PEMEX, Cantarell And The Potential Implosion Of The Mexican State - Seeking Alpha

[hatrack]

EDIT

The second crisis relates to collapsing oil production and hence state revenue; the biggest Mexican oil field, Canterell, has seen production tumble 37% in a year and down 50% from its 2004 peak, equivalent to 1.2m barrels a day. For US energy security this is a full blown emergency; this field was a 'Supergiant', as big as the four largest discovered in US Gulf waters combined and Mexico is currently the third largest oil exporter to the US, after Saudi and Canada.

Amazingly, Mexican production fell 10% and oil exports dropped over 16% in the first 7 months of 2008. The faster decline in exports reflects soaring domestic demand. Canterell may be down to just 600k b/d with a couple of years, with devastating implications for Mexican tax revenues; 40% of all revenues are generated by oil, and Pemex, the state oil monopoly, pays an effective 61% tax rate. The company has been plundered by politicians for decades, and the resulting underinvestment is now proving disastrous, exacerbated by the fact that foreign companies with superior technology and experience have been barred by statute from involvement. Some economists estimate that Mexico will run out of oil within just 7 years, implying a near halving of the tax base just as hugely wealthy criminal warlords step up their challenge to Federal authority.

Oil exports will certainly have dried up on that timeframe. The balance of resources between the government and criminal groups will deteriorate rapidly in coming years, and the US may face a de facto criminalized narco-state as a neighbor with violence spilling across its Southern borders. Other implications would include a massive surge in illegal immigration from the current estimated 450,000 a year as impoverished Mexicans flee both declining living standards and rampant lawlessness, and the US losing energy security by becoming even more dependent on oil shipped huge distances from the Persian Gulf and West Africa.

Ironically, the success of US policies to support the Colombian government now threaten to undermine the strategically far more important Mexican one, a classic case of the law of unintended consequences in action. It will take more than that fancy new border fence or oil drilling in Alaska to address the looming crisis that will almost inevitably explode by the end of the new President's first term.

EDIT

http://seekingalpha.com/article/94209-mexico-running-out-of-oil-and-options

[Bigmack]

1. Woh! This is IMPORTANT

and should be banner headlines in this country. The potential impact of this on immigration is HUGE! Thanks for the post....I guess.... Ms Bigmack

[hunter]

2. I think the immigration aspect is exagerated...

Things could get plenty rotten enough in the United States... droughts and floods, crumbling infrastructure, no jobs, bad money.

During the last Depression U.S. citizens often turned against one another. In that case there would be no reason for someone to leave Mexico to face worse here, especially while Mexico is still producing enough oil and gas for their own domestic use.



There's little reason to assume the USA will remain "Number One." Historically, great empires do collapse.

Canada should worry.

[GliderGuider]

3. It depends on the relative rates of collapse.

If Mexico collapses faster than the USA in the near term (and it will) there will be a strong northward pressure until things get bad enough in the US to level the playing field.

And much of Canada is already getting plenty nervous, thanks.

[hunter]

4. In my elementary school district 40% of the kids speak Spanish at home.

Public school assemblies and school board meetings are entirely bilingual. (This used to drive me crazy because everything took twice as long, while the mundane and boring business seemed to take even longer.)

Places like my city, common throughout California, may seem hostile and dangerous to immigrant populations who identify with the politically conservative U.S. "homeland."

Our local police department doesn't deal with immigration issues at all except to export actual criminals -- if possible, and only if they think they can safely do so. The police are generally blind to immigration status because they must be, otherwise their ability to do their jobs in recent immigrant communities would be severely compromised. They can't go around asking to see people's papers.

In a very concrete sense communities like mine are already bound with Mexico -- what happens in Mexico will happen here, and what happens here In the U.S. will happen there. The fate of someone forced by difficult economic circumstance to leave their home in Nebraska is much less important, and that person from Nebraska is likely to find less opportunity here than someone who is familiar with the place.

The "holding back the tide" analogy is false. The border between the United States and Mexico has always been porous, and any exclusion of Mexican, Chinese, Filipino and other immigrants has always been local. There are still many communities in California that maintain their homogeneity by overt harassment and discrimination. In these places "Driving While Brown" traffic citations are not a joke, and discrimination in housing and hiring is real. During the Great Depressions this same exclusionary behavior was equally harsh against other U.S. citizens, especially economic refugees from Oklahoma and the rest of the dust bowl.

[Bigmack]

5. We live in Calif. in the winter

and I've seen much of what you speak of. And I agree with what you write.... Especially since we stole California from Mexico in the "first" place. I reckon there's a certain "fair play" in the Mexican migration to the north. But I DO wish there was greater prosperity in Mexico for the masses. I don't "begrudge" them the trip to el norte, but I just wish there was greater opportunity for ALL in Mexico. But, given the closing of the opportunity doors here too........ Ms Bigmack

[XemaSab]

6. California wasn't stolen

It was again, a question of migration fron different places.

I, for one, am happy to be a third generation Californian as well as an American.

I can't imagine that California under Mexican rule would have turned out better in any way.

[hunter]

8. It was stolen by Europeans -- Spanish speaking or otherwise.

There was a complex Native American culture established here in California, most of it now lost.

Europeans probably could have learned quite a bit about fire management from the California Indians if they hadn't been so busy killing them and destroying their cultures.

[Ah Xoc Kin]

7. the truth hurts

Mexico is not going to be more prosperous or turn the crime around.
I grew up, and started school as an embassy child
in Mexico City, and lived in El Paso, TX a number of years.
The quality of life in Mexico has steadily deteriorated.
The only productive action Americans can take is to bulk up border security.

[pscot]

9. However badly civil order erodes around here

Mexico under the drug lords will be a lot worse. There is likely to be a lot of killing while they sort things out.