Fox Proposes End to Energy Monopoly

President Vicente Fox unveiled his long-awaited energy plan Wednesday, saying Mexico could not meet its needs in coming years without a thorough restructuring to permit more private investment in what is now a state-owned energy monopoly.

Fox’s plan is expected to set off intense political maneuvering. His predecessor, Ernesto Zedillo, proposed changes in energy policy involving liberalizing electricity and petrochemical investment, which failed even though Zedillo’s party, the Institutional Revolutionary Party, then controlled the congress. Fox’s National Action Party is in the minority.

“Our country has a great richness in energy,” Fox said. “However, much as we have done, it’s not enough. It is necessary to begin new projects to cover the requirements of supply.”

Although Mexico has the world’s ninth-largest crude oil reserves and is the seventh-largest oil producer, the federal government has been bleeding the oil monopoly Petroleos Mexicanos dry, leaving insufficient cash for investment in the future, Energy Secretary Ernesto Martens told a gathering at Los Pinos, the presidential residence.

The federal budget relies on Pemex for 36% of its revenue, up from 24% as recently as 1994.

As a result, oil reserves have been declining for more than 15 years.

Electric power generation could fall short of demand, producing blackouts, by 2005. Unless important new sources of natural gas are developed soon, Mexico will have to import vast amounts in three years.

The answer, Fox said, is to restructure Pemex and the Federal Electricity Commission, the power utility serving most of Mexico, along the lines of private companies.

Although the existing companies would not be privatized, outside companies would be given greater access to compete.

But Mexico has a long tradition of state-supported energy, and reforms will be a difficult sell in Mexico’s congress.

As did President Zedillo, the Fox administration painted a bleak scenario in its call for action.

Energy Undersecretary Francisco Barnes de Castro said Mexico already imports 11% of its natural gas, 26% of its gasoline and 29% of its liquid propane gas, a popular residential heating and cooking fuel. Imports will rise dramatically without reform, he said.

Although Mexico is nearly self-sufficient in natural gas, by 2005, it will have to import one quarter of its consumption to supply the gas-powered electric power plants now under construction or planned, Barnes de Castro said.