The Great Temptation: Oil in Mexico, Part I (translation)

On September 15th, the most recent book by Andrés Manuel López Obrador entitled The Great Temptation: Oil in Mexico was published by Grijalbo. As the Mexican Congress is just now on the verge of passing a Pemex "reform" law of some kind or other, I will over the next two days be presenting here a translated excerpt of Obrador's book, from the chapter entitled "La política irresponsable," or "Irresponsible Policies."

The Great Temptation: Oil in Mexico
by Andrés Manuel López Obrador
translated by Kurt Hackbarth

"Irresponsible Policies"

The neo-conservative governments have confiscated from Pemex all of its earnings. From 2000 to date alone, while Pemex has registered accumulated sales of $6 trillion 442 billion pesos, it has paid $4 trillion 467 billion of those in taxes, which amounts to 75.8% of its sales. In contrast, direct public investment in Pemex (without including debt) over the same period came to $162 billion pesos, barely 2.5% of its total sales.

These oil-obtained revenues have been used to finance the federal budget, to the point that, for every budgetary peso, forty cents (centavos) are derived from oil. Such a fiscal policy – one which bleeds Pemex to death – has been used to make up for the deficit in tax collection, in light of the fact that the large corporations in our country pay practically no taxes at all.

In 2007, for example, Pemex posted sales of $1 trillion, 134 billion 980 million pesos, and its contribution to public finances amounted to $846 billion 200 million pesos, that is, 74.6% of its sales. In this same year, according to Mexican Stock Exchange statistics, nine large corporations posted sales for $1 trillion, 209 billion 316 million pesos and paid $51 billion 325 million in taxes: 5% of their sales. Pemex, in other words, provided sixteen times more. It is necessary to add, moreover, that these corporations were allowed to defer $106 billion 296 million pesos in taxes in their balance sheets, making the fiscal credits they received amount to double what they paid in taxes. In the end, we do not know how much they really did pay because it often happens that corporations like these also wind up benefiting later from tax rebates.

The enormous corruption that is rife in the upper echelons of economic and political power in Mexico can be described by noting that a worker, a member of the middle class or a small-to-medium businessperson or entrepreneur is required to pay between 15% and 28% in income tax (ISR). However, the large monopolies linked to power, due to the privileges they receive, reduce their tax payments to a minimum, and in certain cases, pay nothing at all.

The fiscal reforms undertaken by the Fox government, and continuing to the present, have only aggravated the problem. This is confirmed by the recent report of the Federal Audit Bureau [Auditoría Superior de la Federación], which states that in 2005, “fifty large taxpayers were detected whose individual income tax payments, after deductions, were less than $74 pesos.” In the same vein, it points out that “tax rebates in the 2001-2005 period came to a total of $604 billion 300 million pesos. This generates a situation of privilege for a certain few taxpayers that goes against the principle of fiscal equity.” This situation continues unabated: during the first semester of 2008, tax rebates rose to a total of $93 billion 613 million pesos.

Finally, it is important to add that the PAN governments have had the advantage of having the highest oil prices in the history of the world. During his administration, Fox received budgetary contributions from oil revenue to the order of $335 billion dollars, and just for high prices alone, $10 billion dollars extra per year over the three-year period 2004-2006. And the disgrace was – and continues to be – that, this money, instead of going to modernizing Pemex, promoting development in Mexico and guaranteeing the well-being of the people, was squandered in top-level bureaucracy or was spilled down the drain of corruption.

Thus, in 2007, the de facto government took in $12 billion extra dollars due to the high prices of oil exports, and in 2008, it is on pace to take in $20 billion more. Let’s remember that the Chamber of Deputies [Cámara de Diputados, Mexico’s Lower House] set an estimated per-barrel price of $49 dollars in its Federal Revenue Law, and it has been selling instead at an average of $100 dollars a barrel. Since 1901 – when oil production began in Mexico – to the present, no president of Mexico has ever obtained so much money from oil as will the usurper Felipe Calderon this year. Nevertheless, just like with Fox, all of these resources have either been used to subsidize his large corporate allies, have been squandered in corruption, or have been funneled into maintaining the privileges of high-level public officials. It is worth noting that the de facto government has done nothing to reduce the enormous costs of its bureaucracy. On the contrary: in 2007, it increased it by $154 billion pesos. And it is projected to spend $250 billion more on bureaucracy in 2008. In only two years then, $404 billion pesos more. In short: ineptitude, corruption, and waste by the bucketful.