As wells dry up, Mexico could be forced to privatize oil

So far, Calderón has reiterated that he will not consider private direct investment. "There will be deliberations that we Mexicans will have in Congress to find the means by which Pemex can access the probable reserves, particularly in the deep waters of the Gulf of Mexico," he said at a September press conference. "But, for now, I will be very respectful of national legislation on the matter, which doesn't permit foreign investment in petroleum extraction...."

In its legislative agenda, his incoming administration has also remained unclear when it comes to its energy plans, focusing on the need to "modernize" and increase investment in Pemex.

"These things are very vague, one could interpret them as minor fiscal reforms, or ... major constitutional reforms," says Allyson Benton, an expert on economics and politics at the CRTE in Mexico City. "They want to wait to see what kinds of coalitions can be built around these things."

When it comes to obtaining gasoline here, drivers have only one, decidedly Mexican, choice: the green and red pumps at Pemex. That's the way many want it. Calderón barely squeaked out a victory in the July 2 election, winning by just half a percentage point. While his rival, Andrés Manuel López Obrador, disputed the race this summer, López Obrador used many of his protest gatherings to rally supporters about keeping foreigners out of the energy sector. Each appeal brought wild applause.

Indeed, the divided electorate means that Calderón is unlikely to find the political capital to challenge nationalization, even partially. "It is too much of a political danger for them under the conditions they won," says Miguel Tinker-Salas, an oil and politics expert at Pomona College in California.

Mr. Shields puts it more starkly, saying that allowing international companies back into Mexico is tantamount to letting "the invader back in," he says. "There will be a revolution before there is foreign direct investment."

Those against foreign investment received a boost this month when businessman Carlos Slim, the third-richest man in the world according to Forbes magazine, announced that Mexico did not need foreign help to reach deep-sea oil.

Some analysts say that more foreign investment is not the only solution for Pemex. Mr. Tinker-Salas, for example, says that with more oversight, Pemex could become more efficient.

Ms. Benton says that Calderón might have the most room for change by addressing fiscal reform. One option would be to lift the heavy tax burden from Pemex, which sees nearly half of its earnings go to government coffers, so that Pemex can focus on daily operations. The budget is so stripped, she says, that Pemex has to import a significant portion of its refined products.

But some still hope that Calderón will be able to open the industry to more private participation, beyond the current flat-fee subcontracts that foreign companies can participate in. The long-ruling Institutional Revolutionary Party (PRI), for example, moved to the right of the spectrum on the issue this election, says Mr. Nacif. The PRI is also more likely to cooperate with the Calderón administration because it is in a weaker position, having dropped to the third-largest party in Congress.

But more than anything, the reality of dwindling oil production may help to change sentiments. "One of the factors that drives policy change everywhere is the deterioration of the status quo," says Nacif, "and the perception is that the status quo is worsening. It's going to help [Calderón]" move toward opening the industry up to private firms.

• Ms. Llana is Latin America correspondent for the Monitor and USA Today.

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