Date first published: 26/10/2021
Key sectors:all; oil and gas; cargo transport
Key risks:civil unrest; business disruption; interruption
Several recent incidents of disruptive unrest have proven to be stark reminders of the high potential for such events to inflict a significant negative economic impact on key sectors. In October labour grievances and opposition to government policies triggered protests that directly or collaterally affected the Tula refinery, the country’s second-largest, President Andres Manuel Lopez Obrador’s (AMLO)’s flagship Dos Bocas refinery project and the Lazaro Cardenas port on the Pacific coast – also the country’s second-largest. Several other protests, including a strike of liquefied petroleum gas (LPG) distributors which led to shortages and disruption across Mexico City, were also reported across the country.
Why it matters
Although the incidents were not part of a unified nationwide protest movement, their drivers risk causing further recurrent losses to key sectors such as oil and gas and cargo transport. Those who have been taking to the streets have reason to believe that hitting where it hurts may lead to small but significant victories. The involvement as well as statements made by top government officials, including AMLO and the Energy Ministry, underscore the level of unease that the unrest has – and may continue to cause – at the very least over the coming months.
The way in which the different assets and activities were affected and the causes behind the disruptive action were varied. On 22 October state-owned oil firm Pemex reportedly confirmed that operations at its Tula refinery had resumed on 20 October following an unrest-related three-week shutdown. Tula, located in Hidalgo state, was affected by protests led by unionised teachers in Michoacan state who blocked a railway between Morelia and Lazaro Cardenas used by Pemex to transport produce from Tula. Recurrent blockades have reportedly prevented railway company Kansas City Southern de Mexico (KCSM) from transporting at least 2.8m barrels of oil from Tula to the Lazaro Cardenas port since early August. The teachers, who demanded overdue salary and pension payments, also blocked access to the port itself, which as of 14 October has been blocked for over 70 days. Estimates from end-September suggested that the losses could reach US$3.8bln.
On 11 October the Dos Bocas project located in Tabasco state faced a labour-related strike as 5,000 ICA Fluor construction workers demanded better pay among other issues. The strike turned violent the day after, with at least four workers injured and three arrested amid clashes with the police. Although talks with the firm and the government – including the Energy Minister who visited the site shortly after the unrest – seem to have appeased the unrest, the risk of further stoppages and associated violence will persist.
LPG distribution workers also launched an indefinite strike on 11 October to protest the government’s decision to cap LPG distribution prices. At least five demonstrators were arrested and one was injured outside the Energy Ministry in Mexico City on that day. One striking worker was arrested for attempted homicide after spraying the police with fuel oil during the protest. Protests over the issue were also reported in early August, when truck drivers blocked access to gas tank farms and vandalised trucks on the outskirts of Mexico City.
October witnessed simultaneous and consecutive strikes and protest action across at least five states causing significant disruption and managing to get federal government attention, a risk set to persist in the aforementioned key areas.