Selling Part of Oil Giant Hits At Heart of Mexico's Identity

'Mexico's oil for Mexicans!" With that battle cry punctuating the air, a small group of Mexico City high school volunteers rattled coffee cans at passing fellow students last Thursday.

They're seeking contributions of pesos and expressions of public outrage that they say can head off a looming partial privatization of Mexico's oil industry.

"This is our way of defending the sovereignty of our country," said Oscar Sosa, a member of Naucalpan Science and Humanities High School's Petrochemical Defense Committee.

For Oscar - and millions of other Mexicans, according to opinion surveys - an oil industry that was wrested from foreign control and became government-owned in 1938 remains the country's most potent symbol of economic independence and development potential.

The Mexican government is mindful of that symbolism. President Ernesto Zedillo Ponce de Lon has assured Mexicans that Mexico's oil "is and will continue to be Mexican," and that the production and refining of oil will never leave state hands. But the government also says that privatizing some secondary parts of Petroleos Mexicanos, or Pemex, is needed to modernize and pump new money into Mexico's petrochemical industry and to help pay the country's foreign debt.

Beyond that, it is also aiming with the sell-off to refurbish Mexico's standing in a globalized, foreign-investment-driven economy.

Unfortunately for the government, that internationalized market economy, which initially charmed many Mexicans with dreams of developed-world status, has lost favor in the wake of last year's peso crash and severe economic downturn. Add to that Pemex being by far Mexico's biggest taxpayer - 90 percent of its profits go into government coffers - and the result is a public increasingly sensitive to any talk of oil's privatization.

"What we are seeing is a clash of two antagonistic visions for the future of Mexico," says Victor Durand Ponte, a sociologist at Mexico's City's National Autonomous University. "One leans toward the international market, and the other toward the state as trustee of national wealth."

In this context, an organization called Pro-Mexico and spearheaded by Cuauhtmoc Crdenas Solrzano - a 1988 left-wing presidential candidate whose father, Lazaro, remains a mythic character for nationalizing oil when he was president - is seeking to halt a sale that Mr. Crdenas insists is only the foot in the door to a full sell-off of Mexico's oil industry. Pro-Mexico is organizing dozens of local committees like the one at Naucalpan High School for a national collection to guarantee that all of Mexico's oil industry stays in public hands.

It is a tall task, since the government's privatization program involves some 61 "secondary" petrochemical plants expected to net up to $6 billion. That's a lot of coffee cans - and a lot of pesos.

On the other hand, the privatization plan that was to have been completed by October is behind schedule and in doubt. Oil analysts and political observers say the sale is in trouble because bids on the first plant offered - a petrochemical complex in Cosoleacaque, Veracruz, were disappointingly low, and because of complications over land titles and bidders' tough questions.

Some speculate that persistent public opposition to the sale is also giving the government cold feet. "Right now the sell-off is in limbo," says Albert Antebi, a Mexico City oil-services analyst. "And you can blame that on two things: a lack of political leadership, and all the noise created by the posturing over the issue of oil in Mexico."

Pro-Mexico's campaign could succeed in putting off the sale, observers agree. "[The campaign] will be a financial failure, because people don't take this sale so seriously as they did the nationalization in 1938," says Mr. Durand. "But it could very well be an ideological success."

For his part, Crdenas says he is not ideologically opposed to privatizations, but that oil is a "strategic national industry" that should be managed in the national interest and not merely according to the profit motive of a multinational oil corporation. Mexico may have little more than 30 years of profitable oil production left, he says - other oil experts say Mexico has about 50 years of reserves - and its reserves should be developed with Mexico's needs in mind.

Pemex did increase production last year to levels unseen since the early 1980s, and in the first quarter of this year increased production over the same period last year by nearly 7 percent, to 3.3 million barrels a day. That increase was carried out to help Mexico cover its international debts, which are largely with the US, says Mr. Antebi. "The irony is that Pemex is forced to produce more because of the stumbling block in the privatization process," he says, "and all of this plays right into the hands of Crdenas."

The danger for Mexico if the petrochemical sale is put off is not so much the loss of the expected revenue, says Antebi - although that would complicate Mexico's standing with its debtors and could even constitute a violation of NAFTA, he says - but the signal it would send of a Mexico wavering on its commitment to the international market economy. "At some point you have to decide what road you are going to take," he says, "and stick to it."

Mexico needs this sell-off to prove its credit-worthiness, says another oil analyst. "This is the demonstration project Mexico needs to get back on the map," says George Baker, director of Mexico Energy Intelligence in Oakland, Calif.

Crdenas says he agrees that Mexico needs to reestablish confidence among foreign investors - just not by losing control of the oil industry. "Let that big investment even be in a new petrochemical development, or in tourism or another industry," he says, "but not at the price of selling our patrimony."