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Mexico's Fox Pushing For Energy Reforms

Mexico's Fox Pushing For Energy Reforms

Mexican President Vicente Fox said that he will push strongly to allow private investment in the country's state-run electricity commission because without it, the country will have to practically beg for help from the United States to meet its energy needs. He insisted, however, at an economic summit in central Mexico last week that there are no plans to privatize the country's state-run electricity commission or its state-run oil company.

Without a program to allow more private investment to modernize the country's energy industry, Fox said that in six years, Mexico "would be almost on its knees asking the United States to sell us, please, electricity, diesel fuel, gasoline and natural gas that we don't have."

"These are reforms that cannot be delayed," said Fox of his proposal to open the power industry to private investment, which would finance development. He said that the investments would "create better conditions for accelerated, sustainable growth."

This month, Fox will send a massive tax reform package to the legislature to simplify the tax system. He also plans to send an energy package, which will include the private investment changes, but one Mexican official said recently that the two packages coming at the same time may make the energy package difficult to pass.

Speaking at the Cambridge Energy Research Associates meeting in Houston in February, the general director of Mexico's Comision Federal de Electricidad (CFE), Afredo Elias Ayub, said he was pessimistic that the Mexican Congress would consider reforming electricity laws at the same time it was reforming tax laws (see NGI, Feb. 19).

"It will take legal changes to go from a big monopoly to a market with several generators," Elias said. "We've had some trouble getting laws approved in Congress that would stop the monopoly." Currently, Mexico's Congress has three parties, and none holds the majority. In the past, Mexicans have opposed privatization of any sort.

However, Mexican energy officials estimate that the country will need about $50 billion in investments to develop more energy infrastructure to support its growth in the next 10 years (see NGI, Dec. 11, 2000). If new natural gas production does not come on-stream in Mexico in the next two to three years, the country will have to import more than half of its gas needs, according to a report from the country's energy regulator Comision Reguladora de Energia (CRE). The country now imports about 7% of its gas, mostly from South Texas.

Electric power demand in Mexico is forecast to grow at an annual rate of 6% in the next 10 years, which will require an annual investment of US$5 billion. However, the existing infrastructure will only last until 2004, CRE warned, and new investments are necessary to install more generating capacity and modernize transmission and distribution grids.

Carolyn Davis, Houston

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