Mexico’s largest company is broke. The country’s state oil company, Pemex, which is one of the federal government’s main sources of revenue, is losing money and is one of the world’s most indebted oil firms.
The company's production has dropped for 11 straight years now, while gross income plummeted more than 80 percent last year.
Due to low international oil prices, the Mexican government recently ordered the company to cut US$5.5 billion from its 2016 budget, amid concerns that the firm’s financial difficulties could lead to the crisis spreading to the wider domestic economy.
However, critics argues that the Government-backed cuts, represent an attempt to intentionally underfund the company in order to move forward with privatization of the country’s oil reserves.
The massive cuts take place as Mexican President Enrique Peña Nieto intends to move forward with energy-sector reforms, which will allow foreign participation and financing in the energy sector, with the assumption that these measures will result in a more efficient exploitation of the country’s untapped energy potential.
As part of the 2013 energy reforms, which ended Pemex’s decades-long monopoly on oil production, Mexico's energy ministry will award license contracts and secure rights to foreign transnational companies over petroleum exploration and production areas,
Under the newly approved Mexican Energy Reform law, the state-owned Pemex will maintain the rights to 83 percent of the country’s existing reserves, while it will only control 21 percent of all prospective reserves.
However, opponents of the privitization measures argue that the energy reform policies will have a negative impact on ordinary Mexicans because they will increase the prices of gas and electricity.
Many analysts and experts also warn that that the new reforms will only foster corruption and result in capital flight from the nation's most important economic sector.
“Transferring the control of the Mexican fossil fuel resources to private corporations will be bad news for the planet, but also for its people, since a huge portion of the national economy and public budget revenues depend on the energy sector.” Author and scholar Daniel Chavez told the Transnational Institute in a recent interview.
Mexico’s government depends on Pemex for about one-third of its revenue.