Self-Imposed Limits

August 10, 2025

Luis Rubio

Macondo, the fictional town invented by Gabriel García Márquez in One Hundred Years of Solitude, represents a place where myth and reality intertwine to explain the human capacity for adaptation in the face of life’s and history’s twists and turns. When one reads—or rereads—the novel, it’s impossible not to associate it with the mythology that characterizes governments identifying as leftist. As soon as they adopt that label, they take on a set of absolute values that become burdens, hindering their ability to advance their own objectives.

No one can doubt the historical importance—economic, political, and symbolic—of oil in Mexico. Oil is a central component of Mexican nationalism and has been the most important source of funding for the construction of modern Mexico throughout the 20th century. Its financial contribution is indisputable and monumental. But that is history, not today’s reality. Taking PEMEX as an entity, it contributes ever less to the public coffers and has become an increasing burden. The question is whether the government will have the ability and willingness to act in the face of this reality or if it will continue to squander scarce fiscal resources to preserve the status quo of a poorly managed, corrupt, and increasingly costly company.

I’m not an oil expert, but PEMEX’s reports and the new strategic plan leave no doubt: even with all its excessive costs and the corruption eating away at it, oil extraction remains profitable and continues to yield positive figures. However, the refining division of the company systematically and increasingly loses money. Not only that —the new refinery, if it ever becomes operational- is located far from the markets it would serve, and there’s no pipeline connection to transport its production. In other words, beyond being costly in its design and construction, its operation will multiply the already significant losses of the company. Any sensible administration would reach the obvious conclusion: keep producing oil and shut down refining. Otherwise, the drain on public finances will be so massive that it could end up paralyzing—or even bankrupting—the government in the not-so-distant future.

This is not an ideological issue. Looking around the world, there are exceptionally successful state-owned companies that yield positive returns to their governments and citizenry. In India, for example, the state-owned oil company IOCL is listed on financial markets, has professional managers, and a board composed of independent individuals who oversee every decision and ensure independence from political interests.

Aramco, Saudi Arabia’s oil giant, is also listed on the world’s major stock exchanges and is managed by technical and professional experts, many—if not most—of whom are foreigners. As the main source of funding for the Saudi government (by magnitudes far exceeding anything PEMEX has ever been), the company’s mandate is to exploit the country’s finite underground resources in a sustainable manner. During the pandemic, the company continued to pay its contractors and service providers to ensure its smooth operation—one reason it currently has no outstanding debts hindering its performance, unlike PEMEX.

Both India and Saudi Arabia follow similar principles in areas such as metro construction, toll roads, and refineries. Instead of treating state-owned companies as decorative items or fiefdoms for partisan, union, business, or political interests, they see them as key drivers of national development.

The problem with PEMEX (and the CFE) is not that they are state-owned, but that they function as political bureaucracies dedicated to everything except their formal purpose. With a few notable exceptions, nearly all their past managers have represented private interests, seeing their time at the company as an opportunity to profit rather than to contribute to the country’s broader development.

The question the government must ask itself is whether the status quo is an unchangeable and immovable reality or whether PEMEX’s new reality—ceasing to be a source of revenue—constitutes an opportunity to make difficult but inevitable decisions. Sooner or later, this administration or a future one will have to face the facts. The issue is what matters more: the country’s development (and the government’s financial survival) or the outdated mythology that no longer holds up.

In an ideal world, the government would undertake reform at PEMEX and shut down its refining operations. The idea of privatizing the company—a notion some still dream about—is simply absurd. But there are far better ways to manage such a vast source of wealth than the way it has been done, which has essentially amounted to privatization through corruption. As the old saying goes, every crisis is also an opportunity—and PEMEX today represents an exceptional one.