Oil reform debate stirs national pride in Mexico

By Catherine Bremer

MEXICO CITY (Reuters) - When Mexico expropriated its fledgling oil industry in 1938, Mexicans handed over family jewels, silverware and chickens to fund a new state oil company and pay off the foreign firms being booted out.

Four decades later, a poor fisherman spotted grease bubbling up in the Gulf of Mexico, stumbling upon a huge oil field that brought a flood of petrodollars and put Mexico among Latin America's wealthiest nations.

Today, many Mexicans' pride in their oil -- still the nation's main economic motor and the No. 3 source of U.S. crude imports -- is creating resistance to a government plan to modernize the now creaking energy industry.

President Felipe Calderon, a pro-business conservative, wants to shore up flagging output and reserves by attracting foreign companies to Mexico with contracts that include cash incentives for successful projects.

But left-wingers say the plan smacks of privatization and a wave of protests and a blockade of Congress have thrown Calderon the toughest test so far of his 17 months in office.

"The expropriation was a huge effort for the nation. To sell off our oil would be a disgrace," said Franco Flores, 63, who runs a car-washing business near the dated brown skyscraper where state oil monopoly Pemex is headquartered.

Polls show Mexico divided over his proposal so Calderon, a former energy minister and only the country's second president since seven decades of one-party rule ended in 2000, is playing on national pride to try and win support.

"While other countries have taken advantage of their deep-sea oil for years, Mexico hasn't been able to start," he said in a televised speech. "It's time for all Mexicans to act with true patriotism to get the most out of our resources."