KRWG

Addressing Corruption In Mexico

Jan 28, 2019

Commentary: I watched with horror the video coverage of the January 18 gasoline line explosion that took place in Tlahuelilpan, Mexico, which is in the state of Hidalgo, north of Mexico City. At the time of this writing, 85 people have been confirmed dead. The Mexican government has reported that the lines were breached by people stealing gasoline. Mexico has long struggled with thieves who steal gasoline from these lines and sell the product on the black market. This has been a common practice in Mexico. It has been reported that from January through October 2018, fuel lines have been illegally broken into 12,581 times or more than 40 times per day by gasoline thieves. 

Less than a month ago, Mexican President Andres Manuel Lopez Obrador (AMLO) addressed this problem by ordering the shutdown of gasoline lines in areas that have been hit the hardest. He is promising the creation of more storage tanks that can be a more efficient and protected distribution system throughout the country, and be better guarded. However, this action has caused outages and may cause more attempted gasoline thefts with tragic consequences such as those in Tlahuelilpan, which has had its lines breached 10 times in the last three months alone. As fuel becomes more scarce, people result to more extreme methods to access this resource.

It is estimated that the fuel thefts amount to the equivalent of more than $3 billion dollars of losses for PEMEX, the state-owned petroleum company. The Mexican army has been sent to protect the fuel lines in regions around Mexico, but it has not been able or willing to crack down on the escalating thefts. In many instances, outnumbered Mexican soldiers have been threatened or physically assaulted by mobs that are intent on stealing gasoline. 

AMLO is in a tight spot trying to stop illegal gas thefts, while putting a large portion of the population at risk by not having access to fuel. This is not only an economic problem, but one of survival for more vulnerable Mexican citizens. I frequently used to visit the region in which Tlahuelilpan lies when I was in Mexico City and I know that region well. To see the destruction wreaked upon this small town is hard to take. I would imagine that the Mexican government will have to shut down the section of pipe flowing through Tlahuelilpan for repairs or to intentionally stop gasoline thefts for the foreseeable future. This will further exacerbate the gasoline shortage problem and make life miserable for more people. 

AMLO was elected president on a platform of improving the lives of Mexican citizens, especially the poorer ones. A key element to his platform was weeding out corruption. The gasoline theft problem is not solely vested on the ground-level via desperate villagers. It stretches from the highest levels of PEMEX to local government officials and businessmen, to the person on the street who simply wants to pay a discounted price of black-market gasoline or possibly nothing at all. What is happening is reflective of the deep-seated corruption that AMLO faces not just in this particular industry, but in other sectors of the Mexican economy.

Since the appropriation of the Mexican petroleum industry in 1938 by then-President Lazaro Cardenas, PEMEX has always been referred to as the “people’s company.” However, it has always been held with distrust by millions of Mexicans who have seen scandal after scandal related to the operations of this behemoth. And now, apparently many Mexicans are taking the term “people’s company” literally by helping themselves to actual company products.

I’ve read reports that estimate that corruption in Mexico robs the nation of at least one percentage point of GDP annually. While that doesn’t sound like a lot, one has to consider that Mexico, with a $1.2 trillion-dollar GDP, ranks 15 on the list of the world’s largest economies. A loss of one percent due to corruption robs the nation of billions of dollars that it could be using to build infrastructure to bolster the economy and provide better healthcare and education for its citizens.

Reducing corruption in Mexico is not something that happens overnight, and many people scoffed at AMLO when he put an emphasis on this during his campaign. It will take years, not months or even one presidential term, to accomplish this task. There is probably no better place to start and make a strong statement than attacking corruption in PEMEX and in gas distribution throughout the country. Unfortunately, as many Mexicans who are experiencing fuel shortages know first-hand, it will also be painful. 

Jerry Pacheco is Executive Director of the International Business Accelerator, a non-profit trade counseling program of the New Mexico Small Business Development Centers Network, and the President/CEO of the Border Industrial Association.  He can be reached at 575-589-2200 or jerry@nmiba.com