From Politics to Profit

At a time when Latin American countries complain of lagging foreign investment, one company--and a nationalized one at that--finds money pouring in from all sides. The company is Mexico's Petroleos Mexicanos (Pemex), the oldest of Latin America's state-owned oil monopolies and about the only one with any claim to success. In one recent deal, Britain's Imperial Chemical Industries Ltd. joined in an $8,000,000 petrochemical project; in another, the French government lent Pemex a hefty $100 million for further expansion in petrochemicals.

For years after Mexico's leftist President Lazaro Cardenas stunned the world in 1938 by expropriating $400 million worth of U.S.-and European-owned oilfields, no one wanted to put a plugged peso into Pemex. Organized to run the nationalized industry, Pemex almost ruined it; the company was a political grab bag for the hacks of Mexico's ruling Revolutionary Party. Between 1952 and 1957, according to one unofficial study, graft and mismanagement cost Pemex $113.6 million. Even so, the insatiable demands of Mexico's fast-rising economy slowly increased crude-oil production to 100.6 million barrels in 1958, compared to 38.8 million barrels in the year of the takeover. Yet the government company seldom made money, wound up $9,230,000 in the hole for 1958.

Four years ago, President Adolfo Lopez Mateos sacked the politicians in control of Pemex and named a new boss: Pascual Gutierrez Roldan, 60, a successful Monterrey steelman. Gutierrez Roldan got rid of as many old pols and their pals as he could, reduced operating costs and used the money to drill new wells, build refineries and lay extensive pipelines. He then went after the foreign capital that he needed, hitting the money market at just the right time. Postwar reconstruction was well out of the way, and both European and U.S. banks were hunting new investments. Within six months Gutierrez Roldan picked up $150 million.

Last year Pemex produced 121.6 million barrels of oil and finally made a profit of $9,270,000. The last installment has been paid on the $167 million indemnification to the former owners. And now Pemex is rapidly expanding into the profitable new fields of fertilizers, plastics and synthetic rubber--all from petrochemical byproducts of oil processing. From the jungles south of Veracruz to the arid, sun-baked flats of Reynosa just across the U.S. border, 18 petrochemical plants have gone up since 1959, and another 22 are abuilding. By 1966, says one Pemex official, petrochemicals will be the country's second biggest industry--surpassed only by oil itself.

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