Pemex Essay

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Pemex  is a Mexican  state-owned  oil company  that operates throughout Mexico. The company is so large that  its revenues  account  for as much  as one-third of  the  Mexican  government’s  entire  revenue,  and for about 7 percent  of Mexico’s export earnings. The company is involved in exploration, production, refining, petrochemicals,  and more. Pemex has estimated reserves of 15.5 billion barrels of oil equivalent.

In the early years of the Mexican oil industry, the Mexican engineer Ezekiel Ordóñez  discovered an oil reserve in San Luis Potosí, Mexico, in 1901. In the same year, President  Porfirio Díaz issued the Petroleum Act to boost  oil activity, giving advantages  to foreign investors and foreign companies. Later, with the  fall of Porfirio  Díaz, the  revolutionary  government of President Francisco I. Madero issued on June 3, 1912, a decree to establish a special tax stamp on the production of oil, and subsequently, he ordered a register of companies operating in the country. Three years later President Venustiano Carranza established the  Petroleum  Technical  Commission.  By 1917 the Constitution of Mexico had dictated national control of all the riches of the subsoil, and the Carranza government soon imposed a tax on land and oil contracts to exert control over the industry.

In 1920 there were 80 oil companies in Mexico producing and exporting; 17 of these companies received 90 percent  of their  capital  from  Anglo-Americans. The company Petroleos de Mexico, A. C., was founded later, in 1934, and was responsible  for encouraging more domestic investment in the oil industry.

Other important events in the history of the Mexican oil industry include the establishment  of a union of Petroleum  Workers  in Mexico in 1935. Just two years later, following a series of events that damaged the relationship  between  employees and employers, a strike broke out against foreign oil companies  and paralyzed  the  country.  The Conciliation  and  Arbitration  Board ruled in favor of the workers, but oil companies sought protection before the Supreme Court of Justice. In 1938, President Lázaro Cárdenas sided with oil workers striking against foreign-owned oil companies  for an increase in pay and social services. On March 18, citing the 27th article of the 1917 constitution, President  Cárdenas  embarked  on  the state’s expropriation of all oil resources and facilities, nationalizing the U.S. and Anglo-Dutch operating oil companies and creating Pemex.

In  1992 the  Mexican  government  issued  a new Organic  Law of Petroleos  Mexicanos  (Pemex)  and subsidiary bodies where the government  set up basic guidelines to define the powers of Pemex as a decentralized  body of the  Federal Public Administration, and as a company responsible for leading the national oil production.  This new law establishes the creation of a corporate  body and  four subsidiary bodies for Pemex  and  its  future  operations.  These subsidiary bodies are Pemex Exploration and Production  (PEP), Pemex Refining (PXR), Pemex Gas and Basic Petrochemical (PGPB), and Pemex Petrochemical  (PPQ).

Despite its current  $77 billion in revenue,  Pemex pays high taxes to contribute to the federal budget. In recent years the company has only been able to meet its demands  through  massive borrowing,  so that  it owes a staggering $42.5 billion, including $24 billion in off-balance-sheet debt because the Mexican government treats the company as a major source of revenue. The state-run  company pays out over 60 percent of its revenue in royalties and taxes, with those funds paying for about a third of the federal government’s budget.

In 2005, with record-breaking oil prices (due to the Iraq war, economic expansion of the United States and the People’s Republic of China) the company saw an unexpected  excess of funds. This tendency continued in 2006 and 2007. However, the excess funds were used to pay salaries of bureaucrats  and current  government expenses,  instead  of being  invested  in  projects  for exploration and production.  During President Vicente Fox’s administration, these funds amounted  to about $70 billion, yet the administration said that there was not enough money to pay debts. To help capitalize the company, President Felipe Calderón then made clear at the beginning of his presidency that he would respect the constitutional mandate to keep Pemex in the government’s hands, but that he would try his best to open up the sector to private investment.


  1. José Antonio Almazán González, El debate constitucional sobre la reforma de Pemex: conclusiones y propuestas [The Debate on the Constitutional Reform of Pemex:  Conclusions  and  Proposals]  (Grupo  Parlamentario de PRD, 2008);
  2. Luis Pazos, Los dueños de PEMEX: del saqueo a la reforma [The Owners of PEMEX: The Pillaging of Reform] (Diana, 2008);
  3. Pemex, (cited March  2009);
  4. Simone Pulver, “Importing Environmentalism: Explaining Petroleos Mexicanos’ Cooperative Climate Policy,” Studies in Comparative International Development (v.42/3–4, 2007).

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