Mexico to Abandon OPEC Deal?
stratfor.com
_________________________________________
Summary
Mexico's Zedillo government appears to be concerned that oil prices
have climbed too high, threatening Mexico's commercial and political
interests in the United States. With the U.S. elections only two months
away, Mexico may increase its oil exports as much as possible in order
to score political points with Democrats and Republicans in Washington,
D.C. - where soaring domestic gasoline prices are a hot political
issue. The Zedillo government may also be seeking to shore up the peso
against potential speculative attacks in the early weeks of the
incoming Fox Administration.
Analysis
Mexican Energy Sub-Secretary Andres Antonius announced at the recent
OPEC meeting in Vienna that Mexico "could increase" its oil exports by
200,000 barrels per day "if current market conditions do not change,"
reported Reuters on Sept. 11. Mexico's interests within OPEC are now
clashing with a significantly more vital Mexican interest outside OPEC:
its relationship with the U.S. through the North American Free Trade
Agreement (NAFTA).
Two years ago, Mexico aligned itself with The United States' top oil
suppliers, OPEC members Venezuela and Saudi Arabia, catalyzing the
three-fold increase in world oil prices; OPEC could not undertake
serious production cuts until these three countries agreed to stop
competing over U.S. market share. The oil windfall has been an
important factor in Mexico's robust economic growth during the past
year.
The future growth and stability of Mexico depend heavily upon a strong U.S. economy. The United States
is Mexico's largest trading partner, while Mexico is America's second-largest trading partner - after
Canada and ahead of Japan. High oil prices barely threaten the U.S. economy, which uses a great deal
less petroleum per GDP dollar than in previous years. Yet, the Zedillo government is concerned that
excessively high oil prices - more than $25-28 a barrel - over a sustained period of time could
eventually slow the U.S. economy and affect Mexico, which ships about 80 percent of its total exports to
U.S. markets.
U.S. presidential elections are only two months away, and the Mexican government does not want to offend
either Democrats or Republicans in Washington, D.C. Mexican President-elect Vicente Fox would prefer a
victory in November by Texas Governor George W. Bush, a staunch supporter of NAFTA who, unlike
Democratic Vice President Al Gore, is not beholden to organized labor and environmentalists. However,
regardless of who wins in November, raising oil exports beforehand would be a good start for the Fox
administration's relations with the next U.S. government.
Raising oil exports by 200,000 bpd now would also be a prudent financial move for Mexico. For the first
time in more than 20 years, Mexico expects to achieve a transfer of presidential power in December
without suffering a financial crisis and devaluation of the peso. However, the increased revenue stream
would provide Mexico's Central Bank a cushion to defend the peso against potential attacks by currency
speculators. The PRI still controls oil policy in Mexico and would not ordinarily do anything to aid an
opposition government, but President Ernesto Zedillo has placed the country's economic and political
stability ahead of his party's partisan interests.
________________________________________________________________
Promote global intelligence. Forward this newsletter to your
colleagues and friends!
__________________________________________________________________
OPEC's approval of an 800,000 bpd increase in production may fail to reduce and stabilize oil prices.
Mexico's stated willingness to increase its oil exports in light of the decision also indicates a
divergence of interests with Venezuela, which favors tight production controls and smaller increases in
output. Mexico wants to maximize its oil export revenues without pushing the major consumer countries
into a recession. Venezuela has taken the position that oil prices are currently at "fair" levels and
that consumer countries should cut their internal energy taxes to achieve cheaper domestic pump prices
rather than pressure crude producers to increase supply.
Although Mexico has stated that it will consult with OPEC and non-OPEC producers before making any
decision, such consultations would be mere diplomatic formalities. Mexico will soon boost its oil
exports, and ship most or all of that increase to the U.S., raising its oil revenues, expanding its
market share in the U.S., and winning the approval of key Democratic and Republican leaders in
Washington, D.C.
_____________________________________________________________
For more on the Mexico, see:
stratfor.com
_____________________________________________________________
(c) 2000 Stratfor, Inc.
_______________________________________________
SUBSCRIBE to the free, daily Global Intelligence Update. Click on
stratfor.com
UNSUBSCRIBE by clicking on
stratfor.com
_______________________________________________
Stratfor.com
504 Lavaca, Suite 1100 Austin, TX 78701
Phone: 512-583-5000 Fax: 512-583-5025
Internet: stratfor.com
Email: info@stratfor.com |
