Oil and World Power: PEMEX and PETROBRAS

Abstract

Petróleos Mexicanos (PEMEX) and Petróleo Brasileiro S.A. (PETROBRAS) are two of the most important oil companies in Latin America and the world. Both have served to the economic development of their countries since their creation, and have gone through times of expansion, contraction, political tension, and reform. However, Pemex and Petrobras are two very different companies that have evolved in opposite ways. After the expropriation of Mexican oil in 1938, Pemex consolidated its strategic role in developing the energy sector in the country, and during the following decades it became a pillar of the domestic economy. However by the mid-2000s oil production began to shrink drastically, resulting in a constant questioning of the company’s management, the state ownership of subsoil resources, and the role that it plays in the Mexican economy. In a different direction, Petrobras has become one of the top oil producing companies as well as a global reference of public-private business relations. Even though the oil sector in Brazil was not attractive for private investment during its early years of development, the Brazilian company managed to improve its operations to become the 11th top oil producer in the world in 2012 according to the EIA, just 2 places behind Pemex. What is striking about this data is that in year 2004 Mexico ranked 5th and Brazil did not even appear in the top 15 producers list. So, what happened to the Mexican and Brazilian industries to evolve in such different ways? Why has Mexico’s production decreased so rapidly in the last decade whereas the Brazilian industry is showing important signs of progress? At what point in time did Pemex’s operations began to deteriorate and those of Petrobras to improve?