In an age when even Fidel Castro has rolled out the welcome mat for foreign energy companies wanting to drill for oil off Cuba's shores, the Mexican left is stubbornly vowing to uphold the national government's monopoly on oil and electricity production. State ownership of energy resources is the last sacred-cow left over from decades of rule by the Institutional Revolutionary Party, during which a large chunk of the Mexican economy belonged to the government and certain strategic industries were off-limits to foreign investment. When President Carlos Salinas de Gortari sold off the phone company, a television network, two airlines, several banks and hundreds of other public-sector enterprises in the 1990s, the notoriously corrupt and inefficient PEMEX oil corporation and two state-owned electrical power utilities were withheld from the auction block for reasons that had more to do with patriotic sentimentality than rational economic policy.

Mexico is now paying a high price for retaining the energy sector in government hands. Output at PEMEX's main oil field in the Bay of Campeche dropped by 15 per cent in 2007 and 40 per cent of all the gasoline sold last year in one of the world's top crude-exporting countries was imported. Mexico needs to double its generation of electrical power by 2015 but doesn't have the resources to do so on its own. President Felipe Calderon understands this and wants to carry out a sweeping reform of the energy sector that could finally open the door to extensive private, foreign participation in the industry. But the man he narrowly defeated for the job in the 2006 election, Andres Manuel Lopez Obrador of the left-wing Party of the Democratic Revolution, has drawn a line in the sand and pledged to resist any changes that remotely smack of privatization.

When he was Energy Secretary in the cabinet of President Vicente Fox, Calderon estimated in 2003 that Mexico needed to invest $130 billion in its oil and natural gas industries over a ten-year period just to keep up with rising domestic demand. Now that he's in the presidential chair, the center-right Calderon has identified energy reform as the top legislative priority for this year, and he is expected to present his specific proposals to the Mexican senate in the coming weeks. His rationale is simple: there are new, abundant oil reserves in the Gulf of Mexico just waiting to be tapped, but because the government has long treated PEMEX as the cash cow of preference for filling up its treasury coffers, the company cannot afford the high cost of exploiting those offshore reserves.

Enter Lopez Calderon. In the aftermath of his razor-thin loss in the July 2006 balloting and throughout all of last year, he has been barnstorming the country and touting himself as the legitimate president of the republic who was ripped off at the polls. But the crowds who turn out for Lopez Obrador's rallies have dwindled over time, and the former mayor of Mexico has pounced on the energy reform issue as his last, best hope for staving off political oblivion. His shrill warnings that Calderon is about to sell off the national patrimony to the highest bidder could strike a chord in ways that his claims of electoral fraud did not 18 months ago. Mexico was the first developing country to nationalize its oil industry when it expropriated U.S. and British firms in 1938. The anniversary of that bold stroke is solemnly observed each year, and talk of relinquishing the government's stranglehold on the industry has aroused fierce opposition from the country's labor unions in the past.  

An overhaul of the country's energy sector is desperately needed. It will have to be done carefully, given the country's checkered experience with privatization in the past. When Salinas de Gortari announced his fire sale of government assets nearly 20 years ago, the state's telecommunications monopoly was handed on a silver platter to a consortium headed by Carlos Slim, who went on to become the world's richest human being in a society where nearly half of the population scrapes by on $4 a day. Calderon and his allies in congress need to ensure that any opening to private capital occurs under circumstances that primarily benefit the Mexican people and not the usual crew of crony capitalists with lifetime passes to the corridors of power. But if something isn't done soon to arrest the country's falling levels of oil and electricity production, Mexico runs the risk of becoming every bit as energy-dependent as its commodity-challenged neighbors in Central America. And Calderon has to move quickly. Mid-term congressional elections are scheduled for the summer of 2009, and if the president doesn't get his energy reform package through the Mexican Senate and Chamber of Deputies before next January when opposition parties will go into campaign mode, a promising opportunity to revamp a failed vestige of Mexico's past will have been squandered.