Duncan Wood
Director of the International Relations Programme
View from the Top

The Road to 2012 Elections

Wed, 01/25/2012 - 13:02

Q: What role will the oil and gas industry play in the 2012 Mexican presidential elections?

A: It is through the economy that Pemex becomes important as an issue in the upcoming elections. We have already seen [opposition party PRI’s presidential candidate] Enrique Peña Nieto identify Pemex as the axis for development of the Mexican economy. Analysts are asking themselves right now what that will actually mean. Does it mean that Pemex is so important that we need to make sure that it works, which means the possibility of further liberalization of the sector? Or does it mean that the government will invest public money in Pemex to make it a strong company again, but an entirely nationalized monopoly, so that it can compete internationally?

My own feeling is that it is the second option that Peña Nieto is talking about in his manifesto, but that he will not attempt to reverse the Calderón administration’s introduction of integrated service contracts. They have already survived a legal challenge, and if the PRI is sensible it will not attempt to jeopardize the contracts’ potential benefits. The contracts are the product of the Calderón administration, so the PRI can always blame Calderón if they eventually fail, which I think is an ideal situation for them.

In terms of the energy industry playing a role in the campaign as actors and lobbyists, there is a limited scope for that. We will always remember ‘Pemexgate’, when funds from the Pemex labour union were directed to support the election campaign of PRI presidential candidate Francisco Labastida Ochoa, although I think there is only a small chance that this will happen again, as the levels of transparency and accountability are now much higher than they were back in 2000.

Q: Do you think the Pemex labour union will have a role to play in the upcoming election?

A: It will be very interesting. I think the labour union will ally itself very firmly with the PRI. It is not going to be an important factor, because Peña Nieto is so far ahead. But if we get some surprises in the campaign, and the gap between Peña Nieto and Josefina Vázquez Mota closes, and there are a lot of scenarios in which that could happen, then I think it becomes a lot more interesting. So the role of unions like the Pemex union or the teacher’s union would become fundamental, on the condition that the gap closes.

Q: What kind of impact does that election cycle have on the oil and gas industry, and what can we expect to see developing from the industry in an election year?

A: 2012 is going to be fascinating because we might see the first incentive-based contracts for deepwater. It would be highly controversial to launch these contracts in an election year. I still think that the Calderón government will continue with that, because they want to get the contracts in place before they leave, but there is a very tight schedule. Calderón is a very stubborn man who believes in the double-down approach. That is part of the mentality that we will see next year.

In terms of major changes within the company, this all depends upon whether Pemex CEO Suárez Coppel is still there after the elections. I deeply hope that he is, because he is the right man for the job and, if he remains in charge, we will see a much higher level of stability. If he goes, I think we will see a great deal of instability in terms of how Pemex is going to be run as a company and how it can maximize the opportunities that it is facing today.

Q: How do you think the role of the Senate and Congress can be improved?

A: There is almost no kind of expertise in the Chamber of Deputies on oil and gas. One of the reasons why is because of the classic question of re-election: because politicians in Mexico cannot get re-elected for multiple terms, there is no opportunity to build expertise in any area.

The alternative is to build a professional sta in the Senate and Chamber of Deputies, but that is not the way that Mexican politics works. There are technical secretaries in the energy commissions, in both chambers, and those people know what they are talking about, but they do not have a great deal of power. There needs to be a better developed outreach capacity on the part of the Congress to those people in civil society, academia, and so on, who actually know about these things, and right now that is not the way that it works.