President Fox Sends Congress Formal Legislative Initiative to Reform Electrical-Power Sector

SourceMex Economic News & Analysis on Mexico, September 25, 2002 | Go to article overview

President Fox Sends Congress Formal Legislative Initiative to Reform Electrical-Power Sector


President Vicente Fox has raised the stakes in the debate regarding the future of Mexico's electricity sector by presenting the Congress with a formal proposal to allow private companies to invest in construction of power plants. Fox submitted the bill to legislators in mid-August, two weeks before the beginning of the new session of Congress.

The initiative requests changes to the Mexican Constitution, which could doom the bill in Congress unless Fox can overcome opposition from the former governing Partido Revolucionario Institucional (PRI), which holds a slim plurality in both the Chamber of Deputies and the Senate.

"The only certainty at this time is that the presidential bill to open the electric sector has a very complicated, obstacle-filled future," political analyst Alfonso Zarate told The Dallas Morning News.

Existing statutes allow private companies to produce electricity for their own use or for sale to large industrial users, but under the Constitution they are not allowed to distribute power to individual domestic consumers.

The law has been interpreted to mean that private companies cannot sell electricity to the state-run Comision Federal de Electricidad (CFE) and Compania Luz y Fuerza del Centro (LFC). Fox's initiative would amend the Constitution not only to allow such sales but to expand the network of privately operated plants that would supply the CFE and LFC.

Proposal to change Constitution jeopardizes bill

The proposal to change the Constitution could be a huge stumbling block for the Fox proposal, unless the president can convince a large contingent of PRI legislators to form a coalition with his center-right Partido Accion Nacional (PAN). The constitutional changes would need a two-thirds majority in Congress to pass.

The PRI support is very much in doubt, especially since its relations with Fox have deteriorated because of the administration's decision to pursue corruption charges against former officials and union leaders of the state-run oil company PEMEX. Union leaders Carlos Romero Deschamps and Ricardo Aldana and ex-PEMEX director Rogelio Montemayor Seguy are accused of illegally channelling PEMEX funds into the campaign of PRI presidential candidate Francisco Labastida Ochoa in a case known as Pemexgate (see SourceMex, 2002-01-30, 2002-05-15 and 2002-09-18).

"I don't see signs that the consensus needed to pass constitutional reforms are there," said Sergio Rosado, an energy consultant with IPD Latin America. "The reform is needed, but it is not going to be a fast or easy road."

Rumors were circulating that the PRI was trying to work out a deal with the Fox administration to support the electrical-reform plan in exchange for dropping or minimizing the PEMEX case. These rumors were especially strong after PRI president Roberto Madrazo emerged from a meeting with Fox pledging cooperation between the former governing party and the administration.

The rumors created strong concerns among rank-and-file PRI members. "It would be suicide to compromise our position on electrical privatization in exchange for leniency in the Pemexgate case because the government has no proof to pursue its charges," said PRI Deputy David Penchyna.

Many PRI members also oppose Fox's privatization plan as a sign of solidarity with the party's labor factions, in particular the electrical-workers union (Sindicato Mexicano de Electricistas, SME). The SME, which fears that any privatization could eventually lead to job losses for CFE or LFC workers, has joined with other labor and campesino organizations to form the Frente Nacional de Resistencia contra la Privatizacion de la Industria Electrica.

The privatization plan is supported by a large segment of the private sector, including prominent business chambers like the Confederacion de Camaras Industriales (CONCAMIN) and the Consejo Coordinador Empresarial (CCE). …

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President Fox Sends Congress Formal Legislative Initiative to Reform Electrical-Power Sector
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