Mexico's guerrilla country up in arms as oil drillers move in

MEXICO CITY (Bloomberg) -- When an angry mob torched City Hall in the southern Mexican town of Tecpatan last month, it sent a warning flare across a country already thrown into turmoil by Donald Trump.

The outrage was over oil, specifically the government’s plan to auction off a swath of land around their farming community to private drillers. The locals say they weren’t informed that a date—July 12—had been set. When they found out, they set fire to the two-story town hall, which now sits charred and abandoned, its windows smashed and the iron gate chained shut. The clock on its tower stopped at 10:55.

In some ways, the unrest set clocks all the way back to the 1990s, when Zapatista rebels were roaming the region and declaring war on NAFTA. But the fact that today’s target is the government’s energy policy could spell trouble ahead. President Enrique Pena Nieto is trying to revive Mexico’s struggling oil industry by bringing in foreign capital—that’s why the land around Tecpatan is up for grabs. The frontrunner in next year’s presidential election, Andres Manuel Lopez Obrador, is vowing to roll back the changes.

And Amlo, as he’s known, stands a decent chance of winning—thanks to Trump. The new U.S. president has incensed Mexicans, creating the perfect opening for a fiery populist who promises to stand up to foreigners and big business, putting local people first.

That’s Amlo’s message. It chimed with the mood in early March at the humid concrete hall in Tecpatan where community leaders were meeting to plan more acts of resistance.

“With machetes, with pistols, with whatever necessary, we will defend our land,” said Elmer Escalante, an elementary school teacher. “Oil development here won’t mean jobs for us. But it will mean the ruin of our land.”

Pena Nieto’s reforms opened the door for giants such as Chevron Corp. and Exxon Mobil Corp. to operate in Mexico for the first time since the government took over the whole industry almost 80 years ago.

The expropriation still looms large in the national memory. A large fountain in Mexico City commemorates it; employees at the state oil company Pemex rallied this month, as they do every year, to celebrate its anniversary. In the tumultuous days after the 1938 seizure, rich and poor Mexicans donated whatever they could—from fur coats and jewelry to pigs and chickens—to help pay off the foreign oil companies.

So Lopez Obrador’s defiance strikes a chord. And increasingly, Pena Nieto’s justification for his policy doesn’t. Mexicans were told that energy prices would fall as investment poured in. So far, the opposite has happened.

When the government raised gasoline prices on Jan. 1, protests and riots broke out nationwide, the president’s popularity plunged to record lows—and Lopez Obrador extended his poll lead. He’s promising a referendum on keeping energy resources under national control, though he said in an interview this month that there’ll be no “authoritarian action” to confiscate assets.

To be sure, Mexico’s energy reformers had plenty of reasons to argue that foreign capital and know-how were needed. After peaking in 2004, annual oil output has dropped each year as the giant Cantarell field in the shallow waters of the Gulf of Mexico dries up. The government says that the arrival of the world’s biggest producers will reverse the trend because they’ll be able to extract deep-water oil that Pemex, with its limited technology, couldn’t reach.

Even if Amlo wins, it won’t be easy to turn back the clock, said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. He’ll likely lack support for the measure in Congress; a Supreme Court ruling may be required; and “the energy reform itself will be beginning to pay dividends by that point, in terms of rising oil production and fiscal revenue.”

Still, perhaps in response to the risk of a President Amlo, the government is speeding up its plan.

Rights to about 40 areas have been sold since 2015. A similar number are up for auction this summer, when the National Hydrocarbons Commission expects to raise up to $2.8 billion from onshore sales. Thirteen companies, including France’s Total SA, Colombia’s Ecopetrol SA and Canada’s Gran Tierra Energy Inc., have registered an interest. Mexico “needs more participants” to make the sale a success, Commissioner Juan Carlos Zepeda said in a March 10 interview.

Two of the new blocks are in northern Chiapas, and the CNH says at least 12 exploratory wells will be drilled there, across an area of about 525 square miles. It’s mostly inhabited by the Zoques, a people with links to Aztec and Mayan civilizations and an economy based on cattle, corn, beans and coffee.

“There are a lot of indigenous communities in Chiapas, and if you don’t show the right kind of sensitivities to their customs and traditions, then you are going to run into problems,” said Wood. “If mistakes are made, by investors and by the government,” then opposition will spread, he said.

In tiny towns with names that derive from the local dialect—Chapultenango, Ixtacomitan—protests are already stirring. Energy Ministry officials have visited the region to inform and consult. But communities like Tecpatan are isolated: mobile phone service and internet access are luxuries.

What really spread the news of the imminent land auction, locals say, was the jailing of Silvia Juarez Juarez, a mother of two, for organizing opposition.

“The local government arrested her to silence the movement, but by doing so just created more awareness and resistance,” said Sergio Cruz, a Tecpatan resident who’s become a protest leader. “It was the wrong move.”

On International Women’s Day this month, hundreds marched through Tecpatan on a steamy morning to denounce the oil plans. They carried huge pictures of Juarez, and chanted that the Zapatistas are alive and well.

Of course, today’s unrest is on nothing like the earlier scale. In less than two weeks in 1994, the Zapatistas freed prisoners, torched army barracks and seized town halls and ranches across Chiapas. A military crackdown ensued, leaving scores dead, but the rebellion simmered for years afterward.

And now it may be heating up again. Silvia Juarez’s sister, Evanjelina, said she’d visited the activist the previous day in a jail near the provincial capital Tuxtla Gutierrez.

“She’s happy her arrest has advanced the movement,” Evanjelina said. “That’s what she wants. It needs to be known that in this region, we protect our lands any way we can.”