Mexican President Vicente Fox said last weekend that he willpush strongly to allow private investment in the country’sstate-run electricity commission because without it, the countrywill have to practically beg for help from the United States tomeet its energy needs. He insisted, however, that there are noplans to privatize the country’s state-run electricity commissionor its state-run oil company.
Without a program to allow more private investment to modernizethe 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 wedon’t have.” Fox was speaking at an economic summit in centralMexico.
“These are reforms that cannot be delayed,” said Fox of hisproposal to open the power industry to private investment, whichwould 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 thelegislature to simplify the tax system. He also plans to send anenergy package, which will include the private investment changes,but one Mexican official said recently that the two packages comingat the same time may make the energy package difficult to pass.
Speaking at the Cambridge Energy Research Associates meeting inHouston in February, the general director of Mexico’s ComisionFederal de Electricidad (CFE), Afredo Elias Ayub, said he waspessimistic that the Mexican Congress would consider reformingelectricity laws at the same time it was reforming tax laws (seeDaily GPI, Feb. 16).
“It will take legal changes to go from a big monopoly to amarket with several generators,” Elias said. “We’ve had sometrouble getting laws approved in Congress that would stop themonopoly.” Currently, Mexico’s Congress has three parties, and noneholds the majority. In the past, Mexicans have opposedprivatization of any sort.
However, Mexican energy officials estimate that the country willneed about $50 billion in investments to develop more energyinfrastructure to support its growth in the next 10 years (seeDaily GPI, Dec. 1, 2000). If new natural gas production does notcome on-stream in Mexico in the next two to three years, thecountry will have to import more than half of its gas needs,according to a report from the country’s energy regulator ComisionReguladora de Energia (CRE). The country now imports about 7% ofits gas, mostly from South Texas.
Electric power demand in Mexico is forecast to grow at an annualrate of 6% in the next 10 years, which will require an annualinvestment of US$5 billion. However, the existing infrastructurewill only last until 2004, CRE warned, and new investments arenecessary to install more generating capacity and modernizetransmission and distribution grids.
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