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Over the last 20 years, Mexico has put in place a long list of economic and political reforms that have greatly modernized the country. But so far no politician has been blessed with both the boldness and political capital necessary to reform Mexico’s aging patriotic icon: Pemex.

Today’s prices of $30 per barrel for Maya crude are generating record royalties from oil exports that hardly motivate political action. Yet, behind the facade of Mexico’s beloved cash cow is a troubling future for Pemex and indirectly Mexico’s fiscal stability. The world’s most indebted oil company owes $37.1 billion to creditors and has less than 14.2 million barrels of proven reserves, enough to last 11 years at present production levels. The company is now struggling to maintain production capacity as it faces outdated infrastructure needing replacement and its principal producing asset, the vast Cantarell field, approaches declining output. With oil prices expected to come down from their 2004 peaks by as much as 20-to-25% in 2005, Mexico’s government, which relies on Pemex for 30% of its revenue, will find itself short of cash.