Easy Life Is Ending in Mexico’s Oil Towns

Guiding a sedan through this sun-baked settlement of tidy green and yellow cottages, Mayor Simon Zea can barely contain his pride in The Town That Oil Built.

Here, he indicates with a pudgy finger, is the grammar school funded by Pemex, the state-owned oil giant. Further on is the Pemex General Hospital. Over there is the Pemex day-care center with its motherly staffers in pink gingham Pemex smocks.

The mayor lives in the Pemex-built “workers’ neighborhood,” showers with free, Pemex-supplied water, drives on roads laid by Pemex.

In Ciudad Pemex, even the beauty queen--”The Flower of Petroleum”--rides on the oil company truck in the town’s annual parade.

“Everything we have is thanks to Pemex,” the gray-haired Zea said, adding cheerfully: “The [Mexican] government does nothing.”

But today, startling change is sweeping the country. And nowhere is it more evident than in its vast oil patch, which is filled with dozens of Pemex company towns.

After decades of treating Pemex as an eternal wellspring of wealth and national pride, official Mexico has concluded that the world’s opening borders make this impossible. Now it is trying to do the unthinkable: run the oil company as a company.

Pemex has slashed jobs, cutting Latin America’s biggest corporate payroll in half. Generating a national uproar, the government is trying to privatize one of the company’s four operating divisions. The idea is to raise revenues and get the government out of petrochemicals.

For Pemex company towns, as dependent on oil as many California communities once were on the military, the change is gut-wrenching. For millions of Mexicans in other areas, it’s an ideological revolution.

“Pemex was one of the country’s icons--along with the Virgin of Guadalupe, the army, the red, white and green flag,” said George Grayson, a professor at the College of William and Mary in Williamsburg, Va., who has studied the company.

“There is a lot of nationalist mystique that infuses Pemex.”

Since 1938, when the government seized British and U.S. oil companies here and created a state monopoly, Pemex--or Petroleos Mexicanos--has symbolized Mexico’s independence.

Providing cheap energy and billions of tax dollars, the monopoly helped make Mexico an industrial nation. Its massive steel pipelines and refineries were a chest-puffing sign that Mexicans could run a sophisticated industrial giant--without foreign help, thank you.

Today, southern Mexico is dotted with Pemex towns. With their modern hospitals and schools, their concrete houses with swing sets and Ford pickups, the towns reflect the upward mobility that Pemex has represented for thousands of peasants.

Mayor Zea is among them. He is one of 12 offspring of a poor farmer in the southern state of Chiapas. During three decades as a Pemex safety inspector, he earned enough to put his five children through college.

Even today, the well-paid Pemex life is the envy of many. The company operates the nation’s fifth-largest network of medical clinics. At the insistence of the powerful oil workers’ union, it established cradle-to-grave benefits and runs 82 schools, 20 sports centers and 74 public libraries.

It even chips in to defray the cost of workers’ gasoline.

“There are university professors sweeping floors, just to have a space” in Pemex, said Encarnacion Hernandez, a guard at the Pemex hospital here.

But these days, nervousness is widespread among the 10,000 or so residents of Ciudad Pemex, which was founded in 1958 amid natural-gas fields in tropical Tabasco state.

Like millions of Americans, they are having to say “adios” to the notion of lifetime employment.

“Before, if you had work, it was definitive. It was a job until you retired,” said Maria de Jesus Diaz, a 28-year-old secretary who was driving a white Pemex truck. She was picking up her daughter at the Pemex day-care center. “Now, it’s no longer secure.”

Since 1987, Pemex has slashed its payroll from 210,000 to about 106,000. Here in Ciudad Pemex, there are 2,868 employees--a 75% decrease from the start of the decade, Zea estimated.

The downsizing is widely praised by oil analysts. They say the company, encouraged by Mexican political leaders oriented toward a free market, has wrenched back control from a corrupt oil union that padded employment rolls.

Under the leadership of Adrian Lajous, a dynamic, British-educated economist, Pemex now is as concerned with benchmarks as it is with benefits, analysts say. Lajous has said that Pemex can best serve the nation by being an efficient oil producer--not just a job producer.

“[Lajous] has been obsessed, and rightly so, with asking the question, ‘How efficient is Pemex compared to other companies?’ ” said George Baker, an Oakland-based expert on Mexican energy.

Talk about efficiency. After cutting the payroll by half, Pemex still produces as much oil as before--about 2.5 million barrels a day, making Mexico the world’s sixth-largest producer.

Lajous and his predecessor, Francisco Rojas, have been changing a culture in which employees were routinely no-shows and a corrupt union collected a 2% fee on all service contracts given to outside firms.

In Pemex’s 52-story glass-and-steel headquarters in Mexico City, the talk may be of such culture changes. But at Ciudad Pemex’s day-care center, around the swimming pool at the Oil Workers’ Club and at the free cooking classes at the Pemex social club, the talk is of a way of life that is ending.

For years, a Pemex job was a birthright--literally. Under union rules, fathers bequeathed their places in the company to their sons.

“Friends of mine in high school used to say, ‘Why waste five years studying [in college] if you already have a secure job?’ ” said Simon Zea Jr., the mayor’s 30-year-old son, who earned an MBA and works in Pemex’s contracts department. “Some of them were fired. They have no job, no career--no options.”

In mostly rural southeastern Mexico, where much of the oil industry is located, few other well-paying positions are available. Eduardo Mendez, 28, did contract work for Pemex until 1994, when the company trimmed many such workers. He said he’s struggling to get by on his 120-peso ($16) weekly salary as a shop attendant. At Pemex, he earned seven times that amount.

“In the store, I earn very little. That’s why I’m still a bachelor,” he said quietly, watching his niece and nephew play by the pool at the Oil Workers’ Club.

His only option, he said, may be to leave his hometown.

Hundreds of others have departed Ciudad Pemex since the layoffs and early retirements began in the late 1980s. Reflecting the drop in employment, bus service to such glamorous destinations as Mexico City and Veracruz has been cut back.

“There are fewer dances,” mused 67-year-old Enrique Monroy, a hardware-store owner who once constructed buildings for Pemex. Recalling the town’s heyday in the 1970s, when world oil prices soared, he declared: “During the boom period, Ciudad Pemex had it all.”

Bernardo Sanchez, a 42-year-old engineer who runs Ciudad Pemex’s petrochemical operations, said he understands the culture of the petrolero. His father also was an oil worker.

“In my life, I owe everything to Pemex,” he said in an interview in his office, decorated with Pemex awards and a diploma from Northwestern University’s J. L. Kellogg Graduate School of Management.

But the company, he said, has to bow to the winds of progress. Companies the world over are reducing payrolls to increase their efficiency.

“Pemex can’t remain apart from this change,” he said.

Some employees agree.

Unlike his father, Simon Zea Jr. enthuses about Pemex’s new programs in total quality management, the statistics-based philosophy of continuous improvements straight out of an MBA textbook. “Before, people didn’t work as they should,” he said. “Today you have to work . . . and with a certain quality.”

That emphasis on quality is just one sign of how Pemex is shifting onto a more commercial footing. There are many others.

The company has allowed foreign firms to drill in the oil-rich Bay of Campeche. It has split into four units that charge one another for their products. It soon will permit private Mexican and foreign companies to sell natural gas here. It is paying more attention to the environment it once thoughtlessly despoiled. Hoping to free up more money for investment, Pemex is negotiating with the government to lower its taxes--now 67% of sales.

In the boldest change yet, the government of President Ernesto Zedillo this year plans to sell 61 petrochemical plants to private interests. The goal is to allow Pemex to focus more on its profitable core business: oil exploration and drilling.

But in a sign of the continuing sensitivity about changing Pemex, the privatization has sparked noisy, nationwide demonstrations. Opposition politicians claim the nation is selling its patrimony. Pemex workers fear for their jobs.

Even professionals as dedicated to change as the younger Zea are nervous.

“The people who buy the plants will give foreign workers an advantage over Mexican workers,” he said. “People say if they keep cutting [jobs], Ciudad Pemex will disappear.”

In fact, it’s unlikely foreign firms would bring in large numbers of foreigners. And none of the plants marked for privatization is based in Ciudad Pemex. But that hasn’t stopped nervous speculation here.

“We suppose the ultimate goal is to privatize the entire company,” muttered Raul Becerra, a 28-year-old labor representative.

Pemex denies such an aim. But in the face of so much opposition, the government has been forced to partially backtrack from its plan to welcome foreign investors.

Now, officials say bidders that are majority-owned by Mexicans will be given preference in many plant sales.

To Sanchez, the Pemex manager, opponents of the privatization effort are burying their heads in the sand. Foreign investors would bring fresh capital to the investment-starved Pemex petrochemical plants, he said.

“The country has to live with reality,” he said. “We need investment.” And Pemex workers can hardly complain, he said. They have lived the good life. They earned enough to educate their children. They should be able to move beyond Ciudad Pemex.

“The oil workers who lived here had a chance to project their family to another level,” Sanchez said. Their children “don’t have to depend on the town mine, like in the U.S. or Europe.”

Even a few Pemex workers acknowledge that the company could use further shaking up. Despite the reforms, they say, corruption and laziness persist.

“Pemex belongs to everybody, and nobody,” said Hernandez, the hospital guard. “If it goes into private hands, there will be more control, less waste.”

Mayor Zea said state ownership of Pemex has been like a religious doctrine for Mexicans. But even if it’s painful to sell part of the company, he said, Pemex’s interests must come first, for the sake of the next generation in the oil patch.

“The important thing,” he said, “is that my grandchild, if he has to work in Pemex, finds a company that is well-administered and strong.”