions would be granted, it knew that licenses would be the same as concessions. Now it only had to wait for the secondary legislation.

For the reform to be consummated, it needed the approval of the House of Representatives and a majority of the Congresses of each federal entity as well as the Senate backing. In spite of the blockades, that consummation happened without discussion and in some cases in only a few minutes. Not only was there no discussion, there wasn’t even enough time for local legislators to read what had been sent to them to pass. The executive enacted the reform fefore Christmas.

Obama congratulates Peña Nieto

In mid-January, 2014, the Asia Pacific Parliamentary Forum held its 22nd annual meeting in Puerto Vallarta, and the Mexican delegation presented the energy reform as one of its great achievements.

Obama called Mexico’s President to congratulate him on the reform and the president of the Italian Council of Ministers did the same during his visit to Mexico.

The fight to annul the reform begins

In a march against the consummated privatization of the country’s energy sector, Cárdenas announced that there would be a struggle to annul the sellout reform. He met with parties and 40 organizations to explore actions aimed at reversing the transfer of Mexican subsoil.

One fundamental action agreed on was to continue collecting signatures demanding a referendum. It is envisaged that by March 2014 the number of signatures will be complete and that what had been passed could be overturned in the 2015 elections.

MORENA announced that it was preparing a legal battle against the reform on the grounds that its passage had been marked by irregularities and violated legal and legislative processes, especially in local congresses. It inaugurated a “wall of shame” on Mexico City’s grand avenue with photos of these legislators and filed a claim against President Peña Nieto for betraying the country.

Social networks circulated photos of the legislators who voted for the energy reform, calling them traitors to the country. As the opposiiton unexpectedly mounted, the government warned that its tolerance had limits, announcing that it would criminalize grassroots protest even further. The task now facing citizens is huge.

Towards anti-development

After the energy reform was passed, analysis of its implications multiplied. Writers Arnaldo Córdova and Adolfo Gilly consider that the Constitution has been substantially dismantled and its fundamental articles destroyed, deepening a political, financial, productive, territorial and military subordination to the United States. They recalled that the Constitution is a basic permanent pact and can’t be changed to favor a few people. Energy reform means annulling the national system of ownership of primordial assets: its territory, subsoil and sea bed. Instead of a social pact, what we have is an oligarchy turned into a dominant system, a government of the rich for the rich, a total domination of money with its consequential waste and corruption.

Researcher Julio Boltvinik stated that the energy reform encourages anti-development because it hands over the oil to international capital and, regardless of its legality is illegitimate, immoral and anti-national. It is absurd for a poor country to give away the people’s resources to the world’s millionaires. Jorge Eduardo Navarrete reflected that the reform condemns Mexico to the status of a crude oil exporter and net importer of derivatives and reincorporates the territory and national waters into the hunting grounds of transnational corporations, relegating projects to extend and diversify the national oil and petrochemical industry and placing PEMEX at an impasse, closing off the option for autonomous industrial development.

The philosopher Gabriel Vargas Lozano stated that the massive demonstrations of rejection had been for nothing because the oligarchy had defended its interests against the majority. Nonetheless, there was no shortage of indications that the people don’t see PEMEX as an ally, that its products are expensive and it doesn’t take responsibility for the disasters it causes, a crisis owing much to the deviation of funds into the coffers of the corrupt, who, under its cover have built huge fortunes.

Environmental organizations warned that Mexicans’ water, health and wellbeing will be put at risk with the reform due to the exploitation of shale gas, achieved through fracking, which takes a lot of water and is highly contaminating. Referring to the sellout December bazaar, the EZLN’s Subcomandante Marcos stated that the pillage was being covered up by lies. He pointed out that the Mexican countryside has been destroyed since the Salinas reform of article 27 two decades ago.

The new constitutional modification will make oil, electricity and education more expensive. The Chiapas group known as Las Abejas condemned the reform for destroying the gains made with the peasants’ blood in the Mexican revolution. The indigenous peoples and peasants, defenders of their lands in various states, lamented that the energy reform would close legal channels for defending their lands and natural resources, but announced they would continue to defend what was theirs with whatever it takes.

How to oppose
extractivist capitalism

The Portuguese social scientist Boaventura de Sousa Santos wrote that throughout the world capitalism is tying together environmental, food and energy crises and that, through financial speculation, natural resources are being privatized with predatory voracity. He called attention to mining, oil and natural gas, increasingly more powerful “runaway trains” that annihilate anything that gets in their way or complicates their profits. He is convinced that only powerful grassroots movements can oppose this extractivist capitalism.

Partisan mobilization of the Mexican Left failed to stop the privatizing and extractivist reform so now it will try to reverse it. Nonetheless, the greatest mobilization, the one that will oppose this avarice day after day, will be the resistance of the peoples who see their vital lands affected.

Jorge Alonso is a researcher for CIESAS West and the envío correspondent in Mexico.

Print text

Send text