Commentary: Policies hurt Mexico’s oil production

But with the election of AMLO all that has changed. He has railed against the five-year overhaul of Mexico’s energy sector, instead opting to pour billions of dollars into solidifying Pemex and other state-owned companies. Critics have suggested that Obrador may be driven by nostalgia and nationalist ideology and has completely shut down exploration of alternative energy sources that could prove viable in Mexico.

Indeed, oil and nationalism have been part of the same dialogue ever since Mexico kicked out foreign oil companies and the government appropriated the energy sector back before World War II. And popular sentiment in the country is behind Obrador. Mexicans understand that Pemex, one of Mexico’s largest employers, dominates the economy of the country’s states that adjoin the Gulf and funds 20% of the national budget. Obrador spins his policy as a way to bolster the national economy, create more jobs, and increase GDP.

AMLO’s enthusiasm for one of the traditional symbols of Mexican strength may sound nice to voters, but Pemex is deeper in the red than any other energy company on the planet. As of the end of the second quarter of 2019 it was $104 billion in debt and spent a large part of 2019 on the brink of losing its investment grade status. Oil production has continued to wane as Mexico has slipped from fourth place to 11th globally. And government mismanagement and corruption that has plagued Mexico throughout its history has left its mark. In a continuation of that tradition, Obrador has appointed to positions of power those who share his opposition to private energy investments.

Analysts have been scratching their heads, wondering why Mexico, a country heavily dependent on the global market, is shooting itself in the foot. They have compared the rise of Petrobras to a global oil production power to Pemex’s painfully slow decline as a case study of the intersection between nationalistic ideologies and political policy.

While Obrador has allowed foreign oil companies to continue doing business in Mexico, some pundits believe they will soon lose interest. AMLO has been a harsh critic of the 100 contracts that were awarded to private companies under the 2013-2014 legislation and refuses to issue more unless he sees the results he wants, though there is some ambiguity regarding exactly what that means.