Mexico’s oil obsession is killing its petrochemical sector
Securing such a strategic industry requires the government to understand its own limitations.
There is one big investment the Mexican government isn’t showing off. In May of last year, Braskem—a Brazilian petrochemical company, one of the largest in Latin America—announced that they were inaugurating a new ethane terminal in the gulf coast state of Veracruz.
The project cost half a billion dollars. So it was noteworthy that that government didn’t trumpet it as a thumping great success in the framework of Plan México—president Claudia Sheinbaum’s flagship industrial policy—as it has with virtually every other investment announced in the past couple of years.
It is probably because it would have been embarrassing for the government to have taken credit for the terminal. Its construction was the direct result of a massive international legal fight between Braskem and Pemex, the Mexican State’s oil company.
“Pemex was not able to supply sufficient volumes of ethane gas that it had committed to,” Cleantho Leite—until recently a Braskem director—told The Mexico Political Economist. Starved of ethane, Braskem’s $5.2 billion dollar complex was slowly grinding to a halt and with it Mexico’s supply of locally made polyethylene—the substance that makes up 30% of the global plastics market.
“And so, we had this big petrochemical complex running, initially at 90%, then at 85%, then at 80%, then at 70%,” said Leite. By 2021, Pemex was supplying just half the agreed upon supply.
“Pemex paid penalties for this undersupply for a while. And then at some point, it stopped,” Leite said. “We almost went into international litigation. And as a solution, Pemex agreed to concede some space in the Coatzacoalcos area to build a terminal to allow for the importation of ethane from the US. And that was a major project, which ended up being a new company called Terminal Química Puerto México. A $500 million-dollar investment concluded just now at the end of 2025.”
It was an embarrassing episode, but unfortunately not an isolated incident. Across the entire petrochemical sector, the Mexican government and the private petrochemical industry are in a lethal embrace, slowly suffocating each other but unable to let go.
This is the story of how they got to this point—dragging the rest of the Mexican economy with them.
