Mexico left-leaning party proposes limited energy reform

Reuters News
Posted: Aug 19, 2013 4:26 PM
Mexico left-leaning party proposes limited energy reform

By David Alire Garcia

MEXICO CITY (Reuters) - Mexico's largest left-of-center political party has proposed a plan that would revamp state-oil monopoly Pemex, but without amending the constitution to permit more private investment in the oil, gas and electricity sectors, as the government has suggested.

The proposal of the opposition Party of the Democratic Revolution, or PRD, seeks to modernize Pemex by providing it with budget and management autonomy, and create a new fund to administer the nation's energy riches.

The proposal would also gradually lower the company's tax burden by 9 percent to 62.5 percent by 2018, freeing up more resources to invest in exploration and production activities.

But the heart of the proposal is to oppose any move to open the sector to more private investment, which PRD leaders see as a betrayal of the state-run energy industry enshrined in the constitution.

"We will convene to throw off the (constitutional) reforms, if they are disgracefully approved," said Cuauhtemoc Cardenas, the PRD's founder and the son of President Lazaro Cardenas who nationalized the oil sector in 1938.

Cardenas presented the PRD's initiative at a speech in Mexico City on Monday, as PRD activists waved "modernize not privatize" flags.

Unlike the more aggressive reform bills by President Enrique Pena Nieto of the centrist Institutional Revolutionary Party (PRI), as well as the conservative National Action Party (PAN), the PRD's bill does not seek to lure private oil companies back to the country.

Mexico, the world's 10th biggest crude producer, has seen oil output slide by a quarter since hitting peak production of 3.4 million barrels per day (bpd) in 2004.

The cornerstone of Pena Nieto's reform is a new profit-sharing contracting scheme aimed at attracting private capital and boosting output, while the PAN calls for the establishment of concessions for oil and gas developments.

The energy reform is the central plank of a wide-reaching reform package Pena Nieto hopes will boost growth in Mexico, Latin America's second largest economy, and drag its energy industry into the modern era.

High-ranking government officials say Pena Nieto's proposal seeks to open up a range of new and mature oil and gas fields to private firms, and new partnerships with Pemex could be launched in the second half of next year.

The PRD proposal would overhaul the company's administration by removing most government officials as well as all union officials who currently serve on the company's board.

A proposed national petroleum fund that would administer future oil and gas profits is a rare point of agreement between the country's three major parties.

Andres Manuel Lopez Obrador, who finished second to Pena Nieto in last year's presidential election and has since broken ranks with the PRD, has vowed street protests next month against any constitutional reform, which he calls "traitorous" and the same as privatization.

The PRD has distanced itself from Lopez Obrador and the prospect of disruptive protests, which could give the party's lawmakers a freer hand to negotiate a compromise. Government officials have privately voiced concern about the prospect of large-scale protests against the reform plan.

The government's proposal sits in a middle ground between those of the PAN and PRD.

A new poll published on Monday gave the government's plan a boost, revealing that 58 percent of adults favor constitutional changes to allow private companies to extract oil.

Published in daily newspaper Excelsior, the telephone survey by pollster BGC questioned a random sample of 400 men and women over age 18 on August 16, after both the PAN and government's bills had been presented. The poll's margin of error was 5 percent.

(Editing by Simon Gardner)