Mexico's Constitution may prohibit foreign oil firms from drilling

MEXICO CITY — Almost a century after its constitution was drafted, Mexico is in knots over the meaning of a single article dealing with oil.

President Felipe Calderon wants the state oil company, Petroleos Mexicanos, to contract with private foreign firms to build desperately needed refineries and drill for deep-water oil.

But it's not clear that Mexico's 1917 constitution allows it.

The constitution came out of the Mexican revolution, which began in 1910 to overthrow a 30-year dictatorship, restrain the Roman Catholic Church and redistribute wealth and land, much of it in the hands of foreigners and the church.

Regarding natural resources, the constitution was explicit.

"The direct dominion of all the natural resources of the continental shelf and the underwater (bases) of the islands, corresponds to the nation," the article says.

Back in 1917, there wasn't yet a state oil company. The Ford Model T automobile was just nine years into mass production, and Article 27 of the constitution was more about land rights and mining than black gold.

On March 18, 1938, a date every Mexican school kid knows by heart, President Lazaro Cardenas nationalized foreign oil companies, citing the constitution. The biggest was Standard Oil, founded by oil baron John D. Rockefeller, which today lives on as ExxonMobil.

A popular song from the era, "Corrido de la Expropriacion," immortalized Cardenas' act, boasting that "he expelled the companies/who exploited the riches/without paying royalties/they filled mansions with gold/undressing our country of its precious treasure."

For the next 70 years, any mention of foreign involvement in Mexico's energy sector exploded into a debate over national sovereignty.

For constitutional reasons, oil was excluded from the 1994 North American Free Trade Agreement, a deal that otherwise completely opened trade among the United States, Canada and Mexico.

"Was it a mistake? It could have been a mistake," said James Jones, who was the U.S. ambassador to Mexico during the debate over NAFTA. "It would have been nice to have something in there (NAFTA) to open it up. Now, having said that, we probably wouldn't have got a deal."

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