Fox Plugs Bill for Energy Reform

Warning that an energy crisis looms, President Vicente Fox has asked a reluctant Congress to allow private companies to generate and sell electricity in Mexico.

An energy bill, received by the Senate this week, is one of the president’s top legislative priorities and a test of his ability to deliver economic change. It is opposed by lawmakers who have already blocked much of the free-market agenda that helped Fox win election two summers ago, ending 71 years of rule by the Institutional Revolutionary Party, or PRI.

Fox has been touring the country over the last week, appealing directly to the public to nudge Congress behind the initiative. Critics say it would surrender a strategic national resource to private control, including foreign interests.

“We’re embarking on a great debate, and I hope we will resolve it positively, as other countries have already done--without losing our sovereignty over this resource but supplementing it with private investment,” Fox told an audience Monday in Cancun.

Officials say Mexico needs $56 billion by 2009 to modernize and expand its electricity sector. Unless private investors contribute most of that money, they say, power generation could fall short of demand within three years, causing blackouts and stifling economic growth.

Energy Secretary Ernesto Martens said this week that the bill could assure needed investment. It would amend the Mexican Constitution to allow private companies to compete with the public Federal Electricity Commission to supply large industrial consumers.

“Otherwise,” he said, lawmakers “had better be vigilant that Mexico is not left castrated in its energy needs in the future and that their children and my grandchildren aren’t left to lead a country that is half-lighted.”

The state has a near-monopoly on the generation, sale and distribution of electricity. In April, the Supreme Court struck down a government effort to liberalize the energy market by decree, prompting Fox to order up the bill.

Opposition to the measure stems from a nationalist belief that electric energy, like Mexico’s vast oil and gas reserves, should remain entirely in state hands. Critics argue that ill-conceived privatization schemes have disrupted energy production in other Latin American countries and in California.

“Around the country there are poor communities that do not have electricity, and if private interests take over they never will,” said Marti Batres, a legislator from the Democratic Revolution Party, or PRD. “We need more state funds for energy production.”

Legislators from Batres’ left-of-center party and the PRI, which together have a majority in Congress, have vowed to fight Fox’s bill. Both opposition parties have offered proposals for reforming the debt-burdened electricity commission without resorting to private investors.

But PRI legislators are divided over the government bill, and Fox is hoping to persuade enough of them to go along to muster the necessary two-thirds vote in both chambers.

A 1992 law opened up power generation to the private sector but limited investors to building plants for self-supply. It also permitted, in special cases, foreign investment in power generation for export to the United States.

That law has attracted about $10 billion in private investment but not enough to keep up with Mexico’s demand for power, which is growing at 5.5% a year. Fox has argued that the billions of dollars needed for new generators could be better spent improving schools and health care.

Roberto Madrazo, president of the PRI, said Monday that the opposition should not reject Fox’s bill without serious study and debate. “We have to think about the long-term good of the country,” he said.

Other politicians said Fox submitted the bill knowing that it would be defeated but hoping to portray opposition parties as obstructionist villains ahead of next year’s congressional elections.