Streamlining Mexico's Bloated Oil Monopoly

PRESIDENT Carlos Salinas de Gortari is taking another pass at Mexico's leviathan oil monopoly, Petroleos Mexicanos (Pemex), hoping to remake it into a more manageable, efficient conglomerate. But analysts doubt the latest reforms will be sufficient.

This round was triggered by the April 22 subterranean gas explosions in Guadalajara which killed at least 200 people. The evidence pointed to leaky Pemex pipes. On May 15, President Salinas gave the state-run enterprise 30 days to produce a major restructuring plan.

Last week, Salinas announced the world's sixth largest oil producer would be reorganized into a holding company with four semi-autonomous business divisions: exploration and production, refining, gas and basic petrochemical products, and secondary petrochemical products.

The plan aims to improve efficiency by making the holding company responsible for strategic planning while giving the new entities "autonomy to develop their own operating and investment programs."

"It appears to be a cosmetic change rather than a profound one," says Fabio Barbosa, a petroleum specialist at Mexico's National Autonomous University. "But we'll have to see how it works; how much freedom the units actually have."

Many analysts view the changes with skepticism.

The Guadalajara disaster, one of several major Pemex accidents in recent years, raised expectations that the politically untouchable oil giant, enshrined in the Mexican Constitution, might finally be opened to private investment, creating a more competitive operating environment.

But the June 15 announcement rules out foreign or national private investment in all but the secondary petrochemical division - already open to investors.

Since the mid-1970s, Mexican governments have contemplated taming the bloated Pemex colossus by breaking it up. But powerful union bosses derailed such efforts - until Salinas came to office. In 1989, he arrested the boss of Latin America's largest and richest union, Joaquin Hernandez Galicia. 50,000 jobs cut from roll

Since then, Salinas has shaved about 50,000 workers from the Pemex roll, which now stands at about 150,000. The oil union's patronage grip on the business has also been reduced. Foreign companies are now allowed to have oil service contracts without hiring Mexican union workers.

Despite the changes to date, Pemex continues to preside over numerous non-oil businesses that include housing, road, school, and medical services projects. Mr. Barbosa estimates Pemex administrative staff to number 20,000.

Before Guadalajara, the Pemex reorganization had slowed to a crawl, caught up by bureaucratic turf fights. For example, the United States consulting firm McKinsey & Co. recommended a computer system to share departmental information, make budget projections, and simulate organizational changes. But an internal Pemex document says different accounting systems - fruits of personal fiefdoms - make it "very difficult to know the real spending of sectors and consequently make a concrete general evaluation of profitability impossible."

Meanwhile, Barbosa and other oil analysts say Pemex's fundamental need for huge sums of capital investment remains unaddressed by recent reforms. Gasoline imports

Pemex can no longer meet domestic demand for gasoline. Last year Mexico imported almost 70,000 barrels of gasoline a day.

In an interview, Pemex director Francisco Rojo said Pemex could theoretically build a new refinery this year but it would use up 96 percent of the $3.2 billion investment budget the government had allocated it for 1992. He noted that Pemex paid 90 percent of its profits, about $15 billion, into the Mexican Treasury last year.

The Guadalajara catastrophe also highlighted the lack of maintenance spending during the past decade. Total investment is increasing now, but independent studies suggest Pemex needs about $30 billion to boost production and prevent it from becoming a net importer of petroleum by the next decade.

Although not announced last week, it is widely expected that the 19 petrochemical products classified as "basic" and thus off-limits to private investment, will soon be reduced to five.

But unless Mexican investment laws are modified to offer greater security to foreigners, this change will not attract much interest, Barbosa says. Private firms have put money into producing only four of the 52 products reclassified since 1986.

Meanwhile, there is speculation in business circles that the North American Free Trade Agreement may eventually open up Pemex to private investment.