Trial of ex-Pemex boss threatens to lift lid on Mexico’s ‘cash box’

FILE PHOTO: Reporters gather around a car, part of a convoy believed of transporting Emilio Lozoya, the former chief executive of the oil company Petroleos Mexicanos, who is wanted in Mexico on corruption charges, after his extradition from Spain, in Mexico City, Mexico

The trial of a former boss of Petroleos Mexicanos threatens to expose years of alleged malpractice at the state oil company and provide a canvass for Mexico’s leftist president to depict rot at the heart of government that he has vowed to clean up.

Once a symbol of Mexican self-reliance and ingenuity, the firm known as Pemex became increasingly beset by graft accusations and financial problems, crushed under a mountain of debt and taxes.

The extradition to Mexico of former Pemex chief executive Emilio Lozoya on corruption charges has enabled President Andres Manuel Lopez Obrador to put a face on the company’s woes and back his assertion that previous governments led it to ruin.

Both Lopez Obrador and the Pemex management he appointed emphasize that they have made a clean break with what they describe as corrupt practices of the past.

Lozoya’s trial could boost Lopez Obrador’s fortunes in the run-up to mid-term congressional elections next year. Still, creating lasting change at the giant company is likely to prove a daunting task, analysts and policymakers say.

Over time, Pemex became so deeply embedded in public sector contracts that many Mexicans came to view it as a government “cash box,” said Heriberto Galindo, who was a congressman for the centrist Institutional Revolutionary Party (PRI), which governed during Lozoya’s 2012-2016 tenure.

“Pemex grew so much that the government lost control of it,” said Galindo, a onetime member of the lower house energy committee. “In terms of oversight, finances and public works.”

Prosecutors contend that, among other things, before becoming CEO, Lozoya solicited and obtained funds from Brazilian company Odebrecht, and funneled cash into the PRI’s 2012 election campaign for former president Enrique Pena Nieto.

Then, as boss of Pemex, he awarded contracts to Odebrecht and did the same for steelmaker Altos Hornos de Mexico after receiving bribes, they allege.

Odebrecht has admitted paying bribes in Mexico. The bosses of Altos Hornos have denied wrongdoing, as has Lozoya.

Lozoya’s lawyers have said he acted on Pena Nieto’s orders in conducting major transactions that have landed him in trouble. Pena Nieto has not been charged with anything and has rejected any suggestion of wrongdoing.

Lopez Obrador says he expects Lozoya to catalogue corruption under Pena Nieto, whose rule the president has castigated as the culmination of a 36-year “neoliberal” project that fed inequality and devastated Mexico.

“The trial of Mr. Lozoya will really help to clear these things up so we find out what happened and can continue the fight against corruption,” he said last week.

In 2013-14, Pena Nieto opened up the oil and gas market to private investors, some of whom teamed up with former Pemex executives to claim lucrative oil fields. But the tax burden stayed high and Pemex slipped further into debt.

After defeating the PRI and taking power in December 2018, Lopez Obrador halted the market liberalization, which he casts as a covert attempt to privatize Pemex.

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