Vote Scandal Threatens Pena Nieto Support in Mexico Congress

Mexican President Enrique Pena Nieto’s multi-party pact to boost private investment in the oil industry and improve tax collection has been jeopardized by allegations of corruption in the government.

The opposition National Action Party, or PAN, released video tapes that allegedly showed officials arranging to use government social programs to promote the ruling party ahead of local elections in July. As a result, the PAN and the Democratic Revolution Party refused to take part in a banking bill they helped negotiate, forcing the president to delay its presentation today until as late as next month. One PAN lawmaker said the pact among the parties is “in danger.”

“This is the most serious problem Pena Nieto has faced since taking office,” said Jorge Chabat, a political science professor at the Center for Economic Research and Teaching, a Mexico City-based university. “It’s the biggest problem for him, but also for what’s most important to him -- the pact. It will fail if he doesn’t correct what’s happening.”

The accord, known as the Pact for Mexico, has been responsible for presenting bills that swiftly passed at least one congressional house to boost competition in the telecommunications industry and to overhaul the education system. If Pena Nieto doesn’t address the accusations, the pact could dissolve before the most important bills to revamp the energy sector and tax collection are presented, Chabat said.


Patching up differences among the parties “is getting more and more difficult,” said Jose Isabel Trejo, a PAN lawmaker who heads the lower house’s finance committee and who said the pact is in danger.

The decision by the ruling PRI party and PRD to push a bill through committee requiring mining companies to pay royalties, without negotiating it through the pact, “is one factor that could lead to a rupture,” Trejo said. The bill will probably be brought before the lower house floor tomorrow, he said.

The finance committee, which convened without Trejo yesterday, approved the bill to set royalties for mines in Mexico.

Gustavo Madero, the head of PAN, Mexico’s largest opposition party, said the president must fire the social development minister and open a federal investigation after the accusations of electoral crimes in the state of Veracruz.

Cracks Appear

Nomura Holdings Inc., said some “cracks in the pact” have appeared, and that the dissolution of the accord would trigger a “strong negative reaction” in government bonds and the currency, according to a research note by strategist Benito Berber. If the impasse is resolved, the currency could rally further, Berber said.

The peso strengthened 0.3 percent at 3:59 p.m. Mexico City time to 12.2448 per dollar. The peso has risen 5 percent this year, the best performance among 16 major currencies tracked by Bloomberg. The yield on fixed-rate government peso bonds due 2024 rose three basis points to 4.61 percent.

Barclays Plc chief Mexico economist Marco Oviedo wrote in a note that he’s “optimistic” the government will resolve the conflict and that the pact will endure.

“Time is of the essence,” Oviedo wrote, as Congress still has to complete passage of the telecommunications bill and discuss the bank lending bill before the legislative period ends on April 30.

Pena Nieto’s government said in a statement today that he decided to delay the lending bill’s presentation and suspend the pact’s activities in order to “open a space for a frank dialogue that will permit us to overcome our disagreements and strengthen the pact.”

The lending bill delays might extend beyond the current legislative session, which ends Apr. 30, Finance Minister Luis Videgaray said in an interview with Radio Formula.

Jesus Zambrano, the head of the PRD, suggested his party may find solutions to the impasse, saying in an MVS Radio interview that he thinks “we can overcome our differences.”

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