Pemexgate Takes New Twist as Oil Union Head Indicted

WASHINGTON -- In the latest twist of the Pemexgate scandal, a Mexican federal judge over the weekend ordered oil union leader Carlos Romero Deschamps to stand trial on embezzlement and other charges, an apparent victory for President Vicente Fox's corruption crackdown though skeptical analysts wonder whether Deschamps will ever be jailed. Deschamps, who is accused by Fox's government of funneling 1.5 billion pesos from Pemex's coffers to the Institutional Revolutionary Party (PRI) which had governed Mexico for seven decades before Fox took office in 2000, on Monday remained free under a previous court order and could post bond. "This probe has been going on now for two years and the man is still free," said a Mexico City-based analyst who requested anonymity. "To some extent, the indictment is a positive signal but it won't last unless the guy is jailed. Fox has lost a lot of credibility over his inability to make progress on this white collar crackdown." Government charges against Deschamps, other union leaders and former Petroleos Mexicanos chief Rogelio Montemayor were dropped in July when officials said they did not have enough evidence to prove money laundering or other organized crime accusations. But they left open the possibility of charging the men with embezzling Pemex funds to help fund PRI's unsuccessful presidential campaign in 2000. After losing his congressional seat in September elections, Deschamps no longer counts on immunity from prosecution. Though some analysts say Fox may not push hard for justice in the Pemexgate scandal because he needs the support of PRI, which regained control of Congress after strong wins in July mid-term elections, others say the very fact he dared speak publicly about white-collar corruption goes a long way. "The Fox administration has successfully exposed what has been for years a public secret," Mexican businessman Carlos Luken told Oil Daily. "Fox ushered in an atmosphere of anti-corruption … that may sway parties to mellow their opposition to foreign investment and open them up to accepting non-traditional approaches to investment." Ian Bremmer, senior fellow at the World Policy Institute, said that Mexico's reform process is getting back on track after Fox's big defeat at the mid-term elections. "The electoral debacle of June had two important results. It raised the PRI to power-sharing status, pushing party leaders to go ahead with reforms instead of thwarting the president's initiatives as they had done previously," Bremer wrote in a recent editorial, adding that Fox made a good political move by replacing Ernesto Martens as energy minister by the politically savvy Felipe Calderon. "These developments bode well for fiscal and energy reform, which is desperately needed to attract foreign investment to Mexico's energy sector," Bremmer said. Under Fox, Pemex has increased upstream spending but given its huge fiscal burdens, it needs outside help if it is to meet domestic demand and maintain, yet alone boost, exports. On Friday, the state oil concern placed 6.5 billion pesos of peso-denominated bonds on the Mexican Stock Exchange in the first tranche of a multimillion-peso debt program aimed at exploration financing. If successful, the company hopes to tap capital markets for other ventures. Pemex funding requirements are expected to total some $16 billion in 2003 and 2004. Energy Minister Calderon on Friday called for Pemex's heavy tax burden to be reduced, freeing up funds to be invested in the oil company itself. "Now is the time for Pemex to invest in its own future which is also a way of investing in the future of Mexico," he said. Earlier this month, Repsol-YPF became the first foreign oil firm to participate in Mexico's upstream sector since the oil industry was nationalized in 1938 when it submitted the sole bid for the multiple service contract (MSC) for the Reynosa-Monterrey Block. It was the first of seven tenders that are designed to boost Mexico's natural gas production (OD Oct.15,p5). Karen Matusic