It wasn't supposed to be like this.

By now, the Western Hemisphere was supposed to be well on its way to energy independence. Oil from Mexico, Venezuela and Colombia was supposed to be pouring into U.S. refineries, sating our demand while boosting the emerging economies from whence it came.

Instead, the vision has been derailed by pitfalls that so often undermine economic reform in developing markets: politics, patronage and profiteering.

The latest case is Raúl Muñoz Leos, the director general of Petróleos Mexicanos, Mexico's state-run oil company, called Pemex. Neither Muñoz Leos, 65, nor Pemex has given a reason for his resignation Monday. Last month, a newspaper reported that he used company funds to pay for his wife's liposuction. He also came under fire from lawmakers who felt a recent union contract he negotiated was too generous.

Maybe Muñoz Leos, the first private company executive to run Pemex, succumbed to the same corruption that has held the company back for decades. Or maybe politics caught up with him. He frequently squared off with lawmakers who opposed his efforts to encourage foreign investment in Pemex's operations.

Either way, the world is watching to see if Pemex will continue to push for reform or return to its old ways.

The stakes are high. The United States imports about 15 percent of its oil from Mexico. Pemex sells more debt than any other oil company, with about $37 billion in bonds held by investors around the globe.




Oil monopoly model

The same thing is happening across Latin America, where Mexico has long been the model when it comes to oil monopolies.

Mexican President Lazaro Cardenas seized foreign oil company assets in 1938 to form Pemex, creating a symbol of national pride. A decade later, Colombia nationalized oil assets in a similar manner, followed by Peru in 1968 and Venezuela in 1975.

Seizing assets is one thing; maintaining them is another.

"Those countries are not investing as much as they should in the future," Ricardo Amorim, lead of Latin America research for WestLB in New York told my colleague Jenalia Moreno last month.

That lack of investment shows at Pemex's giant Tula refinery, near Mexico City, where equipment is antiquated and profits per barrel are less than half the industry norm. Pemex lacks the technology to tap deep-water reserves and imports about 25 percent of its gas from the United States.

Bringing in foreign companies with technological expertise would boost reserves, increase revenues and benefit both Pemex and the government. In Mexico, though, that idea is akin to our government subdividing the Statue of Liberty into condos.

Can't live on pride

Oil represents independence, the resource that spawned the country's economic freedom. The constitution prohibits foreign companies from owning even a partial stake in national oil reserves.

President Vicente Fox has tried to change the old ways, but Congress has fought his efforts to allow foreign companies a percentage of drilling profits.

Under Muñoz Leos, Pemex offered fee-based contracts to U.S. oil companies, similar to contract drilling but without equity participation. The majors have favored countries such as Angola and Nigeria where they get a better return on their investment.

Regardless of why he left, Muñoz Leos brought a businesslike approach to Pemex, streamlining a bureaucracy that for years thrived on patronage and favoritism. Hard-liners who believe the company's role was to benefit employees accused him of selling off the country's oil to foreign profiteers.

It's a popular argument, but one that ignores Pemex's looming crisis.

The hope of energy independence in our hemisphere this decade is largely gone. In its place is a growing worry that state-run oil companies are being drained by shortsighted governments.

In Mexico, the issue remains one of national pride versus economic stability.

Without significant investment, though, Mexico in the next few decades may not have any recoverable oil to take pride in.
