Will the Mafia take over Mexico or a Mafia/Marxist joint dictatorship or what? Drug cartels have diversified into siphoning off Mexico’s state-owned oil company. Can the new government of Mexico meet the challenge?
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9-6-18
-A woman sells gasoline stolen from pipelines on the black market in Veracruz, Mexico. Photo: Rodrigo Cruz
Mexico’s last three presidents were business-friendly centrists who promoted free trade and close military cooperation with the United States. López Obrador has criticized the privatization (the previous plan) of Pemex and wants to decouple Mexico’s security from the U.S.-led drug war. He has also pledged to deal with crime by addressing the root causes, which he says are poverty and government corruption....
But with production on the decline since 2010 and fuel theft on the rise, Pemex is now a net drain on the federal treasury....
Most analysts consider the CJNG, under its secretive leader, Nemesio Oseguera Cervantes, alias El Mencho, to be the most powerful drug cartel in Mexico — and the country’s reserves of oil and gas represent a potential source of wealth far greater than illegal narcotics could ever yield. The CJNG has been expanding into the state of Guanajuato, another pipeline-dense territory, but the independent gasoline mafia there doesn’t seem intimidated....
government auditors have flagged more than a hundred contracts that Pemex has issued in recent years, amounting to more than $11 billion in suspected fraud. Losses that large lend credence to López Obrador’s accusations that, as bad as the problem of gasoline theft looks at street level, the wild gun battles may be only a superficial symptom of a free-for-all that mostly takes place in air-conditioned boardrooms. “Everyone has their hand in the cookie jar,” says one former Pemex official who asked not to be named. “You’re touching the Achilles’ heel of Mexico.”
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(Pemex, the state oil company, reduced spending for security by 67% between 2014-17. That does not seem to work so well—to the tune of a $7.6 billion loss from 2016 through 2018.)
“We’re not just talking about the theft of oil but about a plan involving government insiders and a complex distribution system. It’s not easy to distribute and sell the pilfered contents of 600 pipelines each and every day,” said Pres. Lopez Obrador…(The President plans entail an) estimated $8 billion needed just to build the new oil refinery he has promised for his home state of Tabasco. To that end, the government has increased Pemex’s budget for 2019 by 19% to over $23 billion. It has also suspended auction bid rounds for deepwater and onshore shale oil and gas projects for three years.
Both Moody’s and Fitch have raised alarm bells about Pemex’s $106 billion of debt — the biggest of any global energy company. https://wolfstreet.com/2019/01/01/mexico-new-government-declares-war-on-black-market-for-oil/
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10-23-2018 Fitch Ratings downgraded the outlook for Pemex’s debt from stable to negative amid concerns about the incoming government’s proposed energy policies. It rates Pemex three notches above “junk” (BBB+), but only because the company is state-owned. Its standalone credit profile — if Pemex were not backstopped by the Mexican state — is junk, seven notches into junk (CCC).
Fitch has also warned earlier that if Pemex’s credit rating drops, so too will Mexico’s sovereign debt rating. Even a small deterioration in credit risk could exact a heavy toll on both the company and the country. https://wolfstreet.com/2018/10/23/defiant-energy-policy-of-mexicos-president-elect-rattles-moodys-and-fitch/
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