Mexico president weighs energy reform, delays unveiling

Reuters News
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Posted: Aug 07, 2013 2:38 PM
Mexico president weighs energy reform, delays unveiling

By Anahi Rama and Ana Isabel Martinez

MEXICO CITY (Reuters) - Mexico's government has pushed back to next week the unveiling of a proposed energy sector overhaul, as President Enrique Pena Nieto on Wednesday weighed the political cost of a divisive bill to revamp an ailing oil industry.

The energy reform, which Pena Nieto said on Tuesday would be presented this week, aims to lure more private investment into the oil, gas and electricity sectors to boost flagging output and drive growth in Latin America's No. 2 economy.

Lawmakers familiar with last-minute negotiations over the government's proposal say it will try to amend the constitution to allow more private investment in oil, gas and electricity by eliminating the exclusivity currently granted to the public sector in those businesses.

Officials from Pena Nieto's ruling centrist Institutional Revolutionary Party (PRI) have issued differing views on whether that will include the most important - article 27 - which explicitly prohibits concessions and has also been interpreted to ban risk-sharing contracts.

Proponents of the reform say it will be hollow without a constitutional amendment to allow risk-sharing contracts. Critics say throwing out article 27 will hand Mexico's oil riches on a platter to foreign companies, a lightning rod of Mexican nationalism.

"There will be constitutional changes to more than one article, that is certain," one top PRI official said when asked if article 27 would be changed, insisting on anonymity given the sensitivity of the issue.

The government has pushed through a series of other reforms from education to telecoms through a cross-party political pact with the conservative opposition National Action Party (PAN) and leftist Party of the Democratic Revolution (PRD).

However PRI officials say the energy reform is set to be a collaboration with the PAN alone. The PRD is against changing the constitution, arguing it is tantamount to privatization.

"TWO VISIONS" WITHIN PRI

Jesus Zambrano, chairman of the PRD, believes the reform delay is down to differences of opinion within the PRI itself over how aggressive the energy reform should be. He met with government and opposition officials on Tuesday to discuss issues related to the political pact.

"In the heart of the PRI, there are two grand visions of people closely linked to a more liberal, progressive sector which says constitutional reform is not necessary ... and others who are convinced that if you have to do it, now is the time," Zambrano said in telephone interview, saying the PRD would present its own energy overhaul proposal once the PRI has unveiled its reform.

A senior ruling party official said the bill had been pushed back to next week so Pena Nieto has time to go through it thoroughly.

"The president is signing off on details, revising article by article, and wants to present it with more certainty," the official said, requesting anonymity because of the sensitivity of the bill.

In a speech on Tuesday, Pena Nieto said: "The energy reform that I am set to present in the course of this week aims to give Mexican companies ... access to a supply of cheap electric energy at internationally competitive prices."

But that quote was later cut from the presidential office's transcript of Pena Nieto's speech sent to the press.

The PAN last week presented its own proposal to reform Articles 25, 27 and 28 of the constitution, allow concessions for oil companies to exploit reserves instead of operating less lucrative service contracts, and strengthen the country's energy regulatory bodies by making them autonomous.

Pena Nieto will need PAN backing to secure the required two-thirds majority in Congress to pass the bill.

Mexico is the world's 10th-biggest producer of crude oil, according to OPEC data. But output has fallen by a quarter since hitting a peak of 3.4 million barrels per day in 2004, driving home the need to kickstart production.

(Additional reporting by Gabriel Stargardter and Liz Diaz; Editing by Simon Gardner and Andrew Hay)