lunes, 25 de mayo de 2015

PEMEX ensures opacity of its operations in tax havens


In an extraordinary session the Administrative Board of Petróleos Mexicanos (Mexican Petroleum, PEMEX) transformed PMI Comercio Internacional (International Commerce Inc.) from a parastatal company to a subsidiary one. This change allowed the extinction of the Internal Control Body, the legal impossibility of the Chief Audit Office of the Federation to inspect the so-called commercial branch of the petroleum company and converted it into a non-obliged subject towards the Law on Transparency, thus it won’t have to render account to this civic procedure. The PMI in the hands handles all the sales and purchases of crude oil and its related products overseas, for more than 1.2 trillion pesos and the operations in tax havens of 14 private enterprises 100% in the ownership of Pemex.

Seven-teen days after coming into operation the Administrative Board of Pemex approved –in an extraordinary sessions held the 19th of December 2014- a structural change in the company: to transform the PMI Comercio Internacional from a parastatal to a subsidiary firm.

This change will ensure the opacity of the national oil company in all the operations performed in tax havens such as Cayman Islands, the Bahamas, the US-State of Delaware, Ireland, Switzerland, the Netherlands Antilles and the Great Duchy of Luxembourg, throughout its 14 subsidiary non-parastatal firms of the Group called PMI, that despite being entirely of its property are considered as private companies. This group keeps away of the public budget 150 billion pesos in foreign bank accounts, also considered as “private”.

The lack of transparency that was granted to Pemex with this change is not limited to the operations of the PMI Group: it extends now to all sales of fossil fuels and the purchase of petrol-related on international markets, that before the great fall of the prices of crude represented over 1.2 trillion pesos annually, as well as the direct acquisitions of PMI overseas.

According to the web site of PMI the group “is a group of companies in charge of performing commercial activities in the international of crude oil, petroleum products and petro chemistry, operating in over 20 countries. Among its activities is also the development of strategic projects such as the construction of infrastructure [as well as] alliances with other participants of the industry”.

These operations will be a part of the transparency, as the change of PMI Comercio Internacional SA de CV, of an enterprise of major state participation to a subsidiary enterprise of Pemex implies the extinction of the Internal Control Body (OIC) of the PMI, the legal barrier for the Auditor General of the Federation (Auditoría General de la Federación) to supervise its operations or part of them and the exclusion of the current General Transparency Act (Ley General de Transparencia).

Substantial ´”change”

The decision to change PMI into a subsidiary was taken by the Administrative Board in its 885th extraordinary Session of the 19th of December 2014. With this change, the so-called commercial branch of the oil company broke off the internal audition, of the revisions by the Auditor General of the Federation and of the duties to render account to the Mexican People throughout the General Transparency and Access to the Information and Protection of Personal Data Act (Ley General de Transparencia y Acceso a la Información y Protección de Datos).

Such is the response of the two responses to the information requests made by Contralínea. In one of them identified under the folio 0002700029115, the Secretariat of Public Function declares the non-existence of the inquired information under the argument that it ceased the Internal Control Body of PMI International Commerce Inc starting from the 1st of January 2015. The cited request was related to the corruption file about purchase-sale of fuel that led to the disqualification of the former Director of PMI, Rocío CárdenasZubieta, who recently had won a case against her.

    

The extinct OIC was responsible for “preventing, detecting and reducing the acts of corruption ant to promote transparency and the attachment to legality of public servants, throughout auditions and revisions of several processes of the institution, as well as the Attention to complaints, denunciations, petitions from citizens, the resolution of administrative procedures and of disagreements”.

In accordance with the public function the pending cases were transferred to the oil company itself, specifically to the Department of Social Responsibility.

In the official response the Secretariat states that “throughout the Administrative Delivery/Reception Act of the Internal Control Body of [sic] PMI Comercio Internacional SA de CV of the 16th of January, the then auditing body of PMI performed towards the General Coordination of vigilance and control Bodies, specified in the section “XII Transparency and Access to Information”. Among others PMI will keep the custody of the concluded files of the Internal Control Body”.

Therefore the Secretariat of the Public Function “suggests to the petitionary to direct his inquiry to the Liaison Unit of PMI Comercio Internacional, SA de CV, located at Marina Nacional Avenue No. 329, colonia (district of) Petróleos Mexicanos, Delegación (Municipality) Miguel Hidalgo, Postal Code 11311, Federal District, Mexico, in order to obtain through it the information of interest”.

However by “responding” to the request No. 1860000001615 of Contralínea PMI points out the following: “I let you know that the past 19th of December 2014 the Administrative Board of Petroleos Mexicanos (PEMEX), in accordance with the Agreement CA-149/2014 in the extraordinary Session No.885, and having effect on the 1st of January 2015, the change of PMI International Commerce Inc. was authorized to transform it from a company of a majority of parastatal shareholders to a subsidiary company of Pemex under the scheme foreseen by the Title IV of the Mexican Petroleum Act (Ley de Petróleos Mexicanos)”.

In its response the now-subsidiary firm refers to the second paragraph of Article No. 61 of the aforementioned act, “which stipulates that the subsidiary will not be parastatal entities and will have a legal status and will be organized according to the private law of the place of constitution or creation.”

He adds that: “Thus it is inferred that currently PMI is not a parastatal entity of the federal public administration, ceasing to be constrained by the First Title, Chapter 1 of the Federal Transparency and Access to the Public Governmental Information Act (Ley Federal de Transparencia y Acceso a la Información Pública Gubernamental, [from now on the General Law]. Derived from the before mentioned, your information inquiry shall be brought to the Liaison Unit of Mexican Petroleum for your attention.”

For years the PMI International Commerce Inc. has been used by Pemex to triangulate the billionaire resources it obtains from the selling of crude oil to tax havens, in addition to the 14 “private” companies it heads all property of Pemex, founded overseas outside Mexican jurisdiction, which maintain a “privatized” capital of at least 156 billion pesos in foreign accounts.

The Subsidiaries of Pemex

The operating mode as a private entity is not limited to PMI. For 25 years Pemex has built a parallel corporate network to its official structure, which are not held accountable for its activities because –despite involving public resources- is considered as private and not parastatal. These are at least 40 limited companies created in Mexico as in third countries, including famous tax havens as the Cayman Islands, the Netherlands, Ireland, the US State of Delaware and Switzerland. Out of the 40 private companies of Pemex, 11 have been constituted in the current administration under the leadership of Emilio Lozoya Austin.

Nine of these companies are 100% property of Pemex and two are associated with 50% of shares such as Mexichem and Sempra Energy respectively, according to the latest reports rendered by the Mexican oil company to the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, CNBV) for the third trimester od 2014; to the US Securities and Exchange Commission (SEC) in December 2014; as well as from the web site of PMI International Commerce Inc. and the Trade Register of Madrid, Spain, to which Contralínea had access.

Despite the fact that 9 out of 11 companies are a 100% property of Pemex –which implies that the oil company invests public resources in it for its constitution and operation-, these are created as private non-parastatal companies, hence they avoid the federal audit.

Since the first company of this kind was constituted in 1988, Pemex has counted on the endorsement of the Presidency of the Republic, the Secretariat of Finance and Public Credit (SHCP) and the federal comptroller.

Documents of the former Secretariat of the Programming and Budget and of the SHCP in possession of the magazine, reveal that the former president Ernesto Zedillo himself authorized Pemex to constitute “private” companies.

In an interview Jorge Retana Yarto, Master’s Degree in Finance and specialist on international economy and national security intelligence, comments that the presence of Pemex in tax havens “offers a discretional management of huge amounts of money, usually for unconstitutional operations”.

According to the member of the Mexico-China Network (Red México-China) of the Faculty of Economy of the National Autonomous University of Mexico, this is “unacceptable”, because there are public resources that should be subject to audition, concerning its use and destination by the competent authority: the Chief Audit Office of the Federation.

The author of the books The Empire of Transnational Mafias (El imperio de las mafias transnacionales ) and Transnational Mafia and criminal economy: Mexico in the orbit of a parastatal power (Mafia transnacional y economía criminal: México en la órbita de un poder paraestatal), comments that this custom in which the oil company incurs is due to be severely sanctioned, because it is illegal. Pemex “not only diverts the income of the fiscal authorities, but also to the knowledge of society itself”.

The new enterprises

According to reports Pemex delivered to the CNBV and to the SEC, the oil company consolidated the enterprise PMI Infraestructura de Desarrollo, SA de CV (PMI Development Infrastructure (founded the 12th of November 2013), Pro-Agroindustria, SA de CV (founded the 18th of December 2013), and PMI Azufre Industrial SA de CV (PMI Industrial Sulphur), SA de CV (founded the 7th of March 2014).

However the list of recently created private companies are not limited to the consolidated ones: it includes PPQ Cadena Productiva (Productive Chain) having its headquarters in Madrid, Spain (constituted on 29th of April 2013); and MGI Enterprises, US LLC in the US (dating from the 24th of June 2013).

Furthermore the page of the now-filial PMI International Commerce reveals that on the 3rd of October 2014 other four enterprises were created: PMI Servicios Portuarios Transoceánico, SA de CV (Transoceanic Port Services); PMI Midstream del Centro SA de CV (Midstream of the Center), PMI Cinturón Transoceánico Gas Natural , SA de CV (Transoceanic Belt Natural Gas), and PMI Transoceánico Gas LP, SA de CV (Transoceanic Gas LP).

Derived from the reports and consulted data it can be said that Pemex also created Petroquímica Mexicana de Vinilo, SA de CV (Mexican Vinyl Petrochemistry) and Gasoductos del Noreste S de RL de CV (Northeastern Pipelines), in association with Mexichen and Sempra Energy respectively.

The lawyer Luis Ortíz de la Concha, responsible for the anti-corruption area and corporate fraud prevention in the company Ortiz de la Concha Abogados, SC said in an interview, that the audition of the operations of Mexican Petroleum overseas must be comprehensive: to audit on how the money is being is handled between private companies, the contracted debt schemes, in addition to seeing that this money pays the taxes in all jurisdictions and to achieve a mechanism to verify the operations performed by third parties.

For the Master’s Degree on international tributary Right by the University of Florida, it is well known that Pemex relies on several private enterprises, some of which are placed in territories of low corporate taxes. Henceforth each case should be studied, each company, each operation.

The private Network

To the list of 9 companies of recent foundation, 31 companies could be added founded previously under these characteristics. The first one was PMI Holding NV established in the Netherlands Antilles in the beginnings of 1988 and which currently is established in Madrid under the company name of PMI Holding Petróleos España (Holding Petroleum Spain).

On the 31st of March 1988 the then-Secretary of Programming and Budget Pedro Aspe Armella signed the document 1630 which authorized the constitution of PMI Services BV. This document was addressed to the late Fernando Hiriart Balderrama, at that time head of the former Secretariat of Energy, Mines and Parastatal Industry:

“The Administrative Board of Petróleos Mexicanos (Mexican Petróleum) in the Session held on the 4th of February of the current year [1988], approved the constitution of a one-membered society of Dutch Nationality that shall be called PMI Services BV, whose essential purpose is, though not only, to serve as a corporate instrument in order to provide it of related services related with the distribution of crude oil and its derivatives”, points out the document obtained through the Federal Transparency and Access to Information and Personal Data Protection Act (Ley Federal de Transparencia y Acceso a la Información y Protección de Datos).

It states in the official document that: “(This) will aid the commercial activities of the entity abroad to develop in a way that will allow it to be more competitive with regard to the oil companies operating in the international market, as well as to reduce the risk that its income from the sales shall be subject to local taxes”.

He adds that “the strategy of internationalization of Mexican Petroleum is coherent with the National Development Plan (Plan Nacional de Desarrollo) 1983-1988 and in accordance with the National Energy Plan (Plan Nacional de Energéticos) 1984-1988”.

Out of the 40 private companies currently owned by Pemex, what is known as the Pemex Corporate Group is direct and indirect owner of 24 (21 of which are operated by the subsidiary PMI International Commerce). Other five are owned by Pemex Exploración y Producción (Exploration and Production) and the 11 remaining of Pemex Gas y Petroquímica Básica (Gas and Basic Petro chemistry).

Throughout these private companies, most of them without office or staff, Pemex manages over 1.2 billion pesos annually derived from the sales of crude oil in the international markets, particularly in the US.

As being treated officially as limited private companies these 40 companies are not subject to the restructuration process established by energetic reform. Additionally most of them are beyond the reach of the Mexican legal audit, by declaring its headquarters abroad, including the tax havens such as Ireland, the Netherlands, Switzerland, the Cayman Islands and the US State of Delaware.

The 40 companies have tasks assigned that the oil company and its subsidiaries should be carrying out (in the midst of a restructuration process), such as the sale and purchase of crude oil in the international markets, contracting debt, to develop infrastructure projects and to hire works and projects with third parties.

Another of its characteristics is the absence of personnel, thus being the public servants ascribed to the oil company who operate it from the Pemex Executive Tower located at Marina Nacional Avenue, Miguel Hidalgo Municipality (Delegación), in the Federal District.

Scope of the new enterprises

The private companies created by the current administration of Pemex have the scope from the construction of infrastructure up to the privatization of certain areas that used to be considered as a priority sector for the country.

As an example PMI Infraestructura en Desarrollo (Infrastructure of Development) was created by the private subsidiaries PMI Norteamérica SA de CV (North America Inc., with 99.9% of the shares) and PMI Holdings BV with 0,01% of the shares, with the objective to be the holder of the projects of its first shareholder.

Pro-Agroindustria was established by PMI Norteamérica, SA de CV (99%) and PMI Infraestructura en Desarrollo (1%) with the purpose to build a Solidifying Plant of Sulphur and to produce urea with ammonia. The 7th of March 2014 was created PMI Azufre Industrial (Industrial Sulphur) for the “development of several projects related with Sulphur”.

PMI Servicios Portuarios Transoceánicos, SA de CV (Transoceanic Port Services SA de CV) has the corporate purpose to build, develop, administer and operate seaports, piers, sea walls, warehouses, tanks of natural and liquefied Gas obtained of petroleum or any other petroleum derivative, as well as the construction or development of any port facility.

In the case of PMI Midstream del Centro, SA de CV, this was created in order to build (multiproduct) pipelines to transport, distribute, sell, purchase, dispose of any oil product, including the so-called clean ones, as well as any type of oil product subject to obtain the related permits.

PMI Cinturón Transoceánico Gas Natural, SA de CV (Transoceanic Belt Natural Gas Inc.) will be responsible for constructing (gas) pipelines to transport, distribute, sell, dispose of ethane and any oil derivative subject to related permits, as well as to provide of transport services through gas pipelines
.
In the case of PMI Transoceánico Gas LP, SA de CV (Transoceanic LP Gas Inc.), this one was created to build (gas) pipelines, multiproduct pipelines to transport, distribute, sell, dispose of LP Gas and propane, any given oil product, including the so-called clean ones, as well as any type of oil products subject to related permits, as well as the provision of transport services throughout gas pipelines.

        

According to the web site of Pemex, PPQ Cadena Productive (Productive Chain) has the corporate purpose the control and administration of securities of the own funds of entities residing or not on Spanish soil, as well as the acquisition, subscription, possession, enjoyment, management and alienation of shares active in other companies.

However the information settled in the Trade Register of Madrid reveals that the main purpose of the company is its association with Mexichem, property of the businessman Antonio de Valle, who used to be owner of the Bital bank.

According to the consulted registry, the President of the Administrative Board of PPQ Productive Chain –Jorge Valadez Montoya, assistant Director of Analysis and Projects of the subsidiary PMI International Commerce -“has special powers to sign and celebrate, in the name of and representing the company, the co-investment agreement that will celebrate equally Mexichem, SAB de CV; Mexichem Derivados (Derivates), SA de CV; Unión Minera del Sur (Mining Union of the South), SA de CV; Pemex Petroquímica (Petrochemistry); and Petroquímica Mexicana de Vinilo (Mexican Petro chemistry of Vinyl), SA de CV; with the purpose to compel and acquire the rights, in the name and representation of the company under the terms of the aforementioned agreement, which will have the purpose of integrating the chain of salt-chlorine/soda-ethylene-vinyl chloride Monomer, throughout the contribution to the Petroquímica Mexicana de Vinilo, SA de CV Company by Pemex Petroquímica (Petro chemistry) of some industrial plants of the Pajaritos Complex and by Mexichem SAB de CV, of the industrial plant of brine-chloride-soda, so that further on Mexichem and Pemex Petroquímica- this last one through PPQ Productive Chain- participate in the share capital of Petroquímica Mexicana de Vinilo, SA de CV” (sic).


Nancy Flores, @nancy_contra
(Translated by: Axel Plasa)


Contralínea 436 / del 11 al 17 de Mayo 2015


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