Mexico is the world’s sixth-largest oil producer, and the steady climb in the price of oil has reached record highs. The soaring prices should have generated US$3 billion above budget estimates for the state oil monopoly, Pemex. But now the government says that windfall just is not there.
The recent announcement by the finance ministry angered opposition politicians, who declared that government technocrats were manipulating the numbers.
The spat over the missing windfall is about more than government largess, although that is part of the issue. Under Mexican law, a percentage of extra money from high oil prices is distributed to state governors to be spent on public works. (Opposition parties govern most of Mexico’s 31 states as well as Mexico City.)
But the stakes are even bigger. Congress is in the middle of two months of public debate over a proposal to overhaul the oil company, formally called Petroleos Mexicanos.
At the heart of Mexican President Felipe Calderon’s proposal is the argument that the oil company does not have the revenue it needs to find, pump and refine more oil. The government says the missing profits are evidence of Pemex’s problems.
The left-wing opposition argues that Calderon’s plan, which would streamline procedures for outside contractors and reward them for finding new oil, is a disguised attempt to privatize Pemex. The left believes the government is manipulating the figures to make Pemex look worse than it is in order to bolster the case for private investment.
Despite the opposition’s doubts, many outside analysts accept the government’s explanation for the vanished windfall. “The numbers are quite clear,” said Carlos Elizondo, a political analyst at CIDE, a Mexico City research organization.
Though oil prices are up, Mexico is exporting less crude oil, which it does not have the capacity to refine itself, and importing more refined gasoline, raising the cost of subsidizing Mexico’s below-market gasoline prices.
Congress budgeted for crude oil production of 3.2 million barrels a day this year, and exports of 1.7 million barrels a day.
But production in the first quarter was only 2.9 million barrels a day, down 7.8 percent from the first quarter of last year. First-quarter exports were 1.5 million barrels a day, down 12.4 percent from first quarter last year.
Andres Manuel Lopez Obrador, a former presidential candidate who has never recognized his 2006 loss to Calderon, has led public protests against the energy bill that would overhaul parts of Pemex, demonstrations that have given his movement renewed vigor.
At a rally this week, Lopez Obrador demanded the government account for what he said was US$20 billion in missing oil revenues, money he argued could go to rebuilding Pemex.
Rogelio Ramirez de la O, an economist who has advised Lopez Obrador on energy, said the government’s accounting was correct under the letter of the law here, but that it was not transparent. The result has been to create suspicions among opposition legislators.
“The finance ministry has taken the role with Congress of an accountant who is annoying the client with technicalities,” he said.
The ministry’s explanations have failed to quiet complaints. “The deficit this year is totally atypical under the scenario of record oil prices,” said Mexico City Finance Secretary Mario Delgado, announcing on Wednesday that he asked the head of Pemex for an explanation on behalf of other state finance secretaries.
Each year, the Mexican Congress projects how much the government will earn from oil by estimating the price Pemex will get for each barrel, how much it will produce and how much it will export. The windfall is calculated based in part on what Pemex earns over that estimate.
In the first quarter, the price for Mexican oil averaged 40 percent more than the budget’s estimate - a jump that should have delivered an extra US$3 billion to the treasury. But declining production meant that Pemex exported almost 12 percent less crude than Congress estimated when it passed the budget last year.
But along with declining production and exports, the cost of gasoline imports spiked 39 percent due to higher volumes and prices than legislators had estimated. A strong peso hurt too, because Mexico received less in peso terms for its dollar-denominated oil sales.
The result, the finance ministry said, was a shortfall of about US$800 million.
Miguel Messmacher, a top finance ministry official, said that the formula used to calculate the oil windfall, which is the same this year as in years past, is confusing.
“The mechanisms are complex,” he said. “But they are made with the idea that the windfall isn’t distributed unless you have it.”
This year, for the first time, the costs of subsidizing controlled gasoline prices have shown up very significantly in the books — at a cost of about US$5 billion to the government in the first quarter.
Officials have been meeting with state governors and opposition politicians to explain the accounting.
“Nevertheless, the governors are not happy and they will continue to make noise,” Messmacher said.
Elizondo, the political scientist, said he doubted the spat over the windfall by itself would swing the debate over the energy bill.
Calderon’s conservative government needs support from the opposition Institutional Revolutionary Party (PRI) to pass the Pemex proposal. But some PRI factions have also backed away from the bill.
The PRI’s response will depend “on if the government is able to convince people that we can’t pay for Pemex,” Elizondo said.
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