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Pemex plan spreads an oily sheen over Mexico’s history

Seventy-five years ago, Mexican president Lazaro Cardenas announced the expropriation of the U.S. and British oil companies operating in Mexico. The unexpected but popular measure led to the creation of the state-owned energy giant Petroleos Mexicanos (Pemex), which President Enrique Pena Nieto has now vowed to reform.

Pemex has been one of the cornerstones of Mexican identity since the expropriation, and Mr. Pena Nieto's government will face an uphill battle to gain popular support for his proposed amendment to the Mexican constitution.

Recent polls indicate that 65 per cent of the population opposes opening the energy sector to private companies.

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The much-anticipated announcement was launched with a massive government public relations campaign, including an appearance by Mr. Pena Nieto on national television and a Twitter campaign – #ReformaEnergetica (Energy Reform), which was immediately countered by the opposition's #vendanPemex (they're selling Pemex).

A flashy website instantly went live, touting the top-10 benefits of energy reform.

In a surprising spin, the Pena Nieto government claims that it is not selling out the nationalist promise of Mr. Cardenas's expropriation, but is rather returning to his original ideal.

In an interesting use (or abuse) of history, the Reforma Energetica website includes links to original documents showing the amendments Mr. Cardenas made to article 27 of the Mexican constitution after the expropriation, which the current government claims were meant to allow private companies to contribute to the development of the energy sector if it was deemed to be in the national interest. In recent years, Pemex's oil production has slipped markedly, bolstering arguments that now is such a time.

Pemex has fallen behind Brazil's Petrobras to become Latin America's second-largest oil producer and seventh in the world (down from fifth). Its output of crude oil has been falling since 2004, and although it remains one of the major sources of oil for the U.S. market, fears are mounting that Mexico may become a net importer of crude by 2018.

Most recently, a fatal explosion at the Mexico City headquarters of Pemex raised questions about crumbling infrastructure and a questionable safety record.

But Mr. Pena Nieto will be wise to remember the reasons put forth for the 1938 nationalization, reasons that hinge on a different vision of national interest. Mexico's economy, like Canada's, is inextricably linked to the energy industry: Oil revenues account for more than a third of the government's budget.

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Industry changes have a drastic effect not just on production and sales, but also the country's ability to provide a social safety net for its people. Rather than paying dividends to private shareholders, Pemex pays its dividends to the Mexican people.

The decision to expropriate the oil industry came when the Mexican subsidiaries of Royal Dutch Shell and Standard Oil refused to be bound by the Mexican Supreme Court's decision against the companies in a labour conflict.

Unable to brook this insubordination to domestic law, Mr. Cardenas took swift and decisive action that was rewarded with an outpouring of nationalist support. The expropriation is still seen by many Mexicans as a heroic act in defence of national sovereignty in the face of economic imperialism.

Mr. Cardenas announced the expropriation in a live radio broadcast the evening of March 18, 1938. In the days that followed, massive demonstrations took place backing the measure. People from all walks of life united behind the president, donating everything from jewellery to chickens in order to help pay for the companies' indemnification.

Despite the Pena Nieto government's attempts to warp historical memory, this new move toward privatization is more likely to provoke mass opposition than the outpouring of support shown 75 years ago.

Amelia Kiddle is assistant professor of Latin American history at the University of Calgary, a senior fellow of the Latin American Research Centre, and a specialist in the history of Mexico's foreign relations.

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