Mexico's Unfinished Reform

President Calderón tackles the state oil monopoly -- and the anti-democratic forces that support it.

THOUGH YOU wouldn't know it from listening to the Democratic presidential candidates, Mexico's biggest economic problem is not the North American Free Trade Agreement but its failure to open its economy even more widely to investment and trade. The single largest obstacle to Mexican growth is the country's state oil monopoly, Petróleos Mexicanos, or Pemex. Created in 1938, the company has become synonymous with inefficiency and corruption; though it supplies 40 percent of Mexico's government revenue, its production has declined 10 percent in the last three years, largely because it lacks the capital or expertise to tap offshore oil reserves.

Now Mexico's courageous president, Felipe Calderón, has proposed a modest reform aimed at easing this bottleneck. Legislation he introduced in the Mexican Congress would allow Pemex to contract out exploration, drilling and refining to foreign companies and to pay bonuses in lieu of ownership shares in any new fields. The reform could allow a substantial boost in Mexican production and income and could save the country from massive imports of refined products -- while still preserving state control over oil resources, a near-sacred principle in Mexican politics.

Unfortunately for Mr. Calderón, the economy is not the only arena where Mexico's liberal revolution of the 1990s remains fragile. Democracy, too, is vulnerable. Though it is likely that the president has enough support to pass the reform, at least in the Mexican Senate, no vote is likely anytime soon -- because both houses of Congress have been occupied and barricaded by left-wing populists attempting to stop the legislation by force. Their leader is Andrés Manuel López Obrador, who already made clear his contempt for democracy in 2006, when he refused to accept his defeat by Mr. Calderón in the presidential election; at that time, his supporters occupied the center of Mexico City.

Mr. Calderón does not shrink from confrontation. His presidency has been largely consumed so far by the war he launched against Mexican drug gangs, a bloody and messy but desperately needed struggle to restore government control over key northern cities. His government has responded to Mr. López Obrador's provocation by joining with the opposition Institutional Revolutionary Party in proposing that the reforms be debated by Congress in a 50-day special session. The leftists have rejected the proposal. Instead they are bombarding Mexicans with incendiary and mendacious rhetoric about what they claim is a plot to hand Mexican oil to U.S. companies. In fact, if the reform is passed, Brazil's state oil company is the best bet to sign the first contract with Pemex.

Following the election Mr. Calderón outmaneuvered Mr. López Obrador by patiently but firmly insisting that the rule of law be followed. Soon it became clear that the overwhelming majority of Mexicans supported him. The same logic applies in this case. Pemex's future -- and that of the Mexican economy -- should be decided by a legal and democratic vote, not by a mob.