A lot of the problems that are happening with PEMEX is due to poor allocation of funds by the government. Whether they are overspending on social programs or just taking the money to line their pockets does not matter at this point, PEMEX is in decline because of it. Calderon in May stated that PEMEX needed to be more like Statoil in Norway, I think he should have said that the Mexican government needs to be more like the Norwegians. Let us take a quick look at Norway’s management of state oil revenue and also the performance of Statoil in order to show why the latter is the case and also the former.
Norway manages a Pension Fund from its oil revenue, it is the third largest oil exporter in the world, not just by what the return possibilities are, but also on a code of ethics. There is an ethics board who screens investments, and also at the central bank an ethics philosopher, all in a dialogue on the correct way to invest the money they believe is begotten by doing harm to the environment. So, in a way, it is an act of appeasing their guilt, but also it is about building true corporate responsibility. This is a large sovereign wealth fund and many companies and other organizations want them to be investors, especially when it is a steady flow of money. They have disinvested from companies for building cluster bombs, utilizing sweatshops, and also for severe environmental damage. This is not to state that this country does not have its own share of human rights violations to contend with, such as then Aker-Kvaerner running operations such as sewage and refueling at Guantanamo, but domestically it is on the right track to having a transparent governing body for public funds.
Statoil has 84.116 billion USD in non-current assets and 27.85 billion USD in current assets, so they are definitely a large firm with a lot of clout. They have total equity and liabilities at 120.324 billion USD, with a net debt to capital employed ratio of 23.5%, a strong company that is not over-leveraged. They have an expectation to drill approximately 40 wells, and increase investment into exploration for 2011. As well, the reports put out by the company are not shrouded in mystery, but offer explorations on their accounting methods, even stating when this or that is in estimate and not a permanent figure. The company is built upon a philosophy of transparency and democracy, is under scrutiny by committees and also its citizenry, when the normal mantra is that public owned is inefficient and bureaucratic, Statoil destroys the status-quo. Statoil had a net income for 2010 of 7 billion USD, which if broken down for quarter is a net income of 1.75 billion/quarter. So, with all this money being bandied about, the ethics philosopher at the central bank is running around quoting Hobbes and stating that greed will only lead to a life that is ,”poor, nasty, brutish, and short.”
Now, turning to the Mexican government and its need for this ethical philosopher, not for a pension fund, as PEMEX is not near Statoil on the level of revenue, but for proper investment and business practices in state-owned companies. Transparency International rated México 3.1 for corruption on a scale of 0-10 with 0 being very corrupt and 10 being very clean. It has been claimed by multiple sides that the government is purposely attempting to commit suicide in order to privatize PEMEX and in reality it is more to this side, as the last director of PEMEX was an ex-executive of Dupont México. This is because a state-owned company as a government does not operate the same as a private business. Selecting an ex-executive of a private company is then selecting an individual whose point of view of how a company is run does not match the actual necessities of the company. If that is going to be the selection then, México is filled with philosophers that are world class and are able to fill this role of the ethics philosopher than analyzes and develops reports on how funds are spent, as well as criticizing the practices of the board and executives enacting decisions. This is needed because it has been documented that México is not always the most transparent government with its statistics or its decision making processes for its state-owned companies. If Norway is a good case study in proper administrating of state-owned companies and México has these corruption problems, then in the opinion of this author, México is in need of an ethics philosopher.
By. Andrew Smolski
Andrew Smolski is a contributor at Oilprice.com and specializes in Political/Economic Sociology. His work has been syndicated in many leading online publications and he can be reached at email@example.com