Schettino on Pemex

Macario Schettino weighs in on the bad news from Pemex earlier this week.

Now, the million and a half daily barrels that we consume in Mexico also generate oil profits, and that's how it will stay. The government income will depend, in this case, only the international price of crude and the exchange rate. At a greater price, more profits, and a more devalued peso, more resources in pesos for the government.

But, however we look at the books, we should be clear that the goose that lays golden eggs has died, and although a very nice business remains, we can no longer get out of bed at 12. Mexico has the immense fortune to have guaranteed coverage for the internal demand of energy, but it no longer has the miracle of abundance. It can no longer waste.

What this means is not a terrible energy crisis in Mexico, but only that a strong adjustment will be necessary in public finance, in addition to a correction, just as strong, in the international trade balance sheet. What oil can no longer do is substitute for tax payment and competitiveness. If we don't cover the needs of the state, there won't be oil to use. And if we don't manage to generate the resources to cover our demand, there won't be oil to give us dollars.

At bottom, this means that we will have to work more and better, and pay more taxes. The truth is that given how we have managed the country, it continues being a miracle that it's not exhausted, and that we still have opportunities. It's true that having to work sounds horrible, but so it goes. There's still a way to fix things.

This is more optimistic than most of Schettino's recent (and not so recent) commentary on Pemex, which is perhaps a bit surprising given the consistency of the bad news. Then again, as Schettino alludes to and as he has written explicitly in the past, removing Mexico's dependency on oil, while sure to be painful, is a key step in modernizing the economy and the public accounts.