Mexico May Be Forced To Privatize Oil (2nd biggest supplier to USA)

October 27, 2006

Even as popular pressure grows around Latin America for a stronger state hand in developing natural resources such as oil and gas, Mexico's president-elect Felipe Calderón may be forced to consider putting more power in private hands.

The country's flagship oil company Pemex, has been a point of pride since the industry was wrenched from foreign hands and nationalized in 1938. Its revenues alone cover one-third of Mexico's budget.

But prosperity from years of record oil prices has allowed Mexico to postpone what most agree are much-needed reforms. And now, as production at Pemex's top oil field declines, pressure to find new fields is mounting. But industry analysts say Mexico's constitutional restriction on foreign direct investment will hamstring costly exploration efforts, and possibly disrupt the flow of oil, 80 percent of which heads to the US.

Indeed, with his fragile political mandate, Mr. Calderón may find that oil becomes the issue that will define his presidency.

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Mexico is the second-biggest supplier of oil to the US, favored because of its proximity and relative political stability.

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http://www.cbsnews.com/stories/2006/10/27/world/main2130902.shtml