Mexico

In contrast to Argentina, efforts at privatization of the Mexican petroleum industry and the opening of new business opportunities to foreign companies have been negligible. Electric power and natural gas distribution projects appear to provide the greatest opportunity for foreign investment {see Endnote 50}. Mexico's recent privatization of large nonenergy public firms along with the signing of the North American Free Trade Agreement created some initial optimism among foreign companies that petroleum privatization would ensue {see Endnote 51}. In 1991, Chevron expanded its small representative office in Mexico City in the hope of signing a service deal to gain access to Mexican oil. Similarly, Amoco, Mobil, and Texaco showed an interest in Mexican investment {see Endnote 52}. Both Occidental and Royal Dutch/Shell's U.S. affiliate, Shell Oil, recently made equity investments in petrochemical operations formerly belonging to Pemex, the Mexican state petroleum company and the world's third-largest producer of crude oil and the tenth-largest refiner in terms of crude oil refining capacity.

However, despite some initial efforts, reform in Mexican petroleum has faltered. Foreign participation in the exploitation of Mexico's petroleum resources has long been a particularly sensitive matter in Mexican politics.

Although, substantial early development of the Mexican petroleum industry was accomplished by British and U.S. petroleum companies {see Endnote 53}, nationalization of all foreign petroleum assets on March 18, 1938 abruptly ended foreign activity in Mexican Petroleum {see Endnote 54}. Foreign participation in oil and gas exploration, production, and refining is still proscribed by the Mexican constitution, which allows only Pemex to engage in these activities. So far, the only substantive reform measures include a restructuring of Pemex's operations (along with substantial reductions in employment), an attempt to sell several chemical units and other non-core operations, and an increased reliance on foreign drilling contractors. Pemex also has undertaken joint ventures abroad. Pemex's downstream operations have focused on reconfiguring and modernizing its refineries to both increase product output and address environmental concerns. Despite refinery upgrades, Pemex's refinery capacity is less than current product consumption, leading to increased product imports and further refinery construction. Pemex also replaced some of its domestic shortfall by gaining a 50-percent share in Shell Oil's Deer Park, Texas, refinery {see Endnote 55}.