If you need to fuel up your car in Mexico you look for the green, white and red Pemex filling station(pronounced peh-mecs). There are no Exxon or Shell franchises; no mom and pop Gas N’ Gos. Just Pemex. Pemex, which stands for “Petroleos Mexicanos,” has been the only game in town forever. But, all of this is about to change.
Last week, Pemex–with its issues around reform, steep hikes in prices at the pump, and protesters creating blockades–became front page Mexican news. And, it caused many of us to stop and think about what a world with limited fuel might look like. At the same time, many snowbirds and ex-pats began to ask questions about Pemex–How did Pemex come to be, and why a price hike now? What follows is a brief summary and analysis of the history of Pemex and the current situation in which those of us in Mexico find ourselves.
Why Only One Company?
During the early years of the 20th century, U.S. and British oil companies were quick to exploit both Mexico’s oil and gas reserves and the Mexican labor force. This prompted the Mexican government in 1917, during the Mexican Revolution, to nationalize and essentially make oil and gas reserves the property of the Mexican state through a Constitutional Amendment. However, it would take another twenty years before Pemex would come on the scene and Mexico would expropriate all remaining foreign-owned and non-governmental oil companies. For the next half century, Pemex became a premier company, expanding and changing to keep up with often volatile markets and evolving industrial conditions. They made money for the Mexican state and became a major employer of Mexican workers, offering stable jobs and good salaries with pensions and other benefits to their 150,000+ workers. Pemex has held this virtual monopoly on the Mexican petroleum industry for almost eighty years.
What Has Happened with Pemex?
In the last decade or so, Pemex has slipped in profitability. In 2012, for instance, the Mexican federal government received 852 billion pesos (roughly $40 billion dollars)from oil revenue. In 2015, this figure had dropped to half that amount, only 408 billion pesos. This is creating a situation whereby rather than make money for the country, the country faces subsidizing an aging petroleum organization and infrastructure.
While a drop in world oil prices has contributed to the slip in profitability, lack of money for reinvestment, general mounting debt, pension obligations and an over sized work force have all contributed to the continued demise of the oil behemoth. In addition, the Cartels continue to plague Pemex operations as they create ever more sophisticated means of siphoning off petroleum from the country’s aging pipelines. Recent major accidents, lower yields on existing wells, and the glut in the global supply have also contributed to Pemex’s inability to re-organize and keep up with the times. Last year they experienced the worst fiscal year in a quarter of a century.
What’s with the Reforms?
By 2012 it was clear that something had to change. Between 2012 and 2014 there were major reforms to the Mexican petroleum industry. In 2013, the 75-year monopoly on Mexican state held oil production was lifted by a Congressional vote. By 2015, bidding rounds began so that private companies could start to invest in Mexican oil exploration, production, and domestic sales.
How Does this Tie in with the Current Price Hike?
Up until 2016 the Mexican government subsidized the petroleum industry to such a degree that the consumer did not pay the actual cost of gasoline and diesel. They paid a lower price. The reforms conceptualized in 2012 and 2014 allowed the government to remove its subsidy of the industry and shift the actual cost for gasoline and diesel back on to the consumer. The hope was that by “liberalizing” (or, de-regulating/privatizing) the gas and oil industry, and, by allowing outsiders into the Mexican petroleum process, Mexico would be able to afford to modernize and compete with prices on the world market. And, consumers would reap the benefits down the line. (Time will tell if this actually happens. Theoretically, however, it sounded good to the majority of Mexicans back in 2012.)
The current price hike was originally slated to begin in 2018. The start-up date was moved to January 1, 2017. We can assume this was done because the government could not afford to subsidize the national petroleum industry for even one more year.
Worst Possible Timing
Many are criticizing President Pena Nieto for his terrible timing of this price hike. After all, January is peak driving season in Mexico; President-Elect Trump is threatening to pull out of trade agreements and introduce tariffs on Mexican goods; the peso has dropped dramatically against the dollar and is now ranked the worst currency in the world; Ford Motors will not be building its $1.6 billion plant in Mexico; and, inflation is spiraling almost out of control. President Pena Nieto has been asked, why now for this 20% fuel hike after promising that gas prices would be lower and not higher? Why now for an abrupt adoption of the “liberalization process,” instead of the gradual process over the course of this year?
What Lies Ahead
President Pena Nieto has publicly said that he is not going to reverse his decision to increase the price of gas. If he made a sudden policy change as a result of public pressure, it could potentially introduce too much uncertainty over future regulatory decisions into the mix. And, this might scare away potential investors. The Mexican Constitution bars Pena Nieto from running for another term. Therefore, he has little to lose politically, and, has no incentives to back down from raising prices.
The wild card in all of this is the protest movement. The current protests are not part of an organized movement. Their strength is coming from transportation unions and support from social media. If security forces double down on demonstrations and take lives or inflict injuries, it could potentially trigger more unrest. Should an opposition party (Pena Nieto is a member of the PRI), such as the PRD (Democratic Revolution Party) jump on the protest bandwagon, it could legitimize the demonstrations making it possible to garner more support.
It is unclear right now how much longer the protest will last. A few hours? A day? A week? No one knows. At the moment of this writing, sources say that it is a “mass display of unconnected protests,” rather than a coordinated effort at undermining energy reform. It appears that unless these multiple organizations can pull themselves together and get the support of the PRD, labor unions, and social media, the whole thing may just fizzle out pretty quickly.
So, Pena Nieto is in an awkward position. Does he demonstrate to investors that he “caves” to pressure from street demonstrations? Or, does he push ahead and inflame further protests, potentially hurting his party’s (PRI) chances in the 2018 race–which is already proving to be very contentious. The next few hours, or, days will tell the story.
–by Linda Whedbee and edited by Lisbeth Vincent
Just in off of the SF chatter pages:
Stephanie Summers from Mississippi has signed on as the new EDR investor. Rumor suggests that even though she is in for 50%, Butler will continue to run the show. At the Developer meeting on the 3rd of November, it was implied that completion of all past projects will begin immediately, with a 6 month deadline for getting everything done. (Holding ones breath is not recommended quite yet.) It is not clear which projects are on the docket for completion. Perhaps those of you who attended the meeting could be so kind as to give us all an update.
In the meantime, the following is a brief bio of Ms. Summers. Any thoughts that she might be interested in joining the Nasty Baja Mujeres Group should be considered a stretch. But, having said that…stranger things have happened.
Biography of Stephanie Summers, CEO, DTC
Stephanie Summers’ life journey evolved from her birth place in Jackson, Mississippi – through the oil fields in Yazoo City, Mississippi, into full time employment as the Chief Operating Officer of the largest minority mental health care company in Mississippi owned by her father, to becoming a successful businesswoman involved in International Business. Exposed to business as a child, Stephanie has always been dedicated to the achievement of excellence. Her business spirit is inspired through the legacy of her maternal grandfather, George W. Stutts, Sr., who owned the first oil producing wells in Mississippi and her motivation comes from her paternal grandfather, Business Pioneer and Philanthropist, William James Summers, owner of the late Summers Hotel and home of one of the acclaimed “Mississippi Juke Joints”, Subway Lounge, in Jackson, Mississippi. Her first real exposure to Capitol Hill and the integral activities of politics was in 1987, as a Congressional Intern for Former U.S. House of Representative, Mike Espy (D2-Mississippi), later U.S Secretary of Agriculture. In 1998, Stephanie ventured out and with her first husband and founded Diversified Trade Company, LLC. As Chief Executive Officer of Diversified Trade Company, LLC, Stephanie has assisted several U.S. and foreign companies to increase their market share both in the domestic and foreign markets and assisted foreign governments and private companies to implement economic development plans. Offering business development services and international trade management, Stephanie has traveled throughout the United States, the continent of Africa, Europe and Asia, the Caribbean, Canada and Mexico From 1999 and for four (4) years, Stephanie was a Board Member of the Small Business Exporters Association, a trade advocacy association in Washington, D.C. that represented the interests of over 25,000 U.S small business exporters. As a Board Member, Stephanie worked with Exim Bank, OPIC and U. S. Members of Congress to encourage the development of programs that favor the interests of U.S small businesses. This work included issuing the opinions about the reauthorization of EXIMBANK. Stephanie is a dynamic speaker and has been a presenter for USDA Agricultural Marketing Outreach conferences and has given numerous presentations, including “Business Development for Inventors”, “Farm Management to Enhance Marketability” and “Market Information: How to Find It and Use It”, which was published in the Agriculture Marketing Outreach Training Manual, USDA, 1999. In 2000, Stephanie was one of only thirty (30) companies represented to participate in the National Trade Education Tour with the Former U.S. Secretary of Commerce, Honorable William Daley. In September 2003, Stephanie was a U.S. NGO delegate to the World Trade Organization’s 5th Ministerial Conference hosted in Cancun, Mexico. Eager to make a difference in the lives of Mississippians, Stephanie was heavy in politics. In 2004, Stephanie was a Republican Candidate for the U.S. House of Representatives, District 2, Mississippi. Active in Mississippi politics, Stephanie was a Co-Chairman of the Inauguration for Governor, Mississippi, Haley Barbour and was a Mississippi delegate for the 2004 Republican National Convention. Recognized by Mississippi as one of Mississippi’s most successful businesswomen, Stephanie was chosen to be one of Mississippi’s “50 Leading Business Women 2004” by the Mississippi Business Journal. In 2011, she was featured in Forbes, January 2011 Issue, Mississippi Women in Business. In 2015, Stephanie began the execution of the expansion and growth plan of Diversified Trade Company, LLC (DTC). She made some hard choices and some personal and financial sacrifices and began to reshape DTC into a holding company. Her first acquisition targets were oil and gas companies. Her goal is to create one of the largest oil and gas companies in the world during the downturn of the industry. Currently, Stephanie has ownership in companies with assets in real estate, oil and natural gas reserves, industrial minerals, mining and exploration, construction, manufacturing, health care, financial services, and transportation. Stephanie is a Hampton University graduate and the proud mother of one daughter.–PDF bio found on Google
Linda Whedbee (emphasis mine)
This is a very well done little film on the plight of the Vaquita. There are some good shots of the San Felipe area. Filmed by a gentleman from Idaho.
Beginning March 1, 2015, gill net and trawler fishing will be banned from a potion of the north end of the Sea of Cortez. This ban has come about in an effort, by the Mexican Government, to help save the vaquita from extinction. This restriction is scheduled to last two years and will cover an area ten times greater than the currently established protected area of two thousand square kilometers. Although several news articles claim that fishing south of San Felipe will not be part of the ban, it is a little unclear just where the southerly boundary of the protected area begins and ends.
In a statement made in Mexico City today by Luis Fueyo MacDonald representing the Commission of Protected Environmental Areas, the aim of this measure is to attempt to stabilize a population which has lost 145 vaquitas over the last two years. The vaquita is the smallest and rarest of the porpoises. Until 1959, the vaquita was thought to be a myth. Currently only 97 are still living. Vaquitas reproduce every two years and there are only twenty-four mature females remaining. Experts predict it will take twenty to thirty more years of these kinds of protection efforts to save the vaquita from total extinction. That would mean creating a population of around 5,000 vaquitas. Officials from the Mexican Federal Environmental Protection Agency (PROFEPA) estimate that if nothing is done now to protect them, the vaquita could become extinct as early as 2018.
Beginning in March, the restricted areas will be patrolled by three drones operated by the Mexican Navy. These three drones will cost the Mexican government approximately thirty million pesos (a little over 2 million dollars using current conversion rate). They are capable of covering one hundred kilometers at fifteen thousand feet, and, can be kept in the air for approximately twelve hours at a time. These drones are also expected to help in efforts to combat totuaba trafficking and protect other endangered species in the area. Certain parts of the totuaba command incredible prices ($5,000 and up) in Asian markets.
The Mexican Government is well aware of the impact this move will have on the livelihood of many, if not most, San Felipeans. Working in coordination with the Mayor of Mexicali’s office, the Government has put together a plan to compensate San Felipe fishermen and associated industries during this two year moratorium. Licensed fishermen who can demonstrate a history of commercial fishing in this area will receive an annual compensation of up to $120,000 pesos (currently equivalent of $8,275 dollars) annually during the ban. It was unclear as to whether this annual compensation was to be awarded to individual fishermen, or, to the fishing vessel. Each fishing vessel is generally manned by two fishermen.
Approximately four-hundred fishing vessels and eight-hundred fishermen operate out of the Port of San Felipe. Estimates are that an additional two-hundred fishermen operate in the area without official permits.
At this writing, what impact this will have on the availability of shrimp, clams, and other local fish (and, the price thereof) is unclear.
BLUE GECKO BAKERY IS HAPPY TO ANNOUNCE that starting this Wednesday, December 17th we will be at the South Camp Community Center from 9-1 with the Veggie Man[behind the community center on the patio] so if you need bread or pastries or would like to make an order please stop by and see us.
We will be there every Wed from 9-1 through May. Come taste our breads! We will have our Extra Sour Sourdough, Sourdough, Jewish Rye, Russian Rye, Orange Rye, Parmesan/Herb, Multi-Grain. We offer Gluten-free, Sugar-free and Dairy-free products, Pot Pies, and more……
By now, most of you have seen many photos of the Seaport Airlines 9 passenger Cessna which completed its maiden voyage from San Diego to San Felipe on December 15th, as well as snapshots of its passengers, the dignitaries, and the celebrations on both sides of the border. Commercial air service between San Diego and San Felipe will be such a boon to travelers going either direction! I loved being in on the fun of this first flight. It was especially gratifying to hear the applause of the hundreds of members of the San Felipe community standing on the tarmac and inside the terminal as the Cessna landed and taxied to a stop.
I’ve been asked many questions about the flight:
1. How was it? The flight was smooth. The weather was calm: We did not experience turbulence, and if we had, it would have been no more unsettling than being jostled around on an airliner. So, do not worry about lightening strikes or vortexes of any description! Of course once seated, you cannot get up and walk around. Actually, you cannot walk around even when you are walking around; you must climb up a short ladder-like stairway, duck your head when you enter the plane, and make your way to a seat. Seats are equipped with car-style seat belts. Unless you are sitting behind the co-pilot, you will not have a seat mate.
2. How was it really? ¡Fantástico! Flying over San Diego, seeing Pt Loma from both sides, staring down at Baja’s mountain tops, spotting the Sea of Cortez in the distance, and finally, cruising over San Felipe: What views!
Altitude is low enough for a really good look at the landscape, but not quite as close to the ground as our San Felipe ultralite!
3. What was the movie? Very funny.
4. What does it cost? My ticket cost about $127; $89 for the flight, and the rest for taxes. In addition, anyone without some kind of residency status in Mexico must pay $25 CASH to the Customs Authorities at the San Felipe Airport for a tourist permit, even if returning to San Diego on the next flight that same day. Check out seaportairlines.com for prices and other information; remember that the flights to and from San Felipe are at present only available on Mondays, Thursdays, Fridays and Saturdays.
5. Were there any surprises? Yes, an unpleasant one. At check-in, I was asked how much I weigh. This wasn’t the lady at the DMV asking, so I couldn’t lie!
Photos by Margaret Reish Downing and Seaport
Since the creation of Desert Mothers we have had the dream of opening a center for creative arts expressly for our diverse San Felipe community. The new Community Creativity Center will expand the original focus of Desert Mothers to include men, women and children of San Felipe. It will also be open to full and part time non-native residents and visitors to San Felipe.
Desert Mothers will remain unchanged, but now, because of our access to many creative tools and materials, we will add a space where people of all ages and cultures can come together to learn and experience many art forms including: ceramics, mosaics, mask creation, metal art, jewelry making, sewing, furniture making, glass fusing, glass etching, and tile making. In addition to our focus on the arts, space will be available for offering classes in self-improvement, such as: yoga, meditation, dancing, exercise, nutrition, spiritual guidance,book clubs, games, etc.
Our goal is to provide a special space for everyone in the community to come and build relationships while exploring and sharing their talents.
How Can I Use the Community Center?
The Center is here for YOU to use. You can learn new skills or art forms; share your skills by teaching a class; or, rent space for your own individual art project. All of this is available to you through easy membership plans. Become a patron member, or, a sponsor member by the hour, day, week, month, or year. If you teach a class, the space is rented for a nominal fee, while you get to keep the rest of the proceeds. As a non-profit organization, we want to keep this affordable and profitable for everyone.
We are looking for teachers, instructors, and volunteers to help out. If you would like to give back to the San Felipe community, please give me a call, or, send me an email.
- Email: firstname.lastname@example.org
- Land Line: 576-0089
- Mx Cell: 686-169-5267