A move that could smooth the way for private investment in Mexico’s energy sector won approval last weekend by the country’s hardliners, the Institutional Revolutionary Party (PRI), which has long opposed any attempts at privatization.
The PRI held its national assembly to discuss key issues for next year’s presidential election, when the party will face President Vicente Fox, who has encouraged private investment in the country’s oil and natural gas sector. The PRI holds more seats than any other in both houses of Congress, and has used its muscle to block Fox’s attempts at energy reform.
However, Robert Madrazo, PRI’s president, won backing last weekend in the 19th National Assembly meeting to remove a ban on private investment in the party’s policy platform. PRI’s platform, which has carried the banner against outside investment for decades, is now calling on a “new model for the energy industry” to take “the decisions that permit our energy resources to support national development.”
Petroleos Mexicanos (Pemex), Mexico’s state-owned oil company, has long appealed for private participation to develop natural gas fields, explore offshore fields and fund basic maintenance.
Pemex reported a net loss of 14.1 billion pesos (US$1.2 billion) in 2004 after paying the government taxes equivalent to 61% of its US$69 billion in sales. The Congress now is considering a bill to reduce Pemex’s tax burden, but the company contends that unless private investment is allowed, the country’s energy sector will never grow. Pemex estimates that it has 54 billion boe of reserves in the deepwater of the Gulf of Mexico, but it said it lacks the finances and the technology to develop it.
Fox’s Minister of the Interior Santiago Creel said, “I celebrate that finally, in almost the fifth year of this government, the PRI has taken notice of the need to open the energy sector.” Creel plans to meet with Madrazo in the next few days.
The outcome for private investment is not assured. Madrazo narrowly won the changes to the party platform, and Enrique Jackson, PRI’s Senate leader and a possible presidential candidate in July 2006, said, “We feel not capable of ensuring conditions of democracy, normality, dialogue and equality.”
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