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Mexico’s president taps new energy chief Elizondo facing tough mission: Opening energy to foreign firms Debra Beachy Petroleum News Contributing Writer
Mexico’s new Energy Minister Fernando Elizondo is facing an impossible mission that no one else has accomplished: getting Congress to change Mexico’s Constitution to allow more foreign investment in energy, an analyst says.
Elizondo, formerly finance director of the northern border state of Nuevo Leon, was chosen by Mexican President Vicente Fox Quesada June 1 to replace Felipe Calderon. The flamboyant, outgoing former energy minister resigned from the post after Fox publicly rebuked him for unveiling presidential ambitions.
“I don’t think Elizondo will be able to do anything to move Fox’s energy reforms forward. I don’t think anything will happen until Mexico’s next president is elected,” said Michele Foss, director of the Energy Institute at the University of Houston. Fox’s term ends in 2006.
“Why did Fox choose Elizondo?” she added. “He is not well known.”
Calderon, a former president of Fox’s National Action Party, had a strong, extensive political network that included influential members of the opposition Institutional Revolutionary Party and the leftist Revolutionary Democratic Party, as well as his own National Action Party.
“If Calderon couldn’t get anything done, how can he?” Foss remarked. Calderon held the position less than a year, having been appointed energy minister in September of 2003.
Elizondo, a former corporate lawyer, built his career in the northern industrial city of Monterrey, providing legal counsel for large Monterrey-based corporations, such as steelmaker Alfa S.A. He had been working with Fox on tax reforms aimed at changing the country’s tax code. Elizondo Fox’s third energy minister Elizondo is Mexico’s third energy minister under Fox. His political experience includes serving as interim governor of the state of Nuevo Leon and as its finance minister. He has been described as unassuming and quiet.
The new appointment is unlikely to affect Mexico’s oil policy, Foss said. The state-run oil monopoly Pemex has said it aims to raise crude oil exports to 1.95 million barrels a day by the fourth quarter from the current 1.86 million barrels a day to help ease high crude prices and supply concerns.
It remains to be seen whether Elizondo will pursue the plans announced shortly before Calderon’s resignation to lay off more than 3,000 non-unionized Pemex workers. Calderon had said the layoffs were part of his plan to slim down Pemex, which has nearly 140,000 employees. More than 90,000 of the Pemex employees are union members, and the union strongly opposes opening up Mexico’s energy sector to foreign investment.
The proposed administrative overhaul of Pemex would merge Strategic Planning, Safety and Environmental Protection, and Competitiveness and Innovation into other areas. In the first quarter of this year, Pemex reported a 10 percent increase in administrative costs, which contributed to the company’s 993 million peso ($86 million) net loss for the period, compared with a 4.71 billion peso ($409 million) profit in the same 2003 period. Mexico’s government-owned oil monopoly also pays taxes and royalties to the government that equal about 60 percent of its revenues. Calderon had proposed improving corporate governance In addition, Calderon had proposed the creation of a special audit committee, aimed at improving corporate governance. Calderon had said it was needed because Pemex, as an issuer of bonds on international markets, was supposed to have an independent audit committee, which is required to guarantee accurate financial information for bondholders.
Mexico’s president, a former Coca-Cola executive and state governor, has pushed hard to open up Mexico’s energy sector to foreign investors. Under his administration, foreign companies have won contracts to build power plants, and to supply natural gas to power plants. His administration also has allowed foreign companies to compete for contracts to drill for natural gas in Mexico’s rich Burgos basin. But his energy initiatives that would allow foreign companies any share in production have faced stiff opposition from political opponents, and have ended up deadlocked in debate.
Political opponents also have ripped the so-called multiple service contracts that allow foreign companies to drill in the Burgos basin as unconstitutional because Mexico’s constitution prohibits any foreign participation in energy. Although Mexico’s Congress hasn’t declared the so-called multiple service contracts to drill for gas unconstitutional, it also hasn’t said they are constitutional. It has sidestepped the entire issue by saying it doesn’t have the jurisdiction to decide the matter.
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