INSIGHT-Mexico's rural landowners pose threat to foreign energy investors

Wed Jun 18, 2014 2:00am EDT
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By Gabriel Stargardter

EMILIANO ZAPATA, Mexico, June 18 (Reuters) - When foreign investors begin to pour into Mexico's overhauled energy sector in the coming months, they will face a potent force well-known to miners: Mexico's ejidos, or rural landowner groups.

The product of revolutionary land reform - almost a century ago - that redistributed more than 100 million hectares from large landowners to small farming groups, the ejidos control surface rights to large swaths of Mexico.

The ejidos are often poor but they can be powerful: machete-wielding landowners shuttered government plans for a new Mexico City airport in 2002.

For years, foreign companies have owned concessions to mine metals in Mexico, leading them into delicate negotiations with the ejidos, who often block mines for months when they feel they are getting a raw deal.

But until last year, when Congress approved a reform to end state oil giant Pemex's 75-year monopoly, foreign firms were blocked from exploiting the oil and gas reserves of the world's 10th largest oil producer.

Now, they too will have to get along with the ejidos, forging long-term relationships that will help define the success of Mexico's efforts to boost economic growth and lure new investment to stem a decade of declining crude oil output.

"If you don't manage it well, this can be a real challenge," said Gustavo Nieves, a project manager for Mexican oil services company Grupo Diavaz, which operates on behalf of Pemex in the Chicontepec region in central Mexico and pumps up to 13,000 barrels of crude a day. "It can get really complicated."

Leftist lawmakers and agrarian groups, many of whom opposed the reform, have raised the temperature for foreign investors by accusing them of planning land grabs.   Continued...