Opec rally fails to aid crippled Latin oil giants

Washington

FOR the three titans of Latin American oil - Pemex, PDVSA and Petrobras - last week's Opec-driven price rally won't be enough to halt a slow descent from the ranks of international crude heavyweights.

Even as news of the cartel's 1.2 million-barrel-a-day output cut spurred the steepest three-day oil gain in 15 months, the biggest Latin American producers remain hobbled by financial, political, technical and structural problems. Mexico and Brazil have been turning to outside investors to help boost output, with Mexico on Monday offering up stakes for the first time to drill in its deep waters.

Oil prices are an especially pressing issue for the behemoths responsible for large chunks of their local and national economies, all while supplying one of every 13 barrels of crude produced around the globe every day. Unlike North American explorers who were free to fire workers and abandon costly, high-risk projects as crude collapsed, the Latin companies operate under close bureaucratic controls that hinder their ability to respond to market forces, said Thomas McNulty of Navigant Consulting Inc. "Higher prices are always a good thing but these are state-owned quasi-companies that have tremendous social obligations to their countries and little freedom to take rational cost-cutting steps," said Mr McNulty, director of Navigant's valuations and financial risk manage…