Tightrope
El Financiero, February 28th, 2025
Two major news stories today as I write for you. On one hand, Pemex’s report on the close of 2024; on the other, the rushed extradition of three dozen drug traffickers, apparently without following normal legal procedures. These are just two more examples of the catastrophic failure of the last administration—a failure we will continue paying for.
Pemex reported a net loss of 620 billion pesos for the year—about 4 million pesos lost in the time it takes you to read this article, nearly 2 billion pesos per day. However, it paid only 124 billion pesos in crude extraction fees, because the government decided it could charge Pemex less than it charges private companies. This so-called rescue is nothing more than financial destruction. Pemex’s net contribution to the country—the sum of net profits and tax payments—was negative 500 billion pesos, the worst result in history. The only comparable situations were in 2015, due to energy reform adjustments and a major peso depreciation, and during the pandemic. Now, there is no excuse.
During the last administration, refining (Industrial Transformation) accumulated a loss of 1.2 trillion pesos. This should never have happened. In the previous administration, studies were conducted on how to reduce losses in refining, concluding that operating refineries at around 50% of installed capacity would break even. Operating above that level resulted in losses due to technical and human inefficiencies and the low quality of crude being refined. But the last government decided to push production to the maximum. In their limited vision, producing more meant earning more. They even named their strategy: "For the Rescue of Sovereignty."
It was a massive lie. Over the six-year term, Pemex burned through more than 2 trillion pesos, yet it failed to reduce the company’s negative capital. Today, Pemex is worth negative 2 trillion pesos. The 2024 fiscal year alone reduced national wealth by another half a trillion pesos. We still import more than half of the gasoline we consume and most of the gas we need to generate electricity. Shockingly, in 2024, Pemex even lost money in Exploration and Production—and at Deer Park! Today, Pemex is the greatest threat to Mexico’s public finances, and we are one step away from a full-blown crisis. There is nothing sovereign about this.
The second news story follows the same pattern. Suddenly, without due legal process, 29 drug traffickers held in Mexican prisons were extradited to the United States. Just a few days ago, El Mayo Zambada demanded repatriation, claiming that he had been illegally taken from Mexico. Now, he and 29 others will face trial in the U.S. This is probably for the best, especially given that Mexico’s justice system is collapsing, but I fail to see any sovereignty in this decision.
Perhaps, to stay true to the last government’s approach, they sent them off with hugs before boarding the plane, but the results in security and energy are disastrous. In healthcare, complaints are piling up as hospitals shut down due to lack of supplies. In education, discontent is growing. Protests, which miraculously disappeared during the last administration, have now been happening for five months over all sorts of issues. In Congress, the president is failing to pass a law she cares about.
We close February quite literally on a tightrope. Let’s hope we don’t get the final push.