Subsidizing the Cartels: The Export-Import Bank and the Mexican Drug War

Jun 24, 2014 by AFP

By Mallory Carr

Criminal organizations have made Mexico an extremely dangerous place. The drug cartels have brought violence and disorder to the country, leading the US Department of State to warn potential travelers about the high risk involved.

However, despite the damage the cartels have inflicted on the country and the tens of thousands of lives they have taken, American taxpayers may actually be helping to indirectly fund these criminal groups. Through the Export-Import Bank, American taxpayers have backed billions of dollars in loans to a company that admits organized crime has corrupted their organization.

Pemex, Mexico’s massive state-owned oil producing company, is one of the largest recipients of Export-Import Bank loans, and has been confronting allegations of corruption and theft for years.  Worse, they have openly conceded that they deal with “interference from organized crime” and “serious levels of corruption.”

On top of the internal corruption, Pemex has been unable to prevent cartels from siphoning oil off their pipelines. One of the largest gangs, the Zetas, made over $1 billion from reselling stolen oil in 2012 and 2013. Profits from stolen oil have risen recently, with 2,600 siphons found on Pemex pipelines last year.

Even if it weren’t for the corruption, Pemex would still not be a sound investment. As The Washington Post notes, the company, which operated as a state-owned monopoly for 75 years before finally opening up the oil market at the end of last year, is run more like a government agency than an actual business. Just like most government bureaucracies, that means operating absent of any sort of basic financial accountability. Last year alone, Pemex lost $13 billion. The trend has continued into 2014, with Pemex reporting losses of almost $3 billion in the first quarter of this year.

Perhaps this is why Pemex is forced to seek financing on the backs of American taxpayers instead of private sector banks, who most likely know well enough to stay away from a company like Pemex.

But in spite of all this, the Export-Import Bank continues to send money to the company. As of September 2013, Pemex was the bank’s largest debtor, owing American taxpayers over $6 billion. In total, the Export-Import bank has provided a whopping $12 billion in loans and long-term guarantees to Pemex.

American taxpayers do not need to send money to an unprofitable, state-managed company that – whether directly or inadvertently – props up violent cartels and organized crime syndicates. It’s long past time to pull the plug on the Export-Import Bank and stop making loans that private banks are smart enough to stay away from.