President Salinas Shows the Oil Card : A stunning crack in long-held Mexican policy

Like a magician who keeps pulling rabbits out of a hat, Mexico’s President Carlos Salinas de Gortari came up with another surprise at his Monterrey summit meeting with President Bush. There the energetic young leader who has broken so many of the totems of Mexican politics began chipping away at the biggest one of all: his nation’s oil industry.

Treasury Secretary Nicholas Brady announced that Salinas has requested a $1.5- billion loan guarantee for PEMEX, Mexico’s state-run oil monopoly, from the U.S. government. If approved, the money would be used to contract with U.S. oil companies to drill for Mexican oil. For their own political reasons, spokesmen for Salinas downplayed the significance of the announcement, saying that it does not mean Mexico’s oil fields are now open to foreign exploitation--merely that a closed door had been opened just a crack.

But even if this is only a small step, it’s still dramatic. It’s a step in a direction that no Mexican political leader has been willing to take for more than half a century, since revered former President Lazaro Cardenas nationalized the Mexican holdings of U.S. and British oil companies in 1938. Mexicans consider Cardenas’ decision a declaration of economic independence, and to them it’s every bit as significant as what the U.S. Founding Fathers did in 1776. In Mexico’s political lexicon, oil is commonly called “the national patrimony.”

In effect, Salinas is offering Bush yet another opportunity to help him open up Mexico’s heretofore closed economy to the rest of the world. It should be seized quickly. For the economic circumstances are such that Salinas may actually be able to convince his people and a vociferous political opposition--led by, among others, Cardenas’ son Cuauhtemoc--that the oil industry is being opened to U.S. investment not because the gringos want it, but because Mexico needs it.

Mexico has the world’s fourth-largest oil reserves, and they may be even grander than that. One reason nobody knows for certain is that PEMEX is limited in its ability to look for more oil by Mexico’s financial problems. That is also why Mexico has benefited only slightly from the recent upsurge in oil prices caused by the Persian Gulf crisis. Its extracting and refining capacities are already at their limit because there is simply not enough capital left in Mexico to build more refineries and look for more oil, especially in the Gulf of Mexico.

Salinas knows the closest place to find the money and technology PEMEX needs is just across the border in states like Texas and California. Now he must convince his compatriots that, in asking the traditionally mistrusted gringos for help, he’s not surrendering to the economic imperialism Mexicans defeated in 1938. It won’t be easy. Politicians and oil men in this country can help by not boasting about this opportunity or appearing overly eager to march into Mexico like triumphant Marines.

But in the end it will be up to Salinas to sell this deal to his countrymen. If he does, it will be the most impressive part of his act so far.