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Pemex Needs Clear Rules for Private Investment, Vazquez Says

Nov. 10 (Bloomberg) -- Josefina Vazquez Mota, who is vying for the presidential candidacy of Mexico’s ruling party, said state oil company Petroleos Mexicanos should be given more flexibility to receive private investment.

“We need to improve the investment and working capacity of Pemex,” Vazquez Mota said in an interview yesterday in Mexico City, referring to the oil producer. “We have to decide in what areas of Pemex there’s the possibility of private investment and also we have to continue improving technology and research.”

Vazquez Mota seeks the candidacy of President Felipe Calderon’s National Action Party. She served as social development minister during the administration of President Vicente Fox and public education minister in Calderon’s Cabinet before heading her party in the lower house of Congress.

“If Pemex isn’t modernized, and if it doesn’t open certain sectors with very clear rules that safeguard the nation’s production, we’ll be taking it to subprime levels,” she said.

Mexican law banned private companies from exploring, producing and refining crude until energy legislation in 2008 allowed performance-based service contracts. Pemex now seeks to entice companies to drill in aging and deep-water fields using these contracts, Chief Executive Officer Juan Jose Suarez Coppel said in an Oct. 19 presentation to lawmakers. The company wants to attract outside technology and experience for existing fields and stem output declines at its largest reserves, he said.

Pemex’s efforts to reverse declining production are hindered by the company’s heavy tax burden. About a third of the federal budget is financed by taxes on Pemex, and the company cited high taxes and a weaker peso in its third-quarter loss of 81 billion pesos ($5.92 billion).

Organized Crime

To fight organized crime gangs, Mexico needs to strengthen state police forces and the judicial system and attack drug cartels’ finances, Vazquez Mota said in the interview.

The federal government is locked in a battle with drug trafficking organizations, which has led to the deaths of around 43,000 people since Calderon took office in Dec. 2006, according to an Oct. 4 report by the U.S. Drug Enforcement Administration.

Mexico holds presidential and congressional elections next July.

To contact the reporter on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net;

To contact the reporter on this story: Adriana Lopez Caraveo in Mexico City at adrianalopez@bloomberg.net

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