Mexico Replaces Oil Monopoly Boss

The general director of Mexico’s state oil company was replaced Monday amid a scandal involving the use of corporate funds to pay for his wife’s plastic surgery.

The departure of Raul Munoz Leos from Petroleos Mexicanos, or Pemex, comes a week after Mexican newspapers detailed how his wife, Hilda Ledezma Mayoral, billed the company for liposuction treatments costing a total of $12,000 last year and this April.

Although Pemex insisted that any of its employees and their dependants were entitled to similar medical reimbursements and that Munoz Leos repaid the company, the damage was done. Energy Secretary Fernando Elizondo announced Monday that he was replacing him with Luis Ramirez Corzo, the former head of Pemex’s exploration unit.

President Vicente Fox’s office issued no comment on the move. Fox was on a state visit to Canada last week when the scandal first broke and withheld judgment on the Pemex chief at the time, while saying Mexico was committed to transparency and a “settling of accounts.”

Analysts said Munoz Leos’ major misstep, however, may have come last month when he signed off on a $700-million benefits package for oil workers as part of a new contract with their union. Even members of Fox’s Cabinet and Munoz Leos’ own board of directors denounced the package as excessive.

Oil workers’ benefits are a sensitive topic here. They were the basis of “Pemexgate,” a 2002 scandal in which Munoz Leos’ predecessor was alleged to have misappropriated $140 million of company funds disguised as worker loans and other benefits to finance the Institutional Revolutionary Party’s losing presidential candidate in 2000.

Fox and his National Action Party, which ended seven decades of PRI rule by sweeping to power that year, had long complained that the former ruling party used Pemex funds for illegal political ends. PRI still controls the workers union, known by its Spanish initials, STPRM.

But the revelations about the medical bills of Munoz Leos’ wife “sealed his fate,” Mexican Sen. Oscar Canton said Monday, by weakening his stature as a force for efficiency and sound business practices in the bloated monopoly.

When Fox named Munoz Leos to head Pemex after the 2000 election, the president called the former Dupont executive just the man to spearhead an overhaul of the monopoly. The company’s payroll of 120,000 workers is notoriously inflated -- twice that of Venezuela’s oil monopoly but with roughly the same petroleum output.

But Munoz Leos’ attempts to trim the fat, reduce the payroll and reorganize Pemex along corporate models largely failed. So did his drive to appoint outside businesspeople, instead of government officials, to the board of directors in an attempt to lessen its political focus.

Munoz Leos had some successes during his tenure. He convinced the Finance Ministry, which relies on Pemex oil sales for 30% of government revenue, to leave more funds on the table so the company could reinvest in oil exploration, said Luis Labardini, partner at Marcos & Associates, a Mexico City-based consulting firm. Pemex now has 60 oil rigs drilling in the Gulf of Mexico, up from about 20 at the start of Fox’s term.

Investing in exploration is important because output from Cantarell, the offshore field in the gulf that provides more than half the company’s production, is expected to decline within five years, George Baker, director of Houston-based Mexico Energy Intelligence, said Monday.

Pemex oil production has risen over Munoz Leos’ tenure.

Mexico exports about 1.6 million barrels of oil a day to the U.S., placing it among the top three exporters to America, along with Saudi Arabia and Canada.

However, Baker said Munoz Leos wasn’t up to the political task of pushing reforms through an opposition-controlled Congress.

Munoz Leos’ major goal of attracting about $8 billion in foreign capital to finance natural gas exploration has been stalled by court challenges, noted David Shields, an independent Mexico City-based oil industry analyst.

Opponents claim the contracts violate a constitutional ban on foreign exploitation of Mexican hydrocarbons.