Page 5 - LatAmOil Week 49

LatAmOil COMMENTARY LatAmOil

That investigation, known as the Lava Jato (“Car government-controlled companies all possible
Wash”) probe, has been in process since 2014 advantages within the oil and gas sector.
and is now in its 74th round. One of its targets Under these circumstances, the partners
has been Odebrecht, a Brazilian construction will have few options for pushing back against
and industrial group that has admitted to using pressure from Pemex and Cenagas. They are
bribery schemes to secure contracts in Mexico not likely to find much sympathy within gov-
and 11 other countries. In turn, Odebrecht has ernment offices if they fault or criticise these
a controlling stake in Braskem, a petrochemical state-owned companies.
manufacturer – and Braskem, of course, is one For example, if they were to point out that
of the investors in Braskem Idesa. Cenagas did not try to renew contracts for
The joint venture’s ties to the Brazilian cor- ethane and gas in July – the usual target date for
ruption scandal have raised the hackles of Mex- negotiating new deals, according to Eduardo
ican President Andres Manuel Lopez Obrador, Prud’homme, a former Pemex and Cenagas
who made anti-corruption initiatives the cen- staffer who now heads Gadex, a private Mexi-
trepiece of his campaign in 2018. Indeed, the can energy consultancy – then they might sim- Braskem Idesa
president has alleged that Odebrecht bribed ply be reminded that President Lopez Obrador appears to have
Mexican legislators in order to ensure the pas- has criticised the contract for ethane deliveries
sage of comprehensive energy reforms in 2013 to Etileno XXI. few friends in
and 2014, when his predecessor Enrique Peña Or they might simply be hit with another
Nieto was in power. demand for renegotiation of the contract, on Mexico City at
More recently, Lopez Obrador said his the grounds that it forces Pemex to accept
administration intended to investigate a mat- below-market prices for gas. (Indeed, some the moment
ter related to Lava Jato. Specifically, he said this industry observers believe that the government
week that Mexican authorities would look into sees recent developments as a means of forcing
the US Justice Department’s charge that Pemex Braskem Idesa to sign new contracts that are
employees took bribes from Vitol, one of the more favourable to both Cenagas and Pemex.)
world’s largest commodity traders, in exchange
for ensuring the approval of major contracts. No easy solution
He was speaking a day after PMI Comer- In short, Braskem Idesa appears to have few
cio Internacional sent a letter saying that it had friends in Mexico City at the moment.
“taken the decision to suspend temporarily It is a representative of private enterprise at
commercial relations” with Vitol and all of its a time when the president favours the public
subsidiaries, pending the completion of the gov- sector, and it cannot escape its ties to the Brazil-
ernment’s investigation. According to a Reuters ian corruption scandal. As such, it is unlikely to
report, another state-owned company – CFE, secure much in the way of relief from the gov-
the national electric power provider – said that ernment in the near future.
its fuel trading subsidiaries would do the same. In the meantime, damage has been done.
Since Cenagas halted natural gas deliveries to
Corruption and competition Etileno XXI in early December, both Fitch Rat-
But Braskem Idesa isn’t just tainted by its associ- ings and Standard & Poor’s have downgraded
ation with Odebrecht and the Lava Jato scandal. Braskem Idesa’s credit ratings, citing the disrup-
It is also running up against one of the Mexican tion in operations that followed the suspension
president’s core political convictions – namely, of gas shipments.
that state-run companies ought to play the lead- Fitch explained its decision further by high-
ing role in Mexico’s economy. lighting its “base case expectation that the com-
For one thing, its shareholders – Braskem pany will be able to find alternative fuel sources
and Grupo Idesa, a Mexican chemical and pet- that will allow it to resume operation, but at a
rochemical manufacturer – are privately owned. lower capacity utilisation level and with a higher
For another, Braskem Idesa is at odds with state- cost structure.” It also remarked: “A failure to
owned Pemex and Cenagas at a time when resume operations in the near-future would
Lopez Obrador is declaring his intent to give likely lead to a multi-notch downgrade.” ™

Etileno XXI uses both natural gas and ethane (Photo: Odebrecht)

Week 49 10•December•2020 www. NEWSBASE .com P5