ARTICLE IN PRESS

Energy Policy 32 (2004) 2035–2047

Oil policies and privatization strategies in Mexico: implications for

the petrochemical sector and its production spaces
Norma Mart!ınez Laguna*
! Coyoacan,
Institute of Geography, National University of Mexico (UNAM), Circuito Exterior, Ciudad Universitaria, Delegacion ! C. P. 04510, Mexico

Abstract

Through a retrospective analysis of Mexico’s oil history, this work examines the privatization processes that occurred in the
petrochemical sector, from the abolishment of the government’s monopoly, Petroleos ! Mexicanos (PEMEX) during the 1980s, until
the restructuring and open liberalization in the early 1990s, focusing on the areas incorporated to production processes, particularly
along the Gulf coast. As a result of the industrial policies and regional development strategies promoted by the government from the
sixties, oriented towards strengthening production in areas with the highest potential, attractive business investment areas were
developed. These included southern Tamaulipas, a strategic region where a number of industrial factors facilitated access to raw
materials at competitive prices, as well as their processing and distribution to local and international markets, all of these within a
single location. The strategic nature of the petrochemical location and production have made southern Tamaulipas a key factor for
the territorial shaping and industrial development linked to the behavior of transnational companies that, seeking comparative
advantages, have relocated parts of their production capacity in this region.
r 2003 Elsevier Ltd. All rights reserved.

Keywords: Petrochemistry; Privatization; Territory; Oil

1. Introduction
Fundamental changes have occurred in the institu-
tional and regulatory frameworks of several producing
and exporting countries over the last two decades,
leading to the opening of the oil industry. In Mexico,
economic recessions, the collapse of international oil
prices and the inability to pay the foreign debt have led
to the application of neoliberal adjustment measures
related to the privatization of government-owned
companies, the development of foreign-investment
policies and the reorientation of production towards
foreign trade. A number of policies have been intro-
duced in important economic-strategic sectors, such as
the petrochemical industry, the diverse and versatile
production of which has enabled the establishment of
vertical links with a number of interdependent produc-
tion branches.
Throughout the last fifty years, Mexico’s petrochem-
ical industry incorporated strategic territories where raw
*Tel.: +52-55-56224339; fax: +52-55-56162145.
E-mail address: nmlaguna@igiris.igeograf.unam.mx
(N.M. Laguna).
materials were located (oil and natural gas) and linked
them with production complexes and units, domestic
consumer areas and export centers by means of an oil-
pipeline distribution system. Given the sector’s liberal-
ization trend and the trade opening, the comparative
advantages of these areas were attractive for private
investment, always seeking to broaden their global
production capacity. The case of southern Tamaulipas
is discussed within this context, a region characterized
by having a privileged geographical situation in the Gulf
coast, an economic development closely linked to the
country’s oil history, and important port activity. All
these factors have attracted petrochemical production
industries since the seventies, and have raised interest in
the last decade as a result of the construction of the
Altamira port, the most extensive industrial port
development in the country, originally built to address
the specific regional needs of transnational companies.
The present analysis begins with the general acknowl-
edgement of the relevance and availability of energy
resources that have fostered the development of the
petrochemical sector, followed by an analysis of the
phases defined by the different government interventions
in the oil industry, and the economic policies related to

0301-4215/03/$ - see front matter r 2003 Elsevier Ltd. All rights reserved.
doi:10.1016/S0301-4215(03)00179-4
 ARTICLE IN PRESS
2036 N.M. Laguna / Energy Policy 32 (2004) 2035–2047
the oil sector and its production spaces, through time.
Specifically, the evolution, industrial structure and
economic potential of southern Tamaulipas, a model
territory for these processes, are discussed.
2. Economy and oil in Mexico
Mexico’s evolution is bound to the development of its
energy sector and, basically, to the oil and natural-gas
industries operated by the government-owned company
!
Petroleos Mexicanos (PEMEX). PEMEX is a decen-
tralized public organization, the activities of which
include hydrocarbon exploration and extraction, as well
as production, storage, distribution and commercializa-
tion of oil and petrochemical products. Its constant
expansion and modernization in some areas have earned
it a strategic position in terms of energy and social well-
being, as a source of foreign revenues and public
income.
2.1. The economic importance of oil the industry
The Oil industry has been one of the core instruments
in promoting Mexico’s economic development. From
the mid-1970s, during the international oil crisis (1973–
1974), and given the unexpected rise in oil prices, the
Mexican government decided to increase investments in
oil exploration and extraction. As a result of the
discovery of new oil fields, Mexico shifted from an oil
importer to a net oil exporter within three years; in the
1980s, nearly 80% of the total income derived from oil
exports. During 1995–2000, the oil industry contributed
approximately 34% of the tax-related federal income,
9.4% of total exports and almost 2% of the country’s
GDP (Secretar!ıa de Energ!ıa, 2000, p. 25). These figures
are rather modest, because PEMEX’s financial and
industrial development has been driven by over regula-
tion, price and tax control, limited business management
and heavy taxation, all of which have discouraged
strategic investment. More than 68% of Pemex’s total
income goes to the Federal government, limiting its
ability to compete in the challenging domestic and
global markets, in turn resulting in a decline of
production and undercapitalization.
PEMEX is Mexico’s largest company, ranked among
the ten most important oil companies worldwide in
terms of both assets and income. As of January 1st 2002,
it ranked fifth in crude-oil production, ninth in natural-
gas production, tenth in proven oil reserves and 22nd in
proven gas reserves. PEMEX’s oil exports (1882
thousand barrels per day (tbd)) accounted for 4.3% of
total world exports, mostly to the US (1424 tbd) and
Europe (197 tbd), being Mexico’s main partners (Statis-
tical Review of World Energy, 2002).
!
2.2. Petroleos Mexicanos: operation and administration
restructuring
2.2.1. Oil in the government’s hands
Since 1917, article 27 of Mexico’s Constitution,
stipulated the restitution of underground oil rights to
the country; however, oil expropriation did not take
place until 1938, from which time the government
managed the industry’s upstream and downstream
activities through PEMEX. Consequently, PEMEX
became one of the cornerstones in the promotion of
capitalism development founded in imports-replacement
industrialization models (1950–1970), which was later
based on exports.
In the context of energy and the financial crises of
global proportions, the governments of presidents
Echeverr!ıa (1970–1976) and Lopez ! Portillo (1977–
1982) substantially increased oil-industry investments
at the expense of a growing external debt. In 1974
Mexico ranked 14th in crude-oil production worldwide
(517 000 barrels per day (bd)), reaching fourth place in
1982 (2.8 million barrels per day (mbd)); exports
boomed from 90,000 bd in 1976 to 1.5 mbd in 1983
(PEMEX, 1983, p. 4). The refining capacity arose from
760 mbd in 1974 to 1630 mbd in 1983; basic petrochem-
ical production almost quadrupled in volume, from 2.97
to 11.26 million tons (mton) with more than 80 plants
being operational (PEMEX, 1987, p. 56). The substan-
tial crude oil, natural gas, oil-derivatives and petro-
chemical exports profoundly impacted PEMEX’s
participation in Mexico’s total exports, from 15% in
1975 to 75% in 1983. These provided the financial
resources of about $64.6 billion US dollars that led to
the oil boom in the late 1970s. The ‘‘petrolization’’ of
the economy, particularly in the foreign sector, made it
dependent on fluctuations of international oil prices,
which fell from $33.20 US dollars in 1981 to $11.85 US
dollars in 1986, leading to a profound crisis that
translated into the indirect penetration of transnational
capital through foreign debt (Sua! rez, 2001, p. 39).
2.2.2. The Mexican oil’s neoliberal pathway
In late 1982, the Mexican economy adopted a
neoliberal strategy. Transnational companies promoted
their capital’s global expansion through the privatiza-
tion of strategic sectors, as agreed by the governments of
presidents De la Madrid, Salinas and Zedillo, with the
International Monetary Fund and the World Bank each
time the foreign debt was renegotiated. The oil policy
was adjusted to this strategy, which proposed the
privatization of PEMEX and promoted to bring the
vertically integrated monopoly to an end. The first phase
in the industry’s opening occurred in 1986 with the
implementation of measures oriented towards privatiz-
ing the government-owned basic petrochemical indus-
try. Private companies were authorized to import basic
 ARTICLE IN PRESS
N.M. Laguna / Energy Policy 32 (2004) 2035–2047 2037

petrochemicals that PEMEX could not supply, 36 of the (La Jornada, 2001, February 17, p. 26). The lack of new
72 basic petrochemicals were reclassified as secondary clearly defined industrial-policy schemes will lead to the
by decree, and a flexible pricing policy was enacted. In country’s progressive loss of direct control over this
1989, the government strengthened the privatization strategic sector.
phase by restructuring labor, with a 50%-reduction in
salaries, massive lay-offs of almost 71,000 workers from
1987 to 1993, and the annulment of the union’s
3. The basic petrochemical industry in Mexico
participation in PEMEX’s activities (PEMEX, 1988,
1999). Successive reclassifications, further limiting the
3.1. Industry characterization
number of basic petrochemicals to 19 in 1989 and only
nine in 1992, eliminated PEMEX’s monopoly in this
The basic petrochemical industry’s role is to trans-
area. In parallel with the North American Free Trade
form oil and natural gas into raw materials for hundreds
Agreement (NAFTA), importation permits were re-
of chemicals used in the manufacture of plastics, fibers,
voked, custom duties were reduced and cancellation was
paints, adhesives, fertilizers, solvents and pharmaceu-
agreed as of 2004 (Morales, 1997, p. 57; De la Vega,
ticals, among others (Fig. 1). In accordance with the
1999, p. 223).
1996 reforms to the Constitution’s Article 27 in matters
NAFTA’s resolution in 1992 represented the greatest
of oil, the regulatory framework set forth the differ-
opening of the energy sector towards foreign investment.
entiation between basic petrochemistry (BP), for the
PEMEX underwent an administrative reorganization
exclusive exploitation by the government, and the one
that included a new Internal Law. This mandated the
known as secondary petrochemistry at that time, where
creation of decentralized subsidiary areas with their own
private investment is allowed. BP consists of nine
budget and jurisdiction: PEMEX-Exploration and
products (ethanol, propane, butane, pentane, hexane,
Production, PEMEX-Refining, PEMEX-Gas and Basic
naphtha, heptane, methane and raw materials for black
Petrochemistry and PEMEX-Petrochemistry. In order
smoke), derived from the first phase of natural-gas and
to raise production-efficiency indexes, the private sector
crude-oil industrial transformation which are the
was given access to strategic and profitable activities.
initiators of all petrochemical activities.
These included drilling marine wells in Sonda de
The non-basic petrochemistry, which includes all the
Campeche, and joint-venture agreements with transna-
remaining petrochemicals, involves seven companies
tional companies for hydrocarbon refining (Sua! rez,
and three petrochemical units owned by PEMEX, plus
2001, p. 65).
approximately 260 private companies, which jointly
As a result of the financial and liquidity crises at the
represent 83% of the total production (Secretar!ıa de
beginning of president Zedillo’s term (1994–2000), oil
Energ!ıa, 2000, p. 42). This division, the only one of its
was designated as a guarantee to the $51,759 million-US
kind in the world, impedes the integration of production
dollar credit package granted by the IMF, of which the
phases and affects the company’s competitiveness.
US contributed $20,000 million US dollars. To this end,
the Mexican government and the U.S Treasure Depart-
ment signed the Guarantee Agreement in 1995, includ- 3.2. Historical background
ing the Agreement on the Oil Income Scheme, which not
only compromised the country’s sovereignty by mortga- Within the dynamic context of the production,
ging PEMEX’s total income, but also substantially manufacturing and farming sectors, the BP industry
debilitated the company by opening up all its strategic emerged in the 1950s aimed at supplying the domestic
!
information to the US (Angeles, 2001, pp. 66, 67). demand of the secondary chemical and petrochemical
From 2000, privatization has acquired in a sui generis sectors, orienting surplus production to exports. From
approach. President Fox openly took another step this moment, the lack of precision as to whether to
forward in giving PEMEX more profound business consider BP as an activity of PEMEX or the private
orientation by appointing Raul ! Muñoz Leos, a former sector, along with the poor management of pricing
DuPont manager, as General Director (La Jornada, policies, resulted in PEMEX’s slow development
2001, February 7, p. 24). This new approach is based on (Snoeck, 1986, p. 16). Of the 16 basic petrochemicals
a policy known as ‘‘differentiated opening’’, whereby decreed in 1960, PEMEX only produced four (sulfur,
direct private investment is allowed not only in gas and dodecyl-benzene, tetramer and alkyl-aryls) with a
petrochemicals but also in refining. This shows evidence volume of 57,000 tons, making importation of these
to the absence of an energy policy to support domestic materials imminent (Barbosa, 1993, p. 47). Conse-
production, planning and regulation of oil exploitation quently, PEMEX accelerated the expansion of its
through a project that would add value to hydrocarbons production plant in a financially complex moment for
and avoid the cost of importing petrochemicals and the company, with foreign capital playing a fundamen-
natural gas worth $25 billion US dollars each year tal role.
 ARTICLE IN PRESS
2038 N.M. Laguna / Energy Policy 32 (2004) 2035–2047
Fig. 1. Production chains in the petrochemical industry. Source: Secretar!ıa de Energ!ıa/SECOFI, (1997). Programa de desarrollo de la Industria
Petroqu!ımica Mexicana, 1997–2000.
PEMEX’s limited financial resources contributed to a
spatially dispersed distribution of BP in the country.
Plants were built either as extensions of existing
refineries, as in the case of Poza Rica, Azcapotzalco,
Madero, Salamanca and Reynosa, or within their
vicinity, as in Cosoleacaque and Pajaritos (Table 1;
Mart!ınez, 2001, p. 103). Likewise, the significant urban-
industrial growth led to the location of some plants
within the Mexico City metropolitan area (e.g. Azca-
potzalco, Independencia and Salamanca) and also near
Monterrey, the country’s second biggest industrial city
(e.g. Reynosa). The oil industry became territorially
integrated through oil-pipeline systems, which serve for
transporting crude oil from extraction areas to proces-
sing and domestic consumption areas, as well as to
Tampico, Veracruz and Minatitla! n for exporting. Thus,
BP diversified to include 27 products in 1970, and the
production volume rose to 2 mton/year (Barbosa, 1993,
p. 48). Domestic sales (1 mton) accounted for an income
of about $12.9 million Mexican pesos, and its participa-
tion in PEMEX’s total domestic sales reached 9.6%,
well above 3.2% in 1960 (PEMEX, op.cit.). Further-
more, the subsidized pricing policy to support the
private sector translated to an average 17% annual
growth in the secondary petrochemical sector which,
although below BP’s recorded rate (42%), surpassed the
growth of the oil industry as a whole (8.8%; Banco de
Me! xico, 1983; Figs. 2 and 3).
3.3. Mexico’s petrochemical expansion
During 1976–1982 BP grew vigorously, clear evidence
of an important public and private investment program,
as well as of PEMEX’s expansion plans in the Gulf
(Coatzacoalcos and Ciudad Madero), and Pacific coasts
(La! zaro Ca! rdenas and Salina Cruz). This growth
occurred in parallel with the oil boom, together with a
substantial rise in the price of PEMEX’s products in the
national market (Snoeck, 1986, pp. 41, 42; Secretar!ıa de
Energ!ıa/SECOFI, 1997, p. 63). The selected areas, which
had an oil production platform and an important
infrastructure to ensure both internal supply and
exports, were regarded as priorities in the national plans
for industrial and urban development, when the
economic climate fostered the development of capital
industries with exporting capability.
Although the availability of infrastructure and
services needed by the petrochemical industry (commu-
nication and transportation routes, water and electri-
city) represented important elements for defining the
location strategy, access to raw materials has been the
key factor. Thus, PEMEX restarted its petrochemical
expansion with the construction of plants in or near
refining centers in Ciudad Madero, Tamaulipas; Sala-
manca, Guanajuato and Tula, Hidalgo (Fig. 2).
The new investment program eliminated the disper-
sion trend that characterized BP in Mexico. From the oil
boom, BP became a spatial organizing element supple-
menting the industrial concentration in Southeastern
Veracruz, one of the largest chemical industrial centers
that between 1980 and 1982 concentrated 70% of the
country’s installed capacity for basic petrochemicals.
Three plants in Pajaritos plus ten in La Cangrejera stood
out because of their production of acetaldehyde,
ethylene oxide and cumene that rendered substantial
imports unnecessary. Likewise, the Cosoleacaque
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N.M. Laguna / Energy Policy 32 (2004) 2035–2047
Table 1
Evolution of PEMEX’s petrochemical structure
Complex/start of operations No. of Products
plants
Poza Rica, Veracruz 1951 1 Sulfur
Azcapotzalco, D. F. 1959 1 Dodecyl-benzene
Ciudad Madero, Tamaulipas 1960 1 Carbon
Cosoleacaque 1962 7 Ammonia
Para-xylene
Hydrogen
Pajaritos, Veracruz 1967 11 Acetaldehyde
Ethylene oxide
vinyl chloride
Ethylene perchloride
Ether Methyl T.
Camargo, Chihuahua 1967 1 Ammonia
Independencia 1969 5 Methane
Acrylonitrile
Polymers
Petrochemical specialties
Salamanca, Guanajuato 1969 2 Ammonia
Carbon Dioxide
San Mart!ın Texmelucan, Puebla 1 Isopropanol
1969
Escol!ın, Veracruz 1971 3 HDPE
LDPE
Tula, Hidalgo 1979 1 Acrylonitrile
La Cangrejera, Veracruz 1980 20 Ethylene Oxide
Acetaldehyde
Styrene
Cumene
Benzine
Toluene
Para-xylene
Morelos, Veracruz 1988 8 Ethylene Oxide
Glycols
Polyethylene AD
Acetaldehyde
Polypropylene
Acrylonitrile
Source: PEMEX (1970, 1980, 1990).
complex became the main ammonia-producing center
worldwide because of the operation of ammonia units
VI and VII (with a capacity of 2.4 mton/year) (PEMEX,
1980, pp. 15, 16; Fig. 2).
This expansion, subsidized with foreign credits, led to
a 132% rise in total gross production from 3.9 mton in
1976 to 9.2 mton in 1981, as a result of a 27.5% increase
2039
Final uses
Fertilizers
Detergents
Paints and pigments
Chemical and fertilizer Industries
Chemical and fertilizer Industries
PEMEX – Refining
Paints, synthetic fibers, perfumes
Colorants, films, surface-active agents
Plastics, paints, pipes
Solvents for the textile industry
Oxygen-adding agent for gasoline
Chemical Industry and Fertilizers, agricultural use
(direct application)
Resins, insecticides, textiles, solvents and fuels,
fumigation
aids and extinguishers
Fibers, resins, adhesives, nitrile rubber
Petrochemical polymers, fuel
Foams, rust inhibitors, gasoline additives, degreasers
Chemical and fertilizer Industries
Fertilizer industry
Chemical, automobile parts
Agricultural and industrial films, automobile parts,
containers
heavyduty sacks, container coating, hose pipes
Acrylic fibers, automobile parts, paints, packaging,
varnishes
Industries that manufacture products for intermediate
and final usage such as
fumaric acid, lubricants, adhesives, resins, surface-
active agents, plastics, pigments,
ethylene glycol, polyester fibers, film for industrial and
agricultural use, conduit pipe
Industries that manufacture products for intermediate
and final usage such as
acetic acid, acrylic fiber, antifreeze, fibers and polyester
resins, vinyl resins, automobile parts, pipes, container
sacks and adhesives
in installed capacity from 1981 to 1982 (Fig. 3).
However, production failed to meet the domestic
demand, and imports had a 13.8% participation in
domestic consumption. The negative balance of PE-
MEX’s foreign trade in this area increased from 25
thousand tons (Mton) in 1970 to 430 Mton in 1977.
Despite the growth experienced by the oil industry
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2040 N.M. Laguna / Energy Policy 32 (2004) 2035–2047

Fig. 2. Pemex: Distribution of petrochemical centers.

Fig. 3. PEMEX: Petrochemicals production, 1970–2001 thousand tons. Source: PEMEX (1980, 2001). Anuario Estad!ıstico.

during the boom, basic imports continued with an PEMEX’s foreign trade of petrochemicals showed
associated cost of $156.4 million US dollars in 1977, deficits until 1986, but at the beginning of 1988 and
$522.8 in 1980 and $572.8 in 1985, a rise that led to throughout most of the 1990s this trend reverted, and a
unsustainable financial problems (PEMEX, 1980). surplus was achieved in terms of volume and profits.
 ARTICLE IN PRESS
N.M. Laguna / Energy Policy 32 (2004) 2035–2047
This resulted from the annulment of the petrochemical
importation control demanded by the private sector
during president Miguel De la Madrid’s term.
The most relevant territorial implications that PE-
MEX’s petrochemical industry generated from the oil
boom are directly related to the concentration of
important secondary petrochemical industries in specific
areas of the country. Southeastern Veracruz and south-
ern Tamaulipas stand out because of the high concen-
tration levels of these industries.
3.4. Petrochemical liberalization
The announced restructuring of Mexico’s energy
industry has brought about the imminent privatization
process of PEMEX’s petrochemical assets, which
represent 25% of the company’s operations. The
reclassification decree of basic to non-basic petrochem-
icals, along with PEMEX’s division into four decen-
tralized organizations, gave rise to options for selling
petrochemical plants. In late 1995 the auction of the
Cosoleacaque complex (which generated 36% of PE-
MEX’s petrochemical production, 87% of ammonia,
85% of carbon dioxide and 100% of hydrogen at that
time) was published, a difficult sale because of the lack
of clarity in the process, the excessive caution of
investors and the fall of international petrochemical
prices.
The federal government sought to promote the
participation of private investment in the development
of the non-basic petrochemical industry, because it
lacked sufficient resources to invest in new plants. For
this reason, the industry’s strategy was redefined and
PEMEX-Petrochemical was reorganized (in 1997) into
subsidiaries in order to expand the production capacity,
deriving 49% of the company’s capital to private
investors. Nonetheless, planned actions were never
carried out as expected, and in 1998 the auction to
privatize Morelos Petrochemistry was abandoned, for
the following reasons:
* The impossibility of integrating production chains
causes a reduction in the certainty of product supply
and reduces added value.
* The high price of natural gas and the absence of long-
term supply contracts make investments in countries
with access to gas and lower opportunity costs more
attractive.
* PEMEX’s monopoly in the production, distribution
and sales of basic petrochemicals generates a lack of
confidence from investors in the sector’s competitive
conditions.
* The private sector maintains expectations that
eventually PEMEX Petrochemistry’s subsidiaries
will be privatized, which has delayed investment
decisions.
2041
These processes had no effect on the plants’ opera-
tion. However, since 1997 PEMEX-Petrochemistry
products were affected by the downward trend in prices,
due to the oil industry’s growth in developing countries,
the high unit production costs in view of the intensive
capital use, the need to permanently adopt technological
changes, and the limited investment as part of the
policies oriented towards attracting foreign capital. This
led to progressive reductions in production, from 11,513
thousand tons in 1997 to 5994 thousand tons in 2001
(PEMEX, 2001, p. 39; Fig. 3). In some cases high costs
have caused the closure of a number of plants: Pajaritos
polyethylene and chlorinated chemical plants; Cosolea-
caque para-xylene, ammonia and hydrogen plants; La
Cangrejera cumene plant and the Independencia dode-
cyl-benzene plant (PEMEX, 1999).
Likewise, the taxation regime imposed on PEMEX by
the federal government (almost 70% of its total income),
has forced the company to sacrifice the programmed
investments in expansion projects and petrochemical
modernization works, these being among the most
affected areas in 2002.
In order to reactivate the petrochemical industry,
PEMEX is planning to build a petrochemical complex
jointly with the private sector (the construction of which
will be contested in March, 2003). This complex is
planned to produce 1.5 million tons of ethylene,
eliminating imports that annually total 800 thousand
tons and hence compensate for the sectors’ commercial
deficit which currently reaches $7 billion US dollars.
This project involves both the construction of the
ethylene plant and the required infrastructure for
processing it to produce polyethylene, aromatics and
other ethylene derivatives. Basf, British Petroleum and
Shell are some of the companies invited to participate in
the plant’s construction, which will cost $2,500 million
US dollars. In order to make the operation more
attractive for investors, PEMEX is not aiming to be the
main shareholder but rather a minor shareholder, i.e.
owning less than 25% of stocks. In fact, whether
PEMEX’s participation will be in terms of capital or
raw materials remains to be defined.
The final decision regarding the site for constructing
the new complex will be taken by shareholders based
on market opportunities, timely raw material supplies
and the best conditions for obtaining higher profits.
Altamira, Tamaulipas, has been proposed because
of its location near the industrial area and buyers,
but Coatzacoalcos, Veracruz, would also be
convenient if having the plant located near the
central primary-supplies production site is
preferred. Both regions have already experienced a high
concentration of oil and petrochemical industry acting
as the territory’s structuring element. Today, the
consequences of the privatization process are evident
in both areas.
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2042 N.M. Laguna / Energy Policy 32 (2004) 2035–2047
The case of southeastern Tamaulipas is studied here
because of its relevance within the global petrochemical
production. This is an old oil-producing area which
emerged as a result of oil extraction and refining works
dating back to the beginning of the twentieth century,
followed by an economic reawakening as a result of the
late-seventies oil boom. From that moment on, the
economic globalization process that fostered PEMEX’s
restructuring, imprinted diverging characteristics to its
production-specialization and growth dynamics.
4. Oil and petrochemistry in southern Tamaulipas
4.1. An introduction to Southern Tamaulipas
Located along the Gulf of Mexico’s coastal area,
southern Tamaulipas comprises of the municipalities of
Tampico, Ciudad Madero and Altamira, and is the
region with the most concentrated highest private
investment in petrochemical and chemical companies
in Mexico. Its economic development, closely linked to
the country’s oil history and to the presence and growth
of maritime activity, has shaped it into a top-priority
region for industrial development because of its modern
infrastructure and equipment, highly-qualified labor and
a dynamic domestic and international trade.
Since the beginning of the twentieth century and once
that the industrial exploitation of Mexican oil wells
adopted a formal character, foreign interests that
dominated the sector transported crude oil from the
United States to Tampico for refining purposes. With
the discovery of high-yield oil fields in the area (such as
!
El Ebano in San Luis Potos!ı; Cerro Azul and la Faja de
Oro in Veracruz), the Tampico port became an
important oil emporium worldwide by transporting fuel
to Dover, England, in 1914. These facts favored the
foundation of the ‘‘Francisco I. Madero’’ refinery by the
‘‘El Aguila’’ oil company. Tampico’s decline started in
late 1921 due to the presence of brackish water in the
Faja de Oro oil wells plus the occurrence of fires in other
highly productive oil wells. Nevertheless, it remained an
important oil-extraction zone until 1940. After nationa-
lization, the Cuidad Madero refinery underwent mod-
ernization and an expansion process, becoming the
refinery with the highest distillation capacity from 1940
to 1960.
4.2. Advantages for the petrochemical industry
development
4.2.1. Oil resources
As an oil producer, the Northern Region—to which
southern Tamaulipas belongs—stimulated a more in-
tegrated economic development compared to other
areas of Mexico, despite its reduced participation in
national production: it contributed 4.8% in 1985, 4.1%
in 1990 and 2.5% in 2001. Lately, it has overcome the
adverse profitability situation. It was a region that
operated with losses in the past (1992–1994), but during
the past six years it has achieved positive numbers in
operation utilities, with a 1481% growth in 1995–2000.
Furthermore, it has a series of comparative advantages
which render it attractive in the short term: 33% of
Mexico’s proven hydrocarbon reserves are located there;
its jurisdiction includes two important gas-producing oil
fields (Burgos and Veracruz); the Chicontepec project,
with high oil reserves and a vast extension of land and
marine areas with an extraordinary potential, make it an
area of extraordinary potential (PEMEX, 1994, 2001a–
c; Ya! nez, 2001, pp. 1, 2).
4.2.2. The ‘‘Francisco I. Madero’’ refinery
PEMEX’s Madero Refinery has focused primarily on
the production of gasoline, diesel, airplane-fuel (turbo-
sine) and fuel-oil. It was one of the first refineries to
address the production of basic petrochemicals, thereby
strengthening inter-sector and commercial relationships
in the region. Although its production has not been
outstanding at a national level, it has remained constant
(16% in 1985, 12% in 1990, 13% in 1995 and 11% in
2000) aiming to play the strategic role of supplying oil
derivatives to the central, northern and northeastern
areas, the most industrialized areas in Me! xico that
generate 64% of the country’s Gross Domestic Product
(GDP).
In 2001 the Madero refinery recorded a process
capacity of 155,000 bd of crude oil, derived from Sonda
de Campeche (30% of Mayan crude oil), the southern
Veracruz district (54%) and the region’s oil fields (16%
Arenque, Pa! nuco and Tamaulipas crude oil). During
1999–2002 Reconfiguration works were carried out
involving the construction of 10 new plants and 3 steam
boilers, the modernization of 7 existing plants, and the
installation of 2 to improve the refinery’s scheme and
expand its processing capacity to 190,000 bd of crude oil
(Tables 2 and 3). These initiatives seek to meet the
growing regional demand of gasoline and diesel,
complying with environmental regulations NOM-085
(for industrial sources) and NOM-086 (for automobile
sources) and to reduce the production of high-sulfur
fuel-oil.
4.2.3. Pipeline transportation system and production
flows
Transportation of hydrocarbons, oil derivatives and
petrochemicals from production to consumer areas is
carried out mostly through the National Pipeline System
(Fig. 2), spread along the Gulf coast, from Sonda de
Campeche and from the Tabasco and Chiapas produc-
tion fields to the Pacific coast through to Istmo de
Tehuantepec, the center, mid west, northeast and north
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N.M. Laguna / Energy Policy 32 (2004) 2035–2047 2043

Table 2 c. A 48-diameter gas pipeline with a length of 1106 km

Madero Refinery reconfiguration: new plants which links Cactus, Chiapas with San Fernando,
Process plants Capacity Start of Tamaulipas, and the Madero Refinery.
(barrels per day) operation d. A 30-km fuel-oil duct which supplies the Altamira
Combined 100% Maya 137,000 Dec/01 geothermal plant owned by the Federal Electricity
Coke 45,500 Mar/02 Commission.
HDS combustibles 50,000 Feb/02 e. A number of petrochemical pipelines linking the
Rent 9300 Feb/02 refinery with private companies in the area.
MTBE 2500 Jan/02
TAME 2600 Jan/02
Hydrogen (MMSCFD) 42 MMSCFD Nov/01
Natural gas 4.2.4. Ports
Sulfur 600 ton/day Feb/02 The presence of the Tampico port system (comprising
Gasoline reformer 10,000 Jan/02 of Tampico’s commercial port and Ciudad Madero’s oil
Catalytic disintegration 30,500 Jan/02
port) led to the continued establishment of mining
Source: PEMEX-Refinery, 2001. Francisco I. Madero Refinery. companies linked to oil aimed at addressing both
Internal files. internal supplies and exportation. The development of
Table 3
these industries was supported by the presence of
Reconfiguration of the Madero Refinery: modernized plants PEMEX’s oil port in Ciudad Madero, where petro-
chemicals and fuel produced in PEMEX’s Cosoleacaque
Plants Capacity Start of
(barrels per day) operation
and Pajaritos plants enter by sea to supply important
processing plants that operate in southern Tamaulipas.
Combined BA 40,000 Mar/02 With a load capacity of 17,929 thousand tons in the
Combined MF 13,000 Jan/02
year 2000, of which 32% was by public terminal
HDS Turbosine (U-500) 15,000 Oct/01
HDS of Naphtha’s (U-600) 18,000 Oct/01 participation, private terminals with 35% and PEMEX
Catalytic ME (FCC-1) 30,000 Jan/02 with 33%, Tampico is considered the second most
Hydrocarbons CH 1584 MMSCFD Aug/01 important port for transoceanic ships and the fifth in
separator regards to cargo and the management of containers at a
HDS Kerosene Diesel 25,000 Oct/01
national level. In 2000, exports (3,334,582 tons) and
(U501)
imports (2,807,685 tons) were bound to the United
Source: PEMEX-Refinery, 2001. Francisco I. Madero Refinery. States, a country which monopolize 34% and 54% of
Internal files.
the market with products such as crude oil, gasoline,
diesel and asphalt.
of the country. In 1998, this pipeline network totaled Tampico’s development resulted in the growth of the
26,060 km and transported 61.5% of products (PE- urban area, limiting the port’s possibility for further
MEX, 2000, p. 53). expansion due to lack of space. In view of this situation
The national oil-pipeline network—that begins at the Altamira Industrial Port was built, ten times as large as
Nuevo Teapa pumping station in Veracruz—transports Tampico’s in total area and five times as large in storage
the Mezcla crude-oil types (Maya, Despuntado and area. Its growth during the last few years makes it the
Istmo) through a 3000 0-diameter pipeline that runs country’s second most important port in total cargo
1031 km to connect Nuevo Teapa-Poza Rica-Madero- movement of containers, including transoceanic and
Cadereyta. However, in view of the refinery reconfigura- coastal traffic.
tion process, its capacity to process growing crude-oil
production proved insufficient, and a new 2000 0-diameter 4.3. PEMEX and private investment: shaping of
oil pipeline was projected, which could deliver segre- specialized production areas in southern Tamaulipas
gated light/weight crude oil, allowing manufacturing the
optimum percentage of mixtures in refineries (Fig. 2). 4.3.1. A world’s opportunity
The regional oil-pipeline network is integrated by: From the sixties, the oil industry’s new spatial
organization within the world system was closely linked
a. Two oil pipelines measuring 2000 and 2400 in diameter to the behavior of the large transnational companies
and 92.5 km in length which link the Madero- which, seeking comparative advantages, relocated part
southern District stretch, plus another three measur- of their production capacity in developing countries
ing 1000 which link the Pa! nuco, Tamaulipas and (Gunder, 1983). The advantages of this strategy
Arenque oil fields to the refinery. included the availability of cheap labor, low raw
b. A 1200 -diameter polyduct and 495 km in length which material prices, the proximity to energy sources, local
transports distilled products from Madero to Mon- tolerance of hazardous and polluting industries, and the
terrey, Nuevo Leon.! existence of an adequate infrastructure. Enclaves
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2044 N.M. Laguna / Energy Policy 32 (2004) 2035–2047
isolated from the rest of the territory were created,
which offered multinational companies a number of tax,
trade, financial and infrastructure incentives. Industria-
lization, focused on exports, depending on the interests
of business groups with headquarters in developed
countries (Caravaca, 1990, p. 16).
4.3.2. Territory and production links
Within this context, the privileged geographical
location of the Gulf of Mexico, its economic
development linked to the country’s oil history and
the port activities in Tampico, along with the
construction of Altamira industrial port system—the
country’s largest port built to address the region’s
specific needs focused on transnational businesses—
made southern Tamaulipas an attractive area for
business investments.
As a result of the oil boom an intense territorial
process took place in Ciudad Madero, derived from
government investments which broadened and diversi-
fied the refinery’s installed capacity. This, in addition
to the differential-pricing regime and tax incentives
(discounts of up to 30% in electricity, energy and
petrochemical raw material prices) set forth in the
National Plan for Industrial Development, generating
an accelerated establishment of private petrochemical
businesses. These benefited from the closeness to port
installations and PEMEX storage terminals, which
facilitated the arrival by sea of a number of raw
materials from petrochemical complexes located in
southeastern Veracruz via the Pajaritos Maritime
Terminal.
The region’s BP industry offered solid ground for the
growth of private petrochemistry under the control of
large private oligopolies, mainly by colossal transna-
tional chemical companies such as DuPont, BASF,
Shell, General Electric, Repsol-Hilse, Enertek, among
others, as well as by national companies from the most
important business groups like AXA.
Since 1960, the Ciudad Madero refinery joined the
petrochemical arena with an important carbon produc-
tion, allowing its first commercial flows to be established
in 1961 with Pigmentos y Productos Qu!ımicos, S.A. de
C.V., which was the first private petrochemical industry
in the region, located in northeastern Tampico. Never-
theless, the installation of secondary petrochemical
industries along the Tampico-Altamira industrial corri-
dor during the seventies, marked the beginning of a
territorial concentration of this highly specialized
industrial activity. The location of Hules Mexicanos,
S.A. in the seventies and of Negromex, S.A. in the
eighties, both companies dedicated to the production of
synthetic rubber, required the production of butadiene
from Madero Refinery and styrene from Cosoleacaque,
Veracruz. Chemical companies such as Novaquim
(catalyzers, dyes), and Policyd (PVC), obtained all their
raw materials from Southeastern Veracruz. Petrocel,
which produces secondary products for the manufacture
of polyester fibers, established commercial ties with the
Madero refinery, who supplied raw materials through
methanol and paraxylene ducts (Fig. 4).
New secondary petrochemical industries were estab-
lished in Altamira’s industrial port areas in 1983.
Promociones Industriales Mexicanas, S.A. (PRIMEX)
uses vinyl chloride as a raw material (from Southeastern
Veracruz), ortho-xylene and 2-ethyl (imported pro-
ducts); its production of intermediate petrochemicals,
derived for export markets, is used in the manufacture
of electric wires, tubing and bottles. Finacryl, S.A.
manufactures acrylic fibers for textiles obtaining acry-
lonitrile and methyl-formide from the Independencia
complex, in San Mart!ın Texmelucan, and from South-
eastern Veracruz. Altaresin, S. A. de C.V. (PVC resins)
and Polymar (acrylonitrile and styrene for the manu-
facture of synthetic rubber and plastics), maintain
production links with southeastern Veracruz, where
vinyl chloride, styrene and acrylonitrile are produced,
which are indispensable raw materials for their pro-
cesses. Madero refinery also supplies Polymar with
butadiene and styrene (Fig. 4).
The accelerated urban processes, linked to industrial
growth through labor demand, stimulated changes in
land-use permits and triggered an urbanization process
between Tampico and Altamira, meaning that industries
originally located beyond urban limits have now been
absorbed.
4.4. Petrochemical, liberalization and reindustrialization
in southern Tamaulipas
PEMEX’s restructuring, which marked the creation
of subsidiary organisms in 1992, led to the closure and
dismantling of the Madero refinery’s petrochemical
plants. Consequently, the reduction in production
capacity lowered PEMEX’s production flow for use by
the private industry to four products derived from their
processes: black smoke (for Nhumo), polypropylene (for
Indelpro), oil-fuel (for the Altamira Thermoelectrical
plant) and carbon (for Cemex). Given this situation, the
government adopted policies oriented towards promot-
ing and reinforcing factors (such as infrastructure,
adequate services and specialized labor) and making
the region attractive to direct foreign investment.
Reindustrialization—which required the adoption of
production and organizational innovations by compa-
nies—has not given rise to intrinsically dynamic areas,
but instead to exporting platforms which have generated
new inequalities and dependence relationships, and have
not translated into any improvement in the population’s
living standards.
To this respect, the state and federal governments
have stimulated Mexico’s most extensive industrial port
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N.M. Laguna / Energy Policy 32 (2004) 2035–2047 2045

Fig. 4. Distribution of private companies in South Tamaulipas.

development in southern Tamaulipas, with the
best and most efficient infrastructure in order to
gain access to raw materials at competitive prices, as
well as their processing and distribution to the
domestic and international markets, all within a single
location.
Altamira Industrial Port Complex comprises of three
strategic areas: The Petrochemical Corridor, Altamira
Port and Altamira Industrial Park.
With an accumulated historical investment of $5,500
million US dollars, the Petrochemical Corridor includes
businesses with production representing over 30% of the
total chemicals and petrochemicals in the country, a
leader in the production of black smoke and titanium
dioxide, and manufacturing 80% of total resins in
Mexico. More than 80% of products manufactured
under the concept of industrial groups are derived to
exportation, an advantage that has been detected by
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2046 N.M. Laguna / Energy Policy 32 (2004) 2035–2047

Table 4
Companies located along the petrochemical corridor

Company Start Products Industry into which it integrates

DuPont 1959 Titanium dioxide Paints, paper

Hules Mexicanos 1967 Synthetic rubber-emulsion
Novaquim 1972 Chemical rubber
Petrocel 1974 Dimethyl terephthalate Petrochemicals, varnishes
Nhumo 1977 Black smoke Tyres, rubber, dyes
Policyd 1981 Vinyl polychloride Pipes, plastics, bottles
Negromex 1982 Synthetic rubber-solution Tyres, shoes, adhesives
Cryoinfra 1990 Industrial gas Gas supplier
Indelpro 1992 Polypropylene Bottles, packaging, fabrics
Pecten Poli!ester 1997 Polyester resin Packaging and containers
Temex 1997 Terephthalic acid Video films
Enertek 1998 Electric and steam energy Energy supplier
Dyatext 1998 Clothing manufacturing Clothing industry
Guillford Mills 1999 Clothing manufacturing Textiles
DuPont 2000 Ferric chloride Petrochemicals
Uniroyal Chemical 2000 Accelerators, antioxidants Plastics, tyres, agrochemicals

Source: Altamira Industrial Port (2001). Internal Files.

Table 5
Altamira’s Park Companies

Company Start Products Industry to which they are integrated

Grupo Primes 1983 PVC compounds, resins, plastics Automobile, communications, construction, foods
Finacril 1985 Synthetic and acrylic fibers Textiles
Concretos Monterrey 1989 Premixed concrete Industrial and construction
Gas Hilda 1990 Liquid gas storage Services
GE Plastics 1991 ABS and SAN resins Electrical appliances, automobile, telephones, computation
Johns Manville 1994 Asphalt waterproofing Construction and industry
Basf 1995 Resins, dispersions y auxiliaries Medical, electronic, automobile and telephone applications
Polioles 1995 Expandable polystyrene Agricultural and industrial packaging
Papelera Altamira 1995 Toilet paper and napkins Paper products
Advanced Profiles 1995 PVC profiles Construction of houses and buildings
Royal Build Systems 1995 PVC construction system Decoration
PPG Industries 1997 Precipitated silica Rubber, tires, agrochemicals
Basf 1997 Polystyrene Textiles, paper and leather
Dowell Schlumberger 1997 hydrochloric acid storage Services
Basf 1998 Copolymer styrene Waterproofing

Source: Altamira Industrial Port (2001). Internal Files.

strong local industrial groups such as CYDSA and
ALFA, besides foreign groups such as Shell and DuPont
(Table 4, Fig. 4).
Altamira is Mexico’s most developed port, and the
first to be privatized in 1994. Today, the port ranks first
in the handling of petrochemical fluids, and is one of the
country’s four most important ports. This port has the
capacity to host 160 ships simultaneously, with a total of
nine maritime terminals offering 900 meters of dock
currently in operation, and also having railroad cargo
facilities:
* 2 public terminals for multiple uses, including
containers.
* 5 private terminals specialized in handling petro-
chemical fluids
* 1 bulk farming and mineral
* 1 bulk mineral
Logistics-support operations are carried out in the
port in relation to equipment and merchandise, includ-
ing companies such as Terminal de Automoviles ! de
Altamira, with a storage capacity of 200 thousand units
per year, and Conteiner K., focused on container
maintenance and repairing. The port has an official
depth of 39 feet, which facilitates the access of ships of
up to 60000 tons in gross weight, which was increased to
40 feet in 2001, making it the deepest port along the
Gulf of Mexico. It has a surrounding developed
industrial area: Altamira Industrial Park is a complex
where any company can transfer cargo, process materi-
als or manufacture products, with an area of 4000 has.
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N.M. Laguna / Energy Policy 32 (2004) 2035–2047
Companies may purchase those areas which best meet
their needs and take advantage of the proximity to the
transoceanic port and the already existing industrial
infrastructure and terrestrial transport (Table 5, Fig. 4).
The process that has taken place in southern
Tamaulipas is not yet concluded, and today changes
are still in progress in the region’s industrial system.
Large-scale projects are in the detailed-engineering
phase, and will be built in the near future, as in the
case of BASF’s nine petrochemical plants, NEMISA’s
copper plant, and the macro electricity-production
project in which the MITSUBISHI Company partici-
pates. Thus, the region will continue depending strongly
on global oil policies.
5. Conclusions
PEMEX’s restructuring processes, and the trade
liberalization of basic petrochemicals that has taken
place since 1986, have failed to create conditions for
attracting the capital and technology required to
modernize the sector. Hence, the high unit production
cost and limited investment in plants to meet the
growing demand for manufacturing oil derivatives,
added to the downward trend in oil prices in the
international market since early 1997, translating into
the negative results obtained by this industry so far. The
direct repercussions of these processes are reflected in
the decline in production, income, domestic sales and
exports of PEMEX-Petrochemistry. However, through
regional imbalances, this has had deeper and more
complex effects in Mexican territory, since the indus-
trialization policies implemented through time, diverted
financial resources towards building industrial infra-
structure and to the buying of industrial equipment
required by transnational companies, instead of focus-
ing on the technological modernization of PEMEX’s
plants and broadening their capacity. Furthermore,
competitive advantages were developed in strategic
regions oriented to meeting the needs of international
markets. These new developments are impacting the
distribution dynamics and hierarchy of economic
activities, with unemployment being a dominant feature.
2047
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