Faced with thousands of conservative opposition demonstrators camping out in the streets of Mexico City since he took office, the administration of Mexican President Andrés Manuel Lopez Obrador (AMLO) is under renewed pressure to come up with a strategy to address the nation’s tottering energy sector, which has reached a critical juncture in the historic and controversial privatization carried out by his predecessor, Enrique Peña Nieto, which marked the ostensible end to a central tenet of modern-day Mexican self-determination and reintroduced foreign and U.S. oil interests into the core of Mexico’s socio-economic development.

Petroleos Mexicanos (PEMEX), once a bastion of Mexican national sovereignty, threatens to become an “incurable cancer,” according to Bank of Mexico’s deputy governor, Jonathan Heath, as the ‘liberalized’ state oil company tops the list of the world’s most indebted, with a balance owed in excess of $100 Billion.

On Thursday, AMLO announced his intention to reverse Peña Nieto’s energy reform bill if he is unable to find structural solutions to the company’s severe financial problems, which have been further complicated by the downgrading of its stock to junk status in April of this year by credit rating agencies Moody’s and Fitch, triggering billions of dollars worth of bond sell-offs.

COVID economy

Mexico’s financial outlook has dimmed considerably due to the confluence of the energy company’s problems and the internationally-imposed COVID-19 economic lockdown protocols. AMLO has blamed foreign oil interests for constricting his plans to use PEMEX as a springboard to correcting the nation’s economic woes and, in 2018, suspended all international oil auctions for three years after successful bidders failed to actually invest in oil exploration or production.

Mr. Heath, who was appointed by Obrador to head Banxico, the country’s national bank, came to assume the role after serving as chief Latin American economist for HSBC; a bank deeply embroiled in laundering billions of dollars for Mexican drug cartels.  According to him, if AMLO doesn’t limit the company’s tax obligations, it will eventually affect Mexico’s sovereign rating because a full 14% of GDP is contingent on PEMEX’s production.

AMLO first hinted at the prospect of re-nationalizing Mexico’s oil industry in August and doubled down on the idea during Thursday’s press conference, as well as leaving open the possibility of refinancing the energy sector’s enormous debt. In June, Obrador vowed to boost capacity at the country’s six refineries in order to achieve gasoline independence by 2023.

“López Obrador has the potential to be one of the best presidents,” Heath claimed in a 2018 interview. He also “has the potential to be one of the worst…,” Heath told the Financial Times. In May, the head of Banxico characterized AMLO’s approach to the country’s economic crisis as swapping one problem for another, referring to AMLO’s decision to avoid debt as a mechanism to escape the economic problems brought on by the pandemic and the energy sector’s systemic issues. “Instead of having a short recession and then an immense headache with an unplayable debt,” Heath observed, “[AMLO] is betting on having a more profound and complicated recession, but once we are out, we will not have the same headache that other countries will have.”

Historical returns

The history of how PEMEX came into existence and its significance in the geopolitical landscape between the U.S. and Mexico, in particular, cannot be overstated. In the throes of one of the world’s bloodiest revolutions at the turn of the twentieth century, foreign oil companies and their respective governments were intervening directly in the pivotal conflict more than a hundred years ago.

British, German, and American firms were fighting amongst each other to control the country’s oil and were contributing to the turmoil by financing the different factions vying for control of a nascent political system. The Partido Revolucionario Institucional (PRI), the conservative party that emerged out of that war and that would rule uninterrupted for the next seven decades, hinged nearly all of its power on the nationalization of the country’s oil, which served to not only to eject the deleterious influence of the burgeoning foreign energy cartels from Mexico but also to forge a national identity.

As the world undergoes a transformation on par with the one that marked the beginning of Western hegemony in the twentieth century, Mexico, once again stands at the threshold of a pivotal course of action that will determine if the nation survives into the second half of the twenty-first century.

Feature photo | Striking workers from Mexico’s state oil company, PEMEX, stand next to their encampment outside the National Palace in Mexico City, Sept. 15, 2020. Rebecca Blackwell | AP

Raul Diego is a MintPress News Staff Writer, independent photojournalist, researcher, writer and documentary filmmaker.