Mexico Needs Constitutional Change to Open Energy, Senator Says

Mexico needs to change the constitution to open the energy industry to more private investment, a proposal likely to be debated in the second half, according to the top lawmaker on the Senate’s energy committee.

Congress should overhaul the nation’s laws to attract more private investment into crude oil, natural gas, electricity and renewable energy, said Senator David Penchyna, a member of President Enrique Pena Nieto’s Institutional Revolutionary Party.

“We need to have a modern constitutional design that strengthens the economic stewardship by the state,” Penchyna said yesterday in an interview at Bloomberg’s Mexico City office. The changes should “prevent the privatization of the energy industry but allow, because one thing doesn’t cancel the other, the possibility that in several aspects of the energy sector we have investment of both public and private capital.”

Pena Nieto, who took office in December, has promised an initiative this year to reverse eight years of oil production declines at state-owned Petroleos Mexicanos. He won the ruling PRI party’s support to ease Pemex’s oil monopoly and support constitutional changes at the party’s national assembly last month.

The debate on an energy bill would probably precede a promised overhaul of the tax system since the oil producer’s revenue funds one third of the federal budget and the government would need to find a way to replace part of that money should it be reinvested back into Pemex, Penchyna said.

Constitutional Change

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

Senator Salvador Vega, the top lawmaker from the opposition National Action Party on the Energy Committee, said in an April 11 interview that the PAN supports a possible constitutional change to open the oil industry and will work with other parties to pass such legislation.

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.

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