Mexico’s populist president is trying to reshape the country into an economy with strong worker protections that is driven by oil growth. Yet hundreds of workers at state oil firm Pemex have gone unpaid for months, current and former employees told Quartz.
Even in the midst of the coronavirus pandemic, Pemex has not paid many of the employees it hired on temporary contracts in 2019 and hasn’t provided them with the health insurance, vacation, or other benefits it normally does, the sources said. The contractors work in a division that builds and renovates refineries—and many are assigned to the controversial $8 billion Dos Bocas refinery project in Mexican president Andres Manuel Lopez Obrador’s home state of Tabasco. While most of the unpaid contractors are now working remotely, sources said some are still working at the construction site.
Lopez Obrador, a resource nationalist who wants Pemex to drive the Mexican economy as it did in the 1960s and 1970s, has made Dos Bocas central to his bid (paywall) to revive the firm, which is Latin America’s second-biggest company by revenue. But Pemex is also the world’s most indebted oil company. It lost $35 billion last year and Fitch downgraded the firm’s credit rating even further into “junk” territory earlier this month.
Although the failure to pay workers began long before Lopez Obrador took power, the problem is antithetical to his plans for a “fourth transformation” of Mexico into a worker-friendly country, a former Pemex board member said. “Unfortunately, the current administration’s attitude towards workers is not what I would have hoped from a leftist government,” they said. “It’s a huge level of uncertainty for these people.”
As Mexico’s economy reels from the pandemic, Lopez Obrador has refused to take on more debt to stop it shrinking as much as 10% this year. He also ignored suggestions that he fund an economic stimulus by rerouting money from non-urgent projects like the Dos Bocas refinery. Even before the coronavirus crisis, many analysts said it would be cheaper to import foreign oil than refine it via the costly project, while pointing out that Mexico’s six existing refineries work at less than 30% capacity. “There’s so much cognitive dissonance it makes you dizzy,” said Jeremy Martin, vice president for energy and sustainability at the Institute of the Americas think tank. The president’s coronavirus response plan isn’t “a stimulus as much as a doubling down on commitments he’d made as a candidate and in the early part of his presidency—including Dos Bocas,” Martin said.
Amid plunging prices, global oil producers sought an agreement to cut production last week. But Lopez Obrador—banking his political future on the state oil industry—fought hard against those cuts, and on Sunday struck a deal that allows Mexico to cut production far less than other producers. That could end up costing Pemex, however, if it keeps working on unprofitable oil fields.
For several years, issues with Pemex’s funding and its labyrinthine human resources system have forced contract workers to go months at a time without pay. When their contracts lapse, managers informally ask them to continue working in the hope they will be later remunerated and given a full-time contract, sources said. “As far as the human resources system goes, [they] don’t exist,” said one current Pemex employee, who asked to speak anonymously for fear of losing their job. While the problem predates Lopez Obrador’s administration, the situation has since become “critical” in part due to coronavirus, the source said.
Pemex hasn’t taken adequate measures to protect those working onsite, another employee told Quartz. The firm provides hand sanitizer and a doctor checks people’s temperatures when they enter, but they don’t have masks or gloves and social distancing measures aren’t in place. “There was a certain disdain [toward the virus] in the early days of the pandemic,” the former Pemex board member said. “They have started taking stricter measures…but they’re missing a lot.”
Energy secretary Rocio Nahle tweeted an image from the Dos Bocas site last week, which showed workers without masks who seemingly weren’t keeping to government guidelines of standing 1.5 meters (5 feet) apart.
Lopez Obrador’s cabinet has ordered a month-long shutdown of all non-essential activities. Energy and critical infrastructure projects are allowed to continue, but Dos Bocas shouldn’t fall under that category, said Duncan Wood, director of the Mexico Institute at the Wilson Center think tank. “If you’re talking about refineries already producing fuel for the economy, yes, that’s essential,” he said. “But, no, projects that are being built can be delayed without any problem for the country…if you had a shortage of fuel, you’d import it from the US because the prices are low.”
Since Pemex isn’t covering their healthcare, pregnant women and people with chronic illnesses often pay for private insurance so they can see doctors, said a person working on the Dos Bocas project who sent Quartz files showing they hadn’t been paid since December. “Pemex’s salaries are very attractive. But it is like a bet,” the person wrote in a message. “You may work for free in order to be considered as a ‘loyal asset.'”
By asking people to work without a contract, Pemex is breaking Mexican employment law, said Adolfo Armas, a labor lawyer at Mexico City law firm Goodrich, Riquelme y Associados. The unpaid employees have the right to take Pemex to court and claim months’ worth of pay and other compensation, but a case normally takes between two and five years in Mexico’s backlogged labor courts, he said. The government, he added, could also inspect and fine Pemex for the breaches.
As of April 2019, there were 356 people across the division working on temporary contracts, according to an internal document seen by Quartz. In January, and again in March, a manager wrote to Pemex’s security division to ask that they give certain workers access to Pemex sites, files seen by Quartz show. People without active contracts can’t access Pemex workplaces without special permission.
The firm is also failing to pay contracting companies on time. “They have not been paying [contracting companies] for many months,” said David Enriquez, an energy lawyer at Goodrich Riquelme. “The amount owed to contractors is really huge and, of course, Dos Bocas is not an exception—even when Dos Bocas is [the president’s] pet project.”
Aside from its costs, Dos Bocas has stirred controversy for environmental abuses linked to the project. Quartz previously reported that Pemex has illegally cut down protected mangrove trees on the project’s site, which was already prone to flooding. Lopez Obrador’s appointee at the federal environment watchdog canceled a fine imposed on a company that earlier chopped down mangroves at Dos Bocas.
Pemex didn’t respond to a request for comment on this story.