The politics of energy reform: assessing the winners and losers

BY DAVID AGREN
The News

All sides in the energy reform debate lauded themselves for accomplishing what had been politically unthinkable a decade ago – and promptly took credit for the approval of a seven-point package that overhauls the state-run oil concern Pemex and allows for increased private sector participation in the petroleum sector.

President Felipe Calderón called the approval of an energy reform package the most import event in the country’s petroleum sector since March 18, 1938, the day foreign oil companies were evicted from the country by then-President Lázaro Cárdenas. Senior officials in the Institutional Revolutionary Party, or PRI, and Democratic Revolution Party, or PRD, made similar pronouncements, but also highlighted their roles in hammering out an agreement that took more than six months to achieve and involved a 16-day takeover of Congress by left-wing protesters, more than two months of hearings over the summer, a partisan referendum and street protests.

Even ardent energy reform foe Andrés Manuel López Obrador claimed some responsibility for his role in forcing lawmakers to water down the original proposal as he told supporters of this petroleum defense movement that their threats, legislative shutdown and street protests resulted in plans being included for a new refinery - to be built with public money - and changes to some of the company’s accounting rules.

But the self-described “legitimate president” rebuked the final reforms due to the lack of a clause forbidding the exclusive management of specific geographic areas by foreign companies.

PRI THE BIG WINNER?
López Obrador aside, analysts say each of the three big parties won something through energy reform, but perhaps none as much as the PRI.

“The big winner in this is the PRI because its legislative agenda and political agenda is embodied in the final documents,” said Aldo Muñoz, political science professor at the Universidad Iberoamericana.

The PRI, which held the chair of the Senate Energy Commission, unveiled a middle-ground proposal that gained wide acceptance. It proposed scrapping plans for private investment in refineries, storage and pipeline maintenance and discarded the idea of setting up smaller Pemex subsidiaries.

PRI legislators also stayed united throughout the energy reform process, having pacified its more nationalistic factions in the Chamber of Deputies, and protected one of its biggest patrons, the powerful oil workers' union.

“[The union] is a PRI partner and with the PRI winning, the union also wins,” Muñoz said.

Somewhat ironically, some analysts say the deal brokered in Congress contains similarities to a proposal that intransigent PRI lawmakers shot down earlier this decade.

“The least common denominator that we have now is the one that we had several years ago. Everyone agreed that Pemex needed an administrative and a financial reform, that’s what it has,” said Federico Estévez, political science professor at ITAM.

“Four years ago it was impossible because the PRI was unwilling to play ball.”

ANOTHER PAN ACHIEVEMENT
President Felipe Calderón took pains to point out that approval of an energy reform package marked the fifth major reform to come out of a divided Congress during his administration. Other reforms included changes to state pensions, tax collection, the electoral system and the criminal justice system.

The path to achieving energy reform took a toll on the governing party, however. Calderón appointed his most trusted adviser, Juan Camilo Mourño, as interior secretary in order to foster better relations with Congress. Mourño was almost immediately assailed for allegedly steering Pemex contracts toward a family firm while serving in other government positions earlier this decade. He was eventually cleared of any improprieties, but his role as a mediator was damaged.

The PAN later sacked party Senate leader Santiago Creel in May to give a new “push” to energy reform proposals that appeared stalled. Analysts say that energy reform simply provided a pretext for replacing Creel, who had a history of butting heads with Calderón and angered the party leadership by accepting a debate challenge on petroleum issues from López Obrador.

PRD: WINNERS AND LOSERS
Energy reform arrived in the Senate mere weeks after the PRD staged a messy internal election, which was eventually annulled by the electoral tribunal. PRD officials spoke of finding unity in rallying against energy reform, but it never really materialized as party moderates disagreed with staging a congressional takeover and avoided participating in López Obrador’s “petroleum defense movement.”

The PRD eventually pitched its own proposals and its members of the Senate Energy Committee take credit for achieving the removal of the provision awarding incentive-laden contracts to Pemex contractors. But López Obrador refused to back the final outcome achieved late last month.

Analysts say the former presidential candidate’s politicking could backfire and strengthen his internal opponents.

“The anti-López Obrador faction … by putting their mark on the reform, they delivered a blow to López Obrador,” said Muñoz of the Universidad Iberoamericana.

“They landed a strong blow to the mobilizations that he leads. His image remains marginal ... and damaged. López Obrador lost his ability to steer the legislative agenda.”

OTHER PLAYERS
The nation’s five small political parties split on energy reform, with the Convergence party and Labor Party – staunch López Obrador allies – voting against the measure. The Green Party claimed victory for having measures included that promote energy conservation and foment the use of renewable sources of energy.

Muñoz commented that many in the business class with PAN ties would come out as winners due to the expanded role for the private sector. Estévez from ITAM agreed.

“The big winner will be all those little Mexican firms,” he said.

“The next best thing to a government bailout is a government contract. It’s just about business patronage."

Senate votes for reform

AMLO addresses followers at November 2007 rally.


Senate votes for reform

BY DAVID AGREN
The News

The Senate approved an energy reform package Thursday, six months after President Felipe Calderón unveiled his controversial plan for overhauling the state-run petroleum sector and stemming a precipitous decline in oil production.

Lawmakers from the three main parties voted overwhelmingly in favor of the seven initiatives comprising the package, which now moves to the Chamber of Deputies.

"It's a success that we've had a civilized Senate debate, producing new rules of the game for a better, more modern and more transparent Pemex," said Sen. Manlio Fabio Beltrones, leader of the Institutional Revolutionary Party, or PRI, in the Senate.

The vote was moved from the Senate chamber to a heavily guarded office tower several blocks away in order to avoid protesters loyal to former presidential candidate Andrés Manuel López Obrador, who has long decried the plan as a first step to privatizing the nation's oil industry.

But López Obrador's protests, which included a takeover of Congress earlier this year and regular street demonstrations by his "oil defense brigades," lost some of their steam after members of his same Democratic Revolution Party, or PRD, opted to negotiate the deal with the PRI and Calderón's National Action Party, or PAN.

The initiatives approved Thursday grant Pemex increased budgetary and operational autonomy; allow the state-owned oil giant to partner with private firms for oil exploration and exploitation ventures; make the company's tendering process more flexible and provide incentives to restart dormant drilling activity in mature oil fields.

But the reforms discarded Calderón's proposals for paying performance bonuses to Pemex's private-sector partners and eliminated another for building new refineries with private money. The reforms also failed to touch the influential oil workers union, which holds five seats on the Pemex board.

Despite the changes, Calderón lauded the Senate-approved package.

"Without exaggerating, I can say that it is the most favorable change in the hydrocarbons sector since 1938," he said, referring to the year the petroleum industry was expropriated.

Analysts described the reforms as an improvement over the status quo, but inadequate for solving the managerial issues in Pemex and arresting production declines.

"This reform is important in providing Pemex with increased autonomy, both financially and operationally," said Alejandro Schtulmann, director of research at Empra, a Mexico City risk consultancy.

"But it falls short in solving Pemex's challenges. The union is a huge problem ... it won't do anything to reverse the decline of [the massive Cantarell oil field.]"

The vote followed six months of discord over energy reform, which has provoked legislative shutdowns, more than two months of public hearings, a partisan citizen consultation process and the threat of López Obrador-sponsored brigades flooding the streets.

A small group of senators representing a coalition of left-wing parties known as the FAP voted against the reforms due to the lack of a clause explicitly forbidding future privatization. They also objected to a measure allowing private firms to win contracts for managing entire production areas on behalf of Pemex.

Deputy Javier González Garza, PRD leader in the Chamber of Deputies, said the two measures would be raised during debate in the Chamber, although he added, "I agree with a large part of the reform."

Debate in the Chamber is expected to begin Tuesday.

The untouchables

Even with energy reform on political agenda, few dare address a core issue: Pemex's union

BY DAVID AGREN
The News

Omar Toledo Aburto normally mans one of the offshore rigs pumping crude from the Campeche Sound. But these days, he's in charge of a protest camp outside the Labor Secretariat, where he sleeps in the cab of a pickup truck parked alongside one of the capital's busiest thoroughfares.

But his current discomfort has nothing on the possible consequences of confronting the powerful oil workers union, which represents more than 90,000 Pemex employees nationwide, and is run by a group that "rules through terrorism," as Toledo Aburto puts it. "If you don't agree with their rules, you'll automatically be fired," he said.

Or, worse, subjected to death threats and harassment.

Mere hours after the 24-year-veteran petroleum worker set up camp in Mexico City on July 28, his wife and children were threatened by "union toughs," he said. But even though he expressed concern for his family's safety, he remains defiant.

"I'm not scared," he said, pointing to a property line marking the limits of the guarded federal land that he's currently occupying.

With the nation's political parties immersed in debates over proposed reforms to the nation's oil industry, Toledo and a band of about a dozen current and former Pemex workers are calling for changes in the oil workers union, an organization that wields enormous influence over the state-owned petroleum concern, Pemex, and dominates the political sphere in many oil-producing parts of the country.

But such is the union's clout that neither the governing National Action Party, or PAN, nor the Institutional Revolutionary Party, or PRI, has dared propose altering the union's relationship with Pemex in their energy reform proposals. Interior Secretary Juan Camilo Mouriño recently said that dealing with the union "is a different discussion," while PRI senators approved a measure last week saying that they would only support an energy reform package that omits union changes. "People pay tremendous prices for fooling with the union," said George Baker, a Houston-based energy consultant and expert on the Mexican oil industry.

Only the Democratic Revolution Party, or PRD, which plans to unveil its own energy reform initiative on Monday, has dared to challenge the union, which some analysts say is a foe of the left-wing party.

"For the PRD, the oil workers union is a political enemy," said Aldo Muñoz, a union expert at the Universidad Iberoamericana. "The Pemex union supports the PRI and, if it suits them, PAN candidates against the PRD."

PRD Sen. Carlos Navarrete last week warned that the PRD would recommend stripping power from the union in its energy reform proposal.

"In what part of the world does the union have almost half of the [seats on the] board of directors in the most important company in its country?" Navarrete told the newspaper Excélsior. "It's absolutely anachronistic."

Former PRD presidential candidate López Obrador has gone even further, accusing the government and the oil workers of brokering an unseemly, but mutually beneficial, deal.

"There's an agreement between [oil workers union leader] Carlos Romero Deschamps and [President] Felipe Calderón to keep corruption in the union in exchange for supporting the Calderón reform," he said recently.

Some analysts, meanwhile, question whether tackling the union issue - however worthwhile an objective - is appropriate during the early phases of a politically difficult reform process.

"You're trying to get some initial traction [on reform]," Baker said. "Getting traction on the union question probably isn't at the top of the list."

The union, too, has remained silent on the government's energy reform proposals - which would allow increased private sector participation in the exploration and exploitation of oil reserves - a move that Muñoz said was symbolic of just how "pragmatic" the syndicate is.

"It publicly supports the PAN in terms of energy reform, because its interests are never touched," he said.

THE PATH TO POWER

The origin of the oil union's power goes back decades. It initially gained authority after the 1938 expropriation of the petroleum industry, as then-President Lázaro Cárdenas proposed having the government and workers co-manage Pemex. That arrangement established conditions for the union leader to play an important role on the national stage, while his subordinates dominated the affairs of regional petroleum centers, where they funded public works projects, held sway over municipal governments and often ran local businesses.

Even to this day, section leaders control hiring and firing decisions. Nepotism is said to be rife, and positions are reputedly sold for as much as 50,000 pesos. (Pemex could not be reached for comment on these allegations, but has denied them in the past.)

Union leaders often manage side businesses that provide Pemex with employee transportation services, construction crews and basic supplies, according to the dissidents protesting in Mexico City. The union also holds five of the 11 seats on the Pemex board of directors.

Oil workers are now some of the best-paid employees in the country, as the union has consistently won generous wage and benefits packages that include gasoline subsidies, a series of worker-only hospitals and Christmas bonuses worth nearly two-months' pay.

The wealth and influence of the union leaders and members - "the real sheiks" of the oil industry, as Alan Riding called them in his 1985 book on Mexico, "Distant Neighbors" - are far-reaching, too. Successive governments have yielded to the union's hardball negotiating tactics, which have included the trump card of threatening to shut down the entire petroleum sector - the source of 40 percent of the federal budget.

BATTLING ON

Allegations of thuggery - denied by the company - are also common. Toledo said that at least 80 dissident members have disappeared over the past eight years.

The union dissident is calling for Romero Deschamps to be deposed by the Labor Secretariat, arguing that the date of the last internal election was improperly moved ahead.

"He's interested in nothing more than keeping himself in power," Toledo Aburto said. "This man, in every sense of the word, has hijacked the union."

In spite of the threats, the union protesters plan to stay put - partly out of principle, but also due to the potentially uncomfortable situation that awaits some of them upon returning to their hometowns and workplaces.

"I can't go back," Toldeo Aburto said. "They've already stripped me of my job."

The Untouchables

Even with energy reform on political agenda, few dare address a core issue: Pemex's union

BY DAVID AGREN
The News

Omar Toledo Aburto normally mans one of the offshore rigs pumping crude from the Campeche Sound. But these days, he's in charge of a protest camp outside the Labor Secretariat, where he sleeps in the cab of a pickup truck parked alongside one of the capital's busiest thoroughfares.

But his current discomfort has nothing on the possible consequences of confronting the powerful oil workers union, which represents more than 90,000 Pemex employees nationwide, and is run by a group that "rules through terrorism," as Toledo Aburto puts it. "If you don't agree with their rules, you'll automatically be fired," he said.

Or, worse, subjected to death threats and harassment.

Mere hours after the 24-year-veteran petroleum worker set up camp in Mexico City on July 28, his wife and children were threatened by "union toughs," he said. But even though he expressed concern for his family's safety, he remains defiant.

"I'm not scared," he said, pointing to a property line marking the limits of the guarded federal land that he's currently occupying.

With the nation's political parties immersed in debates over proposed reforms to the nation's oil industry, Toledo and a band of about a dozen current and former Pemex workers are calling for changes in the oil workers union, an organization that wields enormous influence over the state-owned petroleum concern, Pemex, and dominates the political sphere in many oil-producing parts of the country.

But such is the union's clout that neither the governing National Action Party, or PAN, nor the Institutional Revolutionary Party, or PRI, has dared propose altering the union's relationship with Pemex in their energy reform proposals. Interior Secretary Juan Camilo Mouriño recently said that dealing with the union "is a different discussion," while PRI senators approved a measure last week saying that they would only support an energy reform package that omits union changes. "People pay tremendous prices for fooling with the union," said George Baker, a Houston-based energy consultant and expert on the Mexican oil industry.

Only the Democratic Revolution Party, or PRD, which plans to unveil its own energy reform initiative on Monday, has dared to challenge the union, which some analysts say is a foe of the left-wing party.

"For the PRD, the oil workers union is a political enemy," said Aldo Muñoz, a union expert at the Universidad Iberoamericana. "The Pemex union supports the PRI and, if it suits them, PAN candidates against the PRD."

PRD Sen. Carlos Navarrete last week warned that the PRD would recommend stripping power from the union in its energy reform proposal.

"In what part of the world does the union have almost half of the [seats on the] board of directors in the most important company in its country?" Navarrete told the newspaper Excélsior. "It's absolutely anachronistic."

Former PRD presidential candidate López Obrador has gone even further, accusing the government and the oil workers of brokering an unseemly, but mutually beneficial, deal.

"There's an agreement between [oil workers union leader] Carlos Romero Deschamps and [President] Felipe Calderón to keep corruption in the union in exchange for supporting the Calderón reform," he said recently.

Some analysts, meanwhile, question whether tackling the union issue - however worthwhile an objective - is appropriate during the early phases of a politically difficult reform process.

"You're trying to get some initial traction [on reform]," Baker said. "Getting traction on the union question probably isn't at the top of the list."

The union, too, has remained silent on the government's energy reform proposals - which would allow increased private sector participation in the exploration and exploitation of oil reserves - a move that Muñoz said was symbolic of just how "pragmatic" the syndicate is.

"It publicly supports the PAN in terms of energy reform, because its interests are never touched," he said.

THE PATH TO POWER

The origin of the oil union's power goes back decades. It initially gained authority after the 1938 expropriation of the petroleum industry, as then-President Lázaro Cárdenas proposed having the government and workers co-manage Pemex. That arrangement established conditions for the union leader to play an important role on the national stage, while his subordinates dominated the affairs of regional petroleum centers, where they funded public works projects, held sway over municipal governments and often ran local businesses.

Even to this day, section leaders control hiring and firing decisions. Nepotism is said to be rife, and positions are reputedly sold for as much as 50,000 pesos. (Pemex could not be reached for comment on these allegations, but has denied them in the past.)

Union leaders often manage side businesses that provide Pemex with employee transportation services, construction crews and basic supplies, according to the dissidents protesting in Mexico City. The union also holds five of the 11 seats on the Pemex board of directors.

Oil workers are now some of the best-paid employees in the country, as the union has consistently won generous wage and benefits packages that include gasoline subsidies, a series of worker-only hospitals and Christmas bonuses worth nearly two-months' pay.

The wealth and influence of the union leaders and members - "the real sheiks" of the oil industry, as Alan Riding called them in his 1985 book on Mexico, "Distant Neighbors" - are far-reaching, too. Successive governments have yielded to the union's hardball negotiating tactics, which have included the trump card of threatening to shut down the entire petroleum sector - the source of 40 percent of the federal budget.

BATTLING ON

Allegations of thuggery - denied by the company - are also common. Toledo said that at least 80 dissident members have disappeared over the past eight years.

The union dissident is calling for Romero Deschamps to be deposed by the Labor Secretariat, arguing that the date of the last internal election was improperly moved ahead.

"He's interested in nothing more than keeping himself in power," Toledo Aburto said. "This man, in every sense of the word, has hijacked the union."

In spite of the threats, the union protesters plan to stay put - partly out of principle, but also due to the potentially uncomfortable situation that awaits some of them upon returning to their hometowns and workplaces.

"I can't go back," Toldeo Aburto said. "They've already stripped me of my job."

Oil boom delivers wealth, pressures to Campeche town

David Agren
The News

Ciudad del Carmen, Camp. – Rudecindo Cantarell was fishing in a rich shrimping zone known as Las Delicias in the early 1970s, when he noticed thick crude floating past his boat. He initially attributed the slicks to leaks spilling from ships passing through the area. But the oil continued reappearing.

The veteran fisherman eventually notified officials with Petróleos Mexicanos, or Pemex, in Coatzacoalcos, Veracruz of his discovery on two occasions, but the state-owned oil concern showed little interest. Cantarell would later go to the Pemex headquarters in Mexico City with news of oil bubbling up to the surface of the Campeche Sound.

Pemex eventually dispatched technicians to Las Delicias, and, within three years, the company constructed its first offshore platform in an area that would eventually produce more than 2 million barrels of crude on a daily basis.

Cantarell had discovered the world's second-largest oil field, which now bears his name, but because the Constitution grants the state ownership rights to all natural resources, he had no legal claim to it. He died penniless in 1998.

"If he had been an American, he would have been a millionaire," said Dr. Daniel Cantarell, a local historian in Ciudad del Carmen, Campeche, and a distant relative of the fisherman.

But Rudecindo Cantarell's inadvertent find unleashed an economic boom in Ciudad de Carmen, now a port city of 155,000 inhabitants on a slender island surrounded by mangroves just off the Campeche coastline.

The discovery of oil transformed the modestly prosperous fishing outpost into a boomtown. Warehouses and industrial facilities now occupy the main docks once used by some of the more than 4,000 fishing boats that previously hauled in jumbo shrimp – the region's principal product prior to the discovery of oil. Helicopters departing for the drilling platforms some 80 kilometers offshore are a common sight. Two modern bridges – which were built after a ferry accident – now link the island with the mainland.

Crude pumped from Cantarell has been a boon for the federal government, which today supports 40 percent of its annual budget with oil revenues. But it also has produced a windfall for local contractors, whose services range from supplying offshore oil rigs with everything from milk to tortillas to furnishing Pemex with sophisticated equipment for extracting oil from deep below the ocean floor.

Pemex employees and contract workers in Ciudad del Carmen – many of whom hail from other parts of Mexico – have cashed in with relatively generous benefits and salaries. The employees and contractors use their earnings to purchase homes in modern subdivisions and large pickups and sport utility vehicles, which they drive down newly paved streets. Municipal officials estimate the oil industry now accounts for 80 percent of the regional economy.

But many locals missed out on the newfound prosperity. They watched Pemex and an army of contractors displace the local fishing industry and then found themselves largely passed over for positions with the petroleum monopoly.

In addition, the influx of outsiders – comprised of wealthy oil workers and impoverished job-seekers arriving from other states – placed enormous strains on a municipality that previously lacked paved roads, adequate drainage and a secure source of drinking water. Meanwhile, those flush with cash began crowding locals out of the rental market and paying inflated prices for basics like food and transportation.

"If a rental property used to cost 800 pesos, after Pemex arrived, it cost 5,000 pesos," said Dr. Cantarell, who recalled oil workers pitching tents in the town square during the early days of the boom due to a lack of accommodations.

"Pemex never prepared the town to receive so many people."

PERPETUAL BOOM TOWN
Since its founding in 1716, when the Spanish finally evicted marauding pirates from the area, Ciudad del Carmen has lived through a series of serendipitous economic bonanzas. Past booms ranged from the harvesting of dyewood to exporting chewing gum to catching jumbo shrimp.

"They say that this place has been blessed, that the Virgin of Carmen looks out for us," said Dr. Cantarell, who has authored 19 books on Campeche history. "As one activity would disappear another would almost immediately take its place."

But oil was different from the other booms – and many of its riches have failed to trickle down to the native population.

"We're not rich, but we have a mentality of wealth here because nothing was ever lacking until Pemex arrived," said Marco Antonio Rodríguez, president of Marea Azul, a local environmental advocacy group.

Resentment toward Pemex and the oil industry still runs high in the area, according to some local observers.

"There are frictions here because so many people born in Ciudad del Carmen aren't hired by the industry," said Jorge Luis Sansores, communications director at the Universidad Autónoma del Carmen.

Those people include Bernardo Pantoja, a fisherman-turned taxi driver, who, along with his three brothers, abandoned shrimping in the early 1990s after Pemex forbade them access to the waters surrounding its oil platforms and their catches dried up.

"There used to be a lot of shrimp and it was really profitable," Pantoja said, holding his hands six inches apart to show the size of the jumbo shrimp he used pull from the areas now occupied by drilling platforms.

"But Pemex entered the area and screwed everything up," he said. "They installed the first wells and shut down everything."

Pemex prohibits fishing in a large area surrounding its drilling platforms – and navy patrols ward off potential interlopers. The company expanded its exclusion zone after the Sept. 11, 2001 terrorist attacks.

Its drilling activities and a spate of oil spills are blamed for wiping out the prime breeding grounds for jumbo shrimp, but Dr. Cantarell said poor management and over-exploitation by fishermen from outside of the region also played a role. The Agriculture Secretariat reported that the shrimp catch in the Campeche Sound declined from 2,938 tons in 2000 to just 843 tons in 2006. Catches in the 1970s averaged more than 20,000 tons. The Environmental Secretariat recently listed the beaches around Ciudad del Carmen as some of the most polluted in Mexico, although much of the contamination is from untreated sewage rather the oils spills, which are generally carried by currents toward Tabasco and Veracruz.

MISTRUST OF TRUST FUNDS
The federal government and Pemex established two trust funds as compensation for the displaced fishermen, who were expected to use the 15-million-peso annual payments to establish other economic activities. Some of the fishermen are now trying to establish fish farms, while a group of ribereños – fishermen that stick close to shore and mostly catch robalo, shrimp and oysters – established an ice house and a bottled water business.

Some ribereños still engage in fishing, but they say their catches are modest.

"There are some good days, but our haul often doesn't even cover the cost of buying fuel," said Jorge Alonso Jiménez, 30, as he clutched a tall can of beer after a morning of fishing for robalo.
Jiménez pointed to corruption and irregularities with the trust funds as a prime source of the problem.

"Pemex gives a lot of money so that you stay out of its exclusion zone," he commented, adding that much of the money appears unaccounted for and that many non-fishermen are listed on the padron, or beneficiaries' list.

Jiménez said he receives only about 1,000 pesos per year from one of the funds.

"If Pemex sends 10 pesos, we might get one peso," he explained, adding: "I'd rather be an oil worker."

No one from either of the trust funds was available for comment.

PREFERENTIAL HIRING
There are two principal labor organizations in Ciudad del Carmen's oil industry. Section 42 of the national oil worker's union represents those Pemex employees manning the company's offshore drilling platforms, while Section 47 is responsible for administrative and support workers.

Lázaro Gómez, a Ciudad del Carmen native, works 12-hour shifts on a drilling platform for two weeks at a time. He landed his job through a connection: his sister was a nurse in a hospital for Pemex employees, where, he said, "Pretty much everyone is working with a family member."

His job includes generous health and retirement benefits and a Christmas bonus worth 57 days' pay. According to Pemex salary figures dated Aug. 1, 2006, entry-level support employees working in marine maintenance earn 8,042 pesos per month while an engineer's assistant makes 14,389 pesos. All employees receive monthly allowances for food, housing and fuel totaling another 8,354 pesos along with 35 days' paid vacation, attendance and performance bonuses and scholarships for their children.

Gómez did not disclose his salary, but several contractors said that Pemex employees generally work fewer hours and receive a better overall compensation package that those in the private sector.

According to Gómez, most Pemex workers in Ciudad del Carmen had previous connections with one of the union bosses, who often dictate hiring, influence working conditions and sell positions.

He estimated that 75 percent of his coworkers come from outside the local area.

A Pemex spokesman, who was unauthorized to speak on the record, attributed the hiring of outsiders to a lack of qualified local candidates, but added that the situation was gradually changing. Officials from Section 42 declined comment for this story.

José Francisco Chi Dominguez, a spokesman for the municipal government, said Pemex hires a few locals for unskilled positions and that some of the multinational contractors hire graduates from the local university.

But he cited "union influence" for the presence of so many out-of-state workers.

"The union has more deeper roots in states like Tamaulipas and Veracruz so they bring in people from those places," he said.

Chi Dominguez acknowledged the lingering dissatisfaction over Pemex's hiring practices and impact on the fishery, but he said the oil giant plows money back into the municipality through several programs meant for improving the local waterworks, paving roads and funding public works projects like police precincts and health clinics.

AN END TO THE BOOM
Ciudad del Carmen's petroleum boom could ironically end before the local population starts occupying key positions in the industry. Production in the Cantarell oil field has already started declining, prompting concern for many in the local government.

"As [the oil field] gradually declines, the city could go back to what it was in the early 70s," Chi Dominguez said.

Dr. Cantarell, the historian, spoke of past precedents for what was happening in Ciudad de Carmen.

"The oil here is going to run out. That's obvious," he said.

"And people are once again standing around asking, 'What comes next?'"

Sliding oil prices jeopardize Mexico's budget

Former president Vicente Fox - he seems so out of memory these days - in many ways righted Mexico's financial situation and ushered in a period of macroeconomic stability. He even drove down the country's budget deficit. He received high praise, but University of Guadalajara political science professor Marco Antonio Cortes shrewdly observed: "He deserves credit, but not all of the credit that's been attributed to him.

"He's been lucky."

Lucky enough to ride an upswing in world oil prices. Oil - more specifically, Pemex profits - floats the Mexican government. Fox took advantage of high prices to rectify government finances - even though Pemex is as troubled as ever.

Now with prices falling, President Felipe Calderon faces a problem. The Mexican government budgeted for an average price of $42.80, but the price for Mexican crude recently tumbled below that threshold. Compounding the problem, production in Mexico's principle oil fields is falling as Pemex remits 60 percent of its income to the federal government. The lack of exploration and maintenance is finally catching up to the company and country. Columnist Sergio Sarmiento, an advocate of private participation in the Mexican oil industry, dubbed it: "The end of the lottery." This could be Calderon's most vexing problem over the next six years.

UPDATE: Pemex is predicting its production will decline by 13 percent over the next six years - Felipe Calderon's presidential term.