Mexican Constitutional Oil Change Achievable, PAN Senator Says

Mexico’s National Action Party supports a possible constitutional change to open the state-controlled oil industry to more private investment and will work with other parties to pass such legislation, according to the PAN’s top senator on the energy commission.

The PAN, as the party is known, wants to allow private companies to invest in oil and natural gas production and development, an area the nation’s charter now limits to state-owned Petroleos Mexicanos, Salvador Vega said. The party would stop short of allowing companies to own Mexico’s oil, as they did before the late President Lazaro Cardenas nationalized them in 1938, he said.

President Enrique Pena Nieto of the Institutional Revolutionary Party, who took office in December, has promised an initiative this year to reverse eight years of production declines at Pemex, the oil producer that funds one third of the federal budget. Working with the PRI, as Pena Nieto’s party is known, and the Democratic Revolution Party, Vega said the PAN can help achieve changes that it failed to win under President Felipe Calderon, Pena Nieto’s predecessor.

“We must leave no doubts for whoever seeks to invest in Mexico that they have the legal and constitutional right to do so,” Vega, who served as Calderon’s anti-corruption minister, said in an interview in his Senate office yesterday. “It wouldn’t be possible for someone to come and spend billions of dollars without knowing that it’s legal.”

Support, Opposition

Economy Minister Ildefonso Guajardo, speaking at Bloomberg’s Mexico Economic Summit on March 21, said the overhaul the administration wants would require a constitutional change. Jesus Zambrano, the head of the PRD, as Mexico’s third-biggest party in Congress is known, says it seeks to modernize Pemex while opposing any moves it sees as “privatization.”

Pena Nieto won the PRI’s support to ease Pemex’s oil monopoly and support constitutional changes at the party’s national assembly last month. The president has pledged to open the oil industry to more competition and reduce Pemex’s tax burden. His administration says such measures could boost economic expansion, which has trailed Latin America’s for the past decade, and increase gross domestic product by as much as 2 percentage points a year.

Changing the nation’s charter requires approval by two-thirds of Congress and a majority of legislatures from 31 Mexican states and the capital. The PAN and PRI together control more than two-thirds of the Senate and about two thirds of the lower chamber. Adding support from the PRI-allied Green Party creates a majority of more than 70 percent in both chambers.

Consensus Building

The federal government needs to work within the PRI and with outside parties to build a consensus for an energy overhaul, Vega said, adding that he doesn’t expect a unanimous PRI vote for a constitutional change.

“I’m not that sure all of the PRD will be opposed,” he said. “Having a clear and concrete proposal can help to resolve things.”

The PRI weakened energy and tax overhauls under former presidents Calderon and Vicente Fox, most recently thwarting a 2009 bid by Calderon to expand taxes to food and medicine. Both Calderon and Fox were PAN members.

The PAN and PRI have worked together since Pena Nieto’s election to approve a labor initiative giving employers more flexibility in hiring and firing workers and an education bill to improve standards and make teachers more accountable for performance.

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