Mexico’s New Refinery: The Wait is Finally Over

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In 2008, in the midst of the debate over oil reform, Mexican President Felipe Calderón promised to build a new refinery. Now, one year down the road, the refinery’s location and a $9 billion investment have finally been chosen in a process that was the victim of a slow-moving bureaucratic machine.

Whenever it had seemed that the final decision will at last be announced, some other delay appeared. The process to pick a spot, secure land and actually begin the construction has revealed many of the inefficiencies of the Mexican state, including the lack of a trustworthy land registry and the inability of both federal and state governments to move forward with their decisions.

Calderon’s choice—or failure to make one—surprised quite a few. Instead of keeping the old Mexican tradition of vertical orders, he started a contest for the refinery. States who felt they could manage the facility were to send proposals and studies to Pemex (the state oil company), and technicians in the company would then decide for the president. After months of bitter debate in the media between governors and pundits, oil experts announced the winner, or rather a winner and a half, on April 14. The state of Hidalgo, some 50 miles (80 kilometers) north of Mexico City, was selected as the preferred refinery location. But since Hidalgo is governed by the opposition Institutional Revolutionary Party (PRI), the president’s party (National Action Party – PAN) received a consolation prize: expansion of the existing refinery in Guanajuato, a state they govern. The “award” was given on the condition that states acquired and donated to Pemex the land needed for the refineries in less than 100 days.

The 100 days went by and neither Hidalgo nor Guanajuato managed to secure the land. Some of the owners couldn’t be found, while some of the ones that could be found didn’t appear on the land property registry. Some parcels even turned out to have multiple owners on record. A week after the deadline, both states claimed to have the necessary land and were struggling to convince Pemex to build the refinery. But the decision remained in limbo, with the ball in the court of Agrarian Reform Secretary Abelardo Escobar, who had to verify the land claims. Last week, the result was finally announced: a new $9 billion refinery will be built in Hidalgo and the Guanajuato refinery will get a $3 billion upgrade.

But with this decision, many questions have still arisen as a result of the refinery contest. First, the fact that Guanajuato and Hidalgo claimed to deserve the facility came as a bit of a surprise. Wasn’t Guanajuato only getting an extension of the one already in place? Actually yes, but it was later decided that it could still join the refinery competition for a reason that still is unclear. And why didn’t the President make a decision? Some would say it was a twisted way to explore alternatives to long-standing, top-down practices, but others—probably a majority—argue that it was sheer lack of stamina and an excess of political clumsiness. And why could neither Hidalgo nor Guanajuato manage to acquire the land plots on time? Perhaps without the old political brokers around—who would negotiate by force with agrarian leaders—states lack the capacity to effectively broker deals with land owners, or maybe it’s the general state of disarray of the states’ land records.

But the result cannot be argued. After a year of delays, Mexico is still without a much-needed new refinery; at least the construction can now begin.

*Eugenio Fernández Vázquez is a contributing blogger to AmericasQuarterly.org. He is an editor at ejeCentral.com.mx, an online news and blog portal on Mexican politics.

Tags: Felipe Calderon, Guanajuato, Hidalgo, Mexico, oil, Pemex