Fox Targets Graft in Mexico Oil Monopoly

For decades, Mexico’s ruling party was largely sustained by two notoriously corrupt pillars of the oil economy: the state-owned petroleum monopoly Pemex and the Oil Workers Union.

Petrodollars flowed smoothly to the state and the party, thanks to union leaders who used threats and violence to curb labor dissent. In return, they were allowed to assign drilling contracts, often to firms they owned, and to serve in Congress. Some threw lavish parties, wore extravagant jewelry and wagered embezzled funds in Las Vegas.

To the dismay of democratic reformers, much of this monolith survives. But two years after his electoral victory over the long-ruling Institutional Revolutionary Party, or PRI, President Vicente Fox has begun to challenge the core of its lingering power: the axis of political and union bosses.

Early this month, federal investigators charged three Oil Workers Union leaders with diverting $170 million from Pemex to the PRI’s 2000 presidential campaign. The union responded by threatening its first strike in 65 years, a prospect that last week shook Mexico’s financial markets and weakened the peso.

As Wednesday’s strike deadline nears, however, the monolith is cracking. The PRI is split, but its leaders refuse to support a strike. And dissidents in the 92,000-member union, which long has been a cornerstone of the PRI, are speaking out against the threatened action.

Pemex and union negotiators say they are now focused solely on wage issues that were on the table before the recent indictments. A strike could cause a new spike in worldwide oil prices, disrupt petroleum exports to the U.S. and cripple Mexico’s economy, but both sides are optimistic about reaching an accord by early next week.

Challenging the union and yet avoiding a strike would be a landmark triumph for Fox, who was elected on a promise to end corruption but, until now, had been reluctant to go after past wrongdoers.

Fox Seeks New Image

By facing down a serious challenge to that effort, according to the hawkish advisors who now have his ear, Fox is trying to shed the image of an ineffective, over-conciliatory leader who shies from political combat.

Other aides have been warning the president for months that a frontal attack on the PRI’s corrupt legacy would unleash waves of labor unrest and kill any hope of winning the party’s support for his free-market reforms. The PRI still controls major trade unions and remains the largest force in Congress, where no party has a majority.

But after talks between Pemex and the oil workers broke down last week, Fox accused union leaders of using the strike threat as “blackmail” to try to force a withdrawal of the indictments. “Combating corruption,” he declared Wednesday in unusually firm language, “is not on the negotiating table.”

“Many redoubts of power in the area of corruption still remain in our country,” the president added, “but change is on the way.”

The charges against the oil workers are part of the Fox administration’s largest anti-corruption case, one that promises to shed light on the inner workings of the world’s eighth-largest petroleum company and one of Latin America’s richest trade unions.

This year, prosecutors brought criminal charges against Rogelio Montemayor, the last PRI-appointed director general of Pemex, for authorizing the $170-million payment to the union. Montemayor now lives in Houston, a fugitive from Mexican justice.

This month’s indictment, detailing the passage of the money to the PRI campaign, names Carlos Romero Deschamps, the Pemex union boss; Ricardo Aldana, the union’s treasurer; and Jesus Olvera, a union section chief.

On Tuesday, a committee of the Chamber of Deputies, the lower house of Congress, launched an investigation of the three men to determine, within 60 days, whether they should be stripped of legislative immunity and sent to trial. Romero and Aldana are federal congressmen; Olvera is a state legislator in Tamaulipas.

In resisting the strike, Fox has won support from all three of Mexico’s major parties.

At first, the PRI defended the unionists. Party leaders denounced the criminal case as a weapon in Fox’s campaign to partly privatize Pemex. The company has been a symbol of Mexican nationalism since a PRI government nationalized U.S. and British oil companies here in 1938.

PRI Head Against Strike

“The oil workers union is part of the PRI, and it is our obligation to defend the union,” Sen. Manuel Bartlett said this week.

But party President Roberto Madrazo and other leaders have backed away from the union leaders, arguing that justice must run its course. To the chagrin of nationalists, Madrazo said he opposes a strike because it would “prevent us from fulfilling our international commitments to supplying the United States” with oil.

Both Fox and the PRI are attuned to public opinion. In a survey by the newspaper El Universal, 48% of respondents said fighting corruption is more important than avoiding a strike, while 29% think the opposite. Ninety percent said they wanted the accused union leaders to stand trial.

“Mexicans want an end to impunity, and this has become a galvanizing idea for Fox,” said Denise Dresser, a Mexican political scientist. “The PRI is learning a lesson: If it wants to gain strength in terms of its political position, it cannot be viewed as the party of corruption.”

Some oil workers have written “NO STRIKE” on their hard hats. Unionists claiming to represent several thousand oil workers plan a march in Mexico City on Sunday to protest the strike threat.

Such dissent was swiftly punished in the old days. Mexican labor law, which Fox wants to rewrite, still gives labor leaders power to get employees fired from the workplace for defying union mandates.

Tens of thousands of oil workers have marched in support of their indicted leaders in 12 cities over the last two weeks. Some said they were ordered to do so.

Yet the dissidents have openly voiced contempt for the indicted union leaders, calling them Mafiosi. “The unions cannot remain the last sector untouched if society is becoming democratic,” said Marcos Centeno, the leader of one dissident group.

After the indictments, the oil workers upped their demands for a pay raise to 15%, apparently trying to provoke an irreconcilable dispute. Pemex first offered 5.5%. Fox, touring an oil facility in Campeche state on Thursday, said negotiators would probably settle for about half the increase the union seeks. Pemex workers, privileged by Mexican standards, earn an average of $12 a day, plus generous benefits.

Since taking office, Fox has watched PRI lawmakers water down such major initiatives as tax reform and an Indian rights bill. Two months ago, in the face of machete-wielding farmers, he withdrew a multibillion-dollar project to build a new airport for Mexico City on their land in the village of San Salvador Atenco.

Although Fox remains popular, these setbacks have given Mexicans a sense that he is not in control.

One official close to Fox said the president decided that it was time to restore his authority and credibility.

Congress Still Combative

“If they remembered Atenco and thought his hand was going to tremble, they were wrong,” said the official, who spoke on condition of anonymity. “I believe that a series of internal decisions have now been taken by the union and the PRI to hang up their boxing gloves.”

That doesn’t mean, the official added, that Fox can now get his way in Congress. Madrazo, the PRI leader, has agreed to consider the president’s bill to privatize part of the energy industry.

But divisions within the PRI, sharpened by Madrazo’s opposition to an oil strike, may have hurt the bill’s chances.

Some analysts say the turmoil within the PRI could weaken the party in the long run.

“The PRI was never completely discredited,” said Mexico City pollster Daniel Lund. “There was a historic vote in 2000, but the old party retains enormous power. Unless the fragmentation continues and the PRI is reduced significantly in power, it’s hard to imagine the democratic transition in Mexico making a lot of headway.”