Mexico Largest Opposition Party Seeks to Sell Pemex Shares
Mexico’s opposition National Action Party today sent Congress a bill to change the constitution and pave the way for Petroleos Mexicanos to sell shares.
The changes would require additional legislation to enable a “small” share sale, said Salvador Vega, the party’s top member on the Senate Energy Committee. The proposal would also break the monopoly on electricity generation and distribution held by state power company Comision Federal de Electricidad, or CFE, he said.
The PAN is proposing the most “audacious” changes in Mexico’s energy industry since 1938, when Mexico expropriated assets from U.K. and U.S. companies and changed its constitution to assert control over its energy resources, Vega said. The proposal may go beyond that of President Enrique Pena Nieto who last month declined to say whether he’ll push to change the constitution and has promised to “modernize, not privatize” Pemex.
“We’re looking for a way to democratize Pemex, including listing small amounts of shares,” Vega said today in a telephone interview from Mexico City. “We’re also contemplating an opening for the electric sector.”
The PAN’s announcement preempts the energy proposal expected from Pena Nieto’s Institutional Revolutionary Party, or PRI. That plan will be presented within days, David Penchyna, the head of the Senate Energy Committee and a member of the PRI, said in an interview today with Radio Formula.
The peso briefly pared its loss after Vega’s comments and erased it after the U.S. Federal Reserve said it will maintain its $85 billion in monthly bond purchases. The peso was little changed at 12.7641 per U.S. dollar at 1:55 p.m. in Mexico City.
This isn’t the first time the PAN has thought about trying to give Pemex the ability to sell shares. In 2011, then President Felipe Calderon decided against an energy bill that would have included selling shares of Pemex after initially saying such a sale “could be an alternative.”
The PAN’s proposal could also face opposition from the Democratic Revolution Party, or PRD, the nation’s third-biggest party. Jesus Zambrano, the PRD’s president, has promised that the party will oppose any drive that it sees as privatization.
Andres Manuel Lopez Obrador, the party’s candidate who came in second to Pena Nieto in last year’s presidential election, said he’ll call supporters to Mexico City’s Zocalo, or main square, in early September to rally against the expected energy overhaul proposals.
“My sense is that the PAN does want to go further on energy reform, and by putting these types of topics into the debate are ensuring that a number of options are considered,” Eric Farnsworth, head of the Washington office of the Council of the Americas, said in a telephone interview. “Whether or not it’s a bridge too far is something the Mexican people would obviously have to decide.”
When asked about the possibility of a share sale at a news conference today, PAN lawmaker Ruben Camarillo said the proposal would call for annual Congressional approval of Pemex’s debt levels and whether parts of its funding would come from a share offering.
Lawmakers will have an “extensive debate” to decide how much funding will come from debt, the hybrid securities known as Citizen Bonds, or shares, Camarillo said. The amendments to articles 25, 27, and 28 won’t address the details for those changes, and they will be attended to in secondary laws, he said.
Camarillo said that his party also wants to remove the Pemex union from the company board, where workers currently hold five of the 15 seats of the board.
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