Mexican opposition holds energy reform hostage

Amid charges of political arm-twisting, an opposition party has held passage of legislation vital to an overhaul of Mexico’s energy sector hostage to its demands for a political revamping.

The tactic by the opposition center-right National Action Party threatens to delay for weeks – or even months – enactment of a plan to open the energy sector to foreign investment, crucial to economic revitalization.

“This isn’t blackmail,” Sen. Jorge Luis Preciado, the head of the party’s faction in the Senate, told foreign correspondents. “This was agreed upon from the beginning: First this, then that.”

His party’s refusal to debate framework legislation has sent prospects for the energy overhaul into an eleventh hour free-for-all. The legislative session ends at the end of June and doesn’t reconvene until September.

Without the support of the opposition party, which is known by its Spanish initials as the PAN, President Enrique Peña Nieto’s ruling Institutional Revolutionary Party, or PRI, can’t garner sufficient votes to usher the framework legislation through the Senate, where the PRI and an allied party hold only 62 of 128 seats.

The energy overhaul is the cornerstone of a drive by President Peña Nieto to remake Mexico, altering nationalist policies that the PRI set up during nearly three-quarters of a century of rule before it lost power in 2000 and stayed on the sidelines for 12 years.

Mr. Preciado says the dispute dated to December 2012, when Peña Nieto came to office. It was then that his party and two major opposition parties announced an unprecedented accord to carry out a series of revisions called the Pact for Mexico.

“In 18 months, we achieved 18 major reforms that hadn’t been achieved in the previous 90 years,” Preciado says.

But Preciado says the PAN was dismayed at 2012 state elections in which the PRI governors of a handful of states, controlling state electoral apparatuses, disallowed PAN complaints about the use of public money for campaigns and other matters.

“The way the governors operated was absolutely brutal,” Preciado says. “Our objective was to dismantle the feudal control of the governors.”

As a result, he says, his party obtained a signed addendum to the Pact for Mexico that committed the ruling party to ushering through a political reform package before matters such as the energy overhaul would come up for a vote.

The political changes include taking gubernatorial control away from state election bodies and turning it over to federal authorities, ensuring proportional representation in state legislatures, and establishing legislative control over key federal prosecutors.

But it’s a smaller change – one that calculates how tiny parties are awarded votes when they present candidates in alliance with larger parties – that’s generated the discord.

The PRI and the leftist Party of the Democratic Revolution (PRD) sponsor small parties, keeping them alive and eligible for abundant federal campaign funds in exchange for their unwavering support. This week, the two parties sought to roll back an article in the broader political reform that would undercut the small parties and even threaten their viability.

A PRD bench chief in Congress’ lower Chamber of Deputies, Silvano Aureoles Conejo, told the PAN to “act like adults” and get over the matter.

With stakes growing over the fate of the energy revamp, which the government says will add up to 1.5 percent to Mexico’s economic growth in coming years, the ruling party has lashed out at the PAN.

“This is an exercise in vile political blackmail,” Marco Antonio Bernal Gutierrez, a PRI legislator who’s the head of the energy commission of the Chamber of Deputies, told Congress’ official news agency.

The broad outlines of the energy overhaul sailed through Congress last December, auguring the end of the 75-year monopoly of the state oil giant, Petroleos Mexicanos. What’s before the Senate now is secondary legislation enshrining terms for how foreign companies could operate in Mexico, which has seen oil production fall significantly in the past decade.

Mexico is one of the 10 largest oil producers in the world, and the third largest in the Americas, after the United States and Canada.

An analyst in Houston, George Baker of Mexico Energy Intelligence, a policy advisory service, says any delay in the opening of the energy sector would dismay foreign energy companies.

“This would be a negative signal, but it would not be an overwhelmingly negative signal,” Mr. Baker says.

He says  the political dispute had arisen in part because Peña Nieto failed to seek broad public support for the energy overhaul, empowering opposition parties such as the PAN to make demands.

“They’ve got a free pass for objecting to the energy reform,” he says.