July 29, 2020 / 6:41 PM / 7 days ago

UPDATE 1-Mexico could change constitution to strengthen Pemex -president

(Adds quote, background, former U.S. ambassador)

By Dave Graham

MEXICO CITY, July 29 (Reuters) - Mexico might seek to change the constitution in the second half of the current administration to bolster state oil firm Petroleos Mexicanos (Pemex) and national power company the Comision Federal de Electricidad, the president said Wednesday.

President Andres Manuel Lopez Obrador, a leftist, told a news conference the government was not currently contemplating the move, which could reverse the liberalization of Mexico’s energy market pursued by his centrist predecessor.

But he said the prospect could not be ruled out if it became necessary to help revive the state-run enterprises.

“If a change in the law is required to give back Pemex and the Comision Federal de Electricidad their function as strategic companies for the development of Mexico, and the nation’s primacy over natural resources, we would see whether an initiative to reform the constitution is presented,” he said.

He said a change in the constitution was “not likely” and suggested it might not be considered until after a possible referendum on his presidency earmarked for early 2022.

Constitutional changes require two-thirds majorities in Congress and mid-term legislative elections in June 2021 could weaken Lopez Obrador’s hold on the lower house.

Lopez Obrador has been a vigorous critic of the previous government’s constitutional reform to open up the energy market to private capital, saying the process was tainted by corruption and has not reversed years of slumping crude output.

But he reiterated his pledge not to change the present legal framework on the energy market during the first half of his six-year term, which began in December 2018.

Lopez Obrador has spent months embroiled in contractual disputes with investors over his attempts to carve out a bigger role for the state in energy policy, arguing that previous governments skewed the market in favor of private companies.

That has prompted some of Mexico’s closest allies, including Canada and the European Union, to complain that the government’s push to renegotiate the terms of contracts is putting billions of dollars worth of infrastructure projects at risk.

Jim Jones, a former U.S. ambassador to Mexico, told a videoconference hosted by the Washington-based Wilson Center on Wednesday it was time that Lopez Obrador made a decision.

“(He) either needs to just totally upset and change the energy policy in Mexico, or recognize that it’s going to really disrupt his ability to get more investment,” Jones said. (Reporting by Dave Graham, Editing by Franklin Paul and Steve Orlofsky)

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