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Wednesday, March 11, 2015

ASU : The 2015 Budget Cutbacks

Arizona State University will have their work cut out if they are to emerge from Sun Devil country like a Phoenix rising from the ashes of a major budget cutback. At the “New American University” Dr. Crow has long cast the big goal of the University as “a force for dynamism” (Crow, 2002 B). Just as Matthew Kraatz and Edward J. Zajac (1996) assess Neoinstitutionalism through a comparison of adaptive theory, one applies the same theories to Arizona State University in addition to an examination of the historical perspective of ASU in order to create a broader perspective of the institution.

ASU President Michael Crow

historical perspective

Looking at ASU leadership and vision through the lens of the historical perspective and legacy of previous President Lattie Coor. He endeared himself to the state for many reasons, making many tremendous contributions during his successful stewardship of ASU. It may arguably be his greatest legacy that ASU has emerged as a highly competitive university when competing for large research grants from the federal government, especially in scientific and engineering fields where the largest predictable revenue stream expansion may be utilized for the benefit of the university.

Presumably, structural maintenance is served by continuing a policy of research expansion. This would clearly imply that Coor’s incumbent, Crow, was selected precisely because it was felt he would continue with the central vision that Coor championed, a vision that has lifted ASU to a new level of national prominence. In the case of ASU, certain high technology research, especially biotechnology, is perceived to be a highly attractive potential revenue stream due to an extrapolation of recent funding trends by major federal institutes. Naturally, the initiative is politically sanctified as a great economic engine for the expanding high technology economy in the state; thus, enhancing a widespread acceptance for the strategic initiatives which are increasingly driven by various mixtures of external private and public capital.

adaptive theory

The competitive marketplace, which supports adaptive theory, is a driving force behind the organizational change at Arizona State University – now the largest public university in the United States. Adaptive theory, as applied to ASU, frames the structural changes and practices of the higher education institution based on the influences of changing micro and macro environments, which are often technical by nature (Kraatz & Zajac, 1996). Not-for-profit liberal arts institutions are evolving in a heterogeneous manner as determined by the influence of macro and micro level technical environments. The macro level increases professional programs, while the characteristics of the additions are determined by the communities surrounding individual institutions – the micro level (Kraatz & Zajac, 1996)

During previous serious budget restraints, Crow recommended committing money into two areas, enrollment growth and research development (Crow, 2002A). As large state universities were forced to look for other sources funding, the technological environment could be ignored. Besides enrollment growth funds, a significant proposal for organizational change that Crow is made was the investment in biotechnology and biosciences. Crow viewed the expansion of biotechnology and the biosciences as the direction of technological research. Investing, it was thought, would give ASU a considerable return on its investment in the future. 

Keeping up with research and development is a mechanism for ASU to develop alternate sources of funding. Early in Crow's stewardship, it was necessary to become creative in order to respond to the financial crisis of ASU. Moving with the changing technical environment has been the preferred way for ASU to improve its financial future. Proposals of change made by Arizona State University President Crow support Kraatz and Zajac’s (1996) conclusion that colleges and universities do not operate within a large vacuum, but instead individual institutions change at least partially in response to the influences of external environments. 

To this date, Crow has been continuing and expanding the vision that Coor began in 1989, seeking to continue the expansion of the student base while managing an accelerated controlled growth strategy that embraces revenue generating research ventures. 

neo-institutional theory

The changes proposed by President Crow back then were seen to be driving against the core principles of Neo-institutionalism, which placed emphasis on institutional environments instead of external technical environments. Social rules, as we know, frame the conformity of the organization. Persistence, rather than change, becomes the priority. 

In neo-instutional Theory the homogeneity and stability of the organization is emphasized. Change related to technical forces is contradictory to the neo-institutional position outlined by Kraatz and Zajac (1996). Accordingly, ASU needs to search beyond organizational conformity to be able to survive decreases of state funding. Kraatz and Zajac’s description of the neo-institutional Theory discusses the persistence within institutions compared to the adaptive theory, which involves change based on the external technical environment (1996). 

In order to succeed in the future, ASU needs to promote change within the institution, and not rely on goal persistence. Kraatz and Zajac (1996) examine liberal arts colleges in the United States as a means of testing the concept of “new institutionalism” within the organizational structures that comprise the United States higher education system. The main components driving new institutionalism are: (1) organizations remain relatively constant over time due to shared values and norms, (2) structural maintenance prevails over systemic change, and (3) organizations making up the system are relatively homogeneous. The results of the study indicate that the aforementioned principles supporting the new institutional framework lack validity when applied to liberal arts campuses. 

A reasonable question, then, to ask is “do the conclusions made by Kraatz and Zajac apply exclusively to liberal arts colleges or are there also implications related to larger universities?” Crow's vision has always relied heavily upon enrollment growth as being essential to meeting the social and economic needs of an expanding state population. ASU increased enrollments and expanded campus facilities and they did so in order to meet the needs of the external community, not in a response to a systematic change across peer institutions or even those institutions ASU aspires to be like. Thus, the change is not mimetically, professionally, or coercively isomorphic as neo-institutionalists would predict. 

Another massive undertaking was the increase of research growth in the areas of biotechnology and bioscience, this too was inconsistent with the new institutional framework. Crow was very clear that by investing in biotechnology and the bio-sciences, which he refers to as the “major growth industry of the 21st century,” strong revenue streams would be created for ASU, as well as for the state of Arizona (Crow, 2002A). 

This entrepreneurial initiative at ASU represented the institution’s movement toward the behaviors of the private, corporate sector. The shift was in response to both a decrease in state-supported funding, as well as an increase in the market demand for high-tech innovations. Thus, ASU’s entrepreneurial reaction to the market’s technological demands was incongruent with new institutional supporters’ belief that colleges and universities are not influenced by external technological factors.


I support adaption theory over neo-institutionalism in the emergence of Arizona State University as a world-class research university. While continuity carries some value in any organization, external economic pressures tend to influence the way strategic goals are shaped in higher education; thus, I suggest Arizona State University will adapt its impending “Changing Direction” as a reaction to the needs of society (Crow, 2002B). University stakeholders need to be aware of impending and remote environments, and the power external environments have on influencing the mission the institution pursues. As ASU elaborates their plans to deal with budget cuts of 2015, it would be wise to take stock of the carrying costs associated with maintaining the largest public university in the United States. 

In stark contrast to growth for the sake of growth (and increased revenue and economy of scale), the rescission environment means serious difficulty when it comes time to make budget allocations which are likely to trigger cutbacks. Areas of academic and research duplication require a value based analysis to prioritize potential cutbacks in lieu of forcing students (and taxpayers) to absorb massive costs. The Arizona Board of Regents are obligated to observe the Arizona Constitution and shape their policy in accordance with the clear constitutional directive to provide as close to a free education as possible for the residents of Arizona. Ratcheting back budgets will require the sober conclusion that ASU, like NAU and the UofA, will have to deal with significant cutbacks. All three universities, ASU included, must do so under the auspices of heading 11 section 6 of the Arizona Constitution (AZLEG, 2015) which clearly states the following;

"The university and all other state educational institutions shall be open to students of both sexes, and the instruction furnished shall be as nearly free as possible." 


ASU News. (2002, October 4). University president draws board approval of investmentoriented budget request. Retrieved Oct. 5, 2002 from Arizona State University web site on the World Wide Web: http://www.asu.edu/asunews/university/budgetrequest_100402.htm.

Arizona Legislature (2015). Arizona Constitution, Retrieved March 10, 2015 from the Arizona Legislature web site on the World Wide Web: http://www.azleg.gov/FormatDocument.asp?inDoc=/const/11/6.htm

Crow, M. (2002A). Crow requests investment-orientated budget. E-mail to Arizona State University faculty, dated Sept 27, 2002.

Crow, M. (2002B). ASU’s goal: Becoming a force for dynamism. The Arizona Republic, published Oct. 13, 2002.

Crow, M. (2002C). Changing directions. E-mail to La Verne Abe Harris, dated Oct. 29, 2002.

Kraatz, M.S. and Zajac, E.J. (1996). Exploring the limits of new institutionalism: The causes and consequences of illegitimate organizational change. American Sociological Review, 61,5. 812-36. 

Tuesday, March 10, 2015

Leadership in 11 Bullet Points

Leadership in 11 Bullet Points
  • Know yourself and seek continuous self-improvement 
  • Be technically and tactically proficient 
  • Seek responsibility and take responsibility
  • Set the example
  • Know your people and look out for their welfare
  • Keep your people informed
  • Ensure the task is understood, supervised, and accomplished
  • Develop a sense of responsibility among your people
  • Train your people as a team
  • Make sound and timely decisions
  • Employ your work unit in accordance with its capabilities
It's not difficult...

Understand who you are, your values, priorities, strengths and weaknesses. Self-improvement is a process of sustaining strengths and overcoming weaknesses. Remember that before leaders can lead effectively, they must master the tasks required by the people they lead. Leaders do not avoid responsibility by placing the blame on someone else when things go wrong. Leaders realize that if they expect courage, responsibility, initiative, competence, commitment, and integrity from direct reports, they must demonstrate these characteristics. 

Telling your people you care about them has no meaning unless they see you demonstrating it. Your people must understand what you want done, to what standard and by when. Remember that over-supervision causes resentment while under-supervision causes frustration, so find your balance. Delegation indicates trust in people and encourages them to seek responsibility. Develop people by giving them challenges and opportunities. 

Train and cross train people until they are confident in the team’s abilities. Leaders must know the factors to consider when deciding how, when, and if to make decisions. Good decisions made at the right time are better than the best decisions made too late  Leaders must know their work unit’s capabilities and limitations. People gain satisfaction from performing tasks that are reasonable and challenging, but they are frustrated if tasks are too easy, unrealistic or unattainable.

Friday, March 6, 2015

Nobody Left To Blame

At 444.4 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. By mid-April, if the trend continues, the country could be in a state known as “tank tops” which means all available storage for crude inventories will be full. If there’s nowhere left to store the crude… you get the picture? Prices will fall further, some say to 20/bbl, and what would that do to the Alberta economy?

With U.S. oil inventories last week were reported at 444.4 million barrels and refinery inputs reported 85% of capacity, one can argue it is an indicator the oil glut continues to grow, which in turn, will place additional downward pressure on the commodity spot prices. 

In addition to political challenges for pipeline transportation, overcapacity clearly limits ROI projections for commodity suppliers while no Pacific tidewater outlet continues to vex Western Canadian oil and gas producers; it has been vexing Alberta producers for many years.

Approximately 97% of Canadian oil exports are sent to the United States while there is no functional Pacific tidewater outlet for Canadian oil. Meanwhile, over 1.3 million barrels of oil per day in unused capacity on Pacific tidewater goes unused on the Trans-Alaska Pipeline (TAPS), which has over 7 million barrels of storage capacity and a 24 hour turnaround for two VLCC (very large crude carrier (2 – 3.7 million barrels capacity). Even with general purpose and medium range tankers, all the oil in the pipeline can be sent to Asian markets to the tune of 80 million in taxable daily revenue or approximately 29 billion dollars of taxable sales per year… if one calculates based on an average blended price of 50 dollars per barrel. In 2012 when I met with First Nations, Alaska, Yukon, and NWT officials, everybody was willing to work to get a pipeline from Ft. McMurray to connect with TAPS… there was not one political entity in opposition. I repeat… not even one.

I estimate lost taxable revenue, assuming a one year ramp to construction on a bold initiative and another year to test and deploy, we can safely take a blended average price of 75 and point out the Government of Alberta’s failure to act has easily lost gross revenue available for taxation of over 50 billion, depending on prices, that amount will tick up between 30 and 50 billion per year. Assuming a two year decision to revenue ramp, the price of inaction has, as of today, cost over 1.3 trillion (yes… with a T) dollars of lost tax revenue opportunity. It’s important to point out the 1.3 trillion is not lost revenue to the government, it’s lost revenue opportunity (i.e. the amount taxable) and, of course, there has been no mention of the benefit derived from diversification of the economy, the ability to secure a right of way suitable for rail transportation within the same corridor as the pipeline, and the economic benefits of job growth.

Finally, and perhaps more important, the ability to leverage that investment to spur on LNG capacity in British Columbia is enhanced by this strategy because the first nations do not object to natural gas and LNG infrastructure because gas will dissipate to air in the event of a spill, it does not destroy ancient fisheries and sacred lands. The synergies of a growing Pacific tidewater oil port and LNG infrastructure growth in Western Canada is good for all Canadians including our Arctic residents. Once again, I am befuddled and I have to ask… why can’t our provincial governments take yes for an answer? What is so hard about accepting a logical decision everybody can agree with? Why do Canadians have to suffer for this crazy, negative, and counterproductive need to fight or be inactive?

My most fundamental question is… how stupid to you have to be to fail to capitalize on the ability to send approximately 1.6 million barrels of oil per day to Asian markets leveraging a fully developed infrastructure? I might point out… especially when one of your own citizens has handed you a blueprint for this combined with firsthand knowledge of the ability to secure agreements from all parties? Maybe stupid isn’t the work we’re looking for, maybe arrogant is a better word… maybe it’s more accurate.  

On the other hand, perhaps I am the arrogant one for thinking this should be obvious. Perhaps I am the fool for believing that a pre-existing joint economic feasibility plan produced by the Yukon Governmentand the State of Alaska showing a positive net public benefit on a railway... far more expensive than a pipeline. This should be enough to warrant serious discussions.

A new royalty structure complete with legislation that mandates a percentage of revenue to be placed into the Heritage Fund combined with legislation that effectively closes the door to raiding parties of the Heritage Fund. I am deeply offended that our government has repeatedly raided the Heritage Fund to pay for deficits. My message to the current PC’s is simple… look back to the early days. The PC party was right back then… Peter Lougheed did the right thing by setting up the Heritage Fund… be more like Peter.

Let the rocks rain down and let the chips fall where they may, it’s time for a deeper focus on the people’s interest and less focus on corporate interests. Like all of you, I have heard the people suggest that corporations will leave if we don’t give them the free ride they are accustomed to. Their billions were generated precisely because they are here, but if they want to set up shop somewhere else… say, perhaps Havana, Pyonyang, or maybe Riyad, then fine. Corporations that would leave are not the ones upon which a society builds a collaborative future anyway.

I expect more from my government than has been delivered in recent years. In Alberta, PC’s must accept responsibility for everything because after 43 years… there’s nobody left to blame. Perhaps it's time to move on, stop blaming and finger pointing, and get the business of moving energy product to global markets into gear. If you can't get it done... then call me up and I'll deliver your agreements with plenty of time left over to go fishing for halibut in Ninilchik.

Thursday, October 2, 2014

Prioritizing Canada's Energy Problem

Rising costs for labour and materials, market access issues, and limited pipeline access plague Alberta's oil sands projects. Norway's Statoil shelved the Corner project for three years. Statoil operates the 20,000 BBL/day Leismer project, but going forward with the Corner project, designed for 40,000 BBL/day is off the table for the next three years.

Statoil's Leismer Project - credit Helge Hansen - Statoil

In May, France's Total SA announced the Joslyn project would not go forward at this time. Partners Suncor, Occidental, and Japan's Inpex Corp. are also stepping back. Last year Total SA and Suncor stopped plans to build the 11.6 billion dollar Voyageur upgrader in hopes that it would be more profitable to ship bitumen.

Voyageur Upgrader - credit Ledcor

In the larger picture, estimates of 250,000 BBL/day annually by RBC Capital Markets place an estimated capital investment of 26 billion in 2014 and a peak of 33 billion in 2016, with deductions in place for projects that are getting shelved, those numbers shrink. Still, the number constitutes impressive growth, but it is far less than it could be with pipeline infrastructure to refineries and tidewater were in place.

The shelving of projects and retraction of investment in the oil sands mean other areas will receive the attention of those companies slowing or stopping their investment in Alberta's oil sands in order to invest in other areas where their return on investment will be higher. One of the potential areas is British Columbia's potential liquid natural gas industry. But once again, there are frayed nerves. Apache Corp. announced it is pulling out of the Kitimat liquefied natural gas project and is selling its 50 per cent interest while Malaysian energy giant Petronas is wavering on its LNG project in British Columbia because of the lack of fiscal clarity.

LNG Ships - Credit Qatar Gas
Encana has been into the United States for acquisitions in the Eagle Ford play from Freeport McMoRan and they've bought Texas-based Athlon Energy. Mexico's privatization means enormous amounts of shale drilling is going to take place in the Eagle Ford that stretches to the other side of the border. The CEO of Petronas has characterized Canada as being 40 years behind the rest of the world in terms of setting the stage for energy investment.

The issue of energy transportation, as the crux of the problem why companies are shelving projects, is an important reason why companies are concerned the economics are shifting away from Canada. I should not have to remind anyone that over half of our national foreign direct investment (54%) inflow comes into the energy and mining sectors, transportation (11%) is in second place. To combine energy mining and transportation issues, we see 65% of Canada's foreign direct investment inflow under pressure. With the price of oil dropping, more shale coming online, and the concerns of a global investment environment where Canadian product is being attacked across different forms of media, it seems to me a prudent government priority is to focus on solving product transportation bottlenecks quickly.

The government is responsible to be both offensive and defensive in their outlook. The offensive strategy is to quickly identify the pipelines that will not be viable and forget them. Move forward with the ones that will be viable in the short term. The defensive component is to consider what the strategy should be if oil sands projects continue to be placed on shelves. As of right now, it feels like we're going to need a good defense if we are to win the game.

Friday, February 14, 2014

Good Neighbours

We all know that rapid expansion of Alberta's economy has greatly accelerated the demand for skilled and highly qualified labour in numerous sectors. Our steel fabrication industry is particularly important for energy industry projects and is one such area where the labour shortage is pressing.

Port Alberta Director Don Oborowski, CEO of Waiward Steel, joined me on reciprocal trade mission to lay the foundations for a near-term deal between institutions of higher education in Idaho, Washington, and Alberta in order to develop a pipeline of qualified labour arriving with Alberta based curriculum and apprenticeship training. Preliminary discussions between American and Canadian institutions of advanced education have resulted in this exciting opportunity to put a real dent in a key labour shortage in our region. This opportunity is the result of a trade mission to encourage bilateral corporate investment between Alberta and neighbour states.

Between 2007 and 2011, Alberta's exports to Washington and Idaho were worth more than $10 billion. It's wise to have good relations with your biggest business partners. When Mexico voted to allow foreign direct investment into key elements of its energy industry, Alberta's intra-hemispheric trading relationships were set to expand faster than ever. NAFTA countries already account for approximately 25% of global GDP. Our intra-hemispheric economic growth, combined with abundant energy and stabilized hemispheric labour costs, will accelerate "nearshoring activity", meaning a mutually beneficial transfer of business to a neighbouring country.

These developments, combined with global economic recovery, will increase our hemispheric manufacturing capacity. Ameliorating labour shortages in our key industries will help our regional economy expand while enabling Albertans to export more products to neighbours and the rest of the world.

Tuesday, December 31, 2013

Port of Santa Marta, Colombia

Port of Santa Marta

The growing port of Santa Marta Colombia is a remarkable location for many reasons.  First, it sits on the Caribbean Sea at the northern tip of South America just at the base of the Sierra Nevada Mountains.  Santa Marta is a natural deep port, sheltered and basking in one of the best climates on the planet, this was the first city founded by the Spanish back in 1525 primarily because of the ideal port location.  The port iteslf has great capicity, it boasts post-panamax capability with a deepwater approach and >60 foot draft dockside in a natural seeing with no dredging required.  

Cartagena is the largest port in Colombia and is Colombia's main oil exporting port.  Intermodal traffic is being expanded and is expected to handle between 6 and 7 million TEU's within in two years. Cartagena is home to a variety of private ports including Dole, BASF, Cemex, Dow Chemicals, DuPont, and Reficar SA.

Santa Marta enjoys a different product mix.  Santa Marta a port authority that is a publlic/private parthership.  The largest export from Santa Marta is coal mined from the Sierra Nevada mountain range.  In addition, the port accomodates roll on roll off (ro-ro), grains and intermodal.  The port is ISO 14001 certified and has the distinction of being the first port outside of the European Union to be officially named an environmentally friendly port or a "green" port.  

Considerable capital investment was required to deliver the green port status.  Much of that has to do with how coal exports are handled.  Structures have been constructed to reduce wind impact, semi lifts have been installed, hydrochemical dust management systems prevent the excape of coal dust during the unloading process into a closed auger system that delivers coal to the bulk ships. This has preserved the undersea environment surrounding the port which is healthy and thriving.  In order to maintain the certification, the port is inspected including the undersea areas.

Closed Coal Auger
Santa Marta is blessed by a number of interesting geographical conditions.  Storage and shipment of dry grains is facilitated by the wind that sweeps down from the Sierra Nevada mountains out to the sea, this makes it relatively dry compared to many sea ports.  With nearly 600 plug in stacks in the intermodal yard, the refrigerated export capacity of Santa is ideal for exporting bananas and various tropical fruits.  Fyffes service calls at the port of Santa Marta and serves Antwerp in Belgium and Portsmouth UK and provides fresh bananas to the tables of Europe and the UK in addition to the port ro-ro, dry bulk, grains, and other reefer products.  Santa Marta also handles general cargo, typically moving oil and gas drilling equipment along with some dredging equipment.

Fyifes - Bananas headed to UK and EU

Barranquilla is a large port that enjoys fresh water shipping access via the Magdelena River and is a home to a large zona franca that confers tax benefits and exclusion from duties until point of export or after value add activities.  The zona franca of Barranquilla is very large in terms of industrial presence with the most important Colombian companies holding a presence in this particular port due the the large zona franca.  Santa Marta also has a zona franca, mostly utilized by ro-ro traffic.

Ro-Ro Load to Zona Franca
What's next?  It occurs to me that Colombia invested heavily in road networks prior to the strong emergence of intermodal traffic.  That road infrastructure investment resulted in moving a lot of ocean going exports not tied to a particular area of production, like coal, and shifted it to the Pacific port of Buenaventura.  After driving the mountains of Colombia, it occurs to me the value of lost time due to traffic congestions creates a negative impact to gross domestic product data, social impacts, and lost productivity directly resulting from traffic congestion throughout the national highway system. These matters are obviously compounded by environmental damage.

Port of Santa Marta from the beach
Rail in Colombia is not extensive and the major population centers are not well interconnected.  The wildcard in this is China's appetite for coal, and Colombia is one of the largest producers in the World. China is considering investing into a rail line between the Port of Buenaventura and Cargegena.  This would be a rail line that could compete with the Panama Canal in some respects. If a rail line between Cartagena and Santa Marta is built, there would be intermodal connectivity between Bogota, Medellin, Santa Marta, Cartagena, and Buenaventura.  Such a rail line would start transnational access with over 10 million TEU's in a post panamax environment while hosting a market space of over 15 million for imported TEU traffic.  Arguably, the easiest way to capitalize on Colombia's port infrastructure is to focus on P3 development of rail lilnes to link Buenaventura with Cartagena and Santa Marta to connect petroleum, dry bulk, ro-ro, grain, and intermodal traffic with major metropolitan areas.

Tuesday, December 3, 2013

¡Si! - The Mexican Senate and Energy Reforms in Mexico!

sourcefile: PEMEX
The Mexican government is currently engaged in a debate of ideology, and the winners and losers in this debate have a lot at stake.  From the outside looking in, it's evident that Petroleos Mexicanos (PEMEX) has operated without the benefit of private efficiency.  To compare PEMEX with Statoil, they both drive approximately the same sales figures, but PEMEX delivers these sales with 153,000 personnel compared to Statoil's 23,000.  While this is just a quick comparison of employee to sales, it underscores the well known issues of state run oil companies in general... they're not the most efficient entities around.

PEMEX has been boosting exploration budgets significantly since 2006 without a corresponding boost in production, in fact, the numbers have been deteriorating.  The larger picture, for our Mexican cousins, is the evolution of Mexico as a market with a rapidly advancing skilled workforce strategically placed with new land bridges connecting Atlantic and Pacific shipping lanes through powerhouse ports like Lázaro Cárdenas and Veracruz.

Mexico is growing quickly and Mexico needs to pay for infrastructure to underpin a rapidly growing economy.  The trend to on shore is gaining momentum and I see very bright days ahead for North American manufacturing.  Mexico's manufacturing sector is gaining steam and Nissan's CEO recently announced that Mexico would soon overtake Japan as an export base for Nissan vehicles.  The trade growth of Mexico has seen investments in rail, roads, and inland port infrastructure to support the rapidly growing economy.  A fine example that defines both economic growth and global integration of Mexico is their container traffic growth.

Port of Lázaro Cárdenas
Mexican container traffic, at the port of Lazaro Cardenas alone, handled about 43,000 twenty foot equivalents TEU's in 2004 and expanded to 270,000 TEU's by 2007, a 527% increase in three years. In 2012, five years later, it handled 1.24 million TEU's, a 359% increase, and has a capacity of 2.2 million TEU's annually, an expansion likely to be reached in a few years time.  The expansion was driven by the investment of Hong Kong's Hutchison Port Holding's Ltd. and the expansion created berths and channels that allowed Lázaro Cárdenas able to receive container vessels up to 12,500 TEU's. The expansion of Mexican port TEU capacity has been largely driven by these investments. Here's a comparison of the growth compared to Canadian TEU growth since the turn of the century.  It's obvious that Mexico is growing their capacity at faster clip than Canada.

Mexican & Canadian TEU Growth 2000 - 2011
source: Port Alberta
None of this should come a surprise as the port has direct rail connections to inland ports that service Mexico City's greater market, which boasts in excess of 20 million people.  The inland port initiative of Mexico has resulted in tremendous connections to the entire North American market place through rail connections and inland ports like the Guanajuato Interior Port (Puerto Interior Guanajuato).  The Guanajuato inland port, a.k.a. GTO, is an example of what a well thought out inland port can become for a region and an entire nation.  I have noticed the design, location, and relative advantages of GTO capture the infrastructure that parallels numerous other inland ports, including the advantages proposed by Port Alberta... but that's another story for another day.

Guanajuato Inland Port 
Crossing back to the privatization of Mexico's oil industry, we understand that Mexico requires billions to ramp up production.  Large shale plays like Eagle Ford exist in Mexico, but the financial and technological capacity to ramp up production on their side of the Eagle Ford shale play is limited by capital resources.  This, of course, is exacerbated by the ever pressing need to satisfy tremendous infrastructure requirements to support the scope and scale of Mexico's growth.

The dialogue in Mexico is not related to the ownership, per se, of the petroleum resources themselves, but rather, it is an accommodation that allows private companies to partner with PEMEX, which allows the private partners to declare reserves for the purpose of stock valuation while the citizens of Mexico retain their "ownership" of the actual hydrocarbons.  Sounds a bit complicated, but it's not complicated.  At the end of the day, the private interests that would invest heavily in Mexican oil are simply looking for a fair deal before they start pumping billions of dollars into Mexican investments.

I believe the parties can come to a political settlement, but it won't be without some discussions and concerns.  To start with, there is a huge legacy where oil is concerned in Mexico.  Lázaro Cárdenas, the President who nationalized Mexican oil is considered a political and social reformer and is widely lionized as a hero of the Mexican people.  He occupies a very important part of Mexican history, and it is his legacy that is linked with land reform, the rights of industrial workers, unionization rights, and the nationalization of the railway.  Perhaps one of the most important legacies of President Cárdenas was the expropriation of equipment and declaration that the petroleum reserves of Mexico were nationalized.  Over seventy years later, PEMEX, the state run Mexican oil company, still stands as a legacy of President Cárdenas.

President Lázaro Cárdenas
The legacy of President Cárdenas still holds enormous sway in the history of Mexico and is greatly amplified by his own son, Cuauhtémoc Cárdenas, remains a political force in Mexico and is revered as a senior leader of one of Mexico's major political parties.  His voice, and the legacy of his father, will be part of the dialogue that shall come to a vote.  That vote shall have a long term impact of Mexico that can change the face of Mexico's economy, shift an entire hemisphere into high gear, and return manufacturing prowess to the North American continent at precisely the moment when the continent is becoming energy sufficient.  In short, the new structure allows the changes PEMEX needs in order to facilitate the expansion of Mexico's vast oil resources and Cuauhtémoc Cárdenas is leading the opposition to this reform by calling it a "privatization" of the industry.

Cuauhtémoc Cárdenas
The changes may create a more agile oil industry in Mexico, something that could bring great benefit to the country at precisely the correct point in history when it is needed most.  It won't be the sweeping "privatization" people think it is... instead, one might characterize it more as a sharing of risk and the ability to partner with external corporations and investors, but all while maintaining the purview of government approval for any contracts.  In short, the people of Mexico will not lose their control over hydrocarbons under President Nieto's reforms, but what they very well may gain will be summed up in economic growth, jobs, and a strong draw back to a great country that has lost so much intellectual capital over the last few decades as people have emigrated to find their way.

Senate of Mexico
If Mexico enacts these reforms, they may unwittingly encounter a different problem altogether... there could be a reversal of immigration issues on the U.S. / Mexican border as Americans seek to improve their ability to earn a decent living, have great weather, and enjoy all the richness of the amazingly beautiful Mexican culture.  Unfortunately for those Americans, they're likely to have to battle to get into Mexico once the race is on and the exploration starts to ramp up in Mexico's Eagle Ford shale and offshore in the Gulf.  Mexicans should keep in mind that if their citizen is undocumented in the United States, they are documented in Mexico and they'll be bringing back new skills, new jobs, the english language skills, and a rich appetite to earn good wages and live at home with families they left behind.
The Mexican oil and economic boom I sense could be right around the corner.  Before Christmas, Mexicans should know the type of reform their President will sign.

If there is any predictability in the stock markets, the Mexican Peso was up today almost 1% as we move into the decision time frame.  But even if the decision to reform the energy sector emerges and is signed by the President, the Mexican Senate was given 1.7 million signatures, a threshold dictated by the Mexican Constitution that would call for 2% of signatures of registered voters are required in order to bring public consultation.  And just as the role call was being taken on the debate, I lost my feed from the Senate that was streaming beautifully from the Canal de Congreso.  I thought the debate was very thoughtful, there was a minimum of emotion, and the leaders of the great nation are debating some of the most critical legislation I have ever, in my entire life, witnessed in the history of Mexico.  And as much as I would love to stay until the very end of the session... actually, they're voting now.  I'll stay.  If it's a yes vote, then the title of the article will be Si!  And I'm pleased to note that a few minutes ago, the legislation to reform elections, the main "political deal" that will allow energy reform to go forward, was passed by a vote of 106-15.

Citizens protest the reforms