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Reform, sovereignty collide in Mexico

MEXICO CITY — Even with oil prices at record highs, Mexico's state-run oil company is managing to lose money.

But a presidential plan to fix Petroleos Mexicanos by inviting foreign help is riling deep-seated emotions over sovereignty — and causing a paralysis that could doom the United States' third-largest oil supplier.

Leftist legislators have padlocked the doors of Congress, camping out in the chambers for two weeks in protest. Opponents on the right have attacked them in a national TV ad, invoking images of Adolf Hitler.

Everyone in Mexico seems to be swept up in the fervor.

While President Felipe Calderon's administration calls the congressional lockdown an international embarrassment, Fernanda de Jesus Arriola gives up her afternoon soaps and takes her young children to march in Mexico City.

"Calderon is a right-winger who is going to take away our way of life," said Arriola, 35, as her family walked with hundreds of protesters. "It's the same as strangling us, because foreign oil companies are exploiters who will enslave us."

Pemex is rapidly running out of the oil that provides more than a third of Mexico's federal budget. Finding more will require drilling thousands of feet below the surface of the Gulf of Mexico. Nearly everyone agrees that Pemex lacks the capability to accomplish this without serious reforms.

But Mexico's Constitution bans Pemex from joint ventures with private and foreign companies that have the technology and expertise to find oil in such deep water.

Calderon has backed off the politically explosive idea of changing the Constitution, proposing merely to ease some state restrictions on involvement by private companies.

His plan still retains much more state control than other Latin American government oil monopolies do. Even Cuba is working with outside companies to drill in the gulf.

But while Mexicans may shop at Wal-Mart and eat at McDonald's, oil is a birthright. The sentiment dates back to March 18, 1938, when President Lazaro Cardenas kicked out the U.S. and European oil companies that refused demands for union wages.

Every year on that day, schoolchildren learn about the eviction of foreign companies.

Women offered their jewelry to establish the national oil company. Arriola says her grandparents gave their chickens and pigs, and she is determined to protect the company.

Protesters are spurred on by leftist leader Andres Manuel Lopez Obrador, who commands tens of thousands of protesters.

But oil expert Justin Dargin says Mexicans' passion for their oil could doom the company — and possibly the country.

The national turmoil is keeping anyone from dealing with declining production, leaky pipelines and a lack of technology to tap into potential reserves in the gulf, where U.S. companies are busily preparing to drill.

Mexico could lose its standing as a major oil exporter in five years if it does not find more oil, experts say.

"We're talking about the vitality of the Mexican state. That's how important this issue is," said Dargin, a research fellow at Harvard University.

The impasse isn't likely to be resolved soon.

Lopez Obrador said Thursday that his protests had already succeeded by preventing what he called "el fast-track" for Calderon's reforms.

On the other side, a conservative group ran television spots comparing Lopez Obrador to Hitler. The spots were pulled this week after they outraged viewers.

For Maria Elena Hernandez, 53, much more is at stake than Mexico's image.

The retired secretary joined demonstrators singing the national anthem to police guarding an office building where legislators have fled in hopes of getting some work done.

"If we let down our guard, the Americans would come in and install their oil workers," said Hernandez. "Soon they would be telling us that we have to pay rent to live here."

Reform, sovereignty collide in Mexico 04/24/08 [Last modified: Thursday, October 28, 2010 11:55am]

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