Mexico Discovers New Oil
But Still Squanders Opportunities
By Daniel Muniz

Mexico, an oil producing nation, suffers the same fate of many Third World countries. Instead of using its rich natural resources to transform an underdeveloped financial system into an economic powerhouse, it has squandered away its wealth, and perhaps its entire future.

In all truthfulness, Mexico should not be in abject poverty as it is right now.

Its oil reserves were vast and they have always had a ready market of buyers, especially from countries like the United States who do not want to be entirely dependant on the blackmailing OPEC cartel.

Even so, their black gold never financed any extensive worthwhile economic expansion or created any substantial infrastructure as it should have. In fact, it did very little to lower the country’s unemployment or ease enough poverty.

Today, Mexico still does not have a true middle class and it does not have many of the financial capabilities that the oil revenues should have provided. Its economy is not much different than the other poverty-stricken oil producing countries such as Venezuela, Nigeria, Angola, etc. Many of these governments are plagued by endless corruption and gross mismanagement of resources.

In fact, Norway is about the only Democratic country that truly utilized its oil wealth to benefit its entire society.

Yes, there are plenty of undemocratic countries that have turned its oil into a thriving economy, such as Kuwait, Saudi Arabia, UAE, etc. But those governments are not democracies and they have absolutely no intention in becoming an open and free society. Instead, such prosperous authoritarian nations simply used their oil wealth to upgrade their own personal finances. But, they also had the foresight to partner with foreign investors that already had the technology and know-how to properly utilize the oil. And in hindsight, many of them made wise business decisions.

However, struggling countries like Mexico, Venezuela, and others have always had a rough and tumble political system that is rigged to benefit an elite ruling class. Recently, Mexico has risen above its imitation democracy to have a multi-party system but the economy and its government is still rife with corruption and inefficiencies.

And to add insult to injury, Mexico is very much a socialist country. They abhor the free markets of the United States and they felt that the government could do a much better job in managing and in creating wealth for their society. As a result, its major industries are managed by state-run companies.

In addition, many Mexican laws prevent foreign investors from becoming an active participant in their economy. With the exception of certain manufacturing sectors, the country is almost paranoid of any meddling done by outside investors, especially from the United States.

But if the free market is so terrible, then what do they have to show for it after all of these decades when the government was managing its oil?

Poverty has not been alleviated and much of Mexico’s infrastructure is grossly underdeveloped. Law and order is still not prevalent in the drug infested parts of the country. But most importantly, where did all the oil revenue go to?

And sadly, it seemed that Mexico’s oil would run out. Its current reserves were being depleted and it wouldn’t be long until oil would have to start being imported.

However, a newly discovered deep-water reserve may eventually produce 10 billion barrels of crude oil. According to government estimates, this new discovery could very well exceed the reserves of their largest oil field, which is the enormous offshore field Cantarell.

Consequently, Mexico gets another chance to develop its oil wealth.

Unfortunately, this next chance doesn’t seem to hold much promise if everything remains the same.

Mexico’s oil industry is a monopoly and their government run company, Petroleos Mexicanos or Pemex, is the only organization, allowed by law, to extract the oil from the oil field. Instead of forming partnerships with foreign companies that already have the expertise and the deep water technology; Pemex would have to go at it alone.

Pemex already stretched the rules by allowing a foreign company to drill the first well. However, the Mexican Congress has already blocked any further efforts of future collaboration even if it costs more money and takes more time.

Again, suspicion of the free market takes precedence. And again, Mexico stands another chance in wasting away its opportunity to lift the country out of abject poverty.

It is disturbing to think that this second chance will be squandered. Unfortunately, too many people believe that the government can do a better job at managing wealth than the efforts and creativity of individual people. But look what the government has already done to the country’s oil revenues. And this is supposed to be better than the Free Enterprise that the United States exercises?

Socialism has failed and it has failed spectacularly.

Unfortunately, there are too many people who loathe the idea of a Free Market that creates wealth even though socialism has yet to lift the masses out of poverty. Until more Third World countries realize that Free Markets and Free Enterprise are the engines of economic growth, they will continue to remain in the mire of hardship and deprivation.

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