Sliding global crude oil prices are dealing a heavy blow to the Mexican economy, with the country’s state-run oil company Pemex deciding to lay off as many as 10,000 workers in its outsourcing divisions.
No Pemex employee has been removed; those on their way out are all outsourcing and technical personnel, according to the Mexican finance daily El Financiero. But a Bloomberg report says job losses could even rise to 50,000.
Pemex is struggling to cut costs and please investors in the capital markets, where its share price has been in free fall.
The sudden drop in global crude oil prices comes at a particularly bad time for Mexico. The North American country has just reformed its energy sector in the hope of creating employment and boosting the export sector.
Crude oil prices have now fallen below US$50 a barrel in the international market, and major oil producers such as Russia and Venezuela are struggling to shore up their economies which are teetering on the brink of recession.
While Mexico is unlikely to suffer as much as Russia or Venezuela, Stuart Hill, the managing director of Xperto Offshore in Mexico, stated in an interview with Bloomberg that “the city is in shock.”
Pemex has declined to renew several contracts in recent months, with a Pemex official telling Bloomberg that the services the company had been contracting were no longer needed.
Mexico is sitting on a huge deposit of oil (Mexico’s maritime border with the United States alone could hold up to 30 billion barrels of oil), which should see exports bring in significant revenue in foreign currency. But analysts say Mexico’s aspirations will remain a dream until oil prices creep back up to $100 a barrel.
One of the key aims of Mexico’s recent energy reforms was to increase the efficiency of Pemex and accelerate production. Yet now, Pemex may be able to buy time to increase its efficiency and production because the current slump in global crude prices is largely blamed on overproduction.