The U.S.S.A: The Equation of the American Collapse
PART ONE: The A-mexi-can Economy
In March of 2008, unfamiliar broadcast initiatives commandeered the primetime television programming of our immediate southern neighbor, Mexico. Night after night, commercials bombarded the airwaves with a booming narration to parallel Mexican President Felipe Calderon’s expressed position. Images of children looking into the rolling waves of the country’s eastern coast were accompanied by the tenderly delivered words “Mexico has a great treasure, a treasure hidden below the bottom of the sea… But the world now confronts a new reality.” The images then abruptly cut to elementary visual representations of deep sea drilling, explaining that the targeted Mexican oil is at a depth 30 times greater than the country’s highest building; and the amount of pressure at such a point is the equivalent of 60 trucks compounded upon an aluminum soda can. The music then built to a climax to amplify the impact of the information, and the narrator returned to assert, “Reaching our oil is one of the biggest challenges of our time; and Mexico has to take the necessary actions to achieve it.”
According to President Calderon, these “necessary actions” include the fractionation and selling of the state-owned oil monopoly, Petroleos Mexicanos, which accounts for 40% of Mexico’s federal budget. This comes over seventy years after the country proudly nationalized its oil industry in 1938—when the Mexico City based “Pemex” was formed from the expropriated assets of the Chevron and Exxon Mobil Corporations. Foreign private investment in the industry has been prohibited ever since, but the Mexican president states that the reintroduction of external contracts would revitalize the otherwise collapsing Mexican economy.
Calderon has the support of the majority of industry analysts who warn that Pemex has been plagued by a lack of investment and mismanagement. According to their approximations, the company’s output is declining by 200,000 barrels a day; and if the trend continues, Mexico will be forced to import petroleum well within a decade’s time. They claim the solution can be found—as depicted in Calderon’s television campaign—in the northern Gulf of Mexico. There, some estimate more than 50 billion barrels’ worth of oil lies in the nation’s deep-water reserves, but the administration contends that the country lacks the technology, let alone the capital to access them.
“We must go after that oil,” Calderon told reporters in February of 2008. “It’s a problem of technology and operational capacity.”
After months of campaigns and debates, Mexico’s Congress approved a concessional law in October of 2008 to allow Pemex to hire private and foreign companies to search for crude oil within Mexican jurisdiction. Last week, on January 28th, President Calderon happily announced that he will meet with the heads of several major energy companies at the World Economic Forum in Davos this week in preparation to offer the first oil exploration contracts to foreign corporations since the nationalization of the industry. Although the Mexican president has not named with which companies he will convene, Carlos Morales, the director of exploration and production for Pemex, said that the company wants to discuss production and exploration contracts with corporations including Exxon Mobil, Royal Dutch Shell Plc and Chevron; and that the initial contracts may be awarded by the end of 2009.
Leftists argue that the convention to take place between President Calderon and the corporations is indicative of a corrupt Mexican government attempting to sell the nation’s patrimony to “gringos”. Conservatives rebut that although it may mean the return of U.S. and British conglomerates that originally established drilling sites in the country, the industrial reform is absolutely necessary to avoid the imminent collapse of the Mexican economy.
How does this effect America? If President Calderon’s desperate attempts to liquidate national assets are inadequate, inert or ineffective, the Mexican economy will undoubtedly collapse; and the U.S. will almost certainly follow. Not only is Mexico the third-largest supplier of petroleum imports to the United States at 1.2 million barrels a day, but also the second-largest international trader in general. With an already-stressed U.S. economy and growing American dependency upon China to purchase the debt of the “stimulus package” in the form of 30 year treasury bonds, the slightest economic decline in neighboring Mexico could prove detrimental to the United States’ attempt to reverse it’s current recession. Even with the partial privatization of Mexico’s petroleum industry, the Mexican government would still require the marketing of it’s petroleum at $30 a barrel over the current competitive rate of approximately $40 in order to securely balance the federal budget.
The situation is only further compounded by China’s current possession of $682 billion of U.S. Treasury debt, recording of it’s slowest economic growth in seven years, and increasing threats of inability to afford the $2 trillion cost of the American “stimulus package”. Other countries, such as Russia and Japan, are also significant investors in U.S. debt, however, lack the purchasing ability to adequately suffice in the event of China’s withdrawal from negotiations. With no other possible buyers, America would be forced to compensate for the lower profit by raising the interest rates of the existing debt, adding an additional $200-$300 billion to it’s ultimate cost.
The predicament echoes of the strategic economic impasse once imposed by the U.S. upon the U.S.S.R. during the Reagan administration—that is, the oil partnership forged with Saudi Arabia, which lead to the middle-eastern country to triple it’s oil production while cutting it’s selling price to the U.S. by 50%, causing an economic explosion in the western world, and an economic implosion in the eastern, and oil-revenue-dependent, Soviet Union. Now, the economic high-ground has shifted; and it is the west that faces the exceeding dilution of resources, inflation, and the threat of self-destruction; but this is only one of several variables in the dismal equation of the impending American collapse.
To make matters worse, while the world leaders of the United States and Mexico scramble to preserve their countries’ economies, rising tension along their shared border is becoming increasingly reminiscent of another similar scenario of the Cold War—one between a weakening U.S.S.R. and a now infamous Afghani militant, over twenty years ago.
