MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto on Sunday sounded a warning shot to his ruling party over corruption, saying no one is above the law as he tries to tackle the graft that has blighted its reputation in the past.

Speaking just days after the head of Mexico's powerful teachers' union was arrested on charges of embezzling around $200 million, Pena Nieto vowed a new era of transparency at a congress attended by some 4,200 members of his Institutional Revolutionary Party, or PRI.

"There are no untouchable interests," said Pena Nieto, who pledged to break with the party's past reputation for shady deals and patronage when he won the presidency last year. "The only interest I will protect is the national interest."

Political analysts say the arrest of union leader Elba Esther Gordillo, herself a former PRI grandee, was a warning to any politicians or labor bosses involved in corruption.

However, the incident also raised fears that the PRI may be returning to past tactics of squashing dissent. Gordillo left the PRI several years ago and had opposed a new law being pushed by Pena Nieto to overhaul Mexico's education system.

The PRI had become a byword for corrupt and often authoritarian rule by the time it was voted out of office in 2000 after a 71 years in power.

Pena Nieto, who is seeking to push through a raft of economic reforms in a bid to modernize the economy and boost growth, campaigned on a promise of a new PRI.

The party has updated its manifesto to include measures to foster transparency, including free access to information, which party members say applies in particular to economic issues.

"Today we are a more transparent party, open to the scrutiny of the people and being held to account," Pena Nieto said. "Today the PRI has an instrument to distance itself from and reject those who are not up to the ethical standards of our party."

"Let us demonstrate through our attitude, our voice, our actions that we are a new generation of the PRI."

(Reporting by Simon Gardner; Editing by Kieran Murray and Christopher Wilson)