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The Reform and Its Prospects

No other natural resource in the world stirs up as many expectations and disappointments as petroleum. Beyond its commercial value, a barrel of oil contains all kinds of prospects. For the inhabitants of countries rich in energy resources, especially developing nations, oil offers the promise of wealth, economic development, a decrease in cost of the standard of living, etc. One of the prospects is the expectation of increased and better job opportunities. The federal government’s message calling for support for the energy reform in Mexico was based on this last promise.

These expectations were awakened in Mexico by the 2013 reform, which not only involved a mere change in the rules but also delineated the reinvention of the country’s energy model. The constitutional changes promised to transform the industrial sector as well as the country’s economic, political, and social bases. The shift from multiple state monopolies to a model of dynamic competition in the hydrocarbon and electricity sectors marked a break from the vestiges of a monolithic regime with the construction of an open industry. The dissolution of the exclusivity of Petróleos Mexicanos (PEMEX) and the Federal Electricity Commission (CFE) aimed to shake the impenetrability of the entire sector and open up a reserve of industry-related professions. Since the reform, the professional world has opened up to those wishing to dedicate their careers to this industry. Opening the industry broke down walls that previously had been restraining knowledge.

Expanding employment opportunities in the industry was expected to rejuvenate the connections between employers and job seekers. An industry open to competition cannot stand on the work of civil servants and employees hired through personal, union, or political connections alone; rather, it must make room for “meritocracy.” Competition should be extensive, not only for companies and resources, but also for human beings. After decades of nepotism in CFE and PEMEX, the reform efforts required these organizations to open up the job market and offer opportunities to talented people. The reform involved a knowledge-based meritocracy and competence development system with new technical, management, and even cultural knowledge, eradicating the inbreeding in PEMEX, CFE, the government, and private actors who were too comfortably settled within the old regime.

The change in the energy industry was swift. The constitutional reform was approved in just two weeks, without any opposition from other political parties or trade unions. Furthermore, secondary laws were implemented without any conflict in August 2014. It seemed that the country would transform at the same pace as these changes to the legal framework, encouraged by the predictions of President Enrique Peña Nieto’s government. Extremely optimistic investment figures were announced along the entire hydrocarbon and electricity value chain. But what about the people? How should they be trained to face the challenges of a newly reinvented industry? At the time the reform was launched, they did not foresee the turbulence or pressure changes to come in the industry. The secretariat of energy (SENER) announced that 135,000 jobs would be available in the industry by 2018, based on the understanding that the reform would grant privileges without obstacles.

Secretary Joaquín Coldwell’s comments on the need to train human capital were relatively negligible in an environment focusing on investment. What has remained unclear is the capacity of the workers producing value and growth in both the private and public sector. Due to the speed of the reform, there is a significant learning curve along with few economic and human resources. This should not be underestimated, considering that the model’s success depends on good governance. The energy reform put civil servants to work as quickly as possible. In less than a year, the federal government had reformed the Constitution, issued a considerable body of legislation, established “Round Zero” with PEMEX, and launched a tender process for contracts. All of these actions were taken without the public’s knowledge due to the closed nature of the industry. The regulatory agency in Mexico had never tendered petroleum contracts before and the SENER had only designed one such tender process. The pace was intensified. As everything happened rather quickly, it was reasonable to question whether the government, the new State-Owned Productive Enterprises, and private initiatives would be able to offer the necessary supply of qualified personnel to make certain prospects a reality.

This paper offers a critical analysis of the federal government’s efforts to build public policy for human capital through a specific instrument called the “Strategic Human Resources Training Program for the Energy Industry,” released in February 2014. The purpose of this paper is to assess the viability of this program, considering organizational theory and institutional analysis in light of these questions: What is the Strategic Program’s vision for the energy industry, and how does it shed light on the problems of human capital formation? Which connections and mechanisms would make the program viable? How does the government’s volition interact with market dynamics? Is the government aware of the market and its uncertainties? Without satisfactory answers to these questions, the program’s potential effectiveness is questionable.

This paper also establishes a basic vocabulary for discussing “human capital.” What does this concept suggest and why do we prefer it to others, such as “human resources,” despite its controversial nature? Its use is questionable, since training people in this industry not only presents an educational challenge, but also a quantum leap in work culture. Until the present day, civil servants and employees of PEMEX and CFE have not been exposed to the dynamic fluidity of an open job market with different demands, pressures, and objectives. A strategic program with a strategic vision must address these complex issues and different possibilities for handling them. Without these considerations, one may question whether the Strategic Program is in fact better than other planning instruments issued by the Mexican federal government.

The Strategic Program document was written with a conscious choice of terminology that may be considered controversial for those who have denounced “commercial objectification” from an ideological perspective, not so much in reference to natural resources as Mexico and its people. If political leaders opposing the energy reform were to claim that “petroleum is not for sale,” it would be much less acceptable to speak of human beings as “capital.” Gary Becker, Nobel Prize laureate in economics, speaks of certain people’s aversion to referring to human beings as capital in which “it would be good to invest,” with the prospect of obtaining returns. This reflection is relevant in a country where, rather than just being a profitable business, the energy industry has the dual vocation of functioning as both a business and a welfare system. The Mexican energy duopoly is unique due to its welfare component, with energy expenses at prices controlled by authorities who are more concerned with political popularity than business profitability. There is a common perception that the corpus of PEMEX and CFE personnel are “martyrs” keeping the country and its inhabitants afloat through their hard work and despite a lack of resources; consequently, referring to said personnel as “resources,” or even worse, “capital,” could be considered dehumanizing them as interchangeable goods.

The energy reform has placed PEMEX and CFE in a different category with clear business repercussions. The name “Productive State Enterprise” indicates the abandonment of the aid model and the rebirth of these organizations with a business vocation. If creating value is the new constitutional mandate for productive enterprises, these “martyrs” should be transformed into employees and civil servants equipped with the material and intellectual resources to fulfill this mandate.

Speaking of an investment in human capital “implies technical, financial, legal, administrative, and social considerations.” The literature on techniques for building and measuring human capital policies suggests a multifaceted approach. Without this holistic vision, there are significant blind spots impeding the establishment of critical paths that would allow us to see whether the formation and transformation of human beings is achieving the desired purposes. The idea is to see whether investment in human capital can be transferred to the quality of goods and services, company profitability, and substantial improvements in the standard of living. In the words of public administration scholar David Arellano, a human capital strategy should “rediscover the importance of human beings as individuals and diverse groups, not as ‘resources,’ and deal with them through a directional process that is not limited to merely describing but also proposing methods for advancement and development.”

What remains unclear is how to transmit this knowledge, how to apply it, and for what purposes. In Mexico, the education given to a young person who wants to enter the industry is not the same as the education that must be given to industry veterans. Due to the significant changes in the industry, these veterans require further knowledge without discrediting the knowledge they have already accumulated. A very important question in the case of Mexico is what to do with the knowledge of those who have already acquired experience under the old model. The risk of thinking that the “the old guard” of CFE and PEMEX workers is already obsolete would be a serious claim with significant social consequences; consequently, an attempt should be made to integrate veterans into today’s industry.

Another important question is the definition of ex ante indicators that allow us to measure the scope, deficiencies, and achievements of public policy. If the government’s intention is to carry out a strategy for building human capital, it should analyze the vast international literature regarding these experiences, focusing special attention on the limitations presented by certain indicators, in particular “traditional” measurement methods. A study by the Organisation for Economic and Cooperation Development (OECD) pointed out that some of the most common indicators are “incomplete,” as they don’t establish a clear relationship between the level of knowledge and the generation of well-being. Salary, for example, was mentioned as one of the incomplete indicators, which does not necessarily allow us to draw a connection between knowledge and remuneration. This study indicates that not even workers’ “productivity” is a complete indicator of the quality of human capital. Outside of the context in which other variables are at play, the study claims that the impact of human capital formation does not allow for an adequate qualitative assessment, insisting that one cannot speak of the formation of human beings without considering the specifics of the political and social context. Speaking of education and the transfer of knowledge within an isolated circuit impedes us from seeing the full panorama. The OECD was right to introduce indicators such as inclusion policies for targeting workers of different genders and marginalized communities, access to health and services, and social and geographic mobility, as well as other factors that go beyond corporate profits.

Another fundamental issue is the uncertainty associated with efforts to train human beings. Employers will follow their own free will or what the job market will allow., according to their specific circumstances. Manuel Molano Ruiz, adjunct director from the Mexican Competitiveness Institute, points out that the state or the private sector can invest any amount of resources in training human beings for a specific activity; however, there are a number of unforeseen factors that may impede these people from dedicating their time to the activities for which they were trained. On the other hand, there is the question of the volatility of industries and markets. This point is crucial for understanding the potential impact of consolidating a human capital policy for the industry, which is now entering turbulent waters and massive layoffs, as it may call into question the need to promote personnel training. Nevertheless, as an industry with wide-ranging and long-term impact on the country, it would be foolish to stop the efforts to further build a body of knowledge in Mexico.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.